Windstream 2009 Annual Report Download - page 181

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
12. Income Taxes, Continued:
allowances when necessary to reduce deferred tax assets to amounts expected to be realized. As of December 31,
2009 and 2008, the Company recorded a valuation allowance of $24.4 million and $2.6 million, respectively,
related to state loss carryforwards, which are expected to expire and not be utilized. The 2009 increase in the
valuation allowance is primarily associated with the acquisition of certain state net operating losses from D&E
and Lexcom and was recorded with an offset through goodwill. At December 31, 2009 and 2008, the Company
had state tax credit carryforwards of approximately $15.1 million and $15.4 million, respectively.
13. Commitments and Contingencies:
Lease Commitments – Minimum rental commitments for all non-cancelable operating leases, consisting
principally of leases for network facilities, real estate, office space and office equipment were as follows as of
December 31, 2009:
Year (Millions)
2010 $ 31.2
2011 22.2
2012 11.2
2013 4.0
2014 1.5
Thereafter 1.4
Total $ 71.5
Rental expense totaled $29.6 million, $25.3 million and $19.0 million in 2009, 2008 and 2007, respectively.
Litigation – The Company is party to various legal proceedings. Although the ultimate resolution of these various
proceedings cannot be determined at this time, management of the Company does not believe that such
proceedings, individually or in the aggregate, will have a material adverse effect on the future consolidated results
of income, cash flows or financial condition of the Company.
In addition, management of the Company is currently not aware of any environmental matters that, individually or
in the aggregate, would have a material adverse effect on the consolidated financial condition or results of
operations of the Company.
14. Business Segments:
Windstream is organized based on the products and services that it offers. Under this organizational structure, its
operations consist of its wireline and directory publishing segments. Previously, the Company reported a product
distribution segment, but in the first quarter of 2009, the Company reorganized its operations to integrate the sales
and administrative functions of the product distribution segment into its wireline operations. As a result of this
change, the chief operating decision maker no longer reviews the financial statements of the product distribution
operations on a stand alone basis, and the Company operates its wireline and product distribution operations as a
single reporting segment (“the wireline segment”). As required by the authoritative guidance for segment
presentation, segment results for these operations have been retrospectively adjusted to reflect this change for all
periods presented.
On November 30, 2007, Windstream completed the split off of its directory publishing business (see Note 3).
Prior to the split off, the Company’s publishing subsidiary coordinated advertising, sales, printing and distribution
for 356 telephone directory contracts in 34 states.
The Company accounts for affiliated sales at current market prices, tariff rates, or negotiated prices. The
evaluation of segment performance is based on segment income, which is computed as revenues and sales less
operating expenses, excluding the effects of strategic transaction costs as discussed in Note 10. In addition,
non-operating items such as other income, net, gain on sale of assets, loss on extinguishment of debt,
intercompany interest income, interest expense and income taxes have not been allocated to the segments.
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