Windstream 2010 Annual Report Download - page 112

Depreciation and Amortization Expense
Depreciation and amortization expense primarily includes the depreciation of the Company’s plant assets and the
amortization of its definite-lived intangible assets. The following table reflects the primary drivers of year-over-year
changes in depreciation and amortization expense:
Twelve Months Ended
December 31, 2010
Twelve Months Ended
December 31, 2009
(Millions)
Increase
(Decrease) %
Increase
(Decrease) %
Due to depreciation of acquired businesses plant assets $ 87.1 $ 3.1
Due to amortization of intangible assets acquired in the purchase of
acquired businesses 82.3 2.7
Due to increase in amortization of franchise rights (a) - 31.8
Due to changes in depreciation expense (b) (2.1) 19.0
Due to decreases in amortization expense (c) (11.5) (11.5)
Total increases in depreciation and amortization expense $ 155.8 29% $ 45.1 9%
(a) Effective January 1, 2009, the Company began amortizing its franchise rights on a straight-line basis over an
estimated useful life of 30 years. Previously, the Company had assigned an indefinite useful life to these assets but
the effects of increasing competition resulted in a prospective change in their estimated useful life (see Note 2).
(b) Increases in depreciation expense in 2009 are due primarily to capital spend and plant placed in service.
(c) Decreases in amortization expense are due to the use of accelerated amortization methods used.
Restructuring and Merger and Integration Costs
We continually evaluate our operating structure to identify opportunities for increased operational efficiency and
effectiveness. Among other things, this involves evaluating opportunities for task automation, network efficiency and
the balancing of our workforce based on the current needs of our customers. Restructuring charges, consisting
primarily of severance and employee benefit costs, are sometimes incurred as a result of these efforts. These costs
should not necessarily be viewed as non-recurring.
During 2010, Windstream recognized $7.7 million in severance and employee benefit costs primarily related to
identified opportunities for increased operational efficiency and effectiveness. This resulted from the Company’s
offering of a voluntary workforce reduction program during the fourth quarter of 2010. The Company expects to
realize annual pretax savings of approximately $11.4 million as a result of this initiative.
During 2009, Windstream recognized $9.3 million in severance and employee benefit costs primarily related to the
workforce reduction initiated during the third quarter of 2009 to better align the Company’s focus on high-speed
Internet and enterprise opportunities. The Company expected to realize annual pretax savings of approximately $20.0
million as a result of this initiative. During the first quarter of 2009, the Company recorded a $0.1 million reduction in
liabilities to reflect differences between estimated and actual costs paid associated with a work force reduction initiated
during the fourth quarter of 2008. During the second quarter of 2009, the Company incurred $0.1 million in severance
and employee benefit costs associated with the closure of an out of territory sales and product distribution facility.
During the year ended December 31, 2008, the Company incurred $8.5 million in severance and employee benefit
costs primarily related to the announced workforce reduction in the fourth quarter of 2008 to control expenses in a
challenging economy and the realignment of certain information technology, network operations and business sales
functions.
Merger and integration costs are unpredictable by nature, and include costs incurred related to strategic transactions
such as transaction costs, rebranding costs, system conversion costs and employee related transaction costs consisting
of severance employee benefit cost.
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