Windstream 2010 Annual Report Download - page 113

Set forth below is a summary of restructuring and merger and integration costs for the years ended December 31:
(Millions) 2010 2009 2008
Merger and integration costs
Transaction costs associated with acquisitions (a) $ 41.2 $ 11.4 $ 0.1
Employee related transition costs (b) 26.7 8.6 -
Computer system and conversion costs (c) 4.2 1.6 6.1
Signage and other rebranding costs (d) 5.2 0.7 -
Total merger and integration costs 77.3 22.3 6.2
Restructuring charges 7.7 9.3 8.5
Total merger, integration and restructuring charges $ 85.0 $ 31.6 $ 14.7
(a) During 2010, the Company incurred acquisition related costs for accounting, legal, broker fees and other
miscellaneous costs associated with the acquisitions of the Acquired Companies, D&E and Lexcom. During 2009,
the Company incurred acquisition related costs for accounting, legal, broker fees and other miscellaneous costs
associated with the acquisitions of D&E, Lexcom, NuVox and Iowa Telecom. These costs are considered indirect
or general and are expensed when incurred in accordance with authoritative guidance on business combinations.
(b) During 2010, the Company incurred $26.7 million in employee transition costs, primarily severance related in
conjunction with the integration of D&E, Lexcom, NuVox and Iowa Telecom. During 2009, the Company
incurred $8.2 million and $0.4 million in employee transition costs, primarily severance related, for D&E and
Lexcom, respectively.
(c) During 2010, the Company incurred $4.2 million in system conversion costs related to the acquisitions of the
Acquired Companies. During 2008, the Company incurred $6.1 million in system conversion costs related to the
acquisition of CTC. Of these charges, $5.4 million represented a non-cash charge to abandon certain software
acquired from CTC.
(d) During 2010, the Company incurred $5.2 million in signage and other branding costs related to the acquisitions of
the Acquired Companies.
Summary of Liability Activity Related to Both Merger and Integration Costs and Restructuring Charges
The following table is a summary of liability activity related to both merger and integration costs and restructuring
charges as of December 31:
(Millions) 2010 2009 2008
Balance, beginning of period $ 6.6 $ 8.3 $ 14.7
Merger and integration costs, net of non-cash charges 77.3 22.3 1.6
Total restructuring charges 7.7 9.3 8.5
Cash outlays during the period (81.1) (33.3) (16.5)
Balance, end of period $ 10.5 $ 6.6 $ 8.3
As of December 31, 2010, the remaining liability of $10.5 million for accrued merger, integration and restructuring
charges consisted of $8.8 million of accrued severance costs primarily associated with the integration of the Acquired
Companies. Severance and related employee costs are included in other current liabilities in the accompanying
consolidated balance sheet and will be paid as positions are eliminated. Each of these payments will be funded through
operating cash flows.
Merger, integration and restructuring costs decreased net income $59.1 million, $19.4 million and $9.0 million for the
years ended December 31, 2010, 2009 and 2008, respectively, giving consideration to tax benefits on deductible items.
See Note 10 for additional information regarding these charges.
Regulatory Matters
Our incumbent local exchange carrier subsidiaries (collectively the “ILECs”) are regulated by both federal and state
agencies. Our interstate products and services and the related earnings are subject to federal regulation by the FCC and
our local and intrastate products and services and the related earnings are subject to regulation by state Public Service
Commissions (“PSCs”). The FCC has principal jurisdiction over matters
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