Windstream 2010 Annual Report Download - page 138

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Background and Basis for Presentation:
Formation of Windstream – On July 17, 2006, Alltel Corporation, which has subsequently merged with Verizon
Communications, Inc. (“Alltel”), completed the spin off of its wireline telecommunications division and
immediately merged with and into Valor Communications Group Inc. (“Valor”), with Valor continuing as the
surviving corporation. Windstream Corporation (the “Company”) is a leading communications and technology
solutions provider, specializing in complex data, high-speed Internet access, voice and transport services to
customers in 29 states. The Company provides a variety of solutions, including IP-based voice and data services,
multiprotocol label switching (“MPLS”) networking, data center and managed services, hosting services and
communications systems to businesses and government agencies. The Company operates an extensive local and
long-haul network, including 60,000 route miles of fiber, used to deliver voice and data traffic of Windstream, as
well as other carriers on a wholesale basis. The Company also provides high-speed Internet, voice, and digital
television services to residential customers. As of December 31, 2010, the Company provided service to
approximately 3.3 million access lines and 1.3 million high-speed Internet customers.
Basis of Presentation – The preparation of financial statements, in accordance with accounting principles
generally accepted in the United States, requires management to make estimates and assumptions that affect the
reported amounts of assets, liabilities, revenues and expenses and disclosure of contingent assets and liabilities.
The estimates and assumptions used in the accompanying consolidated financial statements are based upon
management’s evaluation of the relevant facts and circumstances as of the date of the consolidated financial
statements. Actual results may differ from the estimates and assumptions used in preparing the accompanying
consolidated financial statements, and such differences could be material.
Certain prior year amounts have been reclassified to conform to the 2010 financial statement presentation. These
changes and reclassifications did not impact net or comprehensive income.
2. Summary of Significant Accounting Policies and Changes:
Significant Accounting Policies
Consolidation of Financial Statements – Our consolidated financial statements include the accounts of
Windstream and its subsidiaries. All significant affiliated transactions have been eliminated.
Cash and Cash Equivalents – Cash and cash equivalents consist of highly liquid investments with original
maturities of three months or less.
Accounts Receivable – Accounts receivable consist principally of trade receivables from customers and are
generally unsecured and due within 30 days. Expected credit losses related to trade accounts receivable are
recorded as an allowance for doubtful accounts in the consolidated balance sheets. In establishing the allowance
for doubtful accounts, the Company considers a number of factors, including historical collection experience,
aging of the accounts receivable balances, current economic conditions and a specific customer’s ability to meet
its financial obligations to the Company. When internal collection efforts on accounts have been exhausted, the
accounts are written off by reducing the allowance for doubtful accounts. Concentration of credit risk with respect
to accounts receivable is limited because a large number of geographically diverse customers make up the
Company’s customer base, thus spreading the credit risk. Due to varying customer billing cycle cut-off, the
Company must estimate service revenues earned but not yet billed at the end of each reporting period. Included in
accounts receivable are unbilled receivables related to communications and technology solutions of $35.2 million
and $29.2 million at December 31, 2010 and 2009, respectively.
Inventories – Inventories consist of finished goods and are stated at the lower of cost or market value. Cost is
determined using either an average original cost or specific identification method of valuation.
Assets Held For Sale – During 2010, Windstream reclassified the $16.6 million of wireless assets acquired from
D&E Communications, Inc. (“D&E”) to assets held for sale in the accompanying consolidated balance sheet. In
addition, wireless licenses acquired from Iowa Telecommunications Services, Inc. (“Iowa Telecom”) of $34.0
million have been classified as assets held for sale. On October 26, 2010, Windstream entered into a definitive
agreement to sell the wireless assets acquired from D&E for approximately $22.0 million. As a result of this
transaction, the Company will recognize a gain of $5.4 million. The transaction is expected to close during 2011,
subject to certain conditions, including certain necessary regulatory approvals.
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