Windstream 2011 Annual Report Download - page 122

F-14
Interest Expense
Set forth below is a summary of interest expense for the years ended December 31:
(Millions)
Senior secured credit facility, Tranche A
Senior secured credit facility, Tranche B, net of interest rate swaps
Senior secured credit facility, revolving line of credit
Senior unsecured notes
Notes issued by subsidiaries
Credit facility extension fees
Other interest expense
Less capitalized interest expense
Total interest expense
2011
$ 6.1
105.0
19.8
413.0
20.9
—
0.3
(6.8)
$ 558.3
2010
$ 6.9
98.1
6.6
371.3
38.6
1.8
0.5
(2.1)
$ 521.7
2009
$ 6.8
91.8
3.8
263.8
39.2
6.4
0.1
(1.7)
$ 410.2
Interest expense increased $36.6 million, or 7.0 percent and $111.5 million, or 27.2 percent, for the years ended December 31,
2011 and 2010, respectively. The increase in 2011 was primarily due to interest incurred on additional debt issued during 2011.
The increase in 2010 was primarily due to interest incurred on the $1,100.0 million in additional debt issued during the fourth
quarter of 2009, $400.0 million of additional debt issued during the third quarter of 2010 and the $500.0 million of additional
debt issued during the fourth quarter of 2010. The weighted-average interest rate paid on the long-term debt was 7.5 percent in
2011 and 7.8 percent in 2010.
Income Taxes
Income tax expense decreased $94.5 million, or 48.3 percent in 2011, and $55.2 million, or 22.0 percent in 2010. The decrease
in income tax expense in both 2011 and 2010 was primarily due to a decrease in income before taxes. Our effective tax rate in
2011 was 37.0 percent, compared to 38.5 percent in 2010 and 38.6 percent in 2009.
For 2012, our annualized effective income tax rate is expected to range between 38.0 percent and 39.0 percent, excluding one-
time discrete items. Changes in the relative profitability of our business, as well as recent and proposed changes to federal and
state tax laws may cause the rate to change from historical rates. See Note 12, “Income Taxes”, to the accompanying
consolidated financial statements for further discussion of income tax expense and deferred taxes.
Discontinued Operations, net of tax
On November 30, 2011, we completed the acquisition of PAETEC. The operating results of the energy business acquired as
part of PAETEC, which sells electricity to business and residential customers, primarily in certain geographic regions in New
York state, as a competitive electricity supplier, have been separately presented as discontinued operations in the accompanying
consolidated statements of income. As the energy market is outside of our core business, we intend to divest the PAETEC
energy business. We will have no significant continuing involvement in the operations or cash flows of the PAETEC energy
business upon disposition.
Regulatory Matters
We are subject to regulatory oversight by the Federal Communications Commission (“FCC”) for particular interstate matters
and state public utility commissions (“PUCs”) for certain intrastate matters. We are also subject to various federal and state
statutes that direct such regulations. We actively monitor and participate in proceedings at the FCC and PUCs and engage
federal and state legislatures on matters of importance to us.
Communications services providers are regulated differently depending primarily upon the network technology used to deliver
the service. We believe this regulatory approach impedes market-based competition in areas where service providers using
different technologies exchange telecommunications traffic and compete for customers.
From time to time federal and state legislation is introduced dealing with various matters that could affect our business. Most
proposed legislation of this type never becomes law. It is difficult to predict what kind of legislation, if any, may be introduced
and ultimately become law. We strongly support the modernization of the nation's telecommunications laws.