Windstream 2012 Annual Report Download - page 112

F-14
The gain (loss) on extinguishment of debt is shown as follows for the twelve months ended December 31, 2012:
(Millions) 2012 2011
2015 PAETEC Notes:
Premium on early redemption $(14.3)$ —
Unamortized premium on original issuance 16.2 —
Gain on early extinguishment for PAETEC 2015 Notes 1.9 —
2016 Notes:
Premium on early redemption —(101.2)
Unamortized discount on original issuance —(26.6)
Third-party fees for early redemption —(3.0)
Unamortized debt issuance costs on original issuance —(1.1)
Loss on early extinguishment for 2016 Notes —(131.9)
Valor Notes:
Premium on early redemption —(10.3)
Third-party fees for early redemption —(0.4)
Unamortized premium on original issuance — 6.5
Loss on early extinguishment for Valor Notes —(4.2)
Total gain (loss) on early extinguishment of debt $ 1.9 $ (136.1)
Interest Expense
Set forth below is a summary of interest expense for the years ended December 31:
(Millions) 2012 2011 2010
Senior secured credit facility, Tranche A $ 13.9 $ 6.1 $ 6.9
Senior secured credit facility, Tranche B 51.8 40.2 40.9
Senior secured credit facility, revolving line of credit 18.1 19.8 6.6
Senior unsecured notes 400.8 413.0 371.3
Notes issued by subsidiaries 91.8 20.9 38.6
Credit facility extension fees — — 1.8
Impacts of interest rate swaps 56.4 64.8 57.2
Other interest expense 3.2 0.3 0.5
Less capitalized interest expense (10.9)(6.8)(2.1)
Total interest expense $ 625.1 $ 558.3 $ 521.7
Interest expense increased $66.8 million, or 12.0 percent and $36.6 million, or 7.0 percent, for the years ended December 31,
2012 and 2011, respectively. The increase in 2012 was primarily due to interest incurred on notes issued by subsidiaries,
specifically PAETEC. The increase in 2011 was primarily due to interest incurred on additional debt issued during 2011.
We enter into interest rate swap agreements to mitigate the interest rate risk inherent in our variable rate senior secured credit
facilities. Our swaps are off-market swaps; therefore, they contain an embedded financing element. Our swap counterparties
recover this financing through an incremental charge in our fixed rate over what we would be charged for an on-market swap.
As such, a portion of our swaps' cash payment is representing the rate we would pay on a hypothetical on-market interest rate
swap and is recognized in interest expense. See Note 2 for additional details.
Income Taxes
Income tax expense increased $0.8 million, or 0.8 percent in 2012, and decreased $96.2 million, or 49.2 percent in 2011. The
increase in income tax expense in 2012 was primarily due to an increase in income before taxes. The decrease in income tax
expense in 2011 was primarily due to a decrease in income before taxes. Our effective tax rate in 2012 was 37.3 percent,
compared to 37.0 percent in 2011 and 38.5 percent in 2010.