Windstream 2012 Annual Report Download - page 168

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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F-70
10. Merger, Integration and Restructuring Charges:
We incur a significant amount of costs to complete a merger or acquisition and integrate its operations into our business, which
are presented as merger and integration expense in our results of operations. These costs include transaction costs, such as
accounting, legal and broker fees; severance and related costs; IT and network conversion; rebranding; and consulting fees. Our
recent acquisitions of PAETEC, NuVox, Iowa Telecom, Q-Comm, and Hosted Solutions described in Note 3 drive merger and
integration costs for the years presented.
Restructuring charges are sometimes incurred as a result of evaluations of our operating structure. Among other things, these
evaluations explore opportunities for task automation, network efficiency and the balancing of our workforce based on the
current needs of our customers. Severance, lease exit costs and other related charges are included in restructuring charges.
On May 31, 2012, we announced the review of our management structure to increase the efficiency of decision-making, to
ensure our management structure is as simple and as responsive to customers as possible and position ourselves for continued
success. We eliminated approximately 350 management positions as part of the restructuring. The restructuring was completed
in the third quarter of 2012 resulting in severance related costs of $22.4 million. The changes will result in annualized savings
of approximately $40.0 million.
The following is a summary of the merger, integration and restructuring charges recorded for the years ended December 31:
(Millions) 2012 2011 2010
Merger and integration costs
Transaction costs associated with acquisitions $ 7.1 $ 40.7 $ 41.2
Employee related transition costs 20.3 22.3 26.7
Information technology conversion costs 6.1 5.7 4.2
Rebranding, consulting and other costs 31.9 1.1 5.2
Total merger and integration costs 65.4 69.8 77.3
Restructuring charges 27.4 1.3 7.7
Total merger, integration and restructuring charges $ 92.8 $ 71.1 $ 85.0
Merger, integration and restructuring charges decreased net income $58.2 million, $44.1 million and $59.1 million for the years
ended December 31, 2012, 2011 and 2010, respectively, giving consideration to tax benefits on deductible items.
The following is a summary of the activity related to the liabilities associated with our merger, integration and restructuring
charges at December 31:
(Millions) 2012 2011
Balance, beginning of period $ 12.9 $ 10.5
Merger, integration and restructuring charges 92.8 71.1
Cash outlays during the period (85.4)(68.7)
Balance, end of period $ 20.3 $ 12.9
As of December 31, 2012, we had unpaid merger, integration and restructuring liabilities totaling $20.3 million, which
consisted of $3.7 million of accrued severance costs primarily associated with the integration of the Acquired Companies, $5.8
million primarily associated with the restructuring announcement made on May 31, 2012, and $10.8 million related to other
integration activities. The severance and related employee costs will be paid as positions are eliminated. Each of these
payments will be funded through operating cash flows.