| Notes to Financial Statements | |
| 6 Months Ended
Jun. 30, 2009
USD / shares
|
| Notes to Financial Statements [Abstract] | |
| 1.Preparation of Interim Financial Statements: |
1. Preparation of Interim Financial Statements:
Formation of Windstream - In this report, Windstream Corporation and its subsidiaries are referred to as Windstream, we, or the Company. On July17, 2006, Alltel Corporation (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. The resulting company was renamed Windstream Corporation.
Windstream is a customer-focused telecommunications company that provides local telephone, high-speed Internet, long distance, network access, and video services to approximately 3.0million customers primarily located in rural areas in 16 states. In the first quarter of 2009, the Company reorganized its operations to integrate the sales and administrative functions of the product distribution segment into its wireline operations. As a result of this change, the chief operating decision maker no longer reviews the financial statements of the product distribution operations on a stand alone basis, and the Company operates as a single reporting segment. As required by Statement of Financial Accounting Standards (SFAS) No.131 Disclosures about Segments of an Enterprise and Related Information, segment results of operations have been retrospectively adjusted to reflect a single segment presentation for all periods presented. As such, separate segment reporting is no longer required, and thus not included. Additionally, certain amounts previously reported have been reclassified to conform to the current year presentation of the consolidated financial statements. These changes and reclassifications did not impact net or comprehensive income.
The accompanying unaudited consolidated financial statements have been prepared based upon Securities and Exchange Commission (SEC) rules that permit reduced disclosure for interim periods. Certain information and footnote disclosures have been condensed or omitted in accordance with those rules and regulations. The accompanying consolidated balance sheet at December31, 2008 was derived from audited financial statements, but does not include all disclosures required by accounting principles generally accepted in the United States (U.S. GAAP). In our opinion, these financial statements reflect all adjustments that are necessary for a fair presentation of results of operations and financial condition for the interim periods shown including normal recurring accruals and other items. The results for the interim periods are not necessarily indicative of results for the full year. For a more complete discussion of significant accounting policies and certain other information, this report should be read in conjunction with the consolidated financial statements and accompanying notes included in Windstreams Annual Report on Form 10-K for the year ended December31, 2008, which was filed with the SEC on February19, 2009.
The preparation of financial statements in accordance with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses and di |
| 2.Accounting Changes: |
2. Accounting Changes:
Change in Accounting Estimate - Effective January1, 2009, the Company prospectively changed its estimate of useful life for its franchise rights from indefinite-lived to 30 years primarily due to the effects of increasing competition. Commensurate with this change, the Company reviewed its franchise rights for impairment, and noted that no impairment existed as of January1, 2009. As a result of this change, amortization expense increased by $8.0 million and $15.9 million, calculated on a straight line basis, and net income decreased $4.9 million and $9.5 million or $.01 and $.02 per share for the three and six month periods ended June30, 2009, respectively.
Recently Adopted Accounting Standards
Adoption of SFAS No.165 - Windstream adopted SFAS No.165, Subsequent Events, in the second quarter of 2009, which establishes general standards of accounting for and disclosure of events that occur after the balance sheet date but before the financial statements are issued or are available to be issued. SFAS No.165 sets forth the period after the balance sheet date during which management should evaluate events or transactions that may occur for potential recognition or disclosure in the financial statements; the circumstances under which an entity should recognize events or transactions occurring after the balance sheet date in its financial statements; and the disclosures that an entity should make about events or transactions that occurred after the balance sheet date. Subsequent events have been evaluated through August 6, 2009, the date the financial statements were issued.
Adoption of FSP FAS 107-1 and APB 28-1 - On April1, 2009, Windstream adopted Financial Accounting Standards Board (FASB) Staff Position No. (FSP) FAS 107-1 and Accounting Principles Board Opinion No. (APB) 28-1, Interim Disclosures about Fair Value of Financial Instruments. This pronouncement extended the annual disclosures required under SFAS No.107, Disclosures about Fair Value of Financial Instruments to interim reporting periods. See Note 6 for the disclosures required by FSP FAS 107-1 and APB 28-1.
Adoption of FSP FAS 157-4 - EffectiveApril1, 2009, Windstream adopted FSP FAS 157-4, Determining the Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly, which provided additional guidance for estimating fair value in accordance with SFAS No.157 when the volume and level of activity for the financial asset or liability has significantly decreased. FSP FAS 157-4 also provided guidance on identifying circumstances that indicate a transaction is not orderly. There was no impact to Windstreams consolidated financial statements upon adoption.
Adoption of SFAS No.141(R) - SFAS No.141(R), Business Combinations, a revision of SFAS No.141, became effective January1, 2009. Under SFAS No.141(R), an acquiring entity is required to recognize all the assets acquired and liabilities assumed in a transaction at the acquisition-date fair value with limited exceptions. SFAS No.141(R) changed the accounting treatment for certain specific items, in |
| 3.Dispositions: |
3. Dispositions:
Disposition of Wireless Business - On November21, 2008, Windstream completed the sale of its wireless business to ATT Mobility II, LLC for approximately $56.7 million. The transaction included approximately 52,000 wireless customers, spectrum licenses and cell sites covering a four-county area of North Carolina with a population of approximately 450,000, and six retail locations. Revenues from these operations totaled $11.8 million and $23.5 million during the three and six month periods ended June30, 2008, respectively. The operating results of the wireless business have been separately presented as discontinued operations in the accompanying unaudited interim consolidated statements of income.
Disposition of Acquired Assets Held for Sale - Certain assets acquired from CT Communications, Inc. (CTC), including the corporate headquarters building and a license for wireless spectrum, were sold during the first six months of 2008. Windstream received net proceeds of $17.3 million, which approximated the fair value at the date of acquisition. |
| 4.Goodwill and Other Intangible Assets: |
4. Goodwill and Other Intangible Assets:
As of January1, 2009, the Company completed its annual impairment review of goodwill and franchise rights in accordance with the guidance contained in SFAS No.142 Goodwill and Other Intangible Assets and determined that no write-down in the carrying value of these assets was required. Commensurate with its change from multiple segments to a single reporting segment as discussed further in Note 1, the Company no longer uses a combination of the discounted cash flows and the calculated market values of comparable companies to determine the fair value of a reporting unit. Rather, the Company assesses impairment of its goodwill by evaluating the carrying value of its shareholders equity against the current fair market value of its outstanding equity, where the fair market value of the Companys equity is equal to its current market capitalization plus a control premium estimated to be 20 percent through the review of recent market observable transactions involving wireline telecommunication companies. During the six months ended June30, 2009, there were no changes in the carrying amounts of goodwill.
The carrying value of the Companys franchise rights was $955.0 million as of December31, 2008. As discussed in Note 2, effective January1, 2009, the Company prospectively changed its assessment of useful life for its franchise rights from indefinite-lived to 30 years. Effective with this change these rights are now amortized on a straight line basis in accordance with the way in which these operations are expected to contribute to the undiscounted cash flows of the Company.
Intangible assets subject to amortization were as follows:
(Millions) June30, 2009
Gross
Cost Accumulated Amortization Net Carrying Value
Franchise rights $ 955.0 $ (15.9 ) $ 939.1
Valor customer list 210.0 (110.6 ) 99.4
CTC customer list 45.0 (15.7 ) 29.3
Other customer list 67.6 (44.3 ) 23.3
Cable franchise rights 22.5 (21.7 ) 0.8
$ 1,300.1 $ (208.2 ) $ 1,091.9
December 31, 2008
(Millions)
Gross
Cost
Accumulated
Amortization
NetCarrying
Value
Valor customer list $ 210.0 $ (94.4 ) $ 115.6
CTC customer list 45.0 (11.7 ) 33.3
Other customer list 67.6 (40.9 ) 26.7
Cable franchise rights 22.5 (20.9 ) 1.6
$ 345.1 $ (167.9 ) $ 177.2
Amortization expense for intangible assets subject to amortization was $20.2 million and $40.3 million for the three and six month periods ended June30, 2009, respectively, as compared to $13.6 million and $26.9 million for the same periods of 2008. Amortization expense for intangible assets subject to amortization is estimated to be $78.2 million in 2009, $71.1 million in 2010, $65.4 million in 2011, $59.7 million in 2012 and $47.4 million in 2013. |
| 5.Debt and Derivative Instruments: |
5. Debt and Derivative Instruments:
Long-term debt was as follows:
(Millions)
June30,
2009
December31,
2008
Issued by Windstream Corporation:
Senior secured credit facility, Tranche A - variable rates, due July17, 2011 $283.3 $283.3
Senior secured credit facility, Tranche B - variable rates, due July17, 2013 1,372.0 1,379.0
Senior secured credit facility, Revolving line of credit - variable rates, due July17, 2011 (a) 150.0
Debentures and notes, without collateral:
2016 Notes 8.625%, due August1, 2016 (c) 1,746.0 1,746.0
2013 Notes 8.125%, due August1, 2013 (c) 800.0 800.0
2019 Notes 7.000%, due March15, 2019 (c) 500.0 500.0
Issued by subsidiaries of the Company:
Valor Telecommunications Enterprises LLC and Valor Telecommunications Finance Corp. - 7.75%, due February15, 2015 (b)(c) 400.0 400.0
Windstream Holdings of the Midwest, Inc. - 6.75%, due April1, 2028 (b)(c) 100.0 100.0
Debentures and notes, without collateral:
Windstream Georgia Communications LLC - 6.50%, due November15, 2013 50.0 50.0
Teleview, LLC - 7.00%, due January2, 2010 and May2, 2010 0.2 0.3
Discount on long-term debt, net of premiums (25.3 ) (26.1 )
5,226.2 5,382.5
Less current maturities (24.2 ) (24.3 )
Total long-term debt $5,202.0 $5,358.2
(a) During the second quarter of 2009, the Company repaid the full amount outstanding under its revolving line of credit in its senior secured credit facilities. The revolving line of credits variable interest rates ranged from 1.59 percent to 2.45 percent, and the weighted average rate was 1.77 percent during the six months ended June30, 2009. Letters of credit are deducted in determining the total amount available for borrowing under the revolving credit agreement. Accordingly, the total amount outstanding under the letters of credit and the indebtedness incurred under the revolving credit agreement may not exceed $500.0 million. At June30, 2009, the amount available for borrowing under the revolving credit agreement was $493.2 million.
(b) The Companys collateralized Valor debt is equally and ratably secured with debt under the senior secured credit facilities. Debt held by Windstream Holdings of the Midwest, Inc., a subsidiary of the Company, is secured solely by the assets of the subsidiary.
(c) Certain of the Companys debentures and notes are callable by the Company at various premiums on early redemption.
The terms of the senior secured credit facilities and indentures include customary covenants that, among other things, require Windstream to maintain certain financial ratios, restrict its ability to incur additional indebtedness, and limit its cash payments. These financial ratios include a maximum leverage ratio of 4.5 to 1.0 and a minimum interest coverage ratio of 2.75 to 1.0. In addition, the covenants include restrictions on dividend and certain other types of payments, as well as restrictions on capital expenditures, whi |
| 6.Fair Value Measurements: |
6. Fair Value Measurements:
Windstream utilizes market data or assumptions that market participants would use in valuing its assets and liabilities, including assumptions about risk and the risks inherent in the inputs to the valuation technique. These inputs can be readily observable, market corroborated, or generally unobservable. Valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs are used, and the fair value balances are classified based on the observability of those inputs. The highest priority is given to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurement) and the lowest priority is given to unobservable inputs (level 3 measurement). As required by SFAS No.157, assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. The Companys assessment of the significance of a particular input to the fair value measurement requires judgment and may affect the valuation of fair value assets and liabilities and their placement within the fair value hierarchy levels.
The Companys non-financial assets and liabilities include goodwill, intangible assets and asset retirement obligations (AROs) that are measured at fair value on a non-recurring basis. No event occurred during the six months ended June30, 2009 requiring goodwill or intangible assets to be recognized at fair value (see Notes 2 and 4). The fair value measurements for AROs were insignificant during the six months ended June30, 2009.
The Companys financial instruments consist primarily of cash and cash equivalents, accounts receivable, accounts payable, long-term debt and interest rate swaps. The carrying amount of accounts receivable and accounts payable was estimated by management to approximate fair value due to the relatively short period of time to maturity for those instruments. Cash equivalents, long-term debt and interest rate swaps are measured at fair value on a recurring basis in accordance with the fair value measurement provisions of SFAS No.157.
The fair values of the Companys cash equivalents and interest rate swaps were determined using the following inputs:
(Millions) June30, 2009
QuotedPrice in Active Markets for IdenticalAssets Significant Other Observable Inputs Significant Unobservable Inputs
FairValue CarryingAmount Level 1 Level 2 Level 3
Cash equivalents (a) $ 237.1 $ 237.1 $ 237.1 $ $
Interest rate swaps (b) (see Note 5) $ (123.7 ) $ (123.7 ) $ $ (123.7 ) $
(Millions) December31, 2008
QuotedPrice in Active Markets for IdenticalAssets Significant Other Observable Inputs Significant Unobservable Inputs
FairValue CarryingAmount Level 1 Level 2 Level 3
Cash equivalents (a) $ 296.6 $ 296.6 $ 296.6 $ $
Interest rate swaps (b) (see Note 5) $ (153.4 ) $ (153.4 ) $ $ (153.4 ) $
(a) Included in cash and |
| 7.Commitments and Contingencies: |
7. Commitments and Contingencies:
The Company is party to various legal proceedings. Although the ultimate resolution of these various proceedings cannot be determined at this time, management of the Company does not believe that such proceedings, individually or in the aggregate, will have a material adverse effect on the future consolidated results of income, cash flows or financial condition of the Company.
In addition, management of the Company is currently not aware of any environmental matters that, individually or in the aggregate, would have a material adverse effect on the consolidated financial condition or results of operations of the Company.
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| 8.Employee Benefit Plans and Postretirement Benefits Other Than Pensions: |
8. Employee Benefit Plans and Postretirement Benefits Other Than Pensions:
Windstream maintains a non-contributory qualified defined benefit pension plan, which covers substantially all employees. Prior to establishing the pension plan pursuant to the spin off in 2006, the Companys employees participated in a substantially equivalent plan maintained by Alltel. Future benefit accruals for all eligible nonbargaining employees covered by the pension plan ceased as of December31, 2005 (December 31, 2010 for employees who had attained age 40 with two years of service as of December31, 2005). The Company also maintains supplemental executive retirement plans that provide unfunded, non-qualified supplemental retirement benefits to a select group of current and former management employees. Additionally, the Company provides postretirement healthcare and life insurance benefits for eligible employees. Employees share in, and the Company funds, the costs of these plans as benefits are paid.
The components of pension expense (including provision for executive retirement agreements) were as follows for the three and six month periods ended June30:
(Millions) ThreeMonthsEnded Six Months Ended
2009 2008 2009 2008
Benefits earned during the year $ 3.2 $ 2.6 $ 6.7 $ 6.6
Interest cost on benefit obligation 14.4 14.2 28.6 28.1
Amortization of net actuarial loss 18.0 2.2 35.6 3.2
Amortization of prior service credit (0.1 ) (0.1 ) (0.1 ) (0.1 )
Expected return on plan assets (12.5 ) (18.6 ) (25.0 ) (38.1 )
Net periodic benefit expense (income) $ 23.0 $ 0.3 $ 45.8 $ (0.3 )
The components of postretirement expense were as follows for the three and six month periods ended June30:
(Millions) ThreeMonthsEnded SixMonthsEnded
2009 2008 2009 2008
Benefits earned during the year $ $ $ $ 0.1
Interest cost on benefit obligation 1.9 3.7 4.2 7.0
Amortization of transition obligation 0.2 0.4
Amortization of net actuarial (gain) loss (0.1 ) 0.5 0.7
Amortization of prior service (credit) cost (0.9 ) 0.4 (1.6 ) 0.9
Net periodic benefit expense $ 0.9 $ 4.8 $ 2.6 $ 9.1
Windstream contributed $7.3 million to the postretirement plan during the six months ended June30, 2009, and expects to contribute an additional $6.6 million for postretirement benefits throughout the remainder of 2009, excluding amounts that will be funded by participant contributions to the plans. The Company does not expect to make any contributions to the qualified pension plan in 2009. |
| 9.Merger, Integration and Restructuring Charges: |
9. Merger, Integration and Restructuring Charges:
The following is a summary of the merger, integration and restructuring charges recorded in the three and six month periods ended June30:
(Millions) ThreeMonthsEnded SixMonthsEnded
2009 2008 2009 2008
Transaction costs associated with the acquisition of DE $ 1.4 $ $ 1.4 $
Transaction costs associated with the acquisition of CTC 0.1
Computer system separation and conversion costs 4.6 6.1
Total merger and integration costs 1.4 4.6 1.4 6.2
Severance and employee benefit costs 0.1 0.5 1.1
Total merger, integration and restructuring charges $ 1.5 $ 5.1 $ 1.4 $ 7.3
Costs triggered by strategic transactions, including transaction costs, rebranding costs and system conversion costs are unpredictable by nature. Restructuring charges, consisting primarily of severance and employee benefit costs, are triggered by the Companys continued evaluation of its operating structure and identification of opportunities for increased operational efficiency and effectiveness and should not necessarily be viewed as non-recurring. They are reviewed regularly by the Companys decision makers and are included as a component of compensation targets.
Transaction costs are expensed as incurred and primarily include charges for accounting, legal, broker fees and other miscellaneous costs, including computer system and conversion costs, associated with the acquisition of DE (see Note 14), CTC and the disposition of the publishing business.
Windstream incurred $0.1 million in severance and employee-related costs during the three months ended June30, 2009, primarily related to the closure of an out of territory sales and product distribution location. During the first quarter of 2009, the Company recorded a $0.1 million reduction in liabilities to reflect differences between estimated and actual costs paid associated with a work force reduction initiated during the fourth quarter of 2008. In addition, during the three months ended June30, 2009, the Company expensed transaction costs of $1.4 million in accordance with SFAS No.141(R) Business Combinations associated with the pending acquisition of DE.
During the six months ended June30, 2008, the Company incurred $1.1 million in severance and employee-related costs primarily related to the announced realignment of certain information technology and business sales functions. Additionally, in 2008 the Company incurred charges for accounting, legal and broker fees and other miscellaneous costs associated with the acquisition of CTC. Other merger and integration costs during 2008 consisted of computer system and conversion costs, of which $4.6 million incurred during the second quarter was related to a non-cash charge to abandon certain software acquired in the CTC acquisition.
The following is a summary of the activity related to the liabilities associated with the Companys merger, integration and restructuring charges for the six months ended June3 |
| 10.Comprehensive Income (Loss): |
10. Comprehensive Income (Loss):
Comprehensive income (loss) was as follows for the three and six month periods ended June30:
(Millions) ThreeMonthsEnded Six Months Ended
2009 2008 2009 2008
Net income $ 90.8 $ 102.0 $ 179.0 $ 225.7
Comprehensive income:
Defined benefit pension plans:
Change in net actuarial loss for employee benefit plans (11.2 ) (27.5 ) (11.2 ) (27.5 )
Amounts included in net periodic benefit cost:
Amortization of prior service credits (0.1 ) (0.1 ) (0.1 ) (0.1 )
Amortization of net actuarial loss 18.0 1.6 35.6 3.2
Income tax (expense) benefit (2.5 ) 10.2 (9.3 ) 9.5
Change in pension plan 4.2 (15.8 ) 15.0 (14.9 )
Postretirement plan:
Change in net actuarial gain (loss) for employee benefit plans 12.9 (8.3 ) 12.9 (8.3 )
Amounts included in net periodic benefit cost:
Amortization of transition obligation 0.2 0.4
Amortization of prior service costs (credits) (0.9 ) 0.4 (1.6 ) 0.9
Amortization of net actuarial (gain) loss (0.1 ) 0.5 0.7
Income tax (expense) benefit (5.4 ) 1.3 (5.1 ) 6.4
Change in postretirement plan 6.5 (5.9 ) 6.2 0.1
Change in employee benefit plans 10.7 (21.7 ) 21.2 (14.8 )
Interest rate swaps:
Unrealized holding gain on interest rate swaps 27.6 52.6 27.6 8.9
Income tax expense (10.5 ) (20.1 ) (10.9 ) (3.4 )
Unrealized holding gain on interest rate swaps 17.1 32.5 16.7 5.5
Comprehensive income $ 118.6 $ 112.8 $ 216.9 $ 216.4
Accumulated other comprehensive loss was as follows:
(Millions) June30, December31,
2009 2008
Pension and postretirement plans $ (227.1 ) $ (248.3 )
Unrealized holding losses on interest rate swaps:
Designated portion (70.1 ) (86.6 )
Undesignated portion (1.5 ) (1.7 )
Accumulated other comprehensive loss $ (298.7 ) $ (336.6 )
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| 11.Earnings per Share: |
11. Earnings per Share:
Basic earnings per share was computed by dividing net income applicable to common shares by the weighted average number of common shares outstanding during each period. In accordance with FSP EITF 03-6-1, Windstreams non-vested restricted shares that contain a non-forfeitable right to receive dividends on a one-to-one per share ratio to common shares are considered participating securities, and the impact is included in the computation of basic earnings per share pursuant to the two-class method prescribed under SFAS No.128, Earnings per Share. The two-class method of computing earnings per share is an earnings allocation formula that determines earnings attributable to common shares and participating securities according to dividends declared (whether paid or unpaid) and participation rights in undistributed earnings. Earnings per common share was computed by dividing the sum of distributed earnings and undistributed earnings allocated to common shareholders by the weighted average number of common shares outstanding for the period. In applying the two-class method, undistributed earnings are allocated to both common shares and non-vested restricted shares based on the pro-rata weighted average shares outstanding during the period. The Company also computed dilutive earnings per share using the two-class method as this method is more dilutive than the treasury stock method. Under this method, Windstreams diluted earnings per share is equal to the Companys calculated basic earnings per share. Upon adoption of this standard on January1, 2009, the Company retrospectively adjusted prior period earnings per share data, the impact of which was immaterial.
A reconciliation of net income and number of shares used in computing basic and diluted earnings per share was as follows for the three and six month periods ended June30:
(Millions, except per share amounts) ThreeMonthsEnded Six Months Ended
2009 2008 2009 2008
Basic and diluted earnings per share:
Numerator:
Income from continuing operations $ 90.8 $ 117.9 $ 179.0 $ 239.8
Income from continuing operations allocable to non-vested restricted shares (1.1 ) (1.0 ) (2.2 ) (2.1 )
Adjusted income from continuing operations available to common shares $ 89.7 $ 116.9 $ 176.8 $ 237.7
Loss from discontinued operations (15.9 ) (14.1 )
Loss from discontinued operations allocable to non-vested restricted shares 0.1 0.2
Adjusted income from discontinued operations available to common shares (15.8 ) (13.9 )
Net income available to common shares $ 89.7 $ 101.1 $ 176.8 $ 223.8
Denominator:
Weighted average common shares outstanding for the period 432.4 441.3 434.2 445.4
Basic and |
| 12.Stock-Based Compensation Plans: |
12. Stock-Based Compensation Plans:
Under the Companys stock-based compensation plans, Windstream may issue restricted stock and other equity securities to directors, officers and other key employees. The maximum number of shares available for issuance under the Windstream 2006 Equity Incentive Plan is 10.0million shares. As of June30, 2009, the balance available for grant was approximately 3.6million shares.
During February and May 2009, the Windstream Board of Directors approved grants of restricted stock to officers, executives, non-employee directors and certain management employees. These grants include the standard annual grants to this employee and director group as a key component of their annual incentive compensation plan. The vesting periods and grant date fair value for shares issued during the six months ended June 2009 was as follows:
(Thousands) Common Shares
Vest ratably over a three-year service period 966.3
Vest contingently over a three-year performance period 677.5
Vest one year from date of grant, service based (a) 55.2
Total granted 1,699.0
Grant date fair value (Millions) $ 14.8
(a) Represents shares granted to non-employee directors.
For performance based shares granted, the operating target for the first vesting period was approved by the Board of Directors in February 2009. While achievement of these performance targets remains uncertain, management has determined that it is probable that such targets will be met for fiscal year 2009.
Non-vested Windstream restricted stock activity for the six months ended June30, 2009 was as follows:
(Thousands) WeightedAverage FairValuePerShare
Number of Shares
Non-vested at December 31, 2008 3,352.8 $12.30
Granted 1,699.0 $8.69
Vested (676.6 ) $12.27
Forfeited (48.1 ) $11.77
Non-vested at June 30, 2009 4,327.1 $10.89
The weighted average grant date fair value for restricted stock granted was $0.1 million and $14.8 million for the three and six month periods ended June30, 2009, respectively, compared to $14.3 million for the six month period ended June30, 2008. There was no change in the weighted average grant date fair value for the three months ended June30, 2008. At June30, 2009, unrecognized compensation expense for non-vested Windstream restricted shares was $16.5 million. The unrecognized compensation expense for these non-vested restricted shares has a remaining weighted average vesting period of 1.1 years. Stock-based compensation expense was $5.4 million and $10.6 million for the three and six month periods ended June30, 2009 respectively, as compared to $4.6 million and $9.2 million for the same periods of 2008.
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| 13.Supplemental Guarantor Information: |
13. Supplemental Guarantor Information:
In connection with the issuance of the 2013 Notes, the 2016 Notes, and the 2019 Notes (the guaranteed notes), certain of the Companys wholly-owned subsidiaries (the Guarantors), including all former subsidiaries of Valor, provided guarantees of those debentures. These guarantees are full and unconditional as well as joint and several. Certain Guarantors may be subject to restrictions on their ability to distribute earnings to the Company. The remaining subsidiaries (the Non-Guarantors) of Windstream are not guarantors of the guaranteed notes. Following the acquisition of CTC, the guaranteed notes were amended to include certain subsidiaries of CTC as guarantors.
The following information presents condensed consolidated statements of income for the three and six month periods ended June30, 2009 and 2008, condensed consolidated balance sheets as of June30, 2009 and December31, 2008, and condensed consolidated statements of cash flows for the six months ended June30, 2009 and 2008 of the parent company, the Guarantors, and the Non-Guarantors. Investments in consolidated subsidiaries are held primarily by the parent company in the net assets of its subsidiaries and have been presented using the equity method of accounting.
Condensed Consolidated Statement of Income (Unaudited) Three Months Ended June30, 2009
(Millions) Parent Guarantors Non- Guarantors Eliminations Consolidated
Revenues and sales:
Service revenues $ $ 188.5 $ 528.2 $ (2.2 ) $ 714.5
Product sales 27.5 10.9 38.4
Total revenues and sales 216.0 539.1 (2.2 ) 752.9
Costs and expenses:
Cost of services 59.6 191.8 (1.7 ) 249.7
Cost of products sold 24.5 9.1 33.6
Selling, general, administrative and other 22.7 68.2 (0.5 ) 90.4
Depreciation and amortization 47.9 85.4 133.3
Merger, integration and restructuring 0.1 1.4 1.5
Total costs and expenses 154.8 355.9 (2.2 ) 508.5
Operating income 61.2 183.2 244.4
Earnings (losses) from consolidated subsidiaries 155.0 17.6 (172.6 )
Other income (expense), net 1.7 26.8 (27.9 ) 0.6
Intercompany interest income (expense) 9.1 (3.7 ) (5.4 )
Interest expense (95.7 ) (1.6 ) (0.5 ) (97.8 )
Income before income taxes 70.1 100.3 149.4 (172.6 ) 147.2
Income tax expense (benefit) (20.7 ) 27.3 49.8 56.4
Net income $ 90.8 $ 73.0 $ 99.6 $ (172.6 ) $ 90.8
Condensed Consolida |
| 14.Pending Transactions: |
14. Pending Transactions:
On May10, 2009 the Company entered into a definitive agreement to acquire all of the outstanding shares of common stock of DE. Under the terms of the agreement, DE shareholders will receive 0.650 shares of Windstream common stock and $5.00 in cash per each share of DE common stock. As of June30, 2009, DE had outstanding approximately 14.4million shares of common stock and approximately $185.0 million of long-term debt, including current maturities. Including the early extinguishment of debt, estimated cash consideration to be paid at closing was estimated to be $260.0 million as of June30, 2009. The acquisition of DE will significantly increase Windstreams presence in Pennsylvania by adding approximately 118,000 incumbent local exchange carrier access lines, 47,000 competitive local exchange carrier access lines and 44,000 high-speed Internet customers in central Pennsylvania. In addition, we expect this acquisition to generate significant opportunities for operating efficiencies with contiguous Windstream markets. The acquisition has received federal approval and is expected to close in the fourth quarter of 2009 subject to certain conditions, including necessary approvals from state regulators and DE shareholders.
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