Windstream 2006 Annual Report Download - page 179

INFORMATION REGARDING NON-GAAP FINANCIAL MEASURES
Windstream has presented in this Annual Report unaudited pro forma results from current businesses, which
include results from Valor’s businesses for periods prior to the merger, and excludes various non-recurring items
related to the transaction and to the discontinuation of Statement of Financial Accounting Standards (“SFAS”) No. 71,
“Accounting for the Effects of Certain Types of Regulation”. Windstream’s purpose for including the results of Valor’s
businesses, and excluding non-recurring items, is to improve the comparability of results of operations for prior periods
to the results of operations for periods beginning with the third quarter of 2006. Windstream’s purpose for these
adjustments is to focus on the true earnings capacity associated with providing telecommunication services.
Management believes the items either included or excluded from the pro forma results from current businesses are
related to strategic activities or other events, specific to the time and opportunity available, and, accordingly, should be
excluded when evaluating Windstream’s operations. For these reasons, management believes that presenting current
business measures assists investors by providing more meaningful comparisons of results from current and prior
periods and by providing information that is a better reflection of the core earnings capacity of the businesses.
Windstream uses pro forma operating income before depreciation and amortization (“OIBDA”) from current
businesses as a key measure of the operational performance of its business segments. Windstream management,
including the chief operating decision-maker, uses these measures consistently for all purposes, including internal
reporting purposes, the evaluation of business objectives, opportunities and performance, and the determination of
management compensation.
The ratio of net debt to OIBDA is calculated by dividing our long-term debt less cash, cash equivalents and short-
term investments (net debt) by consolidated OIBDA. The ratio of net debt to OIBDA is a credit metric commonly used
by investors and credit agencies as an indicator of financial risk, including our ability to repay or refinance our debt
obligations.
The following table provides a reconciliation of these “non-GAAP financial measures” to measures calculated in
accordance with Generally Accepted Accounting Principles (“GAAP”). The non-GAAP financial measures used by
Windstream may not be comparable to similarly titled measures of other companies and should not be considered in
isolation or as a substitute for measures prepared in accordance with GAAP.
Windstream Corporation
Unaudited Pro Forma Results From Current Businesses
Reconciliations of Non-GAAP Financial Measures
Reconciliation of Pro Forma Revenues and Sales from Current Businesses
for the twelve months ended December 31:
(Dollars in millions) 2005 2006
Revenue and sales under GAAP
Pro forma adjustments: $2,923.5 $3,033.3
Valor revenue and sales prior to merger 505.9 275.3
Elimination of billings to Valor (17.2) (8.8)
Discontinuance of SFAS No. 71 (222.9) (106.5)
Pro forma revenue and sales from current businesses $3,189.3 $3,193.3
Reconciliation of Pro Forma OIBDA from Current Businesses
for the twelve months ended December 31:
(Dollars in millions) 2005 2006
Operating income under GAAP $ 633.8 $ 898.8
Pro forma adjustments:
Valor operating income 167.0 80.9
Customer list amortization (44.0) (24.0)
Royalty expense 268.8 129.6
Restructuring and other charges 37.7 65.0
Discontinuance of SFAS No. 71 8.6 0.4
Depreciation and amortization 596.8 517.5
Pro forma OIBDA from current businesses $1,668.7 $1,668.2