Windstream 2008 Annual Report Download - page 110

During the twelve months ended December 31, 2008, the assets of Windstream’s pension plan have declined 34.7
percent from approximately $1,001.0 million to $654.0 million due to routine benefit payments of $57.3 million as
well as declines in the market value of assets held of approximately $289.7 million. Primarily as a result of the decline
in market value, the Company will be required to make additional contributions to the pension plan beginning in 2010.
The following table projects the Company’s required minimum contributions for the next five years assuming actual
plan returns equal the expected long-term rate of return on plan assets of 8.0 percent. Due to numerous assumptions
used and the high degree of uncertainties inherent in forward pension funding projections, actual results may materially
differ from these projections.
(Millions)
Year
Projected
Contribution
Net of Tax Benefit (a)
2009 $-
2010 43.0 (b)
2011 43.0
2012 24.0
2013 22.0
(a) Amounts were calculated as of December 31, 2008 in accordance with the funding provisions of the U.S. Pension
Protection Act of 2006 (the “2006 Act”), as corrected by the Worker, Retiree, and Employer Recovery Act using a
twenty-four month average asset value, an 8.0 percent long-term rate of return on assets and all other assumptions
projected to be consistent with the 2008 pension plan assumptions, as disclosed in Note 8.
(b) Includes approximately $24.0 million for the Company’s 2009 plan year required contribution which may be
deferred until 2010 because the pension plan was overfunded as of January 1, 2008.
The Company’s actual funding requirements are established annually by actuarial valuation, with the next such
valuation to be performed as of January 1, 2009. Based on our current projections we expect that the pension plan will
be at or above 80 percent funded. However, if the pension plan falls below 80 percent funded, we may elect to make a
voluntary contribution in 2009 to avoid certain administrative limitations imposed by the 2006 Act on plans not
meeting the 80 percent funding level.
The Company’s board of directors has adopted a current dividend practice for the payment of quarterly cash dividends
at a rate of $0.25 per share of the Company’s common stock. This practice can be changed at any time at the discretion
of the board of directors, and is subject to the Company’s restricted payment capacity under its debt covenants as
further discussed below. Dividends paid to shareholders were $1.00 per share during 2008, totaling $445.2 million.
Windstream also paid $109.9 million to shareholders in January 2009 pursuant to a $0.25 quarterly dividend declared
during the fourth quarter of 2008.
In February 2008, the Windstream Board of Directors approved a stock repurchase program for up to $400 million of
the Company’s common stock continuing until December 31, 2009. No repurchases were made under this program
during the third and fourth quarters of 2008; however, as of December 31, 2008, the Company had repurchased
16.0 million shares for $200.3 million. As of December 31, 2008, the Company had approximately $560.0 million of
restricted payment capacity as governed by our debt covenants available to fund the share repurchase program and
dividends to shareholders. The Company builds additional capacity through cash generated from operations while
dividend payments, share repurchases and other certain restricted investments reduce the available restricted payments
capacity. Given the current economic and credit environment, the Company plans to continue preserving liquidity and
may opportunistically consider free cash flow accretive initiatives with a bias toward debt repurchases. Achievement of
the share repurchase plan will depend on such factors as the overall credit environment and liquidity needs of the
business.
As discussed further in Note 5, the Company currently has approximately $5.4 billion in long-term debt outstanding,
including current maturities. This outstanding debt is principally comprised of approximately $2.3 billion secured
primarily under the Company’s senior secured credit facilities and approximately $3.0 billion in unsecured senior
notes. Scheduled principal payments under the credit facility approximate $14.0 million per year through 2011. In
addition, the Company will make sinking fund payments of approximately $10.0 million per year on its subsidiary
debt. The remaining principal balance of Tranche A and the revolving line of credit of the senior secured credit
facilities, totaling $433.3 million, will be due in 2011.
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