Windstream 2008 Annual Report Download - page 176

INFORMATION REGARDING NON-GAAP FINANCIAL MEASURES
Windstream has presented in this Annual Report unaudited pro forma results from current businesses, which
include results from the CTC wireline business for periods prior to their acquisition and excludes (1) results from the
directory publishing business, (2) all merger and integration costs resulting from the transactions discussed above, and
(3) a $6.5 million non-cash impairment charge for acquired assets held for sale. Windstream’s purpose for including
the results of the acquired businesses, and for excluding non-recurring items and the results of the directory publishing
business, is to improve the comparability of results of operations for the twelve months ended December 31, 2008 to
the results of operations for the same period of 2007. 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 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 the Company’s
operations. 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 results from current businesses, including pro forma revenues and sales and pro forma
operating income before depreciation and amortization (“OIBDA”) from current businesses, as key measures of
operational performance of its business segments. Windstream management, including the chief operating decision-
maker, use these measures consistently for all purposes, including internal reporting purposes, the evaluation of
business objectives, opportunities and performance, and the determination of management compensation.
OIBDA can be calculated directly from the Company’s financial statements by taking operating income and
adding back depreciation and amortization expense. The Company will also at times make reference to pro forma
OIBDA from current businesses, which is also a non-GAAP measure. Pro forma OIBDA from current businesses
adjusts OIBDA for the items that are either included or excluded from pro forma results from current businesses. Also
included in this Annual Report is pro forma OIBDA from current businesses and discontinued wireless operations. This
measure adjusts pro forma OIBDA from current businesses to include the pro forma OIBDA from discontinued
wireless operations up to the date of its sale on November 21, 2008. Management considers OIBDA to be useful to
investors because OIBDA provides information specific to the Company’s operating performance.
Free cash flow is defined as net cash provided from operations less net cash used in the procurement of property,
plant and equipment. The Company believes free cash flow provides the investor useful information about cash
available to pay dividends. Dividend payout ratio is defined as dividends paid on common shares divided by free cash
flow. The Company believes the dividend payout ratio provides the investor useful information about its remaining
investable funds after the payment of dividends to shareholders.
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.