Windstream 2009 Annual Report Download - page 116

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Overview
Windstream Corporation (“Windstream”, “we”, or the “Company”) is a customer-focused telecommunications
company that provides phone, high-speed Internet and digital television services. The Company also offers a wide
range of IP-based voice and data services and advanced phone systems and equipment to businesses and government
agencies. As of December 31, 2009, the Company provided service to approximately 3.0 million access lines and
1.1 million high-speed Internet customers primarily located in rural areas in 16 states.
The sections that follow provide an overview of our results of operations and highlight key trends and uncertainties in
our business to the extent practicable. Certain statements set forth below constitute forward-looking statements. See
“Forward-Looking Statements” at the end of this discussion for additional factors relating to such statements, and see
“Risk Factors” in Item 1A of Part I of this annual report for a discussion of certain risk factors applicable to our
business, financial condition and results of operations.
Executive Summary
Among the highlights in 2009:
• Windstream completed the acquisitions of D&E Communications, Inc. (“D&E”) and Lexcom, Inc. (“Lexcom”) on
November 10, 2009 and December 1, 2009, respectively. The Company expects to achieve significant synergies
through the combination of these companies with existing Windstream operations.
• Access lines, excluding the access lines acquired from D&E and Lexcom of 145,000 and 22,000, respectively,
declined 143,000 or 4.8 percent, compared to a decline of 165,000 or 5.2 percent for the same period in 2008. (See
“Business Trends”).
• High-speed Internet customers, excluding the customers acquired from D&E and Lexcom of 45,000 and 9,000,
respectively, increased 98,900 or 10.1 percent, compared to an increase of 107,400 or 12.3 percent for the same
period in 2008. (See “Business Trends”).
• Revenues and sales, excluding post acquisition D&E and Lexcom revenues of $20.1 million and $3.3 million,
respectively, decreased $198.3 million, or 6 percent, for the year ended December 31, 2009 as compared to the
same period in 2008. This decline was primarily due to the decline in access lines, declines in product sales
associated with the disposition of the out of territory product distribution operations during the third quarter of
2009, and general declines in product sales to business customers. Partially offsetting these decreases were
increases attributable to growth in high-speed Internet customers as discussed above.
• Operating income, excluding post acquisition D&E and Lexcom operating income of $4.5 million and $1.1
million, respectively, decreased $181.1 million, or 16.0 percent, during 2009 as compared to 2008. The decline in
operating income during 2009 is attributable to the impacts of pension expense, revenue declines associated with
continued access line losses and the amortization of franchise rights.
• During 2009, the Company generated cash flows from operations of $1,120.8 million, an increase of 3.7 percent
compared to 2008. This increase was primarily due to expense management initiatives and lower cash taxes. Cash
flows from operations were used to repurchase $121.3 million of the Company’s common stock and to pay $437.4
million in dividends in 2009.
As further discussed in strategic transactions, the acquisition of NuVox, Inc. (“NuVox”) was completed on February 8,
2010, and we expect to complete the acquisition of Iowa Telecommunications Services, Inc. (“Iowa Telecom”) in mid
2010.
Also during 2010, we expect that competition in the telecommunications industry will continue to present significant
challenges. In addressing competition, the Company will continue to focus its efforts on increasing sales of next
generation data products, increasing high-speed Internet penetration and expanding its service offerings and
distribution channels.
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