Windstream 2009 Annual Report Download - page 94

Windstream Corporation
Form 10-K, Part I
Item 1A. Risk Factors
the board of directors, and Windstream’s common stockholders should be aware that they have no contractual or other
legal right to dividends. In addition, the other risk factors described in this section could materially reduce the cash
available from operations or significantly increase our capital expenditure requirements, and these outcomes could
cause capital to not be available when needed in an amount sufficient to support our current dividend practice. The
amount of dividends that Windstream may distribute is also limited by restricted payment and leverage covenants in
Windstream’s credit facilities and indentures, and, potentially, the terms of any future indebtedness that Windstream
may incur. The amount of dividends that Windstream may distribute is also subject to restrictions under Delaware law.
If Windstream’s board of directors were to adopt a change in its current dividend practice that resulted in a reduction in
the amount of dividends, such change could have a material and adverse effect on the market price of Windstream’s
common stock.
In addition, the American Jobs and Growth Tax Relief Reconciliation Act of 2003 designated qualifying dividend
payments on capital stock as long term capital gains, which capped the federal tax rate on these payments at 15 percent.
The provisions of this act are set to expire January 1, 2011, and if not renewed, dividends will become taxable as
ordinary income to the shareholder at their current federal tax rate. This could adversely effect the market price of
Windstream’s common stock by decreasing the after tax yield of holding the stock.
Windstream’s data center migration could result in a material disruption to our operations.
Windstream currently outsources the data center for its information technology (“IT”) systems and internet service
provider systems to a third party under a contract ending June 30, 2010. During 2009, our third party service provider
provided notice that this contract will not be renewed, and Windstream will be required to relocate each of these data
centers to a new location and service provider. The data center services to be migrated include managed mainframe
services, output processing, IT support services, and data storage, which support most of Windstream’s IT systems
including billing, financial reporting, customer service, and assignment and provisioning. While this data center
migration is a complex process, Windstream believes that it has sufficient time and resources to complete a successful
migration. However, our inability to complete this migration successfully could result in a material disruption in our
ability to service customers, process bills and perform other support services and could thereby adversely affect our
business, revenue and cash flows.
Item 1B. Unresolved Staff Comments
No reportable information under this item.
Item 2. Properties
The Company’s properties do not provide a basis for description by character or location of principal units. Certain
Windstream properties are pledged as collateral as discussed further in Note 15 to the consolidated financial
statements. The obligations under our senior secured credit facilities are secured by liens on substantially all of the
personal property assets of Windstream and its subsidiaries who are guarantors of our senior secured credit facilities. A
summary of the Company’s investment in property, plant and equipment is presented below.
The Company owns property, which consists primarily of land and buildings, office and warehouse facilities, central
office equipment, software, outside plant and related equipment. Outside communications plant includes aerial and
underground cable, conduit, poles and wires. Central office equipment includes digital switches and peripheral
equipment. The Company’s gross investment in property, by category, as of December 31, 2009, was as follows:
(Millions)
Land $ 28.0
Building and improvements 478.9
Central office equipment 4,040.1
Outside communications plant 4,843.9
Furniture, vehicles and other equipment 496.3
Total $ 9,887.2
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