Windstream 2010 Annual Report Download - page 120

Factors that could affect Windstream’s short and long-term credit ratings would include, but are not limited to, a
material decline in the Company’s operating results, increased debt levels relative to operating cash flows resulting
from future acquisitions, increased capital expenditure requirements, or changes to our dividend policy. If
Windstream’s credit ratings were to be downgraded, the Company might incur higher interest costs on future
borrowings, and the Company’s access to the public capital markets could be adversely affected. The Company’s
exposure to interest risk is further discussed in the Market Risk section below. A downgrade in Windstream’s current
short or long-term credit ratings would not accelerate scheduled principal payments of Windstream’s existing long-
term debt, as discussed further in Note 5. Windstream’s next significant scheduled debt maturity is in 2013.
Historical Cash Flows
(Millions) 2010 2009 2008
Cash flows provided from (used in):
Operating activities $ 1,094.5 $ 1,120.8 $ 1,080.4
Investing activities (1,457.5) (492.8) (233.1)
Financing activities (657.6) 138.3 (622.7)
Increase (decrease) in cash and cash equivalents $ (1,020.6) $ 766.3 $ 224.6
Cash Flows – Operating Activities
Cash provided from operations is the Company’s primary source of funds. Cash flows from operating activities
decreased by $26.3 million in 2010 as compared to 2009, and increased $40.4 million in 2009 as compared to 2008.
The decrease during 2010 is primarily from a voluntary payment of $41.0 million to its qualified pension plan during
the third quarter of 2010. This voluntary payment was made to preserve an accumulated credit balance, which may be
used to offset required future contributions. If Windstream had not made the voluntary payment, it would have
forfeited a portion of the credit balance in accordance with currently enacted funding regulations. In 2009, increases
were partially offset by changes in working capital requirements, including timing differences in the billing and
collections of accounts receivable, payment of trade payables and purchases of inventory. The Company plans to make
a pension contribution of approximately $60.0 million in the first quarter of 2011, in the form of Windstream common
stock, which will allow the Company to preserve cash and manage overall net debt leverage. The amount and timing of
future contributions to the pension plan are dependent upon a myriad of factors including future investment
performance, changes in future discount rates and changes in the demographics of the population participating in the
Company’s qualified pension plan. During 2010, the Company generated sufficient cash flows from operations to fund
its capital expenditures, scheduled principal payments of long-term debt, its voluntary pension contribution and
payment of dividends as further discussed below.
Cash Flows – Investing Activities
Cash used in investing activities increased by $964.7 million in 2010 as compared to 2009, primarily due to net cash
used to acquire the Acquired Companies, as previously discussed (see Notes 2 and 3). Cash used in investing activities
increased by $259.7 million in 2009 as compared to 2008, primarily due to net cash used to acquire D&E and Lexcom,
as previously discussed. Proceeds from the 2008 sale of the wireless business and acquired assets held for sale, totaling
$56.7 million and $17.8 million, respectively, also contributed to the increase in 2009 (see Notes 2 and 3).
Capital expenditures were $415.2 million, $298.1 million and $317.5 million for 2010, 2009 and 2008, respectively.
Capital expenditures increased $117.1 million in 2010, primarily due to $61.2 million in capital expenditures related to
the properties of the Acquired Companies, D&E and Lexcom and a general increase in capital spending during the
second half of the year. Capital expenditures in each of the three years were incurred to construct additional network
facilities and to upgrade the Company’s telecommunications network in order to expand our offering of other
communications services, including high-speed Internet communication services. During each of the three years, the
Company funded its capital expenditures through internally-generated funds.
The primary uses of cash for future capital expenditures are for property, plant and equipment necessary to support the
Company’s wireline operations. Capital expenditures are forecasted to be between $520.0 million and $580.0 million
for 2011, which includes the forecasted capital to support the Acquired Companies’ networks as well as begin
construction on the projects that received grants from the RUS. Windstream must be substantially complete with the
RUS projects within two years and must have completed the projects within three years.
Capital expenditures for 2011 will be primarily incurred to construct additional network facilities and to upgrade the
Company’s telecommunications network. Windstream will continue to focus capital expenditures on the expansion of
its advanced data and integrated solutions products, including MPLS networking and data center and managed hosting
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