Windstream 2010 Annual Report Download - page 26

During 2010, the executive officers participated in a short-term cash incentive plan based on
(1) Windstream’s achievement of Adjusted OIBDA, which is a non-GAAP financial measure and is one of the
principal measures used by Windstream to communicate its financial performance in its quarterly earnings
releases and (2) achievement of certain strategic initiatives during 2010, which were the migration of data center
services for most IT systems to new locations and providers, the integration of the acquisitions of D&E
Communications, Inc., Lexcom, Inc., NuVox, Inc. and Iowa Telecommunication Services, Inc., and revenues
from business sales. Windstream provides the methodology for calculating non-GAAP measures in the Current
Report on Form 8-K that accompanies its quarterly earnings releases. The Adjusted OIBDA measure excluded
non-cash pension expense, equity compensation expense and restructuring expense and excluded the results of
operations of Q-Comm Corporation and Hosted Solutions which were acquired in December 2010 and were not
included in the calculation of the performance goals for the year. Windstream utilized Adjusted OIBDA as a
performance metric for 2010 because it is a critical indicator of Windstream’s ability to generate sustainable cash
flows over a long period of time.The Adjusted OIBDA component was weighted at 80% of the plan. The
strategic initiatives component, weighted at 20% of the plan, recognized the importance of several strategic goals
necessary for the success of an aggressive, transformational business plan. The Compensation Committee did not
use pre-established targets, weightings or formulas to determine the payout for the strategic component.
Under the Windstream short-term incentive plan, executive officers were eligible to receive payments in
proportion to Windstream’s achievement of the performance goal that was set at minimum (or threshold), target
and maximum levels. The executive officers were eligible to receive 50% to 200% of these target payout
amounts if threshold or maximum levels, respectively, were achieved. No payout would be made if performance
was below the threshold level and performance between threshold, target and maximum levels results in prorated
payouts. During 2010, the target performance goal was the achievement of Adjusted OIBDA of $1,899 million.
Windstream’s actual performance for Adjusted OIBDA for 2010 was $1,944 million, which reflected an
approximate 176% achievement against the target performance goal for Adjusted OIBDA. The Compensation
Committee considered the achievement of the strategic goals to be well above target levels and approved
payment of 200% for that component. The following table shows the target and actual payouts under the short-
term incentive plan for 2010:
Named Executive Officer Target Payout Percentage Actual Payout Percentage
Jeffery R. Gardner 125% 226%
Anthony W. Thomas 70% 127%
Brent Whittington 80% 145%
John P. Fletcher 80% 145%
Cynthia B. Nash 55% 100%
The Compensation Committee believes the payouts reflect the outstanding financial performance driven
by Windstream’s management while delivering industry-leading financial and operating results and successfully
completing four acquisitions and a highly complex migration of Windstream’s entire data center platform to new
third party providers.
Equity-Incentive Awards. Windstream maintains an equity-based compensation program for executive
officers to provide long-term incentives, to better align the interests of executives with stockholders and to
provide a retention incentive. The Compensation Committee has implemented its equity-compensation program
as part of its goal to make a substantial portion of total direct compensation at risk. The Compensation
Committee also prefers equity incentives over cash and has used it exclusively in lieu of cash as the method of
providing long-term compensation incentives. Each officer receives a portion of his or her total direct annual
compensation for a given year in the form of long-term equity-based incentive compensation.
All Windstream equity compensation awards have been issued as either time-based restricted stock,
performance-based restricted stock or performance-based restricted stock units under the Windstream Amended
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