Windstream 2011 Annual Report Download - page 129

F-21
Our senior secured credit facility and Windstream indentures include maintenance covenants derived from certain financial
measures that are not calculated in accordance with accounting principles generally accepted in the United States (“non-GAAP
financial measures”). These non-GAAP financial measures are presented below for the sole purpose of demonstrating our
compliance with our debt covenants and were calculated as follows:
(Millions, except ratios)
Gross leverage ratio:
Total debt
Operating income, last twelve months
Depreciation and amortization, last twelve months
Other non-cash and non-recurring expense adjustments required by the credit facilities and indentures (a)
Adjusted earnings before interest, taxes, depreciation and amortization (“Adjusted EBITDA”)
Leverage ratio (b)
Maximum gross leverage ratio allowed
Interest coverage ratio:
Adjusted EBITDA
Interest expense, last twelve months
Adjustments required by the credit facilities and indentures (c)
Adjusted interest expense
Interest coverage ratio (d)
Minimum interest coverage ratio allowed
December 31,
2011
$ 9,150.4
$ 968.0
847.5
583.7
$ 2,399.2
3.81
4.50
$ 2,399.2
$ 558.3
112.5
$ 670.8
3.58
2.75
(a) Adjustments required by the credit facility and indentures primarily consist of the inclusion of PAETEC's
preacquisition operating income before depreciation and amortization, pension and stock-based compensation expense
and non-recurring merger, integration and restructuring charges.
(b) The gross leverage ratio is computed by dividing total debt by adjusted EBITDA.
(c) Adjustments required by the credit facility and indentures primarily consist of the inclusion of interest expense related
to the remaining debt assumed in connection with the acquisition of PAETEC as if it were assumed on January 1,
2011, capitalized interest and amortization of the discount on long-term debt, net of premiums.
(d) The interest coverage ratio is computed by dividing adjusted EBITDA by adjusted interest expense.
Credit Ratings
As of February 16, 2012, Moody’s Investors Service, Standard & Poor’s Corporation and Fitch Ratings had granted us the
following senior secured, senior unsecured and corporate credit ratings:
Description
Senior secured credit rating
Senior unsecured credit rating
Corporate credit rating
Outlook
Moody’s
Baa3
Ba3
Ba2
Stable
S&P
BB+
B+
BB-
Stable
Fitch
BBB-
BB+
BB+
Stable
Factors that could affect our short and long-term credit ratings would include, but are not limited to, a material decline in our
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 our credit ratings were to be downgraded, we might incur
higher interest costs on future borrowings, and our access to the public capital markets could be adversely affected. Our
exposure to interest risk is further discussed in the Market Risk section below. A downgrade in our current short or long-term
credit ratings would not accelerate scheduled principal payments of our existing long-term debt, as discussed further in Note 5.
Our next significant scheduled debt maturity is in 2013.