Windstream 2011 Annual Report Download - page 27

base salary) for all executive officers in order to reflect such individual’s contributions to Windstream and the
market level of compensation for such position. The Compensation Committee has adopted short-term incentive
plans as part of its goal to make a substantial portion of total direct compensation at risk.
During 2011, the executive officers participated in a short-term cash incentive plan based 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. 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 it also excluded the results of operations of
PAETEC which was acquired in December 2011 and was not included in the calculation of the performance
goals. Windstream utilized Adjusted OIBDA as a performance metric for 2011 because it is a critical indicator of
Windstream’s ability to generate sustainable cash flows over a long period of time.
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 Compensation Committee sets each performance goal at levels that are difficult but
achievable and designed to drive industry leading results. 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 is
made if performance is below the threshold level, and performance between threshold, target and maximum
levels results in prorated payouts. During 2011, the target performance goal was Adjusted OIBDA of $2,023
million. Windstream’s actual performance for Adjusted OIBDA for 2011 was $2,048 million, which reflected an
approximate 140% achievement against the target performance goal for Adjusted OIBDA. The following table
shows the target and actual payouts under the short-term incentive plan for 2011:
Named Executive Officer Target Payout Percentage Actual Payout Percentage
Jeffery R. Gardner 125% 175%
Anthony W. Thomas 80% 112%
Brent Whittington 80% 112%
John P. Fletcher 80% 112%
Cynthia B. Nash 60% 84%
The Compensation Committee believes the payouts reflect the outstanding financial performance driven
by Windstream’s management while delivering industry-leading financial and operating results, successfully
integrating four key acquisitions made in 2010, and adding another key business to Windstream’s portfolio with
the acquisition of PAETEC.
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.
The Compensation Committee began granting performance-based restricted stock units (PBRSUs) instead
of performance-based restricted stock in 2011 in order to provide for greater administrative flexibility for the
issuance of a variable number of shares of common stock based on a range of results between threshold and
maximum performance goals. If performance is achieved between the threshold and target amounts, the number
of shares vested will vary accordingly. Also, the Compensation Committee has designed the PBRSUs to issue an
incremental number of shares equal to 50% of the target grant amount based on achievement of a long-term
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