Windstream 2013 Annual Report Download - page 159

F-23
Windstream Corp.'s senior secured credit facility and its 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 compliance with Windstream Corp.'s debt covenants and were calculated as follows at December 31, 2013:
(Millions, except ratios)
Gross leverage ratio:
Long term debt including current maturities $ 8,707.2
Capital leases, including current maturities 79.2
Total long term debt and capital leases $ 8,786.4
Operating income, last twelve months $ 1,009.0
Depreciation and amortization, last twelve months 1,340.9
Other non-cash and non-recurring expense adjustments required by the credit facilities and indentures (a) (45.5)
Adjusted earnings before interest, taxes, depreciation and amortization ("Adjusted EBITDA") $ 2,304.4
Leverage ratio (b) 3.81
Maximum gross leverage ratio allowed 4.50
Interest coverage ratio:
Adjusted EBITDA $ 2,304.4
Interest expense, last twelve months $ 627.7
Adjustments required by the credit facilities and indentures (c) 5.7
Adjusted interest expense $ 633.4
Interest coverage ratio (d) 3.64
Minimum interest coverage ratio allowed 2.75
(a) Adjustments required by the credit facility and indentures primarily consist of the inclusion of pension and share-
based compensation expense, 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 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 24, 2014, Moody’s Investors Service, Standard & Poor’s Corporation ("S&P") and Fitch Ratings had granted
the following senior secured, senior unsecured and corporate credit ratings:
Description Moody’s S&P Fitch
Senior secured credit rating (a) Ba2 BB+ BBB-
Senior unsecured credit rating (a) B1 B BB
Corporate credit rating (b) Ba3 BB- BB
Outlook (b) Stable Stable Stable
(a) Ratings assigned to Windstream Corp.
(b) Corporate credit rating and outlook assigned to Windstream Corp. for Moody's and Fitch, while S&P assigns corporate
credit rating and outlook to Windstream Holdings, Inc.
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.