Windstream 2014 Annual Report Download

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2014 ANNUAL REPORT
PROXY STATEMENT & FORM 10-K

Table of contents

  • Page 1
    2014 ANNUAL REPORT PROXY STATEMENT & FORM 10-K

  • Page 2
    A LETTER FROM THE PRESIDENT AND CHIEF EXECUTIVE OFFICER >PUKZ[YLHTNLULYH[LKZ\IZ[HU[PHSHKQ\Z[LKMYLLJHZOÃ...V^PUHUKWHPKTVYL[OHU TPSSPVUPUKP]PKLUKZ [VZOHYLOVSKLYZ(S[OV\NOV]LYHSSYLZ\S[Z...

  • Page 3
    WINDSTREAM HOLDINGS, INC. NOTICE OF 2015 ANNUAL MEETING OF STOCKHOLDERS AND PROXY STATEMENT WEDNESDAY, MAY 14, 2015 10 A.M. ( CENTRAL TIME)

  • Page 4
    ... OF 2014 ANNUAL MEETING OF STOCKHOLDERS PROXY SUMMARY & VOTING INFORMATION PROXY STATEMENT BOARD AND BOARD COMMITTEE MATTERS PROPOSAL NO. 1 - ELECTION OF DIRECTORS SECURITY OWNERSHIP AUDIT COMMITTEE REPORT COMPENSATION DISCUSSION & ANALYSIS COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION...

  • Page 5
    ... on March 31, 2015, we began mailing to many of our stockholders a notice of internet availability of proxy materials. This notice contains instructions on how to access our Annual Meeting materials, including our Proxy Statement and Annual Report on Form 10-K, and to vote online. The notice also...

  • Page 6
    ... By Order of the Board of Directors, K RISTI MOODY Secretary Little Rock, Arkansas March 31, 2015 Important notice regarding the availability of proxy materials for the 2015 Annual Meeting of Stockholders to be held on May 14, 2015: Windstream's Proxy Statement and Annual Report to security holders...

  • Page 7
    ... December 31, 2014. INFORMATION ABOUT OUR 2015 ANNUAL MEETING OF STOCKHOLDERS Date: Time: Location: Record Date: Thursday, May 14, 2015 10:00 a.m. (central time) Via the internet: www.virtualshareholdermeeting.com/WIN15 Holders of our common stock at the close of business on March 19, 2015 may vote...

  • Page 8
    ... Windstream is committed to good corporate governance, which promotes the long-term interests of stockholders, strengthens Board of Directors and management accountability, and helps build public trust in Windstream. Highlights of our corporate governance practices include: Board Independence Board...

  • Page 9
    ... compensation consultants 9 Regularly evaluate equity plan overhang levels and run rates What We Don't Do: Ã- No dividends on unvested performance-based restricted stock Ã- No excise tax gross-ups in any circumstance Ã- No hedging transactions for directors and executive officers Ã- No special...

  • Page 10
    ... our executive officers' compensation in 2014 was at-risk through allocation of short-term cash incentives and long-term equity-based incentives. Base salaries for executive officers not receiving promotions in fiscal 2014 were subject to modest increases. As with previous years, executive officers...

  • Page 11
    ... Communications Sales & Leasing, Inc. ("CS&L"). Windstream and CS&L will enter into a long-term, exclusive lease allowing Windstream to operate the network and continue to provide advanced network communications services to businesses and consumers. CS&L will become a new publicly traded real-estate...

  • Page 12
    ... availability of proxy materials instead of a full set of Windstream's Annual Meeting materials, or vice versa? In accordance with rules and regulations of the Securities and Exchange Commission (the "SEC"), we are providing online access to Windstream's Annual Meeting materials over the internet...

  • Page 13
    ... of record as of the close of business on March 19, 2015 (the "Record Date") are entitled to receive notice of and to vote during the Annual Meeting. As of the Record Date, there were 605,000,385 shares of Windstream's common stock issued and outstanding, held by 30,007 holders of record. How can...

  • Page 14
    ... the toll free number found on the voting instruction form. By Mail. You may vote by proxy by filling out the voting instruction form and returning it in the envelope provided. What is the quorum requirement for the Annual Meeting? The holders of a majority of the outstanding shares of Common Stock...

  • Page 15
    ... vote on executive compensation Amendments to enable stockholders to call special meetings Amendments to eliminate super-majority voting provisions Ratification of appointment of independent accountant Majority of votes cast 66 2/3% of shares issued and outstanding 66 2/3% of shares issued and...

  • Page 16
    ... constitutes a "related-person transaction" under applicable SEC rules or would interfere with the directors' exercise of independent judgment in carrying out their responsibilities as directors. Leadership Structure. Since the inception of Windstream, the positions of Chief Executive Officer and...

  • Page 17
    ...the rules of the SEC. Compensation Committee. The Compensation Committee held seven meetings during 2014. The Compensation Committee assists the Windstream Board of Directors in fulfilling its oversight responsibility related to the compensation programs, plans, and awards for Windstream's directors...

  • Page 18
    ..., and mergers and acquisitions. The Board supplements its ability to discharge its risk oversight role by receiving and reviewing a report on the results of an annual risk assessment of Windstream as prepared by the Internal Audit Department. This report is used primarily to assist Internal Audit in...

  • Page 19
    ...data provided by its independent compensation consultant, Pearl Meyer & Partners, LLC, to ensure our director compensation program is consistent with industry and peer group practices. Board members generally receive pro-rated amounts of the annual cash retainer and the annual restricted stock grant...

  • Page 20
    ... and address Windstream's challenges and opportunities as a public company. As a former chief executive officer of a public company and a director of several private businesses, he has insight on managing complex business operations, overseeing business risk, designing compensation programs that...

  • Page 21
    ...a provider of subscription-based DVR services and interactive video advertising. Until 2014, Mr. Hinson served as a director, Audit Committee member and Chairman of the Nominating and Governance Committee of Ares Commercial Real Estate Corporation (NYSE: ACRE), a specialty finance company focused on...

  • Page 22
    ... Board include his wide range of financial and business experience. In his role as a member of the Compensation Committee of Windstream and through his professional career, including his prior role as a chief executive officer of a private company, Mr. Montgomery has experience in strategic planning...

  • Page 23
    ... Board. Alan L. Wells, age 55, has served as a director of Windstream since 2010. He is a founding partner of Financial Advisory Partners, LLC, which makes private equity investments and provides financial advisory services to mid-sized companies in the Midwest. He served as Chief Executive Officer...

  • Page 24
    ... executive with two public companies. Through his prior experience as a senior executive in the telecommunications and other regulated industries, he has insight on managing complex regulated enterprises, developing strategic plans in changing regulatory environments, overseeing financial reporting...

  • Page 25
    ... meet the new ownership guidelines. (2) The table below sets forth the number of shares of Common Stock that each non-management director is expected to own by the Annual Meeting (based on the closing price of Windstream common stock on the date of the 2014 Annual Meeting) and the number of shares...

  • Page 26
    ...2020 Annual Meeting of Stockholders to meet the new ownership guidelines. Security Ownership of Directors and Executive Officers. Set forth below is certain information, as of March 1, 2015, as to shares of Windstream common stock beneficially owned by each director, by each named executive officer...

  • Page 27
    ...'s equity compensation plans hold the sole right to vote such shares. Windstream grants performance-based restricted stock units (PBRSUs) to its executive officers. Because unvested PBRSUs do not provide the recipients the right to vote or other elements of beneficial ownership as defined under SEC...

  • Page 28
    ... COMMITTEE REPORT This report provides information concerning the Audit Committee of Windstream Holdings, Inc.'s Board of Directors. The Audit Committee's Charter is available on the Investor Relations page of Windstream Holdings, Inc.'s website at www.windstream.com/investors. The Audit Committee...

  • Page 29
    ...Guidelines - We have robust stock ownership guidelines that apply to all executive officers and require that, among other things, our CEO own Windstream stock valued at 10 times his base salary. Independent Compensation Consulting Firm - The Compensation Committee benefits from its utilization of an...

  • Page 30
    .... The Board believes that Mr. Thomas is the right executive to lead Windstream and position the Company for long-term success. Say on Pay. As required by section 14A of the Exchange Act, stockholders at the 2015 Annual Meeting will be asked again to approve, on an advisory basis, the compensation of...

  • Page 31
    ... Compensation Committee assists the Board in fulfilling its oversight responsibility related to the compensation programs, plans, and awards for Windstream's directors and principal officers. The Compensation Committee annually reviews and approves goals relevant to our CEO's compensation and, based...

  • Page 32
    ... included plan design and company performance data from a specific group of companies which included: DISH Network Corp. ADP United States Cellular Time Warner Telecom Charter Communications CenturyLink NII Holdings Western Union Fidelity Information Services TDS Frontier Level 3 The Committee...

  • Page 33
    ... management transition in December 2014 and the pending closing of the REIT spin-off scheduled for the second quarter of 2015. Our Leadership Transition Since Windstream was formed in 2006, we have executed a focused strategy to expand our business into a national provider of advanced communications...

  • Page 34
    ...‡ ‡ Base salary; Short-term (annual) cash incentive payments; and Long-term incentives in the form of equity-based compensation. The compensation program for the named executive officers also includes the Windstream 2007 Deferred Compensation Plan, the Windstream 401(k) Plan, change-in-control...

  • Page 35
    ... executives to achieve Company-wide performance goals over annual or quarterly periods. Under these plans, the Compensation Committee sets different target payout amounts (as a percentage of base salary) for all executive officers in order to reflect such individual's contributions to Windstream...

  • Page 36
    ... of the Company's principal executive officer. Mr. Whittington was not employed by Windstream at the end of 2014 and, therefore, did not receive a payout under the short-term incentive plan. Long-Term Equity-Based Incentive Awards. Windstream maintains an equity-based compensation program to provide...

  • Page 37
    .... In determining the number of shares of restricted stock or performance-based restricted stock to award to any individual under the Equity Plan, the Compensation Committee divides the approved grant value for such individual by the closing stock price of Windstream Common Stock on the date that...

  • Page 38
    ... in the employment agreement), then Windstream will pay to Mr. Thomas, in a lump sum, the following amounts: ‡ ‡ his annual base salary through the date of termination and any other vested benefits, in each case to the extent not previously paid, and three times his annual base salary. 34 |

  • Page 39
    ... with the compensation arrangements of other market participants. The change-in-control agreements for our NEOs provide that upon a qualifying separation from service the executive officers will be eligible to receive a cash, lump sum payment equal to a multiple times base salary and target...

  • Page 40
    ... compensation arrangements of other companies. The plan offers participants the ability to defer compensation above the IRS qualified plan limits. Perquisites/Aircraft Use. Effective February 2015, Mr. Thomas is allowed to utilize Windstream's corporate aircraft for personal use under a time-sharing...

  • Page 41
    ... to the covered compensation; and (iv) the Board determines in its sole discretion that it is in the best interests of Windstream and its stockholders for the executive officer to repay the covered compensation. The policy is limited to compensation that is vested or paid based on the achievement...

  • Page 42
    ... Board of Directors that the "Compensation Discussion and Analysis" be included in Windstream Holdings, Inc.'s Annual Report on Form 10-K for the fiscal year ended December 31, 2014 and Windstream Holdings, Inc.'s Proxy Statement on Schedule 14A for the 2015 Annual Meeting of Stockholders for filing...

  • Page 43
    ... in which the Compensation Committee viewed or determined the equity compensation values for the named executive officers. Specifically, under applicable SEC rules, the grant date fair values for the performance-based restricted stock or units is calculated based on the stock price when the target...

  • Page 44
    ... or 2013 and Mr. Works was not a NEO in 2012. Does not include $3,000,000 severance payment made in fiscal 2015. GRANTS OF PLAN-BASED AWARDS The following table shows information regarding grants of plan-based awards, including equity and non-equity incentive plans, made by Windstream during 2014 to...

  • Page 45
    ... Pursuant to SEC rules and applicable accounting rules, because the Compensation Committee sets the annual performance targets at the start of each respective performance period, only the grant date fair value of the portion of the grant subject to a particular performance period is reported in this...

  • Page 46
    ... values of the performance-based equity awards and the Overachievement Amount are based on the stock price of Windstream Common Stock on the date of the grant, which is considered the date the performance targets were set. Shares related to the 2014, 2013 and 2012 overachievement amounts cliff vest...

  • Page 47
    ... outstanding awards under the Windstream equity incentive plans held by the individuals named below as of December 31, 2014. All awards represent grants of restricted stock or units under the Equity Plan. Stock Awards (1) Time-Based Vesting Restricted Stock Performance-Based Vesting Restricted Stock...

  • Page 48
    ... shares related to the 2013 grant of PBRSUs as noted in footnote (5) of the "Grants of Plan-Based Awards" table. Performance-based shares will vest March 1, 2016, if at all, if Windstream achieves the performance objectives set by the Compensation Committee for fiscal 2015. Performance-based shares...

  • Page 49
    ... employees. No named executive officers are eligible for continuing accruals under the Pension Plan as of the end of 2014. The Pension Plan's accrued benefit is payable in the form of a monthly life annuity following normal retirement at age 65 (or, if later, at five years of service or at the fifth...

  • Page 50
    ... regard to the IRS compensation limit ($260,000 for 2014) over (y) the participant's regular Pension Plan benefit (on a single life-annuity basis payable commencing on the later of the participant's retirement date or age 65 regardless of the actual form or timing of payment). If the participant has...

  • Page 51
    ... plan had compensation not been limited under the 401(k) plan by the Internal Revenue Code, plus the amount, if any, by which the executive officer's matching contribution under the Windstream 401(k) plan is reduced due to the executive officer's contributions to the 2007 Plan. Participant accounts...

  • Page 52
    ...,974 1,430,401 486,322 The value of the accelerated vesting of restricted shares is based on the closing price of Windstream's Common Stock on December 31, 2014 of $8.24 per share. These amounts reflect actual 2014 payouts, which are reported in the Non-Equity Incentive Plan Compensation column of...

  • Page 53
    ... or its affiliates for "good reason" (as defined below) on December 31, 2014, then Windstream would have been obligated to pay Mr. Thomas, in a lump sum, approximately $3,000,000. This severance benefit under the Employment Agreement equals (i) his annual base salary through the date of termination...

  • Page 54
    ...receive, in a lump sum paid by Windstream or its successor, the following amounts pursuant to the change-in-control agreements: Three times for Messrs. Thomas, Fletcher, and Works, two times for Mr. Gunderman, and one time for Mr. Eichler the sum of the executive's base salary and target annual...

  • Page 55
    ... based anywhere other than its principal executive offices; (iv) the failure by Windstream to pay to the executive any portion of the executive's current compensation, deferred compensation or business expense reimbursements; (v) the failure by Windstream to continue in effect any compensation plan...

  • Page 56
    ... of restricted shares is based on the closing price of Windstream's Common Stock on December 31, 2014 of $8.24 per share. None of the named executive officers are eligible to receive a tax gross-up payment for the golden parachute excise tax imposed on the change in control severance benefits under...

  • Page 57
    ... to create an independent publicly traded real estate investment trust (REIT), Communications Sales & Leasing, Inc. (CS&L). The proposed transaction is expected to close in the second quarter of 2015 and will enable Windstream to accelerate network investments, provide enhanced services to customers...

  • Page 58
    ...Company's business in the best interests of the stockholders. Additionally, the proposed amendments would require that stockholders requesting a special meeting hold the requisite stock ownership percent in a "net long position." A stockholder's "net long position" is the amount of Windstream shares...

  • Page 59
    ...forth in the Windstream Bylaws, a special meeting of stockholders may be called upon receipt by Windstream's Corporate Secretary of a written request from one or more stockholders of record who have continuously held at least a 20% "net long position" of our outstanding common stock for at least one...

  • Page 60
    ...the 2014 Proposal received the support of 47.75% of our outstanding common stock, representing approximately 98% of the votes cast on such proposal at last year's annual meeting (excluding abstentions and broker non-votes). Considering the level of support for the 2014 Proposal, the Windstream Board...

  • Page 61
    ... business before an annual meeting, (2) the number, election and term of office of the Board of Directors, (3) the filling of vacancies on the Board of Directors, (4) the procedural requirements for the nomination of directors, and (5) amendment of the Windstream Bylaws. To amend, alter, change...

  • Page 62
    ... of the proposed amendments to Articles Seven and Eleven of the Windstream Certificate and Article VII of the Windstream Bylaws set forth above is qualified in...the Windstream Bylaws generally and the super-majority voting provisions will remain in effect. Board Recommendation THE BOARD OF DIRECTORS ...

  • Page 63
    ... filings, and accounting and financial reporting consultations. The increase in 2014 is due primarily to incremental audit and accounting services performed by PwC in connection with Windstream's anticipated REIT spin-off, including SEC filings made in connection therewith. Audit-related fees...

  • Page 64
    ...PwC should be engaged to perform the services. None of the services described above were approved pursuant to the de minimis exception provided in Rule 2-01(c)(7)(i)(C) of Regulation S-X promulgated by the SEC. Board Recommendation THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE...

  • Page 65
    ... and Treasurer and an executive director of Windstream, became President and Chief Executive Officer of CS&L, Windstream's newly formed REIT subsidiary that is expected to be spun-off into a new publicly traded company in 2015. In that capacity, he will receive a base salary of no less than $700...

  • Page 66
    ... in the company's employee benefit and compensation plans generally made available to employees with similar levels of responsibilities. SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE Section 16(a) of the Exchange Act requires Windstream's directors and executive officers, and persons who...

  • Page 67
    ..." and the "Compensation Committee Report on Executive Compensation" shall not be deemed soliciting material or otherwise deemed filed and shall not be deemed to be incorporated by any general statement of incorporation by reference in any filings made under the Securities Act of 1933 or the Exchange...

  • Page 68
    ... and amortization OIBDA (A) Merger and integration costs Pension expense (benefit) Restructuring charges Share-based compensation Adjusted OIBDA (B) Adjustments: Adjusted capital expenditures Cash paid for interest Cash refunded (paid) for taxes Adjusted free cash flow Dividends paid Payout ratio...

  • Page 69
    ... BYLAWS TO ENABLE STOCKHOLDERS TO CALL SPECIAL MEETINGS Proposed Amendment to the Windstream Certificate ARTICLE Ten For so long as any security of the Company is registered under Section 12 of the Securities Exchange Act of 1934: (i) the stockholders of the Corporation may not take any action...

  • Page 70
    ...Section 2(b) and related provisions of these Bylaws shall be determined in good faith by the Board of Directors or its designees, which determination shall be conclusive and binding on the Corporation and the stockholders. (c) In order for a Stockholder Requested Special Meeting to be called, one or...

  • Page 71
    ... when the person attends for the express purpose of objecting at the beginning of the meeting to the transaction of any business because the meeting is not lawfully called or convened. For purposes of these Bylaws, "electronic transmission" means any form of communication, not directly involving the...

  • Page 72
    ... meeting arranged in alphabetical order, showing the address of each stockholder and the number of shares registered in the name of each stockholder; provided, that the Corporation shall not be required to include electronic mail addresses or other electronic contact information on such list. Such...

  • Page 73
    ... is called for a date that is not within 25 days before or after such anniversary date, notice by the stockholder to be timely must be so received not later than the close of business on the 10th day following the date on which notice of the date of the annual meeting was mailed or public...

  • Page 74
    ... Windstream Bylaws ARTICLE VII AMENDMENTS In furtherance and not in limitation of the powers conferred by statute, the Board of Directors of the Corporation is expressly authorized to make, alter, amend, change, add to or repeal these Bylaws by the affirmative vote of a majority of the total number...

  • Page 75
    ... 31, 2014 or TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _____ to _____ 4001 Rodney Parham Road Little Rock, Arkansas 72212 (Address of principal executive offices) (Zip Code) (501) 748-7000 (Registrant's telephone number...

  • Page 76
    ... Holdings, Inc. Accordingly, Windstream Corporation meets the conditions set forth in general instruction I(1)(a) and (b) of Form 10-K and is therefore filing this form with the reduced disclosure format. Unless the context indicates otherwise, the use of the terms "Windstream," "we," "us" or...

  • Page 77
    ... 14. Directors, Executive Officers, and Corporate Governance Executive Compensation Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters Certain Relationships and Related Transactions, and Director Independence Principal Accountant Fees and Services Part IV...

  • Page 78
    ...to use all of its shares of the REIT opportunistically during a twelve-month period following the spin-off, subject to market conditions, to retire additional Windstream Corp. debt. On January 21, 2015, we announced that we have received all regulatory approvals from state public service commissions...

  • Page 79
    ..., we expect increases in real-time streaming video and traditional Internet usage to motivate customers to upgrade to faster broadband speeds with a higher price. As of December 31, 2014, we could deliver speeds up to 3 Megabits per second ("Mbps") to all of our addressable lines, and speeds up to...

  • Page 80
    ... payment received as the shareholder's pro rata ownership of the company remains the same and the dividend is adjusted up accordingly. Following the reverse stock split, Windstream expects to pay an annual dividend of $.60 per share, paid on a quarterly basis. To illustrate the effects of the spin...

  • Page 81
    ... multi-site networking, data center, managed services, and other integrated voice and data services. Enterprise customers also include government contracts, including those under programs such as E-Rate. Small businesses traditionally are served by high-speed Internet, integrated voice and data and...

  • Page 82
    ... rate plans based on minutes of use, flexible or unlimited long distance calling services. We offer consumer video services primarily through a relationship with Dish Network LLC ("Dish Network"). We also own and operate cable television franchises in some of our service areas. Our video offerings...

  • Page 83
    ...VHUYLFHVWRRWKHUWHOHFRPcarriers. Consumer Sales and Marketing 2XU...RQOLQHVDOHVDQGQDWLRQDOagents. NETWORK WHKDYHGHYHORSHGDUREXVWIOH[...directly:KHUHZHRZQODVWPLOHIDFLOLWLHVZHDUHDEOHWRofIHUXSWR*ESVRI(WKHUQHWPDQDJHGservices....customer'VFRQQHFWLRQWRWKRVHVHUYLFHVKDVJUHDW...

  • Page 84
    ...000 per month based upon our ability to leverage our national network to provide complex, customized solutions with personalized service. Our small business customers are driving growth in revenues by purchasing valueadded services such as data backup, hosting services, and tech support. Our primary...

  • Page 85
    ... ‡ &DEOHWHOHYLVLRQ companies: Cable television providers are aggressively offering high-speed Internet, voice and video services in our service areas. These services are typically bundled and offered to our customers at competitive prices. WirHOHVVcarriers: Wireless providers primarily compete...

  • Page 86
    ... of support from universal service funds or other government programs, expected rates of loss of voice lines or inter-carrier compensation, expected increases in high-speed Internet and business data connections, our expected ability to fund operations, expected required contributions to our pension...

  • Page 87
    ...ERDUGRIdirectors; XQDQWLFLSDWHG...customers; WKHLPSDFWRIHTXLSPHQWIDLOXUHQDWXUDOGLVDVWHUVRUWHUURULVWacts; WKHeffectVRIwork...sec.gov ‡ ‡ ‡ ‡ ‡ ‡ ‡ ‡ ‡ ‡ ‡ ‡ ‡ ‡ $GGLWLRQDOIRUZDUGORRNLQJVWDWHPHQWVVSHFLILFWRWKHSURSRVHGspin-ofIDQGIRUPDWLRQRIWKHREIT...

  • Page 88
    ...REITFRPSDQ\WRFRQGXFWDQGH[SDQGWKHLUUHVSHFWLYHEXVLQHVVHV IROORZLQJWKHSURSRVHGspin-ofIand WKHDELOLW\WRUHFHLYHRUGHOD\VLQREWDLQLQJWKHUHJXODWRU\DSSURYDOVUHTXLUHGWRFRPSOHWHWKHSURSRVHGspin...RXUIXWXUHUHVXOWVLQFOXGHGLQWKLVManagement'V'LVFXVVLRQDQG$QDO\VLVRI)LQDQFLDO&...

  • Page 89
    ... rates, terms and conditions included therein are approved by state commissions while other network services, such as some high-capacity Ethernet services, may be obtained through commercial contracts subject to limited government oversight. The availability and pricing of network services purchased...

  • Page 90
    ... for customers. Video streaming services and peer-to-peer file sharing applications use significantly more bandwidth than traditional Internet activity such as web browsing and email. As utilization rates and availability of these services continue to grow, our high-speed Internet customers may use...

  • Page 91
    ..., which limit our pricing flexibility for regulated voice and high-speed Internet products, subject us to service quality, service reporting and other obligations and expose us to the reduction of revenue from changes to the universal service fund, the intercarrier compensation system, or access to...

  • Page 92
    ... of Windstream common stock and certain company-owned real estate properties totaling $89.9 million. The increases were partially offset by routine benefit payments of $65.6 million and lump sum payments and administrative expenses of $86.6 million. Returns generated on plan assets have historically...

  • Page 93
    ... or business conditions may limit, our ability to do some of these things on favorable terms or at all. As of February 20, 2015, Moody's Investors Service ("Moody's"), S&P and Fitch Ratings ("Fitch") had granted Windstream the following senior secured, senior unsecured and corporate credit ratings...

  • Page 94
    ... on our operating results. New technologies may affect our ability to compete in our consumer markets. Wireless companies are aggressively developing networks using next-generation data technologies, which are capable of delivering high-speed Internet service via wireless technology to a larger...

  • Page 95
    ... long distance and other voice carriers over our network in exchange for access charges. These access charges represent a significant portion of our revenues. Additionally, we are making significant capital investments to deploy fiber-to-the-tower and other network services in return for long-term...

  • Page 96
    ...2015. In addition, the national pension agreement covers approximately 500 employees. This agreement expired in 2010 but has been extended indefinitely, subject to the right of Windstream or the unions to terminate the agreement with 30 days notice. Historically, we have succeeded in negotiating new...

  • Page 97
    ... of our properties are pledged as collateral to secure long-term debt obligations of Windstream Corp. The obligations under Windstream Corp.'s senior secured credit facility are secured by liens on all of the personal property assets and the related operations of our subsidiaries who are guarantors...

  • Page 98
    ... to pay dividends under Windstream Corp.'s debt instruments, see Management's Discussion and Analysis of Financial Condition and Results of Operations, Financial Condition, Liquidity and Capital Resources in the Financial Supplement to this Annual Report on Form 10-K. (b) (c) Not applicable. Not...

  • Page 99
    ... stockholder returns on our common stock, and comparative returns on the S&P 500 Stock Index and the S&P Telecom Index. The S&P Telecom Index consists of the following companies: AT&T Inc., CenturyLink, Inc., Crown Castle International Corp., Frontier Communications Corp., Sprint Communications, Inc...

  • Page 100
    ...Under Equity Compensation Plans Under our share-based compensation plans, we may issue restricted stock and other equity securities to directors, officers and other key employees. The maximum number of shares available for issuance under the Windstream 2006 Amended and Restated Equity Incentive Plan...

  • Page 101
    .... 2. 3. Our management, with the participation of the Chief Executive Officer and Chief Financial Officer, has evaluated any changes in Windstream Holdings' and Windstream Corp.'s internal control over financial reporting that occurred during the period covered by these annual reports, and they...

  • Page 102
    ... to Investor Relations, Windstream Corporation, 4001 Rodney Parham Road, Little Rock, Arkansas 72212. For information regarding compliance with Section 16(a) of the Exchange Act, refer to "Section 16 (a) Beneficial Ownership Reporting Compliance" in our Proxy Statement for our 2015 Annual Meeting of...

  • Page 103
    ... For information pertaining to Executive Compensation, refer to "Compensation Discussion and Analysis" in our Proxy Statement for our 2015 Annual Meeting of Stockholders, which are incorporated herein by reference. Item 12. Security Ownership of Certain Beneficial Owners and Management and Related...

  • Page 104
    ... herein: Financial Supplement Page Number Reports of Independent Registered Public Accounting Firm Windstream Holdings, Inc. Consolidated Financial Statements Consolidated Statements of Operations for the years ended December 31, 2014, 2013, and 2012 Consolidated Statements of Comprehensive Income...

  • Page 105
    .... (Registrant) WINDSTREAM CORPORATION (Registrant) By /s/ Anthony W. Thomas Anthony W. Thomas, President and Chief Executive Officer Date: February 24, 2015 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf...

  • Page 106
    ... tax benefit Loss before equity in subsidiaries Equity (losses) earnings from subsidiaries Net (loss) income Comprehensive (loss) income For the Year Ended December 31, 2014 $ $ $ 2.3 $ 2.3 (2.3) (2.3) (0.9) (1.4) (38.1) (39.5) $ (55.9) $ See Notes to Condensed Financial Information (Parent...

  • Page 107
    ... FINANCIAL INFORMATION OF THE REGISTRANT (PARENT COMPANY) BALANCE SHEETS (Millions, except par value) Assets Current Assets: Distributions receivable from Windstream Corp. Other current assets Total current assets Investment in affiliate Total Assets Liabilities and Shareholders' Equity Current...

  • Page 108
    ... assets and liabilities, net: Other current assets Net cash used in operating activities Cash Flows from Financing Activities: Dividends paid to shareholders Distributions from Windstream Corp Net cash provided by financing activities Change in cash and cash equivalents Cash and Cash Equivalents...

  • Page 109
    ... or operations other than its ownership in Windstream Corporation ("Windstream Corp.") and its subsidiaries. Certain covenants within Windstream Corp.'s senior secured credit facility may restrict its ability to distribute funds to Windstream Holdings in the form of dividends, loans or advances...

  • Page 110
    ... information technology conversions and network efficiency projects. Represents cash outlays for merger, integration and restructuring costs. Costs primarily include charges for accounting, legal, broker fees and other miscellaneous costs associated with the acquisitions of NuVox, Q-Comm and PAETEC...

  • Page 111
    ... Windstream Corporation, Peach Merger Sub, Inc. and PAETEC Holding Corp. (incorporated herein by reference to Exhibit 2.1 to Current Report on Form 8K of PAETEC dated July 31, 2011). 2.2 Agreement and Plan of Merger, dated August 29, 2013, by and among Windstream Corporation, Windstream Holdings...

  • Page 112
    ...30 of Windstream Corporation's Form 10-Q dated November 7, 2013). Director Compensation Program dated February 6, 2013 (incorporated herein by reference to Windstream Holdings Inc.'s Form 10-K dated February 19, 2013). Form of Restricted Shares Agreement (Non-Employee Directors) entered into between...

  • Page 113
    ...its directors and executive officers (incorporated by reference to Exhibit 10.1 to the Corporation's Form 8K dated February 14, 2014). Form of Restricted Shares Agreement (Officers: Restricted Stock-Clawback Policy) entered into between Windstream Corporation and its executive officers (incorporated...

  • Page 114
    ... the SEC on February 8, 2008 (SEC File No. 333-149130)) and as assumed by Windstream Holdings, Inc. PAETEC Communications, Inc. Agent Incentive Plan, as amended and restated (filed as Exhibit 4.2.1 to PAETEC Holding Corp.'s Amendment No. 2 to Registration Statement on Form S-4 (SEC File Number 333...

  • Page 115
    WINDSTREAM HOLDINGS, INC. WINDSTREAM CORPORATION FINANCIAL SUPPLEMENT TO ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 2014

  • Page 116
    7KLVSDJHLQWHQWLRQDOO\OHIWEODQN

  • Page 117
    ...'s Report on Internal Control Over Financial Reporting Reports of Independent Registered Public Accounting Firm Annual Financial Statements: Windstream Holdings, Inc. Consolidated Financial Statements Consolidated Statements of Operations for the years ended December 31, 2014, 2013, and 2012...

  • Page 118
    ...legal and board of director fees, Nasdaq listing fees, other shareholder-related costs, income taxes, common stock activity, and payables from Windstream Corp. to Windstream Holdings. For the years ended December 31, 2014 and 2013, the amount of expenses directly incurred by Windstream Holdings were...

  • Page 119
    ... broadband, voice and video services to consumers in primarily rural markets. We have operations in 48 states and the District of Columbia, a local and long-haul fiber network spanning approximately 121,000 miles, a robust business sales division and 27 data centers. EXECUTIVE SUMMARY During 2014...

  • Page 120
    ... services, such as online security and backup, will drive growth in consumer high-speed Internet revenues. We continue to focus on increasing our broadband speeds available to customers. As of December 31, 2014, we could deliver speeds up to 3 Megabits per second ("Mbps") to all of our addressable...

  • Page 121
    ... for businesses to basic voice services. Our sales, marketing and customer support teams are structured based upon the type of customer they serve. We deliver these services over owned or leased network facilities. Our corporate support teams, such as finance and accounting, human resources and...

  • Page 122
    ... Operating Metrics: Customer locations Enterprise Small business Total customer locations (a) Total business customers Carrier special access circuits Consumer Operating Metrics: Voice lines High-speed Internet Digital television customers Total consumer connections (a) 2014 2013 2012 217.9 357...

  • Page 123
    ... to increases in data and integrated services and high-speed Internet revenues (a) Due to increases in data center and managed service revenues (b) Due to decreases in voice, long distance and miscellaneous revenues (c) Net changes in enterprise and small business revenues (a) Increases in data and...

  • Page 124
    ... of long distance calls, as well as reciprocal compensation received from wireless and other local connecting carriers for the use of our network facilities. USF revenues are government subsidies designed to partially offset the cost of providing wireline services in high-cost areas, further...

  • Page 125
    ... types of communications equipment to our customers. Business product sales includes high-end data and communications equipment which facilitate the delivery of advanced data and voice services to our business customers. Consumer product sales include high-speed Internet modems, home networking...

  • Page 126
    ... fiber transport network and adding new data centers and increasing capacity at existing data center locations. The increase during 2014 in interconnection expense was primarily due to increased purchases of circuits due to the growth in data customers, as well as higher capacity circuits to service...

  • Page 127
    ... benefit plans. The increase in sales and marketing in 2014 was primarily due to the expansion of enterprise marketing campaigns designed to generate sales leads and promote brand awareness. The increase in 2013 was due to additional compensation costs resulting from the expansion of our business...

  • Page 128
    ..., we incurred pre-tax restructuring charges of $24.1 million during 2014, primarily consisting of severance and other employee benefit costs. As a result of certain changes in our executive management team, we also incurred severance-related costs of $6.3 million in 2014. In 2012, we completed...

  • Page 129
    ... information related to the proposed transaction. In 2013, we incurred consulting fees related to network efficiency projects. In 2012, these costs primarily reflected the nationwide rebranding of the PAETEC markets and consulting fees related to integration activities. Restructuring charges...

  • Page 130
    ... debt obligations. In 2012, Windstream Corp. retired all $300.0 million of the outstanding 9.500 percent notes due July 15, 2015 ("PAETEC 2015 Notes"). The PAETEC 2015 Notes were purchased using borrowings under the revolving line of credit. The retirement was accounted for under the extinguishment...

  • Page 131
    ...rate risk inherent in Windstream Corp.'s senior secured credit facility and mature on June 17, 2016. See Note 5 for additional details. Income Taxes Income tax expense decreased $130.4 million, or 123.8 percent, in 2014, and increased $7.1 million, or 7.2 percent, in 2013. The decrease in income tax...

  • Page 132
    ... established final rules for CAF Phase II funding based on a forward-looking cost model to further extend broadband to high-cost areas. The FCC anticipates making the offer of CAF Phase II support for right-of-first-refusal ("ROFR") elections to price cap carriers, including us, in early 2015. When...

  • Page 133
    ... all providers of broadband Internet access service disclose network management practices, performance characteristics, and commercial terms of service. On May 15, 2014, the FCC proposed to re-institute the "no-blocking" rule and to create a new rule that would bar commercially unreasonable actions...

  • Page 134
    ... services at reasonable rates to customers in high cost rural areas and to qualifying low-income and disabled customers. By order of the Texas PUC, the Texas USF distributes support to eligible carriers serving areas identified as high cost, on a per-line basis. Texas USF support payments are based...

  • Page 135
    ...of $65.1 million, payments to reduce liabilities related to our integration and restructuring initiatives, changes in working capital primarily driven by timing differences in the payment of vendor payables and compensation-related costs and the decrease in net income taxes refunded. These decreases...

  • Page 136
    ... a rate of $0.25 per share of our common stock. This practice can be changed at any time at the discretion of the board of directors, and is subject to the restricted payment capacity under Windstream Corp.'s debt covenants as further discussed below. Dividends paid to shareholders during 2014 were...

  • Page 137
    ... to pay a pro rata dividend to our shareholders based on the number of days elapsed in the quarter. Pension Contribution During the first quarter of 2014, we contributed 1.0 million shares of our common stock to the Windstream Pension Plan to meet our quarterly 2014 funding requirements. At the time...

  • Page 138
    ... Corp.'s outstanding voting stock, or breach of certain other conditions set forth in the borrowing agreements. At December 31, 2014, Windstream Corp. was in compliance with all debt covenants and restrictions. Windstream Corp.'s senior secured credit facility and its indentures include maintenance...

  • Page 139
    ... scheduled principal payments of our existing long-term debt. Off-Balance Sheet Arrangements We do not use securitization of trade receivables, affiliation with special purpose entities, variable interest entities or synthetic leases to finance our operations. Additionally, we have not entered...

  • Page 140
    ... agreements for network capacity and software licensing. Other long-term liabilities and commitments primarily consist of deferred tax liabilities, pension and other postretirement benefit obligations, interest rate swaps, CAF Phase 1 funding, asset retirement obligations and long-term deferred...

  • Page 141
    ... from changes in interest rates. As of December 31, 2014 and 2013, the unhedged portion of Windstream Corp.'s variable rate senior secured credit facility was $1,476.5 million and $1,526.4 million, or approximately 17.1 percent and 17.7 percent of Windstream Corp.'s total outstanding long-term debt...

  • Page 142
    ... the depreciable lives of assets in service. Based on those results, we implemented new depreciation rates resulting in a net increase to depreciation expense of $59.1 million and a net decrease in net income of $36.5 million or $0.06 per share for the year ended December 31, 2012. Rapid changes in...

  • Page 143
    ... unfunded, non-qualified supplemental retirement benefits to a select group of management employees. The annual costs of providing pension benefits are based on certain key actuarial assumptions, including the expected return on plan assets and discount rate. We recognize changes in the fair value...

  • Page 144
    ... of support from universal service funds or other government programs, expected rates of loss of voice lines or inter-carrier compensation, expected increases in high-speed Internet and business data connections, our expected ability to fund operations, expected required contributions to our pension...

  • Page 145
    ...business; WKHLPSDFWRInewemerJLQJRUFRPSHWLQJtechnologies; IRUFHUWDLQRSHUDWLRQVZKHUHZHOHDVHIDFLOLWLHVIURPRWKHUFDUULHUVDGYHUVHeffectVRQWKHavailability...VSHHG,QWHUQHWcustomers; WKHLPSDFWRIHTXLSPHQWIDLOXUHQDWXUDOGLVDVWHUVRUWHUURULVWacts; WKHeffectVRIwork VWRSSDJHVE\...

  • Page 146
    ...spin-off; WKHDELOLW\RIHDFKRIWLQGVWUHDP SRVWVSLQ DQGWKHQHZREITFRPSDQ\WRFRQGXFWDQGH[SDQGWKHLUUHVSHFWLYHEXVLQHVVHV IROORZLQJWKHSURSRVHGspin...XQFHUWDLQWLHVWKDWPD\ affectRXUIXWXUHUHVXOWVLQFOXGHGLQWKLVManagement'V'LVFXVVLRQDQG$QDO\VLVRI)LQDQFLDO&RQGLWLRQDQG5HVXOWVRI...

  • Page 147
    ..., legal and board of director fees, Nasdaq listing fees, other shareholder-related costs, income taxes, common stock activity, and payables from Windstream Corp. to Windstream Holdings. In 2014 and 2013, the amount of pretax expenses directly incurred by Windstream Holdings totaled approximately...

  • Page 148
    ...compliance and ethics programs as established by our management and the Board of Directors. The internal auditors and the independent registered public accounting firm periodically meet alone with the Audit Committee and have access to the Audit Committee at any time. Dated February 24, 2015 Anthony...

  • Page 149
    ... internal control over financial reporting as of December 31, 2014, has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report which appears herein. Dated February 24, 2015 Anthony W. Thomas President and Chief Executive Officer Robert...

  • Page 150
    ...is to express opinions on these financial statements, on the financial statement schedules, and on the Company's internal control over financial reporting based on our integrated audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United...

  • Page 151
    Report of Independent Registered Public Accounting Firm To the Board of Directors and Shareholders of Windstream Corporation: In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of operations, comprehensive income (loss), shareholders' equity and ...

  • Page 152
    ...operations before income taxes Income tax (benefit) expense (Loss) income from continuing operations Discontinued operations Net (loss) income Basic and diluted (loss) earnings per share: From continuing operations From discontinued operations Net (loss) income 2014 2013 2012 $ 2,994.7 1,267.0 734...

  • Page 153
    ... Amounts included in net periodic benefit cost: Amortization of net actuarial loss Amortization of prior service credits Income tax benefit Change in postretirement and pension plans Other comprehensive (loss) income Comprehensive (loss) income $ 2014 (39.5) $ 2013 241.0 $ 2012 168.0 (23.2) 15...

  • Page 154
    ... Other assets Total Assets Liabilities and Shareholders' Equity Current Liabilities: Current maturities of long-term debt Current portion of interest rate swaps Accounts payable Advance payments and customer deposits Accrued dividends Accrued taxes Accrued interest Other current liabilities Total...

  • Page 155
    ... funds received for broadband stimulus projects Grant funds received from Connect America Fund Network expansion funded by Connect America Fund Acquisition of a business Dispositions of software and energy businesses Disposition of wireless assets Other, net Net cash used in investing activities...

  • Page 156
    ... Changes in designated interest rate swaps Comprehensive income Share-based compensation expense (See Note 8) Stock options exercised Stock issued to employee savings plan (See Note 7) Stock issued to qualified pension plan (See Note 7) Taxes withheld on vested restricted stock and other Dividends...

  • Page 157
    WINDSTREAM CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS For the years ended December 31, (Millions) Revenues and sales: Service revenues: Enterprise and small business Consumer Carrier Wholesale Other Total service revenues Product sales Total revenues and sales Costs and expenses: Cost of ...

  • Page 158
    ... Amounts included in net periodic benefit cost: Amortization of net actuarial loss Amortization of prior service credits Income tax benefit Change in postretirement and pension plans Other comprehensive (loss) income Comprehensive (loss) income $ 2014 (38.1) $ 2013 241.3 $ 2012 168.0 (23.2) 15...

  • Page 159
    ... Total Assets Liabilities and Shareholders' Equity Current Liabilities: Current maturities of long-term debt Current portion of interest rate swaps Accounts payable Advance payments and customer deposits Payable to Windstream Holdings, Inc. Accrued taxes Accrued interest Other current liabilities...

  • Page 160
    ... funds received for broadband stimulus projects Grant funds received from Connect America Fund Network expansion funded by Connect America Fund Acquisition of a business Dispositions of software and energy businesses Disposition of wireless assets Other, net Net cash used in investing activities...

  • Page 161
    ... Balance at December 31, 2012 Net income Other comprehensive income, net of tax: Change in postretirement and pension plans Amortization of unrealized losses on de-designated interest rate swaps Changes in designated interest rate swaps Comprehensive income Share-based compensation expense...

  • Page 162
    ... expenses incurred directly by Windstream Holdings principally consisting of audit, legal and board of director fees, Nasdaq listing fees, other shareholder-related costs, income taxes, common stock activity, and payables from Windstream Corp. to Windstream Holdings. Earnings per share data has not...

  • Page 163
    ...each reporting period. Included in accounts receivable are unbilled receivables related to communications services and product sales of $40.2 million and $46.3 million at December 31, 2014 and 2013, respectively. Inventories - Inventories consist of finished goods and are stated at the lower of cost...

  • Page 164
    ... Accounting Policies and Changes, Continued: On February 22, 2012 and March 30, 2012, we completed the sales of wireless assets acquired from D&E Communications, Inc. ("D&E") and Iowa Telecommunications Services, Inc. ("Iowa Telecom"), respectively. In connection with these sales, we received...

  • Page 165
    ... of, the related cost and accumulated depreciation are deducted from the plant accounts, with the corresponding gain or loss reflected in operating results. The RUS will have a retained security interest in the assets funded by the broadband stimulus grants over their economic life, which varies...

  • Page 166
    ..., long distance and enhanced service revenues are recognized monthly as services are provided. Revenue from sales of indefeasible rights to use fiber optic network facilities ("IRUs") and the related telecommunications network maintenance arrangements is generally recognized over the term of...

  • Page 167
    ... weighted average shares outstanding. Options and warrants granted in conjunction with the acquisition of PAETEC are included in the computation of dilutive earnings per share using the treasury stock method. A reconciliation of net (loss) income and number of shares used in computing basic and...

  • Page 168
    ... the entity expects to be entitled to receive for those goods or services. ASU 2014-09 also includes new accounting principles related to the deferral and amortization of contract acquisition and fulfillment costs. ASU 2014-09 is effective for annual periods beginning after December 15, 2016 and...

  • Page 169
    ... 4,352.8 On October 1, 2014, we acquired for cash a fixed wireless enterprise services provider with operations in four states. As of January 1, 2014, we determined we had three reporting units, excluding corporate-level activities. After considering changes to assumptions used in our most recent...

  • Page 170
    ..., without collateral: PAETEC 2018 Notes - 9.875%, due December 1, 2018 Premium on long-term debt, net Less current maturities Total long-term debt Weighted average interest rate Weighted maturity Senior Secured Credit Facility On December 6, 2013, Windstream Corp. incurred new borrowings of $590...

  • Page 171
    ... Notes, together with available cash, were used to pay the consideration for the tender offer and to redeem the outstanding 2019 Notes, along with related fees and expenses. PAETEC 2017 Notes - In connection with our acquisition of PAETEC on November 30, 2011, Windstream Corp. assumed $650.0 million...

  • Page 172
    ... the first quarter of 2013, Windstream Corp. also retired all $650.0 million of the outstanding PAETEC 2017 Notes. As noted above, the PAETEC 2017 Notes were repurchased using proceeds from the issuance of the 2023 Notes. Windstream Corp. also amended its senior secured credit facility including...

  • Page 173
    ... ____ 4. Long-term Debt and Lease Obligations, Continued: During 2012, Windstream Corp. retired all $300.0 million of the outstanding 9.500 percent notes due July 15, 2015 ("PAETEC 2015 Notes"). The PAETEC 2015 Notes were purchased using borrowings under Windstream Corp.'s revolving line of credit...

  • Page 174
    ... five-year terms. The properties are managed on behalf of the Windstream Pension Plan by an independent fiduciary and terms of the lease agreements were negotiated with the fiduciary on an arm's-length basis. Due to various forms of continuing involvement, including Windstream Corp.'s benefit from...

  • Page 175
    ... day of each month to the one-month London Interbank Offered Rate ("LIBOR"). The swaps had a notional value of $900.0 million as of December 31, 2014, where it will remain until maturity on October 17, 2019. On May 31, 2013, Windstream Corp. entered into six new pay fixed, receive variable interest...

  • Page 176
    ... a current credit rating at or above A. Windstream Corp. expects to recognize losses of $6.6 million, net of taxes, in interest expense in the next twelve months related to the unamortized value of the de-designated portion of interest rate swap agreements at December 31, 2014. Payments on the swaps...

  • Page 177
    ...receivable, income tax receivable, accounts payable, long-term debt, and interest rate swaps. The carrying amount of cash, restricted cash, accounts receivable, income tax receivable and accounts payable was estimated by management to approximate fair value due to the relatively short period of time...

  • Page 178
    ... of new borrowings and other refinancing activities in 2014 resulting in a decline in the frequency and volume of market activity related to Windstream Corp.'s debt obligations, we have reclassified all long-term debt as Level 2. (b) The fair values of interest rate swaps are determined based on...

  • Page 179
    ... Employees share in, and we fund, the costs of these plans as benefits are paid. The components of pension benefit (income) expense (including provision for executive retirement agreements) and postretirement benefits income were as follows for the years ended December 31: Pension Benefits 2014 2013...

  • Page 180
    ... reduce our long-term pension obligations and administrative expenses of the Windstream Pension Plan, during the fourth quarter of 2014, we offered to certain eligible participants of the plan the option to receive a single lump sum payment in full settlement of all future pension benefits earned by...

  • Page 181
    ... at December 31: Pension Benefits 2014 2013 4.14% 5.01% 7.00% 7.00% 2.00% 2.00% Postretirement Benefits 2014 2013 4.21% 4.99% 7.00% 7.00% -% -% Discount rate Expected return on plan assets Rate of compensation increase In developing the expected long-term rate of return assumption, we considered...

  • Page 182
    ... the long time horizon for paying out benefits and our strong financial condition, the pension plan can accept an average level of risk relative to other similar plans. The liquidity needs of the pension plan are manageable given that lump sum payments are not available to most participants. Equity...

  • Page 183
    ...backed securities (d) Common and preferred stocks - domestic (d) Common and preferred stocks - international (d) Derivative financial instruments (e) Hedge fund of funds (f) Mutual fund (d) Real estate and private equity funds (g) Other (h) Total investments Dividends and interest receivable Pending...

  • Page 184
    ...assets of the fund. Private equity funds consist of investments in limited partnerships and are valued based on the Plan's capital account balance at year end as reported in the audited financial statements of the partnership. This category also includes the contributed real estate properties we are...

  • Page 185
    ...1.8 6.7 The 2015 expected employer contribution for pension benefits consists of $0.8 million necessary to fund the expected benefit payments related to the unfunded supplemental executive retirement pension plans to avoid certain benefit restrictions. We intend to fund this contribution using cash...

  • Page 186
    ... equity incentive plan acquired in the PAETEC acquisition. Restricted Stock and Restricted Stock Unit Activity - During 2014, 2013 and 2012, our Board of Directors approved grants of restricted stock and restricted stock units to officers, executives, non-employee directors and certain management...

  • Page 187
    ... between the closing sale price of Windstream's common stock as reported on the Nasdaq Global Select Market on December 31, 2014 and the option exercise price, multiplied by the number of in-the-money options) that would have been received by the option holders if all option holders had exercised...

  • Page 188
    ... savings plan for which payments to eligible participants are expected to be made in Windstream stock. Except for the second and third quarters of 2014, payments made under the applicable executive and management incentive plans had been in the form of cash. A summary of share-based compensation...

  • Page 189
    ... and other costs Total merger and integration costs Restructuring charges Total merger, integration and restructuring charges 2014 $ - - 20.8 19.6 40.4 35.9 76.3 $ 2013 - 7.8 9.5 12.9 30.2 8.6 38.8 $ 2012 7.1 20.3 6.1 31.9 65.4 27.2 92.6 $ $ $ After giving consideration to tax benefits on...

  • Page 190
    ...: Federal State Deferred: Federal State Income tax (benefit) expense $ 2014 $ 0.8 $ (12.5) (11.7) (18.3) 4.9 (13.4) (25.1) $ 2013 (27.0) $ (2.5) (29.5) 104.0 30.8 134.8 105.3 2012 6.2 13.0 19.2 84.0 (5.0) 79.0 98.2 $ Deferred income tax (benefit) expense for all three years primarily resulted...

  • Page 191
    ... and other employee benefits Unrealized holding loss and interest rate swaps Deferred compensation Bad debt Deferred debt costs Restricted stock Other, net Valuation allowance Deferred income taxes, net Deferred tax assets Deferred tax liabilities Deferred income taxes, net $ 2014 1,146.7 1,312...

  • Page 192
    ... tax rate but would accelerate the payment of cash to the taxing authority to an earlier period. These unrecognized tax benefits are included in other long-term liabilities in the accompanying consolidated balance sheets for the years ended December 31, 2014 and 2013. We file income tax returns...

  • Page 193
    ... facilities, real estate, office space and office equipment were as follows as of December 31, 2014: Year 2015 2016 2017 2018 2019 Thereafter Total (Millions) 120.4 99.3 85.0 70.5 59.6 220.8 655.6 $ $ Rental expense totaled $134.5 million, $120.2 million and $108.2 million in 2014, 2013 and 2012...

  • Page 194
    ...31, 2014 (Millions) Windstream Corp. Guarantors NonGuarantors Eliminations Consolidated Revenues and sales: Service revenues Product sales Total revenues and sales Costs and expenses: Cost of services Cost of products sold Selling, general and administrative Depreciation and amortization Merger and...

  • Page 195
    ...31, 2013 (Millions) Windstream Corp. Guarantors NonGuarantors Eliminations Consolidated Revenues and sales: Service revenues Product sales Total revenues and sales Costs and expenses: Cost of services Cost of products sold Selling, general and administrative Depreciation and amortization Merger and...

  • Page 196
    ...31, 2012 (Millions) Windstream Corp. Guarantors NonGuarantors Eliminations Consolidated Revenues and sales: Service revenues Product sales Total revenues and sales Costs and expenses: Cost of services Cost of products sold Selling, general and administrative Depreciation and amortization Merger and...

  • Page 197
    ... Total Assets Liabilities and Shareholders' Equity Current Liabilities: Current maturities of long-term debt Current portion of interest rate swaps Accounts payable Affiliates payable, net Notes payable - affiliate Advance payments and customer deposits Accrued taxes Accrued interest Other current...

  • Page 198
    ... Total Assets Liabilities and Shareholders' Equity Current Liabilities: Current maturities of long-term debt Current portion of interest rate swaps Accounts payable Affiliates payable, net Notes payable - affiliate Advance payments and customer deposits Accrued taxes Accrued interest Other current...

  • Page 199
    ... funds received for broadband stimulus projects Grant funds received from Connect America Fund Network expansion funded by Connect America Fund Acquisition of a business Other, net Net cash provided from (used in) investing activities Cash Flows from Financing Activities: Distributions to Windstream...

  • Page 200
    ... cash Grant funds received for broadband stimulus projects Grant funds received from Connect America Fund Disposition of software business Other, net Net cash provided from (used in) investing activities Cash Flows from Financing Activities: Dividends paid to shareholders Distributions to Windstream...

  • Page 201
    ... network expansion funded by stimulus grants Changes in restricted cash Grant funds received for broadband stimulus projects Disposition of wireless assets Disposition of energy business Other, net Net cash provided from (used in) investing activities Cash Flows from Financing Activities: Dividends...

  • Page 202
    ... the Year Ended December 31, 2014 (Millions) Windstream Corp. PAETEC Issuer Guarantors NonGuarantors Eliminations Consolidated Revenues and sales: Service revenues Product sales Total revenues and sales Costs and expenses: Cost of services Cost of products sold Selling, general and administrative...

  • Page 203
    ...) Windstream Corp. PAETEC Issuer Guarantors NonGuarantors Eliminations Consolidated Revenues and sales: Service revenues Product sales Total revenues and sales Costs and expenses: Cost of services Cost of products sold Selling, general and administrative Depreciation and amortization Merger and...

  • Page 204
    ... the Year Ended December 31, 2012 (Millions) Windstream Corp. PAETEC Issuer Guarantors NonGuarantors Eliminations Consolidated Revenues and sales: Service revenues Product sales Total revenues and sales Costs and expenses: Cost of services Cost of products sold Selling, general and administrative...

  • Page 205
    ... and Shareholders' Equity Current Liabilities: Current maturities of long-term debt Current portion of interest rate swaps Accounts payable Affiliates payable, net Advance payments and customer deposits Accrued taxes Accrued interest Other current liabilities Total current liabilities Long-term debt...

  • Page 206
    ... and Shareholders' Equity Current Liabilities: Current maturities of long-term debt Current portion of interest rate swaps Accounts payable Affiliates payable, net Advance payments and customer deposits Accrued taxes Accrued interest Other current liabilities Total current liabilities Long-term debt...

  • Page 207
    ... funds received for broadband stimulus projects Grant funds received from Connect America Fund Network expansion funded by Connect America Fund Acquisition of a business Other, net Net cash provided from (used in) investing activities Cash Flows from Financing Activities: Distributions to Windstream...

  • Page 208
    ... cash Grant funds received for broadband stimulus projects Grant funds received from Connect America Fund Disposition of software business Other, net Net cash provided from (used in) investing activities Cash Flows from Financing Activities: Dividends paid to shareholders Distributions to Windstream...

  • Page 209
    ... network expansion funded by stimulus grants Changes in restricted cash Grant funds received for broadband stimulus projects Disposition of wireless assets Disposition of energy business Other, net Net cash provided from (used in) investing activities Cash Flows from Financing Activities: Dividends...

  • Page 210
    ... and telecommunications services. On June 15, 2012, we completed for $6.1 million in cash the sale of the energy business also acquired as part of the PAETEC acquisition. This business operated as a competitive energy supplier and sold electricity to business and residential customers in certain...

  • Page 211
    ... shareholders based on the number of days elapsed in the quarter. Following the close of the spin-off transaction and the effects of the 1-for-6 reverse stock split, Windstream expects to pay an annual dividend of $.60 per share and CS&L initially expects to pay an annual dividend of $2.40 per share...

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    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ____ 17. Subsequent Events: On February 11, 2015, we declared a dividend of 25 cents per share on our common stock, which is payable on April 15, 2015 to shareholders of record on March 31, 2015. F-96

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    ... Services, LLC 2 North LaSalle Street Chicago, IL 60602 800-697-8153 http://www.computershare.com/us/investor Institutional Shareholder Contact: Mary Michaels Vice President Investor Relations and Treasury Windstream 4001 Rodney Parham Road Little Rock, AR 72212-2442 Phone: 501-748-7392 E-mail...

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    4001 N. Rodney Parham Rd. Little Rock, AR 72212 windstream.com/investors