Windstream 2014 Annual Report Download - page 10

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Overview of 2014
The Windstream Board of Directors believes that the 2014 actual pay results are aligned with the Company’s
actual 2014 performance results and support the view that the executive compensation program overseen by the
Compensation Committee creates a strong linkage between pay and performance. Windstream’s financial and
operating performance fell short of expectations during 2014, and this performance resulted in a significant reduction
in executive compensation payouts compared to the target opportunities available to our executives.
In addition, in 2014, the Board and Mr. Jeffery R. Gardner, who had served as Windstream’s CEO since its
formation in 2006, each determined a change in perspective was needed in order to accelerate the pace of change
within the Company and to more effectively respond to the rapidly evolving needs of our customers. As a result,
effective December 11, 2014, Mr. Gardner resigned as President and Chief Executive Officer, and Mr. Anthony W.
Thomas was appointed President and Chief Executive Officer. The Board believes that Mr. Thomas is the right
executive to lead Windstream and position the Company for long-term success.
Elements of 2014 Compensation. Consistent with our historical compensation practices, our fiscal 2014 executive
compensation program, which is discussed in detail in this Proxy Statement under the section titled “Compensation
Discussion and Analysis,” featured the following attributes:
At Risk Compensation A substantial portion of our executive officers’ compensation in 2014 was at-risk through
allocation of short-term cash incentives and long-term equity-based incentives.
Base Salary Base salaries for executive officers not receiving promotions in fiscal 2014 were subject
to modest increases.
Incentive Awards As with previous years, executive officers participated in short term and long term
incentive programs in 2014 based principally on Windstream’s achievement of certain
Adjusted OIBDA amounts (OIBDA is operating income before depreciation and
amortization). The Compensation Committee sets target amounts for Adjusted OIBDA,
and the other incentive award performance measures, at levels it believes are difficult but
achievable and designed to drive industry leading results.
Illustrative of our goal to link pay to performance, because operating results fell below
expectations in fiscal 2014, our executive officers’ cash bonuses fell well below their
targeted amounts and no performance units allocated to the 2014 performance period
vested – which represented approximately 50% of total equity awards scheduled to vest
during such time for our executive officers.
2014 Company Performance
Financial Performance
During 2014, Windstream delivered $5.8 billion in total annual revenue, representing a decline of 2.6% year-
over-year. Adjusted OIBDA totaled $2.1 billion, equating to margins of 36.7%, which were aided by disciplined cost
management. Windstream generated substantial adjusted free cash flow, which totaled $794 million for the year. We
returned approximately $600 million to our stockholders, representing a payout ratio of 76%. Operating income for
2014 was $507.1 million (a reconciliation of Adjusted OIBDA and adjusted free cash flow to operating income is set
forth on Appendix A to this Proxy Statement.)