Windstream 2014 Annual Report Download - page 135

F-19
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
Liquidity and Capital Resources
We rely largely on operating cash flows and long-term debt to provide for our liquidity requirements. We expect cash flows from
operations will be sufficient to fund ongoing working capital requirements, planned capital expenditures, scheduled debt principle
and interest payments and dividend payments. We also have access to capital markets and available borrowing capacity under our
revolving credit agreements.
The actual amount and timing of our future capital requirements may differ materially from our estimates depending on the demand
for our services and new market developments and opportunities, and on other factors, including those described in Part I, “Item
1A. Risk Factors” in this annual report. If our plans or assumptions change or prove to be inaccurate, the foregoing sources of
funds may prove to be insufficient. In addition, if we seek to acquire other businesses or to accelerate the expansion of our business,
we may be required to seek material amounts of additional capital. Additional sources may include equity and debt financing.
Further, if we believe we can obtain additional debt financing on advantageous terms, we may seek such financing at any time,
to the extent that market conditions and other factors permit us to do so. The debt financing we may seek could be in the form of
additional term loans under Windstream Corp.’s senior secured credit facility or additional debt securities having substantially the
same terms as, or different terms from, Windstream Corp.’s outstanding senior notes.
Our unrestricted cash position decreased by $20.4 million to $27.8 million at December 31, 2014, from $48.2 million at
December 31, 2013. Cash outflows in 2014 were primarily driven by payments of principal and interest on Windstream Corp.’s
debt obligations, capital expenditures and dividend payments to shareholders. These outflows were partially offset by cash inflows
from operations of $1,467.3 million. A summary of our historical cash flows were as follows for the years ended December 31:
(Millions) 2014 2013 2012
Cash flows provided from (used in):
Operating activities $ 1,467.3 $ 1,519.4 $ 1,777.6
Investing activities (769.1)(707.6)(1,101.7)
Financing activities (718.6)(895.6)(770.9)
Decrease in cash and cash equivalents $ (20.4)$ (83.8)$ (95.0)
Cash Flows – Operating Activities
Cash provided from operations is our primary source of funds. Cash flows from operating activities decreased by $52.1 million
in 2014, and decreased $258.2 million in 2013 as compared to the prior year period. The decrease during 2014 is primarily
attributable to lower earnings, as our operating results were negatively impacted by decreases in voice, long-distance, carrier and
switched access revenues and costs associated with various restructuring initiatives completed during the year. The decrease was
partially offset by a reduction in cash interest paid of $41.3 million. The decrease during 2013 is primarily attributable to payment
of debt refinancing premiums 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 were partially offset by a reduction in cash interest paid of
$62.1 million.
We utilized net operating loss carryforwards (“NOLs”) and other income tax initiatives to lower our cash income tax obligations
for 2014. Cash income taxes in both 2013 and 2012 were favorably impacted due to the effects of the bonus depreciation provisions
in the Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act (“Tax Relief Act”). For tax purposes, bonus
depreciation allowed for the acceleration of depreciation and the related tax benefit on qualified investments. The Tax Relief Act
allowed for 50 percent bonus depreciation for qualified investments made during both 2013 and 2012. We expect cash income tax
payments to be approximately $20.0 million in 2015.
Cash Flows – Investing Activities
Cash used in investing activities primarily includes investments in our network to upgrade and expand our service offerings as
well as spending on strategic initiatives such as the acquisition of complementary businesses. Cash used in investing activities
increased $61.5 million in 2014 as compared to 2013 and decreased $394.1 million in 2013 as compared to 2012. Cash flows from
investing activities reflected a reduction in capital expenditures in both 2014 and 2013, as further discussed below. When compared
to 2013, cash flows from investing activities in 2014 was also impacted by reductions in grant funds received for both broadband
stimulus projects and CAF of $34.8 million and $34.7 million, respectively, and a cash outlay of $22.6 million to purchase a fixed