Windstream 2015 Annual Report Download - page 102

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We use a significant portion of our cash generated from operations to pay dividends to stockholders, which could limit our ability
to make the capital expenditures necessary to support our business needs and growth plans. We expect to be able to fund required
capital expenditures from cash generated from operations. However, other risk factors described in this section could materially
reduce cash available from operations or significantly increase our capital expenditure requirements. If this occurs, funds for
capital expenditures may not be available when needed, which could affect our service to customers and our growth opportunities.
The level of returns on our pension plan investments and changes to the actuarial assumptions used to value our pension
obligations could have a material effect on our earnings and result in material funding requirements to meet our pension
obligations.
Our pension plan invests in marketable securities, including marketable debt and equity securities denominated in foreign
currencies, which are exposed to changes in the financial markets. During 2015, the fair market value of these investments decreased
from $1,042.0 million to $966.6 million primarily due to the return on assets held of $1.6 million, and routine benefit payments
of $74.7 million. Returns generated on plan assets have historically funded a large portion of the benefits paid under our pension
plan.
Funding requirements may increase as a result of a decline in the market value of plan assets, a decline in the interest rates used
to calculate the present value of future plan obligations or government regulations that increase minimum funding requirements
of the pension liability. We estimate that the long term rate of return on plan assets will be 7.0 percent, but returns below this
estimate could significantly increase our contribution requirements, which could adversely affect our cash flows from operations.
Also, reductions in discount rates and extensions of participant mortality rates directly increase our pension liability and expose
us to greater funding obligations in the future. Our earnings reported under accounting principles generally accepted in the United
States (“U.S. GAAP”) may also be adversely affected due to our method of accounting for pension costs, whereby we immediately
recognize gains and losses resulting from the return on plan assets as well as other changes in actuarial assumptions impacting
our discount rate and mortality estimates.
Our substantial debt could adversely affect our cash flow and impair our ability to raise additional capital on favorable terms.
As of December 31, 2015, we had approximately $5,170.5 million long-term debt outstanding, including current maturities. We
may also obtain additional long-term debt to meet future financing needs or to fund potential acquisitions, subject to certain
restrictions under our existing indebtedness, which would increase our total debt. Our substantial amount of debt could have
negative consequences to our business. For example, it could:
• Increase our vulnerability to general adverse economic and industry conditions;
• Require us to dedicate a substantial portion of cash flows from operations to interest and principal payments on outstanding
debt, thereby limiting the availability of cash flow to fund future capital expenditures, working capital and other general
corporate requirements;
• Limit our flexibility in planning for, or reacting to, changes in our business and the telecommunications industry;
• Place us at a competitive disadvantage compared with competitors that have less debt; and
• Limit our ability to borrow additional funds, even when necessary to maintain adequate liquidity.
In addition, our ability to borrow funds in the future will depend in part on the satisfaction of the covenants in our credit facility
and its other debt agreements. If we are unable to satisfy the financial covenants contained in those agreements, or are unable to
generate cash sufficient to make required debt payments, the lenders and other parties to those arrangements could accelerate the
maturity of some or all of our outstanding indebtedness.