Windstream 2015 Annual Report Download - page 132

F-2
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Unless the context indicates otherwise, the terms “Windstream,” “we,” “us” or “our” refer to Windstream Holdings, Inc. and its
subsidiaries, including Windstream Services, LLC, and the term “Windstream Services” refers to Windstream Services, LLC and
its subsidiaries.
The following sections provide an overview of our results of operations and highlight key trends and uncertainties in our business.
Certain statements constitute forward-looking statements. See “Forward-Looking Statements” at the end of this discussion for
additional factors relating to such statements, and see “Risk Factors” in Item 1A of Part I of this annual report for a discussion of
certain risk factors applicable to our business, financial condition and results of operations.
ORGANIZATIONAL STRUCTURE
Windstream Holdings, Inc. (“Windstream Holdings”) is a publicly traded holding company and the parent of Windstream Services,
LLC (“Windstream Services”), formerly Windstream Corporation. Effective February 28, 2015, Windstream Corporation was
converted to a limited liability company (“LLC”). Following the conversion, Windstream Holdings owns a 100 percent interest
in Windstream Services. Windstream Holdings common stock trades on the Nasdaq Global Select Market (“NASDAQ”) under
the ticker symbol “WIN”. All shares of Windstream Services common stock are held by Windstream Holdings and do not trade
on any stock market. Windstream Services and its guarantor subsidiaries are the sole obligors of all outstanding debt obligations
and, as a result also file periodic reports with the SEC. Windstream Holdings is not a guarantor of nor subject to the restrictive
covenants included in any of Windstream Services’ debt agreements.
There are no significant differences between the consolidated results of operations, financial condition, and cash flows of
Windstream Holdings and those of Windstream Services other than for certain expenses directly incurred 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 Services to Windstream Holdings. For the years ended December 31,
2015 and 2014, the amount of expenses directly incurred by Windstream Holdings were approximately $2.0 million and $2.3
million, respectively, on a pretax basis, or $1.2 million and $1.4 million on an after-tax basis. Unless otherwise indicated, the
following discussion of our business strategy, trends and results of operations pertain to both Windstream Holdings and Windstream
Services.
OVERVIEW
We are a leading provider of advanced network communications and technology solutions for consumers, businesses, enterprise
organizations and carrier partners across the United States. We offer bundled services, including broadband, security solutions,
voice and digital television to consumers. We also provide data, cloud solutions, unified communications and managed services
to small business and enterprise clients. We supply core transport solutions on a local and long-haul fiber-optic network spanning
approximately 125,000 miles.
Our vision is to provide a best-in-class customer experience through a world-class network. Our “network first” strategy entails
leveraging our existing infrastructure and investing in the latest technologies to create significant value for both our customers
and our shareholders. In 2015, we implemented a new business unit organizational structure focused on our core customer
relationships to strengthen our ability to achieve our operational, strategic and financial goals. Our new structure segments our
business operations around our four core customer groups; Consumer and Small Business - ILEC, Carrier, Enterprise, and Small
Business- CLEC as further defined below. We differentiate our business customers between enterprise and small business based
on the monthly revenue generated from the customer with enterprise customers comprising those relationships that generate $1,500
or more in monthly recurring revenues and small business comprising those relationships that generate less than $1,500 per month.
Our small business customer base is further disaggregated between those customers located in service areas in which we are the
incumbent local exchange carrier (“ILEC”) and provide services over network facilities operated by us and those customers located
in services areas in which we are a competitive local exchange carrier (“CLEC”) and provide services over network facilities
primarily leased from other carriers. We manage as one business our consumer and small business - ILEC operations due to the
similarities with respect to service offerings, marketing strategies and customer service delivery. Our new business unit structure
aligns all aspects of the customer relationship (sales, service delivery, and customer service) to improve accountability to the
customer and sharpen our operational focus.