Windstream 2015 Annual Report Download - page 133

F-3
EXECUTIVE SUMMARY
Key strategic achievements in 2015 included:
• As further discussed below, we completed the spin-off of certain telecommunications network assets into an independent,
publicly traded real estate investment trust (“REIT”) and then entered into an agreement to leaseback the network assets
from Communications Sales & Leasing, Inc. (“CS&L”). As part of this transaction, we retained a 19.6 percent ownership
interest in CS&L and reduced long-term debt by approximately $3.2 billion lowering our cash interest on long-term debt
by approximately $80.5 million in 2015. Through the monetization of our retained ownership interest in CS&L, we are
positioned to retire additional long-term debt.
• We repurchased in the open market $299.5 million of long-term debt, which improved our debt maturity profile and will
lower annual interest expense on long-term debt by approximately $17.5 million.
• We completed the sale of a substantial portion of our data center business to TierPoint, LLC (“TierPoint”), a leading
national provider of cloud, colocation and managed services, for $575.0 million in cash. As part of the transaction, we
established an ongoing reciprocal strategic partnership with TierPoint, allowing both companies to sell their respective
products and services to each other’s prospective customers through referrals. This arrangement with TierPoint allows
us to invest capital in our core telecommunications offerings while continuing to offer traditional data center services to
enterprise customers across a broader TierPoint data center footprint.
• We made capital investments of nearly $1.1 billion which included upgrades and expansion of our broadband and carrier
network capabilities to provide faster consumer high-speed Internet services and to improve overall network reliability
and efficiency. We believe these capital investments will improve our competitiveness in the marketplace and provide a
path to grow revenue and gain market share.
• To return value to shareholders, on August 5, 2015, our board of directors authorized a stock repurchase program of up
to $75.0 million to be completed by December 31, 2016. Under this plan, we will buy back shares opportunistically
through open market purchases. During 2015, we repurchased 7.5 million of our common shares at a total cost of $46.2
million. We completed the stock repurchase in February 2016 having repurchased $28.8 million of our stock subsequent
to year-end.
Operating results during 2015 were favorably impacted by the gain from the sale of our data center business, additional subsidy
revenues received from the Connect America Fund (“CAF”) Phase II, growth in enterprise revenues, reflecting increased demand
for integrated data and voice services, multi-site networking and data center services, and dividend income earned on our retained
ownership interest in CS&L. Operating results during 2015 were impacted by additional interest expense attributable to the long-
term lease obligation under the master lease agreement with CS&L and REIT-related transaction costs, including investment banker
fees, legal and accounting fees, and losses incurred on the early extinguishment of long-term debt. Reductions in small business,
carrier and switched access revenues due to customer losses from business closures and competition, declining demand for copper-
based circuits to towers and the adverse effects of intercarrier compensation reform, respectively, also impacted our operating
results during 2015, when compared to 2014.
For 2016, our goals are focused on executing on our business unit strategies, specifically to grow Consumer and Small Business
- ILEC revenues and to grow revenues and improve margins in our Enterprise segment. We will continue to make significant
targeted investments to leverage our existing fiber network to provide faster consumer high-speed Internet services, expand our
carrier long-haul network and reduce network-related expenses. We will continue to simplify our IT systems and processes to
improve operating efficiency and to better serve our customers.
COMPLETION OF SPIN-OFF OF CERTAIN NETWORK AND REAL ESTATE ASSETS
On April 24, 2015, we completed the spin-off of certain telecommunications network assets, including our fiber and copper
networks and other real estate, into an independent, publicly traded REIT. The spin-off also included substantially all of our
consumer CLEC business. Pursuant to the plan of distribution and immediately prior to the effective time of the spin-off, we
contributed the network assets and the consumer CLEC business to CS&L, a wholly owned subsidiary of Windstream, in exchange
for: (i) the issuance to Windstream of CS&L common stock of which 80.4 percent of the shares were distributed on a pro rata
basis to Windstream’s stockholders, (ii) cash payment to Windstream in the amount of $1.035 billion and (iii) the distribution by
CS&L to Windstream of approximately $2.5 billion of CS&L debt securities. After giving effect to the interest in CS&L retained
by Windstream, each Windstream Holdings shareholder received one share of CS&L for every five shares of Windstream Holdings
common stock held in the form of a tax-free dividend.