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Reported EPS
4Q13
2013
$.20
$.40
$.02
$.13
(($.13))
(($.13))
$.09
$.40
Non-operational items(1):
M&I, Restructuring expense and
Other(2)
Non-cash p
pension income
Adjusted EPS
Excluding non-operational items, Adj. EPS was $.09 in 4Q and $.40 for 2013
(1)
(2)
Windstream Participants
Jeff Gardner
Chief Executive Officer
Tony Thomas
Chi
i
i l Offi
Chieff Financial
Officer
Brent Whittington
Chief Operating Officer
Bob Gunderman
SVP & Treasurer
2013 Highlights
Maintaining margins
margins of 39%
Invested ~ 2/3 of capex on
growth initiatives
Improved maturity profile,
Returning
g capital
p
to
shareholders
to shareholders
5
Goal: Drive revenue growth with stable, sustainable free cash flow
6
FY 2012 Revenue
$68
($103)
($63)
Strategic Growth
Revenue (1)
($54)
$5,988
FY 2013 Revenue
L
Largest
t iimpactt from
f
ICC reform
f
iis b
behind
hi d us; going
i fforward
d th
the
intercarrier rate step-downs are much smaller
(1) Strategic growth areas include total business and consumer broadband revenue
(2) All Other includes wholesale voice, data and miscellaneous, Other revenues and product sales excluding business and consumer broadband sales.
Key Drivers
($ in millions)
$917
$914
$913
$916
$398
$400
$405
$407
$165
$167
$920
Nationwide,
Nationwide advanced IP solutions
$412
$166
$169
$167
$354
$347
$342
$341
$341
4Q12
1Q13
2Q13
3Q13
4Q13
Voice/Misc.
Carrier
(1) Average business service revenue excluding carrier revenue per customer per month
$334
$328
$327
$324
$
$318
$191
$184
$180
$177
$173
$116
$117
$120
$119
$119
$27
$27
$27
$27
$26
4Q12
1Q13
2Q13
3Q13
4Q13
Video / Misc
Broadband
Key Drivers
Voice & LD
(1) Average consumer high speed Internet revenue per Internet customer per month
38.6%
35%
30%
25%
20%
15%
10%
5%
2010
0%
2011
2012
2013
$924
4Q12
3Q13
$915
$
4Q13
Windstreams culture of
disciplined expense
management has led to
consistent OIBDA
margins of 38 40%
Adjusted OIBDA
Cost structure
C
improvements led
to sequential
improvement in
Adj t d OIBDA
Adjusted
$617
$575
$576
4Q12
3Q13
4Q13
10
$80
$62
$161
$187
$93
$80
$197
$190
$66
$168
$50
$170
$38
$150
Capex
p declining
g as
non-recurring
projects decrease
$36
$134
Non-Recurring
(FttT / Stimulus)
Recurring Capex
(in millions)
1Q12
2Q12
3Q12
4Q12
1Q13
2Q13
3Q13
4Q13
11
$1
$213
Q413
Adj.
OIBDA
Adj. Capex(1)
Cash
Interest
Cash Taxes
Free Cash
Flow
$64
$149
Cash
Dividends
Free Cash
Flow After
Dividends
$6
$891
FY 2013
Adj.
OIBDA
Adj. Capex(1)
Cash
Interest
Cash Taxes
Free Cash
Flow
(1) Adjusted capex excludes the impact of integration capital expenditures which were $5M in 4Q13 and $29M in FY 2013
$594
$298
Cash
Dividends
Free Cash
Flow After
Dividends
12
$2,032
$700
$1,378
$660
Avail
$590
2013
2014
2015
$1,100
$1,332
$850
$387
2016
TermLoan
$1,300
$950
$590
$502
$278
2017
2018
2019
2020
2021
UndrawnRevolver
2022
$100
2023
Thereafter
SrNotes
13
2014 Guidance
2014 Guidance
Total Revenues
Capital Expenditures
$800M - $850M
$775M - $885M
68% - 78%
Notes:
$ in millions
Expect 2014 cash taxes of less than $30 million
Adjusted Free Cash Flow defined as Adjusted OIBDA minus adjusted capex, cash interest and cash taxes
14
Appendix
15
FINANCIAL RESULTS:
Service revenues:
Business
Consumer
Wholesale
Other
Total service revenues
Product sales
Total revenues and sales
Total
$
3,663.4
1,296.4
593.5
222.2
5,775.5
212.6
5,988.1
2013
3rd Qtr.
4th Qtr.
$
920.1
317.7
143.1
55.0
1,435.9
55.4
1,491.3
916.2
323.6
147.8
55.3
1,442.9
55.7
1,498.6
2nd Qtr.
$
912.8
327.0
150.7
54.9
1,445.4
56.3
1,501.7
1st Qtr.
$
914.3
328.1
151.9
57.0
1,451.3
45.2
1,496.5
Total
$
3,611.4
1,339.5
708.0
249.4
5,908.3
231.2
6,139.5
2012
3rd Qtr.
4th Qtr.
$
916.6
334.3
169.0
59.8
1,479.7
54.4
1,534.1
906.4
333.6
181.9
59.6
1,481.5
59.5
1,541.0
2nd Qtr.
$
892.2
335.7
173.6
63.5
1,465.0
65.3
1,530.3
1st Qtr.
$
896.2
335.9
183.5
66.5
1,482.1
52.0
1,534.1
2,571.2
,
183.9
914.9
3,670.0
645.3
45.7
224.4
915.4
643.2
46.2
234.7
924.1
643.1
49.4
227.8
920.3
639.6
42.6
228.0
910.2
2,630.9
,
206.6
918.2
3,755.7
643.0
49.9
223.8
916.7
672.1
56.0
222.2
950.3
654.8
56.4
229.4
940.6
661.0
44.3
242.8
948.1
2,318.1
(115.3)
44.7
9.6
2,379.1
1,340.9
1,038.2
575.9
(115.3)
10.8
0.5
679.9
341.2
338.7
574.5
(1.1)
11.2
1.5
562.9
338.2
224.7
581.4
2.3
10.4
2.7
566.0
332.2
233.8
586.3
(1.2)
12.3
4.9
570.3
329.3
241.0
2,383.8
67.4
43.0
27.2
2,246.2
1,296.9
949.3
617.4
68.7
23.7
4.1
520.9
338.7
182.2
590.7
(1.4)
5.6
11.9
574.6
326.1
248.5
589.7
1.2
6.3
10.3
571.9
320.0
251.9
586.0
(1.1)
7.4
0.9
578.8
312.1
266.7
Margins (D):
Adjusted OIBDA margin
OIBDA margin
Operating income margin
SUPPLEMENTAL INFORMATION:
Revenues from business and broadband:
Business service revenue
B i
Business
product
d t sales
l
Consumer broadband service
Consumer broadband product sales
Business and broadband revenues
Business and broadband as a percent of total revenues
CAPITAL EXPENDITURES:
Recurring capital expenditures
Fiber to the tower and broadband stimulus projects
Adjusted capital expenditures (E)
Recurring capital expenditures as a percent of total revenues
38.7%
39.7%
17.3%
$
$
3,663.4
152 4
152.4
476.2
12.8
4,304.8
71.9%
622.3
189.4
811.7
10 4%
10.4%
38.6%
45.6%
22.7%
$
$
920.1
40 1
40.1
119.3
5.1
1,084.6
72.7%
134.2
35.7
169.9
9 0%
9.0%
38.3%
37.6%
15.0%
$
$
38.7%
37.7%
15.6%
916.2
41 0
41.0
119.4
4.1
1,080.7
72.1%
149.9
37.5
187.4
10 0%
10.0%
912.8
40 8
40.8
120.1
2.2
1,075.9
71.6%
170.3
50.2
220.5
11 3%
11.3%
39.2%
38.1%
16.1%
$
$
38.8%
36.6%
15.5%
914.3
30 5
30.5
117.4
1.4
1,063.6
71.1%
167.9
66.0
233.9
11 2%
11.2%
40.2%
34.0%
11.9%
3,611.4
160 5
160.5
456.6
7.9
4,236.4
69.0%
735.2
314.6
1,049.8
12 0%
12.0%
38.3%
37.3%
16.1%
916.6
40 0
40.0
116.3
2.8
1,075.7
70.1%
190.4
80.0
270.4
12 4%
12.4%
38.5%
37.4%
16.5%
906.4
43 2
43.2
114.5
0.7
1,064.8
69.1%
196.5
92.5
289.0
12 8%
12.8%
38.2%
37.7%
17.4%
892.2
40 3
40.3
113.8
2.8
1,049.1
68.6%
187.3
79.8
267.1
12 2%
12.2%
896.2
37 0
37.0
112.0
1.6
1,046.8
68.2%
161.0
62.3
223.3
10 5%
10.5%
(A) Pro forma results adjusts results of operations under GAAP to exclude all merger and integration costs related to strategic transactions and the results of operations of the software and energy businesses acquired as part of the
PAETEC acquistion.
(B) Adjusted OIBDA is OIBDA before restructuring charges, pension (benefit) expense and share-based compensation.
(C) OIBDA is operating income before depreciation and amortization.
(D) Margins are calculated by dividing the respective profitability measures by total revenues and sales.
(E) Adjusted capital expenditures exclude the impact of integration-related capital expenditures.
16
REVENUE SUPPLEMENT
Service revenues:
Voice and long distance
Data and integrated services
Carrier
Miscellaneous
Business
Voice and long distance
Broadband
Video and miscellaneous
Consumer
Switched access
USF supportt
Voice and long distance
Data and integrated services
Miscellaneous
Wholesale
Pass through taxes and surcharges
Miscellaneous
Other
Total service revenues
Product sales:
Business
Consumer
Other
Product sales
Total revenues and sales
Total
$ 1,226.3
1,623.6
668.5
145.0
3,663.4
,
2013
3rd Qtr.
4th Qtr.
$
304.4
411.5
167.3
36.9
920.1
304.5
406.5
168.5
36.7
916.2
2nd Qtr.
$
306.4
405.2
165.9
35.3
912.8
1st Qtr.
$
Total
311.0
400.4
166.8
36.1
914.3
$ 1,282.8
1,535.4
653.2
140.0
3,611.4
,
2012
3rd Qtr.
4th Qtr.
$
316.9
397.9
165.0
36.8
916.6
321.3
388.3
161.8
35.0
906.4
2nd Qtr.
$
317.1
376.9
164.0
34.2
892.2
1st Qtr.
$
327.5
372.3
162.4
34.0
896.2
713.6
476.2
106.6
1,296.4
172.8
119.3
25.6
317.7
177.2
119.4
27.0
323.6
179.9
120.1
27.0
327.0
183.7
117.4
27.0
328.1
777.0
456.6
105.9
1,339.5
191.2
116.3
26.8
334.3
192.5
114.5
26.6
333.6
196.0
113.8
25.9
335.7
197.3
112.0
26.6
335.9
210.1
272.88
272
63.7
44.2
2.7
593.5
47.5
69.22
69
14.6
11.2
0.6
143.1
51.6
69.88
69
14.6
11.2
0.6
147.8
56.1
66.11
66
16.9
10.9
0.7
150.7
54.9
67.77
67
17.6
10.9
0.8
151.9
337.2
248.99
248
75.6
42.8
3.5
708.0
70.2
67.55
67
19.6
10.9
0.8
169.0
83.9
67.22
67
19.2
10.7
0.9
181.9
86.3
57.22
57
18.6
10.7
0.8
173.6
96.8
57.00
57
18.2
10.5
1.0
183.5
153.1
69.1
222.2
5,775.5
39.0
16.0
55.0
1,435.9
38.5
16.8
55.3
1,442.9
37.1
17.8
54.9
1,445.4
38.5
18.5
57.0
1,451.3
161.0
88.4
249.4
5,908.3
41.2
18.6
59.8
1,479.7
37.8
21.8
59.6
1,481.5
40.7
22.8
63.5
1,465.0
41.3
25.2
66.5
1,482.1
152.4
15.8
44.4
212 6
212.6
$ 5,988.1
40.1
6.0
9.3
55 4
55.4
$ 1,491.3
41.0
4.7
10.0
55 7
55.7
$ 1,498.6
40.8
2.9
12.6
56 3
56.3
$ 1,501.7
30.5
2.2
12.5
45 2
45.2
$ 1,496.5
160.5
13.3
57.4
231 2
231.2
$ 6,139.5
40.0
3.6
10.8
54 4
54.4
$ 1,534.1
43.2
1.6
14.7
59 5
59.5
$ 1,541.0
40.3
5.4
19.6
65 3
65.3
$ 1,530.3
37.0
2.7
12.3
52 0
52.0
$ 1,534.1
(A) Pro forma results adjusts results of operations under GAAP to exclude all merger and integration costs related to strategic transactions and the results of operations of the software and energy businesses acquired
as part of the PAETEC acquisition.
17
Total
2013
3rd Qtr.
4th Qtr.
2nd Qtr.
1st Qtr.
Total
2012
3rd Qtr.
4th Qtr.
2nd Qtr.
1st Qtr.
210.4
395.3
605.7
2.8%
-8.2%
-4.7%
210.4
395.3
605.7
2.8%
-8.2%
-4.7%
208.8
403.7
612.5
2.8%
-8.2%
-4.7%
206.5
414.1
620.6
2.3%
-7.7%
-4.6%
207.0
421.5
628.5
3.3%
-8.0%
-4.6%
204.6
430.7
635.3
2.8%
-8.0%
-4.8%
204.6
430.7
635.3
2.8%
-8.0%
-4.8%
203.2
439.6
642.8
2.7%
-8.0%
-4.8%
201.8
448.8
650.6
2.7%
-8.0%
-4.9%
200.4
458.3
658.7
2.7%
-8.0%
-5.0%
388.3
-7.0%
388.3
-7.0%
393.9
-7.3%
401.2
-6.7%
409.4
-5.4%
417.6
-5.6%
417.6
-5.6%
425.2
-4.4%
429.8
-4.2%
432.7
-5.1%
$
$
(A)
(B)
(C)
(D)
2,994.9
626.74
$
$
100.1
-6.6%
$
$
668.5
545.89
1 722 3
1,722.3
1,170.9
402.3
3,295.5
-6.5%
-3.6%
-5.6%
752.8
641.57
$
$
100.1
-6.6%
$
$
167.3
553.24
1 722 3
1,722.3
1,170.9
402.3
3,295.5
-6.5%
-3.6%
-5.6%
747.7
626.91
$
$
101.5
-9.9%
$
$
168.5
549.31
11,752.7
752 7
1,183.4
409.5
3,345.6
-6.0%
-2.7%
-5.1%
746.9
614.28
$
$
103.0
-9.5%
$
$
165.9
535.33
11,783.3
783 3
1,194.5
414.9
3,392.7
-5.5%
-1.3%
-4.9%
747.5
602.55
$
$
103.6
-8.2%
$
$
166.8
527.51
11,812.9
812 9
1,205.9
421.1
3,439.9
-5.2%
-0.8%
-4.4%
2,958.2
578.24
$
$
107.2
-4.3%
$
$
653.2
487.23
11,841.9
841 9
1,214.5
426.1
3,482.5
-4.5%
0.6%
-4.4%
751.6
594.54
$
$
107.2
-4.3%
$
$
165.0
500.23
11,841.9
841 9
1,214.5
426.1
3,482.5
-4.5%
0.6%
-4.4%
744.6
580.58
$
$
112.7
2.7%
$
$
161.8
476.23
11,865.2
865 2
1,216.2
431.6
3,513.0
-4.4%
1.4%
-3.0%
728.2
562.84
$
$
113.8
5.1%
$
$
164.0
482.28
11,887.5
887 5
1,210.7
436.4
3,534.6
-4.4%
1.7%
-0.7%
733.8
559.11
112.9
7.6%
$
$
162.4
481.40
11,911.5
911 5
1,215.3
440.3
3,567.1
-4.3%
2.4%
1.0%
Business customer locations include each individual location to which we provide service and exclude carrier special access circuits.
Enterprise locations represent customer relationships that generate $750 or more in revenue per month.
Small business locations represent customer relationships that generate less than $750 in revenue per month.
Carrier special access circuits are dedicated circuits purchased by telecommunication carriers to transport traffic from wireless towers, between points on their network or from their network to a customer location.
18
Total
ADJUSTED FREE CASH FLOW:
Operating income under GAAP
Depreciation and amortization
As reported OIBDA
Merger and integration costs
Pension (benefit) expense
Restructuring charges
p
Share-based compensation
As reported adjusted OIBDA
$ 1,009.0
1,340.9
2,349.9
29.2
(115.3)
9.6
44.7
2,318.1
Adjustments:
Adjusted capital expenditures
Cash paid for interest
Cash (paid) refunded for taxes
Adjusted free cash flow
(811.7)
(609.4)
(5.7)
891.3
Dividends paid
593.6
2013
3rd Qtr.
4th Qtr.
$
326.5
341.2
667.7
12.2
(115.3)
0.5
10.8
575.9
(169.9)
(192.0)
(1.3)
212.7
149.0
219.6
338.2
557.8
5.1
(1.1)
1.5
11.2
574.5
(187.4)
(123.3)
(0.5)
263.3
148.3
2nd Qtr.
$
227.0
332.2
559.2
6.8
2.3
2.7
10.4
581.4
1st Qtr.
$
235.9
329.3
565.2
5.1
(1.2)
4.9
12.3
586.3
(220.5)
(188.9)
(3.4)
168.6
(233.9)
(105.2)
(0.5)
246.7
148.2
148.1
Total
$
883.9
1,296.9
2,180.8
65.4
67.4
27.2
43.0
2,383.8
(1,049.8)
(671.5)
100.7
$
763.2
$
588.0
2012
3rd Qtr.
4th Qtr.
$
171.2
338.7
509.9
11.0
68.7
4.1
23.7
617.4
(270.4)
(222.7)
(3.1)
121.2
147.5
235.8
326.1
561.9
12.7
(1.4)
11.9
5.6
590.7
(289.0)
(125.0)
(6.7)
170.0
147.0
2nd Qtr.
$
232.5
320.0
552.5
19.4
1.2
10.3
6.3
589.7
1st Qtr.
$
244.4
312.1
556.5
22.3
(1.1)
0.9
7.4
586.0
(267.1)
(184.8)
(9.6)
128.2
(223.3)
(139.0)
120.1
343.8
147.0
146.5
589.3
596.2
As of
12/31/2013
$ 8,707.2
79.2
$ 8,786.4
57.9
$ 8,728.5
Twelve
Months Ended
/3 / 0 3
12/31/2013
$ 2,318.1
3.79
3.77
19
Total
Reconciliation of Operating Income under GAAP to
Pro forma adjusted OIBDA:
Operating income from continuing operations under GAAP
Pro forma adjustments:
Merger and integration costs
Pro forma operating income
Depreciation and amortization expense
Pro forma OIBDA (B)
Other adjustments:
Pension ((benefit)) expense
p
Restructuring charges
Share-based compensation
Pro forma adjusted OIBDA (C)
Reconciliation of Capital Expenditures under GAAP to
Pro forma Adjusted Capital Expenditures:
Capital expenditures under GAAP
Pro forma adjustments:
Less: Integration-related capital expenditures
Pro forma adjusted capital expenditures (D)
$ 1,009.0
2013
3rd Qtr.
4th Qtr.
326.5
219.6
2nd Qtr.
227.0
1st Qtr.
235.9
Total
883.9
2012
3rd Qtr.
4th Qtr.
171.2
235.8
2nd Qtr.
232.5
1st Qtr.
244.4
29.2
1,038.2
12.2
338.7
5.1
224.7
6.8
233.8
5.1
241.0
65.4
949.3
11.0
182.2
12.7
248.5
19.4
251.9
22.3
266.7
1,340.9
2,379.1
341.2
679.9
338.2
562.9
332.2
566.0
329.3
570.3
1,296.9
2,246.2
338.7
520.9
326.1
574.6
320.0
571.9
312.1
578.8
((115.3))
9.6
44.7
$ 2,318.1
((115.3))
0.5
10.8
575.9
( )
(1.1)
1.5
11.2
574.5
2.3
2.7
10.4
581.4
( )
(1.2)
4.9
12.3
586.3
67.4
27.2
43.0
$ 2,383.8
68.7
4.1
23.7
617.4
((1.4))
11.9
5.6
590.7
1.2
10.3
6.3
589.7
( )
(1.1)
0.9
7.4
586.0
841.0
175.0
193.8
228.7
243.5
$ 1,101.2
291.8
307.3
276.0
226.1
29.3
811.7
5.1
169.9
6.4
187.4
8.2
220.5
9.6
233.9
51.4
$ 1,049.8
21.4
270.4
18.3
289.0
8.9
267.1
2.8
223.3
(A) Pro forma results adjusts results of operations under GAAP to exclude all merger and integration costs related to strategic transactions and the results of operations of the software and energy businesses acquired
as part of the PAETEC acquisition.
(B) Pro forma OIBDA is pro forma operating income before depreciation and amortization.
(C) Pro forma adjusted OIBDA adjusts pro forma OIBDA for the impact of restructuring charges, pension (benefit) expense and share-based compensation.
(D) Pro forma adjusted capital expenditures exclude the impact of integration-related capital expenditures.
20