Windstream (WIN)

Q4 2011 Earnings Call

February 22, 2012 8:30 am ET

Executives

Robert G. Clancy - Senior Vice President of Investor Relations and Treasurer

Jeff Gardner - Chief Executive Officer, President and Director

Brent K. Whittington - Chief Operating Officer

Anthony W. Thomas - Chief Financial Officer

Analysts

Michael Rollins - Citigroup Inc, Research Division

Scott Goldman - Goldman Sachs Group Inc., Research Division

Simon Flannery - Morgan Stanley, Research Division

David W. Barden - BofA Merrill Lynch, Research Division

Philip Cusick - JP Morgan Chase & Co, Research Division

Donna Jaegers - D.A. Davidson & Co., Research Division

Frank G. Louthan - Raymond James & Associates, Inc., Research Division

Presentation

Operator

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Good day, ladies and gentlemen, and welcome to the Windstream Communications' Q4 2011 Earnings Conference Call. [Operator Instructions] As a reminder, today's conference call is being recorded. I'd now like to turn the conference over to your host, Mr. Rob Clancy. Please go ahead.

Robert G. Clancy

Thank you, Allie, and good morning, everyone. We appreciate you joining us today to discuss Windstream's Fourth Quarter and Full Year 2011 Results. Today's conference call was preceded by our earnings release, which has been distributed on the newswires and is available from the Investor Relations section of our website. Today's conference call should be considered together with our earnings release and related financial information.

Today's discussion will include certain forward-looking statements, particularly as they pertain to guidance and other outlooks on our business. Please review the Safe Harbor language found in our press release and in our SEC filings, which describe factors that could cause our actual results to differ materially from those projected by us in our forward-looking statements.

Today's discussion will also include certain non-GAAP financial measures. Again, we refer you to the IR section of our website, where we have posted our earnings release and supplemental materials, which contain information reconciliations for any non-GAAP financial measures.

To assist investors, we have provided supplemental pro forma financial results to include the PAETEC business for all periods shown. Given that Windstream and PAETEC had different operating metric disclosures, we are currently developing a unified approach and plan to enhance our disclosures later this year. At this time, we've continued to provide the business operating metrics for legacy Windstream alone, and we have reclassified various integrated solution units to voice and high-speed Internet.

Additionally, we have updated the pro forma schedules to reflect the impact of the voluntary change in accounting principle for recognizing the actuarial gains and losses within the pension plan. We've elected to reflect the change in actuarial gains and losses and operating results in the year in which they occur and not to smooth the effects over a longer period of time, in order to improve transparency by more quickly recognizing the effects of economic and interest rate trends on the plan. The historical pro forma results have been adjusted to reflect these changes. We will make references to these pro forma results, including the year-over-year comparisons during our call.

Participating in our call this morning are Jeff Gardner, President and Chief Executive Officer; Brent Whittington, Chief Operating Officer; and Tony Thomas, Chief Financial Officer. At the end of the call, we will take a few questions.

With that, here is Jeff Gardner.

Jeff Gardner

Thank you, Rob, and good morning, everyone. I'm going to make a few comments about our results and strategic activities. Brent will then discuss our operating results, and Tony will review our financial performance and 2012 guidance.

2011 was an incredibly successful year for Windstream. Throughout the year, we integrated several key acquisitions made in 2010, which truly enhanced our business strategy and expanded our suite of business offering. In December, we add another key business to our portfolio with the acquisition of PAETEC, making Windstream a leader in providing communications and technology services nationwide. We also made many success-based capital investments that will enhance future growth, and we made significant improvements to our balance sheet and debt maturity profile.

Our pro forma financial results for the year reflect our progress in transforming this business. Our $6.2 billion revenue stream declined 0.3% on a year-over-year basis, and we grew adjusted OIBDA by 1.2%, a remarkable accomplishment. We have significantly improved the financial trajectory of Windstream and reached a significant milestone of growing pro forma revenue and adjusted OIBDA during the fourth quarter, giving us great momentum heading into 2012.

Turning to our strategic initiatives. We competed the acquisition of PAETEC. Now I'd like to, again, welcome the entire PAETEC team to Windstream. Together, we are a much a stronger organization with more than 100,000 route miles of fiber, advanced enterprise-class data centers and an outstanding business sales team with a nationwide presence, all of which make Windstream a leader in the enterprise space, and I'm very excited about the opportunities ahead for our combined company.

On the regulatory front, late last year, the SEC issued its plan to modernize federal intercarrier compensation and universal service policies. The plan was largely consistent with our expectation. We expect the financial impact to be manageable and believe the steps we have taken to diversify our revenue stream and focus on growth opportunities will help us navigate through this transition.

As we look forward, we will be squarely focused on integrating the newly acquired PAETEC business and executing on our growth strategy. We have a tremendous opportunity to build on the momentum of 2011 and to leverage our expanded market presence and network to deliver advanced communications and technology solutions nationwide. We also have exciting prospects to continue investing for growth, including fiber-to-the-tower deployment, data center expansion and broadband stimulus projects, all of which offer attractive returns and improve Windstream's growth opportunities going forward.

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