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Pension Charge At Windstream Contributes to 4Q Loss

3 min read

Windstream Holdings Inc. of Little Rock on Tuesday reported a net loss of $77.5 million in the fourth quarter of 2014, leading to a loss of $39.5 million for the full year.

That’s compared to a reported net income of $118 million in the fourth quarter of 2013 and net income of $241 million for the full year last year.

Windstream (Nasdaq: WIN) also reported total revenues and sales of $1.4 billion in the fourth quarter, compared to total revenues and sales of $1.5 billion in the same quarter last year. Total revenue and sales for the year was $5.8 billion, compared to $6 billion in 2013.

President and CEO Tony Thomas said in a statement that the company was making progress toward spinning off certain assets into a real estate investment trust, a move that was announced July 29, and touted the company’s adjusted free cash flow of $794 million for the year.

“Windstream produced strong cash flow in 2014, although total revenues were lower than expected. We also made great progress toward completing the real estate investment trust spinoff within the next several months, which will make Windstream a stronger, more competitive company,” Thomas said.

“Since my appointment as CEO, we have made a number of significant changes to the business to better serve customers and improve profitability. These changes, combined with planned initiatives, will advance our goals of improving the customer experience, operating a best-in-class network and delivering improved financial results and increased value for shareholders,” he said. “Overall 2014 results fell short of our expectations, and we are taking the necessary actions to put us on the path for success. We will make significant progress this year on our goals. We have to do many things faster and better, and we will.”

Pension Charge

Windstream reported that its fourth-quarter earnings were affected by a pre-tax expense of $128 million for the company’s pension plan.

That expense “resulted from a decrease in the discount rate used to measure the company’s pension obligations and changes to mortality assumptions reflecting longer life expectancies of plan participants,” the company said in a news release. 

Fourth-quarter earnings also included about 3 cents in after-tax merger and integration and restructuring expense. Without those items, the company said earnings per share would have reached 3 cents for the fourth quarter, compared to the actual loss of 13 cents per share.

The company will hold a conference call this morning to discuss the earnings report.

Other highlights from the report included:

  • Enterprise customer locations increased 3.6 percent and the average revenue per business customer grew 9 percent compared to last year.
  • The company’s consumer channel revenues declined less than 2 percent, while consumer broadband revenue increased compared to last year because of “continued demand for faster speeds and additional services.”
  • The company invested about $787 million in capital expenditures in 2014, “with approximately two-thirds directed to growth initiatives, including fiber deployment and broadband expansion and enhancements.”

Looking to 2015, the company said it expects improved revenue trends in enterprise, consumer and small business and “some [continued] revenue pressure” in the carrier business. The company said it expects total service revenue to be either flat or up to a 4 percent decline compared to 2014 service revenue.

Windstream also expects its margins “to be in the range of 34 percent to 34.5 percent for the year,” largely because of “the loss of high-margin carrier, switched access and universal service fund revenues.”

The company also expects to spend between $825 million to $875 million on capital expenditures.

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