Windstream Posts Revenue Gains, But Fourth Quarter Loss On One-time Items

Windstream Corp. produced fourth quarter and full-year financials that resembled the Clint Eastwood classic — “The Good, The Bad & The Ugly.”

Little Rock-based Windstream, which began as a traditional phone line company in a spin-off from the former Alltel, recorded another quarter of lower comparable profits, but improving revenues as it transitions into more broadband, data management and fiber optic offerings. It was the fourth straight quarter of revenue growth for the firm.

Windstream reported a fourth quarter loss of $31.9 million on revenue of $1.21 billion. One year ago, the company recorded a profit of $56.5 million on revenue of $980.6 million.

Several one-time items affected the company’s bottom line in the fourth quarter. Windstream took an after-tax non-cash pension charge of $103 million. It also incurred $30 million in after-tax losses related to its buyout of New York-based PAETEC.

For the full year, Windstream’s revenue jumped 15% to $4.286 billion with net income topping $172.3 million. Profits are down 45% from $312.7 million one year ago. Earnings per share for 2011 were 33 cents versus 66 cents per share in 2010.

Company CEO Jeff Gardner has consistently reminded investors that his firm is going through short-term pain for long-term gain. He likes where the telecom and data provider is positioned during its transformation.

“2011 was an incredibly successful year for Windstream,” said Gardner. “As a result of solid execution in our legacy business, coupled with our targeted acquisition approach, we significantly improved the financial trajectory of our company and reached a significant milestone of growing pro forma revenue and Adjusted OIBDA during the fourth quarter on a year-over-year basis, giving us great momentum heading into 2012.”

Windstream has spent the better part of two years shifting its revenue model from declining home landline service to more lucrative home and business broadband connections. With company capital and hundreds of millions of dollars of stimulus broadband funding, Windstream has been building out networks in rural parts of its footprint to offer higher speed Internet access to underserved communities.

It has also rolled up several major acquisitions that have expanded its data hosting capabilities for business customers, now offering 21 data centers throughout the U.S. The data centers allow Windstream to offer business customers managed data and cloud computing services.

The company has beefed up its “fiber-to-tower” offerings. Fiber optic cabling is the infrastructure backbone that carries data from cell towers across regional and national networks.

“Together we are a much stronger company with an expansive fiber network, an attractive product portfolio and an outstanding business sales team, positioning Windstream for success in the enterprise space on a national level,” Gardner said.

2012 is likely to be a year for execution now that Windstream has key parts in place.

“We have a tremendous opportunity this year to build on the financial momentum of 2011 and our expanded market presence and network to deliver advanced communications and technology solutions nationwide,” Gardner said. “We also have exciting prospects to continue investing for growth through our fiber-to-the-tower program, data center expansion and broadband stimulus projects.”

The company expects to generate a one-time gain of $55 million in the first quarter of 2012 from the sale of two segments of spectrum related to the PAETEC merger.

Windstream’s stock was down slightly in early morning trading to $12.28. In the last year, Windstream shares have floated between a $10.76 low and a $13.57 high.