Supplemental Guarantor Information: | Supplemental Guarantor Information: Debentures and notes, without collateral, issued by Windstream Services, LLC In connection with the issuance of the 7.875 percent senior notes due November 1, 2017, the 7.750 percent senior notes due October 15, 2020, the 7.750 percent senior notes due October 1, 2021, the 7.500 percent senior notes due June 1, 2022, the 7.500 percent senior notes due April 1, 2023 and the 6.375 percent senior notes due August 1, 2023 (“the guaranteed notes”), certain of Windstream Services’ wholly-owned subsidiaries (the “Guarantors”), provide guarantees of those debentures. These guarantees are full and unconditional, subject to certain customary release provisions, as well as joint and several. All personal property assets and related operations of the Guarantors are pledged as collateral on the senior secured credit facility of Windstream Services. Certain Guarantors may be subject to restrictions on their ability to distribute earnings to Windstream Services. The remaining subsidiaries of Windstream Services (the “Non-Guarantors”) are not guarantors of the guaranteed notes. Windstream Holdings is not a guarantor of any Windstream Services debt instruments. Following the redemption of the PAETEC 2018 notes (see Note 4), the guaranteed notes were amended to include certain subsidiaries of PAETEC as guarantors. Previously, all subsidiaries of PAETEC were Non-Guarantors. As a result, prior period information has been revised to reflect the change in the guarantor reporting structure. The following information presents condensed consolidating and combined statements of comprehensive (loss) income for the three and nine month periods ended September 30 , 2015 and 2014 , condensed consolidating balance sheets as of September 30, 2015 and December 31, 2014 , and condensed consolidating and combined statements of cash flows for the nine month periods ended September 30, 2015 and 2014 of Windstream Services, the Guarantors and the Non-Guarantors. Investments consist of investments in net assets of subsidiaries held by Windstream Services and other subsidiaries, and have been presented using the equity method of accounting. 14. Supplemental Guarantor Information, Continued: Condensed Consolidating Statement of Comprehensive (Loss) Income (Unaudited) Three Months Ended (Millions) Windstream Services Guarantors Non- Guarantors Eliminations Consolidated Revenues and sales: Service revenues $ — $ 312.3 $ 1,144.9 $ (6.0 ) $ 1,451.2 Product sales — 41.6 5.8 — 47.4 Total revenues and sales — 353.9 1,150.7 (6.0 ) 1,498.6 Costs and expenses: Cost of services — 111.0 598.3 (5.4 ) 703.9 Cost of products sold — 36.6 4.9 — 41.5 Selling, general and administrative — 40.5 175.6 (0.6 ) 215.5 Depreciation and amortization 4.4 86.4 259.7 — 350.5 Merger and integration costs — — 3.1 — 3.1 Restructuring charges — 1.8 3.5 — 5.3 Total costs and expenses 4.4 276.3 1,045.1 (6.0 ) 1,319.8 Operating (loss) income (4.4 ) 77.6 105.6 — 178.8 Earnings (losses) from consolidated subsidiaries 15.4 (96.6 ) (5.9 ) 87.1 — Other income (expense), net 17.2 0.3 (0.1 ) — 17.4 Gain on early extinguishment of debt 7.6 — — — 7.6 Intercompany interest income (expense) 28.3 (9.5 ) (18.8 ) — — Interest expense (101.2 ) (38.1 ) (90.9 ) — (230.2 ) Loss before income taxes (37.1 ) (66.3 ) (10.1 ) 87.1 (26.4 ) Income tax (benefit) expense (30.1 ) 2.2 8.5 — (19.4 ) Net loss $ (7.0 ) $ (68.5 ) $ (18.6 ) $ 87.1 $ (7.0 ) Comprehensive loss $ (223.2 ) $ (68.5 ) $ (18.6 ) $ 87.1 $ (223.2 ) 14. Supplemental Guarantor Information, Continued: Condensed Consolidating Statement of Comprehensive Income (Unaudited) Three Months Ended (Millions) Windstream Services Guarantors Non- Guarantors Eliminations Consolidated Revenues and sales: Service revenues $ — $ 293.6 $ 1,123.0 $ (7.0 ) $ 1,409.6 Product sales — 37.8 8.1 — 45.9 Total revenues and sales — 331.4 1,131.1 (7.0 ) 1,455.5 Costs and expenses: Cost of services — 123.4 566.9 (5.9 ) 684.4 Cost of products sold — 31.3 7.7 — 39.0 Selling, general and administrative — 38.8 180.3 (1.1 ) 218.0 Depreciation and amortization 5.3 84.8 258.4 — 348.5 Merger and integration costs — — 10.0 — 10.0 Restructuring charges — 1.8 1.8 — 3.6 Total costs and expenses 5.3 280.1 1,025.1 (7.0 ) 1,303.5 Operating (loss) income (5.3 ) 51.3 106.0 — 152.0 Earnings from consolidated subsidiaries 69.6 15.7 0.3 (85.6 ) — Other (expense) income, net (0.3 ) 40.9 (40.7 ) — (0.1 ) Intercompany interest income (expense) 31.8 (13.2 ) (18.6 ) — — Interest expense (130.9 ) (11.2 ) (1.3 ) — (143.4 ) (Loss) income before income taxes (35.1 ) 83.5 45.7 (85.6 ) 8.5 Income tax (benefit) expense (43.3 ) 26.0 17.6 — 0.3 Net income $ 8.2 $ 57.5 $ 28.1 $ (85.6 ) $ 8.2 Comprehensive income $ 13.8 $ 57.5 $ 28.1 $ (85.6 ) $ 13.8 14. Supplemental Guarantor Information, Continued: Condensed Consolidating Statement of Comprehensive (Loss) Income (Unaudited) Nine Months Ended (Millions) Windstream Services Guarantors Non- Guarantors Eliminations Consolidated Revenues and sales: Service revenues $ — $ 876.3 $ 3,353.4 $ (19.5 ) $ 4,210.2 Product sales — 112.2 15.9 — 128.1 Total revenues and sales — 988.5 3,369.3 (19.5 ) 4,338.3 Costs and expenses: Cost of services — 342.7 1,743.1 (16.7 ) 2,069.1 Cost of products sold — 97.2 14.6 — 111.8 Selling, general and administrative — 113.9 543.8 (2.8 ) 654.9 Depreciation and amortization 13.7 254.5 764.8 — 1,033.0 Merger and integration costs — — 74.5 — 74.5 Restructuring charges — 4.1 11.6 — 15.7 Total costs and expenses 13.7 812.4 3,152.4 (19.5 ) 3,959.0 Operating (loss) income (13.7 ) 176.1 216.9 — 379.3 Earnings (losses) from consolidated subsidiaries 19.4 (150.3 ) (5.7 ) 136.6 — Other income, net 27.7 0.5 10.3 — 38.5 Loss on early extinguishment of debt (30.0 ) (5.3 ) (0.5 ) — (35.8 ) Intercompany interest income (expense) 92.7 (37.8 ) (54.9 ) — — Interest expense (343.5 ) (84.4 ) (160.9 ) — (588.8 ) (Loss) income before income taxes (247.4 ) (101.2 ) 5.2 136.6 (206.8 ) Income tax (benefit) expense (135.3 ) 9.5 31.1 — (94.7 ) Net loss $ (112.1 ) $ (110.7 ) $ (25.9 ) $ 136.6 $ (112.1 ) Comprehensive loss $ (435.9 ) $ (110.7 ) $ (25.9 ) $ 136.6 $ (435.9 ) 14. Supplemental Guarantor Information, Continued: Condensed Consolidating Statement of Comprehensive Income (Unaudited) Nine Months Ended (Millions) Windstream Services Guarantors Non- Guarantors Eliminations Consolidated Revenues and sales: Service revenues $ — $ 887.0 $ 3,378.3 $ (18.3 ) $ 4,247.0 Product sales — 117.5 21.9 — 139.4 Total revenues and sales — 1,004.5 3,400.2 (18.3 ) 4,386.4 Costs and expenses: Cost of services — 373.6 1,650.1 (15.1 ) 2,008.6 Cost of products sold — 100.8 19.3 — 120.1 Selling, general and administrative — 122.6 572.5 (3.2 ) 691.9 Depreciation and amortization 16.3 252.1 763.0 — 1,031.4 Merger and integration costs — — 26.0 — 26.0 Restructuring charges — 4.5 15.3 — 19.8 Total costs and expenses 16.3 853.6 3,046.2 (18.3 ) 3,897.8 Operating (loss) income (16.3 ) 150.9 354.0 — 488.6 Earnings from consolidated subsidiaries 229.7 95.4 3.3 (328.4 ) — Other (expense) income, net (0.4 ) 123.5 (123.0 ) — 0.1 Intercompany interest income (expense) 95.1 (40.6 ) (54.5 ) — — Interest expense (392.8 ) (33.5 ) (1.5 ) — (427.8 ) (Loss) income before income taxes (84.7 ) 295.7 178.3 (328.4 ) 60.9 Income tax (benefit) expense (123.9 ) 77.0 68.6 — 21.7 Net income $ 39.2 $ 218.7 $ 109.7 $ (328.4 ) $ 39.2 Comprehensive income $ 31.8 $ 218.7 $ 109.7 $ (328.4 ) $ 31.8 14. Supplemental Guarantor Information, Continued: Condensed Consolidating Balance Sheet (Unaudited) As of September 30, 2015 (Millions) Windstream Services Guarantors Non- Guarantors Eliminations Consolidated Assets Current Assets: Cash and cash equivalents $ 49.3 $ 1.9 $ 46.0 $ — $ 97.2 Accounts receivable (less allowance for doubtful accounts of $38.2) — 258.5 398.8 — 657.3 Notes receivable - affiliate — 4.7 — (4.7 ) — Affiliates receivable, net — 1,558.1 4,586.2 (6,144.3 ) — Inventories — 71.2 9.8 — 81.0 Deferred income taxes 35.3 18.2 75.3 — 128.8 Prepaid expenses and other 49.9 33.0 75.8 — 158.7 Total current assets 134.5 1,945.6 5,191.9 (6,149.0 ) 1,123.0 Investments in consolidated subsidiaries 10,018.2 597.8 242.6 (10,858.6 ) — Notes receivable - affiliate — 314.9 — (314.9 ) — Goodwill 1,636.7 1,469.4 1,233.9 — 4,340.0 Other intangibles, net 559.5 325.4 701.3 — 1,586.2 Net property, plant and equipment 8.8 1,308.4 4,012.5 — 5,329.7 Investment in CS&L common stock 526.0 — — — 526.0 Deferred income taxes — 287.9 131.6 (419.5 ) — Other assets 14.5 52.3 32.7 — 99.5 Total Assets $ 12,898.2 $ 6,301.7 $ 11,546.5 $ (17,742.0 ) $ 13,004.4 Liabilities and Equity Current Liabilities: Current maturities of long-term debt $ 5.9 $ — $ — $ — $ 5.9 Current portion of long-term lease obligations — 42.6 103.8 — 146.4 Current portion of interest rate swaps 19.2 — — — 19.2 Accounts payable 1.1 97.3 268.3 — 366.7 Affiliates payable, net 6,160.0 — — (6,144.3 ) 15.7 Notes payable - affiliate — — 4.7 (4.7 ) — Advance payments and customer deposits — 34.5 172.9 — 207.4 Accrued taxes 0.1 24.4 68.7 — 93.2 Accrued interest 134.3 3.6 1.1 — 139.0 Other current liabilities 12.5 61.3 230.4 — 304.2 Total current liabilities 6,333.1 263.7 849.9 (6,149.0 ) 1,297.7 Long-term debt 5,593.9 99.5 — — 5,693.4 Long-term lease obligations — 1,457.4 3,550.2 — 5,007.6 Notes payable - affiliate — — 314.9 (314.9 ) — Deferred income taxes 742.3 — — (419.5 ) 322.8 Other liabilities 54.6 32.6 421.4 — 508.6 Total liabilities 12,723.9 1,853.2 5,136.4 (6,883.4 ) 12,830.1 Commitments and Contingencies (See Note 7) Equity: Common stock — 39.4 81.9 (121.3 ) — Additional paid-in capital 636.2 4,370.0 3,426.9 (7,796.9 ) 636.2 Accumulated other comprehensive (loss) income (311.7 ) — 2.3 (2.3 ) (311.7 ) (Accumulated deficit) retained earnings (150.2 ) 39.1 2,899.0 (2,938.1 ) (150.2 ) Total equity 174.3 4,448.5 6,410.1 (10,858.6 ) 174.3 Total Liabilities and Equity $ 12,898.2 $ 6,301.7 $ 11,546.5 $ (17,742.0 ) $ 13,004.4 14. Supplemental Guarantor Information, Continued: Condensed Consolidating Balance Sheet (Unaudited) As of December 31, 2014 (Millions) Windstream Services Guarantors Non- Guarantors Eliminations Consolidated Assets Current Assets: Cash and cash equivalents $ — $ 3.8 $ 50.0 $ (26.0 ) $ 27.8 Restricted cash 6.7 — — — 6.7 Accounts receivable (less allowance for doubtful acco unts of $43.4) — 266.5 369.0 — 635.5 Notes receivable - affiliate — 4.8 — (4.8 ) — Affiliates receivable, net — 969.0 2,155.6 (3,124.6 ) — Inventories — 56.2 7.5 — 63.7 Deferred income taxes 67.4 5.9 32.1 — 105.4 Prepaid expenses and other 35.5 32.4 96.7 — 164.6 Total current assets 109.6 1,338.6 2,710.9 (3,155.4 ) 1,003.7 Investments in consolidated subsidiaries 10,001.3 747.9 232.4 (10,981.6 ) — Notes receivable - affiliate — 317.7 — (317.7 ) — Goodwill 1,649.5 1,469.4 1,233.9 — 4,352.8 Other intangibles, net 590.7 355.2 818.1 — 1,764.0 Net property, plant and equipment 9.8 1,329.5 4,073.0 — 5,412.3 Other assets 16.7 37.2 39.0 — 92.9 Total Assets $ 12,377.6 $ 5,595.5 $ 9,107.3 $ (14,454.7 ) $ 12,625.7 Liabilities and Equity Current Liabilities: Current maturities of long-term debt $ 717.4 $ — $ 0.1 $ — $ 717.5 Current portion of interest rate swaps 28.5 — — — 28.5 Accounts payable 2.1 113.0 288.2 — 403.3 Affiliates payable, net 3,277.0 — — (3,124.6 ) 152.4 Notes payable - affiliate — — 4.8 (4.8 ) — Advance payments and customer deposits — 36.5 178.2 — 214.7 Accrued taxes 0.2 25.0 70.0 — 95.2 Accrued interest 94.3 5.8 2.4 — 102.5 Other current liabilities 32.3 26.5 270.1 — 328.9 Total current liabilities 4,151.8 206.8 813.8 (3,129.4 ) 2,043.0 Long-term debt 7,275.9 568.9 1.7 — 7,846.5 Long-term lease obligations — 24.0 57.0 — 81.0 Notes payable - affiliate — — 317.7 (317.7 ) — Deferred income taxes 658.6 199.0 1,021.0 — 1,878.6 Other liabilities 66.5 28.2 457.1 — 551.8 Total liabilities 12,152.8 1,026.9 2,668.3 (3,447.1 ) 12,400.9 Commitments and Contingencies (See Note 7) Equity: Common stock — 39.4 81.9 (121.3 ) — Additional paid-in capital 250.8 4,370.0 3,426.9 (7,796.9 ) 250.8 Accumulated other comprehensive income 12.1 — 14.5 (14.5 ) 12.1 (Accumulated deficit) retained earnings (38.1 ) 159.2 2,915.7 (3,074.9 ) (38.1 ) Total equity 224.8 4,568.6 6,439.0 (11,007.6 ) 224.8 Total Liabilities and Equity $ 12,377.6 $ 5,595.5 $ 9,107.3 $ (14,454.7 ) $ 12,625.7 14. Supplemental Guarantor Information, Continued: Condensed Consolidating Statement of Cash Flows (Unaudited) Nine Months Ended (Millions) Windstream Services Guarantors Non- Guarantors Eliminations Consolidated Cash Provided from Operations: Net cash (used in) provided from operations $ (46.7 ) $ 203.3 $ 600.7 $ — $ 757.3 Cash Flows from Investing Activities: Additions to property, plant and equipment (0.8 ) (118.7 ) (624.9 ) — (744.4 ) Changes in restricted cash 6.7 — — — 6.7 Grant funds received for broadband stimulus projects 23.5 — — — 23.5 Network expansion funded by Connect America Fund - Phase I — (16.5 ) (50.9 ) — (67.4 ) Other, net (4.1 ) 0.1 12.9 — 8.9 Net cash provided from (used in) investing activities 25.3 (135.1 ) (662.9 ) — (772.7 ) Cash Flows from Financing Activities: Distributions to Windstream Holdings, Inc. (355.1 ) — — — (355.1 ) Payment received from CS&L in spin-off 1,035.0 — — — 1,035.0 Repayments of debt and swaps (1,646.7 ) (450.0 ) (1.9 ) — (2,098.6 ) Proceeds of debt issuance 1,620.0 — — — 1,620.0 Debt issuance costs (4.3 ) — — — (4.3 ) Stock repurchases (20.0 ) — — — (20.0 ) Intercompany transactions, net (550.0 ) 394.8 129.2 26.0 — Payments under long-term lease obligations — (13.4 ) (45.9 ) — (59.3 ) Payments under capital lease obligations — (4.2 ) (20.5 ) — (24.7 ) Other, net (8.2 ) 2.7 (2.7 ) — (8.2 ) Net cash provided from (used in) financing activities 70.7 (70.1 ) 58.2 26.0 84.8 Increase (decrease) in cash and cash equivalents 49.3 (1.9 ) (4.0 ) 26.0 69.4 Cash and Cash Equivalents: Beginning of period — 3.8 50.0 (26.0 ) 27.8 End of period $ 49.3 $ 1.9 $ 46.0 $ — $ 97.2 14. Supplemental Guarantor Information, Continued: Condensed Consolidating Statement of Cash Flows (Unaudited) Nine Months Ended (Millions) Windstream Services Guarantors Non- Guarantors Eliminations Consolidated Cash Provided from Operations: Net cash provided from operations $ 43.4 $ 221.9 $ 848.4 $ — $ 1,113.7 Cash Flows from Investing Activities: Additions to property, plant and equipment (1.4 ) (77.2 ) (474.1 ) — (552.7 ) Broadband network expansion funded by stimulus grants — (0.2 ) (11.4 ) — (11.6 ) Changes in restricted cash 2.0 — — — 2.0 Grant funds received for broadband stimulus projects 25.8 — — — 25.8 Grant funds received from Connect America Fund - Phase I — 9.4 16.6 — 26.0 Network expansion funded by Connect America Fund - Phase I — (0.5 ) (1.5 ) — (2.0 ) Net cash provided from (used in) investing activities 26.4 (68.5 ) (470.4 ) — (512.5 ) Cash Flows from Financing Activities: Distributions to Windstream Holdings, Inc. (452.4 ) — — — (452.4 ) Repayments of debt and swaps (1,049.0 ) — — — (1,049.0 ) Proceeds of debt issuance 985.0 — — — 985.0 Intercompany transactions, net 500.0 (154.6 ) (345.4 ) — — Payments under capital lease obligations — (0.6 ) (19.2 ) — (19.8 ) Other, net (9.5 ) 2.7 (2.7 ) — (9.5 ) Net cash used in financing activities (25.9 ) (152.5 ) (367.3 ) — (545.7 ) Increase in cash and cash equivalents 43.9 0.9 10.7 — 55.5 Cash and Cash Equivalents: Beginning of period 13.7 3.1 31.4 — 48.2 End of period $ 57.6 $ 4.0 $ 42.1 $ — $ 103.7 |