Windstream Corp. (Nasdaq: WIN) has entered into a definitive agreement to acquire PAETEC Holding Corp. (Nasdaq: PAET), based in Fairport, N.Y., in a transaction valued at approximately $2.3 billion.

“This transaction significantly advances our strategy to drive top-line revenue growth by expanding our focus on business and broadband services,” said Jeff Gardner, president and CEO of Windstream. “The combined company will have a nationwide network with a deep fiber footprint to offer enhanced capabilities in strategic growth areas, including IP-based services, data centers, cloud computing and managed services. Financially, we improve our growth profile and lower the payout ratio on our strong dividend, offering investors a unique combination of growth and yield.”

“Both PAETEC and Windstream are built on a customer and employee-focused culture. Together, with far denser network assets, an expansive fiber infrastructure, and larger data center footprint, I believe our brightest days are ahead,” said Arunas A. Chesonis, chairman and CEO, of PAETEC.  “Our combination now creates a new Fortune 500 company with the financial strength and scale to compete and win against any other provider in the industry. I’m confident that this transaction will deliver substantial long-term value for our customers, employees, and shareholders.”

PAETEC shareholders will receive 0.460 shares of Windstream common stock for each PAETEC share owned under the terms of the agreement which was approved by the boards of directors of both companies. Windstream expects to issue approximately 73 million shares of stock valued at approximately $891 million, based on the company’s closing stock price on July 29, 2011.

Windstream also will assume or refinance PAETEC’s net debt of approximately $1.4 billion at the time of closing.  PAETEC stockholders are expected to own approximately 13 percent of the combined company upon closing of the transaction.

Significant Synergies and Tax Attributes Drive Free Cash Flow Accretion

The transaction is expected to be accretive to free cash flow per share, excluding merger and integration costs, in the first year following the closing. The transaction is expected to generate annual pre-tax operating cost synergies of approximately $100 million and capital expenditure savings of approximately $10 million, which are expected to be fully realized by the third year after closing.  Windstream expects to incur merger and integration costs of approximately $50 million in operating expense in the first year following the closing and approximately $55 million in capital expenditures over the first three years following closing.

The transaction will allow annual PAETEC net operating loss utilization of approximately $130 million in each of the first 5 years. The tax benefits will have an estimated net present value of approximately $250 million.

Enhanced Scale and Improved Business Mix

The combined company would have had $6.1 billion in total revenue and about $2.4 billion in adjusted operating income before depreciation and amortization, which excludes non-cash pension expense, restructuring charges and stock-based compensation expense, on a pro forma basis for the last 12 months ended March 31, 2011. Business and broadband revenues would have comprised approximately 70 percent of total revenue.

The new company will serve business customers in 46 states and the District of Columbia and maintain approximately 100,000 fiber route miles across the country. Windstream will offer data center services across the United States and have improved capability to serve multi-location business customers.

Strong Balance Sheet and Liquidity

Windstream will continue to have a strong balance sheet and liquidity. The transaction will be slightly deleveraging, including synergies.

Committed Financing

Windstream has received $1.1 billion in committed financing in connection with the acquisition, which financing would be required if Windstream refinances the assumed debt.

Dividend Practice

Windstream pays an annual dividend of $1 per share and its board of directors expects to continue the current dividend practice after the transaction closes.

Approvals and Anticipated Closing

The transaction is expected to close within six months, subject to certain conditions, including necessary approvals from federal and state regulators and PAETEC shareholders.

PAETEC Overview

PAETEC is a competitive local exchange carrier and provides  telecommunications services primarily to business customers in 46 states and the District of Columbia. The company operates seven data centers in the U.S. and owns approximately 36,700 route miles of fiber in portions of 39 states and the District of Columbia.

PAETEC has approximately 5,000 employees, including about 875 in the Rochester, N.Y. area. The company was founded in 1998.

Additional Information

Stephens Inc. and J.P. Morgan Securities LLC are acting as financial advisers and Skadden, Arps, Slate, Meagher & Flom LLP is acting as legal adviser to Windstream in the transaction.

BofA Merrill Lynch and Deutsche Bank Securities, Inc. are acting as financial advisers and Hogan Lovells is acting as legal adviser to PAETEC in the transaction.

Conference Call

Windstream will hold a conference call at 8 a.m. CDT today to review the transaction.

To Access the Call

Interested parties can access the call by dialing 1-877-374-3977, conference ID 88434342, ten minutes prior to the start time.

To Access the Call Replay

A replay of the call will be available beginning at 9 a.m. CDT today and ending at midnight CDT on Aug. 8. The replay can be accessed by dialing 1-855-859-2056, conference ID 88434342.

Webcast Information

The conference call also will be streamed live over the company’s website atwww.windstream.com/investors. A replay of the webcast will be available on the website beginning at 9 a.m. CDT today.

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PAETEC Holding Corp. (NASDAQ GS: PAET) announced today the deployment of PAETEC Visual Messaging which seamlessly integrates enterprise voicemail systems with leading smart phone and tablet devices. The service then automatically transcribes the voicemail to text, and both the audio file and transcription of the message are presented visually on the user’s mobile device, eliminating the need to dial into voicemail systems.

The Visual Messaging product consolidates all voice messages for a user, including office and mobile voicemail, for quick and easy retrieval of the recorded voice message or transcribed text on Android, Apple, and Blackberry platforms as well as assorted tablets. The user may then review, reply, or forward the transcribed voicemail messages in the order of their choosing, even during a meeting.

“PAETEC Visual Messaging is changing how business people communicate,” said John Chapman, chief marketing officer at PAETEC. “Too often, officer workers have an office voicemail, mobile phone voicemail, and corporate e-mail box, each with a different device to retrieve the messages. Our Visual Messaging collapses that into a single platform and makes receiving messages as quick and intuitive as e-mail.”

PAETEC’s Visual Messaging software may integrate directly with a firm’s existing enterprise voicemail system such as Cisco, Nortel, or Avaya, or be hosted by PAETEC in the cloud through its highly secure, fault-tolerant data centers.

Visual Messaging brings the same level of efficiencies and productive gains to voicemail through mobile devices, as users have come to depend on for e-mail. Additionally, enterprises are often plagued with disparate voicemail systems that are unable to work together, not allowing users to forward or reply to voicemail messages to others, even if within the same company. Visual Messaging solves this issue and allows any user to reply, forward, or archive any message, whether they are part of the same voicemail system or not, as well as outside of their company.

“We’ve perfected this software over the past 10 years, and now with PAETEC’s broad network retail customer base and wholesale structure, we believe we have a total solution for office productivity unlike any other provider or system,” said Sam Waicberg, vice president and general manager of PAETEC’s mobile applications.

PAETEC Visual Messaging is the result of the 2011 acquisition of the Boston-based mobile applications provider, Iperia.

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PAETEC Holding Corp. (NASDAQ GS: PAET) announced the launch of an expanded portfolio of cloud-based products and the planned deployment of new data centers coast-to-coast.

As part of its overall cloud and data center strategy and leveraging its breadth and depth of experience in the cloud and data center space, PAETEC plans to add 13 data centers coast-to-coast by the end of 2012 to its current set of seven centers which will result in the company operating 20 centers nationwide. Additionally, the company released new cloud-based products and enhanced existing products for businesses including Dedicated Server, Virtual Server, Managed Storage, and Hosted Exchange. Cloud-based services refer to applications being housed, managed, and maintained in highly secure and fault-tolerant data centers, relieving day-to-day responsibilities from IT staffs allowing them to focus on more strategic initiatives.

“With the advent of high-speed networks and continued migration of network intelligence into the cloud, the need for these network-based services has increased dramatically and we see that trend continuing into the future,” said Arunas Chesonis, chairman and CEO of PAETEC. “Given our historical expertise, nationwide network, deep customer base, and skilled employee base, I believe PAETEC, unlike any other provider, will be extremely well positioned to serve mid-sized and enterprise organizations.”

The research firm Current Analysis also sees the distinct trend in cloud computing. “The industry-wide adoption of cloud computing is increasing at a rapid clip,” said Amy DeCarlo, principal analyst, security and data center services at Current Analysis. “We expect companies like PAETEC that have comprehensive cloud strategies to be well prepared to meet the rising demand of these types of network services.”

PAETEC’s cloud solutions include:

• Virtual Server to provide businesses the ability to buy computing and associated storage on a per-logical server basis for a monthly fee, rather than purchasing their own physical server requiring ongoing upgrades and maintenance. A Virtual Server gives businesses on-demand scalability to meet fluctuating business requirements, as well a promoting a geographically diverse presence for disaster recovery
• Dedicated Server providing turn-key implementations that reside in PAETEC’s enterprise-class data centers. PAETEC’s service enables customers the option to make the transition to virtualization and cloud computing at their own pace, without the burden of new infrastructure deployment or specialized design to support virtualization.
• Managed Storage offering an advanced, multi-tenant storage platform with the ability to purchase storage on demand and on a granular basis as required.
• Hosted Exchange allowing a business to access the power and simplicity of a Microsoft Exchange E-Mail server with PAETEC technicians and engineers available for support.

With the rapid growth in demand for cloud computing services, PAETEC sees a particularly strong opportunity to serve mid-market customers while building on its already strong portfolio of cloud computing services. “Looking at the products and services that were already available in the market, we saw very strong solutions for small business and startups and increasing competition for the large enterprise but very little that was appropriate for the needs of our mid-market customers,” said John Chapman, chief marketing officer of PAETEC. “Unlike other cloud infrastructure providers focused on leveraging commodity hardware, we believe the cloud data center must offer the same performance and reliability of which our customers have become accustomed.”

PAETEC currently has data centers in Andover, Mass., Bethlehem and Conshohocken, Pa., Richmond, Va., Milwaukee, Wis., Houston, Tex., and Phoenix, Ariz.

In 2011, the company has plans to expand to McLean, Va., Tampa, Fla., Columbus, Ohio, Detroit, Mich., and Charlotte, N.C.  In 2012, data centers are also planned for Dallas, Tex., Chicago, Ill., Northern California, Rochester, N.Y., Pittsburgh, Pa., Denver, Co., Atlanta, Ga. and a location in the Pacific Northwest.

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PAETEC Holding Corp. (NASDAQ GS: PAET) has promoted Todd Lechtenberg to Senior Vice President of Engineering. Building on his nearly 20 years of engineering and planning experience, Mr. Lechtenberg will lead the company’s network engineering functions including traditional TDM technologies, packet-based voice and data services, and developing new technology infrastructure.

Mr. Lechtenberg promotion follows the announcement that Sanjay Hiranandani, previous SVP of engineering and current Chief Technology Officer, had accepted a leadership role over PAETEC’s rapidly expanding data center and cloud-services division. Mr. Hiranandani will continue as the company’s CTO.

Leading a team of engineers, and planners, Todd Lechtenberg will continue to develop and execute a strategy for serving PAETEC customers with innovative, fault-tolerant solutions using the latest technological advancements. The team also engineers core infrastructure and next-generation product sets, while supporting the design and deployment of all PAETEC network elements.

Mr. Lechtenberg joined PAETEC as part of the acquisition of McLeodUSA in 2008. Prior to joining McLeodUSA in 2000, he held leadership roles in Network Planning at WilTel and earned a Bachelor of Science degree in Accounting from Oklahoma State University.

Mr. Lechtenberg and his family will relocate from PAETEC’s office in Tulsa, Okla. to the company’s headquarters in Fairport, N.Y.

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PAETEC Holding Corp. (NASDAQ GS: PAET) today announced first quarter 2011 operating results. “The integration of the 2010 acquisitions is progressing as evidenced by solid revenue growth and improved operating performance,” said Arunas A. Chesonis, chairman and CEO. “The combination of PAETEC’s deep product portfolio and the enhanced solutions acquired during 2010 showed tangible results during the first quarter.” Financial results for first quarter 2011 included the following:

• Revenue of $495.5 million;
• Adjusted EBITDA of $91.4 million;
• Net loss of $11.9 million;
• 33rd consecutive quarter of positive free cash flow,*  which increased to $44.5 million for first quarter 2011;
• Net cash provided by operating activities of $60.7 million;
• A cash balance of $103.9 million at March 31, 2011.

First Quarter 2011 Results Compared to First Quarter 2010
Revenue

• Total revenue of $495.5 million for first quarter 2011 increased 27.0% or $105.5 million over first quarter 2010 primarily due to a 21.4% growth in network services revenue, which resulted principally from the inclusion of a full quarter of revenue from Cavalier Telephone. PAETEC’s acquisition of Cavalier Telephone closed in December 2010.
• Core network services revenue for first quarter 2011 was $336.8 million, an increase of 19.0% or $53.7 million over first quarter 2010 primarily due to the inclusion of Cavalier Telephone for the full 2011 quarter. Additionally, core network services revenue for first quarter 2011 showed modest organic growth before giving effect to the contribution of Cavalier Telephone.
• Core carrier services revenue for first quarter 2011 was $59.2 million, an increase of 32.6% or $14.6 million over first quarter 2010 primarily due to the inclusion of Cavalier Telephone for the full 2011 quarter. Core carrier services revenue organic growth before giving effect to the contribution of Cavalier Telephone was positive for first quarter 2011.
• Integrated solutions revenue of $36.3 million increased 119.4% or $19.7 million over first quarter 2010 due to the inclusion of the results of U.S. Energy Partners and Quagga Corporation for the full 2011 quarter and the growth in our IP Simple product.

View full release here

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PAETEC Holding Corp. (NASDAQ GS: PAET) has enabled its network with 100 Mbps Ethernet over Copper (EoC) technology leveraging Overture Networks‘ next generation Carrier Ethernet edge and aggregation platforms.

Overture’s industry-leading EoC technology and features allow PAETEC to leverage the qualifying existing copper infrastructure currently utilizing up to 15 Mbps per copper pair to deliver as much as 100 Mbps access directly to customers, supporting unprecedented bandwidth at a dramatically reduced cost compared to traditional SONET offerings. PAETEC has more than 370 central offices (COs) directly connected to its fiber network with additional COs planned this year.

“As one of the largest providers of EoC in the United States, we are leading the way with one of the fastest offerings on the market,” said Clint Heiden, president of national accounts and fiber services, PAETEC. “Our dense footprint allows us to offer multiple access media and speeds to meet the diverse needs of our customers, including Ethernet over Copper, fiber, and fixed wireless.”

In addition to direct access for PAETEC retail customers, wholesale customers also can establish one or more Ethernet Network-to-Network Interfaces (NNIs) with PAETEC to drive down access charges and reach more than 200,000 business locations.

“As the demand for expanded Ethernet services accelerates, PAETEC, with its broad central office footprint, is well prepared to deliver unparalleled bandwidth and best-in-class Ethernet services that today’s enterprise and wholesale customers have been waiting for,” said Kevin Sheehan, president, Overture Networks. “As the recognized technology, innovation and market leader in Ethernet over Copper solutions, Overture is excited to partner with PAETEC for its launch of 100 Mbps services.”

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PAETEC Holding Corp. (NASDAQ GS: PAET) has promoted Michael Colachico to Vice President and General Manager of Northern California, the Pacific Northwest, Utah and Idaho. Currently based in New England, Colachico, is one of PAETEC’s most tenured and successful sales leaders and will continue to deliver his strong customer focus serving medium and large-sized businesses in the Western U.S.

“Michael Colachico exemplifies the values that have driven PAETEC’s growth over the past 13 years,” said Reginald Scales, president of the West Region at PAETEC. “I’m excited to bring his leadership, strong technical knowledge and customer focus to one of the most technologically savvy areas of the nation.”

Colachico has a history of successful leadership serving as regional director in Boston and Providence, R.I. Most recently he led PAETEC’s Government and Higher Education strategy nationally. Colachico is a perennial award winner, with dozens of accolades at PAETEC as well as prior companies, including RCN, AT&T and Cable & Wireless.

He has a Bachelor of Science degree in marketing from Rhode Island-based Roger Williams University, and is active with the Boy Scouts of America. Colachico will relocate to Danville, Calif., working in PAETEC’s office at 2001 N. Main Street in Walnut Creek.

Vice President and General Manager in the Northwest

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PAETEC Holding Corp. (NASDAQ GS: PAET has been recognized for a third consecutive year as a “Best Large Company to Work For in New York State” by the New York State Society for Human Resource Management (NYS-SHRM). The company was previously ranked ninth in the large company category in the 2010 list, and the final 2011 rankings will be revealed at the awards dinner on Wednesday, April 21, in Albany. More than 20 percent of PAETEC’s 4,600 employees reside in New York state.

“On behalf of our more than 1,000 employees in New York, we’re honored to be again named one of the best places to work in the state,” said Arunas Chesonis, PAETEC chairman and CEO. “Our long-standing belief is that satisfied employees will better care for our growing customer base, and we’re delivering on that promise.”

NYS-SHRM and Best Companies Group formed a partnership to launch the prestigious awards program in New York state in 2007. Recipients were categorized into small/medium and large companies. In total, 50 companies were identified for demonstrating that happy employees make for good business and drive the Empire state’s economy.

Companies were selected based on an assessment of its workplace policies, practices, philosophy, systems, and demographics, as well as results of an internal employee survey conducted by the Best Companies Group, which measures the employee experience.

PAETEC’s corporate culture is based on four values which permeate the organization: Caring Culture, Open Communication, Unmatched Service and Personalized Solutions. By adhering to these values, PAETEC has rapidly grown into one of the largest communication providers in the nation offering its suite of services in 86 of the nation’s top 100 MSAs across 46 states.

Further details about the 2011 Best Companies to Work for in New York initiative can be found online at www.bestcompaniesNY.com.

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This week, PAETEC Holding Corp. (NASDAQ GS: PAET), which provides data, voice, and Internet solutions to business-class customers nationwide, announced the addition of the PAETEC 48x Phone System into it’s IP Simple bundle of IP-based services for small and medium-sized businesses.

IP Simple, launched in September of 2009, is now one of PAETEC’s fastest growing products. The bundle combines PAETEC’s Dynamic IP VoIP product with its award winning IP-based PBX and phones all for a single monthly fee while requiring no capital outlay. The new PAETEC 48x phone system has nearly twice the capacity of the previous 24x system with two T-1 interfaces, and is designed for companies up to 250 employees per site.

“The addition of the 48x dramatically expands the number of businesses that can benefit from our popular IP Simple Bundle,” said John Chapman, PAETEC’s senior vice president of marketing. “PAETEC is unique in that we’re a nationwide voice and data services provider and also design and manufacture our own award-winning phone systems for small and medium-sized businesses. Since we launched the IP Simple product, the positive response from business customers from coast-to-coast has been overwhelming.”

With the IP Simple bundle, customers may choose from the following equipment to complete their IP Simple bundle:

• IP PBX – 48x or 6x
• IP Phones – 9204, 9212 and/or 9224
• Optional Software -Call Assistant, Call Queuing, Conference Center, Advanced Call Distribution, Advanced Multi-Site and Multi Language Pack.

Since IP Simple Solutions is an equipment rental program, at the end of their initial term agreement customers have the option of retaining and continuing with the same monthly rental payments or returning the equipment to PAETEC.

IP Simple Solutions is a result of PAETEC’s acquisition of the IP PBX manufacturer, Allworx, in 2007. The IP Simple Bundle was named a 2009 Product of the Year by Communications Solutions magazine. In October, 2008, PAETEC’s SIP Trunking was named Most Innovative Product by Telephony Magazine and in August, 2010, Business Solutions Magazine named the Allworx 6x and 9204 as Best Channel Product in the IP PBX and IP Phone categories respectively.

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PAETEC Holding Corp. (NASDAQ GS: PAET) today announced that it has signed a definitive merger agreement to acquire Cavalier Telephone Corporation in an all-cash $460 million transaction. Cavalier is a privately held company whose majority owner is M/C Venture Partners, a private equity firm based in Boston. The acquisition will add nearly 17,000 fiber-route miles to PAETEC’s existing service footprint, allowing the company to offer an alternative for last-mile connectivity to customers and reduce overall expenses through improved cost-structures and network grooming. The transaction will further solidify PAETEC as one of the largest competitive local communication service providers in the United States as measured by revenue, adjusted EBITDA* and free cash flow* for the twelve months ended June 30, 2010.

Cavalier’s wholly owned subsidiary, Intellifiber Networks, is one of the largest network providers in the nation with a high capacity fiber network spanning nearly 17,000 route miles and representing over $2 billion of investment. The expansive 12,262 route mile intercity network spans the Midwest and Eastern U.S., as well as 4,689 route miles throughout several existing PAETEC metro areas, allowing for broad connectivity options for customers. Intellifiber offers scalable network solutions for service provider, enterprise, and government customers including private networks, low latency routing, SONET services, wavelengths, Ethernet, and data options.

The combined company would have generated approximately $1.950 billion in revenue and $381 million in adjusted EBITDA for the twelve months ended June 30, 2010 on a pro forma basis, including $30 million in expected run-rate synergies in year two and annually thereafter. After the closing of this transaction, PAETEC expects to have a local presence in 86 of the top 100 Metropolitan Statistical Areas (MSAs) and a presence in 1,178 collocations, or an increase in collocations of 95% as a result of the acquisition.

“This planned acquisition of Cavalier fits our strategic plan to add both fiber assets and regional density to better serve our customers and realize increased network synergies, both in the local loop and long haul,” said Arunas A. Chesonis, chairman and chief executive officer of PAETEC. “Cavalier’s fiber infrastructure, network assets and corporate culture make it a perfect match for PAETEC and dramatically strengthen the company in the Eastern United States.”

“This is a major milestone in the Cavalier story. Our future has never looked brighter,”said Danny Bottoms, president & CEO of Cavalier. “This transaction will soon enable us to take advantage of a combined network and resources that are unmatched in the industry, and build upon a common culture that is singularly focused on the customer.”

* Neither adjusted EBITDA nor free cash flow is a measurement of financial performance under accounting principles generally accepted in the United States, or “GAAP.” Adjusted EBITDA, as defined by PAETEC for the periods presented, represents net loss before depreciation and amortization, interest expense, benefit from income taxes, stock-based compensation, debt extinguishment and related costs, sales and use tax settlement, gain on non-monetary transaction, and other non-operating income. Free cash flow, as defined by PAETEC, consists of adjusted EBITDA less capital expenditures (purchases of property and equipment). See the accompanying tables for a quantitative reconciliation of adjusted EBITDA to net loss, as net loss is calculated in accordance with GAAP.

Transaction Terms and Structure
Under the terms of the merger agreement, which was approved by the boards of directors of both companies, Cavalier will become an indirect wholly-owned subsidiary of PAETEC Holding Corp. Subsequent to the entry of Cavalier and PAETEC into the merger agreement, Cavalier received written consents evidencing the requisite approval and adoption of the merger agreement by Cavalier security holders in accordance with applicable law. Neither the merger agreement nor the merger is subject to the approval of PAETEC’s stockholders.

The transaction is subject to the expiration or termination of the applicable waiting period under the Hart-Scott-Rodino AntiTrust Improvements Act of 1976, approvals by the FCC and state public service commissions in the states where the combined company will operate, and other customary closing conditions. The companies expect that the transaction will close within four to six months.

Concurrent with the execution of the merger agreement, PAETEC entered into a financing commitment letter with Deutsche Bank AG Cayman Islands Branch, Deutsche Bank Securities Inc., Banc of America Bridge LLC, and Banc of America Securities LLC, pursuant to which these parties committed to provide $420 million in financing for this leverage neutral transaction. PAETEC’s ratio of net-debt to LTM adjusted EBITDA will continue at the relatively constant level of 3.4x. Cavalier’s outstanding net indebtedness of approximately $336 million will be repaid at closing.

“This transaction offers clear shareholder and customer benefits by increasing the scale of our business and creating a significant operating synergy opportunity without materially changing our capital structure,”said Keith Wilson, chief financial officer of PAETEC.

Company Leadership and Headquarters
After the closing, Arunas A. Chesonis will remain Chairman and Chief Executive Officer and Keith Wilson as Chief Financial Officer of the combined company. Current Cavalier President and CEO, Danny Bottoms, plans to join PAETEC’s executive team. PAETEC will continue to be headquartered in Fairport, New York, and will maintain Cavalier’s operations in Richmond, Virginia along with PAETEC’s significant regional centers, including Charlotte, North Carolina and Cedar Rapids, Iowa.

Additional information about the transaction will be contained in PAETEC’s Current Report on Form 8-K to be filed with the SEC.

Advisors
Deutsche Bank Securities Inc. and BofA Merrill Lynch are acting as financial advisors to PAETEC and Skadden, Arps, Slate, Meagher & Flom LLP & Affiliates is acting as M&A counsel to PAETEC and Hogan Lovells US LLP is acting as counsel on PAETEC’s anticipated financing . Evercore Partners is acting as financial advisors and Edwards Angell Palmer & Dodge LLP is acting as legal advisor for Cavalier.

Conference Call
PAETEC will host a conference call with the investment community today at 9:00 a.m. ET. PAETEC Chairman and CEO Arunas A. Chesonis and Chief Financial Officer Keith Wilson will be participating, along with Cavalier Telephone President and CEO Danny Bottoms.

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PAETEC Holding Corp. (NASDAQ GS: PAET) officially opened an expansive, high-tech data center today in Andover, MA, approximately 24 miles north of Boston. This new flagship center will help customers maintain their critical data, server operating applications, network, and communications assets. It also represents a major step forward for the company towards supporting cloud computing.

The center not only serves companies in New England, but those nationwide with a need for geographic redundancy or a presence on the East Coast for reduced latency. The two-story, 92,700 square feet facility includes nearly an acre of raised floor space available for customers to collocate their servers, routers, and other communication equipment.

“Moving business applications from the desktop to the cloud will bring efficiency not possible before,” said Arunas Chesonis, chairman and CEO, PAETEC. “With our expertise in telecommunications and data convergence, we’re in a leading position to support the shift towards cloud computing and can provide our customers with a comprehensive set of managed service solutions to meet their business goals.”

The new data center marks the first of many steps PAETEC will take over the next 18 months to open eight more data centers across the country, with new centers in Houston, Milwaukee, and Phoenix scheduled for later this year.

The Andover center will offer Data Backup and Recovery to ensure regulatory compliance, disaster preparedness, and business continuity, as well as Dedicated Hosted Services and Shared Web Hosting based on a customer’s need to either maintain complete administrative control or completely outsource network monitoring and management.

“We’re utilizing our more than ten years of data center experience along with our advanced portfolio of communication solutions,” added Chesonis. “As a result, we’ve built an infrastructure that will responsibly serve our customers’ needs now and in the future as we continue our data center expansion efforts, implement virtualization, and provide server consolidation, content acceleration, and software as a service offerings.”

PAETEC’s data center solutions are hosted in its highly secure central office and data center collocation sites around the country. Supported by a staff of 11 with a 24×7 Technical Assistance Center (TAC), the Andover center with connections to a diverse OC-48 fiber ring has redundant power to the grid, backed-up by five 1400 horsepower, one-megawatt generators with 30,000 gallons of diesel fuel. To keep the center at an optimum temperature for customer equipment, the center boasts 2000 tons of cooling capacity, which will pull from outside air in winter months to help reduce energy costs and overall consumption for increased efficiencies.

Across the nation, PAETEC has 1.4 million square feet or more than 32 acres of data center space. It serves customers in financial services, government, healthcare, higher education, and hospitality industries.

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PAETEC Holding Corp. (NASDAQ GS: PAET) today announced second quarter 2010 financial and operating results. “Our second quarter is marked by continued expansion, from our sequential and year-over-year revenue growth, to the opening of new offices and rate centers nationally,” said Arunas A. Chesonis, chairman and CEO. “Over the last six months PAETEC has shown its commitment to growth by investing in businesses that allow us to deepen our customer relationships and enhance our product portfolio. Additionally, we successfully completed the Kenan to RevChain billing conversion during the second quarter, finalizing our integration of US LEC.” Financial results for second quarter 2010 included the following:

• Revenue of $396.1 million;
• Adjusted EBITDA* of $65.1 million;
• Net loss of $7.5 million;
• Free cash flow* of $33.7 million, which represented the 30th consecutive quarter in which PAETEC or its predecessor generated positive free cash flow;
• Net cash provided by operating activities of $36.9 million; and
• Cash, cash equivalents and short term investments of $125.6 million at June 30, 2010.

Quarterly Results – Second Quarter 2010 Compared to Second Quarter 2009
Revenue

• Total revenue of $396.1 million increased 0.2% or $0.9 million for second quarter 2010 from second quarter 2009, primarily due to the inclusion of revenue from recently acquired companies that more than offset a decline in usage-based revenue and a $4.1 million decline in non-core basic telephone service revenue (“POTS”).
• Core network services revenue increased $0.3 million to $284.9 million for second quarter 2010 from second quarter 2009.
• Core carrier services revenue decreased 6.6% or $3.2 million for second quarter 2010 from second quarter 2009 due to lower usage-based revenue.
• Integrated solutions revenue of $22.8 million increased 47.5% or $7.3 million over second quarter 2009 primarily due to PAETEC’s February 28, 2010 acquisition of US Energy Partners and June 7, 2010 acquisition of Quagga Corporation.

Link to Full press release (PDF-file)

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PAETEC Holding Corp. (NASDAQ GS: PAET), a FORTUNE 1000 company which provides data, voice, and Internet solutions to business-class customers nationwide, announced that is has expanded its local telephone service to 92 additional rate centers across 19 states during the first six months of 2010. The rate center expansion allows PAETEC to provision its business-class local services in additional areas nationwide.

Additionally, PAETEC announced expanded Ethernet local loop capability of up to one Gbps in six new cities including Binghamton, NY; Detroit; Houston; Hudson Valley, NY; Providence; RI; and Springfield, IL with Portland, ME planned to be opened shortly. Ethernet local loops offer connection speeds dramatically faster than traditional methods while simplifying the management for customers.

“Our primary focus while expanding our footprint and last mile options is to simply serve our customers better, wherever they have needs in the continental United States,” said Senior Vice President of Marketing John Chapman. “Our target customer has multiple sites and diversity needs and this continued expansion allows us to offer our complete product portfolio in more areas than most of our competitors.”

In addition to its local service rate centers, PAETEC can serve most areas of the United States with Internet, Advanced VPN Applications, Security Solutions, Conferencing Services, Fixed Wireless, long distance service and many other communication services.

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PAETEC Holding Corp. (NASDAQ GS: PAET), a FORTUNE 1000 company, announced that its chief financial officer Keith Wilson, was named CFO of the Year by the New Jersey Technology Council. The award was sponsored by Cushman & Wakefield. The winners were named at NJTC’s 2010 CFO Awards Breakfast held at the Forsgate Country Club on June 11.

The NJTC CFO of the Year Award honors individuals in the technology community who have enhanced their company’s public image, implemented major projects, raised capital and lead successful mergers and acquisitions.

“I couldn’t agree more with the decision of NJTC to name Keith Wilson CFO of the Year,” said Arunas Chesonis, chairman and CEO of PAETEC. “For nearly 10 years, Keith has helped to both craft our corporate strategy and execute the plan to grow the company ten-fold. We’re a far stronger company today because of Keith’s executive leadership and insightful counsel.”

Under Wilson’s leadership since joining the company as CFO in 2001, PAETEC has grown from $123 million in revenue in 2001 to $1.58 billion in 2009. In addition to serving on PAETEC’s Board of Directors, Wilson’s responsibilities include all financial functions of the organization including Accounting, Treasury, Budgeting, Corporate Finance, Operational Finance, Public Reporting, Investor Relations, Network Cost and Strategic Development including Mergers and Acquisitions.

Many recent key accomplishments by Wilson as part of the consideration include:

* Raised $650 million in High Yield Bonds over the past 12 months;
* Recently acquired US Energy Partners;
* Completed the $600 million acquisition of McLeodUSA which added 35 new markets of local service coverage for PAETEC and over 19,000 route miles of fiber optic transport facilities;
* Acquired Allworx, and industry leading IP PBX-Key System manufacturer;
* Refinanced over $600 million in Debt Capital in 2008 in conjunction with the McLeodUSA transaction;
* Instituted full SOX compliance corporate wide;
* PAETEC has been twice recognized by Deloitte as a Fast 500 organization

Other awards given at the annual awards breakfast include the Hall of Fame Award, Financier of the Year Award and Deal of the Year Award. For photos and more information about the winners of the NJTC 2010 CFO of the Year Awards, visit the New Jersey Technology Council’s website at www.njtc.org.

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PAETEC Holding Corp. (NASDAQ GS: PAET), a FORTUNE 1000 company, announced today that its wholly-owned subsidiary, PAETEC Corp., has closed on the acquisition of Quagga Corporation, a privately-held Sacramento-based company. As a world-class systems integrator, Quagga is the top Avaya partner on the West Coast, with expertise in IP-based voice and video systems for medium and large businesses. The company also specializes in data and business process management as well as consulting, design and maintenance of communication systems. Upon the closing of this acquisition, Quagga will become part of PAETEC’s Integrated Services Group (ISG) focused on delivering complete equipment-based communications solutions to businesses nationwide.

“The acquisition of Quagga fits our five-year strategic plan and further extends our ability to fight unfair in the marketplace by offering unique capabilities which our competitors simply can’t match,” said Douglas Derstine, PAETEC’s president of wholesale also overseeing equipment sales. “For nearly 10 years, we’ve had a robust Value Added Reseller presence in the Eastern United States. The addition of Quagga now allows our equipment capabilities to more geographically mirror those of our national network business.”

Quagga was founded in 2003 by Ken Apperson and Scott Knorp with a focus on delivering unmatched service through the integration of IP-based voice and video solutions. Over the past six years, the company has grown to 80 employees and is the largest Avaya partner in the western region as well as a leading integrator of Polycom, Lifesize and Tandberg video collaboration applications. With sales offices throughout California, New Jersey, Texas, Arizona, Missouri and Nevada, the company’s 150,000 IP voice and video endpoints worldwide are the most of any value added reseller (VAR) in the nation, “Being a part of a national leader in telecommunications like PAETEC will yield immediate benefits for our customers and employees alike,” said Scott Knorp, co-founder of Quagga. “Not only do we share a unique passion for serving customers with complete, personalized business communications solutions, but now have a new, immense product portfolio to offer our customers.”

Quagga will initially keep its name and continue to operate under the leadership of Apperson and Knorp. For more information on Quagga, visit their web site at www.quagga.com.

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PAETEC Holding Corp. (NASDAQ GS: PAET) today announced first quarter 2010 financial and operating results. “We are pleased to announce that PAETEC is a Fortune 1000 member. PAETEC achieved this milestone through a decade of hard work, operational excellence, and disciplined management,” said Arunas A. Chesonis, chairman and CEO. “Solid access line additions and continued strengthening of the customer profile were clear highlights for this quarter and position PAETEC to take advantage of an improving economy.” Financial results for first quarter 2010 included the following:

• Revenue of $390.1 million;
• Adjusted EBITDA* of $65.5 million;
• Net loss of $9.5 million;
• Free cash flow* of $36.1 million, which represented the 29th consecutive quarter in which PAETEC or its predecessor generated positive free cash flow;
• Net cash provided by operating activities of $7.8 million; and
• A cash balance of $144.3 million at March 31, 2010.

Quarterly Results – First Quarter 2010 Compared to First Quarter 2009
Revenue

• Total revenue of $390.1 million decreased 2.3% or $9.2 million for first quarter 2010 from first quarter 2009 primarily due to a decline in usage-based revenue and a $4.6 million decline in non-core basic telephone service revenue (“POTS”).
• Core network services revenue decreased 1.1% or $3.1 million for first quarter 2010 from first quarter 2009 primarily due to a decline in usage-based revenue which was partially offset by a 5.0% increase in PAETEC’s data revenue, generated principally by sales of Dynamic IP and MPLS VPN products.
• Core carrier services revenue decreased 9.2% or $4.5 million for first quarter 2010 from first quarter 2009 due to lower usage-based revenue.
• Integrated solutions revenue of $16.5 million increased 23.2% or $3.1 million over first quarter 2009 as a result of growth in equipment sales and PAETEC’s February 28, 2010 acquisition of US Energy Partners.

View full release (pdf)

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PAETEC Holding Corp. (NASDAQ GS: PAET), a leader in competitive telecommunications nationally, today announced the general availability of its new managed network Intrusion Detection and Prevention System (IDPS). Today’s announcement continues the expansion of PAETEC’s broad portfolio of professionally managed network and IT services for enterprise customers across 46 states, with the release of one of the most robust network protection systems available in the Managed Security Services marketplace today.

PAETEC’s IDPS utilizes deep packet inspection through a combination of a signature-based Intrusion Prevention Sensor (IPS) and a centrally monitored Intrusion Detection System (IDS). By combining the monitoring and detecting components of IDS with the reactive, zero-hour components of IPS, PAETEC’s new offering represents one of the most robust intrusion protection services available. If a potentially negative event is detected, the intrusion prevention sensor and the event correlation engine determine the threat level of the event and act accordingly within a 99.9999% SLA guarding against false positives. Furthermore, since IDPS resides within PAETEC’s MPLS network, there is no need for on-site equipment installation or upgrades and the product protects all sites on the network, not just one.

“Network security ranks as one of the most fundamental priorities for enterprise IT executives, and the traditional approach to this challenge has led to equipment racks full of appliances and spiraling costs to house, support, and monitor all that gear,” said John Chapman, PAETEC senior vice president of Marketing. “Our managed network IDPS service drastically reduces the costs associated with enterprise network security by leveraging our world-class equipment, processes, and personnel in our centralized PAETEC Security Operations Center.”

In addition to the internal demands driving the need for network security, certain industry standards such as PCI DSS and HIPAA require IDPS. PAETEC’s new fully managed and monitored solution offering assists its customers in exceeding industry compliance standards, and its Security Operations Center personnel are equipped to consult with customers to assist in these and other compliance matters.

The new IDPS functions as an add-on service to PAETEC’s Network Firewall service, with features that include:

• Intrusion Detection System (IDS)
• Intrusion Prevention Sensor (IPS)
• Quadruple redundancy, both local and geographically diverseSystem
• Real-time monitoring
• Real-time alarming with automated email notifications
• 99.9999% protection against false positives
• Zero-hour protection
• Extensive reporting and logging information available through PAETEC Online
• Automated patching and updating

“Nearly 50,000 customers across 46 states entrust PAETEC with some of their most mission-critical data, communications services, and applications, and our people and our network have earned that trust through years of exceptionally reliable performance,” said Arunas Chesonis, CEO of PAETEC. “Our new Intrusion Detection and Prevention System marks an important milestone for our company and our customers as we launch yet another mission-critical managed service backed by our industry-leading infrastructure and our unmatched professional support team.”

The new IDPS service is available immediately to all new and existing customers of PAETEC’s Network Firewall service across the direct and agent channels in the Unified Product Portfolio.

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PAETEC Holding Corp. (NASDAQ GS: PAET) today announced fourth quarter 2009 and full year 2009 financial and operating results. “We are pleased to have met our revenue guidance and exceeded our adjusted EBITDA guidance for full year 2009,” said Arunas A. Chesonis, chairman and CEO.

“Our opportunistic issuance in January 2010 of $300.0 million of senior secured notes for the purpose of refinancing a portion of our existing debt strategically positions PAETEC financially for the next several years.”

Financial results for full year 2009 included the following:

• Full year 2009 revenue of $1,580.2 million, a $9.8 million increase over full year 2008 revenue.
• Full year 2009 adjusted EBITDA* of $256.9 million, an increase of 8.1% or $19.2 million over full year 2008 adjusted EBITDA of $237.7 million.
• Full year 2009 net loss of $28.7 million compared to a $487.9 million net loss for full year 2008.
• 28th consecutive quarter of positive free cash flow,* which increased by $17.2 million for full year 2009 to $135.4 million.
• Full year 2009 net cash provided by operating activities of $152.2 million
• A cash balance of $152.9 million at December 31, 2009

Revenue

• Total revenue of $1,580.2 million for 2009 increased 0.6% or $9.8 million over 2008 primarily due to 12.9% growth in PAETEC’s data revenue and the inclusion of McLeodUSA results for full year 2009.
• Core network services revenue for 2009 increased 3.1% or $34.3 million over 2008 primarily due to 13.0% growth in PAETEC’s data revenue related to network services, generated principally by sales of its Dynamic IP and MPLS VPN products, and the inclusion of McLeodUSA results for full year 2009.
• Core carrier services revenue for 2009 increased 2.5% or $4.6 million over 2008 due to the inclusion of McLeodUSA result for full year 2009.
• Integrated solutions revenue of $61.7 million increased 0.4% or $0.2 million over 2008.

Adjusted EBITDA and Margins

Adjusted EBITDA for 2009 increased 8.1% to $256.9 million over adjusted EBITDA of $237.7 million for 2008. Adjusted EBITDA margin, which represents adjusted EBITDA as a percentage of total revenue, improved to 16.3% for 2009 compared to 15.1% for 2008. Cost of goods sold for 2009 increased 0.1% or $1.0 million. Gross margin for 2009 increased to 50.5% from 50.2% for 2008 due in part to attrition of customers purchasing lower margin products and the positive effects of network grooming efforts.

Selling, general and administrative (“SG&A”) expenses for 2009 were $540.8 million, excluding stock-based compensation of $18.8 million, and decreased 1.7% or $9.4 million in 2009 from 2008 due to initiatives instituted by management over the past several quarters to better align costs more closely with revenue performance and expectations. As a percentage of total revenue, SG&A expenses, excluding stock-based compensation, were 34.2% for full year 2009 compared to 35.0% for full year 2008.

Complete report: link (PDF)

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PAETEC Holding Corp. (NASDAQ GS: PAET), which provides data, voice, and Internet solutions to business-class customers nationwide, announced that it will standardize on Cisco (CSCO) Internet Protocol Next-Generation Network edge and core platforms. As a result, PAETEC will continue to increase the availability and reliability of its existing MPLS-VPN, IP trunking, hosted firewall and dedicated Internet services while accelerating deployment of emerging next-generation collaboration services.

“Over the past ten years, PAETEC has been an industry leader in delivering voice and data services to the enterprise customer base, as well as leading the transformation of such services to IP next-generation network platforms,” said Sanjay Hiranandani, PAETEC’s senior vice president of engineering. “By standardizing with Cisco throughout our IP routing platform, PAETEC can now rapidly deploy customer solutions with a high degree of consistency and reliability. Additionally, by continuing to deploy leading-edge IP NGN technologies in our edge network, we’re supporting a wide range of emerging products and services such as online collaboration, Cisco TelePresence and other applications requiring high-bandwidth and real-time response.”

“We are pleased that PAETEC has once again chosen Cisco for its nationwide network expansion to better serve its customers,” said Shailesh Shukla, vice president and general manager, Cisco Service Provider Routing Technology Group.

With a consistent IP NGN edge routing platform, PAETEC will enhance its ability to provision, troubleshoot and maintain service for its 45,000 business customers using IP services across its nationwide footprint. Cisco 7600 Series Routers allow a broad range of dynamic and personalized edge-based services, supporting interfaces from T1 to multi-gigabit Ethernet connectivity with industry-leading reliability.

PAETEC is also expanding the footprint and capacity of its IP NGN network to keep up with increasing demand from the growth of IP and Ethernet services using the Cisco XR 12000 Series Routers. The multi-gigabit core will allow PAETEC to help enable the delivery of high-bandwidth applications, including high-definition voice and video.

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PAETEC Holding Corp. (NASDAQ GS: PAET), which provides data, voice, and Internet solutions to business-class customers nationwide, today announced it has been recognized for a second consecutive year as a Best Large Company to Work For in New York State by the New York State Society for Human Resource Management (NYS-SHRM). The company was previously ranked tenth in the large company category in the 2009 list, and the final 2010 rankings will be revealed at the awards dinner on Wednesday, April 21, 2010 in Albany. Over 25% of PAETEC’s 3,600 employees reside in New York State.

“Receiving this recognition for a second year in a row is a tremendous honor for our employees and validation of our unique corporate culture,” said Arunas Chesonis, PAETEC chairman and CEO. “Since our inception, we’ve believed that a strong focus on the needs of our employees and their families will ultimately translate into superior service and performance for our customers.”

NYS-SHRM and Best Companies Group formed a partnership to launch the prestigious awards program in New York State in 2007. Forty New York-based companies are recognized in two categories: 25 small/medium-sized companies (15-249 employees) and 15 large-sized companies (250 or more employees).

Companies were selected based on an assessment of the workplace policies, practices, philosophy, systems and demographics, as well as results of an internal employee survey conducted by the Best Companies Group measuring the employee experience.

PAETEC’s corporate culture is based on four values which permeate the organization: Caring Culture, Open Communication, Unmatched Service and Personalized Solutions. By adhering to these values, PAETEC has rapidly grown into one of the largest communication providers in the nation offering its suite of services in 84 of the nation’s top 100 MSAs across 45 states.

Further details about the 2010 Best Companies to Work for in New York initiative can be found online at www.bestcompaniesNY.com.

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