MONROE, La., Aug. 6 /PRNewswire-FirstCall/ -- CenturyLink
(CenturyTel, Inc.) (NYSE:CTL) announces operating results for
second quarter 2009. In connection with the July 1, 2009 merger
with Embarq Corporation, CenturyTel began operating under the
tradename CenturyLink. Unless otherwise noted herein, the second
quarter results discussed in this news release relate solely to
legacy CenturyTel, Inc. -- Operating revenues, excluding
nonrecurring items, decreased 3.4% to $634.5 million compared to
$657.1 million in second quarter 2008. Reported under GAAP,
operating revenues decreased 3.6%. -- Operating cash flow (as
defined in the attached financial schedules), excluding
nonrecurring items, was $303.6 million compared to $318.3 million
in second quarter 2008. -- Net income, excluding nonrecurring
items, was $83.3 million compared to $91.2 million in second
quarter 2008. Reported under GAAP, net income declined to $69.0
million from $92.2 million in second quarter 2008, primarily due to
$22.5 million of EMBARQ integration costs incurred in second
quarter 2009. -- Diluted earnings per share, excluding nonrecurring
items, was $.83 compared to $.87 in second quarter 2008, while GAAP
diluted earnings per share was $.68 in second quarter 2009 compared
to $.88 in second quarter 2008. -- Free cash flow (as defined in
the attached financial schedules), excluding nonrecurring items and
$13.5 million of acquisition related capital expenditures, was
$140.1 million compared to $162.5 million in second quarter 2008.
Second Quarter Highlights (Excluding nonrecurring items reflected
in the attached financial schedules) (In thousands, except per
share Quarter Ended Quarter Ended % Change amounts and subscriber
data) 6/30/09 6/30/08 Operating Revenues $634,469 $657,073 (3.4)%
Operating Cash Flow (1) $303,593 $318,266 (4.6)% Net Income (2)
$83,299 $91,162 (8.6)% Diluted Earnings Per Share $.83 $.87 (4.6)%
Average Diluted Shares Outstanding 99,450 103,999 (4.4)% Capital
Expenditures $85,305(3) $59,659 43.0% ------- ------- ---- Access
Lines 1,933,000 2,077,000 (6.9)% High-Speed Internet Customers
681,000 607,000 12.2% ------- ------- ---- (1) Operating Cash Flow
is a non-GAAP financial measure. A reconciliation of this item to
comparable GAAP measures is included in the attached financial
schedules. (2) All references to net income contained in this
release represent net income attributable to CenturyTel, Inc. (3)
Includes $13.5 million of capital expenditures related to the
EMBARQ integration. "Our employees did an excellent job of
remaining focused on serving our customers while working to
complete the EMBARQ acquisition and plan for a successful
integration," Glen F. Post, III, chief executive officer and
president, said. "We will continue to focus on increasing our
long-term cash flows by driving operating efficiencies and
providing compelling product and service bundles to our customers."
Operating revenues, excluding nonrecurring items, decreased 3.4% to
$634.5 million in second quarter 2009 compared to $657.1 million in
second quarter 2008. Revenue increases of approximately $17 million
were driven primarily by growth in high-speed Internet customers
and higher fiber transport revenues. These increases were more than
offset by revenue declines of approximately $39 million primarily
attributable to lower access revenues, lower universal service fund
receipts and access line losses. Operating expenses, excluding
nonrecurring items, decreased 2.2% to $459.4 million from $469.8
million in second quarter 2008, primarily due to lower access
expense, marketing costs and depreciation expense that more than
offset increased operating costs associated with growth in
high-speed Internet customers. "We continue to experience good
demand from our business customers for high bandwidth transport and
Ethernet services in spite of the challenging economy," Post said.
"Additionally, the demand for broadband services from our
residential and small business customers remained solid as we added
more than 16,000 high-speed Internet customers during the quarter
and our consumer penetration reached 44%." Operating cash flow,
excluding nonrecurring items, for second quarter 2009 decreased
4.6% to $303.6 million from $318.3 million in second quarter 2008.
CenturyLink achieved an operating cash flow margin, excluding
nonrecurring items, of 47.8% during the quarter versus 48.4% in
second quarter 2008. Net income, excluding nonrecurring items, was
$83.3 million, an 8.6% decrease from $91.2 million in second
quarter 2008. Diluted earnings per share, excluding nonrecurring
items, declined 4.6% to $.83 in second quarter 2009 compared to
$.87 in second quarter 2008, primarily due to lower operating
income, which was partially offset by lower interest expense and
the 4.4% reduction in diluted shares outstanding as a result of
share repurchases in 2008. For the first six months of 2009,
operating revenues, excluding nonrecurring items, were $1.270
billion compared to $1.306 billion during the same period in 2008,
a 2.7% decrease. Operating cash flow, excluding nonrecurring items,
was $609.1 million for the first six months of 2009, a 4.4%
decrease from the $637.4 million during the same period a year ago.
Net income, excluding nonrecurring items, decreased 6.8% to $165.2
million from $177.3 million in 2009, while diluted earnings per
share, excluding nonrecurring items, decreased 1.8% to $1.64 from
$1.67 in 2008. Under generally accepted accounting principles
(GAAP), net income for second quarter 2009 was $69.0 million
compared to $92.2 million for second quarter 2008. Diluted earnings
per share was $.68 in second quarter 2009 compared to $.88 in
second quarter 2008. Second quarter 2009 results include after-tax
charges of $16.3 million related to the EMBARQ integration and a
legal settlement which were partially offset by a $2.0 million
after-tax favorable impact due to the resolution of transaction tax
audit issues. Second quarter 2008 results include a net $1.3
million after-tax charge related to the freeze of our supplemental
executive pension plan and a net $2.3 million benefit primarily
related to the resolution of certain income tax audit issues. For
the first six months of 2009, under GAAP, the Company reported net
income of $136.2 million, or $1.35 per diluted share, compared to
net income of $180.9 million, or $1.70 per diluted share, for the
six months ended June 30, 2008. See the accompanying financial
schedules for detail of the Company's nonrecurring items for the
years 2009 and 2008. "The completion of the EMBARQ transaction
positions CenturyLink as a premier communications provider that is
financially stronger, more competitive and a leading broadband
provider in our markets across 33 states," Post said. "This merger
brings together complementary assets, increased geographic coverage
and outstanding employees capable of delivering a broader range of
products and services to our customers." Outlook. For third quarter
2009, CenturyLink expects total operating revenues of $1.85 to
$1.89 billion and diluted earnings per share of $.78 to $.82. This
increase in revenues compared to second quarter 2009 guidance is
primarily due to the EMBARQ acquisition which closed July 1, 2009.
For the full year 2009, the Company continues to expect diluted
earnings per share to be in the range of $3.20 to $3.30.
CenturyLink expects capital expenditures to be $525 to $575 million
for the last six months of 2009, which includes capital
expenditures for the EMBARQ properties, but excludes one-time
capital expenditures associated with the EMBARQ integration. These
outlook figures exclude the effects of all nonrecurring items
including any future mergers, acquisitions, divestitures, or other
similar business transactions. These outlook figures for third
quarter also exclude nonrecurring items relating to the EMBARQ
merger, including approximately $135 million of transaction and
integration costs, based on current plans and available
information. The Company's elective filing in September 2008 to
operate a majority of its properties under price cap regulation at
the interstate level was granted by the Federal Communications
Commission and became effective July 1, 2009. As a result, on July
1, 2009, the Company discontinued accounting for certain regulated
operating entities under Statement of Financial Accounting
Standards No. 71 ("SFAS 71"). Upon the discontinuance of SFAS 71,
we expect operating revenues and expenses to decrease approximately
$60 to $70 million, during each of the next two quarters, primarily
due to the elimination of inter-company transactions. Additionally,
as a result of the discontinuance of SFAS 71 and purchase
accounting adjustments related to the EMBARQ merger, we expect,
based on current estimates and information, quarterly results for
each of the next two quarters to be negatively impacted by: --
Increased depreciation and amortization expense related to
amortization of the portion of the purchase price allocated to
EMBARQ's customer base, which will be partially offset by lower
depreciation associated with the discontinuance of SFAS 71, the net
effect of which is approximately $20 to $24 million and -- Higher
retiree benefit and pension related expense recognition of
approximately $12 to $14 million. These above amounts are subject
to change upon finalization of the impact of discontinuing SFAS 71
and the purchase price allocation process. Additional information
about the expected impact of the discontinuance of SFAS 71 and the
EMBARQ acquisition on our business, future operating results and
financial position will be contained in our Quarterly Report on
Form 10-Q for the quarter ended June 30, 2009, which we expect to
file with the Securities and Exchange Commission on August 7, 2009.
EMBARQ Results. The acquisition of Embarq Corporation was effective
July 1, 2009. To assist the investment community in tracking
EMBARQ's financial and operating trends, the Company is providing,
separate from CenturyTel's reported results, selected second
quarter 2009 EMBARQ consolidated financial and subscriber
information. For second quarter 2009, EMBARQ's operating revenues
were $1.325 billion, a 7.9% decline from $1.439 billion in second
quarter 2008, and its operating cash flow was $664 million, in line
with the $670 million in second quarter 2008. EMBARQ's operating
cash flow margin for second quarter 2009 was 50.1%, a 7.5% increase
over the 46.6% operating cash flow margin in second quarter 2008.
EMBARQ experienced more than a $30 million decrease in total
operating expenses in second quarter 2009 compared to first quarter
2009, primarily due to approximately $15 million of favorable
one-time items, along with lower bad debt and marketing expenses.
Operating expenses in EMBARQ markets are expected to return to more
normal run rate levels in the third quarter. Operating income for
second quarter 2009 was $420 million, in line with the $424 million
for the same period in 2008. Operating income margin was 31.7% for
second quarter 2009 versus 29.5% in the year earlier quarter.
EMBARQ generated income from continuing operations of $204 million
in the second quarter, in line with the $202 million for second
quarter 2008. EMBARQ added approximately 12,200 high-speed Internet
subscribers during second quarter 2009 and served approximately
1.465 million high-speed Internet subscribers as of June 30, 2009.
EMBARQ ended the quarter with approximately 5.389 million access
lines in service, experiencing access line losses of 163,000 lines
during the second quarter. EMBARQ invested approximately $147
million in capital investments during second quarter 2009 and
generated free cash flow (defined as income from continuing
operations plus depreciation and amortization less capital
expenditures) of more than $300 million for the quarter. These
results are included in a supplemental schedule attached hereto and
are also available on the Company's investor relations Web site at
ir.centurytel.com. Integration Update. CenturyLink now expects to
realize approximately $475 million in synergies versus the $400
million originally anticipated. The Company continues to expect to
complete conversion of EMBARQ's enterprise resource management
systems and the initial billing conversion in fourth quarter 2009.
The Company's current estimate of post-closing integration costs is
approximately $370 million. Reconciliation to GAAP. This release
includes certain non-GAAP financial measures, including but not
limited to operating cash flow, free cash flow, operating income
and cash flow margins, and adjustments to GAAP measures to exclude
the effect of nonrecurring items. In addition to providing key
metrics for management to evaluate the Company's performance, we
believe these measurements assist investors in their understanding
of period-to-period operating performance and in identifying
historical and prospective trends. Reconciliations of non-GAAP
financial measures to the most comparable GAAP measures are
included in the attached financial schedules. Reconciliation of
additional non-GAAP financial measures that may be discussed during
the earnings call described below will be available in the Investor
Relations portion of the Company's Web site at
http://www.centurytel.com/. Investors are urged to consider these
non-GAAP measures in addition to, and not in substitution for,
measures prepared in accordance with GAAP. Investor Call. As
previously announced, CenturyLink's management will host a
conference call at 10:30 a.m. Central Time today. Interested
parties can access the call by dialing 866.259.6033. The call will
be accessible for replay through August 12, 2009, by calling
888.266.2081 and entering the conference ID number 1377919.
Investors can also listen to CenturyLink's earnings conference call
and replay by accessing the Investor Relations portion of the
Company's Web site at http://www.centurytel.com/ through August 26,
2009. Certain non-historical statements made in this release and
future oral or written statements or press releases by us or our
management are intended to be forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995.
These forward-looking statements are based on current expectations
only, and are subject to a number of risks, uncertainties and
assumptions, many of which are beyond our control. Actual results
or performance by CenturyLink may differ materially from those
anticipated, estimated or projected if one or more of these risks
or uncertainties materialize, or if underlying assumptions prove
incorrect. Factors that could impact actual results of CenturyLink
include but are not limited to: the timing, success and overall
effects of competition from a wide variety of competitive
providers; the risks inherent in rapid technological change; the
effects of ongoing changes in the regulation of the communications
industry (including the Federal Communication Commission's proposed
rules regarding inter-carrier compensation and the Universal
Service Fund described in our recent SEC reports); our ability to
effectively adjust to changes in the communications industry;
changes in our allocation of the EMBARQ purchase price after the
date hereof; our ability to successfully integrate EMBARQ into our
operations, including the possibility that the anticipated benefits
from the EMBARQ merger cannot be fully realized in a timely manner
or at all, or that integrating EMBARQ's operations into ours will
be more difficult, disruptive or costly than anticipated; our
ability to effectively manage our expansion opportunities,
including retaining and hiring key personnel; possible changes in
the demand for, or pricing of, our products and services; our
ability to successfully introduce new product or service offerings
on a timely and cost-effective basis; our continued access to
credit markets on favorable terms; our ability to collect our
receivables from financially troubled communications companies; our
ability to pay a $2.80 per common share dividend annually, which
may be affected by changes in our cash requirements, capital
spending plans, cash flows or financial position; unanticipated
increases in our capital expenditures; our ability to successfully
negotiate collective bargaining agreements on reasonable terms
without work stoppages; the effects of adverse weather; other risks
referenced from time to time in our filings with the SEC; and the
effects of more general factors such as changes in interest rates,
in tax rates, in accounting policies or practices, in operating,
medical or administrative costs, in general market, labor or
economic conditions, or in legislation, regulation or public
policy. These and other uncertainties related to the business and
our plans are described in greater detail in Item 1A to our Form
10-K for the year ended December 31, 2008, as updated and
supplemented by our subsequent SEC reports. You should be aware
that new factors may emerge from time to time and it is not
possible for us to identify all such factors nor can we predict the
impact of each such factor on the business or the extent to which
any one or more factors may cause actual results to differ from
those reflected in any forward-looking statements. You are further
cautioned not to place undue reliance on these forward-looking
statements, which speak only as of the date hereof. We undertake no
obligation to update any of our forward-looking statements for any
reason, whether as a result of new information, future events or
otherwise. CenturyLink is a leading provider of high-quality voice,
broadband and video services over its advanced communications
networks to consumers and businesses in 33 states. CenturyLink,
headquartered in Monroe, La., is an S&P 500 Company and expects
to be listed in the Fortune 500 list of America's largest
corporations. For more information on CenturyLink, visit
http://www.centurylink.com/. FOR MORE INFORMATION CONTACT: Tony
Davis 318.388.9525 CenturyTel, Inc. CONSOLIDATED STATEMENTS OF
INCOME THREE MONTHS ENDED JUNE 30, 2009 AND 2008 (UNAUDITED) Three
months ended June 30, 2009 ------------------------------------ As
adjusted Less excluding In thousands, non- non- except per share As
recurring recurring amounts reported items items ------------
--------- --------- OPERATING REVENUES Voice $207,603 207,603
Network access 190,366 190,366 Data 142,923 142,923 Fiber transport
and CLEC 41,764 41,764 Other 51,813 51,813 ------ --- ------
634,469 - 634,469 ------- --- ------- OPERATING EXPENSES Cost of
services and products 235,732 235,732 Selling, general and
administrative 120,742 25,598(1) 95,144 Depreciation and
amortization 128,552 128,552 ------- ------ ------- 485,026 25,598
459,428 ------- ------ ------- OPERATING INCOME 149,443 (25,598)
175,041 OTHER INCOME (EXPENSE) Interest expense (44,937) 1,700(2)
(46,637) Other income (expense) 7,635 1,600(2) 6,035 Income tax
expense (42,813) 8,029(3) (50,842) ------ ------- ------ NET INCOME
69,328 (14,269) 83,597 Less: Net income attributable to
noncontrolling interests (298) (298) ---- ------- ---- NET INCOME
ATTRIBUTABLE TO CENTURYTEL, INC. $69,030 (14,269) 83,299 =======
======= ====== BASIC EARNINGS PER SHARE $0.68 (0.14) 0.83 DILUTED
EARNINGS PER SHARE $0.68 (0.14) 0.83 AVERAGE SHARES OUTSTANDING
Basic 99,414 99,414 Diluted 99,450 99,450 DIVIDENDS PER COMMON
SHARE $0.7000 0.7000 Three months ended June 30, 2008
------------------------------------ As adjusted Less excluding In
thousands, non- non- except per share As recurring recurring
amounts reported items items ------------ --------- ---------
OPERATING REVENUES Voice 219,901 219,901 Network access 207,904
1,012(4) 206,892 Data 131,060 21(4) 131,039 Fiber transport and
CLEC 43,166 43,166 Other 56,075 56,075 ------ ----- ------ 658,106
1,033 657,073 ------- ----- ------- OPERATING EXPENSES Cost of
services and products 239,626 239,626 Selling, general and
administrative 106,836 7,655(4) 99,181 Depreciation and
amortization 130,954 130,954 ------- ----- ------- 477,416 7,655
469,761 ------- ----- ------- OPERATING INCOME 180,690 (6,622)
187,312 OTHER INCOME (EXPENSE) Interest expense (49,166) (49,166)
Other income (expense) 13,204 5,425(5) 7,779 Income tax expense
(52,264) 2,202(6) (54,466) ------ ----- ------ NET INCOME 92,464
1,005 91,459 Less: Net income attributable to noncontrolling
interests (297) (297) ---- ----- ---- NET INCOME ATTRIBUTABLE TO
CENTURYTEL, INC. 92,167 1,005 91,162 ====== ===== ====== BASIC
EARNINGS PER SHARE 0.88 0.01 0.87 DILUTED EARNINGS PER SHARE 0.88
0.01 0.87 AVERAGE SHARES OUTSTANDING Basic 103,644 103,644 Diluted
103,999 103,999 DIVIDENDS PER COMMON SHARE 0.0675 0.0675 Increase
(decrease) Increase excluding In thousands, except per share
(decrease) nonrecurring amounts as reported items ---------------
--------- OPERATING REVENUES Voice (5.6%) (5.6%) Network access
(8.4%) (8.0%) Data 9.1% 9.1% Fiber transport and CLEC (3.2%) (3.2%)
Other (7.6%) (7.6%) (3.6%) (3.4%) OPERATING EXPENSES Cost of
services and products (1.6%) (1.6%) Selling, general and
administrative 13.0% (4.1%) Depreciation and amortization (1.8%)
(1.8%) 1.6% (2.2%) OPERATING INCOME (17.3%) (6.6%) OTHER INCOME
(EXPENSE) Interest expense (8.6%) (5.1%) Other income (expense)
(42.2%) (22.4%) Income tax expense (18.1%) (6.7%) NET INCOME
(25.0%) (8.6%) Less: Net income attributable to noncontrolling
interests 0.3% 0.3% NET INCOME ATTRIBUTABLE TO CENTURYTEL, INC.
(25.1%) (8.6%) BASIC EARNINGS PER SHARE (22.7%) (4.6%) DILUTED
EARNINGS PER SHARE (22.7%) (4.6%) AVERAGE SHARES OUTSTANDING Basic
(4.1%) (4.1%) Diluted (4.4%) (4.4%) DIVIDENDS PER COMMON SHARE
937.0% 937.0% NONRECURRING ITEMS (1) - Includes integration costs
associated with the acquisition of EMBARQ ($22.5 million) and costs
associated with a legal settlement ($3.1 million). (2) - Favorable
resolution of transaction tax audit issues related to our wireless
operations sold in 2002. (3) - Tax effect of items (1) and (2). (4)
- Curtailment loss related to Supplemental Executive Retirement
Plan, including revenue impact. (5) - Gain upon liquidation of
Supplemental Executive Retirement Plan trust assets ($4.5 million)
and interest income recorded upon the resolution of certain income
tax audit issues ($919,000). (6) - Includes $448,000 net income tax
benefit related to items (4) and (5) and $1.8 million income tax
benefit recorded upon resolution of certain income tax audit
issues. CenturyTel, Inc. CONSOLIDATED STATEMENTS OF INCOME SIX
MONTHS ENDED JUNE 30, 2009 AND 2008 (UNAUDITED) Six months ended
June 30, 2009 ---------------------------------- As adjusted Less
excluding non- non- In thousands, except As recurring recurring per
share amounts reported items items ------------ --------- ---------
OPERATING REVENUES Voice $417,521 417,521 Network access 383,210
1,028(1) 382,182 Data 282,860 282,860 Fiber transport and CLEC
83,262 83,262 Other 104,001 104,001 ------- ----- ------- 1,270,854
1,028 1,269,826 --------- ----- --------- OPERATING EXPENSES Cost
of services and products 470,363 470,363 Selling, general and
administrative 230,587 40,238(2) 190,349 Depreciation and
amortization 256,124 256,124 ------- ------ ------- 957,074 40,238
916,836 ------- ------ ------- OPERATING INCOME 313,780 (39,210)
352,990 OTHER INCOME (EXPENSE) Interest expense (96,969) 1,700(3)
(98,669) Other income (expense) 5,817 (6,400)(4) 12,217 Income tax
expense (85,920) 14,897(5) (100,817) ------- ------- ------- NET
INCOME 136,708 (29,013) 165,721 Less: Net income attributable to
noncontrolling interests (524) (524) ---- ------- ---- NET INCOME
ATTRIBUTABLE TO CENTURYTEL, INC. $136,184 (29,013) 165,197 ========
======= ======= BASIC EARNINGS PER SHARE $1.35 (0.29) 1.64 DILUTED
EARNINGS PER SHARE $1.35 (0.29) 1.64 AVERAGE SHARES OUTSTANDING
Basic 99,270 99,270 Diluted 99,297 99,297 DIVIDENDS PER COMMON
SHARE $1.4000 1.4000 Six months ended June 30, 2008
---------------------------------- As adjusted Less excluding non-
non- In thousands, except As recurring recurring per share amounts
reported items items ------------ --------- --------- OPERATING
REVENUES Voice 440,381 440,381 Network access 416,602 1,012(6)
415,590 Data 257,832 21(6) 257,811 Fiber transport and CLEC 82,799
82,799 Other 109,106 109,106 ------- ----- ------- 1,306,720 1,033
1,305,687 --------- ----- --------- OPERATING EXPENSES Cost of
services and products 477,438 477,438 Selling, general and
administrative 198,461 7,655(6) 190,806 Depreciation and
amortization 266,638 266,638 ------- ----- ------- 942,537 7,655
934,882 ------- ----- ------- OPERATING INCOME 364,183 (6,622)
370,805 OTHER INCOME (EXPENSE) Interest expense (99,288) (99,288)
Other income (expense) 21,867 9,561(7) 12,306 Income tax expense
(105,292) 655(8) (105,947) ------- ----- ------- NET INCOME 181,470
3,594 177,876 Less: Net income attributable to noncontrolling
interests (543) (543) ---- ----- ---- NET INCOME ATTRIBUTABLE TO
CENTURYTEL, INC. 180,927 3,594 177,333 ======= ===== ======= BASIC
EARNINGS PER SHARE 1.71 0.03 1.67 DILUTED EARNINGS PER SHARE 1.70
0.03 1.67 AVERAGE SHARES OUTSTANDING Basic 104,893 104,893 Diluted
105,337 105,337 DIVIDENDS PER COMMON SHARE 0.135 0.135 Increase
(decrease) Increase excluding In thousands, except per share
(decrease) nonrecurring amounts as reported items ---------------
--------- OPERATING REVENUES Voice (5.2%) (5.2%) Network access
(8.0%) (8.0%) Data 9.7% 9.7% Fiber transport and CLEC 0.6% 0.6%
Other (4.7%) (4.7%) (2.7%) (2.7%) OPERATING EXPENSES Cost of
services and products (1.5%) (1.5%) Selling, general and
administrative 16.2% (0.2%) Depreciation and amortization (3.9%)
(3.9%) 1.5% (1.9%) OPERATING INCOME (13.8%) (4.8%) OTHER INCOME
(EXPENSE) Interest expense (2.3%) (0.6%) Other income (expense)
(73.4%) (0.7%) Income tax expense (18.4%) (4.8%) NET INCOME (24.7%)
(6.8%) Less: Net income attributable to noncontrolling interests
(3.5%) (3.5%) NET INCOME ATTRIBUTABLE TO CENTURYTEL, INC. (24.7%)
(6.8%) BASIC EARNINGS PER SHARE (21.1%) (1.8%) DILUTED EARNINGS PER
SHARE (20.6%) (1.8%) AVERAGE SHARES OUTSTANDING Basic (5.4%) (5.4%)
Diluted (5.7%) (5.7%) DIVIDENDS PER COMMON SHARE 937.0% 937.0%
NONRECURRING ITEMS (1) - Revenue impact of settlement loss related
to Supplemental Executive Retirement Plan. (2) - Includes
integration costs associated with the acquisition of EMBARQ ($29.4
million), settlement loss related to Supplemental Executive
Retirement Plan ($7.7 million) and costs associated with a legal
settlement ($3.1 million). (3) - Favorable resolution of
transaction tax audit issues related to our wireless operation sold
in 2002. (4) - Includes costs associated with terminating our $800
million bridge credit facility related to the EMBARQ acquisition
($8.0 million) net of favorable resolution of transaction tax audit
issues ($1.6 million). (5) - Includes $5.8 million income tax
benefit caused by a reduction to our deferred tax asset valuation
allowance and $15.8 million income tax benefit related to items (1)
through (4); net of $6.7 million income tax expense due to the
nondeductible portion of settlement payments related to the
Supplemental Executive Retirement Plan. (6) - Curtailment loss
related to Supplemental Executive Retirement Plan, including
revenue impact. (7) - Gain on the sale of a nonoperating investment
($4.1 million), gain upon liquidation of Supplemental Executive
Retirement Plan trust assets ($4.5 million), and interest income
recorded upon the resolution of certain income tax audit issues
($919,000). (8) - Includes $1.1 million net income tax expense
related to items (6) and (7) and $1.8 million income tax benefit
recorded upon resolution of certain income tax audit issues.
CenturyTel, Inc. CONSOLIDATED BALANCE SHEETS JUNE 30, 2009 AND
DECEMBER 31, 2008 (UNAUDITED) June 30, December 31, 2009 2008 ----
---- (in thousands) ASSETS CURRENT ASSETS Cash and cash equivalents
$59,144 243,327 Other current assets 261,159 312,080 -------
------- Total current assets 320,303 555,407 ------- ------- NET
PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment
8,974,039 8,868,451 Accumulated depreciation (6,187,829)
(5,972,559) ---------- ---------- Net property, plant and equipment
2,786,210 2,895,892 --------- --------- GOODWILL AND OTHER ASSETS
Goodwill 4,015,674 4,015,674 Other 764,513 787,222 ------- -------
Total goodwill and other assets 4,780,187 4,802,896 ---------
--------- TOTAL ASSETS $7,886,700 8,254,195 ========== =========
LIABILITIES AND EQUITY CURRENT LIABILITIES Current maturities of
long-term debt $19,924 20,407 Other current liabilities 427,493
437,983 ------- ------- Total current liabilities 447,417 458,390
LONG-TERM DEBT 2,899,936 3,294,119 DEFERRED CREDITS AND OTHER
LIABILITIES 1,353,025 1,333,878 STOCKHOLDERS' EQUITY 3,186,322
3,167,808 --------- --------- TOTAL LIABILITIES AND EQUITY
$7,886,700 8,254,195 ========== ========= CenturyTel, Inc.
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES (UNAUDITED) Three
months ended June 30, 2009 ------------------------------------ As
adjusted Less excluding non- non- In thousands As recurring
recurring reported items items ------------ --------- ---------
Operating cash flow and cash flow margin Operating income $149,443
(25,598)(1) 175,041 Add: Depreciation and amortization 128,552
128,552 ------- ------- ------- Operating cash flow $277,995
(25,598) 303,593 ======== ======= ======= Revenues $634,469 634,469
======== ======= Operating income margin (operating income divided
by revenues) 23.6% 27.6% ==== ==== Operating cash flow margin
(operating cash flow divided by revenues) 43.8% 47.8% ==== ====
Free cash flow (prior to debt service requirements and dividends)
Net income $69,030 (14,269)(2) 83,299 Add: Depreciation and
amortization 128,552 128,552 Less: Capital expenditures (85,305)
(85,305)(5) ------- ------- ------- Free cash flow $112,277
(14,269) 126,546 ======== ======= ======= Free cash flow $112,277
Gain on liquidation of marketable securities - Deferred income
taxes 8,582 Changes in current assets and current liabilities
30,591 Decrease in other noncurrent assets 2,848 Decrease in other
noncurrent liabilities (2,044) Retirement benefits 8,960 Excess tax
benefits from share-based compensation (418) Other, net 5,937 Add:
Capital expenditures 85,305 ------ Net cash provided by operating
activities $252,038 ======== Three months ended June 30, 2008
------------------------------------ As adjusted Less excluding
non- non- In thousands As recurring recurring reported items items
------------ --------- --------- Operating cash flow and cash flow
margin Operating income 180,690 (6,622)(3) 187,312 Add:
Depreciation and amortization 130,954 130,954 ------- ------
------- Operating cash flow 311,644 (6,622) 318,266 ======= ======
======= Revenues 658,106 1,033(3) 657,073 ======= ===== =======
Operating income margin (operating income divided by revenues)
27.5% 28.5% ==== ==== Operating cash flow margin (operating cash
flow divided by revenues) 47.4% 48.4% ==== ==== Free cash flow
(prior to debt service requirements and dividends) Net income
92,167 1,005(4) 91,162 Add: Depreciation and amortization 130,954
130,954 Less: Capital expenditures (59,659) (59,659) ------- -----
------- Free cash flow 163,462 1,005 162,457 ======= ===== =======
Free cash flow 163,462 Gain on liquidation of marketable securities
(4,505) Deferred income taxes 5,068 Changes in current assets and
current liabilities (44,749) Decrease in other noncurrent assets
3,043 Decrease in other noncurrent liabilities (2,689) Retirement
benefits 12,728 Excess tax benefits from share-based compensation
(55) Other, net 4,815 Add: Capital expenditures 59,659 ------ Net
cash provided by operating activities 196,777 ======= NONRECURRING
ITEMS (1) - Includes integration costs associated with the
acquisition of EMBARQ ($22.5 million) and costs associated with a
legal settlement ($3.1 million). (2) - Includes after-tax impact of
integration costs associated with the acquisition of EMBARQ ($14.4
million) and the after-tax impact of a legal settlement ($1.9
million), net of after-tax favorable impact due to the resolution
of transaction tax audit issues related to our wireless operations
sold in 2002 ($2.0 million). (3) - Curtailment loss related to
Supplemental Executive Retirement Plan, including revenue impact.
(4) - Includes after-tax impact of gain upon liquidation of
Supplemental Executive Retirement Plan trust assets ($2.8 million)
and net benefit due to the resolution of certain income tax audit
issues ($2.3 million), net of the after-tax impact of Item (3)
($4.1 million). (5) - Includes $13.5 million of capital
expenditures related to the integration of EMBARQ. Excluding these
costs, free cash flow was $140.1 million for the three months ended
June 30, 2009. CenturyTel, Inc. RECONCILIATION OF NON-GAAP
FINANCIAL MEASURES (UNAUDITED) Six months ended June 30, 2009
---------------------------------- As adjusted Less excluding non-
non- In thousands As recurring recurring reported items items
------------ --------- --------- Operating cash flow and cash flow
margin Operating income $313,780 (39,210)(1) 352,990 Add:
Depreciation and amortization 256,124 256,124 ------- -------
------- Operating cash flow $569,904 (39,210) 609,114 ========
======= ======= Revenues $1,270,854 1,028(2) 1,269,826 ==========
===== ========= Operating income margin (operating income divided
by revenues) 24.7% 27.8% ==== ==== Operating cash flow margin
(operating cash flow divided by revenues) 44.8% 48.0% ==== ====
Free cash flow (prior to debt service requirements and dividends)
Net income $136,184 (29,013)(3) 165,197 Add: Depreciation and
amortization 256,124 256,124 Less: Capital expenditures (130,801)
(130,801)(6) -------- ------- -------- Free cash flow $261,507
(29,013) 290,520 ======== ======= ======= Free cash flow $261,507
Gain on asset dispositions and liquidation of marketable securities
- Deferred income taxes 25,831 Changes in current assets and
current liabilities 63,622 Decrease in other noncurrent assets
2,542 Decrease in other noncurrent liabilities (4,823) Retirement
benefits (14,537) Excess tax benefits from share-based compensation
(753) Other, net 18,015 Add: Capital expenditures 130,801 -------
Net cash provided by operating activities $482,205 ======== Six
months ended June 30, 2008 ---------------------------------- As
adjusted Less excluding non- non- In thousands As recurring
recurring reported items items ------------ --------- ---------
Operating cash flow and cash flow margin Operating income 364,183
(6,622)(4) 370,805 Add: Depreciation and amortization 266,638
266,638 ------- ------ ------- Operating cash flow 630,821 (6,622)
637,443 ======= ====== ======= Revenues 1,306,720 1,033(4)
1,305,687 ========= ===== ========= Operating income margin
(operating income divided by revenues) 27.9% 28.4% ==== ====
Operating cash flow margin (operating cash flow divided by
revenues) 48.3% 48.8% ==== ==== Free cash flow (prior to debt
service requirements and dividends) Net income 180,927 3,594(5)
177,333 Add: Depreciation and amortization 266,638 266,638 Less:
Capital expenditures (114,398) (114,398) -------- ----- --------
Free cash flow 333,167 3,594 329,573 ======= ===== ======= Free
cash flow 333,167 Gain on asset dispositions and liquidation of
marketable securities (8,641) Deferred income taxes 13,425 Changes
in current assets and current liabilities (57,026) Decrease in
other noncurrent assets 2,254 Decrease in other noncurrent
liabilities (5,479) Retirement benefits 18,202 Excess tax benefits
from share-based compensation (74) Other, net 16,761 Add: Capital
expenditures 114,398 ------- Net cash provided by operating
activities 426,987 ======= NONRECURRING ITEMS (1) - Includes (i)
integration costs associated with the acquisition of EMBARQ ($29.4
million); (ii) settlement loss related to Supplemental Executive
Retirement Plan, including revenue impact ($6.7 million); and (iii)
costs associated with a legal settlement ($3.1 million). (2) -
Revenue impact of settlement loss related to Supplemental Executive
Retirement Plan. (3) - Includes (i) $19.1 million after-tax impact
of integration costs associated with the acquisition of EMBARQ;
(ii) $6.7 million income tax expense due to the nondeductible
portion of settlement payments related to the Supplemental
Executive Retirement Plan; (iii) $5.0 million after-tax charge
associated with terminating our $800 million bridge credit facility
related to the EMBARQ acquisition; (iv) $4.1 million after-tax
impact of settlement loss related to Supplemental Executive
Retirement Plan, including revenue impact; and (v) after-tax impact
of a legal settlement ($1.9 million). These unfavorable items were
partially offset by $5.8 million income tax benefit caused by a
reduction to our deferred tax asset valuation allowance and $2.0
million after-tax favorable impact due to the resolution of
transaction tax audit issues related to our wireless operations
sold in 2002. (4) - Curtailment loss related to Supplemental
Executive Retirement Plan, including revenue impact. (5) - Includes
(i) after-tax impact of gain upon liquidation of Supplemental
Executive Retirement Plan trust assets ($2.8 million); (ii)
after-tax impact of gain on sale of nonoperating investment ($2.6
million); and (iii) net benefit due to the resolution of certain
income tax audit issues ($2.3 million), all partially offset by the
after-tax impact of Item (4) ($4.1 million). (6) - Includes $19.9
million of capital expenditures related to the integration of
EMBARQ. Excluding these costs, free cash flow was $310.4 million
for the six months ended June 30, 2009. Embarq Corporation SELECTED
FINANCIAL AND SUBSCRIBER DATA (UNAUDITED) Three months Three months
ended ended June 30, 2009 June 30, 2008 ------------- (Dollars in
millions) OPERATING REVENUES $1,325 1,439 ------ ----- OPERATING
EXPENSES Cost of services and products 358 414 Selling, general and
administrative 303 355 Depreciation 244 246 --- --- 905 1,015 ---
----- OPERATING INCOME 420 424 OTHER INCOME (EXPENSE) Interest
expense (90) (101) Other income (expense) (1) 1 Income tax expense
(125) (122) ---- ---- INCOME FROM CONTINUING OPERATIONS $204 202
==== === Operating cash flow (operating income plus depreciation)
$664 670 Free cash flow (income from continuing operations plus
depreciation minus capital expenditures) $301 267 Operating cash
flow margin (operating cash flow divided by revenues) 50.1% 46.6%
Operating income margin (operating income divided by revenues)
31.7% 29.5% CAPITAL EXPENDITURES $147 181 LONG-TERM DEBT (as of
June 30, 2009) $5,056 SUBSCRIBER DATA (as of June 30, 2009 and
2008) Access lines (in thousands) 5,389 6,022 High-speed Internet
lines (in thousands) 1,465 1,364 DATASOURCE: CenturyLink CONTACT:
Tony Davis of CenturyLink, +1-318-388-9525, Web Site:
http://www.centurytel.com/
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