MONROE, La., Aug. 3, 2016
/PRNewswire/ -- CenturyLink, Inc. (NYSE: CTL) today reported
results for second quarter 2016.
"CenturyLink delivered solid second quarter financial results
with total operating revenues and core revenues in line with our
guidance, and operating cash flow and adjusted diluted earnings per
share that exceeded our previous guidance," said Glen F. Post III, chief executive officer and
president. "Our new sales and marketing leadership team continues
to refine our sales channels and associated go-to-market strategies
for the Business market, and continues to pivot toward
higher-value bundled solutions for the Consumer market. While
second quarter Consumer subscriber metrics were softer than
anticipated, we expect to see an improvement in unit trends in the
second half of the year.
"We also are continuing to invest with a 'network first' focus
on delivering higher broadband speeds and in the transformation and
virtualization of our network infrastructure through the deployment
of NFV4 and SDN5 technologies. We ended the
quarter with more than 8.4 million addressable households and
businesses with 40 Mbps or higher speeds, including 1.2 million
GPON-enabled addressable units. We expect to reach 11 million 40
Mbps or higher, including 2 million GPON-enabled addressable
households and businesses by year-end 2017," concluded Post.
Consolidated Financial Results
Operating revenues for second quarter 2016 were
$4.40 billion compared to
$4.42 billion in second quarter 2015.
Declines in legacy1,6 and data integration revenues were
partially offset by higher strategic revenues1,6, and
increased high-cost support revenues related to Connect America
Fund Phase 2 (CAF Phase 2) in second quarter 2016.
Operating expenses decreased to $3.75 billion from $3.87
billion in second quarter 2015. Excluding special items,
operating expenses decreased to $3.73
billion from $3.84 billion in
second quarter 2015. The year-over-year decrease in operating
expenses was primarily driven by lower depreciation and
amortization expenses and employee-related costs.
Operating income increased to $650
million from $549 million in
second quarter 2015 due to lower operating expenses this quarter
compared to the same year-ago period.
Operating cash flow (as defined in our attached
supplemental schedules), excluding special items, increased to
$1.65 billion from $1.62 billion in second quarter 2015. For second
quarter 2016, CenturyLink achieved an operating cash flow margin,
excluding special items, of 37.5% versus 36.8% in second quarter
2015.
Net income and diluted earnings per share (EPS) were
$196 million and $0.36, respectively, for second quarter 2016,
compared to $143 million and
$0.26, respectively, for second
quarter 2015. The increase in diluted EPS was due to higher net
income and the impact of the lower number of shares outstanding due
to share repurchases in 2015.
Adjusted net income and adjusted diluted EPS (as
reflected in our attached supplemental schedule) exclude the
after-tax impact of special items, the non-cash after-tax impact of
the amortization of certain intangible assets related to major
acquisitions since mid-2009, and the non-cash after-tax impact to
interest expense relating to the assignment of fair value to the
outstanding debt assumed in connection with those acquisitions.
Excluding these items, CenturyLink's adjusted net income for second
quarter 2016 was $342 million
compared to adjusted net income of $308
million in second quarter 2015. Second quarter 2016 adjusted
diluted EPS was $0.63 compared to
$0.55 in the year-ago period due to
higher adjusted net income and the impact of the lower number of
shares outstanding due to share repurchases in 2015.
The accompanying financial schedules provide additional details
regarding the company's special items and reconciliations of
non-GAAP financial measures for the three months and six months
ended June 30, 2016 and 2015.
Segment Financial Results7
Business segment revenues were $2.60 billion, a decrease of 2.3% from second
quarter 2015, primarily due to a decline in legacy revenues, which
was partially offset by 8% growth in high-bandwidth data revenues.
Strategic revenues were $1.23 billion
in the quarter, an increase of 5.0% from second quarter 2015,
primarily due to the increased high-bandwidth data revenues being
partially offset by lower hosting revenues.
Consumer segment revenues were $1.49 billion, a decrease of 0.6% from second
quarter 2015, primarily due to a decline in legacy voice revenues,
which was partially offset by growth in broadband and
Prism® TV revenues. Strategic revenues were $800 million in the quarter, a 5.5% increase over
second quarter 2015.
Guidance — Third Quarter 2016
CenturyLink expects an increase in data integration revenues and
continued growth in strategic revenues to be offset by an
anticipated decline in legacy revenues, resulting in lower third
quarter 2016 operating revenues compared to second quarter 2016.
The company expects third quarter 2016 operating cash flow to
decline compared to second quarter 2016 primarily due to the
anticipated decline in revenues and increased operating expenses
related to the seasonality of outside plant maintenance and utility
costs.
Third Quarter 2016 (excluding special items)
Operating
Revenues
|
|
$4.35 to $4.40
billion
|
Core
Revenues
|
|
$3.90 to $3.95
billion
|
Operating Cash
Flow
|
|
$1.56 to $1.61
billion
|
Adjusted Diluted
EPS
|
|
$0.52 to
$0.57
|
All 2016 guidance figures and 2016 outlook statements
included in this release (i) speak as of August 3, 2016 only,
(ii) exclude the impact of any share repurchases made after
June 30, 2016 and (iii) exclude the
effects of special items, future impairment charges, future changes
in regulation, future changes in tax laws, accounting rules or our
accounting policies, unforeseen litigation or contingencies,
integration expenses associated with major acquisitions, any
changes in our expected pension fundings, any changes in operating
or capital plans or other unforeseen events or circumstances that
impact our financial performance, and any future mergers,
acquisitions, divestitures, joint ventures or other similar
business transactions. See "Forward Looking Statements" below. For
additional information on how we define certain of the terms used
above, see the attached schedules.
Investor Call
As previously announced, CenturyLink's management will host a
conference call at 4:00 p.m. Central
Time today, August 3, 2016. Interested parties can
access the call by dialing 866-814-1933. The call will be
accessible for replay through August 11,
2016, by dialing 888-266-2081 and entering the access code
1673713. Investors can also listen to CenturyLink's earnings
conference call and webcast replay by accessing the Investor
Relations portion of the company's website at
http://www.centurylink.com through August
25, 2016. Financial, statistical and other information
related to the call will also be posted to our website.
Reconciliation to GAAP
This release includes certain non-GAAP financial measures,
including but not limited to operating cash flow, free cash flow,
core revenues, adjusted net income, adjusted diluted EPS and
adjustments to GAAP measures to exclude the effect of special
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 above,
along with further descriptions of non-GAAP financial
measures, will be available in the Investor Relations portion
of the company's website at www.centurylink.com. Non-GAAP measures
are not presented to be replacements or alternatives to the GAAP
measures, and investors are urged to consider these non-GAAP
measures in addition to, and not in substitution for, measures
prepared in accordance with GAAP. CenturyLink may determine or
calculate our non-GAAP measures differently from other
companies.
About CenturyLink
CenturyLink (NYSE: CTL) is a global communications, hosting,
cloud and IT services company enabling millions of customers to
transform their businesses and their lives through innovative
technology solutions. CenturyLink offers network and data systems
management, Big Data analytics and IT consulting, and operates more
than 55 data centers in North
America, Europe and
Asia. The company provides
broadband, voice, video, data and managed services over a robust
250,000-route-mile U.S. fiber network and a 300,000-route-mile
international transport network. Visit www.centurylink.com for
more information.
Forward Looking Statements
Except for historical and factual information, the matters
set forth in this release and other of our oral or written
statements identified by words such as "estimates," "expects,"
"anticipates," "believes," "plans," "intends," and similar
expressions are forward-looking statements as defined by the
federal securities laws, and are subject to the "safe harbor"
protections thereunder.
These forward-looking statements are not guarantees of future
results and are based on current expectations only, are inherently
speculative, and are subject to a number of assumptions, risks and
uncertainties, many of which are beyond our control. Actual events
and results may differ materially from those anticipated,
estimated, projected, or implied by us if one or more of these
risks or uncertainties materialize, or if our underlying
assumptions prove incorrect. Factors that could affect actual
results include but are not limited to: the effects of competition
from a wide variety of competitive providers, including lower
demand for our legacy offerings; the effects of new, emerging or
competing technologies, including those that could make our
products less desirable or obsolete; the effects of ongoing changes
in the regulation of the communications industry, including the
outcome of regulatory or judicial proceedings relating to
intercarrier compensation, interconnection obligations, access
charges, universal service, broadband deployment, data protection
and net neutrality; our ability to effectively adjust to changes in
the communications industry and changes in the composition of our
markets and product mix; possible changes in the demand for, or
pricing of, our products and services, including our ability to
effectively respond to increased demand for high-speed broadband
service; our ability to successfully maintain the quality and
profitability of our existing product and service offerings and to
introduce new offerings on a timely and cost-effective basis; the
adverse impact on our business and network from possible equipment
failures, service outages, security breaches or similar events
impacting our network; our ability to generate cash flows
sufficient to fund our financial commitments and objectives,
including our capital expenditures, operating costs, debt
repayments, dividends, periodic share repurchases, periodic pension
contributions and other benefits payments; changes in our operating
plans, corporate strategies, dividend payment plans or other
capital allocation plans, whether based upon changes in our cash
flows, cash requirements, financial performance, financial
position, or otherwise; our ability to effectively retain and hire
key personnel and to successfully negotiate collective bargaining
agreements on reasonable terms without work stoppages; increases in
the costs of our pension, health, post-employment or other
benefits, including those caused by changes in markets, interest
rates, mortality rates, demographics or regulations; adverse
changes in our access to credit markets on favorable terms, whether
caused by changes in our financial position, lower debt credit
ratings, unstable markets or otherwise; our ability to maintain
favorable relations with our key business partners, suppliers,
vendors, landlords and financial institutions; our ability to
effectively manage our expansion opportunities; our ability to
collect our receivables from financially troubled customers; any
adverse developments in legal or regulatory proceedings involving
us; changes in tax, communications, pension, healthcare or other
laws or regulations, in governmental support programs, or in
general government funding levels; the effects of changes in
accounting policies or practices, including potential future
impairment charges; the effects of terrorism, adverse weather or
other natural or man-made disasters; the effects of more general
factors such as changes in interest rates, in operating costs, in
general market, labor, economic or geo-political conditions
(including uncertainty about the long-term prospects of the
European Union, China and certain
other economies), or in public policy; and other risks referenced
from time to time in our filings with the U.S. Securities and
Exchange Commission (the "SEC"). For all the reasons set forth
above and in our SEC filings, you are cautioned not to place undue
reliance upon any of our forward-looking statements, which speak
only as of the date made. We undertake no obligation to publicly
update or revise any of our forward-looking statements for any
reason, whether as a result of new information, future events or
developments, changed circumstances, or otherwise. Furthermore, any
information about our intentions contained in any of our
forward-looking statements reflects our intentions as of the date
of such forward-looking statement, and is based upon, among other
things, existing regulatory, technological, industry, competitive,
economic and market conditions, and our assumptions as of such
date. We may change our intentions, strategies or plans without
notice at any time and for any reason.
(1)
|
Core revenues defined
as strategic revenues plus legacy revenues (excludes data
integration and other revenues) as described further in the
attached schedules. Strategic revenues primarily include
broadband, Multiprotocol Label Switching (MPLS), Ethernet, Optical
Wavelength, colocation, hosting, cloud, video, VoIP and IT
services. Legacy revenues primarily include voice, private
line (including special access), switched access and Integrated
Services Digital Network ("ISDN") and other ancillary
services.
|
(2)
|
See attachments for
non-GAAP reconciliations.
|
(3)
|
Beginning first
quarter 2016, CenturyLink revised its Free Cash Flow calculation.
See attachments for non-GAAP reconciliations.
|
(4)
|
Network functions
virtualization.
|
(5)
|
Software-defined
network.
|
(6)
|
Beginning second
quarter 2016, private line (including special access) revenues were
reclassified from strategic services to legacy services. All
historical periods have been restated to reflect this
change.
|
(7)
|
All references to
segment data herein reflect certain adjustments described in the
attached schedules.
|
CenturyLink,
Inc.
|
CONSOLIDATED
STATEMENTS OF INCOME
|
THREE MONTHS ENDED
JUNE 30, 2016 AND 2015
|
(UNAUDITED)
|
(Dollars in
millions, except per share amounts; shares in
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
June 30, 2016
|
|
Three months ended
June 30, 2015
|
|
|
|
|
|
|
|
|
|
|
As
adjusted
|
|
|
|
|
|
As
adjusted
|
|
|
|
Increase
|
|
|
|
|
|
|
excluding
|
|
|
|
|
|
excluding
|
|
|
|
(decrease)
|
|
|
|
|
Less
|
|
special
|
|
|
|
Less
|
|
special
|
|
Increase
|
|
excluding
|
|
|
As
|
|
special
|
|
items
|
|
As
|
|
special
|
|
items
|
|
(decrease)
|
|
special
|
|
|
reported
|
|
items
|
|
(Non-GAAP)
|
|
reported
|
|
items
|
|
(Non-GAAP)
|
|
as
reported
|
|
items
|
OPERATING REVENUES
*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Strategic
|
$
|
2,030
|
|
|
—
|
|
|
2,030
|
|
|
1,929
|
|
|
—
|
|
|
1,929
|
|
|
5.2
|
%
|
|
5.2
|
%
|
|
Legacy
|
1,938
|
|
|
—
|
|
|
1,938
|
|
|
2,089
|
|
|
—
|
|
|
2,089
|
|
|
(7.2)
|
%
|
|
(7.2)
|
%
|
|
Data
integration
|
123
|
|
|
—
|
|
|
123
|
|
|
143
|
|
|
—
|
|
|
143
|
|
|
(14.0)
|
%
|
|
(14.0)
|
%
|
|
Other
|
307
|
|
|
—
|
|
|
307
|
|
|
258
|
|
|
—
|
|
|
258
|
|
|
19.0
|
%
|
|
19.0
|
%
|
|
Total
operating revenues
|
4,398
|
|
|
—
|
|
|
4,398
|
|
|
4,419
|
|
|
—
|
|
|
4,419
|
|
|
(0.5)
|
%
|
|
(0.5)
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING
EXPENSES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of services and
products
|
1,949
|
|
|
2
|
|
(1)
|
1,947
|
|
|
1,959
|
|
|
3
|
|
(3)
|
1,956
|
|
|
(0.5)
|
%
|
|
(0.5)
|
%
|
|
Selling, general and
administrative
|
812
|
|
|
12
|
|
(1)
|
800
|
|
|
863
|
|
|
24
|
|
(3)
|
839
|
|
|
(5.9)
|
%
|
|
(4.6)
|
%
|
|
Depreciation and
amortization
|
987
|
|
|
—
|
|
|
987
|
|
|
1,048
|
|
|
—
|
|
|
1,048
|
|
|
(5.8)
|
%
|
|
(5.8)
|
%
|
|
Total
operating expenses
|
3,748
|
|
|
14
|
|
|
3,734
|
|
|
3,870
|
|
|
27
|
|
|
3,843
|
|
|
(3.2)
|
%
|
|
(2.8)
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING
INCOME
|
650
|
|
|
(14)
|
|
|
664
|
|
|
549
|
|
|
(27)
|
|
|
576
|
|
|
18.4
|
%
|
|
15.3
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER INCOME
(EXPENSE)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
expense
|
(340)
|
|
|
—
|
|
|
(340)
|
|
|
(327)
|
|
|
—
|
|
|
(327)
|
|
|
4.0
|
%
|
|
4.0
|
%
|
|
Other income,
net
|
7
|
|
|
—
|
|
|
7
|
|
|
12
|
|
|
—
|
|
|
12
|
|
|
(41.7)
|
%
|
|
(41.7)
|
%
|
|
Income tax
expense
|
(121)
|
|
|
5
|
|
(2)
|
(126)
|
|
|
(91)
|
|
|
10
|
|
(4)
|
(101)
|
|
|
33.0
|
%
|
|
24.8
|
%
|
NET INCOME
|
$
|
196
|
|
|
(9)
|
|
|
205
|
|
|
143
|
|
|
(17)
|
|
|
160
|
|
|
37.1
|
%
|
|
28.1
|
%
|
BASIC EARNINGS PER
SHARE
|
$
|
0.36
|
|
|
(0.02)
|
|
|
0.38
|
|
|
0.26
|
|
|
(0.03)
|
|
|
0.29
|
|
|
38.5
|
%
|
|
31.0
|
%
|
DILUTED EARNINGS PER
SHARE
|
$
|
0.36
|
|
|
(0.02)
|
|
|
0.38
|
|
|
0.26
|
|
|
(0.03)
|
|
|
0.29
|
|
|
38.5
|
%
|
|
31.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AVERAGE SHARES
OUTSTANDING
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
539,627
|
|
|
|
539,627
|
|
558,640
|
|
|
|
558,640
|
|
(3.4)
|
%
|
|
(3.4)
|
%
|
|
Diluted
|
540,375
|
|
|
|
540,375
|
|
559,220
|
|
|
|
559,220
|
|
(3.4)
|
%
|
|
(3.4)
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
DIVIDENDS PER COMMON
SHARE
|
$
|
0.54
|
|
|
|
|
0.54
|
|
|
0.54
|
|
|
|
|
0.54
|
|
|
—
|
%
|
|
—
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SPECIAL
ITEMS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) -
|
Includes severance
costs associated with recent headcount reductions ($7 million),
integration costs associated with our acquisition of Qwest ($3
million) and costs associated with a large billing system
integration project ($4 million).
|
(2) -
|
Income tax benefit of
Item (1).
|
(3) -
|
Includes severance
costs associated with reduction in force initiatives ($19 million)
and integration costs associated with our acquisition of Qwest ($8
million).
|
(4) -
|
Income tax benefit of
Item (3).
|
*
|
During the second
quarter of 2016, we determined that because of declines due to
customer migration to other strategic products and services certain
of our business low-bandwidth data services, specifically our
private line (including special access) services in our business
segment, are now more closely aligned with our legacy services than
with our strategic services. As a result, we now reflect these
operating revenues as legacy services, and we have reclassified
certain prior period amounts to conform to this change. The
revision resulted in a reduction of revenue from strategic services
and a corresponding increase in revenue from legacy services of
$401 million for the three months ended June 30,
2015.
|
CenturyLink,
Inc.
|
CONSOLIDATED
STATEMENTS OF INCOME
|
SIX MONTHS ENDED JUNE
30, 2016 AND 2015
|
(UNAUDITED)
|
(Dollars in
millions, except per share amounts; shares in
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six months ended
June 30, 2016
|
|
Six months ended
June 30, 2015
|
|
|
|
|
|
|
|
|
|
|
As
adjusted
|
|
|
|
|
|
As
adjusted
|
|
|
|
Increase
|
|
|
|
|
|
|
excluding
|
|
|
|
|
|
excluding
|
|
|
|
(decrease)
|
|
|
|
|
Less
|
|
special
|
|
|
|
Less
|
|
special
|
|
Increase
|
|
excluding
|
|
|
As
|
|
special
|
|
items
|
|
As
|
|
special
|
|
items
|
|
(decrease)
|
|
special
|
|
|
reported
|
|
items
|
|
(Non-GAAP)
|
|
reported
|
|
items
|
|
(Non-GAAP)
|
|
as
reported
|
|
items
|
OPERATING REVENUES
*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Strategic
|
$
|
4,019
|
|
|
—
|
|
|
4,019
|
|
|
3,832
|
|
|
—
|
|
|
3,832
|
|
|
4.9
|
%
|
|
4.9
|
%
|
|
Legacy
|
3,926
|
|
|
—
|
|
|
3,926
|
|
|
4,240
|
|
|
—
|
|
|
4,240
|
|
|
(7.4)%
|
|
|
(7.4)%
|
|
|
Data
integration
|
239
|
|
|
—
|
|
|
239
|
|
|
283
|
|
|
—
|
|
|
283
|
|
|
(15.5)%
|
|
|
(15.5)%
|
|
|
Other
|
615
|
|
|
—
|
|
|
615
|
|
|
515
|
|
|
—
|
|
|
515
|
|
|
19.4
|
%
|
|
19.4
|
%
|
|
Total operating
revenues
|
8,799
|
|
|
—
|
|
|
8,799
|
|
|
8,870
|
|
|
—
|
|
|
8,870
|
|
|
(0.8)%
|
|
|
(0.8)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING
EXPENSES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of services and
products
|
3,849
|
|
|
4
|
|
(1)
|
3,845
|
|
|
3,870
|
|
|
6
|
|
(3)
|
3,864
|
|
|
(0.5)
|
%
|
|
(0.5)
|
%
|
|
Selling, general and
administrative
|
1,643
|
|
|
30
|
|
(1)
|
1,613
|
|
|
1,714
|
|
|
67
|
|
(3)
|
1,647
|
|
|
(4.1)
|
%
|
|
(2.1)
|
%
|
|
Depreciation and
amortization
|
1,963
|
|
|
—
|
|
|
1,963
|
|
|
2,088
|
|
|
—
|
|
|
2,088
|
|
|
(6.0)
|
%
|
|
(6.0)
|
%
|
|
Total operating
expenses
|
7,455
|
|
|
34
|
|
|
7,421
|
|
|
7,672
|
|
|
73
|
|
|
7,599
|
|
|
(2.8)
|
%
|
|
(2.3)
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING
INCOME
|
1,344
|
|
|
(34)
|
|
|
1,378
|
|
|
1,198
|
|
|
(73)
|
|
|
1,271
|
|
|
12.2
|
%
|
|
8.4
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER INCOME
(EXPENSE)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
expense
|
(671)
|
|
|
—
|
|
|
(671)
|
|
|
(655)
|
|
|
—
|
|
|
(655)
|
|
|
2.4
|
%
|
|
2.4
|
%
|
|
Other (expense)
income
|
24
|
|
|
—
|
|
|
24
|
|
|
14
|
|
|
—
|
|
|
14
|
|
|
71.4
|
%
|
|
71.4
|
%
|
|
Income tax
expense
|
(265)
|
|
|
13
|
|
(2)
|
(278)
|
|
|
(222)
|
|
|
22
|
|
(4)
|
(244)
|
|
|
19.4
|
%
|
|
13.9
|
%
|
NET INCOME
|
$
|
432
|
|
|
(21)
|
|
|
453
|
|
|
335
|
|
|
(51)
|
|
|
386
|
|
|
29.0
|
%
|
|
17.4
|
%
|
BASIC EARNINGS PER
SHARE
|
$
|
0.80
|
|
|
(0.04)
|
|
|
0.84
|
|
|
0.60
|
|
|
(0.09)
|
|
|
0.69
|
|
|
33.3
|
%
|
|
21.7
|
%
|
DILUTED EARNINGS PER
SHARE
|
$
|
0.80
|
|
|
(0.04)
|
|
|
0.84
|
|
|
0.60
|
|
|
(0.09)
|
|
|
0.69
|
|
|
33.3
|
%
|
|
21.7
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AVERAGE SHARES
OUTSTANDING
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
539,213
|
|
|
|
539,213
|
|
560,304
|
|
|
|
560,304
|
|
(3.8)
|
%
|
|
(3.8)
|
%
|
|
Diluted
|
540,281
|
|
|
|
540,281
|
|
561,362
|
|
|
|
561,362
|
|
(3.8)
|
%
|
|
(3.8)
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
DIVIDENDS PER COMMON
SHARE
|
$
|
1.08
|
|
|
|
|
1.08
|
|
|
1.08
|
|
|
|
|
1.08
|
|
|
—
|
%
|
|
—
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SPECIAL
ITEMS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) -
|
Includes severance
costs associated with recent headcount reductions ($21 million),
integration costs associated with our acquisition of Qwest ($7
million) and costs associated with a large billing system
integration project ($6 million).
|
(2) -
|
Income tax benefit of
Item (1).
|
(3) -
|
Includes severance
costs associated with reduction in force initiatives ($32 million),
integration costs associated with our acquisition of Qwest ($18
million), the impairment of office buildings ($8 million) and
regulatory fines associated with a 911 system outage ($15
million).
|
(4) -
|
Income tax benefit of
Item (3).
|
*
|
During the second
quarter of 2016, we determined that because of declines due to
customer migration to other strategic products and services certain
of our business low-bandwidth data services, specifically our
private line (including special access) services in our business
segment, are now more closely aligned with our legacy services than
with our strategic services. As a result, we now reflect these
operating revenues as legacy services, and we have reclassified
certain prior period amounts to conform to this change. The
revision resulted in a reduction of revenue from strategic services
and a corresponding increase in revenue from legacy services of
$818 million for the six months ended June 30,
2015.
|
CenturyLink,
Inc.
|
CONDENSED
CONSOLIDATED BALANCE SHEETS
|
JUNE 30, 2016 AND
DECEMBER 31, 2015
|
(UNAUDITED)
|
(Dollars in
millions)
|
|
June
30,
|
|
December
31,
|
|
2016
|
|
2015
|
ASSETS
|
|
|
|
CURRENT
ASSETS
|
|
|
|
Cash and cash
equivalents
|
$
|
191
|
|
|
126
|
|
Other current
assets
|
2,600
|
|
|
2,524
|
|
Total
current assets
|
2,791
|
|
|
2,650
|
|
|
|
|
|
NET PROPERTY, PLANT
AND EQUIPMENT
|
|
|
|
Property, plant and
equipment
|
39,763
|
|
|
38,785
|
|
Accumulated
depreciation
|
(21,869)
|
|
|
(20,716)
|
|
Net
property, plant and equipment
|
17,894
|
|
|
18,069
|
|
|
|
|
|
GOODWILL AND OTHER
ASSETS
|
|
|
|
Goodwill
|
20,766
|
|
|
20,742
|
|
Other, net
|
5,667
|
|
|
6,143
|
|
Total goodwill and other assets
|
26,433
|
|
|
26,885
|
|
|
|
|
|
TOTAL
ASSETS
|
$
|
47,118
|
|
|
47,604
|
|
|
|
|
|
LIABILITIES AND
STOCKHOLDERS' EQUITY
|
|
|
|
CURRENT
LIABILITIES
|
|
|
|
Current maturities of
long-term debt
|
$
|
1,451
|
|
|
1,503
|
|
Other current
liabilities
|
3,391
|
|
|
3,101
|
|
Total current liabilities
|
4,842
|
|
|
4,604
|
|
|
|
|
|
LONG-TERM
DEBT
|
18,165
|
|
|
18,722
|
|
DEFERRED CREDITS AND
OTHER LIABILITIES
|
10,126
|
|
|
10,218
|
|
STOCKHOLDERS'
EQUITY
|
13,985
|
|
|
14,060
|
|
|
|
|
|
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY
|
$
|
47,118
|
|
|
47,604
|
|
|
|
|
|
CenturyLink,
Inc.
|
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
SIX MONTHS ENDED JUNE
30, 2016 AND 2015
|
(UNAUDITED)
|
(Dollars in
millions)
|
|
|
|
|
|
Six months
ended
|
|
Six months
ended
|
|
June 30,
2016
|
|
June 30,
2015
|
OPERATING
ACTIVITIES
|
|
|
|
Net income
|
$
|
432
|
|
|
335
|
|
Adjustments to reconcile net income
to net cash provided by operating
activities:
|
|
|
|
Depreciation and
amortization
|
1,963
|
|
|
2,088
|
|
Impairment of
assets
|
1
|
|
|
8
|
|
Deferred income
taxes
|
21
|
|
|
53
|
|
Provision for
uncollectible accounts
|
96
|
|
|
84
|
|
Share-based
compensation
|
40
|
|
|
38
|
|
Changes in current
assets and liabilities, net
|
93
|
|
|
(93)
|
|
Retirement
benefits
|
(28)
|
|
|
(19)
|
|
Changes in other
noncurrent assets and liabilities, net
|
(35)
|
|
|
(11)
|
|
Other, net
|
18
|
|
|
(2)
|
|
Net cash provided by
operating activities
|
2,601
|
|
|
2,481
|
|
INVESTING
ACTIVITIES
|
|
|
|
Payments for
property, plant and equipment and capitalized software
|
(1,264)
|
|
|
(1,272)
|
|
Cash paid for
acquisitions
|
(24)
|
|
|
(4)
|
|
Proceeds from sale of
property
|
11
|
|
|
26
|
|
Other, net
|
(2)
|
|
|
(8)
|
|
Net cash used in
investing activities
|
(1,279)
|
|
|
(1,258)
|
|
FINANCING
ACTIVITIES
|
|
|
|
Net proceeds from
issuance of long-term debt
|
1,215
|
|
|
594
|
|
Payments of long-term
debt
|
(1,464)
|
|
|
(506)
|
|
Net payments on
credit facility and revolving line of credit
|
(410)
|
|
|
(405)
|
|
Dividends
paid
|
(586)
|
|
|
(609)
|
|
Net proceeds from
issuance of common stock
|
3
|
|
|
9
|
|
Repurchase of common
stock and shares withheld to satisfy tax withholdings
|
(15)
|
|
|
(277)
|
|
Other, net
|
—
|
|
|
(2)
|
|
Net cash used in
financing activities
|
(1,257)
|
|
|
(1,196)
|
|
Net increase in cash
and cash equivalents
|
65
|
|
|
27
|
|
Cash and cash
equivalents at beginning of period
|
126
|
|
|
128
|
|
Cash and cash
equivalents at end of period
|
$
|
191
|
|
|
155
|
|
CenturyLink,
Inc.
|
SELECTED SEGMENT
FINANCIAL INFORMATION
|
THREE MONTHS AND SIX
MONTHS ENDED JUNE 30, 2016 AND 2015
|
(UNAUDITED)
|
(Dollars in
millions)
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
June 30,
|
|
Six months ended
June 30,
|
|
|
2016
|
|
2015
*
|
|
2016
|
|
2015
*
|
Total segment
revenues
|
$
|
4,091
|
|
|
4,161
|
|
|
8,184
|
|
|
8,355
|
|
Total segment
expenses
|
2,141
|
|
|
2,140
|
|
|
4,192
|
|
|
4,211
|
|
Total segment
income
|
$
|
1,950
|
|
|
2,021
|
|
|
3,992
|
|
|
4,144
|
|
Total segment income
margin (segment income divided by segment revenues)
|
47.7
|
%
|
|
48.6
|
%
|
|
48.8
|
%
|
|
49.6
|
%
|
|
|
|
|
|
|
|
|
|
Business
|
|
|
|
|
|
|
|
Revenues *
|
|
|
|
|
|
|
|
|
Strategic
services
|
$
|
1,230
|
|
|
1,171
|
|
|
2,445
|
|
|
2,336
|
|
|
Legacy
services
|
1,244
|
|
|
1,344
|
|
|
2,518
|
|
|
2,737
|
|
|
Data
integration
|
123
|
|
|
143
|
|
|
238
|
|
|
282
|
|
|
Total
revenues
|
2,597
|
|
|
2,658
|
|
|
5,201
|
|
|
5,355
|
|
Expenses
**
|
|
|
|
|
|
|
|
|
Total
expenses
|
1,487
|
|
|
1,504
|
|
|
2,914
|
|
|
2,967
|
|
|
|
|
|
|
|
|
|
|
Segment
income
|
$
|
1,110
|
|
|
1,154
|
|
|
2,287
|
|
|
2,388
|
|
Segment income
margin
|
42.7
|
%
|
|
43.4
|
%
|
|
44.0
|
%
|
|
44.6
|
%
|
|
|
|
|
|
|
|
|
|
Consumer
|
|
|
|
|
|
|
|
Revenues
|
|
|
|
|
|
|
|
|
Strategic
services
|
$
|
800
|
|
|
758
|
|
|
1,574
|
|
|
1,496
|
|
|
Legacy
services
|
694
|
|
|
745
|
|
|
1,408
|
|
|
1,503
|
|
|
Data
integration
|
—
|
|
|
—
|
|
|
1
|
|
|
1
|
|
|
Total
revenues
|
1,494
|
|
|
1,503
|
|
|
2,983
|
|
|
3,000
|
|
Expenses
**
|
|
|
|
|
|
|
|
|
Total
expenses
|
654
|
|
|
636
|
|
|
1,278
|
|
|
1,244
|
|
|
|
|
|
|
|
|
|
|
Segment
income
|
$
|
840
|
|
|
867
|
|
|
1,705
|
|
|
1,756
|
|
Segment income
margin
|
56.2
|
%
|
|
57.7
|
%
|
|
57.2
|
%
|
|
58.5
|
%
|
|
|
|
|
|
|
|
|
|
*
|
During the second
quarter of 2016, we determined that because of declines due to
customer migration to other strategic products and services certain
of our business low-bandwidth data services, specifically our
private line (including special access) services in our business
segment, are now more closely aligned with our legacy services than
with our strategic services. As a result, we now reflect these
operating revenues as legacy services, and we have reclassified
certain prior period amounts to conform to this change. The
revision resulted in a reduction of revenue from strategic services
and a corresponding increase in revenue from legacy services of
$401 million and $818 million (net of $2 million and $4 million of
deferred revenue included in other business legacy services) for
the three and six months ended June 30, 2015,
respectively.
|
**
|
During the first half
of 2016, we implemented several changes with respect to the
assignment of certain expenses to our reportable segments. We have
recast our previously-reported segment results for the three and
six months ended June 30, 2015, to conform to the current
presentation. For the three months ended June 30, 2015, the segment
expense recast resulted in an increase in consumer expenses of $19
million and a decrease in business expenses of $21 million. For the
six months ended June 30, 2015, the segment expense recast
resulted in an increase in consumer expenses of $38 million and a
decrease in business expenses of $42 million.
|
CenturyLink,
Inc.
|
RECONCILIATION OF
NON-GAAP FINANCIAL MEASURES
|
(UNAUDITED)
|
(Dollars in
millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
June 30, 2016
|
|
Three months ended
June 30, 2015
|
|
|
|
|
|
|
As
adjusted
|
|
|
|
|
|
As
adjusted
|
|
|
|
|
Less
|
|
excluding
|
|
|
|
Less
|
|
excluding
|
|
|
As
|
|
special
|
|
special
|
|
As
|
|
special
|
|
special
|
|
|
reported
|
|
items
|
|
items
|
|
reported
|
|
items
|
|
items
|
Operating cash
flow and cash flow margin
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
income
|
$
|
650
|
|
|
(14)
|
|
(1)
|
664
|
|
|
549
|
|
|
(27)
|
|
(2)
|
576
|
|
|
Add: Depreciation and
amortization
|
987
|
|
|
—
|
|
|
987
|
|
|
1,048
|
|
|
—
|
|
|
1,048
|
|
|
Operating cash
flow
|
$
|
1,637
|
|
|
(14)
|
|
|
1,651
|
|
|
1,597
|
|
|
(27)
|
|
|
1,624
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
$
|
4,398
|
|
|
—
|
|
|
4,398
|
|
|
4,419
|
|
|
—
|
|
|
4,419
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
margin (operating income divided by revenues)
|
14.8
|
%
|
|
|
|
15.1
|
%
|
|
12.4
|
%
|
|
|
|
13.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating cash flow
margin (operating cash flow divided by revenues)
|
37.2
|
%
|
|
|
|
37.5
|
%
|
|
36.1
|
%
|
|
|
|
36.8
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Free cash
flow
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating cash
flow
|
|
|
|
|
$
|
1,651
|
|
|
|
|
|
|
1,624
|
|
|
Less: Capital
expenditures (3)
|
|
|
|
|
(648)
|
|
|
|
|
|
|
(654)
|
|
|
Less: Cash paid for
interest, net of amounts capitalized
|
|
|
|
|
(398)
|
|
|
|
|
|
|
(384)
|
|
|
Less: Pension and
post-retirement impacts (4)
|
|
|
|
|
(7)
|
|
|
|
|
|
|
(10)
|
|
|
Less: Cash paid for
income taxes, net of refunds
|
|
|
|
|
(10)
|
|
|
|
|
|
|
(36)
|
|
|
Add: Share-based
compensation
|
|
|
|
|
22
|
|
|
|
|
|
|
20
|
|
|
Add: Other
income
|
|
|
|
|
7
|
|
|
|
|
|
|
12
|
|
|
Free cash flow
(5)
|
|
|
|
|
$
|
617
|
|
|
|
|
|
|
572
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SPECIAL
ITEMS
|
(1) -
|
Includes severance
costs associated with recent headcount reductions ($7 million),
integration costs associated with our acquisition of Qwest ($3
million) and costs associated with a large billing system
integration project ($4 million).
|
(2) -
|
Includes severance
costs associated with reduction in force initiatives ($19 million)
and integration costs associated with our acquisition of Qwest ($8
million).
|
|
|
FREE CASH
FLOW
|
(3) -
|
Excludes $5 million
in second quarter 2016 and $2 million in second quarter 2015 of
capital expenditures related to the integration of Qwest and
Savvis.
|
(4) -
|
2016 includes net
periodic pension benefit income of ($18 million), net periodic
post-retirement benefit expense of $35 million and ($1 million) of
benefits paid to participants of our non-qualified pension
plans. Post-retirement contributions included benefits paid
by company ($38 million) offset by participant contributions $14
million and direct subsidy receipts $1 million.
|
-
|
2015 includes net
periodic pension benefit income of ($17 million), net periodic
post-retirement benefit expense of $41 million and ($2 million) of
benefits paid to participants of our non-qualified pension
plans. Post-retirement contributions included benefits paid
by company ($48 million) offset by participant contributions $14
million and direct subsidy receipts $2 million.
|
(5) -
|
Excludes special
items identified in items (1) and (2).
|
CenturyLink,
Inc.
|
RECONCILIATION OF
NON-GAAP FINANCIAL MEASURES
|
(UNAUDITED)
|
(Dollars in
millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six months ended
June 30, 2016
|
|
Six months ended
June 30, 2015
|
|
|
|
|
|
|
As
adjusted
|
|
|
|
|
|
As
adjusted
|
|
|
|
|
Less
|
|
excluding
|
|
|
|
Less
|
|
excluding
|
|
|
As
|
|
special
|
|
special
|
|
As
|
|
special
|
|
special
|
|
|
reported
|
|
items
|
|
items
|
|
reported
|
|
items
|
|
items
|
Operating cash
flow and cash flow margin
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
income
|
$
|
1,344
|
|
|
(34)
|
|
(1)
|
1,378
|
|
|
1,198
|
|
|
(73)
|
|
(2)
|
1,271
|
|
|
Add: Depreciation and
amortization
|
1,963
|
|
|
—
|
|
|
1,963
|
|
|
2,088
|
|
|
—
|
|
|
2,088
|
|
|
Operating cash
flow
|
$
|
3,307
|
|
|
(34)
|
|
|
3,341
|
|
|
3,286
|
|
|
(73)
|
|
|
3,359
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
$
|
8,799
|
|
|
—
|
|
|
8,799
|
|
|
8,870
|
|
|
—
|
|
|
8,870
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
margin (operating income divided by revenues)
|
15.3
|
%
|
|
|
|
15.7
|
%
|
|
13.5
|
%
|
|
|
|
14.3
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating cash flow
margin (operating cash flow divided by revenues)
|
37.6
|
%
|
|
|
|
38.0
|
%
|
|
37.0
|
%
|
|
|
|
37.9
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Free cash
flow
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating cash
flow
|
|
|
|
|
$
|
3,341
|
|
|
|
|
|
|
3,359
|
|
|
Less: Capital
expenditures (3)
|
|
|
|
|
(1,255)
|
|
|
|
|
|
|
(1,267)
|
|
|
Less: Cash paid for
interest, net of amounts capitalized
|
|
|
|
|
(660)
|
|
|
|
|
|
|
(654)
|
|
|
Less: Pension and
post-retirement impacts (4)
|
|
|
|
|
(28)
|
|
|
|
|
|
|
(20)
|
|
|
Less: Cash paid for
income taxes, net of refunds
|
|
|
|
|
(21)
|
|
|
|
|
|
|
(41)
|
|
|
Add: Share-based
compensation
|
|
|
|
|
40
|
|
|
|
|
|
|
38
|
|
|
Add: Other
income
|
|
|
|
|
24
|
|
|
|
|
|
|
14
|
|
|
Free cash flow
(5)
|
|
|
|
|
$
|
1,441
|
|
|
|
|
|
|
1,429
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SPECIAL
ITEMS
|
|
|
|
|
|
|
|
|
|
|
|
(1) -
|
Includes severance
costs associated with recent headcount reductions ($21 million),
integration costs associated with our acquisition of Qwest ($7
million) and costs associated with a large billing system
integration project ($6 million).
|
(2) -
|
Includes severance
costs associated with reduction in force initiatives ($32 million),
integration costs associated with our acquisition of Qwest ($18
million), the impairment of office buildings ($8 million) and
regulatory fines associated with a 911 system outage ($15
million).
|
|
|
FREE CASH
FLOW
|
(3) -
|
Excludes $9 million
in 2016 and $5 million in 2015 of capital expenditures related to
the integration of Qwest and Savvis.
|
(4) -
|
2016 includes net
periodic pension benefit income of ($38 million), net periodic
post-retirement benefit expense of $71 million and ($3 million) of
benefits paid to participants of our non-qualified pension
plans. Post-retirement contributions included benefits paid
by company ($89 million) offset by participant contributions $29
million and direct subsidy receipts $2 million.
|
-
|
2015 includes net
periodic pension benefit income of ($41 million), net periodic
post-retirement benefit expense of $82 million and ($3 million) of
benefits paid to participants of our non-qualified pension
plans. Post-retirement contributions included benefits paid
by company ($90 million) offset by participant contributions $29
million and direct subsidy receipts $3 million.
|
(5) -
|
Excludes special
items identified in items (1) and (2).
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CenturyLink,
Inc.
|
REVENUES
|
(UNAUDITED)
|
(Dollars in
millions)
|
|
|
|
|
|
|
|
|
|
|
|
Three months
ended
|
|
Six months
ended
|
|
|
June 30,
2016
|
|
June 30,
2015
|
|
June 30,
2016
|
|
June 30,
2015
|
Strategic services
*
|
|
|
|
|
|
|
|
|
Business
high-bandwidth data services (1)
|
$
|
753
|
|
|
697
|
|
|
1,491
|
|
|
1,384
|
|
|
Business hosting
services (2)
|
305
|
|
|
319
|
|
|
612
|
|
|
637
|
|
|
Other business
strategic services (3)
|
172
|
|
|
155
|
|
|
342
|
|
|
315
|
|
|
Consumer broadband
services (4)
|
682
|
|
|
652
|
|
|
1,349
|
|
|
1,287
|
|
|
Other consumer
strategic services (5)
|
118
|
|
|
106
|
|
|
225
|
|
|
209
|
|
|
Total strategic
services revenues
|
2,030
|
|
|
1,929
|
|
|
4,019
|
|
|
3,832
|
|
|
|
|
|
|
|
|
|
Legacy services
*
|
|
|
|
|
|
|
|
|
Business voice
services (6)
|
611
|
|
|
648
|
|
|
1,233
|
|
|
1,318
|
|
|
Business
low-bandwidth data services (7)
|
352
|
|
|
403
|
|
|
718
|
|
|
822
|
|
|
Other business legacy
services (8)
|
281
|
|
|
293
|
|
|
567
|
|
|
597
|
|
|
Consumer voice
services (6)
|
615
|
|
|
675
|
|
|
1,249
|
|
|
1,363
|
|
|
Other consumer legacy
services (9)
|
79
|
|
|
70
|
|
|
159
|
|
|
140
|
|
|
Total legacy services
revenues
|
1,938
|
|
|
2,089
|
|
|
3,926
|
|
|
4,240
|
|
|
|
|
|
|
|
|
|
|
Data
integration
|
|
|
|
|
|
|
|
|
Business data
integration
|
123
|
|
|
143
|
|
|
238
|
|
|
282
|
|
|
Consumer data
integration
|
—
|
|
|
—
|
|
|
1
|
|
|
1
|
|
|
Total data
integration revenues
|
123
|
|
|
143
|
|
|
239
|
|
|
283
|
|
|
|
|
|
|
|
|
|
Other
revenues
|
|
|
|
|
|
|
|
|
High-cost
support revenue (10)
|
173
|
|
|
132
|
|
|
347
|
|
|
266
|
|
|
Other revenue
(11)
|
134
|
|
|
126
|
|
|
268
|
|
|
249
|
|
|
Total other
revenues
|
307
|
|
|
258
|
|
|
615
|
|
|
515
|
|
|
|
|
|
|
|
|
|
Total
revenues
|
$
|
4,398
|
|
|
4,419
|
|
|
8,799
|
|
|
8,870
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
Includes MPLS and
Ethernet revenue
|
(2)
|
|
Includes colocation,
hosting (including cloud hosting and managed hosting) and hosting
area network revenue
|
(3)
|
|
Includes primarily
broadband, VoIP, video and IT services revenue
|
(4)
|
|
Includes broadband
and related services revenue
|
(5)
|
|
Includes video and
other revenue
|
(6)
|
|
Includes local and
long-distance voice revenue
|
(7)
|
|
Includes private line
(including special access) revenue
|
(8)
|
|
Includes UNEs, public
access, switched access and other ancillary revenue
|
(9)
|
|
Includes other
ancillary revenue
|
(10)
|
|
Includes CAF Phase 1,
CAF Phase 2 and federal and state USF support revenue
|
(11)
|
|
Includes USF
surcharges
|
*
|
During the second
quarter of 2016, we determined that because of declines due to
customer migration to other strategic products and services certain
of our business low-bandwidth data services, specifically our
private line (including special access) services in our business
segment, are now more closely aligned with our legacy services than
with our strategic services. As a result, we now reflect these
operating revenues as legacy services, and we have reclassified
certain prior period amounts to conform to this change. The
revision resulted in a reduction of revenue from strategic services
and a corresponding increase in revenue from legacy services of
$401 million and $818 million (net of $2 million and $4 million of
deferred revenue included in other business legacy services) for
the three and six months ended June 30, 2015, respectively. In
addition, our business broadband services remain a strategic
service and are now included in our other business strategic
services.
|
CenturyLink,
Inc.
|
HOSTING REVENUES AND
OPERATING METRICS
|
(UNAUDITED)
|
|
|
|
|
|
|
|
|
|
|
|
Three months
ended
|
|
Six months
ended
|
|
|
June 30,
2016
|
|
June 30,
2015
|
|
June 30,
2016
|
|
June 30,
2015
|
Hosting Revenue
Detail
|
(In
millions)
|
Colocation
|
$
|
156
|
|
|
156
|
|
|
311
|
|
|
312
|
|
Managed Hosting /
Cloud
|
127
|
|
|
141
|
|
|
258
|
|
|
282
|
|
Hosting Area
Network
|
22
|
|
|
22
|
|
|
43
|
|
|
43
|
|
Total Hosting
Revenue
|
$
|
305
|
|
|
319
|
|
|
612
|
|
|
637
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As
of
|
|
As
of
|
|
As
of
|
|
|
|
|
June 30,
2016
|
|
March 31,
2016
|
|
June 30,
2015
|
Hosting Data
Center Metrics
|
|
|
|
|
|
|
|
Number of data
centers (1)
|
|
|
58
|
|
|
59
|
|
|
59
|
|
Sellable square feet,
million sq ft
|
|
|
1.55
|
|
|
1.57
|
|
|
1.57
|
|
Billed square feet,
million sq ft
|
|
|
1.02
|
|
|
1.01
|
|
|
1.01
|
|
Utilization
|
|
|
66
|
%
|
|
65
|
%
|
|
64
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
We define a data
center as any facility where we market, sell and deliver colocation
services, managed hosting (including cloud hosting) services,
multi-tenant managed services, or any combination
thereof.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As
of
|
|
As
of
|
|
As
of
|
|
|
|
|
June 30,
2016
|
|
March 31,
2016
|
|
June 30,
2015
|
Operating
Metrics
|
|
|
(In
thousands)
|
Broadband
subscribers
|
|
|
5,990
|
|
|
6,056
|
|
|
6,108
|
|
Access
lines
|
|
|
11,413
|
|
|
11,611
|
|
|
12,109
|
|
Prism TV
subscribers
|
|
|
311
|
|
|
302
|
|
|
258
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Our methodology for
counting broadband subscribers, access lines and Prism TV
subscribers may not be comparable to those of other
companies.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CenturyLink,
Inc.
|
|
SUPPLEMENTAL NON-GAAP
INFORMATION - ADJUSTED DILUTED EPS
|
|
THREE MONTHS ENDED
JUNE 30, 2016 AND 2015 AND SIX MONTHS ENDED JUNE 30, 2016 AND
2015
|
|
(UNAUDITED)
|
|
(Dollars and
shares in millions, except per share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months
ended
|
|
Six months
ended
|
|
|
|
June 30,
2016
|
|
June 30,
2015
|
|
June 30,
2016
|
|
June 30,
2015
|
|
|
|
|
|
|
|
|
|
|
|
Net Income
|
$
|
196
|
|
|
143
|
|
|
432
|
|
|
335
|
|
|
|
|
|
|
|
|
|
|
|
|
Less Special
Items:
|
|
|
|
|
|
|
|
|
|
Special items
(excluding tax items)
|
(14)
|
|
(1)
|
|
(27)
|
|
(3)
|
|
(34)
|
|
(5)
|
|
(73)
|
|
(7)
|
|
|
Special income tax
items and income tax effect of other special items
|
5
|
|
(2)
|
|
10
|
|
(4)
|
|
13
|
|
(6)
|
|
22
|
|
(8)
|
|
Total impact of
special items
|
(9)
|
|
|
(17)
|
|
|
(21)
|
|
|
(51)
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income, excluding
special items
|
205
|
|
|
160
|
|
|
453
|
|
|
386
|
|
|
|
|
|
|
|
|
|
|
|
|
Add back certain
items arising from purchase accounting:
|
|
|
|
|
|
|
|
Amortization of
customer base intangibles:
|
|
|
|
|
|
|
|
|
|
Qwest
|
187
|
|
|
202
|
|
|
378
|
|
|
407
|
|
|
|
Embarq
|
20
|
|
|
24
|
|
|
40
|
|
|
49
|
|
|
|
Savvis
|
16
|
|
|
16
|
|
|
31
|
|
|
31
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of
trademark intangibles
|
—
|
|
|
—
|
|
|
—
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of fair
value adjustment of long-term debt:
|
|
|
|
|
|
|
|
|
|
Embarq
|
1
|
|
|
2
|
|
|
3
|
|
|
3
|
|
|
|
Qwest
|
(4)
|
|
|
(6)
|
|
|
(9)
|
|
|
(12)
|
|
|
|
|
|
|
|
|
|
|
|
|
Subtotal
|
220
|
|
|
238
|
|
|
443
|
|
|
479
|
|
|
Tax effect of items
arising from purchasing accounting
|
(83)
|
|
|
(90)
|
|
|
(168)
|
|
|
(182)
|
|
|
Net adjustment, after
taxes
|
137
|
|
|
148
|
|
|
275
|
|
|
297
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income, as
adjusted for above items
|
$
|
342
|
|
|
308
|
|
|
728
|
|
|
683
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average
diluted shares outstanding
|
540.4
|
|
559.2
|
|
540.3
|
|
561.4
|
|
|
|
|
|
|
|
|
|
|
|
Diluted EPS
(excluding special items)
|
$
|
0.38
|
|
|
0.29
|
|
|
0.84
|
|
|
0.69
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted diluted EPS
as adjusted for the above-listed purchase accounting intangible and
interest amortizations (excluding special items)
|
$
|
0.63
|
|
|
0.55
|
|
|
1.35
|
|
|
1.22
|
|
|
|
|
The above non-GAAP
schedule presents adjusted net income and adjusted diluted earnings
per share (both excluding special items) by adding back to net
income and diluted earnings per share certain non-cash expense
items that arise as a result of the application of business
combination accounting rules to our major acquisitions since
mid-2009. Such presentation is not in accordance with generally
accepted accounting principles but management believes the
presentation is useful to analysts and investors to understand the
impacts of growing our business through acquisitions.
|
|
(1)
|
|
Includes severance
costs associated with recent headcount reductions ($7 million),
integration costs associated with our acquisition of Qwest ($3
million) and costs associated with a large billing system
integration project ($4 million).
|
|
(2)
|
|
Income tax benefit of
Item (1).
|
|
(3)
|
|
Includes severance
costs associated with reduction in force initiatives ($19 million)
and integration costs associated with our acquisition of Qwest ($8
million).
|
|
(4)
|
|
Income tax benefit of
Item (3).
|
|
(5)
|
|
Includes severance
costs associated with recent headcount reductions ($21 million),
integration costs associated with our acquisition of Qwest ($7
million) and costs associated with a large billing system
integration project ($6 million).
|
|
(6)
|
|
Income tax benefit of
Item (5).
|
|
(7)
|
|
Includes severance
costs associated with reduction in force initiatives ($32 million),
integration costs associated with our acquisition of Qwest ($18
million), the impairment of office buildings ($8 million) and
regulatory fines associated with a 911 system outage ($15
million).
|
|
(8)
|
|
Income tax benefit of
Item (7).
|
|
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SOURCE CenturyLink, Inc.