MONROE, La., Nov. 5 /PRNewswire-FirstCall/ -- CenturyLink
(CenturyTel, Inc., NYSE: CTL) announces operating results for third
quarter 2009, which include the effect of the Embarq acquisition
completed July 1, 2009. -- Added more than 43,500 high-speed
Internet customers, reflecting a 52% increase compared to
high-speed Internet customer growth of 28,600 during pro forma
second quarter 2009. -- Achieved 9% and 16% improvement in access
line performance compared to pro forma second quarter 2009 and pro
forma third quarter 2008 line losses, respectively. -- Made
significant progress on the Embarq acquisition integration -
successfully completed financial and human resource systems
conversions and initial billing and customer care conversion, along
with the launch of our new CenturyLink brand across all markets, in
October. -- Generated free cash flow (as defined in the attached
financial schedules), excluding nonrecurring items and $27.1
million of acquisition related capital expenditures, of $372.1
million in third quarter 2009. Third Quarter Highlights (Excluding
Quarter Ended Quarter Ended % Change nonrecurring items 9/30/09 (1)
9/30/08 reflected in the attached financial schedules) (In
thousands, except per share amounts and subscriber data) Operating
Revenues $1,874,325 $650,073 188.3% Operating Cash Flow (2)
$929,811 $309,079 200.8% Net Income (3) $269,052 $82,760 225.1%
Diluted Earnings Per Share $.90 $.81 11.1% Average Diluted Shares
Outstanding 298,403 100,647 196.5% Capital Expenditures $286,326
(4) $70,606 305.5% Access Lines (5) 7,185,000 2,068,000 247.4%
High-Speed Internet Customers 2,189,000 628,000 248.6% (1) Quarter
Ended 9/30/2009 includes the effect of the Embarq acquisition. For
a comparison of these third quarter 2009 operating results against
the pro forma operating results for second quarter 2009, see the
attached supplemental schedule. (2) 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. (3) All references to net income contained in this
release represent net income attributable to CenturyTel, Inc. (4)
Includes $27.1 million of capital expenditures related to the
Embarq integration. (5) Both periods reflect line count methodology
adjustments to standardize legacy CenturyTel and Embarq line
counts. "CenturyLink achieved solid results in the third quarter
reflecting the contribution of the Embarq acquisition to our
operations," Glen F. Post, III, chief executive officer and
president, said. "We completed the financial and human resource
systems conversions, launched our new CenturyLink brand across all
our markets in 33 states and completed our initial billing
conversion in October. We are off to an excellent start with this
strategic combination that we believe positions CenturyLink well to
drive long-term shareholder value and to provide our customers
expanded products and reliable services." Operating revenues for
third quarter 2009 were $1.874 billion compared to $650.1 million
in third quarter 2008. This increase was primarily due to $1.299
billion of revenue contribution from the Embarq acquisition
completed July 1, 2009. Additionally, revenue increases primarily
driven by growth in high-speed Internet customers and favorable
prior period revenue settlements were more than offset by revenue
declines primarily due to the impact of access line losses and
lower access revenues, along with the elimination of $53 million of
revenues associated with the discontinuance of regulatory
accounting for certain regulated operating entities during third
quarter 2009. Operating expenses, excluding nonrecurring items,
increased 178.4% to $1.307 billion from $469.3 million in third
quarter 2008, primarily due to $922 million of operating costs
associated with the Embarq acquisition which more than offset the
reduction in operating expenses associated with the discontinuance
of regulatory accounting during third quarter 2009. Depreciation
and amortization expense was approximately $34 million lower in
third quarter 2009 compared to amounts previously forecast at the
end of second quarter 2009 due to adjustments to reflect the
preliminary assignment of fair value and depreciable life to
Embarq's property and intangible assets. Such fair value assignment
has not been finalized at this time. Operating cash flow, excluding
nonrecurring items, increased 200.8% to $929.8 million from $309.1
million in third quarter 2008, primarily due to the Embarq
acquisition. For third quarter 2009, CenturyLink achieved an
operating cash flow margin of 49.6% versus 47.5% in third quarter
2008. "We successfully implemented our region operating model and
launched an aggressive broadband strategy across all markets
immediately following the close of the Embarq transaction," Post
said. "These initiatives, along with our continued focus on owning
the broadband position in our markets, resulted in the addition of
more than 43,500 high-speed Internet customers during the quarter."
Net income, excluding nonrecurring items, was $269.1 million in
third quarter 2009 compared to $82.8 million in third quarter 2008,
primarily driven by the Embarq acquisition. Diluted earnings per
share, excluding nonrecurring items, was $.90 for third quarter
2009, an 11.1% increase from the $.81 reported in third quarter
2008. This increase was primarily due to the higher net income as
discussed above, partially offset by the 196.5% increase in average
diluted shares outstanding as a result of our all-stock acquisition
of Embarq. For the first nine months of 2009, operating revenues,
excluding nonrecurring items, increased 60.8% to $3.144 billion
from $1.956 billion for the same period in 2008. Operating cash
flow, excluding nonrecurring items, was $1.539 billion for the
first nine months of 2009 compared to $946.5 million a year ago.
Net income, excluding nonrecurring items, was $434.2 million in the
first nine months of 2009 compared to $260.1 million during the
same period in 2008. Diluted earnings per share, excluding
nonrecurring items, was $2.60 during the first nine months of 2009
compared to $2.48 in the first nine months of 2008. Under generally
accepted accounting principles (GAAP), net income for third quarter
2009 was $280.8 million compared to $84.7 million for third quarter
2008 and, diluted earnings per share for third quarter 2009 was
$.94 compared to $.83 for third quarter 2008. Third quarter 2009
net income and diluted earnings per share reflect after-tax costs
associated with the Embarq acquisition of $127.5 million ($.43 per
share) that were more than offset by a net after-tax benefit of
$133.2 million ($.44 per share) attributable to the extraordinary
gain recognized upon the discontinuance of regulatory accounting
and an after-tax benefit of $6.1 million ($.02 per share) related
to the favorable resolution of certain transaction tax audit
issues. Third quarter 2008 net income and diluted earnings per
share reflect a net after-tax benefit of $2.0 million ($.02 per
share) from the sale of a non-core asset. Net income under GAAP for
the first nine months of 2009 was $417.0 million compared to $265.7
million for the first nine months of 2008 and, diluted earnings per
share for the first nine months of 2009 was $2.50 compared to $2.53
for the first nine months of 2008. See the accompanying financial
schedules for detail of the Company's nonrecurring items for the
nine months ended September 30, 2009 and 2008. Outlook. For fourth
quarter 2009, CenturyLink expects total operating revenues of $1.81
to $1.85 billion and diluted earnings per share of $.84 to $.88.
The Company has also increased and narrowed the range of
anticipated full year 2009 diluted earnings per share guidance from
a range of $3.20 to $3.30 to a range of $3.45 to $3.50. Third
quarter 2009 and fourth quarter 2009 diluted earnings per share
each reflect an approximately $.07 per share favorable impact from
lower depreciation expense than previously forecast at the end of
second quarter 2009 due to adjustments to the preliminary
assignment of fair value and depreciable life to Embarq's property
and intangible assets. Such fair value assignment has not been
finalized at this time. Depreciation and amortization may change
significantly from amounts reported herein upon finalization of the
purchase price allocation process, which we expect to occur during
fourth quarter 2009. In addition to synergies that CenturyLink
expects to realize in 2010, the Company has identified the
following items that can be expected to negatively impact 2010
results when compared to 2009. First, the Company expects Universal
Service Fund receipts to decline. Secondly, a wireless carrier has
notified CenturyLink of its intention to migrate a portion of its
network traffic from the Company in 2010. The Company expects these
items will negatively impact 2010 diluted earnings per share by
$.12 to $.15. CenturyLink expects to provide full year 2010
earnings per share guidance in conjunction with its fourth quarter
2009 earnings release. All outlook figures provided under this
section are presented excluding nonrecurring merger integration
costs, the potential impact of any future mergers, acquisitions or
divestitures, or other nonrecurring events. Integration Update.
CenturyLink incurred $195.5 million of integration, transaction and
other costs related to the Embarq acquisition during third quarter
2009. This amount was approximately $60 million higher than
originally expected primarily due to earlier than anticipated
recognition of severance costs and additional benefits costs
recognized due to change of control provisions. The Company also
incurred approximately $27.1 million of integration-related capital
expenditures. CenturyLink achieved approximately $14 million in
operating cost synergies during third quarter 2009 and expects to
realize additional incremental operating cost synergies of
approximately $12 million in fourth quarter 2009. Reconciliation to
GAAP. This release includes certain non-GAAP financial measures,
including but not limited to operating cash flow, free cash flow,
adjustments to GAAP measures to exclude the effect of nonrecurring
items and certain pro forma combined operating results. 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.centurylink.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 866.206.5917. The call will
be accessible for replay through November 11, 2009, by calling
888.266.2081 and entering the conference ID number 1401927.
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.centurylink.com/ through November
25, 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/. CenturyTel, Inc.
CONSOLIDATED STATEMENTS OF INCOME THREE MONTHS ENDED SEPTEMBER 30,
2009 AND 2008 (UNAUDITED) Three months ended September 30, 2009
----------------------------------------- As adjusted Less
excluding non- non- In thousands, except per As recurring recurring
share amounts reported items items ------------ --------- ---------
OPERATING REVENUES Voice $829,697 829,697 Network access 352,759
352,759 Data 470,465 470,465 Fiber transport and CLEC 43,685 43,685
Other 177,719 177,719 ------- --- ------- 1,874,325 - 1,874,325
--------- --- --------- OPERATING EXPENSES Cost of services and
products 684,865 2,222 (1) 682,643 Selling, general and
administrative 448,275 186,404 (1) 261,871 Depreciation and
amortization 362,202 362,202 ------- ------- ------- 1,495,342
188,626 1,306,716 --------- ------- --------- OPERATING INCOME
378,983 (188,626) 567,609 OTHER INCOME (EXPENSE) Interest expense
(140,422) 2,900 (2) (143,322) Other income (expense) 9,362 9,362
Income tax expense (99,876) 64,309 (3) (164,185) INCOME BEFORE
NONCONTROLLING INTERESTS AND EXTRAORDINARY ITEM 148,047 (121,417)
269,464 Noncontrolling interests (412) (412) ---- -------- ---- NET
INCOME BEFORE EXTRAORDINARY ITEM 147,635 (121,417) 269,052
Extraordinary items, net of income tax expense and noncontrolling
interests 133,213 133,213 (4) - ------- ------- --- NET INCOME
ATTRIBUTABLE TO CENTURYTEL, INC. $280,848 11,796 269,052 ========
====== ======= BASIC EARNINGS PER SHARE Income before extraordinary
item $0.49 (0.41) 0.90 Extraordinary item $0.44 0.44 - Basic
earnings per share $0.94 0.04 0.90 DILUTED EARNINGS PER SHARE
Income before extraordinary item $0.49 (0.40) 0.90 Extraordinary
item $0.44 0.44 - Diluted earnings per share $0.94 0.04 0.90
AVERAGE SHARES OUTSTANDING Basic 298,133 298,133 Diluted 298,403
298,403 DIVIDENDS PER COMMON SHARE $0.70 0.70 Three months ended
September 30, 2008 ----------------------------------------- As
adjusted Less excluding non- non- In thousands, except per As
recurring recurring share amounts reported items items ------------
--------- --------- OPERATING REVENUES Voice 218,253 218,253
Network access 205,385 205,385 Data 132,631 132,631 Fiber transport
and CLEC 38,006 38,006 Other 55,798 55,798 ------ --- ------
650,073 - 650,073 ------- --- ------- OPERATING EXPENSES Cost of
services and products 242,243 242,243 Selling, general and
administrative 98,751 98,751 Depreciation and amortization 128,352
128,352 ------- --- ------- 469,346 - 469,346 ------- --- -------
OPERATING INCOME 180,727 - 180,727 OTHER INCOME (EXPENSE) Interest
expense (49,483) (49,483) Other income (expense) 4,569 3,152 (5)
1,417 Income tax expense (50,624) (1,179)(6) (49,445) INCOME BEFORE
NONCONTROLLING INTERESTS AND EXTRAORDINARY ITEM 85,189 1,973 83,216
Noncontrolling interests (456) (456) ---- ----- ---- NET INCOME
BEFORE EXTRAORDINARY ITEM 84,733 1,973 82,760 Extraordinary items,
net of income tax expense and noncontrolling interests - - ---
----- --- NET INCOME ATTRIBUTABLE TO CENTURYTEL, INC. 84,733 1,973
82,760 ====== ===== ====== BASIC EARNINGS PER SHARE Income before
extraordinary item 0.83 0.02 0.81 Extraordinary item - - - Basic
earnings per share 0.83 0.02 0.81 DILUTED EARNINGS PER SHARE Income
before extraordinary item 0.83 0.02 0.81 Extraordinary item - - -
Diluted earnings per share 0.83 0.02 0.81 AVERAGE SHARES
OUTSTANDING Basic 100,402 100,402 Diluted 100,647 100,647 DIVIDENDS
PER COMMON SHARE 1.3325 1.3325 Increase (decrease) Increase
excluding In thousands, except per (decrease) nonrecurring share
amounts as reported items --------------- --------- OPERATING
REVENUES Voice 280.2% 280.2% Network access 71.8% 71.8% Data 254.7%
254.7% Fiber transport and CLEC 14.9% 14.9% Other 218.5% 218.5%
188.3% 188.3% OPERATING EXPENSES Cost of services and products
182.7% 181.8% Selling, general and administrative 353.9% 165.2%
Depreciation and amortization 182.2% 182.2% 218.6% 178.4% OPERATING
INCOME 109.7% 214.1% OTHER INCOME (EXPENSE) Interest expense 183.8%
189.6% Other income (expense) 104.9% 560.7% Income tax expense
97.3% 232.1% INCOME BEFORE NONCONTROLLING INTERESTS AND
EXTRAORDINARY ITEM 73.8% 223.8% Noncontrolling interests (9.6%)
(9.6%) NET INCOME BEFORE EXTRAORDINARY ITEM 74.2% 225.1%
Extraordinary items, net of income tax expense and noncontrolling
interests - - NET INCOME ATTRIBUTABLE TO CENTURYTEL, INC. 231.5%
225.1% BASIC EARNINGS PER SHARE Income before extraordinary item
(41.0%) 11.1% Extraordinary item - - Basic earnings per share 13.3%
11.1% DILUTED EARNINGS PER SHARE Income before extraordinary item
(41.0%) 11.1% Extraordinary item - - Diluted earnings per share
13.3% 11.1% AVERAGE SHARES OUTSTANDING Basic 196.9% 196.9% Diluted
196.5% 196.5% DIVIDENDS PER COMMON SHARE (47.5%) (47.5%)
NONRECURRING ITEMS (1) - Includes the following costs associated
with our acquisition of Embarq: (i) severance, retention and
contractual early termination benefits related to workforce
reductions ($97.4 million); (ii) integration and transaction costs
($72.2 million); (iii) accelerated recognition of share-based
compensation expense ($17.0 million) and (iv) settlement expense
related to a supplemental executive retirement plan ($8.9 million).
Also includes a $6.9 million expense reduction from the favorable
resolution of certain transaction tax audit issues. (2) - Favorable
resolution of certain transaction tax audit issues. (3) - Tax
effect of items (1) and (2). (4) - Extraordinary gain upon the
discontinuance of regulatory accounting, net of income tax expense
and noncontrolling interests. (5) - Gain on the sale of a non-core
asset. (6) - Tax effect of item (5). CenturyTel, Inc. CONSOLIDATED
STATEMENTS OF INCOME NINE MONTHS ENDED SEPTEMBER 30, 2009 AND 2008
(UNAUDITED) Nine months ended September 30, 2009
---------------------------------------- As adjusted Less excluding
non- non- In thousands, except per As recurring recurring share
amounts reported items items ------------ --------- ---------
OPERATING REVENUES Voice $1,247,218 1,247,218 Network access
735,969 1,028 (1) 734,941 Data 753,325 753,325 Fiber transport and
CLEC 126,947 126,947 Other 281,720 281,720 ------- ----- -------
3,145,179 1,028 3,144,151 --------- ----- --------- OPERATING
EXPENSES Cost of services and products 1,155,228 2,222 (2)
1,153,006 Selling, general and administrative 678,862 226,642 (2)
452,220 Depreciation and amortization 618,326 618,326 -------
------- ------- 2,452,416 228,864 2,223,552 --------- -------
--------- OPERATING INCOME 692,763 (227,836) 920,599 OTHER INCOME
(EXPENSE) Interest expense (237,391) 4,600 (3) (241,991) Other
income (expense) 15,179 (6,400)(4) 21,579 Income tax expense
(185,796) 79,206 (5) (265,002) INCOME BEFORE NONCONTROLLING
INTERESTS AND EXTRAORDINARY ITEM 284,755 (150,430) 435,185
Noncontrolling interests (936) (936) ---- -------- ---- NET INCOME
BEFORE EXTRAORDINARY ITEM 283,819 (150,430) 434,249 Extraordinary
items, net of income tax expense and noncontrolling interests
133,213 133,213 (6) - ------- ------- --- NET INCOME ATTRIBUTABLE
TO CENTURYTEL, INC. $417,032 (17,217) 434,249 ======== =======
======= BASIC EARNINGS PER SHARE Income before extraordinary item
$1.70 (0.90) 2.60 Extraordinary item $0.80 0.80 - Basic earnings
per share $2.50 (0.10) 2.60 DILUTED EARNINGS PER SHARE Income
before extraordinary item $1.70 (0.90) 2.60 Extraordinary item
$0.80 0.80 - Diluted earnings per share $2.50 (0.10) 2.60 AVERAGE
SHARES OUTSTANDING Basic 165,558 165,558 Diluted 165,666 165,666
DIVIDENDS PER COMMON SHARE $2.10 2.10 Nine months ended September
30, 2008 ---------------------------------------- As adjusted Less
excluding non- non- In thousands, except per As recurring recurring
share amounts reported items items ------------ --------- ---------
OPERATING REVENUES Voice 658,634 658,634 Network access 621,987
1,012 (7) 620,975 Data 390,463 21 (7) 390,442 Fiber transport and
CLEC 120,805 120,805 Other 164,904 164,904 ------- ----- -------
1,956,793 1,033 1,955,760 --------- ----- --------- OPERATING
EXPENSES Cost of services and products 719,681 719,681 Selling,
general and administrative 297,212 7,655 (7) 289,557 Depreciation
and amortization 394,990 394,990 ------- ----- ------- 1,411,883
7,655 1,404,228 --------- ----- --------- OPERATING INCOME 544,910
(6,622) 551,532 OTHER INCOME (EXPENSE) Interest expense (148,771)
(148,771) Other income (expense) 26,436 12,713 (8) 13,723 Income
tax expense (155,916) (524)(9) (155,392) INCOME BEFORE
NONCONTROLLING INTERESTS AND EXTRAORDINARY ITEM 266,659 5,567
261,092 Noncontrolling interests (999) (999) ---- ----- ---- NET
INCOME BEFORE EXTRAORDINARY ITEM 265,660 5,567 260,093
Extraordinary items, net of income tax expense and noncontrolling
interests - - --- ----- --- NET INCOME ATTRIBUTABLE TO CENTURYTEL,
INC. 265,660 5,567 260,093 ======= ===== ======= BASIC EARNINGS PER
SHARE Income before extraordinary item 2.54 0.05 2.49 Extraordinary
item - - - Basic earnings per share 2.54 0.05 2.49 DILUTED EARNINGS
PER SHARE Income before extraordinary item 2.53 0.05 2.48
Extraordinary item - - - Diluted earnings per share 2.53 0.05 2.48
AVERAGE SHARES OUTSTANDING Basic 103,396 103,396 Diluted 103,774
103,774 DIVIDENDS PER COMMON SHARE 1.4675 1.4675 Increase
(decrease) Increase excluding In thousands, except per (decrease)
nonrecurring share amounts as reported items ---------------
--------- OPERATING REVENUES Voice 89.4% 89.4% Network access 18.3%
18.4% Data 92.9% 92.9% Fiber transport and CLEC 5.1% 5.1% Other
70.8% 70.8% 60.7% 60.8% OPERATING EXPENSES Cost of services and
products 60.5% 60.2% Selling, general and administrative 128.4%
56.2% Depreciation and amortization 56.5% 56.5% 73.7% 58.3%
OPERATING INCOME 27.1% 66.9% OTHER INCOME (EXPENSE) Interest
expense 59.6% 62.7% Other income (expense) (42.6%) 57.2% Income tax
expense 19.2% 70.5% INCOME BEFORE NONCONTROLLING INTERESTS AND
EXTRAORDINARY ITEM 6.8% 66.7% Noncontrolling interests (6.3%)
(6.3%) NET INCOME BEFORE EXTRAORDINARY ITEM 6.8% 67.0%
Extraordinary items, net of income tax expense and noncontrolling
interests - - NET INCOME ATTRIBUTABLE TO CENTURYTEL, INC. 57.0%
67.0% BASIC EARNINGS PER SHARE Income before extraordinary item
(33.1%) 4.4% Extraordinary item - - Basic earnings per share (1.6%)
4.4% DILUTED EARNINGS PER SHARE Income before extraordinary item
(32.8%) 4.8% Extraordinary item - - Diluted earnings per share
(1.2%) 4.8% AVERAGE SHARES OUTSTANDING Basic 60.1% 60.1% Diluted
59.6% 59.6% DIVIDENDS PER COMMON SHARE 43.1% 43.1% NONRECURRING
ITEMS (1) - Revenue impact of settlement loss related to
Supplemental Executive Retirement Plan. (2) - Includes the
following costs associated with our acquisition of Embarq: (i)
integration and transaction costs ($101.6 million); (ii) severance,
retention and contractual early retirement benefits related to
workforce reductions ($97.4 million); (iii) accelerated recognition
of share-based compensation expense ($17.0 million) and (iv)
settlement expense related to a supplemental executive retirement
plan ($8.9 million). Also includes (i) curtailment expense related
to a supplemental executive retirement plan ($7.7 million); (ii)
costs associated with a legal settlement ($3.1 million) and (iii) a
$6.9 million expense reduction from the favorable resolution of
certain transaction tax audit issues. (3) - Favorable resolution of
transaction tax audit issues. (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 $80.1 million net 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)
- Extraordinary gain upon the discontinuance of regulatory
accounting, net of income tax expense and noncontrolling interests.
(7) - Curtailment loss related to Supplemental Executive Retirement
Plan, including revenue impact. (8) - Gain on the sales of non-core
assets ($7.3 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). (9) - Includes $2.3 million net income tax
expense related to items (7) and (8) and $1.8 million income tax
benefit recorded upon resolution of certain income tax audit
issues. CenturyTel, Inc. CONSOLIDATED BALANCE SHEETS SEPTEMBER 30,
2009 AND DECEMBER 31, 2008 (UNAUDITED) September 30, December 31,
2009 2008 ---- ---- (in thousands) ASSETS CURRENT ASSETS Cash and
cash equivalents $531,189 243,327 Other current assets 927,069
312,080 ------- ------- Total current assets 1,458,258 555,407
--------- ------- NET PROPERTY, PLANT AND EQUIPMENT Property, plant
and equipment 15,608,553 8,868,451 Accumulated depreciation
(6,245,366) (5,972,559) ---------- ---------- Net property, plant
and equipment 9,363,187 2,895,892 --------- --------- GOODWILL AND
OTHER ASSETS Goodwill 10,033,994 4,015,674 Other 2,101,624 787,222
--------- ------- Total goodwill and other assets 12,135,618
4,802,896 ---------- --------- TOTAL ASSETS $22,957,063 8,254,195
=========== ========= LIABILITIES AND EQUITY CURRENT LIABILITIES
Current maturities of long-term debt $769,482 20,407 Other current
liabilities 1,379,795 437,983 --------- ------- Total current
liabilities 2,149,277 458,390 LONG-TERM DEBT 7,454,515 3,294,119
DEFERRED CREDITS AND OTHER LIABILITIES 3,989,242 1,333,878
STOCKHOLDERS' EQUITY 9,364,029 3,167,808 --------- --------- TOTAL
LIABILITIES AND EQUITY $22,957,063 8,254,195 =========== =========
CenturyTel, Inc. RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
(UNAUDITED) Three months ended September 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 $378,983 (188,626)(1) 567,609
Add: Depreciation and amortization 362,202 - 362,202 ------- ---
------- Operating cash flow $741,185 (188,626) 929,811 ========
======== ======= Revenues $1,874,325 - 1,874,325 ========== ===
========= Operating income margin (operating income divided by
revenues) 20.2% 30.3% ==== ==== Operating cash flow margin
(operating cash flow divided by revenues) 39.5% 49.6% ==== ====
Free cash flow (prior to debt service requirements and dividends)
Net income before extraordinary item $147,635 (121,417)(2) 269,052
Add: Depreciation and amortization 362,202 - 362,202 Less: Capital
expenditures (286,326) - (286,326)(4) -------- --- -------- Free
cash flow $223,511 (121,417) 344,928 ======== ======== ======= Free
cash flow $223,511 Gain on asset dispositions - Deferred income
taxes 12,406 Changes in current assets and current liabilities
24,921 Decrease in other noncurrent assets (3,089) Increase
(decrease) in other noncurrent liabilities (7,671) Retirement
benefits (85,763) Excess tax benefits from share-based compensation
(352) Other, net 29,267 Add: Capital expenditures 286,326 -------
Net cash provided by operating activities $479,556 ======== Three
months ended September 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 180,727 - 180,727 Add:
Depreciation and amortization 128,352 128,352 ------- --- -------
Operating cash flow 309,079 - 309,079 ======= === ======= Revenues
650,073 - 650,073 ======= === ======= Operating income margin
(operating income divided by revenues) 27.8% 27.8% ==== ====
Operating cash flow margin (operating cash flow divided by
revenues) 47.5% 47.5% ==== ==== Free cash flow (prior to debt
service requirements and dividends) Net income before extraordinary
item 84,733 1,973(3) 82,760 Add: Depreciation and amortization
128,352 - 128,352 Less: Capital expenditures (70,606) - (70,606)
------- --- ------- Free cash flow 142,479 1,973 140,506 =======
===== ======= Free cash flow 142,479 Gain on asset dispositions
(3,811) Deferred income taxes 10,532 Changes in current assets and
current liabilities 3,337 Decrease in other noncurrent assets 3,854
Increase (decrease) in other noncurrent liabilities 1,501
Retirement benefits 3,144 Excess tax benefits from share-based
compensation (713) Other, net 9,317 Add: Capital expenditures
70,606 ------ Net cash provided by operating activities 240,246
======= NONRECURRING ITEMS (1) - Includes the following costs
associated with our acquisition of Embarq: (i) severance, retention
and contractual early termination benefits related to workforce
reductions ($97.4 million); (ii) integration and transaction costs
($72.2 million); (iii) accelerated recognition of share-based
compensation expense ($17.0 million) and (iv) settlement expense
related to a supplemental executive retirement plan ($8.9 million).
Also includes a $6.9 million expense reduction from the favorable
resolution of certain transaction tax audit issues. (2) - Includes
the after-tax impact of Item (1). (3) - Gain on the sale of a
non-core asset, net of tax. (4) - Includes $27.1 million of capital
expenditures related to the integration of Embarq. Excluding these
costs, free cash flow was $372.1 million for the three months ended
September 30, 2009 CenturyTel, Inc. RECONCILIATION OF NON-GAAP
FINANCIAL MEASURES (UNAUDITED) Nine months ended September 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 $692,763 (227,836)(1) 920,599 Add:
Depreciation and amortization 618,326 - 618,326 ------- --- -------
Operating cash flow $1,311,089 (227,836) 1,538,925 ==========
======== ========= Revenues $3,145,179 1,028 (2) 3,144,151
========== ===== ========= Operating income margin (operating
income divided by revenues) 22.0% 29.3% ==== ==== Operating cash
flow margin (operating cash flow divided by revenues) 41.7% 48.9%
==== ==== Free cash flow (prior to debt service requirements and
dividends) Net income before extraordinary item $283,819
(150,430)(3) 434,249 Add: Depreciation and amortization 618,326 -
618,326 Less: Capital expenditures (417,127) - (417,127)(6)
-------- --- -------- Free cash flow $485,018 (150,430) 635,448
======== ======== ======= Free cash flow $485,018 Gain on asset
dispositions and liquidation of marketable securities - Deferred
income taxes 38,237 Changes in current assets and current
liabilities 88,543 Increase (decrease) in other noncurrent assets
(547) Decrease in other noncurrent liabilities (12,494) Retirement
benefits (100,300) Excess tax benefits from share-based
compensation (1,105) Other, net 47,282 Add: Capital expenditures
417,127 ------- Net cash provided by operating activities $961,761
======== Nine months ended September 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 544,910 (6,622)(4) 551,532 Add:
Depreciation and amortization 394,990 394,990 ------- ------
------- Operating cash flow 939,900 (6,622) 946,522 ======= ======
======= Revenues 1,956,793 1,033 (4) 1,955,760 ========= =====
========= Operating income margin (operating income divided by
revenues) 27.8% 28.2% ==== ==== Operating cash flow margin
(operating cash flow divided by revenues) 48.0% 48.4% ==== ====
Free cash flow (prior to debt service requirements and dividends)
Net income before extraordinary item 265,660 5,567 (5) 260,093 Add:
Depreciation and amortization 394,990 394,990 Less: Capital
expenditures (185,004) (185,004) -------- ----- -------- Free cash
flow 475,646 5,567 470,079 ======= ===== ======= Free cash flow
475,646 Gain on asset dispositions and liquidation of marketable
securities (12,452) Deferred income taxes 23,957 Changes in current
assets and current liabilities (53,689) Increase (decrease) in
other noncurrent assets 6,108 Decrease in other noncurrent
liabilities (3,978) Retirement benefits 21,346 Excess tax benefits
from share-based compensation (787) Other, net 26,078 Add: Capital
expenditures 185,004 ------- Net cash provided by operating
activities 667,233 ======= NONRECURRING ITEMS (1) - Includes the
following costs associated with our acquisition of Embarq: (i)
integration and transaction costs ($101.6 million); (ii) severance,
retention and contractual early retirement benefits related to
workforce reductions ($97.4 million); (iii) accelerated recognition
of share-based compensation expense ($17.0 million) and (iv)
settlement expense related to a Supplemental Executive Retirement
Plan ($8.9 million). Also includes (i) curtailment expense, net of
revenue impact, related to a supplemental executive retirement plan
($6.7 million); (ii) costs associated with a legal settlement ($3.1
million) and (iii) a $6.9 million expense reduction from the
favorable resolution of certain transaction tax audit issues. (2) -
Revenue impact of curtailment loss related to Supplemental
Executive Retirement Plan. (3) - Includes (i) the unfavorable
after-tax impact of Items (1) and (2) ($148.4 million); (ii) the
after-tax charge associated with our $800 million bridge credit
facility ($5.0 million); and (iii) $6.7 million income tax expense
due to the nondeductible portion of settlement payments related to
an Supplemental Executive Retirement Plan. Such items were
partially offset by (i) the favorable resolution of transaction tax
audit issues ($3.8 million) and (ii) a $5.8 million income tax
benefit related to a reduction to our deferred tax asset valuation
allowance. (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 sales of non-core assets ($4.6 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 (1) ($4.1 million). (6) - Includes $47.0 million of capital
expenditures related to the integration of Embarq. Excluding these
costs, free cash flow was $682.5 million for the nine months ended
September 30, 2009. CENTURYLINK SUPPLEMENTAL SCHEDULE (1)
(UNAUDITED) (Pro forma)* Three months Three months ended ended
Increase September 30, 2009 June 30, 2009 (decrease)
------------------ ------------- ---------- (Dollars in thousands)
OPERATING REVENUES (2) $1,874,325 1,906,413 (1.7%) ----------
--------- OPERATING EXPENSES Cash expenses (3) 944,514 939,552 0.5%
Depreciation and amortization 362,202 372,404 (2.7%) -------
------- 1,306,716 1,311,956 (0.4%) --------- --------- OPERATING
INCOME 567,609 594,457 (4.5%) OTHER INCOME (EXPENSE) Interest
expense (143,322) (140,289) 2.2% Other income (expense) 9,362 6,195
51.1% Income tax expense (164,185) (172,780) (5.0%) Noncontrolling
interests (412) (298) 38.3% ---- ---- INCOME FROM CONTINUING
OPERATIONS $269,052 287,285 (6.3%) ======== ======= Operating cash
flow (operating income plus depreciation) $929,811 966,861 (3.8%)
Free cash flow (income from continuing operations plus depreciation
minus capital expenditures) $344,928 428,584 (19.5%) Operating cash
flow margin (operating cash flow divided by revenues) 49.6% 50.7%
Operating income margin (operating income divided by revenues)
30.3% 31.2% CAPITAL EXPENDITURES $286,326 231,105 23.9% SUBSCRIBER
DATA (as of September 30, 2009 and June 30, 2009) Access lines
7,185,000 7,355,000 (2.3%) High-speed Internet lines 2,189,000
2,146,000 2.0% (1) Excludes merger integration and transaction
costs and certain other non-recurring items as further described in
the other attached financial schedules. (2) Decline in operating
revenues ($32 million) driven primarily by access line losses
(2.3%) and declining access minutes of use. (3) Increase in cash
expenses for third quarter driven primarily by approximately $13
million of favorable one-time expense savings in the second quarter
of 2009. * The pro forma information for the three months ended
June 30, 2009 does not reflect information prepared in accordance
with generally accepted accounting principles. Such information: a)
reflects the results of operations of CenturyTel and Embarq
assuming the respective results of operations had been combined on
April 1, 2009; b) reflects a pro forma adjustment to eliminate
revenues and expenses of $53 million as if the discontinuance of
regulatory accounting had occurred in prior periods; c) other than
as noted in (b) above, does not reflect any pro forma adjustments
and has not been prepared in accordance with the rules and
regulations of the Securities and Exchange Commission; and d)
excludes certain non-recurring items. For additional pro forma
financial information relating to the Embarq merger, please see our
Current Report on Form 8-K/A filed with the Securities and Exchange
Commission on August 5, 2009. The above pro forma information is
for illustrative purposes only and is not necessarily indicative of
the combined operating results that would have occurred if the
Embarq merger had been consummated as of April 1, 2009. Management
believes the presentation of this information will assist users in
their understanding of sequential period-to-period operating
performance. DATASOURCE: CenturyLink CONTACT: Tony Davis of
CenturyLink, +1-318-388-9525, Web Site: http://www.centurytel.com/
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