8-K 1 submission.txt FIRST QTR EARNINGS RELEASE UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of earliest event reported) April 29, 2004 CenturyTel, Inc. (Exact name of registrant as specified in its charter) Louisiana 1-7784 72-0651161 (State or other (Commission File (IRS Employer jurisdiction of Number) Identification No.) incorporation) 100 CenturyTel Drive, Monroe, Louisiana 71203 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (318) 388-9000 --------------------------- ITEM 12. Results of Operations and Financial Condition The following information, except for our forecasts for the upcoming quarter and for 2004 and except for our references to non-GAAP financial measures (as defined in Regulation G promulgated by the Securities and Exchange Commission), shall be deemed incorporated by reference into any registration statement heretofore or hereafter filed by us under the Securities Act of 1933, as amended, except to the extent that such incorporated information is superceded by information as of a subsequent date that is included in or incorporated by reference into any such registration statement. None of the following information shall be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, as amended. On April 29, 2004, we issued a press release announcing our first quarter 2004 consolidated operating results. More complete information on our operating results will be included in our Quarterly Report on Form 10-Q for the period ended March 31, 2004, which we expect to file shortly with the Securities and Exchange Commission. The entire text of our April 29, 2004 press release is reproduced below: FOR IMMEDIATE RELEASE FOR MORE INFORMATION CONTACT: April 29, 2004 Media: Patricia Cameron 318.388.9674 patricia.cameron@centurytel.com Investors: Tony Davis 318.388.9525 tony.davis@centurytel.com CenturyTel Reports First Quarter Earnings ----------------------------------------- Monroe, LA. . . CenturyTel, Inc. (NYSE Symbol: CTL) announces operating results for first quarter 2004. o Operating revenues increased 2.7% to $593.7 million from $578.0 million. o Operating cash flow (as defined in the attached financial schedules), excluding nonrecurring items, rose to $310.5 million. o Net income, excluding nonrecurring items, grew 3.2% to $83.3 million. Reported under GAAP, net income was $83.3 million compared to $83.9 million in first quarter 2003. o Diluted earnings per share, excluding nonrecurring items, increased 3.6% to $.58 from $.56 in first quarter 2003. Reported under GAAP, diluted earnings per share for both first quarter 2004 and first quarter 2003 were $.58. o Free cash flow (as defined in the attached financial schedules) was $148.5 million in first quarter 2004. o During the first quarter, the Company repurchased 4,942,000 shares of common stock under its share repurchase program.
------------------------------------------------------------------------------ First Quarter Highlights (1) Quarter Ended Quarter Ended % Change (In thousands, except 3/31/04 3/31/03 per share amounts and customer units) ------------------------------------------------------------------------------ Operating Revenues $ 593,704 $ 578,014 2.7% Operating Cash Flow $ 310,549 $ 306,579 1.3% Net Income $ 83,279 $ 80,696 3.2% Diluted Earnings Per Share $ .58 $ .56 3.6% Average Diluted Shares Outstanding 143,347 143,797 (0.3)% Capital Expenditures $ 61,745 $ 59,669 3.5% ------------------------------------------------------------------------------ Telephone Access Lines 2,366,420 2,407,152 (1.7)% Long Distance Lines (2) 971,922 848,810 14.5% DSL Connections 97,092 60,615 60.2% ------------------------------------------------------------------------------
(1) These results include adjustments for nonrecurring items and other non-GAAP financial measures. A reconciliation of these items to comparable GAAP measures is included in the attached financial schedules. (2) Effective first quarter 2004, long distance units are reported on a line basis instead of a customer basis. First quarter 2003 has been restated on a line basis to ensure period-to-period comparability. * * * * * * * * "CenturyTel achieved both revenue and earnings growth in the first quarter while continuing to generate strong free cash flow," Glen F. Post, III, chairman and chief executive officer, said. "We also made excellent progress with our share repurchase program announced in February, investing over $139 million to acquire more than 4.9 million shares of common stock." As previously announced, CenturyTel is presenting its results of operations in a single segment format beginning first quarter 2004. The Company is also reporting separate revenue components that align with its major products and services. However, CenturyTel is providing operating cash flow and operating income information on a consolidated basis only. Quarterly and full year 2003 financial results have been restated to conform to the single segment format and are included in the attached schedules. Operating revenues rose 2.7% to $593.7 million in first quarter 2004 from $578.0 million in first quarter 2003. This $15.7 million revenue increase was driven primarily by the fiber assets acquired during 2003, data revenue growth from DSL subscriber and data circuit additions and increased enhanced calling feature penetration. These increases more than offset revenue declines attributable to lower intrastate toll revenues and universal service funding, along with access line losses. Operating expenses, excluding nonrecurring items, increased 3.0% to $410.1 million, or $11.9 million over first quarter 2003. Cost of services and products increased $3.7 million primarily due to the fiber assets acquired during 2003. Selling, general and administrative expenses, excluding nonrecurring items, increased $8.0 million primarily due to the 2003 fiber asset acquisitions, increases in employee costs and increased marketing expenses. Operating cash flow, excluding nonrecurring items, increased 1.3% to $310.5 million from $306.6 million. CenturyTel achieved an operating cash flow margin, excluding nonrecurring items, of 52.3% during the quarter versus 53.0% in first quarter 2003. Net income, excluding nonrecurring items, increased 3.2% to $83.3 million from $80.7 million in first quarter 2003 due to a $3.7 million increase in operating income and lower interest expense, which were partially offset by the previously announced increase in state income taxes. Diluted earnings per share, excluding nonrecurring items, increased 3.6% to $.58 from $.56. "The launch of tiered DSL service during the first quarter across CenturyTel's more than 1.5 million DSL-enabled lines was well received as we added more than 13,600 DSL customers, a 90% increase over net additions in fourth quarter 2003. Additionally, a majority of these customers selected bundles with higher speed service offerings," Post said. For first quarter 2004, CenturyTel reported, under generally accepted accounting principles (GAAP), operating revenues of $593.7 million, a 2.7% increase from $578.0 million in first quarter 2003. The Company reported net income of $83.3 million and diluted earnings per share of $.58, compared to $83.9 million and $.58 per diluted share, respectively, in first quarter 2003. Net income in first quarter 2003 included a nonrecurring $5.0 million pre-tax partial recovery of amounts previously written off in connection with the WorldCom bankruptcy. For the second quarter 2004, CenturyTel expects total revenues of $590 to $605 million and diluted earnings per share of $.52 to $.56, which reflects $4.6 million of expenses in connection with the planned prepayment in early May of the Company's $100 million aggregate principal amount of Series B senior notes. For the full year 2004, diluted earnings per share is expected to be in the range of $2.20 to $2.35, an increase of $.15 over previously provided guidance. This increase in full year 2004 EPS guidance is primarily due to stronger first quarter revenues than expected, lower 2004 expenses than originally forecast and fewer fully diluted shares as a result of share repurchases during the first quarter. These outlook figures are presented on a GAAP basis, excluding non-recurring items and the potential impact of any future mergers, acquisitions, divestitures, share repurchases or other similar business transactions. Reconciliation to GAAP. This release includes certain non-GAAP financial measures, including but not limited to operating cash flow, free cash flow 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 readers 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 statements. Reconciliation of additional non-GAAP financial measures that may be discussed during the earnings call described below will be available on the Company's Web site at 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, CenturyTel's management will host a conference call at 10:30 a.m. Central Time today. Interested parties can access the call by dialing 800.346.2923. The call will be accessible for replay until 1:00 p.m. Central Time, May 6, 2004, by calling 800.332.6854 and entering the conference ID number 3383. Investors can also listen to CenturyTel's earnings conference call and replay by accessing the Company's Web site at www.centurytel.com. In addition to historical information, this release includes certain forward-looking statements, estimates and projections that are based on current expectations only, and are subject to a number of risks, uncertainties and assumptions, many of which are beyond the control of the Company. Actual events and results 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 affect actual results 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; the Company's ability to effectively manage its growth, including integrating newly-acquired businesses into the Company's operations, hiring adequate numbers of qualified staff, and successfully upgrading its billing and other information systems; possible changes in the demand for, or pricing of, the Company's products and services; the Company's ability to successfully introduce new product or service offerings on a timely and cost-effective basis; the Company's ability to collect its receivables from financially troubled communications companies; other risks referenced from time to time in the Company's filings with the Securities and Exchange Commission; and the effects of more general factors such as changes in interest 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 Company's business are described in greater detail in the Company's Annual Report on Form 10-K for the year ended December 31, 2003. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this release. The information contained in this release is as of April 29, 2004. The Company undertakes no obligation to update any of its forward-looking statements. CenturyTel, Inc. provides communications services including local, long distance, Internet access and data services to more than 3 million customers in 22 states. The company, headquartered in Monroe, Louisiana, is publicly traded on the New York Stock Exchange under the symbol CTL, and is included in the S&P 500 Index. CenturyTel is the 8th largest local exchange telephone company, based on access lines, in the United States. Visit CenturyTel at www.centurytel.com. * * * * * * * * CenturyTel, Inc. CONSOLIDATED STATEMENTS OF INCOME THREE MONTHS ENDED MARCH 31, 2004 AND 2003 (UNAUDITED)
Three months ended March 31, 2004 Three months ended March 31, 2003 ------------------------------------ ------------------------------------- As adjusted As adjusted Increase Less excluding Less excluding (decrease) non- non- non- non- Increase excluding In thousands, except As recurring recurring As recurring recurring (decrease) nonrecurring per share amounts reported items items reported items items as reported items ------------ ---------- ---------- ----------- ---------- ----------- ----------- ------------ OPERATING REVENUES Local service $ 178,058 - 178,058 177,013 - 177,013 0.6% 0.6% Network access 240,957 - 240,957 246,330 - 246,330 (2.2%) (2.2%) Long distance 44,589 - 44,589 42,560 - 42,560 4.8% 4.8% Data 65,628 - 65,628 58,136 - 58,136 12.9% 12.9% Fiber transport and CLEC 17,432 - 17,432 5,895 - 5,895 195.7% 195.7% Other 47,040 - 47,040 48,080 - 48,080 (2.2%) (2.2%) ------------ ---------- ---------- ----------- ---------- ---------- 593,704 - 593,704 578,014 - 578,014 2.7% 2.7% ------------ ---------- ---------- ----------- ---------- ---------- OPERATING EXPENSES Cost of services and products 181,549 - 181,549 177,860 - 177,860 2.1% 2.1% Selling, general and administrative 101,606 - 101,606 88,616 (4,959)(1) 93,575 14.7% 8.6% Depreciation and amortization 126,992 - 126,992 126,765 - 126,765 0.2% 0.2% ------------ ---------- ---------- ----------- ---------- ---------- 410,147 - 410,147 393,241 (4,959) 398,200 4.3% 3.0% ------------ ---------- ---------- ----------- ---------- ---------- OPERATING INCOME 183,557 - 183,557 184,773 4,959 179,814 (0.7%) 2.1% OTHER INCOME (EXPENSE) Interest expense (52,543) - (52,543) (55,592) - (55,592) (5.5%) (5.5%) Income from unconsolidated cellular entity 2,059 - 2,059 1,569 - 1,569 31.2% 31.2% Other income and expense 2,304 - 2,304 (932) - (932) (347.2%) (347.2%) Income tax expense (52,098) - (52,098) (45,899) (1,736)(2) (44,163) 13.5% 18.0% ------------ ---------- ---------- ----------- ---------- ---------- NET INCOME $ 83,279 - 83,279 83,919 3,223 80,696 (0.8%) 3.2% ============ ========== ========== =========== ========== ========== BASIC EARNINGS PER SHARE $ 0.58 - 0.58 0.59 0.02 0.56 (1.7%) 3.6% DILUTED EARNINGS PER SHARE $ 0.58 - 0.58 0.58 0.02 0.56 -% 3.6% SHARES OUTSTANDING Basic 142,585 142,585 142,901 142,901 (0.2%) (0.2%) Diluted 143,347 143,347 143,797 143,797 (0.3%) (0.3%) DIVIDENDS PER COMMON SHARE $ 0.0575 0.0575 0.055 0.055 4.5% 4.5%
NONRECURRING ITEMS (1) - Partial recovery of amounts previously written off in connection with WorldCom bankruptcy. (2) - Tax effect of item (1). CenturyTel, Inc. CONSOLIDATED BALANCE SHEETS MARCH 31, 2004 AND DECEMBER 31, 2003 (UNAUDITED)
Mar. 31, Dec. 31, 2004 2003 --------------- --------------- (in thousands) ASSETS CURRENT ASSETS Cash and cash equivalents $ 273,293 203,181 Other current assets 239,807 259,758 --------------- --------------- Total current assets 513,100 462,939 --------------- --------------- NET PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment 7,227,139 7,184,155 Accumulated depreciation (3,838,323) (3,728,674) --------------- --------------- Net property, plant and equipment 3,388,816 3,455,481 --------------- --------------- INVESTMENTS AND OTHER ASSETS Goodwill 3,426,714 3,425,001 Other 567,875 552,431 --------------- --------------- Total investments and other assets 3,994,589 3,977,432 --------------- --------------- TOTAL ASSETS $ 7,896,505 7,895,852 =============== =============== LIABILITIES AND EQUITY CURRENT LIABILITIES Current maturities of long-term debt $ 172,258 72,453 Other current liabilities 438,179 398,930 --------------- --------------- Total current liabilities 610,437 471,383 LONG-TERM DEBT 3,016,992 3,109,302 DEFERRED CREDITS AND OTHER LIABILITIES 854,432 836,651 STOCKHOLDERS' EQUITY 3,414,644 3,478,516 --------------- --------------- TOTAL LIABILITIES AND EQUITY $ 7,896,505 7,895,852 =============== ===============
CenturyTel, Inc. RECONCILIATION OF NON-GAAP FINANCIAL MEASURES (UNAUDITED)
Three months ended March 31, 2004 Three months ended March 31, 2003 ----------------------------------- ------------------------------------ As adjusted As adjusted Less excluding Less excluding non- non- non- non- As recurring recurring As recurring recurring In thousands reported items items reported items items ---------------------- ----------- ---------------------- ----------- Consolidated operating cash flow and cash flow margin Operating income $ 183,557 - 183,557 184,773 4,959(1) 179,814 Add: Depreciation and amortization 126,992 - 126,992 126,765 - 126,765 ---------- ---------- ----------- ---------- ---------- ----------- Consolidated operating cash flow $ 310,549 - 310,549 311,538 4,959 306,579 ========== ========== =========== ========== ========== =========== Revenues $ 593,704 - 593,704 578,014 - 578,014 ========== ========== =========== ========== ========== =========== Consolidated operating income margin (operating income divided by revenues) 30.9% 30.9% 32.0% 31.1% ========== =========== ========== =========== Consolidated cash flow margin (operating cash flow divided by revenues) 52.3% 52.3% 53.9% 53.0% ========== =========== ========== =========== Free cash flow (prior to debt service requirements and dividends) Net income $ 83,279 - 83,279 83,919 3,223(1) 80,696 Add: Depreciation and amortization 126,992 - 126,992 126,765 - 126,765 Less: Capital expenditures (61,745) - (61,745) (59,669) - (59,669) ---------- ---------- ----------- ---------- ---------- ----------- Free cash flow $ 148,526 - 148,526 151,015 3,223 147,792 ========== ========== =========== ========== ========== =========== Free cash flow $ 148,526 151,015 Income from unconsolidated cellular entity (2,059) (1,569) Deferred income taxes 26,673 9,502 Changes in current assets and current liabilities 57,695 104,810 Increase in other noncurrent assets (11,032) (6,751) Decrease in other noncurrent liabilities (3,949) (588) Retirement benefits 10,830 5,139 Other, net (4,989) (1,926) Add: Capital expenditures 61,745 59,669 ---------- ---------- Net cash provided by operating activities $ 283,440 319,301 ========== ==========
(1) Partial recovery of amounts previously written off in connection with WorldCom bankruptcy (presented on both a pre-tax and after-tax basis). CenturyTel, Inc. CONSOLIDATED STATEMENTS OF INCOME THREE MONTHS ENDED JUNE 30, 2003, SEPTEMBER 30, 2003 AND DECEMBER 31, 2003 RESTATED FOR SINGLE SEGMENT PRESENTATION * (UNAUDITED)
Three months ended June 30, 2003 Three months ended Sep. 30, 2003 Three months ended Dec. 31, 2003 -------------------------------- -------------------------------- --------------------------------- As adjusted As adjusted As adjusted Less excluding Less excluding Less excluding non- non- non- non- non- non- In thousands, except As recurring recurring As recurring recurring As recurring recurring per share amounts reported items items reported items items reported items items ---------- --------- ----------- -------------------------------- ---------- --------- ----------- OPERATING REVENUES Local service $ 178,360 - 178,360 179,136 - 179,136 178,056 - 178,056 Network access 248,220 - 248,220 252,757 - 252,757 254,155 1,500 (2) 252,655 Long distance 43,201 - 43,201 45,207 - 45,207 42,916 - 42,916 Data 60,672 - 60,672 62,008 - 62,008 64,182 - 64,182 Fiber transport and CLEC 9,036 - 9,036 13,530 - 13,530 14,580 - 14,580 Other 47,240 - 47,240 47,626 - 47,626 48,714 - 48,714 ---------- --------- ----------- ---------- --------- ---------- ---------- --------- ---------- 586,729 - 586,729 600,264 - 600,264 602,603 1,500 601,103 ---------- --------- ----------- ---------- --------- ---------- ---------- --------- ---------- OPERATING EXPENSES Cost of services and products 183,960 - 183,960 190,193 - 190,193 187,197 - 187,197 Selling, general and administrative 89,723 - 89,723 94,561 - 94,561 101,452 7,500 (2) 93,952 Depreciation and amortization 124,665 - 124,665 124,729 - 124,729 127,493 - 127,493 ---------- --------- ----------- ---------- --------- ---------- ---------- --------- ---------- 398,348 - 398,348 409,483 - 409,483 416,142 7,500 408,642 ---------- --------- ----------- -------------------- ---------- ---------- --------- ---------- OPERATING INCOME 188,381 - 188,381 190,781 - 190,781 186,461 (6,000) 192,461 OTHER INCOME (EXPENSE) Interest expense (55,957) - (55,957) (54,360) - (54,360) (60,842) (7,500)(2) (53,342) Income from unconsolidated cellular entity 1,590 - 1,590 1,736 - 1,736 1,265 - 1,265 Other income and expense 974 - 974 (1,076) - (1,076) 3,188 3,000 (3) 188 Income tax expense (47,621) - (47,621) (46,102) 2,527(1) (48,629) (47,630) 3,675 (4) (51,305) ---------- --------- ----------- ---------- --------- ---------- ---------- --------- ---------- NET INCOME $ 87,367 - 87,367 90,979 2,527 88,452 82,442 (6,825) 89,267 ========== ========= =========== ========== ========= ========== ========== ========= ========== BASIC EARNINGS PER SHARE $ 0.61 - 0.61 0.63 0.02 0.61 0.57 (0.05) 0.62 DILUTED EARNINGS PER SHARE $ 0.60 - 0.60 0.63 0.02 0.61 0.57 (0.05) 0.61 SHARES OUTSTANDING Basic 143,329 143,329 143,897 143,897 144,204 144,204 Diluted 144,475 144,475 145,171 145,171 145,354 145,354 DIVIDENDS PER COMMON SHARE $ 0.055 0.055 0.055 0.055 0.055 0.055
* Results of operations for 2003 have been restated to conform to the Company's 2004 presentation of a single reportable segment. In connection with this restatement, the Company has, among other things, (i) eliminated certain 2003 revenues arising out of previously-reported intersegment transactions (which reduced operating expenses by a like amount and therefore had no impact on operating income), and (ii) reclassified depreciation expense related to certain service subsidiaries of the Company to depreciation expense from operating expenses. Previously with multiple segment presentation, such costs were allocated to the Company's regulated telephone operations as an operating expense. NONRECURRING ITEMS (1) - Net out of period income tax adjustments. (2) - Operating taxes, including related revenue effect, and interest associated with various operating tax audits. (3) - Reversal of costs previously accrued to defend unsolicited takeover proposal. (4) - Tax effect of items (2) and (3). CenturyTel, Inc. CONSOLIDATED STATEMENTS OF INCOME TWELVE MONTHS ENDED DECEMBER 31, 2003 RESTATED FOR SINGLE SEGMENT PRESENTATION * (UNAUDITED)
Twelve months ended December 31, 2003 ------------------------------------------------- As adjusted Less excluding non- non- As recurring recurring In thousands, except per share amounts reported items items ------------- ------------- --------------- OPERATING REVENUES Local service 712,565 - 712,565 Network access 1,001,462 1,500 (2) 999,962 Long distance 173,884 - 173,884 Data 244,998 - 244,998 Fiber transport and CLEC 43,041 - 43,041 Other 191,660 - 191,660 ------------- ------------- --------------- 2,367,610 1,500 2,366,110 ------------- ------------- --------------- OPERATING EXPENSES Cost of services and products 739,210 - 739,210 Selling, general and administrative 374,352 2,541 (1) 371,811 Depreciation and amortization 503,652 - 503,652 ------------- ------------- --------------- 1,617,214 2,541 1,614,673 ------------- ------------- --------------- OPERATING INCOME 750,396 (1,041) 751,437 OTHER INCOME (EXPENSE) Interest expense (226,751) (7,500)(2) (219,251) Income from unconsolidated cellular entity 6,160 - 6,160 Other income and expense 2,154 3,000 (3) (846) Income tax expense (187,252) 4,466 (4) (191,718) ------------- ------------- --------------- NET INCOME 344,707 (1,075) 345,782 ============= ============= =============== BASIC EARNINGS PER SHARE 2.40 (0.01) 2.41 DILUTED EARNINGS PER SHARE 2.38 (0.01) 2.39 SHARES OUTSTANDING Basic 143,583 143,583 Diluted 144,700 144,700 DIVIDENDS PER COMMON SHARE 0.22 0.22
* Results of operations for 2003 have been restated to conform to the Company's 2004 presentation of a single reportable segment. In connection with this restatement, the Company has, among other things, (i) eliminated certain 2003 revenues arising out of previously-reported intersegment transactions (which reduced operating expenses by a like amount and therefore had no impact on operating income), and (ii) reclassified depreciation expense related to certain service subsidiaries of the Company to depreciation expense from operating expenses. Previously with multiple segment presentation, such costs were allocated to the Company's regulated telephone operations as an operating expense. NONRECURRING ITEMS (1) - Includes operating taxes associated with various audits ($7.5 million), net of partial recovery of amounts previously written off in connection with WorldCom bankruptcy ($5.0 million). (2) - Includes interest cost ($7.5 million) associated with various operating tax audits and revenue effect of operating taxes in (1) above ($1.5 million). (3) - Reversal of costs previously accrued to defend unsolicited takeover proposal. (4) - Net out of period income tax adjustments ($2.5 million credit), net of tax effect of items (1) through (3). * * * * * * * * SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. CenturyTel, Inc. April 29, 2004 By: /s/ Neil A. Sweasy ---------------------- Neil A. Sweasy Vice President and Controller