EX-99 2 exhibit99.htm EARNING RELEASE earning release
Exhibit 99

 
FOR IMMEDIATE RELEASE
  
FOR MORE INFORMATION CONTACT:
April 27, 2006
  
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: CTL) announces operating results for first quarter 2006.

·  
Operating revenues, excluding nonrecurring items, rose to $610.3 million from $595.3 million in first quarter 2005. Reported under GAAP, first quarter 2006 operating revenues were $611.6 million.

·  
Net income, excluding nonrecurring items, was $72.4 million compared to $80.0 million in first quarter 2005. Reported under GAAP, first quarter 2006 net income was $69.4 million compared to $79.6 million in first quarter 2005.

·  
Diluted earnings per share, excluding nonrecurring items, was $.58 in first quarter 2006 and $.59 in first quarter 2005. Reported under GAAP, diluted earnings per share was $.55 in first quarter 2006.

·  
Free cash flow (as defined in the attached financial schedules), excluding nonrecurring items, was $146.9 million in first quarter 2006 compared to $137.3 million in first quarter 2005.

·  
High-speed Internet customers increased by more than 37,000 in the first quarter of 2006, with nearly 286,000 high-speed Internet connections in service at the end of the quarter.


First Quarter Highlights
  
Quarter Ended
  
Quarter Ended
  
% Change
  
(Excluding nonrecurring items)
  
3/31/06
  
3/31/05
      
(In thousands, except per share
                                
amounts and customer date)
                                
                                 
Operating Revenues
        
$
610,337
        
$
595,282
    
2.5
%
Operating Cash Flow (1)
        
$
297,620
        
$
309,035
    
(3.7
)%
Net Income
        
$
72,421
        
$
79,991
    
(9.5
)%
Diluted Earnings Per Share
        
$
.58
        
$
.59
    
(1.7
)%
Average Diluted Shares Outstanding
          
127,959
          
137,169
    
(6.7
)%
Capital Expenditures
        
$
60,088
        
$
74,903
    
(19.8
)%
                                 
Telephone Access Lines
          
2,191,747
          
2,298,491
    
(4.6
)%
High-speed Internet Customers
          
285,791
          
173,768
    
64.5
%
                                 
(1)  Operating Cash Flow is a non-GAAP financial measure. A reconciliation of this item to comparable GAAP measures is included in the attached financial schedules.

“Penetration of broadband services into our customer base continued to climb during the first quarter as we added more than 37,000 high-speed Internet subscribers, a new quarterly growth record for CenturyTel,” Glen F. Post, III, chairman and chief executive officer, said. “Year-over-year high-speed Internet connections and related revenues grew more than 64% and 53%, respectively, advancing our objective of being the broadband provider of choice in our markets.”
 
Operating revenues, excluding nonrecurring items, rose to $610.3 million in first quarter 2006 from $595.3 million in first quarter 2005. Revenue growth, driven primarily by growth in high-speed Internet connections and revenue from metro fiber assets acquired in mid-2005, more than offset anticipated revenue declines primarily attributable to lower access revenues and universal service funding, and the decline in access lines.

Operating expenses, excluding nonrecurring items, for first quarter 2006 were $447.3 million compared to $418.4 million in first quarter 2005. This increase was primarily due to growth in high-speed Internet connections and our video offerings, along with expenses related to the metro fiber assets acquired in mid-2005.

Operating cash flow, excluding nonrecurring items, decreased to $297.6 million from $309.0 million. CenturyTel achieved an operating cash flow margin of 48.8% during the quarter versus 51.9% in first quarter 2005. This margin decline was principally driven by the growth in revenues with lower margins, such as high-speed Internet, fiber transport and CLEC services, and the decline in higher margin revenues associated with lower USF and access line losses.

Net income, excluding nonrecurring items, was $72.4 million compared to $80.0 million in first quarter 2005. Diluted earnings per share, excluding nonrecurring items, was $.58 compared to $.59 in first quarter 2005. First quarter 2006 diluted earnings per share was favorably impacted by repurchases under the Company’s $200 million and $1 billion share repurchase programs.
 
“Customer demand for bundled services was strong during the quarter as we added more than 47,000 bundle customers. We also continue to experience customer migration from our basic bundle to enhanced bundles which include services such as long distance and high-speed Internet, which we believe strengthens our customer relationships,” Post said.
 
Under generally accepted accounting principles (GAAP), CenturyTel reported operating revenues of $611.6 million in first quarter 2006 compared to $595.3 million in first quarter 2005. In first quarter 2006, the Company reported net income of $69.4 million and diluted earnings per share of $.55, compared to $79.6 million and $.59 per diluted share, respectively, in first quarter 2005. Net income in first quarter 2006 includes $3.0 million net after-tax expense related to a reduction in workforce. Net income in first quarter 2005 includes $3.7 million after-tax expense related to CenturyTel’s purchase and retirement of approximately $400 million of Series J Notes and $3.3 million net benefit related to the settlement of various income tax audits.

For second quarter 2006, CenturyTel expects total revenues of $605 to $615 million and diluted earnings per share of $.54 to $.58. The decline in diluted earnings per share from first quarter to second quarter 2006 is primarily due to increased operating costs related to high-speed Internet, long distance and video customer growth, annual wage adjustments effective in the second quarter and the seasonal impact of maintenance activities for our outside plant.

For the full year 2006, diluted earnings per share is expected to be in the range of $2.30 to $2.40 versus the previous guidance of $2.20 to $2.35, primarily due to fewer fully diluted shares outstanding as a result of retiring approximately 14.4 million shares in connection with the $500 million accelerated share repurchase program announced in February, partially offset by lower than anticipated USF receipts and costs associated with the continued transition of the metro fiber assets acquired in mid-2005.

These outlook figures for the second quarter and full year 2006 exclude nonrecurring items, future share repurchases, mergers, acquisitions, divestitures 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 866.206.6154. The call will be accessible for replay through May 3, 2006, by calling 888.266.2081 and entering the conference ID number 886448. Investors can also listen to CenturyTel’s earnings conference call and replay by accessing the Investor Relations portion of the Company’s Web site at www.centurytel.com through May 17, 2006.

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 and hiring adequate numbers of qualified staff; 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; the Company’s ability to successfully negotiate collective bargaining agreements on reasonable terms without work stoppages; the effect of adverse weather; 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 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 Company’s business are described in greater detail in the Company’s Annual Report on Form 10-K for the year ended December 31, 2005. You should be aware that new factors may emerge from time to time and it is not possible for management to identify all such factors, nor can it 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 of this release. The information contained in this release is as of April 27, 2006. The Company undertakes no obligation to update any of its forward-looking statements for any reason.

CenturyTel (NYSE: CTL) is a leading provider of consumer and business communications solutions in rural areas and small to mid-size cities in 26 states and is included in the S&P 500 Index. The company delivers advanced communications with a personal touch. Visit CenturyTel at www.centurytel.com.


 CenturyTel, Inc.
 CONSOLIDATED STATEMENTS OF INCOME
 THREE MONTHS ENDED MARCH 31, 2006 AND 2005
 (UNAUDITED)
                                               
   
Three months ended March 31, 2006
     
Three months ended March 31, 2005
         
               
As adjusted
                 
As adjusted
     
Increase
 
       
Less
     
excluding
         
Less
     
excluding
     
(decrease)
 
       
non-
     
non-
         
non-
     
non-
 
Increase
 
excluding
 
   
As
 
recurring
     
recurring
     
As
 
recurring
     
recurring
 
(decrease)
 
nonrecurring
 
In thousands, except per share amounts
 
reported
 
items
     
items
     
reported
 
items
     
items
 
as reported
 
items
 
                                               
                                                                     
OPERATING REVENUES
                                                                   
Voice*
  
$
217,449
                
217,449
          
224,500
                
224,500
    
(3.1
%)
  
(3.1
%)
Network access
   
225,246
   
1,128
   
(1)
 
  
224,118
         
230,278
               
230,278
   
(2.2
%)
  
(2.7
%)
Data
   
83,238
   
184
   
(1)
 
  
83,054
         
72,906
               
72,906
   
14.2
%
  
13.9
%
Fiber transport and CLEC
   
35,780
               
35,780
         
20,243
               
20,243
   
76.8
%
  
76.8
%
Other
   
49,936
               
49,936
         
47,355
               
47,355
   
5.5
%
  
5.5
%
     
611,649
   
1,312
         
610,337
         
595,282
   
-
         
595,282
   
2.7
%
  
2.5
%
                                                                     
OPERATING EXPENSES
                                                                   
Cost of services and products
   
222,952
   
5,493
   
(1)
 
  
217,459
         
191,993
               
191,993
   
16.1
%
  
13.3
%
Selling, general and administrative
   
95,940
   
682
   
(1)
 
  
95,258
         
94,254
               
94,254
   
1.8
%
  
1.1
%
Depreciation and amortization
   
134,565
               
134,565
         
132,175
               
132,175
   
1.8
%
  
1.8
%
     
453,457
   
6,175
         
447,282
         
418,422
   
-
         
418,422
   
8.4
%
  
6.9
%
                                                                     
                                                                     
OPERATING INCOME
   
158,192
   
(4,863
)
        
163,055
         
176,860
   
-
         
176,860
   
(10.6
%)
  
(7.8
%)
                                                                     
OTHER INCOME (EXPENSE)
                                                                   
Interest expense
   
(50,086
)
              
(50,086
)
        
(52,625
)
  
(1,196
)
  
(3)
 
  
(51,429
)
  
(4.8
%)
  
(2.6
%)
Income from unconsolidated cellular entity
   
2,073
               
2,073
         
1,313
               
1,313
   
57.9
%
  
57.9
%
Other income (expense)
   
2,524
               
2,524
         
1,535
   
(1,574
)
  
(4)
 
  
3,109
   
64.4
%
  
(18.8
%)
Income tax expense
   
(43,278
)
  
1,867
   
(2)
 
  
(45,145
)
        
(47,467
)
  
2,395
   
(5)
 
  
(49,862
)
  
(8.8
%)
  
(9.5
%)
                                                                     
NET INCOME
 
$
69,425
    
(2,996
)
        
72,421
         
79,616
   
(375
)
        
79,991
   
(12.8
%)
  
(9.5
%)
                                                                     
                                                                     
BASIC EARNINGS PER SHARE
 
$
0.57
    
(0.02
)
        
0.59
         
0.60
   
0.00
         
0.60
   
(5.0
%)
  
(1.7
%)
DILUTED EARNINGS PER SHARE
 
$
0.55
    
(0.02
)
        
0.58
         
0.59
   
0.00
         
0.59
   
(6.8
%)
  
(1.7
%)
                                                                     
AVERAGE SHARES OUTSTANDING
                                                                   
Basic
   
122,394
               
122,394
         
132,183
               
132,183
   
(7.4
%)
  
(7.4
%)
Diluted
   
127,959
               
127,959
         
137,169
               
137,169
   
(6.7
%)
  
(6.7
%)
                                                                     
DIVIDENDS PER COMMON SHARE
  
$
0.0625
                
0.0625
         
0.06
               
0.06
   
4.2
%
  
4.2
%
                                                                     
NONRECURRING ITEMS
                                                                   
(1) - Severance and related costs due to workforce reduction, including revenue impact.
(2) - Tax effect of item (1).
(3) - Write-off of unamortized deferred debt costs associated with purchasing and retiring approximately $400 million of Series J notes.
(4) - Includes (i) $4.8 million debt extinguishment charge related to purchasing and retiring approximately $400 million of Series J notes, net of (ii) $3.2 million of  interest
income related to the settlement of various income tax audits.
(5) - Includes (i) $1.1 million net tax benefit of Items (3) and (4) and (ii) $1.3 million tax benefit related to the settlement of various income tax audits.
 *   Revenues previously reported as "Local service" and "Long distance" have been combined into this "Voice" category for all periods presented. 
  
 
 
 CenturyTel, Inc.  
  
 CONSOLIDATED BALANCE SHEETS  
  
 MARCH 31, 2006 AND DECEMBER 31, 2005  
  
 (UNAUDITED)  
  
               
   
March 31,
      
December 31,
  
   
2006
      
2005
  
       
(in thousands)
      
 ASSETS
 
            
CURRENT ASSETS
                      
Cash and cash equivalents
    
$
15,320
          
158,846
 
Other current assets
      
237,763
         
264,170
 
Total current assets
      
253,083
         
423,016
 
                       
NET PROPERTY, PLANT AND EQUIPMENT
                      
Property, plant and equipment
      
7,837,651
         
7,801,377
 
Accumulated depreciation
      
(4,603,609
)
        
(4,496,891
)
Net property, plant and equipment
      
3,234,042
         
3,304,486
 
                       
GOODWILL AND OTHER ASSETS
                      
Goodwill
      
3,432,649
         
3,432,649
 
Other
      
604,367
         
602,556
 
Total goodwill and other assets
      
4,037,016
         
4,035,205
 
                       
                       
TOTAL ASSETS
    
$
7,524,141
          
7,762,707
 
                       
LIABILITIES AND EQUITY
                      
CURRENT LIABILITIES
                      
Short-term debt and current maturities of long-term debt
    
$
571,456
          
276,736
 
Other current liabilities
      
406,921
         
469,494
 
Total current liabilities
      
978,377
         
746,230
 
                       
LONG-TERM DEBT
      
2,353,859
         
2,376,070
 
DEFERRED CREDITS AND OTHER LIABILITIES
      
1,049,124
         
1,023,134
 
STOCKHOLDERS' EQUITY
      
3,142,781
         
3,617,273
 
                       
                       
TOTAL LIABILITIES AND EQUITY
    
$
7,524,141
          
7,762,707
 
                       
 
 

CenturyTel, Inc.
 
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
 
(UNAUDITED)
 
                                   
                                   
   
Three months ended March 31, 2006
 
Three months ended March 31, 2005
 
   
 
 
 
 
 
 
As adjusted
 
 
 
 
 
 
 
As adjusted
 
 
 
 
 
Less
 
 
 
excluding
 
 
 
Less
 
 
 
excluding
 
 
 
 
 
non-
 
 
 
non-
 
 
 
non-
 
 
 
non-
 
In thousands
 
As
 
recurring
 
 
 
recurring
 
As
 
recurring
 
 
 
recurring
 
 
 
reported
 
items
 
 
 
items
 
reported
 
items
 
 
 
items
 
                                   
Operating cash flow and cash flow margin
                                                 
Operating income
 
$
158,192
    
(4,863
)
  
(1)
 
  
163,055
   
176,860
   
-
         
176,860
 
Add: Depreciation and amortization
   
134,565
               
134,565
   
132,175
               
132,175
 
Operating cash flow
 
$
292,757
    
(4,863
)
        
297,620
   
309,035
   
-
         
309,035
 
                                                   
Revenues
 
$
611,649
    
1,312
         
610,337
   
595,282
   
-
         
595,282
 
                                                   
Operating income margin (operating income divided
 by revenues)
   
25.9
%
              
26.7
%
  
29.7
%
              
29.7
%
                                                   
Operating cash flow margin (operating cash flow
divided by revenues)
   
47.9
%
              
48.8
%
  
51.9
%
              
51.9
%
                                                   
Free cash flow (prior to debt service requirements
 and dividends)
                                                 
Net income
 
$
69,425
    
(2,996
)
  
(1)
 
  
72,421
   
79,616
   
(375
)
  
(2)
 
  
79,991
 
Add: Depreciation and amortization
   
134,565
   
-
         
134,565
   
132,175
   
-
         
132,175
 
Less: Capital expenditures
   
(60,088
)
  
-
         
(60,088
)
  
(74,903
)
  
-
         
(74,903
)
Free cash flow
 
$
143,902
    
(2,996
)
        
146,898
   
136,888
   
(375
)
        
137,263
 
                                                   
Free cash flow
 
$
143,902
                      
136,888
                   
Income from unconsolidated cellular entity
   
(2,073
)
                    
(1,313
)
                  
Deferred income taxes
   
9,522
                     
22,141
                   
Changes in current assets and current liabilities
   
(31,980
)
                    
27,623
                   
Increase in other noncurrent assets
   
(2,193
)
                    
(1,358
)
                  
Increase (decrease) in other noncurrent liabilities
   
957
                     
(729
)
                  
Retirement benefits
   
7,378
                     
6,004
                   
Excess tax benefits from share-based compensation
   
(4,186
)
                    
-
                   
Other, net
   
2,615
                     
(7,340
)
                  
Add: Capital expenditures
   
60,088
                     
74,903
                   
                                                   
Net cash provided by operating activities
 
$
184,030
                      
256,819
                   
                                                   
                                                   
NONRECURRING ITEMS
                                                 
(1) - Severance and related costs due to workforce reduction, including revenue impact (presented on both a pre-tax and an after-tax basis).
 
(2) - Includes (i) $3.7 million after-tax expense related to purchasing and retiring approximately $400 million of Series J notes, net of (ii) $3.3 million net benefit
 
related to the settlement of various income tax audits.