EX-99.1 2 exhibit99.htm PRESS RELEASE exhibit99.htm                                                                             Exhibit 99.1


FOR IMMEDIATE RELEASE:
FOR MORE INFORMATION CONTACT:
August 2, 2007
Tony Davis 318.388.9525
tony.davis@centurytel.com

CenturyTel Reports Second Quarter 2007 Earnings

MONROE, La... CenturyTel, Inc. (NYSE: CTL) announces operating results for second quarter 2007.

 
·  
    Operating revenues, excluding nonrecurring items, increased 5.0% to $639.1 million compared to $608.9 million in second quarter 2006. Reported under GAAP, operating revenues
     increased 13.3% to  $690.0 million.

·  
   Operating cash flow (as defined in the attached financial schedules), excluding nonrecurring items, rose 4.7% to $311.2 million from $297.1 million in second quarter 2006.

·  
    Net income, excluding nonrecurring items, increased 6.9% to $78.4 million from $73.4 million in second quarter 2006. Net income, reported under GAAP, was $112.3 million compared
    to $152.2 million  in second quarter 2006.

·  
    Diluted earnings per share, excluding nonrecurring items, rose 14.8% to $.70 in second quarter 2007 compared to $.61 in second quarter 2006, while GAAP diluted earnings per share
    was $1.00 in second quarter 2007 and $1.26 in second quarter 2006.

·  
   Free cash flow (as defined in the attached financial schedules), excluding nonrecurring items, was $154.8 million in second quarter 2007.

Second Quarter Highlights
(Excluding nonrecurring items)
(In thousands, except per share amounts and operating data)
Quarter Ended
6/30/07
Quarter Ended
6/30/06
 
% Change
 
Operating Revenues
Operating Cash Flow (1)
Net Income
Diluted Earnings Per Share
Average Diluted Shares Outstanding
Capital Expenditures
 
 
$
$
$
$
 
$
 
639,122
311,226
78,434
.70
113,721
57,976
  
 
$
$
$
$
 
$
 
608,907
297,120
73,404
.61
121,636
70,367
  
 
5.0
4.7
6.9
14.8
(6.5)
(17.6)
 
%
%
%
%
%
%
 
Access Lines (2) (3)
High-speed Internet Customers (3)
 
  
 
2,205,000
500,000
    
 
2,153,000
313,000
  
 
2.4
59.7
 
%
%
 
(1)  
     Operating Cash Flow is a non-GAAP financial measure. A reconciliation of this item to comparable GAAP measures is included in the attached financial schedules.
(2)  
     Quarter ended 6/30/2006 access lines include adjustments made during 2006 to reflect the removal of test lines and database conversion and clean-up.
 (3)  
      Quarter ended 6/30/2007 access lines and high-speed Internet customers include the Madison River acquisition. Excluding the effects of this acquisition, access lines
      decreased 5.2% and high-speed Internet customers increased 41.8%.

“CenturyTel achieved strong financial results for the second quarter as the recently acquired Madison River properties contributed to revenue growth and effective cost containment contributed to earnings growth during the quarter,” Glen F. Post, III, chairman and chief executive officer, said. “We achieved solid growth of more 30,000 broadband connections during the quarter and, with the addition of Madison River, CenturyTel now serves more than 500,000 broadband customers.”



Operating revenues, excluding nonrecurring items, increased 5.0% to $639.1 million in second quarter 2007 compared to $608.9 million in second quarter 2006, driven by the $32.1 million in revenues contributed by the Madison River properties acquired April 30, 2007. Other revenue increases during the quarter of approximately $23 million resulted primarily from an increase in high-speed Internet customers and growth in fiber transport revenues. These increases were more than offset by revenue declines of approximately $25 million primarily attributable to previously anticipated lower access revenues, access line losses and lower revenues under the amended satellite television agreement.
 
Operating expenses, excluding nonrecurring items, increased 4.1% to $462.2 million from $443.9 million in second quarter 2006, primarily due to operating costs associated with the Madison River properties. Excluding costs associated with the Madison River properties, operating expenses declined in second quarter 2007 compared to second quarter 2006, primarily due to lower bad debt expense, reduced personnel expenses and outside labor costs, lower expenses under the amended satellite television agreement, and lower depreciation expense associated with fully depreciated assets. These declines more than offset increased expenses associated with growth in high-speed Internet and fiber transport customers.

“CenturyTel’s financial strength allowed us to complete both the Madison River acquisition and our $1 billion share repurchase program with the repurchase of 2.9 million shares for $136 million during the quarter,” Post said. “We continue to retain significant financial flexibility and expect to utilize free cash flow to drive long-term shareholder value.”
 
Operating cash flow, excluding nonrecurring items, for second quarter 2007 was $311.2 million. CenturyTel achieved an operating cash flow margin of 48.7% during the quarter versus 48.8% in second quarter 2006.
 
Net income, excluding nonrecurring items, was $78.4 million compared to $73.4 million in second quarter 2007. Diluted earnings per share, excluding nonrecurring items, increased to $.70 in second quarter 2007 compared to $.61 in second quarter 2006, primarily due to increased operating income and the reduction in diluted shares outstanding as a result of share repurchases during the twelve months ended June 30, 2007.
 
For the first six months of 2007, operating revenues, excluding nonrecurring items, were $1.240 billion compared to $1.219 billion in 2006, a 1.7% increase. Operating cash flow, excluding nonrecurring items, was $607.1 million for 2007 compared to $594.8 million a year ago. Net income, excluding nonrecurring items, was $156.3 million compared to $145.7 million in 2006, while diluted earnings per share was $1.38 compared to $1.19 in 2006.

Under generally accepted accounting principles (GAAP), net income for second quarter 2007 was $112.3 million compared to $152.2 million for second quarter 2006. Diluted earnings per share was $1.00 in second quarter 2007 compared to $1.26 in second quarter 2006. Second quarter 2007 results include a $30.2 million after-tax positive revenue settlement related to the resolution of network access disputes and a $3.6 million after-tax benefit related to the amended satellite television agreement with Echostar. Second quarter 2006 results include a $72.4 million after-tax benefit related to the dissolution of the Rural Telephone Bank and a $6.4 million positive impact from the resolution of various income tax audit issues.

For the first six months of 2007, prepared in accordance with GAAP, the Company reported net income of $190.1 million, or $1.67 per diluted share, compared to net income of $221.5 million, or $1.79 per diluted share, for the six months ended June 30, 2006. See the accompanying financial schedules for detail of the Company’s nonrecurring items for the years 2007 and 2006.

For the third quarter 2007, CenturyTel expects total revenues of $690 to $700 million and diluted earnings per share of $.87 to $.92.  The finalization of revenue settlements during the third quarter is expected to result in an approximate $.23 increase in diluted earnings per share. For the full year 2007, diluted earnings per share is expected to be in the range of $2.90 to $3.00, an increase over the $2.75 to $2.85 range previously provided. This increase in 2007 diluted earnings per share guidance is primarily due to the better than anticipated results during second quarter 2007, projected increases in Internet and long distance revenues, and the expectation that operating expenses will be lower in the second half of 2007 than previously forecast, along with the anticipation of a modest contribution from the Madison River properties.

These outlook figures assume conversion of our $165 million of Series K convertible debentures and exclude nonrecurring items and the potential impact of any future mergers, acquisitions, divestitures, refinancing, share repurchases or other similar business transactions.

 Other. As previously reported, CenturyTel adopted the requirements of Staff Accounting Bulletin No. 108 (SAB 108) in fourth quarter 2006, which required the results of operations previously reported in the first, second and third quarters of 2006 to be adjusted.  Second quarter 2006 and six months ended June 30, 2006 amounts included in this press release reflect amounts adjusted for the application of SAB 108.

 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 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 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 866.837.9781.  The call will be accessible for replay through August 8, 2007, by calling 888.258.7854 and entering the conference ID number 1109813. 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 prior to August 23, 2007.

 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 expansion opportunities, including  successfully integrating newly-acquired properties into the Company’s operations and  retaining and hiring key personnel; possible changes in the demand for, or pricing of, the Company’s products and services; the Company’s continued access to credit markets on favorable terms; 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 (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 Company’s business are described in greater detail in the Company’s Annual Report on Form 10-K for the year ended December 31, 2006, as updated by the Company’s subsequent SEC reports.  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 August 2, 2007.  The Company undertakes no obligation to update any of its forward-looking statements for any reason.

 CenturyTel (NYSE: CTL) is a leading provider of communications, high speed Internet and entertainment services in small-to-mid-size cities through our broadband and fiber transport networks.  Included in the S&P 500 Index, CenturyTel delivers advanced communications with a personal touch to customers in 25 states.  Visit us at http://www.centurytel.com. ###



              CenturyTel, Inc.                
              CONSOLIDATED STATEMENTS OF INCOME       
              THREE MONTHS ENDED JUNE 30, 2007 AND 2006    
              (UNAUDITED)                
                                                             
   
Three months ended June 30, 2007
    
Three months ended June 30, 2006
              
                     
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
   $
219,803
                  
219,803
      
216,485
                  
216,485
       1.5 %     1.5 %
 Network access
    
266,202
      
48,987
       (1 )    
217,215
      
221,663
                  
221,663
       20.1 %     (2.0 %)
 Data
    
108,206
                      
108,206
      
84,447
                  
84,447
       28.1 %     28.1 %
 Fiber transport and CLEC
    
40,714
      
13
       (1 )    
40,701
      
36,051
                  
36,051
       12.9 %     12.9 %
 Other
    
55,066
      
1,869
       (2 )    
53,197
      
50,261
                  
50,261
       9.6 %     5.8 %
     
689,991
      
50,869
              
639,122
      
608,907
      
-
            
608,907
       13.3 %     5.0 %
                                                                               
 OPERATING EXPENSES
                                                                              
 Cost of services and products
    
226,388
       (4,052 )     (2 )    
230,440
      
216,191
                    
216,191
       4.7 %     6.6 %
 Selling, general and administrative
    
97,456
                      
97,456
      
95,596
                    
95,596
       1.9 %     1.9 %
 Depreciation and amortization
    
134,311
                      
134,311
      
132,127
                    
132,127
       1.7 %     1.7 %
     
458,155
       (4,052 )            
462,207
      
443,914
      
-
            
443,914
       3.2 %     4.1 %
                                                                               
 OPERATING INCOME
    
231,836
      
54,921
              
176,915
      
164,993
      
-
            
164,993
       40.5 %     7.2 %
                                                                               
 OTHER INCOME (EXPENSE)
                                                                              
 Interest expense
     (57,667 )                     (57,667 )     (50,639 )                   (50,639 )     13.9 %     13.9 %
 Other income (expense)
    
8,080
                      
8,080
      
123,459
      
118,649
       (4 )    
4,810
       (93.5 %)     68.0 %
 Income tax expense
     (69,984 )     (21,090 )     (3 )     (48,894 )     (85,603 )     (39,843 )     (5 )     (45,760 )     (18.2 %)     6.8 %
 NET INCOME
   $
112,265
      
33,831
              
78,434
      
152,210
      
78,806
              
73,404
       (26.2 %)     6.9 %
                                                                                 
 BASIC EARNINGS PER SHARE
   $
1.03
      
0.31
              
0.72
      
1.32
       .68               
0.64
       (22.0 %)     12.5 %
 DILUTED EARNINGS PER SHARE
   $
1.00
      
0.30
              
0.70
      
1.26
       .65               
0.61
       (20.6 %)     14.8 %
                                                                                 
AVERAGE SHARES OUTSTANDING
                                                                          
 Basic
    
108,405
                      
108,405
      
115,441
                      
115,441
       (6.1 %)     (6.1 %)
 Diluted
    
113,721
                      
113,721
      
121,636
                      
121,636
       (6.5 %)     (6.5 %)
                                                                                 
DIVIDENDS PER COMMON SHARE
   $
0.0650
                      
0.0650
      
0.0625
                      
0.0625
       4.0 %     4.0 %
                                                                                 
 NONRECURRING ITEMS
                                                                                
    (1) - Revenue recorded upon settlement of a dispute with a carrier.
                                                  
    (2) - Reimbursement of amounts upon a change in our satellite television arrangement.
                                          
    (3) - Tax effects of items (1) and (2).
                                                                          
    (4) - Includes gain recorded upon redemption of Rural Telephone Bank stock ($117.8 million) and gain recorded upon sale of Arizona properties ($.9 million).
  
    (5) - Includes $46.3 million aggregate tax expense related to Item (4), net of $6.4 million net tax benefit due to the resolution of various income tax audit issues.
  


 
              CenturyTel, Inc.                
              CONSOLIDATED STATEMENTS OF INCOME       
              SIX MONTHS ENDED JUNE 30, 2007 AND 2006       
              (UNAUDITED)                
                                                             
   
Six months ended June 30, 2007
    
Six months ended June 30, 2006
              
                     
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
   $
428,878
                  
428,878
      
433,499
                  
433,499
       (1.1 %)     (1.1 %)
 Network access
    
477,601
      
48,987
       (1 )    
428,614
      
446,986
      
1,128
       (4 )    
445,858
       6.8 %     (3.9 %)
 Data
    
204,070
                      
204,070
      
167,685
      
184
       (4 )    
167,501
       21.7 %     21.8 %
 Fiber transport and CLEC
    
79,040
      
13
       (1 )    
79,027
      
71,831
                      
71,831
       10.0 %     10.0 %
 Other
    
101,257
      
1,869
       (2 )    
99,388
      
100,197
                      
100,197
       1.1 %     (0.8 %)
     
1,290,846
      
50,869
              
1,239,977
      
1,220,198
      
1,312
              
1,218,886
       5.8 %     1.7 %
                                                                                 
 OPERATING EXPENSES
                                                                                
 Cost of services and products
    
439,919
       (4,052 )     (2 )    
443,971
      
438,746
      
5,493
       (4 )    
433,253
       0.3 %     2.5 %
 Selling, general and administrative
    
188,913
                      
188,913
      
191,536
      
682
       (4 )    
190,854
       (1.4 %)     (1.0 %)
 Depreciation and amortization
    
262,095
                      
262,095
      
266,999
                      
266,999
       (1.8 %)     (1.8 %)
     
890,927
       (4,052 )            
894,979
      
897,281
      
6,175
              
891,106
       (0.7 %)     0.4 %
                                                                                 
 OPERATING INCOME
    
399,919
      
54,921
              
344,998
      
322,917
       (4,863 )            
327,780
       23.8 %     5.3 %
                                                                                 
 OTHER INCOME (EXPENSE)
                                                                                
 Interest expense
     (104,628 )                     (104,628 )     (100,725 )                     (100,725 )     3.9 %     3.9 %
 Other income (expense)
    
13,370
                      
13,370
      
128,056
      
118,649
       (5 )    
9,407
       (89.6 %)     42.1 %
 Income tax expense
     (118,526 )     (21,090 )     (3 )     (97,436 )     (128,778 )     (37,976 )     (6 )     (90,802 )     (8.0 %)     7.3 %
 NET INCOME
   $
190,135
      
33,831
              
156,304
      
221,470
      
75,810
              
145,660
       (14.1 %)     7.3 %
                                                                                 
 BASIC EARNINGS PER SHARE
   $
1.73
      
0.31
              
1.42
      
1.86
      
0.64
              
1.22
       (7.0 %)     16.4 %
 DILUTED EARNINGS PER SHARE
   $
1.67
      
0.29
              
1.38
      
1.79
      
0.61
              
1.19
       (6.7 %)     16.0 %
                                                                                 
AVERAGE SHARES OUTSTANDING
                                                                          
 Basic
    
109,718
                      
109,718
      
118,917
                      
118,917
       (7.7 %)     (7.7 %)
 Diluted
    
115,015
                      
115,015
      
124,798
                      
124,798
       (7.8 %)     (7.8 %)
                                                                                 
DIVIDENDS PER COMMON SHARE
   $
0.1300
                      
0.1300
      
0.1250
                      
0.1250
       4.0 %     4.0 %
                                                                                 
 NONRECURRING ITEMS
                                                                                
    (1) - Revenue recorded upon settlement of a dispute with a carrier.
                                                  
    (2) - Reimbursement of amounts upon a change in our satellite television arrangement.
                                          
    (3) - Tax effects of items (1) and (2).
                                                                          
    (4) - Severance and related costs due to workforce reduction, including revenue impact.
                                          
    (5) - Includes gain recorded upon redemption of Rural Telephone Bank stock ($117.8 million) and gain recorded upon sale of Arizona properties ($.9 million).
  
    (6) - Includes $44.4 million net tax expense related to Items (4) and (5), net of $6.4 million net tax benefit due to the resolution of various income tax audit issues.
  


CenturyTel, Inc.
  
CONSOLIDATED BALANCE SHEETS
  
JUNE 30, 2007 AND DECEMBER 31, 2006
  
(UNAUDITED)
  
               
   
June 30,
      
Dec. 31,
  
   
2007
      
2006
  
       
 (in thousands)
      
ASSETS
              
CURRENT ASSETS
              
Cash and cash equivalents
   $
43,525
        
25,668
  
Other current assets
    
250,881
        
264,449
  
       Total current assets
    
294,406
        
290,117
  
                   
NET PROPERTY, PLANT AND EQUIPMENT
                  
Property, plant and equipment
    
8,560,266
        
7,893,760
  
Accumulated depreciation
     (5,355,716 )       (4,784,483 )
       Net property, plant and equipment
    
3,204,550
        
3,109,277
  
                   
GOODWILL AND OTHER ASSETS
                  
Goodwill
    
3,999,526
        
3,431,136
  
Other
    
775,054
        
610,477
  
        Total goodwill and other assets
    
4,774,580
        
4,041,613
  
                   
                   
TOTAL ASSETS
   $
8,273,536
        
7,441,007
  
                   
                   
LIABILITIES AND EQUITY
                  
CURRENT LIABILITIES
                  
Short-term debt and current maturities of long-term debt
   $
511,307
        
178,012
  
Other current liabilities
    
448,967
        
439,553
  
        Total current liabilities
    
960,274
        
617,565
  
                   
LONG-TERM DEBT
    
2,735,073
        
2,412,852
  
DEFERRED CREDITS AND OTHER LIABILITIES
    
1,441,155
        
1,219,639
  
STOCKHOLDERS' EQUITY
    
3,137,034
        
3,190,951
  
                   
TOTAL LIABILITIES AND EQUITY
   $
8,273,536
        
7,441,007
  

 
 



CenturyTel, Inc.            
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES            
(UNAUDITED)            
                                                 
                                                 
   
Three months ended June 30, 2007
    
Three months ended June 30, 2006
  
                     
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
 $
231,836
      
54,921
       (1 )    
176,915
      
164,993
      
-
            
164,993
  
 
 Add:  Depreciation and amortization
  
134,311
                      
134,311
      
132,127
                    
132,127
  
 
 Operating cash flow
 $
366,147
      
54,921
              
311,226
      
297,120
      
-
            
297,120
  
                                                               
 
 Revenues
 $
689,991
      
50,869
       (1 )    
639,122
      
608,907
      
-
            
608,907
  
                                                               
 
 Operating income margin (operating income divided
  by revenues)
   33.6 %                     27.7 %     27.1 %                   27.1 %
                                                               
 
 Operating cash flow margin (operating cash flow
      divided by revenues)
   53.1 %                     48.7 %     48.8 %                   48.8 %
                                                               
                                                               
 Free cash flow (prior to debt service requirements
   and dividends)
                                                            
 
 Net income
 $
112,265
      
33,831
       (1 )    
78,434
      
152,210
      
78,806
       (2 )    
73,404
  
 
 Add:  Depreciation and amortization
  
134,311
      
-
              
134,311
      
132,127
      
-
              
132,127
  
 
 Less:  Capital expenditures
   (57,976 )    
-
               (57,976 )     (70,367 )    
-
               (70,367 )
 
 Free cash flow
 $
188,600
      
33,831
              
154,769
      
213,970
      
78,806
              
135,164
  
                                                                 
 
 Free cash flow
 $
188,600
                              
213,970
                          
 
 Gain on asset dispositions
  
-
                               (118,649 )                        
 
 Deferred income taxes
  
16,634
                              
12,732
                          
 
 Changes in current assets and current liabilities
  
36,943
                              
31,597
                          
 
 Decrease in other noncurrent assets
  
2,621
                              
2,887
                          
 
 Increase (decrease) in other noncurrent liabilities
   (11,266 )                            
894
                          
 
 Retirement benefits
  
9,011
                              
7,548
                          
 
 Excess tax benefits from share-based compensation
   (3,280 )                             (761 )                        
 
 Other, net
  
2,076
                              
1,702
                          
 
 Add:  Capital expenditures
  
57,976
                              
70,367
                          
 
 Net cash provided by operating activities
 $
299,315
                              
222,287
                          
                                                                 
                                                                 
 NONRECURRING ITEMS
                                                              
 
(1) - Includes $49.0 million revenue recorded upon settlement of a dispute with a carrier and $5.9 million reimbursement of amounts (of which $1.9 million increased revenues) upon a change
 
   in our satellite television arrangement (presented on both a pre-tax and after-tax basis).       
 
(2) - Includes (i) $72.4 million after-tax gains recorded upon redemption of Rural Telephone Bank stock and sale of Arizona properties and (ii) $6.4 million net tax benefit due to the resolution
 
   of various income tax audit issues.           




 CenturyTel, Inc.                        
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES                
 (UNAUDITED)                        
                                                 
                                                 
   
Six months ended June 30, 2007
    
Six months ended June 30, 2006
  
                     
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
   $
399,919
      
54,921
       (1 )    
344,998
      
322,917
       (4,863 )     (2 )    
327,780
  
   Add:  Depreciation and amortization
    
262,095
                      
262,095
      
266,999
                      
266,999
  
   Operating cash flow
   $
662,014
      
54,921
              
607,093
      
589,916
       (4,863 )            
594,779
  
                                                                 
   Revenues
   $
1,290,846
      
50,869
       (1 )    
1,239,977
      
1,220,198
      
1,312
       (2 )    
1,218,886
  
                                                                 
   Operating income margin (operating income
    divided by revenues)
     31.0 %                     27.8 %     26.5 %                     26.9 %
                                                                 
   Operating cash flow margin (operating cash
    flow divided by revenues)
     51.3 %                     49.0 %     48.3 %                     48.8 %
                                                                 
                                                                 
 Free cash flow (prior to debt service requirements
  and dividends)
                                                                
  Net income
   $
190,135
      
33,831
       (1 )    
156,304
      
221,470
      
75,810
       (3 )    
145,660
  
   Add:  Depreciation and amortization
    
262,095
      
-
              
262,095
      
266,999
      
-
              
266,999
  
   Less:  Capital expenditures
     (106,856 )    
-
               (106,856 )     (130,455 )    
-
               (130,455 )
   Free cash flow
   $
345,374
      
33,831
              
311,543
      
358,014
      
75,810
              
282,204
  
                                                                 
   Free cash flow
   $
345,374
                              
358,014
                          
   Gain on asset dispositions
    
-
                               (118,649 )                        
   Deferred income taxes
    
30,005
                              
22,151
                          
   Changes in current assets and
   current liabilities
    
70,835
                               (460 )                        
   Decrease in other noncurrent assets
    
3,653
                              
297
                          
   Increase (decrease) in other noncurrent
    liabilities
     (11,667 )                            
2,286
                          
   Retirement benefits
    
14,647
                              
14,926
                          
   Excess tax benefits from share-based
     compensation
     (6,312 )                             (4,947 )                        
   Other, net
    
4,634
                              
2,244
                          
   Add:  Capital expenditures
    
106,856
                              
130,455
                          
   Net cash provided by operating activities
   $
558,025
                              
406,317
                          
                                                                 
                                                                 
                                                                 
 NONRECURRING ITEMS
                                                                
    (1) - Includes $49.0 million revenue recorded upon settlement of a dispute with a carrier and $5.9 million reimbursement of amounts (of which $1.9 million increased revenues) upon a change
  
       in our satellite television arrangement (presented on both a pre-tax and after-tax basis).                       
    
    (2) - Severance and related costs due to workforce reduction, including revenue impact.   
                                            
    (3) - Includes (i) $72.4 million after-tax gains recorded upon redemption of Rural Telephone Bank stock and sale of Arizona properties, (ii) $3.0 million severance and related costs due to
  
       workforce reduction, including revenue impact, net of tax, and (iii) $6.4 million net tax benefit due to the resolution of various income tax audit issues.