-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, AQ+CHsN3xwujZt/Zaf6S1t5F7Rg5sZXbpF2pG1D5B6oaEHxU3nESlE7rkB6tok3G oonarZ10VLwBpHE+t52E0Q== 0000018926-10-000002.txt : 20100225 0000018926-10-000002.hdr.sgml : 20100225 20100225104928 ACCESSION NUMBER: 0000018926-10-000002 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20100225 ITEM INFORMATION: Results of Operations and Financial Condition ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20100225 DATE AS OF CHANGE: 20100225 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CENTURYTEL INC CENTRAL INDEX KEY: 0000018926 STANDARD INDUSTRIAL CLASSIFICATION: TELEPHONE COMMUNICATIONS (NO RADIO TELEPHONE) [4813] IRS NUMBER: 720651161 STATE OF INCORPORATION: LA FISCAL YEAR END: 0701 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-07784 FILM NUMBER: 10632040 BUSINESS ADDRESS: STREET 1: P O BOX 4065 STREET 2: 100 CENTURYTEL DR CITY: MONROE STATE: LA ZIP: 71203 BUSINESS PHONE: 3183889000 MAIL ADDRESS: STREET 1: 100 CENTURYTEL DR STREET 2: P O BOX 4065 CITY: MONROE STATE: LA ZIP: 71203 FORMER COMPANY: FORMER CONFORMED NAME: CENTURY TELEPHONE ENTERPRISES INC DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: CENTRAL TELEPHONE & ELECTRONICS CORP DATE OF NAME CHANGE: 19720512 8-K 1 file8k.htm FORM 8-K EARNINGS RELEASE Unassociated Document
UNITED STATES
 
SECURITIES AND EXCHANGE COMMISSION
 
Washington, D.C. 20549
 
 
FORM 8-K 
 
 
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 
 
 
Date of Report (Date of earliest event reported):
 
February 25, 2010
 
 
 
CenturyTel, Inc. 
 
(Exact name of registrant as specified in its charter)
 
 
 
Louisiana
(State or other jurisdiction of
incorporation or organization)
1-7784
(Commission File Number)
72-0651161
(I.R.S. Employer
Identification No.)
 
 
 
100 CenturyLink Drive, Monroe, Louisiana 71203
 
(Address of principal executive offices) (Zip Code)
 
Registrant's telephone number, including area code: (318) 388-9000
 
 
 
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
 
 
[ ]
 
 
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
 
 
[ ]
 
 
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240. 14a-12)
 
 
[ ]
 
 
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
 
 
[ ]
 
 
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
 
 
 
Item 2.02.     Results of Operations and Financial Condition.
 
 
The following information, except for any forward-looking statements (including our forecasts for the upcoming quarter and full year 2010) 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 and 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, or otherwise subject to the liabilities of that section.
 
On February 25, 2010, we issued a press release announcing our fourth quarter 2009 consolidated operating results. More complete information on our operating results will be included in our Annual Report on Form 10-K for the period ended December 31, 2009, which we expect to file shortly with the Securities and Exchange Commission. The complete press release is included as Exhibit 99.1.
 
Item 9.01.      Financial Statements and Exhibits.
 
(d)
    Exhibits.
 
 
99.1
Press release dated February 25, 2010 reporting fourth quarter 2009 operating results.

 

 
 
SIGNATURES
 
 
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 hereunto duly authorized.
 
   
 
CENTURYTEL, INC.
 
Dated:  February 25, 2010
 
 
/s/ Neil A. Sweasy                                                             
   
Neil A. Sweasy
   
Vice President and Controller
EX-99.1 2 exh99_1.htm EARNINGS RELEASE exh99_1.htm
Exhibit 99.1

News Release
                                                                                                   CenturyLink
                                                                                   
 
 
FOR IMMEDIATE RELEASE:
FOR MORE INFORMATION CONTACT:
February 25, 2010
Tony Davis 318.388.9525
tony.davis@centurylink.com


CenturyLink Reports Fourth Quarter 2009 Earnings


MONROE, La. . . . CenturyLink (CenturyTel, Inc., NYSE: CTL) announces operating results for fourth quarter 2009, which include the effect of the Embarq acquisition completed July 1, 2009.

§  
Added nearly 47,000 high-speed Internet customers, reflecting an 8% increase compared to third quarter 2009 growth of 43,500.

§  
Improved access line losses by 14% compared to third quarter 2009 and 24% compared to pro forma fourth quarter 2008.

§  
Achieved approximately $40 million in synergies from the Embarq acquisition during fourth quarter 2009 and ended 2009 with estimated annual run rate synergies of more than $190 million.

§  
Generated free cash flow (as defined in the attached financial schedules) of $333.7 million in fourth quarter 2009, excluding nonrecurring items and $28.1 million of acquisition related capital expenditures.

§  
Announced 3.6% dividend increase, from $.70 to $.725 per share quarterly rate.


Fourth Quarter Highlights
(Excluding nonrecurring items reflected in the attached financial schedules)
(In thousands, except per share amounts and subscriber data)
 
Quarter Ended
12/31/09
 
Quarter Ended
12/31/08
 
% Change
 
Operating Revenues
Operating Cash Flow (1)
Net Income (2)
Diluted Earnings Per Share
Average Diluted Shares Outstanding
Capital Expenditures
 
 
$
$
$
$
 
$
 
1,839,424
943,592
286,688
.95
299,233
337,417
 
 
 
 
 
 
  (3)
 
 
$
$
$
$
 
$
 
642,647
311,944
87,044
.87
98,920
101,813
 
 
186.2
202.5
229.4
9.2
202.5
231.4
 
%
%
%
%
%
%
 
Access Lines (4)
High-Speed Internet Customers
 
 
 
7,039,000
2,236,000
 
 
 
2,025,000
641,000
 
 
 
247.6
248.8
 
%
%
 
(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)
All references to net income contained in this release represent net income attributable to CenturyTel, Inc.
(3)
Includes $28.1 million of capital expenditures related to the Embarq integration.
(4)
Both periods reflect line count methodology adjustments to standardize legacy CenturyTel and Embarq line counts.
 
“CenturyLink continued to make solid progress with the Embarq integration and the implementation of our local-focused regional operating model as access line loss improved to an 8.6% annualized rate in the second half of 2009 compared to a 9.8% pro forma annualized rate in the second half of 2008,” Glen F. Post, III, chief executive officer and president, said. “Our launch of enhanced product offerings, targeted marketing campaigns and focus on achieving synergies from the Embarq acquisition helped CenturyLink achieve solid fourth quarter financial results.”
 
Operating revenues, excluding nonrecurring items, for fourth quarter 2009 were $1.839 billion compared to $642.6 million in fourth quarter 2008. This increase was primarily due to $1.266 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 $54.5 million of revenues associated with the discontinuance of regulatory accounting for certain regulated operating entities reflected in fourth quarter 2009.

Operating expenses, excluding nonrecurring items, were $1.252 billion compared to $459.5 million in fourth quarter 2008, primarily due to $855.8 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 reflected in fourth quarter 2009.

Operating cash flow, excluding nonrecurring items, increased 202.5% to $943.6 million from $311.9 million in fourth quarter 2008, primarily due to the Embarq acquisition. For fourth quarter 2009, CenturyLink achieved an operating cash flow margin of 51.3% versus 48.5% in fourth quarter 2008.
 
“We continue to see strong customer demand for broadband services, including high-speed Internet and Ethernet services, as we added nearly 47,000 high-speed Internet customers during the fourth quarter,” Post said. “Based on 2009 pro forma financials, CenturyLink generated $3.8 billion of operating cash flow for full year 2009.”
 
Net income, excluding nonrecurring items, was $286.7 million in fourth quarter 2009 compared to $87.0 million in fourth quarter 2008, primarily driven by the Embarq acquisition. Diluted earnings per share, excluding nonrecurring items, was $.95 for fourth quarter 2009, a 9.2% increase from the $.87 reported in fourth quarter 2008. This increase was primarily due to the higher net income as discussed above, partially offset by the 202.5% increase in average diluted shares outstanding as a result of our all-stock acquisition of Embarq.

For the year 2009, operating revenues, excluding nonrecurring items, increased 91.4% to $4.973 billion from $2.598 billion for the same period in 2008. Operating cash flow, excluding nonrecurring items, was $2.483 billion for 2009 compared to $1.258 billion in 2008. Net income, excluding nonrecurring items, was $720.9 million compared to $347.1 million in 2008. Diluted earnings per share, excluding nonrecurring items, was $3.60 compared to $3.35 in 2008.

Under generally accepted accounting principles (GAAP), net income for fourth quarter 2009 was $230.2 million compared to $100.1 million for fourth quarter 2008, and diluted earnings per share for fourth quarter 2009 was $.77 compared to $1.00 for fourth quarter 2008.

Fourth quarter 2009 net income and diluted earnings per share reflect after-tax costs of $37.8 million ($.13 per share) associated with debt extinguishments, $19.8 million ($.07 per share) related to integration costs associated with the Embarq acquisition, $5.0 million ($.02 per share) related to a litigation settlement, and $4.4 million ($.01 per share) associated with severance related costs and the accelerated recognition of share-based compensation and pension expense. These after-tax costs more than offset a $10.7 million ($.04 per share) net tax benefit related to the recognition of previously unrecognized tax benefits and an adjustment to deferred tax liabilities related to the Embarq acquisition.

Fourth quarter 2008 net income and diluted earnings per share reflect a $12.8 million tax benefit due to the recognition of previously unrecognized tax benefits and a $6.3 million after-tax benefit primarily related to the recognition of previously accrued transaction-related and other contingencies.  Such favorable items were partially offset by an after-tax charge of $1.1 million due to severance and related costs due to a workforce reduction and an after-tax charge of $5.0 million related to costs associated with the acquisition of Embarq.

Net income under GAAP for full year 2009 was $647.2 million compared to $365.7 million for full year 2008 and diluted earnings per share for full year 2009 was $3.23 compared to $3.52 for full year 2008. See the accompanying financial schedules for detail of the Company’s nonrecurring items for full year 2009 and 2008.

Dividend Increase. As noted in a separate press release issued today, CenturyLink’s Board of Directors voted to declare a quarterly cash dividend of $.725 per share, representing a 3.6% dividend increase.
 
“CenturyLink remains committed to maintaining a solid balance sheet and delivering long-term shareholder value. We believe this dividend increase is reflective of our continued strong free cash flow and achieves an appropriate balance of returning cash to shareholders while maintaining a solid credit profile,” said Post.
 
Outlook for 2010. For full year 2010, CenturyLink expects operating revenues, excluding certain unusual items, to be 5.5% to 6.5% lower than 2009 pro forma operating revenues as revenue increases associated with growth in high-speed Internet are expected to be more than offset by revenue declines associated with lower access revenues, reduced universal service funding, access line losses and other items. Giving effect to these unusual items, which approximate $135 to $145 million of revenue reductions, 2010 operating revenues are expected to decline 7.5% to 8.5% compared to pro forma 2009. We expect the additional revenue decline in 2011 associated with these unusual items to be approximately $30 million. Additionally, approximately $75 to $80 million of these unusual items is not expected to affect 2010 operating cash flow because of direct offsetting expense reductions.

Free cash flow for full year 2010 is anticipated to be $1.475 to $1.525 billion, reflecting a dividend payout ratio of 57% to 59%.  The Company currently expects 2010 capital expenditures to be between $825 and $875 million, or approximately 15% lower than 2009 pro forma capital expenditures of $1.0 billion.
 
For full year 2010, CenturyLink anticipates diluted earnings per share to be in the range of $3.10 to $3.20. The following items are expected to have a positive impact on 2010 diluted earnings per share:
·  
expected synergies associated with the Embarq acquisition - $.39 to $.43;
·  
increased revenues associated with expected growth in high-speed Internet customers - $.09 to $.11; and
·  
anticipated lower depreciation and interest expense - $.10 to $.12.
 
The following items are expected to negatively impact 2010 diluted earnings per share:
·  
lower voice-related revenues, primarily due to anticipated access line losses of 7.5% to 8.5% - ($.54) to ($.58);
·  
lower access revenues primarily driven by access line losses and continued pressure on access minutes of use - ($.37) to ($.41);
·  
reduced interstate universal service funding - ($.08) to ($.10); and
·  
expected migration of network traffic from a wireless carrier customer - ($.06) to ($.08).
Additionally, CenturyLink expects to make a voluntary pre-tax $300 million contribution to one of its pension plans during first quarter 2010.
 
See the attached supplemental schedule for pro forma 2009 information.

For first quarter 2010, CenturyLink expects total revenues of $1.77 to $1.80 billion and diluted earnings per share of $.84 to $.88.

These 2010 outlook figures exclude the effects of nonrecurring items, future changes in regulation, integration expenses associated with the Embarq acquisition, any changes in operating or capital plans related thereto, and any future mergers, acquisitions, divestitures or other similar business transactions.
 
Integration Update. CenturyLink incurred $39 million of integration and other costs related to the Embarq acquisition during fourth quarter 2009. The Company also incurred approximately $28 million of integration-related capital expenditures during the fourth quarter.

CenturyLink achieved approximately $40 million in operating cost synergies during fourth quarter 2009 and expects to realize additional incremental operating cost synergies of approximately $10 million in first quarter 2010 and approximately $200 million in incremental synergies for full year 2010 compared to the level of synergies recognized in 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 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 866.219.5894. The call will be accessible for replay through March 3, 2010, by calling 888.266.2081 and entering the conference ID number 1427251. 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 www.centurylink.com through March 17, 2010.

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 those arising out of the Federal Communication Commission’s proposed rules regarding inter-carrier compensation and the Universal Service Fund,  and the Federal Communications Commission’s National Broadband Plan scheduled to be released in first quarter 2010, each as 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 $2.90 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 www.centurylink.com.
 
 
 
 
 
 
 
 

CenturyTel, Inc.
CONSOLIDATED STATEMENTS OF INCOME
THREE MONTHS ENDED DECEMBER 31, 2009 AND 2008
(UNAUDITED)


   
Three months ended December 31, 2009
   
Three months ended December 31, 2008
             
                   
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
  $ 692,422       (8,236 ) (1 )     700,658       215,407                 215,407       221.4 %     225.3 %
Network access
    436,346                   436,346       198,396       307   (6 )     198,089       119.9 %     120.3 %
Data
    459,211       (2,128 ) (1 )     461,339       133,731                   133,731       243.4 %     245.0 %
Fiber transport and CLEC
    45,593                   45,593       41,245                   41,245       10.5 %     10.5 %
Other
    195,488                   195,488       54,175                   54,175       260.8 %     260.8 %
      1,829,060       (10,364 )         1,839,424       642,954       307           642,647       184.5 %     186.2 %
                                                                         
OPERATING EXPENSES
                                                                       
Cost of services and products
    596,859       (6,882 ) (2 )     603,741       235,792       1,483   (6 )     234,309       153.1 %     157.7 %
Selling, general and administrative
    335,479       43,388   (2 )     292,091       101,924       5,530   (7 )     96,394       229.1 %     203.0 %
Depreciation and amortization
    356,384                   356,384       128,796                   128,796       176.7 %     176.7 %
      1,288,722       36,506           1,252,216       466,512       7,013           459,499       176.2 %     172.5 %
                                                                         
OPERATING INCOME
    540,338       (46,870 )         587,208       176,442       (6,706 )         183,148       206.2 %     220.6 %
                                                                         
OTHER INCOME (EXPENSE)
                                                                       
Interest expense
    (133,023 )     11,119   (3 )     (144,142 )     (53,446 )                 (53,446 )     148.9 %     169.7 %
Other income (expense)
    (63,354 )     (71,968 ) (3 )     8,614       15,816       10,000   (8 )     5,816       (500.6 %)     48.1 %
Income tax expense
    (116,084 )     48,467   (4 )     (164,551 )     (38,441 )     9,734   (9 )     (48,175 )     202.0 %     241.6 %
                                                                         
INCOME BEFORE NONCONTROLLING
                                                                       
INTERESTS AND EXTRAORDINARY ITEM
    227,877       (59,252 )         287,129       100,371       13,028           87,343       127.0 %     228.7 %
Noncontrolling interests
    (441 )                 (441 )     (299 )                 (299 )     47.5 %     47.5 %
NET INCOME BEFORE EXTRAORDINARY ITEM
    227,436       (59,252 )         286,688       100,072       13,028           87,044       127.3 %     229.4 %
                                                                         
Extraordinary item
    2,744       2,744   (5 )     -       -                   -       -       -  
NET INCOME ATTRIBUTABLE TO CENTURYTEL, INC.
  $ 230,180       (56,508 )         286,688       100,072       13,028           87,044       130.0 %     229.4 %
                                                                         
BASIC EARNINGS PER SHARE
                                                                       
Income before extraordinary item
  $ 0.76       (0.20 )         0.96       1.00       0.13           0.87       (24.0 %)     10.3 %
Extraordinary item
  $ 0.01       0.01           -       -       -           -       -       -  
Basic earnings per share
  $ 0.77       (0.19 )         0.96       1.00       0.13           0.87       (23.0 %)     10.3 %
                                                                         
DILUTED EARNINGS PER SHARE
                                                                       
Income before extraordinary item
  $ 0.76       (0.20 )         0.95       1.00       0.13           0.87       (24.0 %)     9.2 %
Extraordinary item
  $ 0.01       0.01           -       -       -           -       -       -  
Diluted earnings per share
  $ 0.77       (0.19 )         0.95       1.00       0.13           0.87       (23.0 %)     9.2 %
                                                                         
AVERAGE SHARES OUTSTANDING
                                                                       
Basic
    298,580                   298,580       98,883                   98,883       202.0 %     202.0 %
Diluted
    299,233                   299,233       98,920                   98,920       202.5 %     202.5 %
                                                                         
DIVIDENDS PER COMMON SHARE
  $ 0.70                   0.70       0.70                   0.70       -       -  

NONRECURRING ITEMS
(1) -
Pursuant to business combination accounting rules, certain deferred revenues and costs we assumed in our Embarq acquisition were assigned no fair value and have been eliminated from the balance sheet.  The above adjustment represents the revenues (and an equivalent amount of costs) that were eliminated in our fourth quarter results that are attributable to the third quarter of 2009.
(2) -
Includes integration costs associated with our acquistion of Embarq ($31.9 million); costs associated with a legal settlement ($8.0 million); accelerated recognition of share-based compensation and pension expense ($5.5 million) and severance and related costs due to workforce reductions ($1.5 million).  Such increases were partially offset by the $10.4 million of costs eliminated in our fourth quarter results that were attibutable to the third quarter of 2009 (as described in (1) above).
(3) -
Impact of debt extinguishments.
(4) -
Income tax effect of Items (1) through (3).  Also includes a $15.7 million benefit due to the recognition of previously unrecognized tax benefits and other tax adjustments and a $5.0 million charge related to an adjustment to existing legacy CenturyTel deferred income tax liabilities due to apportionment factor changes as a result of the Embarq acquisition.
(5) -
Adjust tax effect of extraordinary gain recognized in third quarter 2009 related to the discontinuance of regulatory accounting.
(6) -
Severance and related costs due to workforce reduction, including revenue impact.
(7) -
Includes costs associated with the pending acquisition of Embarq ($5.0 million) and severance and related costs due to workforce reduction ($.5 million).
(8) -
Recognition of previously accrued transaction related and other contingencies.
(9) -
Includes $12.8 million benefit due to the recognition of previously unrecognized tax benefits, plus the aggregate tax effect of Items (6) through (8).
 
 
 
 
CenturyTel, Inc.
CONSOLIDATED STATEMENTS OF INCOME
TWELVE MONTHS ENDED DECEMBER 31, 2009 AND 2008
(UNAUDITED)


   
Twelve months ended December 31, 2009
   
Twelve months ended December 31, 2008
             
                   
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
  $ 1,827,063                 1,827,063       874,041                 874,041       109.0 %     109.0 %
Network access
    1,269,322       1,028   (1 )     1,268,294       820,383       1,319   (7 )     819,064       54.7 %     54.8 %
Data
    1,202,284                   1,202,284       524,194       21   (7 )     524,173       129.4 %     129.4 %
Fiber transport and CLEC
    172,541                   172,541       162,050                   162,050       6.5 %     6.5 %
Other
    503,029                   503,029       219,079                   219,079       129.6 %     129.6 %
      4,974,239       1,028           4,973,211       2,599,747       1,340           2,598,407       91.3 %     91.4 %
                                                                         
OPERATING EXPENSES
                                                                       
Cost of services and products
    1,752,087       5,704   (2 )     1,746,383       955,473       1,483   (8 )     953,990       83.4 %     83.1 %
Selling, general and administrative
    1,014,341       270,030   (2 )     744,311       399,136       13,185   (9 )     385,951       154.1 %     92.9 %
Depreciation and amortization
    974,710                   974,710       523,786                   523,786       86.1 %     86.1 %
      3,741,138       275,734           3,465,404       1,878,395       14,668           1,863,727       99.2 %     85.9 %
                                                                         
OPERATING INCOME
    1,233,101       (274,706 )         1,507,807       721,352       (13,328 )         734,680       70.9 %     105.2 %
                                                                         
OTHER INCOME (EXPENSE)
                                                                       
Interest expense
    (370,414 )     15,719   (3 )     (386,133 )     (202,217 )                 (202,217 )     83.2 %     90.9 %
Other income (expense)
    (48,175 )     (78,368 ) (4 )     30,193       42,252       22,713   (10 )     19,539       (214.0 %)     54.5 %
Income tax expense
    (301,881 )     127,673   (5 )     (429,554 )     (194,357 )     9,210   (11 )     (203,567 )     55.3 %     111.0 %
                                                                         
INCOME BEFORE NONCONTROLLING
                                                                       
INTERESTS AND EXTRAORDINARY ITEM
    512,631       (209,682 )         722,313       367,030       18,595           348,435       39.7 %     107.3 %
Noncontrolling interests
    (1,377 )                 (1,377 )     (1,298 )                 (1,298 )     6.1 %     6.1 %
NET INCOME BEFORE EXTRAORDINARY ITEM
    511,254       (209,682 )         720,936       365,732       18,595           347,137       39.8 %     107.7 %
Extraordinary items, net of income tax expense and
                                                                       
noncontrolling interests
    135,957       135,957   (6 )     -       -                       -       -       -  
NET INCOME ATTRIBUTABLE TO CENTURYTEL, INC.
  $ 647,211       (73,725 )         720,936       365,732       18,595           347,137       77.0 %     107.7 %
                                                                         
BASIC EARNINGS PER SHARE
                                                                       
Income before extraordinary item
  $ 2.55       (1.05 )         3.60       3.53       0.18           3.35       (27.8 %)     7.5 %
Extraordinary item
  $ 0.68       0.68           -       -       -           -       -       -  
Basic earnings per share
  $ 3.23       (0.37 )         3.60       3.53       0.18           3.35       (8.5 %)     7.5 %
                                                                         
DILUTED EARNINGS PER SHARE
                                                                       
Income before extraordinary item
  $ 2.55       (1.05 )         3.60       3.52       0.18           3.35       (27.6 %)     7.5 %
Extraordinary item
  $ 0.68       0.68           -       -       -           -       -       -  
Diluted earnings per share
  $ 3.23       (0.37 )         3.60       3.52       0.18           3.35       (8.2 %)     7.5 %
                                                                         
AVERAGE SHARES OUTSTANDING
                                                                       
Basic
    198,813                   198,813       102,268                   102,268       94.4 %     94.4 %
Diluted
    199,057                   199,057       102,560                   102,560       94.1 %     94.1 %
                                                                         
DIVIDENDS PER COMMON SHARE
  $ 2.80                   2.80       2.1675                   2.1675       29.2 %     29.2 %


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 ($133.5 million); (ii) severance, retention and contractual early retirement benefits related to workforce reductions ($98.9 million); (iii)  accelerated recognition of share-based compensation expense ($21.3 million) and (iv) settlement expense related to a supplemental executive retirement plan ($10.1 million).  Also includes (i) curtailment expense related to a supplemental executive retirement plan ($7.7 million); (ii) costs associated with legal settlements ($11.1 million) and (iii) a $6.9 million expense reduction from the favorable resolution of certain transaction tax audit issues.
(3) -
Includes impact of debt extinguishments ($11.1 million) and favorable resolution of transaction tax audit issues ($4.6 million).
(4) -
Includes impact of debt extinguishments ($72.0 million), 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) -
Income tax effect of Items (1) through (4).  Also includes a $15.7 million benefit due to the recognition of previously unrecognized tax benefits and other tax adjustments; a $5.8 million income tax benefit caused by a reduction to our deferred tax valuation allowance; net of $6.7 million income tax expense due to the nondeductible portion of settlement payments related to a supplemental pension plan and $5.0 million of additional tax expense to adjust legacy CenturyTel's existing deferred income tax liabilities due to apportionment factor changes as a result of the Embarq acquisition.
(6) -
Extraordinary gain upon the discontinuance of regulatory accounting, net of income tax expense and noncontrolling interests.
(7) -
Revenue impact of curtailment loss related to Supplemental Executive Retirement Plan ($1.0 million) and revenue impact of severance and related costs due to workforce reductions ($.3 million).
(8) -
Severance and related costs due to workforce reductions.
(9) -
Includes curtailment loss related to Supplemental Executive Retirement Plan ($7.7 million), costs associated with pending acquisition of Embarq ($5.0 million) and severance and related costs due to workforce reductions ($.5 million).
(10) -
Includes recognition of previously accrued transaction related and other contingencies ($10 million); gain on the sales of non-core assets ($7.3 million); gain upon liquidation of Supplemental Executive Retirement Plan trust assets ($4.5 million) and interest income recorded upon the resolution of certain income tax audit issues  ($.9 million).
(11) -
Includes $12.8 million benefit due to the recognition of previously unrecognized tax benefits and $1.8 million income tax benefit recorded upon the resolution of certain income tax audit issues; net of $5.3 million net income tax expense related to Items (7) through (10).

 
 
 

CenturyTel, Inc.
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 2009 AND DECEMBER 31, 2008
(UNAUDITED)


   
December 31,
   
December 31,
 
   
2009
   
2008
 
   
(in thousands)
 
 ASSETS
           
CURRENT ASSETS
           
Cash and cash equivalents
  $ 161,807       243,327  
Other current assets
    878,465       312,080  
    Total current assets
    1,040,272       555,407  
                 
NET PROPERTY, PLANT AND EQUIPMENT
               
Property, plant and equipment
    15,556,763       8,868,451  
Accumulated depreciation
    (6,459,624 )     (5,972,559 )
    Net property, plant and equipment
    9,097,139       2,895,892  
                 
GOODWILL AND OTHER ASSETS
               
Goodwill
    10,251,758       4,015,674  
Other
    2,090,241       787,222  
    Total goodwill and other assets
    12,341,999       4,802,896  
                 
                 
TOTAL ASSETS
  $ 22,479,410       8,254,195  
                 
                 
                 LIABILITIES AND EQUITY
               
CURRENT LIABILITIES
               
Current maturities of long-term debt
  $ 500,065       20,407  
Other current liabilities
    1,238,711       437,983  
    Total current liabilities
    1,738,776       458,390  
                 
LONG-TERM DEBT
    7,253,653       3,294,119  
DEFERRED CREDITS AND OTHER LIABILITIES
    4,020,182       1,333,878  
STOCKHOLDERS' EQUITY
    9,466,799       3,167,808  
                 
TOTAL LIABILITIES AND EQUITY
  $ 22,479,410       8,254,195  
 
 
 
 
CenturyTel, Inc.
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
(UNAUDITED)


   
Three months ended December 31, 2009
   
Three months ended December 31, 2008
 
               
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
  $ 540,338       (46,870 ) (1)     587,208       176,442       (6,706 ) (4)     183,148  
Add:  Depreciation and amortization
    356,384       -       356,384       128,796       -       128,796  
Operating cash flow
  $ 896,722       (46,870 )     943,592       305,238       (6,706 )     311,944  
                                                 
Revenues
  $ 1,829,060       (10,364 ) (2)     1,839,424       642,954       307  (5)     642,647  
                                                 
Operating income margin (operating income divided by revenues)
    29.5 %             31.9 %     27.4 %             28.5 %
                                                 
Operating cash flow margin (operating cash flow divided by revenues)
    49.0 %             51.3 %     47.5 %             48.5 %
                                                 
                                                 
Free cash flow (prior to debt service requirements and dividends)
                                               
Net income before extraordinary item
  $ 227,436       (59,252 ) (3)     286,688       100,072       13,028  (6)     87,044  
Add:  Depreciation and amortization
    356,384       -       356,384       128,796       -       128,796  
Less:  Capital expenditures
    (337,417 )     -       (337,417 ) (7)     (101,813 )     -       (101,813 )
Free cash flow
  $ 246,403       (59,252 )     305,655       127,055       13,028       114,027  
                                                 
Free cash flow
  $ 246,403                       127,055                  
Gain on asset dispositions
    -                       -                  
Deferred income taxes
    115,713                       43,561                  
Changes in current assets and current liabilities
    (173,223 )                     (20,636 )                
(Increase) decrease in other noncurrent assets
    (1,800 )                     3,636                  
Increase (decrease) in other noncurrent liabilities
    54,143                       (23,583 )                
Retirement benefits
    18,186                       (47,412 )                
Excess tax benefits from share-based compensation
    (3,089 )                     (336 )                
Other, net
    18,205                       1,969                  
Add:  Capital expenditures
    337,417                       101,813                  
Net cash provided by operating activities
  $ 611,955                       186,067                  


NONRECURRING ITEMS
(1) -
Includes integration costs associated with our acquistion of Embarq ($31.9 million); costs associated with a legal settlement ($8.0 million); accelerated recognition of share-based compensation and pension expense ($5.5 million); and severance and related costs due to workforce reduction ($1.5 million).
(2) -
Revenues eliminated in fourth quarter 2009 attributable to the third quarter of 2009 pursuant to business combination accounting rules related to deferred revenues.
(3) -
Includes the unfavorable after-tax impact of items (1) and (2) ($29.2 million) and the after-tax charge associated with debt extinguishments ($37.9 million).  Also includes a net income tax benefit of $7.8 million due to the recognition of previously unrecognized tax benefits and an adjustment to existing deferred income tax liabilities due to apportionment factors changes as a result of the Embarq acquisition and other tax-related adjustments.
(4) -
Includes costs associated with the pending acquisition of Embarq ($5.0 million) and severance and related costs due to workforce reduction, including revenue impact  ($1.7 million).
(5) -
Revenue effect of severance and related costs due to workforce reduction.
(6) -
Includes $12.8 million income tax benefit due to the recognition of previously unrecognized tax benefits and $6.3 million after-tax benefit related to the recognition of previously accrued transaction related and other contingencies, net of the after-tax effects of costs associated with the pending acquisition of Embarq ($5.0 million) and severance and related costs due to workforce reductions, including revenue impact ($1.1 million).
(7) -
Includes $28.1 million of capital expenditures related to the integration of Embarq.  Excluding these costs, free cash flow was $333.7 million for the three months ended December 31, 2009.
 
 
 
 
CenturyTel, Inc.
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
(UNAUDITED)


   
Twelve months ended December 31, 2009
   
Twelve months ended December 31, 2008
 
               
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
  $ 1,233,101       (274,706 ) (1)     1,507,807       721,352       (13,328 ) (4)     734,680  
Add:  Depreciation and amortization
    974,710       -       974,710       523,786       -       523,786  
Operating cash flow
  $ 2,207,811       (274,706 )     2,482,517       1,245,138       (13,328 )     1,258,466  
                                                 
Revenues
  $ 4,974,239       1,028  (2)     4,973,211       2,599,747       1,340  (5)     2,598,407  
                                                 
Operating income margin (operating income divided by revenues)
    24.8 %             30.3 %     27.7 %             28.3 %
                                                 
Operating cash flow margin (operating cash flow divided by revenues)
    44.4 %             49.9 %     47.9 %             48.4 %
                                                 
                                                 
Free cash flow (prior to debt service requirements and dividends)
                                               
Net income before extraordinary item
  $ 511,254       (209,682 ) (3)     720,936       365,732       18,595  (6)     347,137  
Add:  Depreciation and amortization
    974,710       -       974,710       523,786       -       523,786  
Less:  Capital expenditures
    (754,544 )     -       (754,544 ) (7)     (286,817 )     -       (286,817 )
    $ 731,420       (209,682 )     941,102       602,701       18,595       584,106  
                                                 
Free cash flow
  $ 731,420