Louisiana
|
1-7784
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72-0651161
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(State or other jurisdiction
|
(Commission
|
(IRS Employer
|
of incorporation)
|
File Number)
|
Identification No.)
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100 CenturyLink Drive
|
|
Monroe, Louisiana
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71203
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(Address of principal executive offices)
|
(Zip Code)
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CenturyLink, Inc.
|
||
Dated: November 2, 2011
|
By: /s/ David D. Cole
|
|
David D. Cole
|
||
Senior Vice President - Controller
|
||
and Operations Support
|
||
Exhibit No. Description
Exhibit 99.1 Press release dated November 2, 2011, reporting third quarter 2011 operating results
|
FOR IMMEDIATE RELEASE:
|
FOR MORE INFORMATION CONTACT:
|
November 2, 2011
|
Tony Davis 318.388.9525
|
tony.davis@centurylink.com
|
●
|
Reported diluted EPS of $0.34, excluding special items, and pro forma Adjusted Diluted EPS of $0.61 (as defined in our supplemental schedules).
|
●
|
Continued track record of strong free cash flow generation of $891 million, excluding special items of $157 million.
|
●
|
Reported operating revenues of $4.596 billion on a consolidated basis, compared to $1.748 billion in third quarter 2010, as a result of the $2.7 billion and $223 million in revenue contributions
from the Qwest and Savvis acquisitions, respectively.
|
●
|
Achieved significant growth in high-speed Internet penetration with a net increase of nearly 57,000 new customers compared to 12,000 in the previous quarter.
|
●
|
Reduced access line loss by more than 20% compared to pro forma third quarter 2010 and more than 15% sequentially.
|
●
|
Demonstrated positive results in integrating legacy Qwest markets into CenturyLink’s proven local model reflected in improved sales momentum across consumer and business products.
|
●
|
Realized early success in cross-selling Savvis managed hosting and cloud services.
|
●
|
Reached milestone of Prismtm TV service availability to 1 million households and grew Prismtm TV subscribers by nearly 25% in third quarter 2011.
|
●
|
Strategic revenues for RMG were $729 million in the quarter, a 2.5% increase over pro forma third quarter 2010. Normalized for allocations between the strategic and legacy revenue classifications and certain one-time
items, the adjusted growth rate is 5.3%.
|
●
|
Generated $2.2 billion in total revenues, a decrease of 6.1% from pro forma third quarter 2010, reflecting the continued decline in legacy services.
|
● |
Grew CenturyLink’s high-speed Internet offerings, adding nearly 57,000 new high-speed Internet customers during the quarter.
|
●
|
Achieved strong Prismtm TV sales during the quarter, with approximately 70% of our PrismTM TV customers subscribing to a triple play bundle.
|
●
|
Improved business sales through expanded product offerings and increased productivity.
|
●
|
Strategic revenues for BMG were $443 million in the quarter, a 2.1% increase over pro forma third quarter 2010. Normalized to exclude low-speed private line services, the adjusted growth rate is 6.6%.
|
●
|
Generated $927 million in total revenues, a decrease of 5.1% from pro forma third quarter 2010 reflecting declines in legacy services and data integration revenues, which more than offset growth in
CenturyLink’s high-bandwidth broadband offerings.
|
●
|
Achieved solid performance in the Federal sector with additional business from the Internal Revenue Service and new business from the Department of Commerce Census Bureau, Federal Mine & Safety
and the U.S. Commission on Civil Rights.
|
●
|
Added nearly 60 frontline sales professionals year-to-date to drive business generation and revenue growth capabilities.
|
●
|
Won additional Managed Trusted Internet Protocol Service (MTIPS) contracts, furthering BMG’s position as a trusted security partner to many Federal agencies.
|
●
|
Strategic revenues for WMG were $573 million in the quarter, a 9.1% increase over pro forma third quarter 2010, driven by wireless carrier bandwidth expansion and Ethernet sales.
|
●
|
WMG generated $979 million in total revenues, a decrease of 3.2% from pro forma third quarter 2010, reflecting the continued decline in legacy services.
|
●
|
As part of the FTTT build-out initiative, WMG completed nearly 1,000 fiber builds during the third quarter, ending the quarter with nearly 8,900 fiber-connected towers and with plans to complete
approximately 900 additional sites by the end of 2011.
|
●
|
Savvis operating revenues were $223 million for the period between the transaction closing date of July 15, 2011 and September 30, 2011, in line with our expectations.
|
●
|
Pro forma operating revenues were $260 million in the quarter, an 8.3% increase from pro forma third quarter 2010. Pro forma total hosting revenues were $196 million, a 12% increase from pro forma third quarter 2010.
|
●
|
Experienced notable third quarter wins in the healthcare and infrastructure outsourcing (ITO) space.
|
●
|
Continued to expand our data center footprint, adding space in two cities in the third quarter, with further expansion planned in three cities in the fourth quarter. Total data center floor space is expected to
be approximately 2 million square feet by year-end 2011.
|
CenturyLink, Inc. | |||||||||||||||||||||||||||||||||||||
CONSOLIDATED STATEMENTS OF INCOME | |||||||||||||||||||||||||||||||||||||
THREE MONTHS ENDED SEPTEMBER 30, 2011 AND 2010 | |||||||||||||||||||||||||||||||||||||
(UNAUDITED) | |||||||||||||||||||||||||||||||||||||
(Dollars in millions, except per share amounts; shares in thousands) | |||||||||||||||||||||||||||||||||||||
Three months ended September 30, 2011
|
Three months ended September 30, 2010
|
||||||||||||||||||||||||||||||||||||
Increase
|
|||||||||||||||||||||||||||||||||||||
As adjusted
|
As adjusted
|
(decrease)
|
|||||||||||||||||||||||||||||||||||
Less
|
excluding
|
Less
|
excluding
|
Increase
|
excluding
|
||||||||||||||||||||||||||||||||
As
|
special
|
special
|
As
|
special
|
special
|
(decrease)
|
special
|
||||||||||||||||||||||||||||||
reported
|
items
|
items
|
reported
|
items
|
items
|
as reported
|
items
|
||||||||||||||||||||||||||||||
OPERATING REVENUES
|
|||||||||||||||||||||||||||||||||||||
Strategic services
|
$ | 1,968 | 1,968 | 515 | 515 | 282.1 | % | 282.1 | % | ||||||||||||||||||||||||||||
Legacy services
|
2,215 | 2,215 | 1,053 | 1,053 | 110.4 | % | 110.4 | % | |||||||||||||||||||||||||||||
Data integration
|
166 | 166 | 39 | 39 | 325.6 | % | 325.6 | % | |||||||||||||||||||||||||||||
Other
|
247 | 247 | 141 | 141 | 75.2 | % | 75.2 | % | |||||||||||||||||||||||||||||
4,596 | - | 4,596 | 1,748 | - | 1,748 | 162.9 | % | 162.9 | % | ||||||||||||||||||||||||||||
OPERATING EXPENSES
|
|||||||||||||||||||||||||||||||||||||
Cost of services and products
|
1,950 | 20 | (1 | ) | 1,930 | 641 | 11 | (3 | ) | 630 | 204.2 | % | 206.3 | % | |||||||||||||||||||||||
Selling, general and administrative
|
870 | 89 | (1 | ) | 781 | 243 | 21 | (3 | ) | 222 | 258.0 | % | 251.8 | % | |||||||||||||||||||||||
Depreciation and amortization
|
1,225 | - | 1,225 | 358 | - | 358 | 242.2 | % | 242.2 | % | |||||||||||||||||||||||||||
4,045 | 109 | 3,936 | 1,242 | 32 | 1,210 | 225.7 | % | 225.3 | % | ||||||||||||||||||||||||||||
OPERATING INCOME
|
551 | (109 | ) | 660 | 506 | (32 | ) | 538 | 8.9 | % | 22.7 | % | |||||||||||||||||||||||||
OTHER INCOME (EXPENSE)
|
|||||||||||||||||||||||||||||||||||||
Interest expense
|
(324 | ) | (324 | ) | (138 | ) | (138 | ) | 134.8 | % | 134.8 | % | |||||||||||||||||||||||||
Other income (expense)
|
7 | 7 | 4 | 4 | 75.0 | % | 75.0 | % | |||||||||||||||||||||||||||||
Income tax expense
|
(94 | ) | 39 | (2 | ) | (133 | ) | (140 | ) | 12 | (4 | ) | (152 | ) | (32.9 | %) | (12.5 | %) | |||||||||||||||||||
NET INCOME
|
$ | 140 | (70 | ) | 210 | 232 | (20 | ) | 252 | (39.7 | %) | (16.7 | %) | ||||||||||||||||||||||||
BASIC EARNINGS PER SHARE
|
$ | 0.23 | (0.11 | ) | 0.34 | 0.76 | (0.07 | ) | 0.83 | (69.7 | %) | (59.0 | %) | ||||||||||||||||||||||||
DILUTED EARNINGS PER SHARE
|
$ | 0.23 | (0.11 | ) | 0.34 | 0.76 | (0.07 | ) | 0.83 | (69.7 | %) | (59.0 | %) | ||||||||||||||||||||||||
AVERAGE SHARES OUTSTANDING
|
|||||||||||||||||||||||||||||||||||||
Basic
|
612,277 | 612,277 | 300,702 | 300,702 | 103.6 | % | 103.6 | % | |||||||||||||||||||||||||||||
Diluted
|
613,686 | 613,686 | 301,386 | 301,386 | 103.6 | % | 103.6 | % | |||||||||||||||||||||||||||||
DIVIDENDS PER COMMON SHARE
|
$ | 0.725 | 0.725 | 0.725 | 0.725 | - | - | ||||||||||||||||||||||||||||||
SPECIAL ITEMS
|
|||||||||||||||||||||||||||||||||||||
(1) - Includes integration, severance, and retention costs associated with our acquisition of Qwest, along with restructuring charges ($65 million); integration and severance costs associated with
our acquisition of Embarq ($24 million); transaction and other costs associated with our acquisition of Savvis ($20 million).
|
|||||||||||||||||||||||||||||||||||||
(2) - Income tax benefit of Item (1).
|
|||||||||||||||||||||||||||||||||||||
(3) - Includes integration costs associated with our acquisition of Embarq ($23 million); severance and related costs due to workforce reductions ($4 million); and transaction
and other costs associated with our acquisition of Qwest ($5 million).
|
|||||||||||||||||||||||||||||||||||||
(4) - Income tax benefit of Item (3).
|
CenturyLink, Inc. | |||||||||||||||||||||||||||||||||
CONSOLIDATED STATEMENTS OF INCOME | |||||||||||||||||||||||||||||||||
NINE MONTHS ENDED SEPTEMBER 30, 2011 AND 2010 | |||||||||||||||||||||||||||||||||
(UNAUDITED) | |||||||||||||||||||||||||||||||||
(Dollars in millions, except per share amounts; shares in thousands) | |||||||||||||||||||||||||||||||||
Nine months ended September 30, 2011
|
Nine months ended September 30, 2010
|
||||||||||||||||||||||||||||||||
Increase
|
|||||||||||||||||||||||||||||||||
As adjusted
|
As adjusted
|
(decrease)
|
|||||||||||||||||||||||||||||||
Less
|
excluding
|
Less
|
excluding
|
Increase
|
excluding
|
||||||||||||||||||||||||||||
As
|
special
|
special
|
As
|
special
|
special
|
(decrease)
|
special
|
||||||||||||||||||||||||||
reported
|
items
|
items
|
reported
|
items
|
items
|
as reported
|
items
|
||||||||||||||||||||||||||
OPERATING REVENUES
|
|||||||||||||||||||||||||||||||||
Strategic
|
$ | 4,244 | 4,244 | 1,524 | 1,524 | 178.5 | % | 178.5 | % | ||||||||||||||||||||||||
Legacy
|
5,471 | 5,471 | 3,256 | 3,256 | 68.0 | % | 68.0 | % | |||||||||||||||||||||||||
Data integration
|
348 | 348 | 122 | 122 | 185.2 | % | 185.2 | % | |||||||||||||||||||||||||
Other
|
635 | 635 | 418 | 418 | 51.9 | % | 51.9 | % | |||||||||||||||||||||||||
10,698 | - | 10,698 | 5,320 | - | 5,320 | 101.1 | % | 101.1 | % | ||||||||||||||||||||||||
OPERATING EXPENSES
|
|||||||||||||||||||||||||||||||||
Cost of services and products
|
4,357 | 60 | (1 | ) | 4,297 | 1,912 | 35 | (5 | ) | 1,877 | 127.9 | % | 128.9 | % | |||||||||||||||||||
Selling, general and administrative
|
2,075 | 344 | (1 | ) | 1,731 | 765 | 75 | (5 | ) | 690 | 171.2 | % | 150.9 | % | |||||||||||||||||||
Depreciation and amortization
|
2,771 | - | 2,771 | 1,069 | 1,069 | 159.2 | % | 159.2 | % | ||||||||||||||||||||||||
9,203 | 404 | 8,799 | 3,746 | 110 | 3,636 | 145.7 | % | 142.0 | % | ||||||||||||||||||||||||
OPERATING INCOME
|
1,495 | (404 | ) | 1,899 | 1,574 | (110 | ) | 1,684 | (5.0 | %) | 12.8 | % | |||||||||||||||||||||
OTHER INCOME (EXPENSE)
|
|||||||||||||||||||||||||||||||||
Interest expense
|
(732 | ) | 5 | (2 | ) | (737 | ) | (416 | ) | (416 | ) | 76.0 | % | 77.2 | % | ||||||||||||||||||
Other income (expense)
|
(4 | ) | (16 | ) | (3 | ) | 12 | 14 | 14 | (128.6 | %) | (14.3 | %) | ||||||||||||||||||||
Income tax expense
|
(293 | ) | 163 | (4 | ) | (456 | ) | (449 | ) | 36 | (6 | ) | (485 | ) | (34.7 | %) | (6.0 | %) | |||||||||||||||
NET INCOME
|
$ | 466 | (252 | ) | 718 | 723 | (74 | ) | 797 | (35.5 | %) | (9.9 | %) | ||||||||||||||||||||
BASIC EARNINGS PER SHARE
|
$ | 0.92 | (0.50 | ) | 1.42 | 2.40 | (0.24 | ) | 2.64 | (61.7 | %) | (46.2 | %) | ||||||||||||||||||||
DILUTED EARNINGS PER SHARE
|
$ | 0.92 | (0.50 | ) | 1.41 | 2.39 | (0.24 | ) | 2.63 | (61.5 | %) | (46.4 | %) | ||||||||||||||||||||
AVERAGE SHARES OUTSTANDING
|
|||||||||||||||||||||||||||||||||
Basic
|
504,919 | 504,919 | 300,058 | 300,058 | 68.3 | % | 68.3 | % | |||||||||||||||||||||||||
Diluted
|
506,063 | 506,063 | 300,663 | 300,663 | 68.3 | % | 68.3 | % | |||||||||||||||||||||||||
DIVIDENDS PER COMMON SHARE
|
$ | 2.175 | 2.175 | 2.175 | 2.175 | - | - | ||||||||||||||||||||||||||
SPECIAL ITEMS
|
|||||||||||||||||||||||||||||||||
(1) - Includes integration, severance, and retention costs associated with our acquisition of Qwest, along with restructuring charges ($316 million); integration and severance costs
associated with our acquisition of Embarq ($79 million); transaction and other costs associated with our acquisition of Savvis ($22 million); net of a favorable settlement of an
operating tax issue ($13 million).
|
|||||||||||||||||||||||||||||||||
(2) - Reflects the interest component of a favorable settlement of an operating tax issue.
|
|||||||||||||||||||||||||||||||||
(3) - Expense associated with terminating a bridge credit facility related to the Savvis acquisition.
|
|||||||||||||||||||||||||||||||||
(4) - Income tax benefit of Items (1) through (3) and a benefit from the reduction of an NOL valuation allowance ($14 million).
|
|||||||||||||||||||||||||||||||||
(5) - Includes integration costs associated with our acquisition of Embarq ($62 million); severance and related costs due to workforce reductions ($33 million); and transaction and other
costs associated with our acquisition of Qwest ($15 million).
|
|||||||||||||||||||||||||||||||||
(6) - Income tax benefit of Item (5), net of a $4 million one-time charge to income tax expense as a result of a change in the tax treatment of Medicare subsidy receipts.
|
CenturyLink, Inc. | ||||||||
CONSOLIDATED BALANCE SHEETS | ||||||||
SEPTEMBER 30, 2011 AND DECEMBER 31, 2010 | ||||||||
(UNAUDITED) | ||||||||
(In millions) | ||||||||
September 30,
|
December 31,
|
|||||||
2011
|
2010
|
|||||||
ASSETS
|
||||||||
CURRENT ASSETS
|
||||||||
Cash and cash equivalents
|
$ | 1,123 | 173 | |||||
Other current assets
|
2,685 | 970 | ||||||
Total current assets
|
3,808 | 1,143 | ||||||
NET PROPERTY, PLANT AND EQUIPMENT
|
||||||||
Property, plant and equipment
|
28,606 | 16,329 | ||||||
Accumulated depreciation
|
(9,316 | ) | (7,575 | ) | ||||
Net property, plant and equipment
|
19,290 | 8,754 | ||||||
GOODWILL AND OTHER ASSETS
|
||||||||
Goodwill
|
21,702 | 10,261 | ||||||
Other
|
11,935 | 1,880 | ||||||
Total goodwill and other assets
|
33,637 | 12,141 | ||||||
TOTAL ASSETS
|
$ | 56,735 | 22,038 | |||||
LIABILITIES AND EQUITY
|
||||||||
CURRENT LIABILITIES
|
||||||||
Current maturities of long-term debt
|
$ | 1,034 | 12 | |||||
Other current liabilities
|
3,703 | 999 | ||||||
Total current liabilities
|
4,737 | 1,011 | ||||||
LONG-TERM DEBT
|
21,142 | 7,316 | ||||||
DEFERRED CREDITS AND OTHER LIABILITIES
|
8,880 | 4,064 | ||||||
STOCKHOLDERS' EQUITY
|
21,976 | 9,647 | ||||||
TOTAL LIABILITIES AND EQUITY
|
$ | 56,735 | 22,038 |
CenturyLink, Inc.
|
||||||||
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
||||||||
NINE MONTHS ENDED SEPTEMBER 30, 2011 AND 2010
|
||||||||
(UNAUDITED)
|
||||||||
(In millions)
|
||||||||
Nine Months
|
Nine Months
|
|||||||
Ended
|
Ended
|
|||||||
September 30, 2011
|
September 30, 2010
|
|||||||
OPERATING ACTIVITIES
|
||||||||
Net income
|
$ | 466 | 723 | |||||
Adjustments to reconcile net income to net cash provided by operating activities:
|
||||||||
Depreciation and amortization | 2,771 | 1,069 | ||||||
Deferred income taxes | 298 | 19 | ||||||
Provision for uncollectible accounts | 94 | 67 | ||||||
Changes in current assets and current liabilities, net | 43 | (145 | ) | |||||
Retirement benefits | (170 | ) | (261 | ) | ||||
Changes in other noncurrent assets and liabilities | 21 | (12 | ) | |||||
Other, net | (50 | ) | 21 | |||||
Net cash provided by operating activities | 3,473 | 1,481 | ||||||
INVESTING ACTIVITIES
|
||||||||
Payments for property, plant and equipment and capitalized software
|
(1,511 | ) | (600 | ) | ||||
Acquisition of Savvis, net of $94 cash acquired
|
(1,671 | ) | - | |||||
Cash acquired in Qwest acquisition, net of $5 cash paid
|
419 | - | ||||||
Other, net
|
14 | 2 | ||||||
Net cash used in investing activities | (2,749 | ) | (598 | ) | ||||
FINANCING ACTIVITIES
|
||||||||
Net proceeds from issuance of long-term debt
|
3,159 | - | ||||||
Payments of long-term debt
|
(1,442 | ) | (14 | ) | ||||
Net payments on credit facility
|
(365 | ) | (181 | ) | ||||
Dividends paid
|
(1,105 | ) | (658 | ) | ||||
Net proceeds from issuance of common stock
|
79 | 54 | ||||||
Repurchase of common stock
|
(31 | ) | (14 | ) | ||||
Other, net
|
(54 | ) | 11 | |||||
Net cash provided by (used in) financing activities | 241 | (802 | ) | |||||
Effect of exchange rate changes on cash and cash equivalents | (15 | ) | - | |||||
Net increase in cash and cash equivalents
|
950 | 81 | ||||||
Cash and cash equivalents at beginning of period
|
173 | 162 | ||||||
Cash and cash equivalents at end of period
|
$ | 1,123 | 243 |
CenturyLink, Inc. | ||||||||||||||||
SELECTED SEGMENT FINANCIAL INFORMATION | ||||||||||||||||
THREE MONTHS AND NINE MONTHS ENDED SEPTEMBER 30, 2011 AND 2010 | ||||||||||||||||
(UNAUDITED) | ||||||||||||||||
(Dollars in millions) | ||||||||||||||||
Three months ended September 30, | Nine months ended September 30, | |||||||||||||||
2011
|
2010
|
2011
|
2010
|
|||||||||||||
Total segment revenues
|
$ | 4,349 | 1,607 | 10,063 | 4,902 | |||||||||||
Total segment expenses
|
2,047 | 613 | 4,456 | 1,803 | ||||||||||||
Total segment income
|
$ | 2,302 | 994 | 5,607 | 3,099 | |||||||||||
Total segment income margin (segment income
divided by segment revenues) |
52.9 | % | 61.9 | % | 55.7 | % | 63.2 | % | ||||||||
Regional Markets Segment
|
||||||||||||||||
Revenues
|
||||||||||||||||
Strategic services
|
$ | 729 | 305 | 1,777 | 903 | |||||||||||
Legacy services
|
1,459 | 812 | 3,725 | 2,493 | ||||||||||||
Data integration
|
32 | 34 | 92 | 107 | ||||||||||||
2,220 | 1,151 | 5,594 | 3,503 | |||||||||||||
Expenses
|
||||||||||||||||
Direct
|
952 | 448 | 2,293 | 1,295 | ||||||||||||
Allocated
|
56 | 10 | 119 | 38 | ||||||||||||
1,008 | 458 | 2,412 | 1,333 | |||||||||||||
Segment income
|
$ | 1,212 | 693 | 3,182 | 2,170 | |||||||||||
Segment income margin
|
54.6 | % | 60.2 | % | 56.9 | % | 61.9 | % | ||||||||
Business Markets Segment
|
||||||||||||||||
Revenues
|
||||||||||||||||
Strategic services
|
$ | 443 | 15 | 899 | 43 | |||||||||||
Legacy services
|
350 | 47 | 758 | 143 | ||||||||||||
Data integration
|
134 | 5 | 256 | 15 | ||||||||||||
927 | 67 | 1,913 | 201 | |||||||||||||
Expenses
|
||||||||||||||||
Direct
|
252 | - | 489 | 1 | ||||||||||||
Allocated
|
318 | 31 | 661 | 89 | ||||||||||||
570 | 31 | 1,150 | 90 | |||||||||||||
Segment income
|
$ | 357 | 36 | 763 | 111 | |||||||||||
Segment income margin
|
38.5 | % | 53.7 | % | 39.9 | % | 55.2 | % | ||||||||
Wholesale Markets Segment
|
||||||||||||||||
Revenues
|
||||||||||||||||
Strategic services
|
$ | 573 | 195 | 1,345 | 578 | |||||||||||
Legacy services
|
406 | 194 | 988 | 620 | ||||||||||||
979 | 389 | 2,333 | 1,198 | |||||||||||||
Expenses
|
||||||||||||||||
Direct
|
44 | 32 | 121 | 105 | ||||||||||||
Allocated
|
253 | 92 | 601 | 275 | ||||||||||||
297 | 124 | 722 | 380 | |||||||||||||
Segment income
|
$ | 682 | 265 | 1,611 | 818 | |||||||||||
Segment income margin
|
69.7 | % | 68.1 | % | 69.1 | % | 68.3 | % | ||||||||
Savvis Operations Segment
|
||||||||||||||||
Revenues | ||||||||||||||||
Strategic services | $ | 223 | - | 223 | - | |||||||||||
Expenses | ||||||||||||||||
Direct
|
$ | 172 | - | 172 | - | |||||||||||
Segment income
|
$ | 51 | - | 51 | - | |||||||||||
Segment income margin
|
22.9 | % | - | 22.9 | % | - |
CenturyLink, Inc.
|
||||||||||||||||||||||||||||
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
|
||||||||||||||||||||||||||||
(UNAUDITED)
|
||||||||||||||||||||||||||||
(Dollars in millions)
|
||||||||||||||||||||||||||||
Three months ended September 30, 2011
|
Three months ended September 30, 2010
|
|||||||||||||||||||||||||||
As adjusted
|
As adjusted
|
|||||||||||||||||||||||||||
Less
|
excluding
|
Less
|
excluding
|
|||||||||||||||||||||||||
As
|
special
|
special
|
As
|
special
|
special
|
|||||||||||||||||||||||
reported
|
items
|
items
|
reported
|
items
|
items
|
|||||||||||||||||||||||
Operating cash flow and cash flow margin
|
||||||||||||||||||||||||||||
Operating income
|
$ | 551 | (109 | ) | (1 | ) | 660 | 506 | (32 | ) | (2 | ) | 538 | |||||||||||||||
Add: Depreciation and amortization
|
1,225 | - | 1,225 | 358 | - | 358 | ||||||||||||||||||||||
Operating cash flow
|
$ | 1,776 | (109 | ) | 1,885 | 864 | (32 | ) | 896 | |||||||||||||||||||
Revenues
|
$ | 4,596 | - | 4,596 | 1,748 | - | 1,748 | |||||||||||||||||||||
Operating income margin (operating income divided by revenues)
|
12.0 | % | 14.4 | % | 28.9 | % | 30.8 | % | ||||||||||||||||||||
Operating cash flow margin (operating cash flow divided by revenues)
|
38.6 | % | 41.0 | % | 49.4 | % | 51.3 | % | ||||||||||||||||||||
Free cash flow
|
||||||||||||||||||||||||||||
Net cash provided by operating activities
|
$ | 1,455 | 600 | |||||||||||||||||||||||||
Less: Capital expenditures
|
(721 | ) | (238 | ) | ||||||||||||||||||||||||
Free cash flow from operations
|
734 | 362 | ||||||||||||||||||||||||||
Special items:
|
||||||||||||||||||||||||||||
Add: Cash paid for transaction, integration, severance, and retention
costs associated with our Qwest, Embarq and Savvis acquisitions
|
157 | 53 | ||||||||||||||||||||||||||
Free cash flow excluding special items
|
$ | 891 | 415 | |||||||||||||||||||||||||
SPECIAL ITEMS
|
||||||||||||||||||||||||||||
(1) - Includes integration, severance, and retention costs associated with our acquisition of Qwest, along with restructuring charges ($65 million); integration and severance costs associated
with our acquisition of Embarq ($24 million); transaction and other costs associated with our acquisition of Savvis ($20 million).
|
||||||||||||||||||||||||||||
(2) - Includes integration costs associated with our acquisition of Embarq ($23 million); severance and related costs due to workforce reductions ($4 million); and transaction and other costs
associated with our pending acquisition of Qwest ($5 million).
|
CenturyLink, Inc.
|
||||||||||||||||||||||||||||
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
|
||||||||||||||||||||||||||||
(UNAUDITED)
|
||||||||||||||||||||||||||||
(Dollars in millions)
|
||||||||||||||||||||||||||||
Nine months ended September 30, 2011
|
Nine months ended September 30, 2010
|
|||||||||||||||||||||||||||
As adjusted
|
As adjusted
|
|||||||||||||||||||||||||||
Less
|
excluding
|
Less
|
excluding
|
|||||||||||||||||||||||||
As
|
special
|
special
|
As
|
special
|
special
|
|||||||||||||||||||||||
reported
|
items
|
items
|
reported
|
items
|
items
|
|||||||||||||||||||||||
Operating cash flow and cash flow margin
|
||||||||||||||||||||||||||||
Operating income
|
$ | 1,495 | (404 | ) | (1 | ) | 1,899 | 1,574 | (110 | ) | (2 | ) | 1,684 | |||||||||||||||
Add: Depreciation and amortization
|
2,771 | - | 2,771 | 1,069 | - | 1,069 | ||||||||||||||||||||||
Operating cash flow
|
$ | 4,266 | (404 | ) | 4,670 | 2,643 | (110 | ) | 2,753 | |||||||||||||||||||
Revenues
|
$ | 10,698 | - | 10,698 | 5,320 | - | 5,320 | |||||||||||||||||||||
Operating income margin (operating income divided by revenues)
|
14.0 | % | 17.8 | % | 29.6 | % | 31.7 | % | ||||||||||||||||||||
Operating cash flow margin (operating cash flow divided by revenues)
|
39.9 | % | 43.7 | % | 49.7 | % | 51.7 | % | ||||||||||||||||||||
Free cash flow
|
||||||||||||||||||||||||||||
Net cash provided by operating activities
|
$ | 3,473 | 1,481 | |||||||||||||||||||||||||
Less: Capital expenditures
|
(1,511 | ) | (600 | ) | ||||||||||||||||||||||||
Free cash flow from operations
|
1,962 | 881 | ||||||||||||||||||||||||||
Special items:
|
||||||||||||||||||||||||||||
Add: Cash paid for transaction, integration, severance,
and retention costs associated with our Qwest, Embarq
and Savvis acquisitions
|
379 | 134 | ||||||||||||||||||||||||||
Add: Cash paid for contribution to pension plans
|
100 | 300 | ||||||||||||||||||||||||||
Free cash flow excluding special items
|
$ | 2,441 | 1,315 | |||||||||||||||||||||||||
SPECIAL ITEMS
|
||||||||||||||||||||||||||||
(1) - Includes integration, severance, and retention costs associated with our acquisition of Qwest, along with restructuring charges ($316 million); integration and
severance costs associated with our acquisition of Embarq ($79 million); transaction and other costs associated with our acquisition of Savvis ($22 million); net
of a favorable settlement of an operating tax issue ($13 million).
|
||||||||||||||||||||||||||||
(2) - Includes integration costs associated with our acquisition of Embarq ($62 million); severance and related costs due to workforce reductions ($33 million); and
transaction and other costs associated with our pending acquisition of Qwest ($15 million).
|
CenturyLink, Inc.
|
||||||||||||||||||||||
SUPPLEMENTAL PRO FORMA INFORMATION - ADJUSTED DILUTED EPS
|
||||||||||||||||||||||
2010 AND 2011
|
||||||||||||||||||||||
(UNAUDITED)
|
||||||||||||||||||||||
(In millions, except per share amounts)
|
||||||||||||||||||||||
Pro Forma*
|
Pro Forma*
|
Pro Forma*
|
Pro Forma*
|
Pro Forma*
|
Proforma*
|
Proforma*
|
||||||||||||||||
Three months
|
Three months
|
Three months
|
Three months
|
Three months
|
Three months
|
Three months
|
||||||||||||||||
ended
|
ended
|
ended
|
ended
|
ended
|
ended
|
ended
|
||||||||||||||||
March 31, 2010
|
June 30, 2010
|
September 30, 2010
|
December 31, 2010
|
March 31, 2011
|
June 30, 2011
|
September 30, 2011
|
||||||||||||||||
(excluding
|
(excluding
|
(excluding
|
(excluding
|
(excluding
|
(excluding
|
(excluding
|
||||||||||||||||
special items)
|
special items)
|
special items)
|
special items)
|
special items)
|
special items)
|
special items)
|
||||||||||||||||
Net income
|
$ | 332 | 285 | 283 | 285 | 306 | 246 | 204 | ||||||||||||||
Addback:
|
||||||||||||||||||||||
Amortization of customer base intangibles:
|
||||||||||||||||||||||
Qwest
|
260 | 257 | 253 | 249 | 246 | 260 | 257 | |||||||||||||||
Embarq
|
49 | 48 | 44 | 44 | 44 | 44 | 39 | |||||||||||||||
Savvis
|
19 | 19 | 19 | 19 | 19 | 19 | 19 | |||||||||||||||
Amortization of trademark intangibles - Qwest
|
21 | 20 | 19 | 18 | 16 | 21 | 20 | |||||||||||||||
Amortization of fair value adjustment of
long-term debt:
|
||||||||||||||||||||||
Embarq
|
1 | - | 1 | 1 | 1 | 1 | 1 | |||||||||||||||
Qwest
|
(81 | ) | (78 | ) | (75 | ) | (60 | ) | (44 | ) | (67 | ) | (56 | ) | ||||||||
Subtotal
|
269 | 266 | 261 | 271 | 282 | 278 | 280 | |||||||||||||||
Tax effect of above items
|
(102 | ) | (101 | ) | (99 | ) | (103 | ) | (107 | ) | (108 | ) | (109 | ) | ||||||||
Net adjustment, after taxes
|
167 | 165 | 162 | 168 | 175 | 170 | 171 | |||||||||||||||
Net income, as adjusted for above items
|
$ | 499 | 450 | 445 | 453 | 481 | 416 | 375 | ||||||||||||||
Weighted average diluted shares outstanding
|
602.9 | 607.4 | 602.4 | 605.9 | 614.1 | 614.5 | 616.6 | |||||||||||||||
Diluted EPS (excluding special items)
|
$ | 0.55 | 0.47 | 0.47 | 0.47 | 0.50 | 0.40 | 0.33 | ||||||||||||||
|
||||||||||||||||||||||
Adjusted diluted EPS as adjusted for
purchase accounting intangible and
interest amortizations (excluding
special items)
|
$ | 0.82 | 0.74 | 0.73 | 0.74 | 0.78 | 0.68 | 0.61 | ||||||||||||||
*The pro forma information presented above reflects the operations of CenturyLink, Qwest and Savvis assuming their respective results of operations
had been combined as of January 1, 2010. Pro forma adjustments include (i) the elimination of intercompany billings and the elimination of certain
deferred revenues and costs; (ii) the elimination of certain components of pension and postretirement benefit costs; (iii) the amortization of the
fair value preliminarily assigned to intangible assets (primarily customer relationship and software); (iv) adjustments to depreciation to reflect
the fair value preliminarily assigned to property, plant and equipment; (v) adjustments to interest expense to reflect valuing debt at fair value;
and (vi) the related income tax effects. The above proforma information (i) has not been prepared in accordance with generally accepted
accounting principles, (ii) is for illustrative purposes only, and (iii) is not necessarily indicative of the the combined operating results that
would have occurred if the Qwest and Savvis mergers had been consummated as of January 1, 2010.
|
CenturyLink, Inc. | |||||||||||||||
PRO FORMA STATEMENTS OF INCOME | |||||||||||||||
PRO FORMA THREE MONTHS ENDED SEPTEMBER 30, 2011, THREE MONTHS ENDED JUNE 30, 2011 AND SEPTEMBER 30, 2010 | |||||||||||||||
(UNAUDITED) | |||||||||||||||
(Dollars in millions, except per share amounts, shares in thousands) | |||||||||||||||
Pro forma*
|
Pro forma*
|
Pro forma*
|
|||||||||||||
Three months | Three months | Three months | |||||||||||||
ended
|
ended
|
ended
|
|||||||||||||
September 30, 2011 | June 30, 2011 | September 30, 2010 | |||||||||||||
(excluding
|
(excluding
|
(excluding
|
|||||||||||||
special items) | special items) | special items) | |||||||||||||
OPERATING REVENUES
|
|||||||||||||||
Strategic
|
$ | 2,005 | 1,990 | 1,910 | |||||||||||
Legacy
|
2,215 | 2,265 | 2,484 | ||||||||||||
Data integration
|
166 | 151 | 197 | ||||||||||||
Other
|
247 | 263 | 266 | ||||||||||||
4,633 | 4,669 | 4,857 | |||||||||||||
OPERATING EXPENSES
|
|||||||||||||||
Cash expenses
|
2,739 | 2,690 |
(A)
|
2,785 |
(D)
|
||||||||||
Depreciation and amortization
|
1,240 | 1,244 | 1,232 | ||||||||||||
3,979 | 3,934 | 4,017 | |||||||||||||
OPERATING INCOME
|
654 | 735 | 840 | ||||||||||||
OTHER INCOME (EXPENSE)
|
|||||||||||||||
Interest expense
|
(327 | ) | (317 | ) |
(B)
|
(354 | ) | ||||||||
Other income (expense)
|
7 | 2 |
(C)
|
- |
(E)
|
||||||||||
Income tax expense
|
(130 | ) | (174 | ) |
(F)
|
(203 | ) |
(F)
|
|||||||
NET INCOME
|
$ | 204 | 246 | 283 | |||||||||||
DILUTED EARNINGS PER SHARE
|
$ | 0.33 | 0.40 | 0.47 | |||||||||||
WEIGHTED AVERAGE DILUTED SHARES OUTSTANDING | 616,560 | 614,529 | 602,424 | ||||||||||||
OPERATING CASH FLOW
|
|||||||||||||||
Operating income
|
$ | 654 | 735 | 840 | |||||||||||
Add: Depreciation and amortization
|
1,240 | 1,244 | 1,232 | ||||||||||||
Operating cash flow
|
$ | 1,894 | 1,979 | 2,072 | |||||||||||
Pro forma**
|
|||||||||||||||
As of
|
As of
|
as of
|
|||||||||||||
OPERATING METRICS
|
September 30, 2011 | June 30, 2011 | September 30, 2010 |
|
|||||||||||
Broadband subscribers
|
5,484 | 5,427 | 5,272 | ||||||||||||
Access lines
|
14,803 | 15,057 | 15,936 | ||||||||||||
*The pro forma information presented above reflects the operations of CenturyLink, Qwest and Savvis assuming their respective results of operations
|
|||||||||||||||
had been combined as of January 1, 2010. Pro forma adjustments include (i) the elimination of intercompany billings and the elimination of certain
|
|||||||||||||||
deferred revenues and costs; (ii) the elimination of certain components of pension and postretirement benefit costs; (iii) the amortization of the
|
|||||||||||||||
fair value preliminarily assigned to intangible assets (primarily customer relationship and software); (iv) adjustments to depreciation to reflect
|
|||||||||||||||
the fair value preliminarily assigned to property, plant and equipment; (v) adjustments to interest expense to reflect valuing debt at fair value;
|
|||||||||||||||
and (vi) the related income tax effects. The above proforma information (i) has not been prepared in accordance with generally accepted
|
|||||||||||||||
accounting principles, (ii) is for illustrative purposes only, and (iii) is not necessarily indicative of the the combined operating results that
|
|||||||||||||||
would have occurred if the Qwest and Savvis mergers had been consummated as of January 1, 2010.
|
|||||||||||||||
**The pro forma operating metrics presented above reflects the broadband subscribers and access lines of CenturyLink and Qwest as though
the companies had been combined as of January 1, 2010 after conforming the definitions of broadband subscribers and access lines between the
two companies.
|
|||||||||||||||
|
|||||||||||||||
Summary description of special items for Second Quarter 2011 and Third Quarter 2010 excluded from above schedule:
|
|||||||||||||||
(A)
|
Integration, transaction and severance costs associated with the Qwest, Embarq and Savvis acquisitions incurred by CenturyLink and realignment,
severance and merger related costs incurred by Qwest, net of a favorable settlement of an operating tax issue ($263 million).
|
||||||||||||||
(B)
|
Interest component of a favorable settlement of an operating tax issue ($5 million)
|
||||||||||||||
(C)
|
Expense associated with terminating a bridge credit facility related to the Savvis acquisition ($16 million).
|
||||||||||||||
(D)
|
Integration, transaction and severance costs associated with the Qwest and Embarq acquisitions incurred by CenturyLink and realignment,
severance and merger related costs incurred by Qwest ($103 million).
|
||||||||||||||
(E)
|
Loss on embedded option in convertible debt incurred by Qwest ($232 million).
|
||||||||||||||
(F)
|
Tax effect of above items ($111 million for second quarter 2011 and $36 million for third quarter 2010).
|
CenturyLink, Inc. | ||||||||
SUPPLEMENTAL PRO FORMA SEGMENT DATA | ||||||||
PRO FORMA THREE MONTHS ENDED SEPTEMBER 30, 2011 AND THREE MONTHS ENDED SEPTEMBER 30, 2010 | ||||||||
ASSUMING CENTURYLINK'S ACQUISITIONS OF QWEST AND SAVVIS OCCURRED JANUARY 1, 2010 | ||||||||
(UNAUDITED) | ||||||||
(Dollars in millions) | ||||||||
Pro forma*
|
Pro forma*
|
|||||||
Three months
|
Three months | |||||||
ended
|
ended
|
|||||||
September 30, 2011
|
September 30, 2010
|
|||||||
Total segment revenues
|
$ | 4,386 | 4,591 | |||||
Total segment expenses
|
2,075 | 2,107 | ||||||
Total segment income
|
$ | 2,311 | 2,484 | |||||
Total segment income margin (segment
income divided by segment revenues)
|
52.7 | % | 54.1 | % | ||||
Regional Markets Segment
|
||||||||
Revenues
|
||||||||
Strategic services
|
$ | 729 | 711 | |||||
Legacy services
|
1,459 | 1,615 | ||||||
Data integration
|
32 | 37 | ||||||
2,220 | 2,363 | |||||||
Expenses
|
||||||||
Direct
|
952 | 948 | ||||||
Allocated
|
56 | 95 | ||||||
1,008 | 1,043 | |||||||
Segment income
|
$ | 1,212 | 1,320 | |||||
Segment income margin
|
54.6 | % | 55.9 | % | ||||
Business Markets Segment
|
||||||||
Revenues
|
||||||||
Strategic services
|
$ | 443 | 434 | |||||
Legacy services
|
350 | 383 | ||||||
Data integration
|
134 | 160 | ||||||
927 | 977 | |||||||
Expenses
|
||||||||
Direct
|
252 | 266 | ||||||
Allocated
|
318 | 311 | ||||||
570 | 577 | |||||||
Segment income
|
$ | 357 | 400 | |||||
Segment income margin
|
38.5 | % | 40.9 | % | ||||
Wholesale Markets Segment
|
||||||||
Revenues
|
||||||||
Strategic services
|
$ | 573 | 525 | |||||
Legacy services
|
406 | 486 | ||||||
979 | 1,011 | |||||||
Expenses
|
||||||||
Direct
|
44 | 42 | ||||||
Allocated
|
253 | 256 | ||||||
297 | 298 | |||||||
Segment income
|
$ | 682 | 713 | |||||
Segment income margin
|
69.7 | % | 70.5 | % | ||||
Savvis Operations Segment
|
||||||||
Revenues
|
||||||||
Strategic services
|
$ | 260 | 240 | |||||
Expenses
|
||||||||
Direct
|
200 | 189 | ||||||
Segment income
|
$ | 60 | 51 | |||||
Segment income margin
|
23.1 | % | 21.3 | % |
* For additional information regarding this pro forma information, including related pro forma adjustments, please see the immediately preceding supplemental schedule.
|
||||||||
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