MONROE, La., Feb. 19 /PRNewswire-FirstCall/ -- CenturyTel, Inc. (NYSE: CTL) announces operating results for fourth quarter 2008.
-- Operating revenues, excluding nonrecurring items, declined 2.3% to
$642.6 million from $657.8 million in fourth quarter 2007. Operating
revenues, reported under GAAP, were $643.0 million.
-- Operating cash flow (as defined in the attached financial schedules),
excluding nonrecurring items, decreased 3.0% to $311.9 million from
$321.5 million in fourth quarter 2007.
-- Net income, excluding nonrecurring items, declined 3.1% to $87.0 million
from $89.8 million in fourth quarter 2007. Net income, reported under
GAAP, was $100.1 million compared to $115.0 million in fourth quarter
2007.
-- Diluted earnings per share, excluding nonrecurring items, increased 7.3%
to $.88 from $.82 in fourth quarter 2007, while GAAP diluted earnings
per share was $1.01 in fourth quarter 2008 and $1.04 in fourth quarter
2007.
-- Free cash flow (as defined in the attached financial schedules),
excluding nonrecurring items, was $114.0 million in fourth quarter 2008
and a record $584.1 million for full year 2008.
Fourth Quarter Highlights
(Excluding nonrecurring Quarter Ended Quarter Ended % Change
items reflected in the 12/31/08 12/31/07
attached financial
schedules)
(In thousands, except
per share amounts and
subscriber data)
Operating Revenues $642,647 $657,846 (2.3)%
Operating Cash Flow (1) $311,944 $321,472 (3.0)%
Net Income $87,044 $89,822 (3.1)%
Diluted Earnings Per
Share $.88 $.82 7.3%
Average Diluted Shares
Outstanding 99,228 110,119 (9.9)%
Capital Expenditures $101,813 $141,744 (28.2)%
Access Lines 1,998,000 2,135,000 (6.4)%
High-Speed Internet
Customers 641,000 555,000 15.5%
(1) Operating Cash Flow is a non-GAAP financial measure. A
reconciliation of this item to comparable GAAP measures is included in
the attached financial schedules.
"CenturyTel achieved record free cash flow of more than $584 million during 2008 driven by solid revenue performance in a challenging economy, a diligent focus on cost containment and prudent capital investment," Glen F. Post, III, chairman and chief executive officer, said. "We are working diligently toward completion of the EMBARQ acquisition which we believe represents a great strategic combination that will diversify our markets. Our combined high-quality broadband networks and IT systems, along with our enhanced financial and operational scale should provide significant advantages for our customers."
Operating revenues, excluding nonrecurring items, declined 2.3% to $642.6 million in fourth quarter 2008 from $657.8 million in fourth quarter 2007. Revenue increases during the quarter of approximately $17 million resulted primarily from growth associated with the 15.5% increase in high-speed Internet customers. These increases were more than offset by revenue declines of approximately $32 million primarily attributable to previously anticipated access line losses and lower access revenues.
Operating expenses, excluding nonrecurring items, decreased 3.0% to $459.5 million from $473.9 million in fourth quarter 2007 as lower cash expenses and lower depreciation expense due to fully depreciated assets more than offset increased costs associated with the growth in high-speed Internet customers.
"We experienced solid demand for broadband services during 2008 as high-speed Internet customers increased by more than 15% year over year," Post said. "We are also pleased with our business customers' rapid adoption of high bandwidth Ethernet services."
Operating cash flow, excluding nonrecurring items, for fourth quarter 2008 declined 3.0% to $311.9 million from $321.5 million in fourth quarter 2007. CenturyTel achieved an operating cash flow margin, excluding nonrecurring items, of 48.5% during the quarter versus 48.9% in fourth quarter 2007.
Other income, excluding nonrecurring items, of $5.5 million for fourth quarter 2008 was $2.9 million lower than during fourth quarter 2007 primarily due to favorable 2006 audit adjustments recorded in fourth quarter 2007 related to a cellular partnership in which we own a 49% interest.
Net income, excluding nonrecurring items, was $87.0 million, a 3.1% decrease from $89.8 million in fourth quarter 2007. Diluted earnings per share, excluding nonrecurring items, increased 7.3% to $.88 in fourth quarter 2008 compared to $.82 in fourth quarter 2007 due to the items discussed above and the reduction in diluted shares outstanding as a result of share repurchases.
For the year 2008, operating revenues, excluding nonrecurring items, were $2.598 billion compared to $2.606 billion in 2007, a 0.3% decrease. Operating cash flow, excluding nonrecurring items, was $1.258 billion for 2008 compared to $1.292 billion for 2007. Net income, excluding nonrecurring items, was $347.1 million compared to $354.3 million in 2007, while diluted earnings per share was $3.37 compared to $3.16 in 2007.
Under generally accepted accounting principles (GAAP), net income for fourth quarter 2008 was $100.1 million compared to $115.0 million for fourth quarter 2007. Diluted earnings per share was $1.01 in fourth quarter 2008 compared to $1.04 in fourth quarter 2007. Fourth quarter 2008 results reflect a $12.8 million tax benefit due to the recognition of previously unrecognized tax benefits in accordance with FIN 48 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 pending acquisition of EMBARQ. Fourth quarter 2007 results reflect an after-tax benefit of $1.8 million related to hurricane-related insurance reimbursements, an after-tax benefit of $2.4 million related to the liquidation of Rural Telephone Bank stock, and a $32.7 million tax benefit due to the recognition of previously unrecognized tax benefits in accordance with FIN 48, which were partially offset by $12.2 million of after-tax impairment charges associated with certain operating and non-operating investments described further in the attached financial schedules.
Under GAAP, for the year 2008, the Company reported net income of $365.7 million, or $3.56 per diluted share, compared to net income of $418.4 million, or $3.72 per diluted share, for the year 2007. See the accompanying financial schedules for detail of the Company's nonrecurring items for the years 2008 and 2007.
Outlook for 2009. The following 2009 outlook discussion is for CenturyTel only and does not include any benefit or impact of the pending acquisition of EMBARQ. Acquisition-related costs incurred by CenturyTel in 2009 are considered nonrecurring items and are also not included in these 2009 outlooks.
Based on current conditions, for full year 2009, CenturyTel anticipates operating revenues to be modestly lower than 2008 operating revenues. The Company expects revenue increases associated with growth in high-speed Internet and data revenues to be more than offset by revenue declines associated with lower access revenues, reduced universal service funding and access line losses.
For full year 2009, CenturyTel anticipates diluted earnings per share to be in the range of $3.20 to $3.30. The following items are expected to have a positive impact on 2009 diluted earnings per share:
-- anticipated further penetration of broadband service offerings - $.09 to
$.11;
-- anticipated cost containment - $.20 to $.28; and
-- anticipated lower depreciation and interest expense - $.15 to $.17.
The following items are expected to negatively impact 2009 diluted earnings per share:
-- reduced interstate universal service funding - ($.07) to ($.08);
-- non-cash pension expense - ($.12) to ($.13);
-- anticipated access line losses of 5.7% to 6.7% and continued pressure on
access revenues - ($.34) to ($.38); and
-- application of a new accounting pronouncement impacting EPS calculation
- ($.04) to ($.05).
For first quarter 2009, CenturyTel expects total revenues of $628 to $638 million and diluted earnings per share of $.77 to $.81.
Finally, the Company currently expects its capital expenditures in 2009, excluding any EMBARQ-related acquisition, integration or post-closing capital expenditures, to be between $280 and $300 million, in line with 2008 capital expenditures of $287 million.
These 2009 outlook figures exclude the effects of nonrecurring items, any share repurchases made after December 31, 2008, the pending EMBARQ acquisition and any changes in operating or capital plans related thereto, and any future mergers, acquisitions, divestitures or other similar business transactions.
We expect to update our outlook after completing the EMBARQ acquisition. We currently expect to close the transaction during second quarter 2009, subject to the receipt of regulatory approvals and satisfaction of other conditions.
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 866.259.1024. The call will be accessible for replay through February 25, 2009 by calling 888.266.2081 and entering the conference ID number 1324380. Investors can also listen to CenturyTel's earnings conference call and replay through March 11, 2009 by accessing the Investor Relations portion of the Company's Web site at www.centurytel.com.
Certain non-historical statements made in this release and future oral or written statements or press releases by us or our management, in each case as they relate to CenturyTel or EMBARQ, the operations of either such company or our pending merger with EMBARQ, 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 CenturyTel or EMBARQ, and issues relating to our pending merger with EMBARQ, 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 CenturyTel or EMBARQ, the combined company or the pending merger 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 the Federal Communication Commission's proposed rules regarding inter-carrier compensation and the Universal Service Fund described in our recent SEC reports); our ability to effectively adjust to changes in the communications industry; our ability to successfully complete our pending merger with EMBARQ, including timely receiving all regulatory approvals and obtaining related financing; the possibility that the anticipated benefits from the 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 successfully integrating newly-acquired or newly-developed businesses into our operations and 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 $2.80 per common share dividend annually, which may be affected by changes in our cash requirements, capital spending plans, cash flows or financial position; 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 this prospectus or other of 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, 2007, 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.
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 www.centurytel.com.
CenturyTel, Inc.
CONSOLIDATED STATEMENTS OF INCOME
THREE MONTHS ENDED DECEMBER 31, 2008 AND 2007
(UNAUDITED)
Three months ended December 31, 2008
As adjusted
Less excluding
non- non-
In thousands, except per As recurring recurring
share amounts reported items items
OPERATING REVENUES
Voice $215,407 215,407
Network access 198,396 307(1) 198,089
Data 133,731 133,731
Fiber transport and CLEC 41,245 41,245
Other 54,175 54,175
642,954 307 642,647
OPERATING EXPENSES
Cost of services and products 235,792 1,483(1) 234,309
Selling, general and
administrative 101,924 5,530(2) 96,394
Depreciation and amortization 128,796 128,796
466,512 7,013 459,499
OPERATING INCOME 176,442 (6,706) 183,148
OTHER INCOME (EXPENSE)
Interest expense (53,446) (53,446)
Other income (expense) 15,517 10,000(3) 5,517
Income tax expense (38,441) 9,734(4) (48,175)
NET INCOME $100,072 13,028 87,044
BASIC EARNINGS PER SHARE $1.01 0.13 0.88
DILUTED EARNINGS PER SHARE $1.01 0.13 0.88
AVERAGE SHARES OUTSTANDING
Basic 98,883 98,883
Diluted 99,228 99,228
DIVIDENDS PER COMMON SHARE $0.7000 0.7000
Three months ended December 31, 2007
As adjusted Increase
Less excluding (decrease)
In thousands, non- non- Increase excluding
except per As recurring recurring (decrease) nonrecurring
share amounts reported items items as reported items
OPERATING REVENUES
Voice 225,525 225,525 (4.5%) (4.5%)
Network access 215,415 (1,216)(5) 216,631 (7.9%) (8.6%)
Data 122,055 (68)(5) 122,123 9.6% 9.5%
Fiber transport
and CLEC 38,466 38,466 7.2% 7.2%
Other 55,101 55,101 (1.7%) (1.7%)
656,562 (1,284) 657,846 (2.1%) (2.3%)
OPERATING EXPENSES
Cost of services
and products 251,026 13,740(6) 237,286 (6.1%) (1.3%)
Selling, general
and
administrative 99,008 (80)(6) 99,088 2.9% (2.7%)
Depreciation and
amortization 137,554 137,554 (6.4%) (6.4%)
487,588 13,660 473,928 (4.3%) (3.0%)
OPERATING INCOME 168,974 (14,944) 183,918 4.4% (0.4%)
OTHER INCOME
(EXPENSE)
Interest expense (53,102) (53,102) 0.6% 0.6%
Other income
(expense) 10,639 2,206(7) 8,433 45.9% (34.6%)
Income tax
expense (11,478) 37,949(8) (49,427) 234.9% (2.5%)
NET INCOME 115,033 25,211 89,822 (13.0%) (3.1%)
BASIC EARNINGS
PER SHARE 1.05 0.23 0.82 (3.8%) 7.3%
DILUTED EARNINGS
PER SHARE 1.04 0.23 0.82 (2.9%) 7.3%
AVERAGE SHARES
OUTSTANDING
Basic 109,008 109,008 (9.3%) (9.3%)
Diluted 110,119 110,119 (9.9%) (9.9%)
DIVIDENDS PER
COMMON SHARE 0.0650 0.0650 976.9% 976.9%
NONRECURRING ITEMS
(1) - Severance and related costs due to workforce reduction, including
revenue impact.
(2) - Includes costs associated with the pending acquisition of EMBARQ
($5.0 million) and severance and related costs due to workforce
reductions ($.5 million)
(3) - Recognition of previously accrued transaction related and other
contingencies.
(4) - Includes $12.8 million benefit due to the recognition of
previously unrecognized tax benefits in accordance with FIN 48,
plus
the aggregate tax effect of Items (1) through (3).
(5) - Revenue reduction associated with gain on liquidation of Rural
Telephone Bank.
(6) - Includes write-down due to impairment of CLEC assets ($16.6
million), net of insurance reimbursements associated with
previously recorded hurricane related expenses ($3.0 million).
(7) - Includes gain on liquidation of Rural Telephone Bank ($5.2
million), net of $3.0 million impairment of a nonoperating
investment.
(8) - Includes $32.7 million benefit due to the recognition of
previously unrecognized tax benefits in accordance with FIN 48,
plus the aggregate tax effect of Items (5) through (7).
CenturyTel, Inc.
CONSOLIDATED STATEMENTS OF INCOME
TWELVE MONTHS ENDED DECEMBER 31, 2008 AND 2007
(UNAUDITED)
Twelve months ended December 31, 2008
As adjusted
Less excluding
non- non-
In thousands, except per As recurring recurring
share amounts reported items items
OPERATING REVENUES
Voice $874,041 874,041
Network access 820,383 1,319(1) 819,064
Data 524,194 21(1) 524,173
Fiber transport and CLEC 162,050 162,050
Other 219,079 219,079
2,599,747 1,340 2,598,407
OPERATING EXPENSES
Cost of services and products 955,473 1,483(2) 953,990
Selling, general and
administrative 399,136 13,185(3) 385,951
Depreciation and amortization 523,786 523,786
1,878,395 14,668 1,863,727
OPERATING INCOME 721,352 (13,328) 734,680
OTHER INCOME (EXPENSE)
Interest expense (202,217) (202,217)
Other income (expense) 40,954 22,713(4) 18,241
Income tax expense (194,357) 9,210(5) (203,567)
NET INCOME $365,732 18,595 347,137
BASIC EARNINGS PER SHARE $3.57 0.18 3.39
DILUTED EARNINGS PER SHARE $3.56 0.18 3.37
AVERAGE SHARES OUTSTANDING
Basic 102,268 102,268
Diluted 102,871 102,871
DIVIDENDS PER COMMON SHARE $2.1675 2.1675
Twelve months ended December 31, 2007
As adjusted Increase
Less excluding (decrease)
In thousands, non- non- Increase excluding
except per As recurring recurring (decrease) nonrecurring
share amounts reported items items as reported items
OPERATING REVENUES
Voice 889,960 889,960 (1.8%) (1.8%)
Network access 941,506 48,298(6) 893,208 (12.9%) (8.3%)
Data 460,755 (68)(6) 460,823 13.8% 13.7%
Fiber transport
and CLEC 159,317 13(6) 159,304 1.7% 1.7%
Other 204,703 1,869(7) 202,834 7.0% 8.0%
2,656,241 50,112 2,606,129 (2.1%) (0.3%)
OPERATING EXPENSES
Cost of services
and products 937,375 11,655(8) 925,720 1.9% 3.1%
Selling, general
and
administrative 389,533 694(8) 388,839 2.5% (0.7%)
Depreciation and
amortization 536,255 536,255 (2.3%) (2.3%)
1,863,163 12,349 1,850,814 0.8% 0.7%
OPERATING INCOME 793,078 37,763 755,315 (9.0%) (2.7%)
OTHER INCOME
(EXPENSE)
Interest expense (212,906) (212,906) (5.0%) (5.0%)
Other income
(expense) 38,770 12,643(9) 26,127 5.6% (30.2%)
Income tax
expense (200,572) 13,701(10) (214,273) (3.1%) (5.0%)
NET INCOME 418,370 64,107 354,263 (12.6%) (2.0%)
BASIC EARNINGS
PER SHARE 3.82 0.59 3.24 (6.5%) 4.6%
DILUTED EARNINGS
PER SHARE 3.72 0.57 3.16 (4.3%) 6.6%
AVERAGE SHARES
OUTSTANDING
Basic 109,360 109,360 (6.5%) (6.5%)
Diluted 113,094 113,094 (9.0%) (9.0%)
DIVIDENDS PER
COMMON SHARE 0.26 0.26 733.7% 733.7%
NONRECURRING ITEMS
(1) - 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).
(2) - Severance and related costs due to workforce reductions.
(3) - 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).
(4) - 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).
(5) - Includes $12.8 million benefit due to the recognition of
previously unrecognized tax benefits in accordance with FIN 48 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 (1) through (4).
(6) - Includes (i) revenue recorded upon settlement of a dispute with a
carrier ($49.0 million) and (ii) revenue impact of severance and
related costs due to workforce reductions ($.5 million), net of
(iii) revenue reduction associated with gain on liquidation of
Rural Telephone Bank ($1.3 million).
(7) - Reimbursement of amounts upon a change in our satellite television
arrangement.
(8) - Includes (i) write-down due to impairment of CLEC assets
($16.6 million) and (ii) severance and related costs due to
workforce reductions ($2.7 million), net of (iii) reimbursement of
amounts upon a change in our satellite television arrangement
($4.1 million) and (iv) insurance reimbursements associated with
previously recorded hurricane related expenses ($3.0 million).
(9) - Includes (i) gain on sale of non-core asset ($10.4 million) and
(ii) gain on liquidation of Rural Telephone Bank ($5.2 million),
net of (iii) $3.0 million impairment of a nonoperating investment.
(10) - Includes (i) $32.7 million benefit due to the recognition of
previously unrecognized tax benefits in accordance with FIN 48,
net of the aggregate tax effects of items (6) through (9)
CenturyTel, Inc.
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 2008 AND DECEMBER 31, 2007
(UNAUDITED)
December 31, December 31,
2008 2007
(in thousands)
ASSETS
CURRENT ASSETS
Cash and cash equivalents $243,327 34,402
Other current assets 312,080 257,997
Total current assets 555,407 292,399
NET PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment 8,868,451 8,666,106
Accumulated depreciation (5,972,559) (5,557,730)
Net property, plant and
equipment 2,895,892 3,108,376
GOODWILL AND OTHER ASSETS
Goodwill 4,015,674 4,010,916
Other 787,222 772,862
Total goodwill and other
assets 4,802,896 4,783,778
TOTAL ASSETS $8,254,195 8,184,553
LIABILITIES AND EQUITY
CURRENT LIABILITIES
Current maturities of long-term
debt $20,407 279,898
Other current liabilities 437,983 456,637
Total current liabilities 458,390 736,535
LONG-TERM DEBT 3,294,119 2,734,357
DEFERRED CREDITS AND OTHER
LIABILITIES 1,338,446 1,304,456
STOCKHOLDERS' EQUITY 3,163,240 3,409,205
TOTAL LIABILITIES AND EQUITY $8,254,195 8,184,553
CenturyTel, Inc.
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
(UNAUDITED)
Three months ended December 31, 2008
As adjusted
Less excluding
non- non-
In thousands As recurring recurring
reported items items
Operating cash flow and cash flow
margin
Operating income $176,442 (6,706)(1) 183,148
Add: Depreciation and
amortization 128,796 - 128,796
Operating cash flow $305,238 (6,706) 311,944
Revenues $642,954 307(2) 642,647
Operating income margin (operating
income divided by revenues) 27.4% 28.5%
Operating cash flow margin
(operating cash flow divided by
revenues) 47.5% 48.5%
Free cash flow (prior to debt
service requirements and dividends)
Net income $100,072 13,028(3) 87,044
Add: Depreciation and
amortization 128,796 - 128,796
Less: Capital expenditures (101,813) - (101,813)
Free cash flow $127,055 13,028 114,027
Free cash flow $127,055
Gain on asset dispositions -
Deferred income taxes 43,561
Changes in current assets and
current liabilities (20,636)
Decrease in other noncurrent
assets 3,636
Decrease in other noncurrent
liabilities (23,583)
Retirement benefits (47,412)
Excess tax benefits from share-
based compensation (336)
Other, net 1,969
Add: Capital expenditures 101,813
Net cash provided by operating
activities $186,067
Three months ended December 31, 2007
As adjusted
Less excluding
non- non-
In thousands As recurring recurring
reported items items
Operating cash flow and cash flow
margin
Operating income 168,974 (14,944)(4) 183,918
Add: Depreciation and
amortization 137,554 - 137,554
Operating cash flow 306,528 (14,944) 321,472
Revenues 656,562 (1,284)(5) 657,846
Operating income margin (operating
income divided by revenues) 25.7% 28.0%
Operating cash flow margin
(operating cash flow divided by
revenues) 46.7% 48.9%
Free cash flow (prior to debt
service requirements and dividends)
Net income 115,033 25,211(6) 89,822
Add: Depreciation and
amortization 137,554 - 137,554
Less: Capital expenditures (141,744) - (141,744)
Free cash flow 110,843 25,211 85,632
Free cash flow 110,843
Gain on asset dispositions (5,207)
Deferred income taxes (42,093)
Changes in current assets and
current liabilities 9,094
Decrease in other noncurrent
assets 4,665
Decrease in other noncurrent
liabilities (6,572)
Retirement benefits 5,958
Excess tax benefits from share-
based compensation 7
Other, net 22,114
Add: Capital expenditures 141,744
Net cash provided by operating
activities 240,553
NONRECURRING ITEMS
(1) - 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).
(2) - Revenue effect of severance and related costs due to workforce
reduction.
(3) - Includes $12.8 million income tax benefit due to the recognition
of previously unrecognized tax benefits in accordance with
FIN 48 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).
(4) - Includes write-down due to impairment of CLEC assets
($16.6 million) and revenue reduction associated with gain from
liquidation of Rural Telephone Bank ($1.3 million), net of
insurance reimbursements associated with previously recorded
hurricane related expenses ($3.0 million).
(5) - Revenue effect of gain from liquidation of Rural Telephone Bank.
(6) - Includes (i) $32.7 million income tax benefit due to the
recognition of previously unrecognized tax benefits in accordance
with FIN 48, (ii) the after-tax effects of (a) the gain from
liquidation of the Rural Telephone Bank, including revenue effect
($2.4 million), and (b) insurance reimbursements associated with
previously recorded hurricane related expenses ($1.8 million), net
of (iii) the after-tax effects of (a) the write-down due to
impairment of CLEC assets ($10.4 million) and (b) the impairment
of a nonoperating investment ($1.9 million).
CenturyTel, Inc.
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
(UNAUDITED)
Twelve months ended December 31, 2008
As adjusted
Less excluding
non- non-
In thousands As recurring recurring
reported items items
Operating cash flow and cash flow
margin
Operating income $721,352 (13,328)(1) 734,680
Add: Depreciation and
amortization 523,786 - 523,786
Operating cash flow $1,245,138 (13,328) 1,258,466
Revenues $2,599,747 1,340(2) 2,598,407
Operating income margin (operating
income divided by revenues) 27.7% 28.3%
Operating cash flow margin
(operating cash flow divided by
revenues) 47.9% 48.4%
Free cash flow (prior to debt service
requirements and dividends)
Net income $365,732 18,595(3) 347,137
Add: Depreciation and amortization 523,786 - 523,786
Less: Capital expenditures (286,817) - (286,817)
$602,701 18,595 584,106
Free cash flow $602,701
Gain on asset dispositions (12,452)
Deferred income taxes 67,518
Changes in current assets and
current liabilities (74,325)
Decrease in other noncurrent assets 9,744
Decrease in other noncurrent
liabilities (27,561)
Retirement benefits (26,066)
Excess tax benefits from share-based
compensation (1,123)
Other, net 28,047
Add: Capital expenditures 286,817
Net cash provided by operating
activities $853,300
Twelve months ended December 31, 2007
As adjusted
Less excluding
non- non-
In thousands As recurring recurring
reported items items
Operating cash flow and cash flow
margin
Operating income 793,078 37,763(4) 755,315
Add: Depreciation and
amortization 536,255 - 536,255
Operating cash flow 1,329,333 37,763 1,291,570
Revenues 2,656,241 50,112(5) 2,606,129
Operating income margin (operating
income divided by revenues) 29.9% 29.0%
Operating cash flow margin
(operating cash flow divided by
revenues) 50.0% 49.6%
Free cash flow (prior to debt
service requirements and dividends)
Net income 418,370 64,107(6) 354,263
Add: Depreciation and
amortization 536,255 - 536,255
Less: Capital expenditures (326,045) - (326,045)
628,580 64,107 564,473
Free cash flow 628,580
Gain on asset dispositions (15,643)
Deferred income taxes 1,018
Changes in current assets and
current liabilities 37,608
Decrease in other noncurrent
assets 12,718
Decrease in other noncurrent
liabilities (20,781)
Retirement benefits 27,350
Excess tax benefits from share-
based compensation (6,427)
Other, net 39,518
Add: Capital expenditures 326,045
Net cash provided by operating
activities 1,029,986
NONRECURRING ITEMS
(1) - Includes curtailment loss related to Supplemental Executive
Retirement Plan, including revenue impact ($6.6 million), costs
associated with the pending acquisition of EMBARQ ($5.0 million)
and severance and related costs due to workforce reductions,
including revenue impact ($1.7 million).
(2) - Includes revenue impact of curtailment loss related to
Supplemental Executive Retirement Plan ($1.0 million) and revenue
impact of severance and related costs due to workforce reduction
($.3 million).
(3) - Includes (i) $12.8 million income tax benefit due to the
recognition of previously unrecognized tax benefits in accordance
with FIN 48, (ii) $6.3 million after-tax benefit related to the
recognition of previously accrued transaction related and other
contingencies, (iii) after-tax impact of gain upon liquidation of
the Supplemental Executive Retirement Plan trust assets ($2.8
million), (iv) after-tax impact of gain on sales of non-core
assets ($4.6 million) and (v) net benefit due to the resolution of
certain income tax audit issues ($2.3 million). Such favorable
adjustments were partially offset by the (i) after-tax impact of
curtailment loss related to Supplemental Executive Retirement
Plan, including revenue impact ($4.1 million), (ii) after-tax
impact of costs associated with the pending acquisition of EMBARQ
($5.0 million) and (iii) after-tax impact of severance and related
costs due to workforce reductions ($1.1 million).
(4) - Includes (i) $49.0 million revenue recorded upon settlement of a
dispute with a carrier; (ii) $5.9 million reimbursement of amounts
upon a change in our satellite television arrangement and (iii)
$3.0 million insurance reimbursements associated with previously
recorded hurricane related expenses. These favorable items were
partially offset by (i) write-down due to the impairment of CLEC
assets ($16.6 million), (ii) impact of severance and related costs
due to workforce reductions ($2.2 million), and (iii) revenue
reduction associated with gain from liquidation of Rural Telephone
Bank ($1.3 million).
(5) - Includes the sum of (i) $49.0 million revenue recorded upon
settlement of a dispute with a carrier; (ii) $1.9 million
reimbursement of amounts upon a change in our satellite television
arrangement and (iii) revenue impact of severance and related
costs due to workforce reductions ($.5 million), net of revenue
reduction associated with gain from liquidation of Rural Telephone
Bank ($1.3 million).
(6) - Includes the after-tax impact of Item (4), the after-tax gain on
the sale of a non-core asset ($6.5 million), the after-tax gain
from liquidation of Rural Telephone Bank ($3.2 million), the
after-tax impairment of a nonoperating investment ($1.9 million),
and $32.7 million income tax benefit due to the recognition of
previously unrecognized tax benefits in accordance with FIN 48.
SOURCE CenturyTel, Inc.
Contact: Tony Davis of CenturyTel, Inc., +1-318-388-9525, tony.davis@centurytel.com