EX-99.1 2 ex99-1.htm EXHIBIT 99.1 exhibit 99.1
Exhibit 99.1

 

FOR IMMEDIATE RELEASE
FOR MORE INFORMATION CONTACT:
May 3, 2007
Tony Davis 318.388.9525
 
tony.davis@centurytel.com


CenturyTel Reports First Quarter Earnings

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

·  
Operating revenues, excluding nonrecurring items, were $600.9 million compared to $610.0 million in first quarter 2006. Reported under GAAP, first quarter 2006 operating revenues were $611.3 million.

·  
Net income, excluding nonrecurring items, rose 7.8% to $77.9 million from $72.3 million in first quarter 2006. Reported under GAAP, first quarter 2006 net income was $69.3 million.

·  
Diluted earnings per share, excluding nonrecurring items, was $.68 in first quarter 2007 compared to $.57 in first quarter 2006. Reported under GAAP, diluted earnings per share was $.55 in first quarter 2006.

·  
Free cash flow (as defined in the attached financial schedules), excluding nonrecurring items, was $156.8 million in first quarter 2007 compared to $147.0 million in first quarter 2006.

·  
High-speed Internet customers increased by more than 43,900 in first quarter 2007, ending the quarter with nearly 413,000 high-speed Internet customers in service.
 

First Quarter Highlights 
  (Excluding nonrecurring items)
(In thousands, except per share amounts and customer data)
 
Quarter Ended
3/31/07
 
Quarter Ended
3/31/06
 
 
% Change
       
Operating Revenues
Operating Cash Flow (1)
Net Income
Diluted Earnings Per Share
Average Diluted Shares Outstanding
Capital Expenditures
$
$
$
$
 
$
600,855
295,867
77,870
.68
116,308
48,880
  
$
$
$
$
 
$
609,979
297,659
72,256
.57
127,959
60,088
  
(1.5)%
(0.6)%
7.8 %
19.3 %
(9.1)%
(18.7)%
Access Lines (2)
High-speed Internet Customers
  
2,070,000
413,000
    
2,177,000
286,000
  
(4.9)%
44.4%
(1)  
Operating Cash Flow is a non-GAAP financial measure. A reconciliation of this item to comparable GAAP measures is included in the attached financial schedules.
(2)  
Quarter ended 3/31/2006 access lines include adjustments made during 2006 to reflect the removal of test lines, database conversion and clean-up, and the sale of our Arizona properties.
 

    “CenturyTel achieved a record 43,900 high-speed Internet customer additions during the quarter, reflecting strong demand for our broadband services,” Glen F. Post, III, chairman and chief executive officer, said. “We continue to focus on bringing a full array of high-quality, reliable communications services and enhanced broadband content to our markets.”
 
    Operating revenues, excluding nonrecurring items, were $600.9 million in first quarter 2007 compared to $610.0 million in first quarter 2006. Revenue increases, driven primarily by growth in high-speed Internet customers and demand for fiber transport services, were more than offset by anticipated revenue declines primarily attributable to access line declines and lower access revenues along with lower revenues due to changes in the terms of the Company’s DBS agreement effective January 1, 2007.
 
    Operating expenses, excluding nonrecurring items, for first quarter 2007 were $432.8 million compared to $447.2 million in first quarter 2006. This decrease primarily resulted from lower personnel related costs due to workforce reductions in 2006, lower marketing, information technology and bad debt expenses, lower depreciation and amortization primarily due to fully depreciated assets and lower expenses under the amended DBS agreement. Such decreases more than offset increased expenses driven by growth in high-speed Internet customers and fiber transport services.
 
    Operating cash flow, excluding nonrecurring items, was $295.9 million in first quarter 2007 compared to $297.7 million in first quarter 2006. CenturyTel achieved an operating cash flow margin of 49.2% during the quarter versus 48.8% in first quarter 2006.
 
    “CenturyTel generated quarterly free cash flow of nearly $157 million during the first quarter, reflecting our continued success in aligning our operating costs with revenues and our disciplined approach to making capital investments in our networks,” Post said. “We also returned $171 million to shareholders through dividends and the repurchase of 3.7 million shares of common stock during the quarter.”

Net income, excluding nonrecurring items, grew 7.8% to $77.9 million in first quarter 2007 from $72.3 million in first quarter 2006. Diluted earnings per share, excluding nonrecurring items, increased 19.3% to $.68 in first quarter 2007 from $.57 in first quarter 2006. First quarter 2007 diluted earnings per share was favorably impacted by the increase in net income and 9.1% fewer average diluted shares outstanding due to share repurchases.
 
Under generally accepted accounting principles (GAAP), CenturyTel reported operating revenues of $600.9 million in first quarter 2007 compared to $611.3 million in first quarter 2006. In first quarter 2007, the Company reported net income of $77.9 million and diluted earnings per share of $.68, compared to $69.3 million and $.55, respectively, in first quarter 2006. Net income and diluted earnings per share in first quarter 2006 include a $3.0 million net after-tax expense related to a reduction in workforce.

For second quarter 2007, CenturyTel expects total revenues of $600 to $610 million and diluted earnings per share of $.62 to $.67. The anticipated decline in diluted earnings per share from first quarter to second quarter 2007 is primarily due to annual wage adjustments effective in the second quarter, anticipated higher marketing expenses and the seasonal impact of outside plant maintenance activities.

For the full year 2007, diluted earnings per share is expected to be in the range of $2.75 to $2.85 versus the previous guidance of $2.60 to $2.70, primarily due to first quarter results exceeding expectations, share repurchases completed through April 30, and the expectation that expenses for the remainder of 2007 will be lower than originally anticipated when 2007 guidance was provided earlier this year.

These outlook figures for the second quarter and full year 2007 exclude nonrecurring items, any share repurchases made after April 30, 2007, and any future mergers, acquisitions, divestitures or other similar business transactions. These outlook figures also exclude any impact of our April 30, 2007 acquisition of Madison River Communications Corp. and a one-time $49 million positive pre-tax settlement related to network access disputes which were finalized during the second quarter.

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

Reconciliation to GAAP. This release includes certain non-GAAP financial measures, including but not limited to operating cash flow, free cash flow and adjustments to GAAP measures to exclude the effect of nonrecurring items. In addition to providing key metrics for management to evaluate the Company’s performance, we believe these measurements assist readers in their understanding of period-to-period operating performance and in identifying historical and prospective trends. Reconciliations of non-GAAP financial measures to the most comparable GAAP measures are included in the attached financial statements. Reconciliation of additional non-GAAP financial measures that may be discussed during the earnings call described below will be available on the Company’s Web site at www.centurytel.com. Investors are urged to consider these non-GAAP measures in addition to, and not in substitution for, measures prepared in accordance with GAAP.

Investor Call. As previously announced, CenturyTel’s management will host a conference call at 10:30 a.m. Central Time today. Interested parties can access the call by dialing 866.259.7123. The call will be accessible for replay through May 9, 2007, by calling 888.266.2081 and entering the conference ID number 1067862. Investors can also listen to CenturyTel’s earnings conference call and replay by accessing the Investor Relations portion of the Company’s Web site at www.centurytel.com prior to May 24, 2007.

In addition to historical information, this release includes certain forward-looking statements, estimates and projections that are based on current expectations only, and are subject to a number of risks, uncertainties and assumptions, many of which are beyond the control of the Company. Actual events and results may differ materially from those anticipated, estimated or projected if one or more of these risks or uncertainties materialize, or if underlying assumptions prove incorrect. Factors that could affect actual results include but are not limited to: the timing, success and overall effects of competition from a wide variety of competitive providers; the risks inherent in rapid technological change; the effects of ongoing changes in the regulation of the communications industry; the Company’s ability to effectively manage its expansion opportunities, including continued access to capital markets on favorable terms, successfully integrating newly-acquired properties into the Company’s operations, and retaining and hiring key personnel; possible changes in the demand for, or pricing of, the Company’s products and services; the Company’s ability to successfully introduce new product or service offerings on a timely and cost-effective basis; the Company’s ability to collect its receivables from financially troubled communications companies; the Company’s ability to successfully negotiate collective bargaining agreements on reasonable terms without work stoppages; the effect of adverse weather; other risks referenced from time to time in the Company’s filings with the Securities and Exchange Commission (the “SEC”); and the effects of more general factors such as changes in interest rates, in tax rates, in accounting policies or practices, in operating, medical or administrative costs, in general market, labor or economic conditions, or in legislation, regulation or public policy. These and other uncertainties related to the Company’s business are described in greater detail in the Company’s Annual Report on Form 10-K for the year ended December 31, 2006, as updated by the Company’s subsequent SEC reports. You should be aware that new factors may emerge from time to time and it is not possible for management to identify all such factors, nor can it predict the impact of each such factor on the business or the extent to which any one or more factors may cause actual results to differ from those reflected in any forward-looking statements. You are further cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this release. The information contained in this release is as of May 3, 2007. The Company undertakes no obligation to update any of its forward-looking statements for any reason.

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

 CenturyTel, Inc.
 
 CONSOLIDATED STATEMENTS OF INCOME
 
 THREE MONTHS ENDED MARCH 31, 2007 AND 2006
 
 (UNAUDITED)
 
                                           
   
Three months ended March 31, 2007
     
Three months ended March 31, 2006
         
           
As adjusted
                 
As adjusted
     
Increase
 
       
Less
 
excluding
         
Less
     
excluding
     
(decrease)
 
       
non-
 
non-
         
non-
     
non-
 
Increase
 
excluding
 
   
As
 
recurring
 
recurring
     
As
 
recurring
     
recurring
 
(decrease)
 
nonrecurring
 
In thousands, except per share amounts
 
reported
 
items
 
items
     
reported
 
items
     
items
 
as reported
 
items
 
                                           
OPERATING REVENUES
                                                             
    Voice
 
$
209,075
          
209,075
         
217,014
               
217,014
   
(3.7
%)
  
(3.7
%)
    Network access
   
211,399
         
211,399
         
225,323
   
1,128
   
(1
)
  
224,195
   
(6.2
%)
  
(5.7
%)
    Data
   
95,864
         
95,864
         
83,238
   
184
   
(1
)
  
83,054
   
15.2
%
  
15.4
%
    Fiber transport and CLEC
   
38,326
         
38,326
         
35,780
               
35,780
   
7.1
%
  
7.1
%
    Other
   
46,191
         
46,191
         
49,936
               
49,936
   
(7.5
%)
  
(7.5
%)
     
600,855
   
-
   
600,855
         
611,291
   
1,312
         
609,979
   
(1.7
%)
  
(1.5
%)
                                                               
OPERATING EXPENSES
                                                             
    Cost of services and products
   
213,531
         
213,531
         
222,555
   
5,493
   
(1
)
  
217,062
   
(4.1
%)
  
(1.6
%)
    Selling, general and administrative
   
91,457
          
91,457
          
95,940
   
682
   
(1
)
  
95,258
   
(4.7
%)
  
(4.0
%)
    Depreciation and amortization
   
127,784
         
127,784
         
134,872
               
134,872
   
(5.3
%)
  
(5.3
%)
     
432,772
    
-
   
432,772
          
453,367
   
6,175
         
447,192
   
(4.5
%)
  
(3.2
%)
                                                               
OPERATING INCOME
   
168,083
   
-
   
168,083
         
157,924
   
(4,863
)
        
162,787
   
6.4
%
  
3.3
%
                                                               
OTHER INCOME (EXPENSE)
                                                             
    Interest expense
   
(46,961
)
        
(46,961
)
        
(50,086
)
              
(50,086
)
  
(6.2
%)
  
(6.2
%)
    Other income (expense)
   
5,290
         
5,290
         
4,597
               
4,597
   
15.1
%
  
15.1
%
    Income tax expense
   
(48,542
)
        
(48,542
)
        
(43,175
)
  
1,867
   
(2
)
  
(45,042
)
  
12.4
%
  
7.8
%
NET INCOME
 
$
77,870
    
-
   
77,870
          
69,260
   
(2,996
)
        
72,256
   
12.4
%
  
7.8
%
                                                               
BASIC EARNINGS PER SHARE
 
$
0.70
    
0.00
   
0.70
         
0.57
   
(0.02
)
        
0.59
   
22.8
%
  
18.6
%
DILUTED EARNINGS PER SHARE
 
$
0.68
    
0.00
   
0.68
         
0.55
   
(0.02
)
        
0.57
   
23.6
%
  
19.3
%
                                                               
AVERAGE SHARES OUTSTANDING
                                                             
    Basic
   
111,031
         
111,031
         
122,394
               
122,394
   
(9.3
%)
  
(9.3
%)
    Diluted
   
116,308
         
116,308
         
127,959
               
127,959
   
(9.1
%)
  
(9.1
%)
                                                               
DIVIDENDS PER COMMON SHARE
  
$
0.065
          
0.065
         
0.0625
               
0.0625
   
4.0
%
  
4.0
%
                                                               
NONRECURRING ITEMS
                                                             
    (1) - Severance and related costs due to workforce reduction, including revenue impact.
 
    (2) - Tax effect of item (1).
                                                             
 
        
 

 CenturyTel, Inc.
 
 CONSOLIDATED BALANCE SHEETS
 
 MARCH 31, 2007 AND DECEMBER 31, 2006
 
 (UNAUDITED)
 
               
       
March 31,
  
December 31,
  
       
2007
  
2006
  
       
(in thousands)
  
ASSETS
              
CURRENT ASSETS
              
Cash and cash equivalents
        
$
763,749
   
25,668
 
Other current assets
          
249,114
   
264,449
 
    Total current assets
          
1,012,863
   
290,117
 
                     
NET PROPERTY, PLANT AND EQUIPMENT
                    
Property, plant and equipment
          
7,919,996
   
7,893,760
 
Accumulated depreciation
          
(4,885,439
)
  
(4,784,483
)
    Net property, plant and equipment
          
3,034,557
   
3,109,277
 
                     
GOODWILL AND OTHER ASSETS
                    
Goodwill
          
3,431,136
   
3,431,136
 
Other
          
611,555
   
610,477
 
    Total goodwill and other assets
          
4,042,691
   
4,041,613
 
                     
                     
TOTAL ASSETS
        
$
8,090,111
    
7,441,007
 
                     
LIABILITIES AND EQUITY
                    
CURRENT LIABILITIES
                    
Short-term debt and current maturities of long-term debt
        
$
360,749
    
178,012
 
Other current liabilities
          
409,347
    
439,553
 
    Total current liabilities
          
770,096
    
617,565
 
                     
LONG-TERM DEBT
          
2,916,511
   
2,412,852
 
DEFERRED CREDITS AND OTHER LIABILITIES
          
1,276,274
   
1,219,639
 
STOCKHOLDERS' EQUITY
          
3,127,230
    
3,190,951
 
                     
TOTAL LIABILITIES AND EQUITY
        
$
8,090,111
    
7,441,007
 
 

CenturyTel, Inc.
 
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
 
(UNAUDITED)
 
                               
                               
   
Three months ended March 31, 2007
 
Three months ended March 31, 2006
 
               
As adjusted  
                    
As adjusted
 
         
Less 
    
excluding
         
Less
       
excluding
 
 
          
non-
    
non-
         
non-
       
non-
 
In thousands
   
As
   
recurring
   
recurring
   
As
   
recurring
       
recurring
 
   
reported  
    
items
   
items
   
reported
   
items
       
items
 
                                           
Operating cash flow and cash flow margin
                                         
    Operating income
 
$
168,083
    
-
   
168,083
    
157,924
   
(4,863
)
(1
)
  
162,787
 
    Add: Depreciation and amortization
   
127,784
         
127,784
   
134,872
             
134,872
 
    Operating cash flow
 
$
295,867
    
-
   
295,867
    
292,796
   
(4,863
)
      
297,659
 
                                           
    Revenues
 
$
600,855
    
-
   
600,855
   
611,291
   
1,312
 
(1
)
  
609,979
 
                                           
    Operating income margin (operating income divided by revenues)
   
28.0
%
        
28.0
%
  
25.8
%
            
26.7
%
                                           
    Operating cash flow margin (operating cash flow divided by revenues)
   
49.2
%
        
49.2
%
  
47.9
%
            
48.8
%
                                           
Free cash flow (prior to debt service requirements and dividends)
                                         
    Net income
 
$
77,870
    
-
   
77,870
    
69,260
   
(2,996
)
(1
)
  
72,256
 
    Add: Depreciation and amortization
   
127,784
   
-
   
127,784
   
134,872
   
-
       
134,872
 
    Less: Capital expenditures
   
(48,880
)
  
-
   
(48,880
)
  
(60,088
)
  
-
       
(60,088
)
    Free cash flow
 
$
156,774
    
-
   
156,774
    
144,044
   
(2,996
)
      
147,040
 
                                           
    Free cash flow
 
$
156,774
                
144,044
                 
    Deferred income taxes
   
13,371
               
9,419
                 
    Changes in current assets and current liabilities
   
33,892
                
(32,057
)
                
    (Increase) decrease in other noncurrent assets
   
1,032
               
(2,590
)
                
    Increase (decrease) in other noncurrent liabilities
   
(401
)
              
1,392
                 
    Retirement benefits
   
5,636
               
7,378
                 
    Excess tax benefits from share-based compensation
   
(3,032
)
              
(4,186
)
                
    Other, net
   
2,558
               
542
                 
    Add: Capital expenditures
   
48,880
               
60,088
                 
    Net cash provided by operating activities
 
$
258,710
                
184,030
                 
                                           
                                           
NONRECURRING ITEMS
                                         
    (1) - Severance and related costs due to workforce reduction, including revenue impact (presented on both a pre-tax and an after-tax basis).