EX-99.1 2 er.htm 3RD QTR 07 PRESS RELEASE er.htm
Exhibit 99.1
FOR IMMEDIATE RELEASE:
FOR MORE INFORMATION CONTACT:
November 1, 2007
Tony Davis 318.388.9525
tony.davis@centurytel.com
 
CenturyTel Reports Third Quarter Earnings

Monroe, La… CenturyTel, Inc. (NYSE: CTL) announces operating results for third quarter 2007.
 
·
Operating revenues, excluding nonrecurring items, were $708.3 million compared to $619.2 million for third quarter 2006. Reported under GAAP, third quarter 2007 operating revenues were $708.8 million.

·
Net income, excluding nonrecurring items, was $108.1 million compared to $77.9 million in third quarter 2006. Reported under GAAP, third quarter 2007 net income was $113.2 million.

·
Diluted earnings per share, excluding nonrecurring items, was $.97 compared to $.66 in third quarter 2006.  Reported under GAAP, third quarter 2007 diluted earnings per share was $1.01.

·
Free cash flow (as defined in the attached financial schedules), excluding nonrecurring items, was $167.3 million in third quarter 2007 compared to $125.5 million in third quarter 2006.

·
Under the recently approved $750 million share repurchase program, 786,000 shares were repurchased and retired for $36.4 million during the quarter.
 
Third Quarter Highlights
(Excluding nonrecurring items)
(In thousands, except per share amounts and customer units)
Quarter Ended
9/30/07
Quarter Ended
9/30/06
% Change
 
Operating Revenues
Operating Cash Flow (1)
Net Income
Diluted Earnings Per Share
Average Diluted Shares Outstanding
Capital Expenditures
 
 
$
$
$
$
 
$
 
708,306
363,005
108,137
.97
112,229
77,445
  
 
$
$
$
$
 
$
 
619,186
301,693
77,928
.66
120,448
     82,579
  
 
14.4
20.3
38.8
47.0
(6.8)
(6.2)
 
%
%
%
%
%
%
 
Access Lines (2)
High-speed Internet Customers
 
  
 
2,171,000
530,000
    
 
2,124,000
340,000
  
 
2.2
55.9
 
%
%
 
(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 9/30/2007 access lines and high-speed Internet customers include the effects of our April 2007 Madison River acquisition. Excluding the effects of this acquisition,
access lines decreased 5.4% and high-speed Internet customers increased 38.8%.
 
 
“CenturyTel achieved over $167 million in free cash flow during the third quarter and we expect to generate record free cash flow for full year 2007,” Glen F. Post, III, chairman and chief executive officer, said. “Nearly 40% year-over-year growth in high-speed Internet customers, the acquisition of the Madison River properties, and the recognition of access revenue settlements drove solid financial results for the quarter.”
 
Operating revenues, excluding nonrecurring items, for third quarter 2007 were $708.3 million compared to $619.2 million in third quarter 2006. Revenue increases aggregating $106 million resulted primarily from $49 million in revenue contribution from the Madison River properties, $42 million related to adjustments to recognize prior period revenue settlements, and $15 million from an increase in high-speed Internet customers in our legacy markets. These increases more than offset revenue declines of $18 million attributable to lower access revenues and access line losses.

Operating expenses, excluding nonrecurring items, increased 7.7% to $481.9 million from $447.6 million in third quarter 2006, primarily due to operating costs associated with the Madison River properties acquired earlier this year. Excluding costs associated with the Madison River properties, operating expenses decreased in third quarter 2007 compared to third quarter 2006, primarily due to lower depreciation expense associated with fully depreciated assets, reduced personnel expenses and lower expenses under our amended satellite television agreement. These decreases more than offset an increase associated with growth in high-speed Internet customers.

Operating cash flow, excluding nonrecurring items, increased to $363.0 million from $301.7 million in third quarter 2006, primarily due to the recognition of prior period revenue settlements during third quarter 2007 and the contribution of the Madison River properties. For third quarter 2007, CenturyTel achieved an operating cash flow margin of 51.2% versus 48.7% in third quarter 2006.

“We remain focused on being the leading provider of broadband products and services to customers in our markets,” Post said. “We added more than 29,000 broadband customers during the third quarter and ended the quarter with more than 29% penetration of broadband-enabled lines.”

Net income, excluding nonrecurring items, was $108.1 million in third quarter 2007 compared to $77.9 million in third quarter 2006. This increase was primarily driven by the after-tax impact of the prior period revenue settlements discussed above.  Diluted earnings per share, excluding nonrecurring items, was $.97 for third quarter 2007, a 47.0% increase from the $.66 reported in third quarter 2006. This increase was driven by the higher net income and a 6.8% decline in average diluted shares outstanding as a result of share repurchases since third quarter 2006.

For the first nine months of 2007, operating revenues, excluding nonrecurring items, increased to $1.948 billion from $1.838 billion for the same period in 2006. Operating cash flow, excluding nonrecurring items, was $970.1 million for the first nine months of 2007 compared to $896.5 million a year ago. Net income, excluding nonrecurring items, was $264.4 million in the first nine months of 2007 compared to $223.6 million during the same period in 2006. Diluted earnings per share, excluding nonrecurring items, was $2.34 during the first nine months of 2007 compared to $1.84 in the first nine months of 2006.

Under generally accepted accounting principles (GAAP), net income for third quarter 2007 was $113.2 million compared to $76.3 million for third quarter 2006 and diluted earnings per share for third quarter 2007 was $1.01 compared to $.64 for third quarter 2006. Third quarter 2007 net income and diluted earnings per share reflect a net after-tax charge of $1.4 million ($.01 per share) related to a reduction in workforce during the quarter and a net after-tax gain of $6.4 million ($.06 per share) from the sale of a non-core asset. Third quarter 2006 net income and diluted earnings per share reflect a net after-tax charge of $1.6 million ($.01 per share) related to a reduction in workforce.

Net income under GAAP for the first nine months of 2007 was $303.3 million compared to $297.8 million for the first nine months of 2006 and diluted earnings per share for the first nine months of 2007 was $2.68 compared to $2.44 for the first nine months of 2006. See the accompanying financial schedules for detail of the Company’s nonrecurring items for the nine months ended September 30, 2007 and 2006.

Outlook.  For fourth quarter 2007, CenturyTel expects total revenues of $645 to $655 million and diluted earnings per share of $.66 to $.71. As a result of better than anticipated third quarter performance, the Company has increased and narrowed the range of anticipated full year 2007 diluted earnings per share guidance from $2.90 to $3.00 to $3.00 to $3.05.

CenturyTel expects to provide full year 2008 earnings per share guidance in February 2008. However, there are a couple of items that can be expected to affect 2008 results when compared to 2007.  First, revenue settlements related to prior periods are anticipated to decline and negatively impact 2008 diluted earnings per share by $.22 to $.24. Additionally, lower Universal Service Fund receipts are expected to negatively impact 2008 diluted earnings by $.08 to $.10 per share. These and other items that may affect 2008 results will be further discussed during the Company’s fourth quarter 2007 earnings call in February 2008.

All outlook figures provided under this section are presented excluding the potential impact of any future mergers, acquisitions or divestitures, any share repurchases after October 31, or other nonrecurring events.

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.  Third quarter 2006 and nine months ended September 30, 2006 amounts included in this press release reflect amounts adjusted for the application of SAB 108.

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

Investor Call. As previously announced, CenturyTel’s management will host a conference call at 10:30 a.m. Central Time today. Interested parties can access the call by dialing 866.219.5631.  The call will be accessible for replay through November 7, 2007, by calling 888.258.7854 and entering the access code: 1147641. 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 through November 21, 2007.

    In addition to historical information, this release includes certain forward-looking statements, estimates and projections that are based on current expectations only, and are subject to a number of risks, uncertainties and assumptions, many of which are beyond the control of the Company.  Actual events and results may differ materially from those anticipated, estimated or projected if one or more of these risks or uncertainties materialize, or if underlying assumptions prove incorrect.  Factors that could affect actual results include but are not limited to:  the timing, success and overall effects of competition from a wide variety of competitive providers; the risks inherent in rapid technological change; the effects of ongoing changes in the regulation of the communications industry; the Company’s ability to effectively manage its expansion opportunities, including  successfully integrating newly-acquired properties into the Company’s operations and  retaining and hiring key personnel; possible changes in the demand for, or pricing of, the Company’s products and services; the Company’s continued access to credit markets on favorable terms; the Company’s ability to successfully introduce new product or service offerings on a timely and cost-effective basis; the Company’s ability to collect its receivables from financially troubled communications companies; the Company’s ability to successfully negotiate collective bargaining agreements on reasonable terms without work stoppages; the effect of adverse weather; other risks referenced from time to time in the Company’s filings with the Securities and Exchange Commission (the “SEC”); and the effects of more general factors such as changes in interest rates, in tax rates, in accounting policies or practices, in operating, medical or administrative costs, in general market, labor or economic conditions, or in legislation, regulation or public policy.  These and other uncertainties related to the Company’s business are described in greater detail in the Company’s Annual Report on Form 10-K for the year ended December 31, 2006, as updated by the Company’s subsequent SEC reports.  You should be aware that new factors may emerge from time to time and it is not possible for management to identify all such factors, nor can it predict the impact of each such factor on the business or the extent to which any one or more factors may cause actual results to differ from those reflected in any forward-looking statements. You are further cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this release.  The information contained in this release is as of November 1, 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 SEPTEMBER 30, 2007 AND 2006 
  
(UNAUDITED)      
  
                                                               
     
Three months ended September 30, 2007
    
Three months ended September 30, 2006
              
                       
As adjusted
                      
As adjusted
          
Increase
  
           
Less
          
excluding
          
Less
          
excluding
          
(decrease)
  
           
non-
          
non-
          
non-
          
non-
    
Increase
    
excluding
  
     
As
    
recurring
          
recurring
    
As
    
recurring
          
recurring
    
(decrease)
    
nonrecurring
  
 In thousands, except per share amounts 
reported
    
items
          
items
    
reported
    
items
          
items
    
as reported
    
items
  
                                                               
 OPERATING REVENUES
                                                            
 
 Voice*
   $
229,862
                  
229,862
      
218,665
                  
218,665
       5.1 %     5.1 %
 
 Network access
    
248,490
      
527
       (1 )    
247,963
      
219,897
      
560
       (1 )    
219,337
       13.0 %     13.1 %
 
 Data
    
134,630
                      
134,630
      
91,473
      
91
       (1 )    
91,382
       47.2 %     47.3 %
 
 Fiber transport and CLEC
    
41,811
                      
41,811
      
37,487
                      
37,487
       11.5 %     11.5 %
 
 Other*
    
54,040
                      
54,040
      
52,315
                      
52,315
       3.3 %     3.3 %
       
708,833
      
527
              
708,306
      
619,837
      
651
              
619,186
       14.4 %     14.4 %
                                                                                   
 OPERATING EXPENSES
                                                                                
 
 Cost of services and products
    
246,430
      
1,967
       (1 )    
244,463
      
226,536
      
3,092
       (1 )    
223,444
       8.8 %     9.4 %
 
 Selling, general and administrative
    
101,612
      
774
       (1 )    
100,838
      
94,212
      
163
       (1 )    
94,049
       7.9 %     7.2 %
 
 Depreciation and amortization
    
136,606
                      
136,606
      
130,147
                      
130,147
       5.0 %     5.0 %
       
484,648
      
2,741
              
481,907
      
450,895
      
3,255
              
447,640
       7.5 %     7.7 %
                                                                                   
 OPERATING INCOME
    
224,185
       (2,214 )            
226,399
      
168,942
       (2,604 )            
171,546
       32.7 %     32.0 %
                                                                                   
 OTHER INCOME (EXPENSE)
                                                                                
 
 Interest expense
     (55,176 )                     (55,176 )     (47,857 )                     (47,857 )     15.3 %     15.3 %
 
 Other income (expense)
    
14,761
      
10,437
       (2 )    
4,324
      
2,818
                      
2,818
       423.8 %     53.4 %
 
 Income tax expense
     (70,568 )     (3,158 )     (3 )     (67,410 )     (47,579 )    
1,000
       (3 )     (48,579 )     48.3 %     38.8 %
                                                                                   
 NET INCOME
   $
113,202
      
5,065
              
108,137
      
76,324
       (1,604 )            
77,928
       48.3 %     38.8 %
                                                                                   
 BASIC EARNINGS PER SHARE
   $
1.04
      
0.05
              
0.99
      
0.66
       (0.01 )            
0.68
       57.6 %     45.6 %
 DILUTED EARNINGS PER SHARE
   $
1.01
      
0.05
              
0.97
      
0.64
       (0.01 )            
0.66
       57.8 %     47.0 %
                                                                                   
AVERAGE SHARES OUTSTANDING
                                                                          
 
 Basic
    
108,996
                      
108,996
      
115,221
                      
115,221
       (5.4 %)     (5.4 %)
 
 Diluted
    
112,229
                      
112,229
      
120,448
                      
120,448
       (6.8 %)     (6.8 %)
                                                                                   
DIVIDENDS PER COMMON SHARE
   $
0.0650
                      
0.0650
      
0.0625
                      
0.0625
       4.0 %     4.0 %
                                                                                   
                                                                                   
                                                                                   
 NONRECURRING ITEMS
                                                                                
 
(1) - Severance and related costs due to workforce reductions in third quarters of 2007 and 2006, including revenue impact.
                  
 
(2) - Gain on sale of non-core asset.             
  
 
(3) - Tax effect of above items.               
  
                                                                                   
*
Revenues from voice mail services previously reflected in "Other" revenues have been reclassified to "Voice" revenues for all periods. 
  
 
 
CenturyTel, Inc.     
  
CONSOLIDATED STATEMENTS OF INCOME  
  
NINE MONTHS ENDED SEPTEMBER 30, 2007 AND 2006 
  
(UNAUDITED)      
  
                                                               
     
Nine months ended September 30, 2007
    
Nine months ended September 30, 2006
              
                       
As adjusted
                      
As adjusted
          
Increase
  
           
Less
          
excluding
          
Less
          
excluding
          
(decrease)
  
           
non-
          
non-
          
non-
          
non-
    
Increase
    
excluding
  
   
As
    
recurring
          
recurring
    
As
    
recurring
          
recurring
    
(decrease)
    
nonrecurring
  
 In thousands, except per share amounts 
reported
    
items
          
items
    
reported
    
items
          
items
    
as reported
    
items
  
                                                               
 OPERATING REVENUES
                                                            
 
 Voice*
   $
664,435
                  
664,435
      
657,559
                  
657,559
       1.0 %     1.0 %
 
 Network access
    
726,091
      
49,514
       (1 )    
676,577
      
666,883
      
1,688
       (6 )    
665,195
       8.9 %     1.7 %
 
 Data
    
338,700
                      
338,700
      
259,158
      
275
       (6 )    
258,883
       30.7 %     30.8 %
 
 Fiber transport and CLEC
    
120,851
      
13
       (1 )    
120,838
      
109,318
                      
109,318
       10.5 %     10.5 %
 
 Other*
    
149,602
      
1,869
       (2 )    
147,733
      
147,117
                      
147,117
       1.7 %     0.4 %
       
1,999,679
      
51,396
              
1,948,283
      
1,840,035
      
1,963
              
1,838,072
       8.7 %     6.0 %
                                                                                   
 OPERATING EXPENSES
                                                                                
 
 Cost of services and products
    
686,349
       (2,085 )     (3 )    
688,434
      
665,282
      
8,585
       (6 )    
656,697
       3.2 %     4.8 %
 
 Selling, general and administrative 
  
290,525
      
774
       (3 )    
289,751
      
285,748
      
845
       (6 )    
284,903
       1.7 %     1.7 %
 
 Depreciation and amortization
    
398,701
                      
398,701
      
397,146
                      
397,146
       0.4 %     0.4 %
       
1,375,575
       (1,311 )            
1,376,886
      
1,348,176
      
9,430
              
1,338,746
       2.0 %     2.8 %
                                                                                   
 OPERATING INCOME
    
624,104
      
52,707
              
571,397
      
491,859
       (7,467 )            
499,326
       26.9 %     14.4 %
                                                                                   
 OTHER INCOME (EXPENSE)
                                                                                
 
 Interest expense
     (159,804 )                     (159,804 )     (148,582 )                     (148,582 )     7.6 %     7.6 %
 
 Other income (expense)
    
28,131
      
10,437
       (4 )    
17,694
      
130,874
      
118,649
       (7 )    
12,225
       (78.5 %)     44.7 %
 
 Income tax expense
     (189,094 )     (24,248 )     (5 )     (164,846 )     (176,357 )     (36,976 )     (8 )     (139,381 )     7.2 %     18.3 %
                                                                                   
 NET INCOME
   $
303,337
      
38,896
              
264,441
      
297,794
      
74,206
              
223,588
       1.9 %     18.3 %
                                                                                   
 BASIC EARNINGS PER SHARE
   $
2.77
      
0.36
              
2.41
      
2.53
      
0.63
              
1.90
       9.5 %     26.8 %
 DILUTED EARNINGS PER SHARE
   $
2.68
      
0.34
              
2.34
      
2.44
      
0.60
              
1.84
       9.8 %     27.2 %
                                                                                   
AVERAGE SHARES OUTSTANDING
                                                                          
 
 Basic
    
109,478
                      
109,478
      
117,685
                      
117,685
       (7.0 %)     (7.0 %)
 
 Diluted
    
114,086
                      
114,086
      
123,348
                      
123,348
       (7.5 %)     (7.5 %)
                                                                                   
DIVIDENDS PER COMMON SHARE
   $
0.1950
                      
0.1950
      
0.1875
                      
0.1875
       4.0 %     4.0 %
                                                                                   
 NONRECURRING ITEMS
                                                                                
 
(1) - Revenue recorded upon settlement of a dispute with a carrier ($49.0 million) and revenue impact of severance and related costs due to workforce reductions ($.5 million).
  
 
(2) - Reimbursement of amounts upon a change in our satellite television arrangement.
                                          
 
(3) - Severance and related costs due to workforce reductions ($2.7 million), net of reimbursement of amounts upon a change in our satellite television arrangement ($4.1 million).
  
 
(4) - Gain on sale of non-core asset.                                     
 
(5) - Tax effects of items (1) through (4).                                     
 
(6) - Severance and related costs due to workforce reduction, including revenue impact.
                                          
 
(7) - Includes gain recorded upon redemption of Rural Telephone Bank stock ($117.8 million) and gain recorded upon sale of Arizona properties ($.9 million).
  
 
(8) - Includes $43.4 million net tax expense related to Items (6) and (7), net of $6.4 million net tax benefit due to the resolution of various income tax audit issues.
  
                                                                                   
*
Revenues from voice mail services previously reflected in "Other" revenues have been reclassified to "Voice" revenues for all periods.
          
 
 
 CenturyTel, Inc.    
 CONSOLIDATED BALANCE SHEETS    
 SEPTEMBER 30, 2007 AND DECEMBER 31, 2006    
 (UNAUDITED)    
             
       
September 30,
  
December 31,
       
2007
  
2006
       
  (in thousands)
   
ASSETS
        
CURRENT ASSETS
        
 
Cash and cash equivalents
$
58,714
  
25,668
 
Other current assets
  
                  269,166
  
264,449
   
Total current assets
  
                  327,880
  
                  290,117
             
NET PROPERTY, PLANT AND EQUIPMENT
        
 
Property, plant and equipment
  
               8,598,777
  
7,893,760
 
Accumulated depreciation
  
              (5,453,958)
  
(4,784,483)
   
Net property, plant and equipment
  
               3,144,819
  
               3,109,277
             
GOODWILL AND OTHER ASSETS
        
 
Goodwill
  
               3,997,028
  
3,431,136
 
Other
  
                  762,923
  
610,477
   
Total goodwill and other assets
  
               4,759,951
  
               4,041,613
             
TOTAL ASSETS
$
              8,232,650
  
               7,441,007
             
   
LIABILITIES AND EQUITY
        
CURRENT LIABILITIES
        
 
Short-term debt and current maturities of long-term debt
$
254,895
  
178,012
 
Other current liabilities
  
                  425,021
  
439,553
   
Total current liabilities
  
    679,916 
  
                  617,565
             
LONG-TERM DEBT
  
               2,747,576
  
2,412,852
DEFERRED CREDITS AND OTHER LIABILITIES
  
               1,440,737
  
1,219,639
STOCKHOLDERS' EQUITY
  
               3,364,421
  
3,190,951
             
TOTAL LIABILITIES AND EQUITY
$
               8,232,650
  
               7,441,007
             
 
 
 
CenturyTel, Inc.           
  
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES      
  
(UNAUDITED)           
  
                                                 
                                                 
   
Three months ended September 30, 2007
    
Three months ended September 30, 2006
  
                     
As adjusted
                      
As adjusted
  
         
Less
          
excluding
          
Less
          
excluding
  
         
non-
          
non-
          
non-
          
non-
  
 In thousands
  
As
    
recurring
          
recurring
    
As
    
recurring
          
recurring
  
   
reported
    
items
          
items
    
reported
    
items
          
items
  
Operating cash flow and cash flow margin
                                                
   Operating income
   $
224,185
       (2,214 )     (1 )    
226,399
      
168,942
       (2,604 )     (1 )    
171,546
  
   Add:  Depreciation and amortization
    
136,606
      
-
              
136,606
      
130,147
                      
130,147
  
   Operating cash flow
   $
360,791
       (2,214 )            
363,005
      
299,089
       (2,604 )            
301,693
  
                                                                 
   Revenues
   $
708,833
      
527
       (1 )    
708,306
      
619,837
      
651
       (1 )    
619,186
  
                                                                 
   Operating income margin (operating income divided
     by revenues)
     31.6 %                     32.0 %     27.3 %                     27.7 %
                                                                 
   Operating cash flow margin (operating cash flow
     divided by revenues)
     50.9 %                     51.2 %     48.3 %                     48.7 %
                                                                 
                                                                 
Free cash flow (prior to debt service requirements
  and dividends) 
                                                              
   Net income
   $
113,202
      
5,065
       (2 )    
108,137
      
76,324
       (1,604 )     (3 )    
77,928
  
   Add:  Depreciation and amortization
    
136,606
      
-
              
136,606
      
130,147
      
-
              
130,147
  
   Less:  Capital expenditures
     (77,445 )    
-
               (77,445 )     (82,579 )    
-
               (82,579 )
   Free cash flow
   $
172,363
      
5,065
              
167,298
      
123,892
       (1,604 )            
125,496
  
                                                                 
   Free cash flow
   $
172,363
                              
123,892
                          
   Gain on asset dispositions
     (10,436 )                            
-
                          
   Deferred income taxes
    
13,106
                              
11,262
                          
   Changes in current assets and current liabilities
     (42,321 )                             (14,012 )                        
   Increase in other noncurrent assets
    
4,400
                              
4,132
                          
   Decrease in other noncurrent liabilities
     (2,542 )                             (1,729 )                        
   Retirement benefits
    
6,745
                              
10,406
                          
   Excess tax benefits from share-based compensation
     (122 )                             (2,913 )                        
   Other, net
    
12,770
                              
2,574
                          
   Add:  Capital expenditures
    
77,445
                              
82,579
                          
   Net cash provided by operating activities
   $
231,408
                              
216,191
                          
                                                                 
                                                                 
 NONRECURRING ITEMS
                                                                
    (1) - Severance and related costs due to workforce reduction, including revenue impact (presented on a pre-tax basis).
                          
    (2) - After-tax effect of gain on sale of non-core asset and severance and related costs due to workforce reduction.
                          
    (3) - After-tax effect of severance and related costs due to workforce reduction.     
                          
 
 
CenturyTel, Inc.           
  
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES      
  
(UNAUDITED)           
  
                                                 
                                                 
   
Nine months ended September 30, 2007
    
Nine months ended September 30, 2006
  
                     
As adjusted
                      
As adjusted
  
         
Less
          
excluding
          
Less
          
excluding
  
         
non-
          
non-
          
non-
          
non-
  
 In thousands
  
As
    
recurring
          
recurring
    
As
    
recurring
          
recurring
  
   
reported
    
items
          
items
    
reported
    
items
          
items
  
Operating cash flow and cash flow margin
                                                
    Operating income
   $
624,104
      
52,707
       (1 )    
571,397
      
491,859
       (7,467 )     (4 )    
499,326
  
    Add:  Depreciation and amortization
    
398,701
      
-
              
398,701
      
397,146
                      
397,146
  
    Operating cash flow
   $
1,022,805
      
52,707
              
970,098
      
889,005
       (7,467 )            
896,472
  
                                                                 
    Revenues
   $
1,999,679
      
51,396
       (2 )    
1,948,283
      
1,840,035
      
1,963
       (4 )    
1,838,072
  
                                                                 
    Operating income margin (operating income
      divided by revenues)
     31.2 %                     29.3 %     26.7 %                     27.2 %
                                                                 
    Operating cash flow margin (operating cash
      flow divided by revenues)
     51.1 %                     49.8 %     48.3 %                     48.8 %
                                                                 
                                                                 
Free cash flow (prior to debt service  requirements
  and dividends)
                                                                
   Net income
   $
303,337
      
38,896
       (3 )    
264,441
      
297,794
      
74,206
       (5 )    
223,588
  
   Add:  Depreciation and amortization
    
398,701
      
-
              
398,701
      
397,146
                      
397,146
  
   Less:  Capital expenditures
     (184,301 )    
-
               (184,301 )     (213,034 )                     (213,034 )
   Free cash flow
   $
517,737
      
38,896
              
478,841
      
481,906
      
74,206
              
407,700
  
                                                                 
   Free cash flow
   $
517,737
                              
481,906
                          
   Gain on asset dispositions
     (10,436 )                             (118,649 )                        
   Deferred income taxes
    
43,111
                              
33,413
                          
   Changes in current assets and current liabilities
    
28,514
                               (14,472 )                        
   Decrease in other noncurrent assets
    
8,053
                              
4,429
                          
   Increase (decrease) in other noncurrent liabilities
     (14,209 )                            
557
                          
   Retirement benefits
    
21,392
                              
25,332
                          
   Excess tax benefits from share-based compensation
     (6,434 )                             (7,860 )                        
   Other, net
    
17,404
                              
4,818
                          
   Add:  Capital expenditures
    
184,301
                              
213,034
                          
   Net cash provided by operating activities
   $
789,433
                              
622,508
                          
                                                                 
 NONRECURRING ITEMS
                                                                
    (1) - 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,
 
            net of (iii) impact of severance and related costs due to workforce reduction ($2.2 million).
                                          
    (2) - Includes (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 reduction ($.5 million).
                                  
    (3) - Includes after-tax gain on sale of non-core asset and the after-tax effect of Item (1).     
                                        
    (4) - Severance and related costs due to workforce reduction, including related revenue impact.
                                          
    (5) - Includes (i) the after-tax effect of gains on sales of assets (primarily gain on Rural Telephone Bank stock redemption), (ii) the after-tax effect of Item (4) and (iii) a $6.4 million
  
            net tax benefit due to the resolution of various income tax audit issues.