DEFA14A 1 d723776ddefa14a.htm DEFA14A DEFA14A

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of the

Securities Exchange Act of 1934

(Amendment No.    )

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¨   Soliciting Material under §240.14a-12

CENTURYLINK, INC.
(Name of registrant as specified in its charter)
(Name of person(s) filing proxy statement, if other than the registrant)
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Explanatory Note: Commencing May 12, 2014, CenturyLink, Inc. plans to distribute the attached presentation materials in connection with outreach meetings to be held with certain of its principal shareholders.

CenturyLink Overview
May 12, 2014

2
Forward-Looking Statements / Non-GAAP Financial Measures
Certain non-historical statements made in this presentation and future oral or written statements or press releases by us or our management are
intended to be forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking
statements are based on current expectations only, and are subject to a number of assumptions, risks and uncertainties, many of which are beyond
our control. Actual events and results may differ materially from those anticipated, estimated, projected or implied by us if one or more of these risks
or
uncertainties
materialize,
or
if
our
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,
including product displacement; the effects of ongoing changes in the regulation of the communications industry, including the outcome of regulatory
or judicial proceedings relating to intercarrier compensation, access charges, universal service, broadband deployment, data protection and net
neutrality;
our
ability
to
effectively
adjust
to
changes
in
the
communications
industry,
and
changes
in
our
markets,
product
mix
and
network
caused
by
our
recent
acquisitions;
our
ability
to
successfully
integrate
recently-acquired
operations
into
our
incumbent
operations,
including
the
possibility
that
the anticipated benefits from our recent acquisitions cannot be fully realized in a timely manner or at all; our ability to effectively manage our
expansion opportunities, including retaining and hiring key personnel; possible changes in the demand for, or pricing of, our products and services,
including
our
ability
to
effectively
respond
to
increased
demand
for
high-speed
broadband
service;
our
ability
to
successfully
introduce
new
product
or
service offerings on a timely and cost-effective basis; the adverse impact on our business and network from possible equipment failures, security
breaches
or
similar
attacks
on
our
network;
our
ability
to
successfully
negotiate
collective
bargaining
agreements
on
reasonable
terms
without
work
stoppages; our ability to use net operating loss carryovers of Qwest in projected amounts; our continued access to credit markets on favorable terms;
our
ability
to
collect
our
receivables
from
financially
troubled
communications
companies;
our
ability
to
maintain
favorable
relations
with
our
key
business partners, suppliers, vendors, landlords and financial institutions; any adverse developments in legal or regulatory proceedings involving us;
changes in our operating plans, corporate strategies, dividend payment plans or other capital allocation plans, including those caused by changes in
our cash requirements, capital expenditure needs, debt obligations, pension funding requirements, cash flows, or financial position, or other similar
changes; the effects of adverse weather; other risks referenced from time to time in our filings with the SEC; and the effects of more general factors
such as changes in interest rates, in tax laws, in accounting policies or practices, in operating, medical, pension or administrative costs, in general
market, labor or economic conditions, or in legislation, regulation or public policy. These and other uncertainties related to our business and our
recent acquisitions are described in greater detail in Item 1A of our Form 10-K for the year ended December 31, 2013, 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
are
inherently
speculative
and
speak
only
as
of
the
date
made.
We
undertake
no
obligation
to
update
any
of
our
forward-looking
statements for any reason.
Non-GAAP Financial Measures
This presentation includes certain non-GAAP financial measures. These measures are provided and valid only as of the date of this presentation and
should not be relied upon beyond that date. Reconciliations of these non-GAAP measures to the most directly comparable GAAP measures are
available on our website at www.centurylink.com.

3
Participants
Stacey Goff
Executive Vice President, General Counsel & Secretary
Stewart Ewing
Executive Vice President, Chief Financial Officer & Assistant Secretary
Scott Trezise
Executive Vice President, Human Resources

CenturyLink
Operating revenues of $18.1B and adjusted
free cash flow of $3.1B in FY 2013
Enterprise
Value
of
approximately
$40B
(1)
Customers range from Fortune 500
companies to families in rural America
240,000 route mile national fiber network with
55 global data centers
Committed to being the broadband leader in
our markets
A
global leader in managed hosting and
cloud services
4
(1)  As of December 31, 2013
•
•
•
•
•
•

Acquired Embarq
July 2009
Acquired Qwest
April 2011
Acquired Savvis
July 2011
2008
2009
2010
2011
2012
2013
Employees
6,500
20,200
20,300
49,200
47,000
46,600
Reported
Revenue
$2.6 billion
$5.0 billion
$7.0 billion
$15.4 billion
$18.4 billion
$18.1 billion
Evolution Over Recent Years
Acquired Ciber ITO
October 2012
Acquired Tier 3
November 2013
Acquired AppFog
June 2013
5

2013 Accomplishments
6
Improved core revenue trend
Generated solid strategic revenue growth
of nearly $400 million, a 4.7% increase
from 2012
Achieved solid subscriber growth –
added
approximately 140,000 high-speed
Internet customers and 69,000 Prism™
TV customers
-2.3%
-1.3%
Core
Revenue
Increased 20 Mbps and 40 Mbps broadband speed enablement by
approximately 25% year-over-year; Added over 1,000 fiber-fed
buildings into our multi-tenant unit program
Repurchased 46 million shares for $1.57 billion during 2013
(1)
Core revenue defined as Strategic revenue plus Legacy revenue (excludes Data Integration and Other revenue);
pro forma 2011 figures reflect the effects of mergers then pending.
Pro forma 2011
2012
2013
(1)

7
Strong 1Q14 Results
Total operating revenues, operating
cash flow and Adjusted Diluted EPS
exceeded expectations
Total operating revenues of $4.54 billion
grew Y/Y $25 million, or 0.6%
•
Compares to Y/Y declines of 2.1%
in 1Q13 and 2.7% in 1Q12
Core
revenue
near
top-end
of
guidance
Core revenues of $4.11 billion was
nearly flat from 1Q13
•
Compares to Y/Y declines of 2% in
1Q13 and 3% in 1Q12
1Q12
1Q13
1Q14
1Q12
1Q13
1Q14
Total Revenue
Y/Y change
Core Revenue
Y/Y change
(1)
Core revenue defined as Strategic revenue plus Legacy revenue (excludes Data Integration and Other revenue)
(3.0%)
(2.0%)
(0.1%)
(2.7%)
(2.1%)
0.6%
1
 

8
Strategic Priorities
Business Network Solutions
Expand MPLS, Ethernet, Wavelength and VoIP offerings
Extend FTTT footprint for wireless data backhaul
Hosting, Cloud and IT Services
Expand and enhance cloud and hosting services platform
Increase participation rate of direct sales and expand partner sales channel
Offer complete portfolio of IT and cloud enablement services
Consumer Broadband and Video
Deploy fiber deeper into network to drive higher speeds
Expand Prism TV footprint and penetration
Operating Efficiency
Simplify and rationalize network infrastructure
Automate and improve processes
Continue to integrate and simplify systems

Governance Profile
9
•
Split our Chairman and CEO roles; Chairman is an independent, non-executive director
•
Amended our articles of incorporation to eliminate ten-vote shares
•
Amended
our
corporate
governance
guidelines
to
strengthen
the
Board’s
ability
to
“clawback”
executive
compensation
•
Implemented majority voting standard in uncontested director elections
•
Eliminated
the
use
of
tax
“gross-up”
benefits
in
our
executives’
change
of
control
agreements
and
split-dollar
insurance
policies
•
Implemented stock ownership guidelines for our executive officers, requiring the CEO to hold 5x base salary and all other
executive officers 3x base salary
•
Amended our insider trading policy to prohibit director and employees from hedging CenturyLink securities
2009
2010
2011
2012
2014
2013
•
Amended our bylaws to provide for proxy access, subject to shareholder ratification at the 2014 annual meeting
•
Amended our corporate governance guidelines to provide that the Nominating and Corporate Governance Committee will
review each director’s continuation on the Board annually, rather than at least once every three years
•
Amended
our
articles
of
incorporation
to
declassify
our
Board
of
Directors,
and
will
have
achieved
full
declassification
as of the
2014 annual shareholders’
meeting
•
Amended
our
insider
trading
policy
to
prohibit
our
senior
officers
and
directors
from
holding
our
securities
in
a
margin account or
otherwise pledging our securities as collateral
•
Eliminated
the
use
of
tax
“gross-up”
benefits
in
our
outside
directors’
executive
physical
program
•
Held
first
non-binding
advisory
“say
on
pay”
vote,
and
have
continued
to
hold
such
votes
on
an
annual
basis
•
Implemented stock ownership guidelines for our outside directors, requiring all outside directors to hold 5x annual cash retainer
•
Increased
the
CEO’s
holding
requirement
under
our
stock
ownership
guidelines
to
6x
base
salary
•
Amended
change
of
control
agreements
to
reduce
available
benefits
and
to
eliminate
“modified
single
trigger”
provisions
Over the last several years, CenturyLink has taken steps to enhance its corporate
governance profile by further aligning our practices with shareholder interests.

Pay Practices
10
Favorable “say on pay”
vote of over 94% in May 2013
Shareholders agree that we have favorable pay practices…
What We Do…
•
Performance-based compensation weighted
heavily towards long-term equity awards
•
Stock ownership guidelines
•
Avoid encouraging excessively risky behavior
•
Conduct
annual
“say-on-pay”
votes
•
Compensation
“clawback”
policy
•
Review peer group annually
•
Benchmark against 50th percentile peer
compensation levels
•
Independent and intensive performance
reviews of our senior officers
•
If our total shareholder return is negative,
then the maximum number of  performance
shares to vest is limited to the target amount
•
Shareholders must approve any future
severance agreements valued at more than
2.99 times the executive’s target cash
compensation
•
Compensation forfeiture covenants broader
than those mandated by law
What We Don’t
Do…
•
Enter into employment agreements with our
incumbent executives
•
Maintain a supplemental executive retirement
plan
•
Permit our directors or employees to hedge
our stock, or our directors or senior officers to
pledge our stock
•
Pay
dividends
on
our
executives’
unvested
restricted stock
•
Permit the Compensation Committee’s current
consultant to provide services to CenturyLink
•
Pay, provide or permit :
(i) excessive perquisites
(ii)
excise
tax
“gross-up”
payments
(iii) single-trigger change of control equity
acceleration benefits, or
(iv) other comparable disfavored
compensation practices.

Pay for Performance
11
2013
2014
Linkage to pay for performance…
Annual review of short-
and long-term incentive programs in order to maintain
a continued focus on pay for performance
Annual Incentive Bonus
•
50% operating cash flow
•
30% strategic revenues
•
20% strategic objectives
Annual Incentive Bonus
•
50% operating cash flow
•
50% core revenues
Long-Term Equity Incentive
•
50% performance-based and 50%
time-based restricted stock
•
Change TSR from S&P 500 index
to custom peer group
•
Addition of 3-year revenue goal
Long-Term Equity Incentive
•
Increased weighting of performance-
based restricted stock from 50% to
60%
•
Maintained custom peer group
•
Maintained 3-year revenue goal

CEO Pay Levels
12
CEO paid below market-competitive pay levels…
Pay actions taken to address CEO pay gaps increased at risk pay to 60% and
heavily weighted to long-term incentives
* based on August
2012 data
August 2012
•
Increased CEO base salary to
$1.1M
May 2013
•
Increased CEO annual incentive
bonus  target from 125% to 150%
•
Increased CEO LTI award value
from $4.4M to $6.6M
February 2014
•
Increased CEO LTI award value
from $6.6M to $7.5M

Q & A

Additional Disclosure
This information is being provided to certain shareholders in addition to our
proxy statement dated April 14, 2014 in connection with the solicitation of
proxies from CenturyLink shareholders.  Please read our proxy statement and
accompanying materials in their entirety as they contain important information. 
Our proxy materials, and any other documents filed by us with the Securities
and Exchange Commission (the “SEC”), may be obtained free of charge at the
SEC web site at www.sec.gov and from our website at www.centurylink.com.
CenturyLink and its directors and officers may be deemed to be participants in
the solicitation of proxies from our shareholders in connection with the
upcoming annual meeting of shareholders.  Information about our directors
and executive officers and their ownership of CenturyLink stock is set forth in
the proxy statement for our 2014 annual meeting of shareholders.
14