LUMEN TECHNOLOGIES, INC. MONROE, La., Feb. 10, 2016 /PRNewswire/ -- CenturyLink, Inc. (NYSE: CTL) today reported results for fourth quarter and full-year 2015.
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"CenturyLink achieved strong fourth quarter financial results as revenues, cash flow and adjusted diluted earnings per share exceeded the top end of our guidance for the quarter, driven by solid revenue performance and lower operating costs," said Glen F. Post III, chief executive officer and president. "Our Consumer segment continued to perform well as revenues grew both sequentially and year-over-year, while Business segment revenues grew sequentially on stronger core revenue generation. Our employees did a great job of containing costs during the second half of the year, which helped us exceed our goal of planned operating expense reductions for the second half of 2015.
"As we look to 2016, we are seeing strong demand for high-bandwidth data and managed services from businesses, which we expect to help mitigate the anticipated further declines in our legacy revenues. Our IT services business, while relatively small today, continued to grow and gain traction during 2015, generating revenues that more than doubled compared to the prior year. We also have a solid funnel of business services opportunities going into 2016, which we expect to help drive network and managed services revenue," Post concluded.
Fourth Quarter 2015 Highlights
-- Achieved core revenues of approximately $4.0 billion in fourth quarter
2015.
-- Revenue from high-bandwidth data services provided to Business
customers, including MPLS(3) and Ethernet, grew approximately 9%
year-over-year; revenue from Consumer strategic services grew more than
6% year-over-year.
-- Operating expenses declined more than $100 million in fourth quarter
2015 compared to third quarter 2015.
-- Generated free cash flow of $591 million, excluding special items.
-- Added approximately 16,000 CenturyLink(® )Prism(TM) TV customers during
fourth quarter 2015, ending the period with approximately 285,000
customers.
-- Ended the quarter with approximately 6.0 million high-speed Internet
customers, a decrease of approximately 22,000 customers in fourth
quarter 2015.
-- Purchased and retired more than 10 million shares of CenturyLink common
stock for nearly $280 million during fourth quarter 2015.
Consolidated Financial Results
Operating revenues for fourth quarter 2015 were $4.48 billion compared to $4.44 billion in fourth quarter 2014 driven by the increase in high-cost support revenues due to the recognition of Connect America Fund Phase 2 (CAF Phase 2) support during fourth quarter 2015, along with strength in high-bandwidth data services and Consumer strategic revenues. These increases were partially offset by the declines in low-bandwidth data services, as well as the decline in legacy revenues(4) which was primarily driven by access line losses and lower long distance revenues. Growth in strategic revenues was primarily due to continued business customer demand for high-bandwidth data services, along with year-over-year growth in consumer high-speed Internet and CenturyLink(® )Prism(TM) TV revenues.
Operating expenses, excluding special items, decreased to $3.71 billion from $3.86 billion in fourth quarter 2014. The year-over-year decrease was primarily driven by lower depreciation and amortization expenses and employee-related expenses.
Operating cash flow (as defined in our attached supplemental schedules), excluding special items, increased to $1.82 billion from $1.71 billion in fourth quarter 2014. For fourth quarter 2015, CenturyLink achieved an operating cash flow margin, excluding special items, of 40.6% versus 38.5% in fourth quarter 2014.
Adjusted Net Income and Adjusted Diluted Earnings Per Share (EPS) exclude the after-tax impact of special items, the non-cash after-tax impact of the amortization of certain intangible assets related to major acquisitions since mid-2009, and the non-cash after-tax impact to interest expense relating to the assignment of fair value to the outstanding debt assumed in connection with those acquisitions. Excluding these items and including the impact of favorable income tax adjustments, CenturyLink's Adjusted Net Income for fourth quarter 2015 was $434 million compared to Adjusted Net Income of $340 million in fourth quarter 2014. Fourth quarter 2015 Adjusted Diluted EPS was $0.80 compared to $0.60 in the year-ago period due to the higher Adjusted Net Income and the impact of the lower number of shares outstanding due to share repurchases in 2015. See the attached schedules for additional information.
Full-Year 2015 Results
For the full-year 2015, operating revenues decreased to $17.9 billion from $18.0 billion in 2014. Core revenues decreased to $16.1 billion in 2015 from $16.3 in 2014. Operating cash flow, excluding special items, was $7.0 billion in 2015 compared to $7.1 billion in 2014. The decline in operating revenues was driven by the impact of lower legacy voice revenues, a decline in strategic low-bandwidth data services and lower data integration revenues. These revenue declines were partially offset by increases in strategic revenues resulting primarily from increased business customer demand for high-bandwidth data services, along with growth in high-speed Internet and CenturyLink(® )Prism(TM) TV revenues, and increased high-cost support revenues due to the recognition of CAF Phase 2 funds. The operating cash flow decline was driven primarily by the decline in operating revenues. Adjusted Net Income, excluding special items, was $1.5 billion in 2015, flat compared to 2014. Adjusted Diluted EPS, excluding special items, was $2.71 in 2015 compared to $2.61 in 2014.
GAAP Results - Fourth Quarter and Full-Year
Under generally accepted accounting principles (GAAP), net income for fourth quarter 2015 was $338 million compared to a net income of $188 million for fourth quarter 2014, and diluted earnings per share was $0.62 for fourth quarter 2015 compared to $0.33 for fourth quarter 2014.
Net income under GAAP for full-year 2015 was $878 million compared to net income of $772 million for full-year 2014, and diluted earnings per share for full-year 2015 was $1.58 compared to diluted earnings per share of $1.36 for full-year 2014.
Additional details regarding the company's special items for the three and twelve months ended December 31, 2015 and 2014 are provided in the accompanying financial schedules.
Segment Financial Results(5)
Segment income margin improved to 50.1% from 49.1% a year ago primarily due to cost reduction efforts and strategic revenue growth, which together more than offset the margin impact of the continued decline in legacy revenue.
Business
The Business segment continued to experience solid demand for high-bandwidth data services in fourth quarter 2015.
-- High-bandwidth data services revenues from business customers grew
approximately 9% year-over-year.
-- Strategic revenues were $1.60 billion in the quarter, a 1.4% increase
from fourth quarter 2014, primarily due to increased high-bandwidth data
services and IT services revenues which were partially offset by
continued declines in low-bandwidth data services.
-- Total segment revenues were $2.66 billion, a decrease of 1.6% from
fourth quarter 2014, due primarily to declines in low-bandwidth data
services and legacy revenues which were partially offset by growth in
high-bandwidth data services revenues.
Consumer
The Consumer segment achieved solid year-over-year revenue growth driven primarily by increased high-speed Internet and CenturyLink(® )Prism(TM) TV revenues.
-- Total segment revenues were $1.51 billion for fourth quarter 2015, an
increase of 1.3% from fourth quarter 2014.
-- Strategic revenues were $773 million in the quarter, a 6.3% increase
over fourth quarter 2014.
-- Approximately 16,000 CenturyLink(® )Prism(TM) TV customers were added
during fourth quarter 2015 and more than 190,000 addressable homes were
added in new and existing service areas, ending the quarter with nearly
3.2 million addressable homes.
Guidance -- Full-Year and First Quarter 2016
CenturyLink anticipates slightly lower operating revenues and core revenues in full-year 2016 compared to full-year 2015 due to expected legacy revenue declines more than offsetting anticipated increases in strategic revenue growth. Operating cash flow is expected to decline from full-year 2015 primarily driven by the continued decline in legacy and low-bandwidth data services revenues. The company also anticipates lower depreciation and amortization expense for full-year 2016 compared to full-year 2015. Free cash flow in full-year 2016 is expected to decline from full-year 2015 due to the lower level of operating cash flow, an increase in cash income taxes and anticipated capital expenditures of $3 billion for the year.
Full-Year 2016 (excluding special items)
Operating Revenues $17.55 to $17.8 billion
Core Revenues $15.75 to $16.0 billion
Operating Cash Flow $6.6 to $6.8 billion
Adjusted Diluted EPS $2.50 to $2.70
Free Cash Flow $1.8 to $2.0 billion
CenturyLink expects first quarter 2016 operating revenues to decrease compared to fourth quarter 2015 primarily due to anticipated declines in legacy, hosting and low-bandwidth data services revenues. The company expects first quarter 2016 operating cash flow to decrease compared to fourth quarter 2015 primarily due to the decline in operating revenues, higher marketing costs and increased payroll taxes, along with approximately $35 million in favorable year-end expense true-ups reflected in fourth quarter 2015 results that are not expected to recur in first quarter 2016. The company also anticipates a decline in depreciation and amortization expense in the first quarter of 2016 which is expected to be more than offset by the decrease in operating cash flow and the impact of favorable income tax adjustments in the fourth quarter 2015, resulting in a decline in adjusted diluted EPS in first quarter 2016 compared to fourth quarter 2015.
First Quarter 2016 (excluding special items)
Operating Revenues $4.40 to $4.45 billion
Core Revenues $3.95 to $4.00 billion
Operating Cash Flow $1.66 to $1.72 billion
Adjusted Diluted EPS $0.67 to $0.73
All 2016 guidance figures and 2016 outlook statements included in this release (i) speak as of February 10, 2016 only, (ii) exclude the impact of any share repurchases made after December 31, 2015 and (iii) exclude the effects of special items, future impairment charges, future changes in regulation (including changes in the CAF Phase 2 program), future changes in tax laws, accounting rules or our accounting policies, unforeseen litigation or contingencies, integration expenses associated with major acquisitions, any changes in our pension fundings, any changes in operating or capital plans or other unforeseen events or circumstances that impact our financial performance, and any future mergers, acquisitions, divestitures, joint ventures or other similar business transactions. See "Forward Looking Statements" below. For additional information on how we define certain of the terms used above, see the attached schedules.
Investor Call
As previously announced, CenturyLink's management will host a conference call at 4:00 p.m. Central Time today, February 10, 2016. Interested parties can access the call by dialing 866-814-1933. The call will be accessible for replay through February 18, 2016, by dialing 888-266-2081 and entering the access code 1667468. Investors can also listen to CenturyLink's earnings conference call and webcast replay by accessing the Investor Relations portion of the company's website at www.centurylink.com through March 3, 2016. Financial, statistical and other information related to the call will also be posted to our website.
Reconciliation to GAAP
This release includes certain non-GAAP financial measures, including but not limited to operating cash flow, free cash flow, core revenues, Adjusted Net Income, Adjusted Diluted EPS and adjustments to GAAP measures to exclude the effect of special 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 above will be available in the Investor Relations portion of the company's website at www.centurylink.com. Investors are urged to consider these non-GAAP measures in addition to, and not in substitution for, measures prepared in accordance with GAAP.
About CenturyLink
CenturyLink (NYSE: CTL) is a global communications, hosting, cloud and IT services company enabling millions of customers to transform their businesses and their lives through innovative technology solutions. CenturyLink offers network and data systems management, Big Data analytics and IT consulting, and operates more than 55 data centers in North America, Europe and Asia. The company provides broadband, voice, video, data and managed services over a robust 250,000-route-mile U.S. fiber network and a 300,000-route-mile international transport network. Visit www.centurylink.com for more information.
Forward Looking Statements
Except for historical and factual information, the matters set forth in this release and other of our oral or written statements identified by words such as "estimates," "expects," "anticipates," "believes," "plans," "intends," and similar expressions are forward-looking statements as defined by the federal securities laws, and are subject to the "safe harbor" protections thereunder. These forward-looking statements are not guarantees of future results and are based on current expectations only, are inherently speculative, 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 effects of competition from a wide variety of competitive providers, including lower demand for our legacy offerings; the effects of new, emerging or competing technologies, including those that could make our products less desirable or obsolete; the effects of ongoing changes in the regulation of the communications industry, including the outcome of regulatory or judicial proceedings relating to intercarrier compensation, interconnection obligations, 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 the composition of our markets and product mix; 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 maintain the quality and profitability of our existing product and service offerings and to introduce new offerings on a timely and cost-effective basis; the adverse impact on our business and network from possible equipment failures, service outages, security breaches or similar events impacting our network; our ability to generate cash flows sufficient to fund our financial commitments and objectives, including our capital expenditures, operating costs, share repurchases, dividends, pension contributions and debt payments; changes in our operating plans, corporate strategies, dividend payment plans or other capital allocation plans, whether based upon changes in our cash flows, cash requirements, financial performance, financial position, or otherwise; our ability to effectively retain and hire key personnel and to successfully negotiate collective bargaining agreements on reasonable terms without work stoppages; increases in the costs of our pension, health, post-employment or other benefits, including those caused by changes in markets, interest rates, mortality rates, demographics or regulations; adverse changes in our access to credit markets on favorable terms, whether caused by changes in our financial position, lower debt credit ratings, unstable markets or otherwise; our ability to maintain favorable relations with our key business partners, suppliers, vendors, landlords and financial institutions; our ability to effectively manage our expansion opportunities; our ability to collect our receivables from financially troubled customers; any adverse developments in legal or regulatory proceedings involving us; changes in tax, communications, pension, healthcare or other laws or regulations, in governmental support programs, or in general government funding levels; the effects of changes in accounting policies or practices, including potential future impairment charges; the effects of adverse weather or other natural or man-made disasters; the effects of more general factors such as changes in interest rates, in operating costs, in general market, labor, economic or geo-political conditions, or in public policy; and other risks referenced from time to time in our filings with the U.S. Securities and Exchange Commission (the "SEC"). For all the reasons set forth above and in our SEC filings, you are cautioned not to place undue reliance upon any of our forward-looking statements, which speak only as of the date made. We undertake no obligation to publicly update or revise any of our forward-looking statements for any reason, whether as a result of new information, future events or developments, changed circumstances, or otherwise. Furthermore, any information about our intentions contained in any of our forward-looking statements reflects our intentions as of the date of such forward-looking statement, and is based upon, among other things, existing regulatory, technological, industry, competitive, economic and market conditions, and our assumptions as of such date. We may change our intentions, strategies or plans without notice at any time and for any reason.
(1) Core revenues defined as strategic revenues plus legacy revenues (excludes data integration and other revenues), as described further in the attached schedules.
(2) See attachments for non-GAAP reconciliations.
(3) Multi-Protocol Label Switching
(4) Beginning first quarter 2015, certain revenues were reclassified between strategic services and legacy services. All historical periods have been restated to reflect this change.
(5) All references to segment data herein reflect certain adjustments described in the attached schedules.
CenturyLink, Inc.
CONSOLIDATED STATEMENTS OF INCOME
THREE MONTHS ENDED DECEMBER 31, 2015 AND 2014
(UNAUDITED)
(Dollars in millions, except per share amounts; shares in thousands)
Three months ended December 31, 2015 Three months ended December 31, 2014
------------------------------------ ------------------------------------
As adjusted As adjusted Increase
excluding excluding (decrease)
Less special Less special Increase excluding
As special items As special items (decrease) special
reported items (Non-GAAP) reported items (Non-GAAP) as reported items
-------- ----- --------- -------- ----- --------- ----------- -----
OPERATING REVENUES*
Strategic $2,372 - 2,372 2,304 - 2,304 3.0% 3.0%
Legacy 1,657 - 1,657 1,744 - 1,744 (5.0)% (5.0)%
Data integration 139 - 139 144 - 144 (3.5)% (3.5)%
Other 308 - 308 246 - 246 25.2% 25.2%
---
Total operating revenues 4,476 - 4,476 4,438 - 4,438 0.9% 0.9%
-----
OPERATING EXPENSES
Cost of services and products 1,915 3 (1) 1,912 1,974 38 (3) 1,936 (3.0)% (1.2)%
Selling, general and
administrative 757 12 (1) 745 850 57 (3) 793 (10.9)% (6.1)%
Depreciation and amortization 1,053 - 1,053 1,131 - 1,131 (6.9)% (6.9)%
Total operating expenses 3,725 15 3,710 3,955 95 3,860 (5.8)% (3.9)%%
-----
OPERATING INCOME 751 (15) 766 483 (95) 578 55.5% 32.5%
OTHER INCOME (EXPENSE)
Interest expense (328) - (328) (330) - (330) (0.6)% (0.6)%
Other income, net 7 - 7 4 - 4 75.0% 75.0%
Income tax expense (92) 60 (2) (152) 31 96 (4) (65) (396.8)% 133.8%
NET INCOME $338 45 293 188 1 187 79.8% 56.7%
==== === === === === ===
BASIC EARNINGS PER SHARE $0.62 0.08 0.54 0.33 - 0.33 87.9% 63.6%
DILUTED EARNINGS PER SHARE $0.62 0.08 0.54 0.33 - 0.33 87.9% 63.6%
AVERAGE SHARES OUTSTANDING
Basic 541,605 541,605 565,327 565,327 (4.2)% (4.2)%
Diluted 542,493 542,493 567,035 567,035 (4.3)% (4.3)%
DIVIDENDS PER COMMON SHARE $0.54 0.54 0.54 0.54 - % - %
SPECIAL ITEMS
(1) - Includes severance costs associated with recent
headcount reductions ($9 million) and
integration costs associated with our
acquisition of
Qwest ($6 million).
(2) - Income tax benefit of Item (1) and a favorable
income tax adjustment of $20 million and $34
million related to affiliate debt
rationalization.
(3) - Includes severance costs associated with
reduction in force initiatives ($22 million),
integration costs associated with our
acquisition of Qwest ($10 million) and a
pension settlement charge ($63 million).
(4) - Income tax benefit of Item (3) and a favorable
income tax adjustment of $60 million.
* During the first quarter of 2015, we determined
that certain products and services associated
with our acquisition of SAVVIS, Inc. are more
closely aligned to legacy services than to
strategic services. As a result, these
operating revenues are now reflected as legacy
services.
CenturyLink, Inc.
CONSOLIDATED STATEMENTS OF INCOME
TWELVE MONTHS ENDED DECEMBER 31, 2015 AND 2014
(UNAUDITED)
(Dollars in millions, except per share amounts; shares in thousands)
Twelve months ended December 31, 2015 Twelve months ended December 31, 2014
------------------------------------- -------------------------------------
As adjusted As adjusted Increase
excluding excluding (decrease)
Less special Less special Increase excluding
As special items As special items (decrease) special
reported items (Non-GAAP) reported items (Non-GAAP) as reported items
-------- ----- --------- -------- ----- --------- ----------- -----
OPERATING REVENUES *
Strategic $9,343 - 9,343 9,166 - 9,166 1.9% 1.9%
Legacy 6,752 - 6,752 7,172 - 7,172 (5.9)% (5.9)%
Data integration 573 - 573 690 - 690 (17.0)% (17.0)%
Other 1,232 - 1,232 1,003 - 1,003 22.8% 22.8%
-----
Total operating revenues 17,900 - 17,900 18,031 - 18,031 (0.7)%% (0.7)%%
------
OPERATING EXPENSES
Cost of services and products 7,778 14 (1) 7,764 7,846 50 (3) 7,796 (0.9)% (0.4)%
Selling, general and
administrative 3,328 152 (1) 3,176 3,347 168 (3) 3,179 (0.6)% (0.1)%
Depreciation and amortization 4,189 - 4,189 4,428 - 4,428 (5.4)% (5.4)%
Total operating expenses 15,295 166 15,129 15,621 218 15,403 (2.1)% (1.8)%
------
OPERATING INCOME 2,605 (166) 2,771 2,410 (218) 2,628 8.1% 5.4%
OTHER INCOME (EXPENSE)
Interest expense (1,312) - (1,312) (1,311) - (1,311) 0.1% 0.1%
Other income, net 23 - 23 11 (14) (4) 25 109.1% (8.0)%
Income tax expense (438) 115 (2) (553) (338) 143 (5) (481) 29.6% 15.0%
NET INCOME $878 (51) 929 772 (89) 861 13.7% 7.9%
==== === === === === ===
BASIC EARNINGS PER SHARE $1.58 (0.09) 1.68 1.36 (0.16) 1.51 16.2% 11.3%
DILUTED EARNINGS PER SHARE $1.58 (0.09) 1.67 1.36 (0.16) 1.51 16.2% 10.6%
AVERAGE SHARES OUTSTANDING
Basic 554,278 554,278 568,435 568,435 (2.5)% (2.5)%
Diluted 555,093 555,093 569,739 569,739 (2.6)% (2.6)%
DIVIDENDS PER COMMON SHARE $2.16 2.16 2.16 2.16 - % - %
SPECIAL ITEMS
(1) - Includes severance costs associated with recent
headcount reductions ($99 million),
integration costs associated with our
acquisition of Qwest ($32 million), regulatory
fines associated with a 911 system outage ($15
million), litigation and other adjustments
associated with pre-acquisition activities of
Qwest and Embarq ($12 million) and the
impairment of office buildings ($8 million).
(2) - Income tax benefit of Item (1) and a favorable
income tax adjustment of $20 million and $34
million related to affiliate debt
rationalization.
(3) - Includes severance costs associated with
reduction in force initiatives ($88 million),
integration and retention costs associated
with our acquisition of Qwest ($51 million),
the impairment of two office buildings ($18
million) and a pension settlement charge ($63
million), less the offsetting impact of a
litigation settlement in the amount of $2
million.
(4) - Impairment of a non-operating investment ($14
million).
(5) - Income tax benefit of Item (3) and a favorable
income tax adjustment of $60 million.
* During the first quarter of 2015, we determined
that certain products and services associated
with our acquisition of SAVVIS, Inc. are more
closely aligned to legacy services than to
strategic services. As a result, these
operating revenues are now reflected as legacy
services.
CenturyLink, Inc.
CONDENSED CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 2015 AND DECEMBER 31, 2014
(UNAUDITED)
(Dollars in millions)
December 31, December 31,
2015 2014
---- ----
ASSETS
CURRENT ASSETS
Cash and
cash
equivalents $126 128
Other
current
assets * 2,524 2,568
Total
current
assets 2,650 2,696
----- -----
NET PROPERTY, PLANT AND
EQUIPMENT
Property,
plant and
equipment 38,785 36,718
Accumulated
depreciation (20,716) (18,285)
Net
property,
plant and
equipment 18,069 18,433
------ ------
GOODWILL AND OTHER ASSETS
Goodwill 20,742 20,755
Other, net
* 6,143 7,219
Total
goodwill
and other
assets 26,885 27,974
------ ------
TOTAL
ASSETS $47,604 49,103
======= ======
LIABILITIES AND
STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Current
maturities
of long-
term debt $1,503 550
Other
current
liabilities 3,101 3,368
----- -----
Total
current
liabilities 4,604 3,918
LONG-TERM
DEBT * 18,722 19,953
DEFERRED
CREDITS
AND OTHER
LIABILITIES
* 10,218 10,209
STOCKHOLDERS'
EQUITY 14,060 15,023
------ ------
TOTAL
LIABILITIES
AND
STOCKHOLDERS'
EQUITY $47,604 49,103
======= ======
* In 2015 we adopted both ASU 2015-03
"Simplifying the Presentation of
Debt Issuance Costs" and 2015-17
"Balance Sheet Classification of
Deferred Taxes" by retrospectively
applying the requirements of the
ASUs to our previously issued
consolidated financial statements.
The impacts of the adoptions on our
December 31, 2014 balance sheet were
as follows:
A decrease of $880 million in Other
current assets;
A decrease of $164 million in Other
assets, net;
A decrease of $168 million in Long-
term debt; and
A decrease of $876 million in
Deferred credits and other
liabilities
CenturyLink, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
TWELVE MONTHS ENDED DECEMBER 31, 2015 AND 2014
(UNAUDITED)
(Dollars in millions)
Twelve months ended Twelve months ended
December 31, 2015 December 31, 2014
----------------- -----------------
OPERATING ACTIVITIES
Net income $878 772
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 4,189 4,428
Impairment of assets 9 32
Deferred income taxes 350 291
Provision for uncollectible accounts 177 159
Share-based compensation 73 79
Changes in current assets and liabilities, net (321) (447)
Retirement benefits (141) (184)
Changes in other noncurrent assets and liabilities, net (78) 99
Other, net 16 (41)
Net cash provided by operating activities 5,152 5,188
----- -----
INVESTING ACTIVITIES
Payments for property, plant and equipment and capitalized
software (2,872) (3,047)
Cash paid for acquisitions, net (4) (93)
Proceeds from sale of property 31 63
Other, net (8) -
--- ---
Net cash used in investing activities (2,853) (3,077)
------ ------
FINANCING ACTIVITIES
Net proceeds from issuance of long-term debt 989 483
Payments of long-term debt (966) (800)
Net payments on credit facility and revolving line of credit (315) (4)
Early retirement of debt costs (1) -
Dividends paid (1,198) (1,228)
Net proceeds from issuance of common stock 11 50
Repurchase of common stock (819) (650)
Other, net (2) (2)
--- ---
Net cash used in financing activities (2,301) (2,151)
------ ------
Net decrease in cash and cash equivalents (2) (40)
Cash and cash equivalents at beginning of period 128 168
--- ---
Cash and cash equivalents at end of period $126 128
==== ===
CenturyLink, Inc.
SELECTED SEGMENT FINANCIAL INFORMATION
THREE MONTHS AND TWELVE MONTHS ENDED DECEMBER 31, 2015 AND 2014
(UNAUDITED)
(Dollars in millions)
Three months ended December 31,* Twelve months ended December 31,*
------------------------------- --------------------------------
2015 2014 2015 2014
---- ---- ---- ----
Total segment revenues $4,168 4,192 16,668 17,028
Total segment expenses 2,081 2,135 8,459 8,509
Total segment income $2,087 2,057 8,209 8,519
====== ===== ===== =====
Total segment income
margin (segment income
divided by segment
revenues) 50.1% 49.1% 49.3% 50.0%
==== ==== ==== ====
Business
Revenues
Strategic services $1,599 1,577 6,311 6,316
Legacy services 917 978 3,765 4,032
Data integration 139 143 571 686
Total revenues 2,655 2,698 10,647 11,034
-----
Expenses
Total expenses 1,484 1,521 6,034 6,089
-----
Segment income $1,171 1,177 4,613 4,945
====== ===== ===== =====
Segment income margin 44.1% 43.6% 43.3% 44.8%
==== ==== ==== ====
Consumer
Revenues
Strategic services $773 727 3,032 2,850
Legacy services 740 766 2,987 3,140
Data integration - 1 2 4
Total revenues 1,513 1,494 6,021 5,994
-----
Expenses
Total expenses 597 614 2,425 2,420
---
Segment income $916 880 3,596 3,574
Segment income margin 60.5% 58.9% 59.7% 59.6%
==== ==== ==== ====
* During the
fourth
quarter of
2014, we
implemented a
new
organizational
structure. As
a result of
this
reorganization,
we now
operate and
report two
segments in
our
consolidated
financial
statements.
During the
first quarter
of 2015, we
determined
that certain
products and
services
associated
with our
acquisition
of SAVVIS,
Inc. are more
closely
aligned to
legacy
services than
to strategic
services. As
a result,
these
operating
revenues are
now reflected
as legacy
services.
CenturyLink, Inc.
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
(UNAUDITED)
(Dollars in millions)
Three months ended December 31, 2015 Three months ended December 31, 2014
------------------------------------
As adjusted As adjusted
Less excluding Less excluding
As special special As special special
reported items items reported items items
-------- ----- ----- -------- ----- -----
Operating cash flow and cash flow margin
Operating income $751 (15) (1) 766 483 (95) (2) 578
Add: Depreciation and
amortization 1,053 - 1,053 1,131 - 1,131
Operating cash flow $1,804 (15) 1,819 1,614 (95) 1,709
===
Revenues $4,476 - 4,476 4,438 - 4,438
===
Operating income margin
(operating income divided by
revenues) 16.8% 17.1% 10.9% 13.0%
===== === === === ===
Operating cash flow margin
(operating cash flow divided by
revenues) 40.3% 40.6% 36.4% 38.5%
===== === === === ===
Free cash flow
Operating cash flow $1,819 1,709
Less: Cash paid for income
taxes, net of refunds (9) (6)
Less: Cash paid for interest,
net of amounts capitalized (396) (404)
Less: Capital expenditures (3) (830) (930)
Add: Other income 7 4
Free cash flow (4) $591 373
SPECIAL ITEMS
(1) - Includes severance costs
associated with recent headcount
reductions ($9 million) and
integration costs associated with
our acquisition of Qwest ($6
million).
(2) - Includes severance costs
associated with reduction in
force initiatives ($22 million),
integration costs associated with
our acquisition of Qwest ($10
million) and a pension settlement
charge ($63 million).
(3) - Excludes $3 million in fourth
quarter 2015 and $4 million in
fourth quarter 2014 of capital
expenditures related to the
integration of Qwest and Savvis.
(4) - Excludes special items identified
in items (1) and (2).
CenturyLink, Inc.
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
(UNAUDITED)
(Dollars in millions)
Twelve months ended December 31, 2015 Twelve months ended December 31, 2014
------------------------------------- -------------------------------------
As adjusted As adjusted
Less excluding Less excluding
As special special As special special
reported items items reported items items
-------- ----- ----- -------- ----- -----
Operating cash flow and cash flow margin
Operating income $2,605 (166) (1) 2,771 2,410 (218) (2) 2,628
Add: Depreciation and
amortization 4,189 - 4,189 4,428 - 4,428
Operating cash flow $6,794 (166) 6,960 6,838 (218) 7,056
===
Revenues $17,900 - 17,900 18,031 - 18,031
========
Operating income margin
(operating income divided by
revenues) 14.6% 15.5% 13.4% 14.6%
===== === === === ===
Operating cash flow margin
(operating cash flow divided by
revenues) 38.0% 38.9% 37.9% 39.1%
===== === === === ===
Free cash flow
Operating cash flow $6,960 7,056
Less: Cash paid for income
taxes, net of refunds (63) (27)
Less: Cash paid for interest,
net of amounts capitalized (1,310) (1,338)
Less: Capital expenditures (3) (2,861) (3,026)
Add: Other income 23 25
Free cash flow (4) $2,749 2,690
SPECIAL ITEMS
(1) - Includes severance costs associated with recent headcount reductions ($99 million), integration costs associated
with our acquisition of Qwest ($32 million), regulatory fines associated with a 911 system outage ($15 million),
litigation and other adjustments associated with pre-acquisition activities of Qwest and Embarq ($12 million) and
the impairment of office buildings ($8 million).
(2) - Includes severance costs associated with reduction in force initiatives ($88 million), integration and retention
costs associated with our acquisition of Qwest ($51 million), the impairment of two office buildings ($18 million)
and a pension settlement charge ($63 million), less the offsetting impact of a litigation settlement in the amount
of $2 million.
(3) - Excludes $11 million in 2015 and $21 million in 2014 of capital expenditures related to the integration of Qwest and
Savvis.
(4) - Excludes special items identified in items (1) and (2).
CenturyLink, Inc.
REVENUES
(UNAUDITED)
(Dollars in millions)
Three months ended Twelve months ended
------------------ -------------------
December 31, December 31, December 31, December 31,
2015 2014 2015 2014
---- ---- ---- ----
Strategic services
Business high-bandwidth data
services (1) $733 675 2,816 2,579
Business low-bandwidth data
services (2) 497 553 2,052 2,345
Business hosting services (3) 320 328 1,281 1,316
Other business strategic
services (4) 49 21 162 76
Consumer high-speed Internet
services (5) 666 622 2,611 2,469
Other consumer strategic
services (6) 107 105 421 381
---
Total strategic services
revenues 2,372 2,304 9,343 9,166
-----
Legacy services
Business legacy voice
services (7) 632 677 2,590 2,780
Other business legacy
services (8) 285 301 1,175 1,252
Consumer legacy voice
services (7) 649 694 2,676 2,864
Other consumer legacy
services (9) 91 72 311 276
Total legacy services
revenues 1,657 1,744 6,752 7,172
-----
Data integration
Business data integration 139 143 571 686
Consumer data integration - 1 2 4
Total data integration
revenues 139 144 573 690
---
Other revenues
High-cost support revenue
(10) 182 128 732 528
Other revenue (11) 126 118 500 475
Total other revenues 308 246 1,232 1,003
---
Total revenues $4,476 4,438 17,900 18,031
====== ===== ====== ======
(1) Includes MPLS and Ethernet
revenue
(2) Includes private line and
high-speed Internet revenue
(3) Includes colocation, hosting
(including cloud hosting and
managed hosting) and hosting
area network revenue
(4) Includes primarily VoIP,
video and IT services
revenue
(5) Includes high-speed Internet
and related services revenue
(6) Includes video and Verizon
wireless revenue
(7) Includes local and long-
distance voice revenue
(8) Includes UNEs, public access
and other ancillary revenue
(9) Includes switched access and
other ancillary revenue
(10) Includes CAF Phase 1, CAF
Phase 2 and federal and
state USF support revenue
(11) Includes USF surcharges
During the first quarter of
2015, we determined that
certain products and
services associated with our
acquisition of SAVVIS, Inc.
are more closely aligned to
legacy services than to
strategic services. As a
result, these operating
revenues are now reflected
as legacy services
CenturyLink, Inc
HOSTING REVENUES AND OPERATING METRICS
(UNAUDITED)
Three months ended Twelve months ended
------------------ -------------------
December 31, December 31, December 31, December 31,
2015 2014 2015 2014
---- ---- ---- ----
Hosting Revenue
Detail (1) (In millions)
Colocation $163 160 626 644
Managed Hosting /
Cloud 136 147 570 580
Hosting Area Network 21 21 85 92
--- --- --- ---
Total Hosting
Revenue $320 328 1,281 1,316
==== === ===== =====
(1) Excludes Wide-Area Network (WAN) revenue previously reported in total
Hosting revenue
As of As of As of
December 31, September December 31,
2015 2015 2014
---- ---- ----
Hosting Data Center Metrics
Number of data centers (2) 59 59 58
Sellable square feet, million sq ft 1.58 1.59 1.46
Billed square feet, million sq ft 0.99 1.01 0.92
Utilization 63% 64% 63%
(2) We define a data center as any facility where we market, sell and deliver
colocation services, managed hosting (including cloud hosting) services,
multi-tenant managed services, or any combination thereof
As of As of As of
December 31, September December 31,
2015 2015 2014
---- ---- ----
Operating Metrics (In thousands)
High-speed Internet subscribers 6,048 6,071 6,082
Access lines 11,748 11,915 12,394
Prism subscribers 285 269 242
Our methodology for counting high-speed Internet subscribers, access lines
and Prism subscribers may not be comparable to those of other companies
CenturyLink, Inc.
SUPPLEMENTAL NON-GAAP INFORMATION - ADJUSTED DILUTED EPS
THREE MONTHS ENDED DECEMBER 31, 2015 AND 2014 AND TWELVE MONTHS ENDED DECEMBER 31, 2015 AND 2014
(UNAUDITED)
(Dollars and shares in millions, except per share amounts)
Three months ended Twelve months ended
------------------ -------------------
December 31, 2015 December 31, 2014 December 31, 2015 December 31, 2014
(excluding (excluding (excluding (excluding
special items) special items) special items) special items)
------------- -------------
Net income * $293 187 929 861
---- --- --- ---
Add back:
Amortization of customer base
intangibles:
Qwest 195 209 799 856
Embarq 20 25 89 108
Savvis 16 16 62 62
Amortization of trademark
intangibles - 2 1 22
Amortization of fair value
adjustment of long-term debt:
Embarq 2 1 6 5
Qwest (6) (6) (23) (42)
Subtotal 227 247 934 1,011
Tax effect of above items (86) (94) (356) (384)
Net adjustment, after taxes 141 153 578 627
--- --- --- ---
Net income, as adjusted for above
items $434 340 1,507 1,488
==== === ===== =====
Weighted average diluted shares
outstanding 542.5 567.0 555.1 569.7
Diluted EPS $0.54 0.33 1.67 1.51
(excluding special items)
Adjusted diluted EPS as adjusted for
the above-listed purchase
accounting intangible and interest
amortizations (excluding special
items) $0.80 0.60 2.71 2.61
The above non-GAAP schedule
presents adjusted net income
and adjusted diluted earnings
per share (both excluding
special items) by adding back
to net income and diluted
earnings per share certain non-
cash expense items that arise
as a result of the application
of business combination
accounting rules to our major
acquisitions since mid-2009.
Such presentation is not in
accordance with generally
accepted accounting principles
but management believes the
presentation is useful to
analysts and investors to
understand the impacts of
growing our business through
acquisitions.
*See preceding schedules for a
summary description of special
items.
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SOURCE CenturyLink, Inc.
