MONROE, La., Feb. 10, 2016 /PRNewswire/ -- CenturyLink, Inc. (NYSE: CTL) today reported results for fourth quarter and full-year 2015.

CenturyLink logo. (PRNewsFoto/CenturyLink, Inc.) (PRNewsFoto/CenturyLink, Inc.)

"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 MPLS3 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® PrismTM 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 revenues4 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® PrismTM 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® PrismTM 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 Results5

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® PrismTM 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® PrismTM 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,
2015

 

December 31,
2014

 

December 31,
2015

 

December 31,
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,
2015

 

December 31,
2014

 

December 31,
2015

 

December 31,
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,
2015

 

September
2015

 

December 31,
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,
2015

 

September
2015

 

December 31,
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
(excluding
special items)

 

December 31, 2014
(excluding
special items)

 

December 31, 2015
(excluding
special items)

 

December 31, 2014
(excluding
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
(excluding special items)

 

$

0.54

   

0.33

   

1.67

   

1.51

 
                   

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.

 

Logo - http://photos.prnewswire.com/prnh/20140806/134213

 

SOURCE CenturyLink, Inc.