OVERLAND PARK, Kan., July 26 /PRNewswire-FirstCall/ -- EMBARQ (NYSE: EQ) today announced results for the second quarter of 2007 that showed improvement in key trends. Second quarter revenues, operating income and earnings per share all increased relative to the first quarter of the year. Additionally, for the third consecutive quarter, EMBARQ reported a decline in access lines that was better than the same quarter in the prior year. As a result of these improvements, the company raised its 2007 outlook for revenue, operating income, capital expenditures and access lines.

"We have made substantial progress in our first year as a public company," said Dan Hesse, EMBARQ Chairman and Chief Executive Officer. "Even though we have raised our 2007 outlook, we must continue to improve our competitiveness, our customer satisfaction levels, and our financial performance."

    Second Quarter Highlights
     *  EMBARQ introduced innovative online voicemail functionality and
        integrated wireless-wireline calling features.
     *  For the third consecutive quarter, access lines declined less than in
        the prior year quarter.
     *  Consolidated net operating revenues increased 1% sequentially to
        $1.605 billion.
     *  Telecommunications segment revenues increased slightly sequentially to
        $1.482 billion.  This represents a decline of less than 1% relative to
        second quarter 2006 results reported on an 'as adjusted' basis, and a
        3% increase relative to second quarter 2006 results reported on a GAAP
        basis.
     *  Operating income increased 8% sequentially to $400 million.
     *  Diluted earnings per share increased 9% sequentially to $1.15.
     *  In light of its solid second quarter results, the company raised its
        outlook for 2007.

    Operating Results

EMBARQ reported consolidated net operating revenues of $1.605 billion for the second quarter of 2007, an increase of 1% relative to the first quarter of the year. In the company's Telecommunications segment, revenues increased slightly sequentially to $1.482 billion, as growth in high speed Internet, wireless and product revenues offset a decline in voice revenue. In the Logistics segment, net operating revenues increased 13% sequentially to $123 million.

EMBARQ reported consolidated operating income of $400 million for the second quarter, an increase of 8% relative to the first quarter of 2007. The company's second quarter operating income results included $8 million of non- recurring spin-off related expenses that negatively impacted selling, general and administrative expenses. Conversely, cost of services was favorably impacted by miscellaneous non-recurring items totaling $5 million.

Also included in second quarter operating income was $20 million of early life-stage dilution associated with the company's wireless business. This amount reflects a standardized reporting methodology the company implemented after further analyzing indirect cost allocations to wireless. Dilution amounts for prior quarters using both the previous and updated methodologies are as follows:

                             3Q-06        4Q-06        1Q-07        2Q-07
    Updated                 ($16M)       ($25M)       ($22M)       ($20M)
    Previous                ($12M)       ($17M)       ($17M)          n/a


    Capital Expenditures and Cash Flow

EMBARQ reported capital expenditures of $188 million for the second quarter of 2007. This amount includes $2 million of non-recurring spin-off related capital spending.

Free cash flow before dividends was $40 million in the second quarter, which was impacted by the timing of interest and tax payments. Year-to-date, free cash flow before dividends totaled $357 million.

The company paid a second quarter dividend of $0.625 per share.

Subscriber Results

EMBARQ reported a decline of 146,000 access lines in the second quarter, which is 5,000 fewer than the decline in the prior year period. On a year- over-year basis, the company's access lines declined 6%.

The company reported second quarter HSI subscriber additions of 52,000. At the end of the quarter, EMBARQ had more than 1.15 million HSI subscribers.

The company continued to grow its wireless business, adding 18,000 new subscribers in the quarter. At quarter end, its wireless subscriber base totaled 89,000.

Video net additions totaled 8,000 in the second quarter. The company ended the quarter with 178,000 of its customers subscribing to video services.

Postretirement Benefits Changes

During the second quarter, EMBARQ amended its postretirement medical and life insurance plans to eliminate medical coverage and Medicare premium subsidies for Medicare-eligible retirees and Medicare-eligible dependents, effective January 1, 2008. In addition, these amendments capped the maximum amount of life insurance benefits through the company-sponsored plan for qualified retirees at $10,000, effective January 1, 2008, and eliminated company-provided life insurance coverage for retirees who have benefits through a separate subsidiary company-sponsored plan, effective September 1, 2007.

These amendments resulted in a reduction of EMBARQ's other postretirement benefit plan obligation of $301 million. This amount will be amortized to expense over the remaining average life of retirees, which is expected to reduce postretirement benefit expense by approximately $20 million over the second half of 2007. Beginning in 2008, the annual expense impact of these amendments is expected to be $40 million, but $20 million of this favorability is expected to be offset, primarily by prior year amendments becoming fully amortized in 2007. Thus, 2008 postretirement benefit expense is expected to be comparable to 2007. Annual cash savings are expected to be approximately $30 million beginning in 2008.

2007 Outlook

EMBARQ updated the outlook for 2007 it provided on April 25, 2007. The company's new expectations for the year, which reflect the postretirement benefit changes outlined above, are as follows:

     *  Access lines are expected to decline at a low to mid 6% rate.
     *  Telecommunications segment revenues are expected to be $5.87 billion
        to $5.92 billion.
     *  Consolidated operating income is expected to be $1.51 billion to
        $1.56 billion, including approximately $30 million of non-recurring
        spin-off expenses, $70 to $80 million of early-stage dilution
        associated with the company's wireless business, and depreciation of
        approximately $1.06 billion.
     *  Consolidated capital expenditures are expected to be approximately
        $865 million, including approximately $15 million of non-recurring
        separation-related capital spending.

    GAAP and 'As Adjusted' Reporting

EMBARQ's reported results under generally accepted accounting principles (GAAP) for periods prior to its May 2006 spin-off from Sprint Nextel do not reflect certain items that are included in its GAAP reporting for periods subsequent to the spin-off. (These items are described in more detail in the "Financial Measures" section on page 7.) Accordingly, the company's pre spin- off GAAP results are not fully comparable to its post spin-off GAAP results.

The company's as adjusted basis of reporting reflects the current composition of its business for all periods prior and subsequent to its spin- off. Thus, as adjusted results are provided to help investors evaluate trends in the company's performance.

Reconciliations between EMBARQ's GAAP and as adjusted results are provided in Schedules 5 and 6.

Conference Call

On Thursday, July 26, 2007, EMBARQ will hold a conference call beginning at 4:30 PM EDT. Dial-in numbers for the conference call are (866) 245-2310 (U.S. and Canada) and (706) 679-0843 (International). The code required to access the call is 5803470. Please plan to dial-in at least five minutes before the scheduled start time. A simultaneous audio webcast of the call and a downloadable presentation will be available at www.embarq.com/investors.

For those unable to participate live, a replay of the call will be available until August 12th, 2007, by dialing (800) 642-1687 (U.S. and Canada) or (706) 645-9291 (International) as well as at www.embarq.com/investors. The accompanying presentation will also be archived and available for download at this website.

Cautionary Statement

This news release contains "forward-looking statements" within the meaning of the securities laws, including statements relating to EMBARQ's outlook or expectations for earnings, revenues, expenses, depreciation and amortization, asset quality, access line declines, customer growth, or other future financial or business performance, strategies or expectations. The words "estimate," "plan," "project," "forecast," "expect," "intend," "anticipate," "believe," "seek," "target," "guidance," "outlook" and similar expressions are intended to identify forward-looking statements. These statements reflect management's judgment based on currently available information and involve a number of risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements. With respect to these forward-looking statements, management has made assumptions regarding, among other things, customer and network usage, customer retention, pricing, operating costs, technology, and the economic and regulatory environment. Future performance cannot be ensured. Actual results may differ materially from those in the forward-looking statements. Some factors that could cause actual results to differ include: economic, competitive, regulatory, technological, capital market and other factors, and the risks that are described in the sections entitled "Risk Factors" and "Cautionary Statement Regarding Forward-Looking Statements" contained in EMBARQ's Annual Report on Form 10-K, as filed with the Securities and Exchange Commission (SEC) and in EMBARQ's other filings with the SEC.

Forward-looking statements speak only as of the date they were made, and EMBARQ undertakes no obligation to update or revise any forward-looking statements in light of new information or future events. You should not place undue reliance on any forward-looking statements, which speak only as of the date of this presentation. EMBARQ is not obligated to publicly update or release any revisions to these forward-looking statements to reflect any events or circumstances after the date of this presentation.

                           Embarq Corporation Consolidated
                          Selected Unaudited Financial Data
                      ($ in millions, except per share amounts)

       Consolidated                          2Q-07     1Q-07      Fav/(Unfav)
       Voice                                $1,071    $1,084    ($13)   -1.2%
       Data                                    188       189      (1)   -0.5%
       High-speed Internet                     121       116       5     4.3%
       Wireless                                 11         9       2    22.2%
       Other services                           63        60       3     5.0%
       Service revenues                      1,454     1,458      (4)   -0.3%
       EMBARQ Logistics                        123       109      14    12.8%
       Other product                            28        22       6    27.3%
       Product revenues                        151       131      20    15.3%
       Net Operating Revenues                1,605     1,589      16     1.0%

       Operating Expenses
       Cost of services                       404      417      13      3.1%
       Cost of products                       142      127     (15)   -11.8%
       Selling, general and
        administrative                        395      404       9      2.2%
       Depreciation                           264      270       6      2.2%
       Total Operating Expenses             1,205    1,218      13      1.1%

       Operating Income                      $400     $371     $29      7.8%
       Interest expense                       111      109      (2)    -1.8%
       Other expense (income), net             --        0       0       N/A
       Income Before Taxes                   $289     $262     $27     10.3%
       Income tax expense                     113      102     (11)   -10.8%
       Net Income                            $176     $160     $16     10.0%

       Diluted Earnings Per Share           $1.15    $1.05


                         Embarq Telecommunications Segment
                         Selected Unaudited Financial Data
                     ($ in millions, except per share amounts)


       Telecom                             2Q-07    1Q-07     Fav/(Unfav)
       Voice                               $1,071   $1,084   ($13)    -1.2%
       Data                                   188      189     (1)    -0.5%
       High-speed Internet                    121      116      5      4.3%
       Wireless                                11        9      2     22.2%
       Other services                          63       60      3      5.0%
       Service revenues                     1,454    1,458     (4)    -0.3%
       Product revenues                        28       22      6     27.3%
       Net Operating Revenues               1,482    1,480      2      0.1%

       Operating Expenses
       Cost of services                       404      417     13      3.1%
       Cost of products                        33       30     (3)   -10.0%
       Selling, general and
        administrative                        387      392      5      1.3%
       Depreciation                           262      267      5      1.9%
       Total Operating Expenses             1,086    1,106     20      1.8%

       Operating Income                      $396     $374    $22      5.9%


                             Embarq Logistics Segment
                         Selected Unaudited Financial Data
                     ($ in millions, except per share amounts)


       Logistics                           2Q-07   1Q-07      Fav/(Unfav)
       Net Operating Revenues                123     109      14      12.8%

       Operating Expenses
       Cost of services & products           109      97     (12)    -12.4%
       Selling, general and
        administrative                         8      12       4      33.3%
       Depreciation                            2       3       1      33.3%
       Total Operating Expenses              119     112      (7)     -6.3%

       Operating Income                       $4     ($3)     $7        N/A


                          Embarq Corporation Consolidated
                         Selected Unaudited Financial Data
                     ($ in millions, except per share amounts)

                                                          2Q-06
                                   2Q-06                    As
      Consolidated          2Q-07   GAAP    Fav/(Unfav)  Adjusted  Fav/(Unfav)
      Voice                $1,071  $1,073   ($2)  -0.2%  $1,129  ($58)  -5.1%
      Data                    188     174    14    8.0%     178    10    5.6%
      High-speed Internet     121      95    26   27.4%      95    26   27.4%
      Wireless                 11      --    11     N/A      --    11     N/A
      Other services           63      68    (5)  -7.4%      61     2    3.3%
      Service revenues      1,454   1,410    44    3.1%   1,463    (9)  -0.6%
      EMBARQ Logistics        123     138   (15) -10.9%     138   (15) -10.9%
      Other product            28      31    (3)  -9.7%      29    (1)  -3.4%
      Product revenues        151     169   (18) -10.7%     167   (16)  -9.6%
      Net Operating
       Revenues             1,605   1,579    26    1.6%   1,630   (25)  -1.5%

      Operating Expenses
      Cost of services           404    367  ($37) -10.1%    390  ($14) -3.6%
      Cost of products           142    149     7    4.7%    148     6   4.1%
      Selling, general and
       administrative            395    403     8    2.0%    398     3   0.8%
      Depreciation               264    254   (10)  -3.9%    267     3   1.1%
      Total Operating Expenses 1,205  1,173   (32)  -2.7%  1,203    (2) -0.2%

      Operating Income          $400   $406   ($6)  -1.5%   $427  ($27) -6.3%
      Interest expense           111
      Other expense (income),
       net                        --
      Income Before Taxes       $289
      Income tax expense         113
      Net Income                $176

      Diluted Earnings Per
       Share                   $1.15


                         Embarq Telecommunications Segment
                         Selected Unaudited Financial Data
                     ($ in millions, except per share amounts)

                                                         2Q-06
                                  2Q-06                   As
      Telecom              2Q-07   GAAP    Fav/(Unfav)  Adjusted  Fav/(Unfav)
      Voice              $1,071  $1,073   ($2)   -0.2%  $1,129  ($58)   -5.1%
      Data                  188     174    14     8.0%     178    10     5.6%
      High-speed
       Internet             121      95    26    27.4%      95    26    27.4%
      Wireless               11      --    11      N/A      --    11      N/A
      Other services         63      68    (5)   -7.4%      61     2     3.3%
      Service revenues    1,454   1,410    44     3.1%   1,463    (9)   -0.6%
      Product revenues       28      31    (3)   -9.7%      29    (1)   -3.4%
      Net Operating
       Revenues           1,482   1,441    41     2.8%   1,492   (10)   -0.7%

      Operating Expenses
      Cost of services          404    368   (36)  -9.8%    391   (13)  -3.3%
      Cost of products           33     23   (10) -43.5%     22   (11) -50.0%
      Selling, general and
       administrative           387    390     3    0.8%    385    (2)  -0.5%
      Depreciation              262    251   (11)  -4.4%    264     2    0.8%
      Total Operating
       Expenses               1,086  1,032   (54)  -5.2%  1,062   (24)  -2.3%

      Operating Income         $396   $409  ($13)  -3.2%   $430  ($34)  -7.9%


                              Embarq Logistics Segment
                         Selected Unaudited Financial Data
                     ($ in millions, except per share amounts)

                                    2Q-06                2Q-06
      Logistics               2Q-07  GAAP   Fav/(Unfav)   GAAP    Fav/(Unfav)
      Net Operating Revenues    123   138   (15)  -10.9%   138   (15)  -10.9%

      Operating Expenses
      Cost of services &
       products                 109   125    16    12.8%   125    16    12.8%
      Selling, general and
       administrative             8    13     5    38.5%    13     5    38.5%
      Depreciation                2     3     1    33.3%     3     1    33.3%
      Total Operating Expenses  119   141    22    15.6%   141    22    15.6%

      Operating Income           $4   ($3)   $7      N/A   ($3)   $7      N/A


    Financial Measures

For periods prior to and including May 17, 2006, the date of EMBARQ's spin-off from Sprint Nextel, reported operating income reflects the combined performance of the specific legal entities that were spun-off from Sprint Nextel in accordance with GAAP. The reported information for these entities prior to and including the date of separation does not include certain items that will be reflected in EMBARQ's reported operating income for periods subsequent to May 17, 2006. These items primarily consist of the following:

     *  In-territory consumer and business long distance customers transferred
        to Embarq by Sprint Nextel, as well as certain in-territory equipment
        and professional service customers transferred to Sprint Nextel by
        Embarq; and
     *  Other assets and liabilities related to ongoing business operations
        transferred to Embarq by Sprint Nextel.

In order to facilitate a comparison of EMBARQ's historical operating performance to its performance subsequent to the spin-off, Schedule 5 provides an as adjusted view of EMBARQ's quarterly operating income for 2006, including reconciliations to GAAP. The as adjusted financial information assumes the spin-off from Sprint Nextel had occurred on January 1, 2006, and includes the items described above. The as adjusted financial information is a non-GAAP measure and should be considered in addition to, but not as a substitute for, the information contained in the company's financial reporting.

Definitions

Net Debt is consolidated debt, including current maturities, less cash and equivalents. This non-GAAP measure should be used in addition to, but not as a substitute for the information provided in the balance sheets and statements of cash flows. EMBARQ believes that Net Debt provides useful information about its capacity to reduce debt and improve its capital structure.

      Reconciliation of Non-GAAP measure-Net Debt
                                               June 30,     March 31,
                                                 2007         2007      Change
    Current maturities                            $54          $37        $17
    Long-term debt                              6,069        6,058         11
    Less: Cash and equivalents                    (14)         (46)        32
      Net Debt                                 $6,109       $6,049        $60

Free Cash Flow is defined as the change in cash and equivalents less cash provided or used by financing activities. This non-GAAP measure should be used in addition to, but not as a substitute for the information provided in the statement of cash flows. EMBARQ believes that Free Cash Flow provides useful information about the cash generated from core operations and its ability to fund dividends, scheduled debt maturities and other financing activities.

                                                     QTD               YTD
      Reconciliation of Free Cash Flow             June 30,          June 30,
                                                     2007              2007

      Change in cash and equivalents                  $(32)             $(39)
      Less: Net cash used by financing
       activities                                       72               396
      Free Cash Flow                                   $40              $357

Average Revenue per Household is calculated by dividing consumer revenues by average primary consumer access lines. While this measure is not defined under accounting principles generally accepted in the United States, the measure uses a GAAP measure as the basis for the calculation. EMBARQ believes Average Revenue per Household provides useful information concerning the success of its bundling initiatives and performance in attracting and retaining high value customers.

HSI Average Revenue per Subscriber is calculated by dividing high-speed Internet revenues by average high-speed Internet subscribers. While this measure is not defined under accounting principles generally accepted in the United States, the measure uses a GAAP measure as the basis for the calculation. EMBARQ believes HSI Average Revenue per Subscriber provides useful information concerning the appeal of its high-speed Internet pricing plans and performance in attracting and retaining high value customers.

About EMBARQ

EMBARQ (NYSE: EQ), headquartered in Overland Park, Kansas, offers a complete suite of common sense communications services. The company has approximately 20,000 employees and operates in 18 states. EMBARQ is included in the S&P 500.

For consumers, EMBARQ offers an innovative portfolio of services that includes reliable local and long distance home phone service, high-speed Internet, wireless, and satellite TV from DISH Network(R) -- all on one monthly bill.

For businesses, EMBARQ has a comprehensive range of flexible and integrated services designed to help businesses of all sizes be more productive and communicate with their customers. This service portfolio includes local voice and data services, long distance, Business Class DSL, wireless, enhanced data network services, voice and data communication equipment and managed network services. In 2007, EMBARQ ranked highest in customer satisfaction among large enterprise businesses, according to J.D. Power and Associates Study.

EMBARQ believes that by focusing on the communities the company serves and by employing common sense and practical ingenuity, it is able to provide customers with a committed partner, dedicated customer service and innovative products for work and home. For more information, visit embarq.com.

                               Embarq Corporation
                      Consolidated Statements of Operations
                    ($ in millions, except per share amounts)
                                   (unaudited)

                                         Quarter Ended June  Six Months Ended
    Schedule 1                                  30,              June 30,
                                           2007     2006      2007     2006

    Net Operating Revenues
      Service revenues                     $1,454   $1,410   $2,912   $2,796
      Product revenues                        151      169      282      344
    Net operating revenues                  1,605    1,579    3,194    3,140

    Operating Expenses
      Cost of services                        404      367      821      745
      Cost of products                        142      149      269      309
      Selling, general and administrative     395      403      799      822
      Depreciation                            264      254      534      492
    Total Operating Expenses                1,205    1,173    2,423    2,368

    Operating Income                          400      406      771      772
    Interest expense                          111       68      220       87
    Other (income) expense, net                --       (3)      --       (8)
    Income Before Taxes                       289      341      551      693
    Income tax expense                        113      125      215      263
    Net Income                               $176     $216     $336     $430

    Basic Earnings Per Share (1)            $1.16    $1.45    $2.23    $2.89
    Basic weighted average shares (1)       151.8    149.1    151.0    149.1

    Diluted Earnings Per Share (1)          $1.15    $1.44    $2.20    $2.87
    Diluted weighted average shares (1)     153.6    150.0    153.0    149.9

    (1) Basic and diluted earnings per share and weighted average shares
    outstanding have been presented on a pro forma basis for the quarter and
    year to date periods ended June 30, 2006.  Shares outstanding and
    dilution effects at the spin-off date of May 17, 2006 were assumed to be
    outstanding at January 1, 2006.


                               Embarq Corporation
                           Consolidated Balance Sheets
                                 ($ in millions)

    Schedule 2                                June 30,        December 31,
                                                2007              2006
                                            (unaudited)

    Assets
    Cash and equivalents                               $14               $53
    Accounts receivable, net                           656               660
    Inventories                                        170               179
    Prepaid expenses and other current assets          152               131
        Total current assets                           992             1,023

    Property, plant and equipment, net               7,837             7,988
    Other non-current assets                            62                80
        Total non-current assets                     7,899             8,068

    Total assets                                    $8,891            $9,091

    Liabilities and stockholders' equity
    Current maturities                                 $54               $37
    Accounts payable                                   436               503
    Accrued payroll & benefits                         159               198
    Accrued taxes                                      146               164
    Deferred revenue                                   207               211
    Accrued interest                                    55                52
    Other current liabilities                          108                99
        Total current liabilities                    1,165             1,264

    Long-term debt                                   6,069             6,421
    Postretirement and other benefit obligations       359               685
    Deferred income taxes                            1,098             1,039
    Other non-current liabilities                      165               150
    Total non-current liabilities                    7,691             8,295

    Stockholders' equity
    Common stock                                         2                 1
      Treasury stock, at cost                           --                --
    Paid in capital                                   (274)             (414)
    Retained earnings                                  470               308
    Accumulated other comprehensive
     income (loss)                                    (163)             (363)
        Total stockholders' equity                      35              (468)

    Total liabilities and stockholders'
     equity                                         $8,891            $9,091


                               Embarq Corporation
                      Consolidated Statements of Cash Flows
                                 ($ in millions)
                                   (unaudited)

    Schedule 3                                     Six Months Ended June 30,
                                                     2007              2006

    Operating Activities
    Net income                                       $336               $430
    Depreciation                                      534                492
    Deferred and uncertain income tax provisions      (52)               (38)
    Provision for losses on accounts receivable        37                 24
    Stock-based compensation expense                   30                  2
    Net losses (gains) on sales of assets              (7)                (7)
    Other, net                                         22                  7
    Changes in assets and liabilities:
           Accounts receivable                        (26)               (18)
           Inventories and other current assets       (30)                92
           Accounts payable and other
            current liabilities                      (146)               198
           Noncurrent assets and liabilities, net       7                 (1)
        Net cash provided by operating activities     705              1,181

    Investing Activities
    Capital expenditures                             (371)              (449)
    Proceeds from construction reimbursements           5                  5
    Proceeds from sales of assets                      18                 20
        Net cash used by investing activities        (348)              (424)

    Financing Activities
    Changes in debt, net                             (332)             1,598
    Net cash paid to Sprint Nextel associated with
     the spin off                                      --             (2,208)
    Dividends paid to stockholders                   (174)                --
    Common stock issued                                88                 --
    Dividends paid to Sprint Nextel                    --               (194)
    Other, net                                         22                 (6)
        Net cash used by financing activities        (396)              (810)

    Change in cash and equivalents                    (39)               (53)

    Cash and equivalents at beginning of period        53                103

    Cash and equivalents at end of period             $14                $50


                               Embarq Corporation
                 Operating Statistics - As Adjusted* (unaudited)
           (Revenues in millions; lines and subscribers in thousands)
        (* Note: As adjusted is a non-GAAP measure.  See Schedule 5 for a
                            reconciliation to GAAP.)

    Schedule 4
                                         2Q-07 (1)  1Q-07 (1)  2006  4Q-06 (1)
    Service and Product Revenues
    Voice                                  $1,071   $1,084   $4,519   $1,120
    Data                                      188      189      716      183
    High-speed Internet                       121      116      393      108
    Wireless                                   11        9        7        4
    Other                                      63       60      248       57
    Service revenues                        1,454    1,458    5,883    1,472
    EMBARQ Logistics                          123      109      530      115
    Other                                      28       22      106       30
    Product revenues                          151      131      636      145
    Net operating revenues                 $1,605   $1,589   $6,519   $1,617

    Operating Unit Revenues
    Consumer                                 $675     $682   $2,726     $671
    Business                                  385      384    1,522      381
    Wholesale                                 422      414    1,741      450
    Telecommunications                      1,482    1,480    5,989    1,502
    EMBARQ Logistics                          123      109      530      115
    Net operating revenues                 $1,605   $1,589   $6,519   $1,617

    Access Lines
    Consumer                                4,461    4,588             4,659
    Business                                2,054    2,065             2,059
    Wholesale                                 176      184               190
    Total                                   6,691    6,837             6,908

    Average Revenue per Household
    Consumer revenue                         $675     $682              $671
    Average primary consumer access lines   4,180    4,261             4,316
    Monthly revenue per average HH         $53.83   $53.35            $51.82

    High-speed Internet Lines
    Consumer                                  963      916               838
    Business                                  154      149               142
    Wholesale                                  39       39                37
    Total                                   1,156    1,104             1,017

    HSI Average Revenue per Subscriber
    High-speed Internet revenue              $121     $116              $108
    Average HSI subscribers                 1,130    1,061               975
    Monthly revenue per average
     subscriber                            $35.69   $36.44            $36.92

    Wireless Subscribers
    Consumer                                   81       65                44
    Business                                    8        6                 4
    Total                                      89       71                48

    Entertainment Subscribers                 178      170               162

    (1)  As Embarq completed the spin-off from Sprint-Nextel on May 17, 2006,
         periods subsequent to the second quarter 2006 represent GAAP results


                                            3Q-06 (1)     2Q-06       1Q-06
    Service and Product Revenues
    Voice                                     $1,109      $1,129      $1,161
    Data                                         180         178         175
    High-speed Internet                           98          95          92
    Wireless                                       3          --          --
    Other                                         64          61          66
    Service revenues                           1,454       1,463       1,494
    EMBARQ Logistics                             125         138         152
    Other                                         27          29          20
    Product revenues                             152         167         172
    Net operating revenues                    $1,606      $1,630      $1,666

    Operating Unit Revenues
    Consumer                                    $668        $686        $701
    Business                                     389         379         373
    Wholesale                                    424         427         440
    Telecommunications                         1,481       1,492       1,514
    EMBARQ Logistics                             125         138         152
    Net operating revenues                    $1,606      $1,630      $1,666

    Access Lines
    Consumer                                   4,731       4,835       4,970
    Business                                   2,069       2,074       2,079
    Wholesale                                    198         208         219
    Total                                      6,998       7,117       7,268

    Average Revenue per Household
    Consumer revenue                            $668        $686        $701
    Average primary consumer access lines      4,384       4,482       4,571
    Monthly revenue per average HH            $50.79      $51.02      $51.12

    High-speed Internet Lines
    Consumer                                     763         690         625
    Business                                     135         127         121
    Wholesale                                     35          32          31
    Total                                        933         849         777

    HSI Average Revenue per Subscriber
    High-speed Internet revenue                  $98         $95         $92
    Average HSI subscribers                      891         813         735
    Monthly revenue per average
     subscriber                               $36.66      $38.95      $41.72

    Wireless Subscribers
    Consumer                                      21           4          --
    Business                                       3           1          --
    Total                                         24           5          --

    Entertainment Subscribers                    146         131         109

    (1)  As Embarq completed the spin-off from Sprint-Nextel on May 17, 2006,
         periods subsequent to the second quarter 2006 represent GAAP results


                              Embarq Corporation
               Reconciliations of Non-GAAP Measures (unaudited)
                                ($ in millions)
    Schedule 5
                                 LD                Shared
    Year Ended                Customer             Assets/               As
    December 31, 2006   GAAP  Transfers  Pension  Liabilities  Other  Adjusted
    Net Operating
     Revenues
    Voice               $4,346   $172      $--     $--            $1  $4,519
    Data                   706      6       --      --             4     716
    High-speed
     Internet              393     --       --      --            --     393
    Wireless                 7     --       --      --            --       7
    Other                  270    (22)      --      --            --     248
    Service revenues     5,722    156       --      --             5   5,883
    EMBARQ Logistics       530     --       --      --            --     530
    Other                  111     (5)      --      --            --     106
    Product revenues       641     (5)      --      --            --     636
    Net operating
     revenues           $6,363   $151      $--     $--            $5  $6,519

    Operating Expenses
    Cost of services     1,594     73       --      --             1   1,668
    Cost of products       598     (4)      --      --            --     594
    Selling, general
     and administrative  1,600     35       --     (52)            1   1,584
    Depreciation         1,027     --       --      38            --   1,065
    Total Operating
     Expenses            4,819    104       --     (14)            2   4,911

    Operating Income    $1,544    $47      $--     $14            $3  $1,608

    Operating Unit
     Revenues
    Consumer            $2,590   $136      $--     $--           $--  $2,726
    Business             1,492     28       --      --             2   1,522
    Wholesale            1,751    (13)      --      --             3   1,741
    Telecommunications   5,833    151       --      --             5   5,989
    EMBARQ Logistics       530     --       --      --            --     530
    Net operating
     revenues           $6,363   $151      $--     $--            $5  $6,519

    Capital
     Expenditures         $923    $--      $--     $67           $--    $990


                                 LD                Shared
    Quarter Ended              Customer             Assets/               As
    June 30, 2006       GAAP  Transfers  Pension  Liabilities  Other  Adjusted
    Net Operating
     Revenues
    Voice              $1,073    $56       $--      $--         $--     $1,129
    Data                  174      2        --       --           2        178
    High-speed Internet    95     --        --       --          --         95
    Wireless               --     --        --       --          --         --
    Other                  68     (7)       --       --          --         61
    Service revenues    1,410     51        --       --           2      1,463
    EMBARQ Logistics      138     --        --       --          --        138
    Other                  31     (2)       --       --          --         29
    Product revenues      169     (2)       --       --          --        167
    Net operating
     revenues          $1,579    $49       $--      $--          $2     $1,630

    Operating Expenses
    Cost of services      367     23        --       --          --        390
    Cost of products      149     (1)       --       --          --        148
    Selling, general
     and administrative   403     13        --      (18)         --        398
    Depreciation          254     --        --       13          --        267
    Total Operating
     Expenses           1,173     35        --       (5)         --      1,203

    Operating Income     $406    $14       $--       $5          $2       $427

    Operating Unit
     Revenues
    Consumer             $642    $44       $--      $--         $--       $686
    Business              369      9        --       --           1        379
    Wholesale             430     (4)       --       --           1        427
    Telecommunications  1,441     49        --       --           2      1,492
    EMBARQ Logistics      138     --        --       --          --        138
    Net operating
     revenues          $1,579    $49       $--      $--          $2     $1,630

    Capital
     Expenditures        $265    $--       $--      $47         $--       $312


                                 LD                Shared
    Quarter Ended              Customer             Assets/               As
    March 31, 2006      GAAP  Transfers  Pension  Liabilities  Other  Adjusted
    Net Operating
     Revenues
    Voice              $1,044    $116       $--       $--        $1    $1,161
    Data                  169       4        --        --         2       175
    High-speed Internet    92      --        --        --        --        92
    Wireless               --      --        --        --        --        --
    Other                  81     (15)       --        --        --        66
    Service revenues    1,386     105        --        --         3     1,494
    EMBARQ Logistics      152      --        --        --        --       152
    Other                  23      (3)       --        --        --        20
    Product revenues      175      (3)       --        --        --       172
    Net operating
     revenues          $1,561    $102       $--       $--        $3    $1,666

    Operating Expenses
    Cost of services      378      50        --        --         1       429
    Cost of products      160      (3)       --        --        --       157
    Selling, general and
     administrative       419      22        --       (34)        1       408
    Depreciation          238      --        --        25        --       263
    Total Operating
     Expenses           1,195      69        --        (9)        2     1,257

    Operating Income     $366     $33       $--        $9        $1      $409

    Operating Unit
     Revenues
    Consumer             $609     $92       $--       $--       $--      $701
    Business              353      19        --        --         1       373
    Wholesale             447      (9)       --        --         2       440
    Telecommunications  1,409     102        --        --         3     1,514
    EMBARQ Logistics      152      --        --        --        --       152
    Net operating
     revenues          $1,561    $102       $--       $--        $3    $1,666

    Capital
     Expenditures        $184     $--       $--       $20       $--      $204


                          Telecommunications Segment
               Reconciliations of Non-GAAP Measures (unaudited)
                                ($ in millions)
    Schedule 6
                                 LD                Shared
    Quarter Ended              Customer             Assets/               As
    June 30, 2006       GAAP  Transfers  Pension  Liabilities  Other  Adjusted
    Net Operating
     Revenues
    Voice               $1,073    $56      $--         $--       $--   $1,129
    Data                   174      2       --          --         2      178
    High-speed Internet     95     --       --          --        --       95
    Wireless                --     --       --          --        --       --
    Other                   68     (7)      --          --        --       61
    Service revenues     1,410     51       --          --         2    1,463
    Product revenues        31    (2)       --          --        --       29
    Net operating
     revenues           $1,441    $49      $--         $--        $2   $1,492

    Operating Expenses
    Cost of services       368     23       --          --        --      391
    Cost of products        23     (1)      --          --        --       22
    Selling, general and
     administrative        390     13       --         (18)       --      385
    Depreciation           251     --       --          13        --      264
    Total Operating
     Expenses            1,032     35       --          (5)       --    1,062

    Operating Income      $409    $14      $--          $5        $2     $430

    Operating Unit
     Revenues
    Consumer              $642    $44      $--          $--      $--     $686
    Business               369      9       --           --        1      379
    Wholesale              430     (4)      --           --        1      427
    Telecommunications   1,441     49       --           --        2    1,492

    Capital
     Expenditures         $265    $--      $--          $47      $--     $312


                                Embarq Corporation
                           Supplemental Cash Flow Data
                                 ($ in millions)
                                   (unaudited)

    Schedule 7                                                  Quarter Ended
                                                                June 30, 2007
    Operating Activities
    Net income                                                      $176
    Depreciation                                                     264
    Deferred and uncertain income tax provisions                     (16)
    Provision for losses on accounts receivable                       20
    Stock-based compensation expense                                  16
    Net losses (gains) on sales of assets                             (4)
    Other, net                                                        11
    Changes in assets and liabilities:
           Accounts receivable                                       (40)
           Inventories and other current assets                       (2)
           Accounts payable and other current liabilities           (221)
           Noncurrent assets and liabilities, net                     21
        Net cash provided by operating activities                    225

    Investing Activities
    Capital expenditures                                            (188)
    Proceeds from construction reimbursements                          2
    Proceeds from sales of assets                                      1
        Net cash used by investing activities                       (185)

    Financing Activities
    Changes in debt, net                                              28
    Dividends paid to stockholders                                  (170)
    Common stock issued                                               53
    Other, net                                                        17
        Net cash used by financing activities                        (72)

    Change in cash and equivalents                                   (32)

    Cash and equivalents at beginning of period                       46

    Cash and equivalents at end of period                            $14

SOURCE EMBARQ 


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