Lineman Forum: CenturyTel Reports First Quarter Earnings - Lineman Forum

CenturyTel Reports First Quarter Earnings

MONROE, La.--(BUSINESS WIRE)--April 27, 2006--CenturyTel, Inc. (NYSE: CTL - News) announces operating results for first quarter 2006.
Operating revenues, excluding nonrecurring items, rose to $610.3 million from $595.3 million in first quarter 2005. Reported under GAAP, first quarter 2006 operating revenues were $611.6 million.
Net income, excluding nonrecurring items, was $72.4 million compared to $80.0 million in first quarter 2005. Reported under GAAP, first quarter 2006 net income was $69.4 million compared to $79.6 million in first quarter 2005.
Diluted earnings per share, excluding nonrecurring items, was $.58 in first quarter 2006 and $.59 in first quarter 2005. Reported under GAAP, diluted earnings per share was $.55 in first quarter 2006.
Free cash flow (as defined in the attached financial schedules), excluding nonrecurring items, was $146.9 million in first quarter 2006 compared to $137.3 million in first quarter 2005.
High-speed Internet customers increased by more than 37,000 in the first quarter of 2006, with nearly 286,000 high-speed Internet connections in service at the end of the quarter.
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First Quarter Highlights
(Excluding nonrecurring items)
(In thousands, except per share Quarter Ended Quarter Ended
amounts and customer data) 3/31/06 3/31/05 % Change
-------------------------------- ------------- ------------- --------
Operating Revenues $ 610,337 $ 595,282 2.5 %
Operating Cash Flow (1) $ 297,620 $ 309,035 (3.7)%
Net Income $ 72,421 $ 79,991 (9.5)%
Diluted Earnings Per Share $ .58 $ .59 (1.7)%
Average Diluted Shares
Outstanding 127,959 137,169 (6.7)%
Capital Expenditures $ 60,088 $ 74,903 (19.8)%
-------------------------------- ------------- ------------- --------
Telephone Access Lines 2,191,747 2,298,491 (4.6)%
High-speed Internet Customers 285,791 173,768 64.5%
----------------------------------------------------------------------

(1) Operating Cash Flow is a non-GAAP financial measure. A
reconciliation of this item to comparable GAAP measures is
included in the attached financial schedules.

"Penetration of broadband services into our customer base continued to climb during the first quarter as we added more than 37,000 high-speed Internet subscribers, a new quarterly growth record for CenturyTel," Glen F. Post, III, chairman and chief executive officer, said. "Year-over-year high-speed Internet connections and related revenues grew more than 64% and 53%, respectively, advancing our objective of being the broadband provider of choice in our markets."

Operating revenues, excluding nonrecurring items, rose to $610.3 million in first quarter 2006 from $595.3 million in first quarter 2005. Revenue growth, driven primarily by growth in high-speed Internet connections and revenue from metro fiber assets acquired in mid-2005, more than offset anticipated revenue declines primarily attributable to lower access revenues and universal service funding, and the decline in access lines.

Operating expenses, excluding nonrecurring items, for first quarter 2006 were $447.3 million compared to $418.4 million in first quarter 2005. This increase was primarily due to growth in high-speed Internet connections and our video offerings, along with expenses related to the metro fiber assets acquired in mid-2005.

Operating cash flow, excluding nonrecurring items, decreased to $297.6 million from $309.0 million. CenturyTel achieved an operating cash flow margin of 48.8% during the quarter versus 51.9% in first quarter 2005. This margin decline was principally driven by the growth in revenues with lower margins, such as high-speed Internet, fiber transport and CLEC services, and the decline in higher margin revenues associated with lower USF and access line losses.

Net income, excluding nonrecurring items, was $72.4 million compared to $80.0 million in first quarter 2005. Diluted earnings per share, excluding nonrecurring items, was $.58 compared to $.59 in first quarter 2005. First quarter 2006 diluted earnings per share was favorably impacted by repurchases under the Company's $200 million and $1 billion share repurchase programs.

"Customer demand for bundled services was strong during the quarter as we added more than 47,000 bundle customers. We also continue to experience customer migration from our basic bundle to enhanced bundles which include services such as long distance and high-speed Internet, which we believe strengthens our customer relationships," Post said.

Under generally accepted accounting principles (GAAP), CenturyTel reported operating revenues of $611.6 million in first quarter 2006 compared to $595.3 million in first quarter 2005. In first quarter 2006, the Company reported net income of $69.4 million and diluted earnings per share of $.55, compared to $79.6 million and $.59 per diluted share, respectively, in first quarter 2005. Net income in first quarter 2006 includes $3.0 million net after-tax expense related to a reduction in workforce. Net income in first quarter 2005 includes $3.7 million after-tax expense related to CenturyTel's purchase and retirement of approximately $400 million of Series J Notes and $3.3 million net benefit related to the settlement of various income tax audits.

For second quarter 2006, CenturyTel expects total revenues of $605 to $615 million and diluted earnings per share of $.54 to $.58. The decline in diluted earnings per share from first quarter to second quarter 2006 is primarily due to increased operating costs related to high-speed Internet, long distance and video customer growth, annual wage adjustments effective in the second quarter and the seasonal impact of maintenance activities for our outside plant.

For the full year 2006, diluted earnings per share is expected to be in the range of $2.30 to $2.40 versus the previous guidance of $2.20 to $2.35, primarily due to fewer fully diluted shares outstanding as a result of retiring approximately 14.4 million shares in connection with the $500 million accelerated share repurchase program announced in February, partially offset by lower than anticipated USF receipts and costs associated with the continued transition of the metro fiber assets acquired in mid-2005.

These outlook figures for the second quarter and full year 2006 exclude nonrecurring items, future share repurchases, mergers, acquisitions, divestitures or other similar business transactions.

Reconciliation to GAAP. This release includes certain non-GAAP financial measures, including but not limited to operating cash flow, free cash flow and adjustments to GAAP measures to exclude the effect of nonrecurring items. In addition to providing key metrics for management to evaluate the Company's performance, we believe these measurements assist readers 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 statements. Reconciliation of additional non-GAAP financial measures that may be discussed during the earnings call described below will be available on the Company's Web site at www.centurytel.com. Investors are urged to consider these non-GAAP measures in addition to, and not in substitution for, measures prepared in accordance with GAAP.

Investor Call. As previously announced, CenturyTel's management will host a conference call at 10:30 a.m. Central Time today. Interested parties can access the call by dialing 866.206.6154. The call will be accessible for replay through May 3, 2006, by calling 888.266.2081 and entering the conference ID number 886448. Investors can also listen to CenturyTel's earnings conference call and replay by accessing the Investor Relations portion of the Company's Web site at www.centurytel.com through May 17, 2006.

In addition to historical information, this release includes certain forward-looking statements, estimates and projections that are based on current expectations only, and are subject to a number of risks, uncertainties and assumptions, many of which are beyond the control of the Company. Actual events and results may differ materially from those anticipated, estimated or projected if one or more of these risks or uncertainties materialize, or if underlying assumptions prove incorrect. Factors that could affect actual results include but are not limited to: the timing, success and overall effects of competition from a wide variety of competitive providers; the risks inherent in rapid technological change; the effects of ongoing changes in the regulation of the communications industry; the Company's ability to effectively manage its growth, including integrating newly-acquired businesses into the Company's operations and hiring adequate numbers of qualified staff; possible changes in the demand for, or pricing of, the Company's products and services; the Company's ability to successfully introduce new product or service offerings on a timely and cost-effective basis; the Company's ability to collect its receivables from financially troubled communications companies; the Company's ability to successfully negotiate collective bargaining agreements on reasonable terms without work stoppages; the effect of adverse weather; other risks referenced from time to time in the Company's filings with the Securities and Exchange Commission; and the effects of more general factors such as changes in interest rates, in tax rates, in accounting policies or practices, in operating, medical or administrative costs, in general market, labor or economic conditions, or in legislation, regulation or public policy. These and other uncertainties related to the Company's business are described in greater detail in the Company's Annual Report on Form 10-K for the year ended December 31, 2005. You should be aware that new factors may emerge from time to time and it is not possible for management to identify all such factors, nor can it predict the impact of each such factor on the business or the extent to which any one or more factors may cause actual results to differ from those reflected in any forward-looking statements. You are further cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this release. The information contained in this release is as of April 27, 2006. The Company undertakes no obligation to update any of its forward-looking statements for any reason.

CenturyTel (NYSE: CTL - News) is a leading provider of consumer and business communications solutions in rural areas and small to mid-size cities in 26 states and is included in the S&P 500 Index. The company delivers advanced communications with a personal touch. Visit CenturyTel at www.centurytel.com.

Contact:
CenturyTel, Inc.
Media:
Patricia Cameron, 318-388-9674
patricia.cameron@centurytel.com
or
Investors:
Tony Davis, 318-388-9525
tony.davis@centurytel.com
www.centurytel.com

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Source: CenturyTel, Inc.



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