CenturyLink Reports Strong Fourth Quarter 2013 Results

CenturyLink Reports Strong Fourth Quarter 2013 Results

Achieved operating revenues of $4.54 billion, including core revenues(1) of $4.11 billion

Generated operating cash flow(2) of $1.84 billion, excluding special items

Generated free cash flow(2) of $601 million, excluding special items and integration-related capital expenditures

Achieved Adjusted Net Income(2) of $396 million and Adjusted Diluted EPS(2) of $0.68, excluding special items

Added nearly 49,000 broadband and a record 26,000 CenturyLink® Prism(TM) TV customers during fourth quarter

Repurchased 50.8 million shares through February 11, 2014 for approximately $1.72 billion since inception of $2 billion program in February 2013; representing 8.2% of outstanding shares as of December 31, 2012.

MONROE, La., Feb. 12, 2014 /PRNewswire/ -- CenturyLink, Inc. (NYSE: CTL) today reported solid operating revenues, operating cash flow and free cash flow for fourth quarter and full-year 2013.

http://photos.prnewswire.com/prnvar/20090602/DA26511LOGO

"CenturyLink achieved strong financial and operating results for the fourth quarter with operating revenues at the top end of our guidance range for the quarter, record Prism(TM) TV subscriber growth, higher than anticipated high-speed Internet subscriber additions and continued demand from business customers for our high-bandwidth data and hosting services," said Glen F. Post III, chief executive officer and president. "Operating cash flow for the quarter, including the benefit of certain favorable year-end operating expense adjustments, exceeded the top end of our guidance.

"We continue to strengthen and enhance our product and services portfolio through recent acquisitions and new product development. Our November 2013 acquisition of Tier 3 enhances our ability to deliver world class automated cloud and managed services for our customers, while the recently announced strategic partnership with IO expands our colocation footprint and strengthens our ability to deliver flexible data center solutions. Our recent launch of Managed Office provides small and medium-sized businesses user-friendly, fully managed IT services and communications bundles that feature a level of customer service typically available only to larger business customers. We also continue to strategically expand our Prism(TM) TV footprint and enhance our broadband speeds to deliver highly competitive video and high-speed Internet solutions for consumers.

"The investments in our key initiatives continue to strengthen CenturyLink's ability to innovate, differentiate and succeed in a very competitive marketplace," Post concluded.

Fourth Quarter Highlights


-- Achieved core revenues of $4.1 billion in fourth quarter, a
year-over-year decline of 0.4% compared with a 2.0% year-over-year
decline in fourth quarter 2012; Strategic revenues(3) grew 5.4% from the
fourth quarter a year-ago.
-- Generated free cash flow of $601 million, excluding special items and
integration-related capital expenditures.
-- Continued growing momentum in data hosting cross-sell opportunities and
new sales.
-- Added approximately 49,000 high-speed Internet subscribers during fourth
quarter, ending the period with nearly six million subscribers in
service.
-- Ended the quarter with 175,000 CenturyLink(® )Prism(TM) TV subscribers,
a record increase of approximately 26,000 subscribers in fourth quarter
2013.
-- Purchased and retired 10.5 million shares for $331 million during fourth
quarter 2013.
Consolidated Fourth Quarter Financial Results

Operating revenues for fourth quarter 2013 were $4.54 billion compared to $4.58 billion in fourth quarter 2012. This decrease was driven by lower legacy services revenues primarily due to the impact of access line losses and lower access revenues. These declines were partially offset by increases in strategic revenues resulting primarily from increased business customer demand for high-bandwidth data services and hosting solutions, along with growth in high-speed Internet and CenturyLink(® )Prism(TM) TV subscribers.

Operating expenses, excluding special items, decreased to $3.87 billion from $3.89 billion in fourth quarter 2012. The year-over-year decrease in depreciation and amortization expenses along with favorable year-end employee benefit and operating tax expense adjustments were partially offset by higher facility costs, increased costs related to the growth of Prism(TM) TV and higher selling costs.

Operating cash flow (as defined in our attached supplemental schedules), excluding special items, decreased to $1.84 billion from $1.91 billion in fourth quarter 2012. This decrease was primarily the result of lower legacy revenues described above. For fourth quarter 2013, CenturyLink achieved an operating cash flow margin, excluding special items, of 40.4% versus 41.7% in fourth quarter 2012.

Adjusted Net Income and Adjusted Diluted Earnings Per Share (Adjusted Diluted EPS)

Adjusted Net Income and Adjusted Diluted EPS exclude the after-tax impact of special items, the non-cash after-tax impact of the amortization of intangible assets related to acquisitions since mid-2009, and the non-cash after-tax impact to interest expense of the assignment of fair value to the outstanding debt assumed in connection with those acquisitions.

Excluding the items outlined above, CenturyLink's Adjusted Net Income for fourth quarter 2013 was $396 million compared to Adjusted Net Income of $415 million in fourth quarter 2012. Fourth quarter 2013 Adjusted Diluted EPS was $0.68 compared to $0.67 in the year-ago period. Fourth quarter 2013 Adjusted Net Income and Adjusted Diluted EPS included a release of valuation allowances against state net operating losses and credits, along with adjustments in our 2013 effective tax rate and other corporate taxes which, together, lowered quarterly tax expense by approximately $16 million ($0.03 per share). See the attached schedules for additional information.

Full-Year Results

For the full-year 2013, operating revenues decreased to $18.1 billion from $18.4 billion for the same period in 2012. Operating cash flow, excluding special items, was $7.4 billion for 2013 compared to $7.7 billion in 2012. The decline in operating revenues was driven by lower legacy services revenues primarily due to the impact of access line losses and lower access revenues, partially offset by increases in strategic revenues resulting primarily from increased business customer demand for high-bandwidth data services and hosting solutions, along with growth in high-speed Internet and CenturyLink(® )Prism(TM) TV subscribers. The operating cash flow decline was driven by the reduction in higher-margin legacy voice and access revenues, which was partially offset by growth in lower-margin strategic revenues. Adjusted Net Income, excluding special items, was $1.66 billion in both 2013 and 2012. Adjusted Diluted EPS, excluding special items, was $2.76 in 2013 compared to $2.67 for 2012.

GAAP Results - Fourth Quarter and Full-Year

Under generally accepted accounting principles (GAAP), net income for fourth quarter 2013 was $239 million compared to $233 million net income for fourth quarter 2012, and diluted earnings per share for fourth quarter 2013 was $0.41 compared to $0.37 diluted earnings per share for fourth quarter 2012.

Net loss under GAAP for full-year 2013 was $239 million compared to net income of $777 million for full-year 2012, and loss per share for full-year 2013 was $0.40 compared to earnings per share of $1.25 for full-year 2012. 2013 GAAP operating results include the impact of our third quarter goodwill impairment charge for one operating segment. For details regarding this and other of the Company's special items for the three and twelve months ended December 31, 2013 and 2012, please see the accompanying financial schedules.

Segment Fourth Quarter Financial Results

Consumer

The Consumer segment realized continued strategic revenue growth driven by increased high-speed Internet and CenturyLink(® )Prism(TM) TV subscribers.


-- Strategic revenues were $683 million in the quarter, a 7.7% increase
over fourth quarter 2012.
-- Generated nearly $1.50 billion in total revenues, a decrease of 1.7%
from fourth quarter 2012, reflecting the continued decline in legacy
services tempered by growth in strategic services.
-- Added a record 26,000 CenturyLink(® )Prism(TM) TV customers during
fourth quarter 2013, growing total customers 17% from the prior quarter.
Business

The Business segment achieved year-over-year recurring revenue growth driven by continued demand for high-bandwidth data services and solid sales momentum.


-- Strategic revenues were $643 million in the quarter, a 7.5% increase
over fourth quarter 2012, driven by strength in high-bandwidth offerings
such as MPLS(4) and Ethernet services.
-- Generated $1.56 billion in total revenues, an increase of 1.0% from
fourth quarter 2012, as growth in high-bandwidth offerings offset lower
legacy services revenues.
-- Continued strong sales momentum in fourth quarter.
Wholesale

The Wholesale segment ended the year with more than 18,800 fiber-connected towers, an increase of nearly 30% from year-end 2012.


-- Strategic revenues were $581 million in the quarter, a 1.6% increase
over fourth quarter 2012, as increases in wireless carrier bandwidth
demand and Ethernet sales, along with delays in copper-based wireless
disconnects, offset declines in copper-based revenue.
-- Generated $884 million in total revenues, a decrease of 2.5% from fourth
quarter 2012, reflecting the continued decline in legacy revenues,
primarily driven by lower long distance and switched access minutes of
use, along with access rate reductions.
-- Completed 930 fiber builds in fourth quarter 2013 and more than 4,100
fiber builds in full-year 2013.
Data Hosting

The Data Hosting segment grew managed hosting (including cloud) and colocation services revenue as cross-selling initiatives continue to strengthen sales opportunities.


-- Operating revenues were $353 million in the quarter, a 3.8% increase
from fourth quarter 2012.
-- Colocation revenues were $147 million, a 1.4% increase from fourth
quarter 2012, and managed hosting revenues were $142 million,
representing a 14% increase over the same period a year ago.
-- In January, Savvis began operating as CenturyLink Technology Solutions,
aligning the brand with CenturyLink and demonstrating deeper ties to the
broad portfolio of IT solutions delivered to businesses.
Guidance - First Quarter 2014 and Full-Year 2014

The Company expects first quarter 2014 revenue and operating cash flow to decrease compared to fourth quarter 2013 primarily due to the decline in legacy and data integration revenues along with approximately $60 million in favorable year-end expense adjustments, primarily related to employee benefits and operating taxes, reflected in fourth quarter 2013 results that are not expected to recur in first quarter 2014. The Company also anticipates a decline in depreciation and amortization expense in the first quarter of 2014 driven primarily by the impact of declining amortization of acquisition-related intangible assets and the annual review and update of depreciation rates, which more than offset increases in depreciation expense associated with continued capital investment. This anticipated lower level of depreciation expense is expected to be offset by the decrease in operating cash flow, along with the impact of favorable income tax adjustments in the fourth quarter 2013, and result in a decrease in Adjusted Diluted EPS in first quarter 2014 compared to fourth quarter 2013.



First Quarter 2014 (excl. special
items)
---------------------------------


Operating Revenues $4.46 to $4.51 billion

Core Revenues $4.07 to $4.12 billion

Operating Cash Flow $1.73 to $1.78 billion

Adjusted Diluted EPS $0.58 to $0.63
-------------------- -----------
CenturyLink anticipates full-year 2014 operating cash flow and free cash flow to decline from full-year 2013 primarily driven by the impact of the decline in legacy revenues, investments to continue growth in strategic revenues, as well as a lower level of incremental acquisition-related synergies in 2014 compared to the level of incremental synergies achieved in 2013. The Company also anticipates capital expenditures(5) of approximately $3.0 billion in 2014.



Full-Year 2014 (excl. special items)
-----------------------------------


Operating Revenues $17.90 to $18.10 billion

Annual percent change in
Operating Revenues 0.0% to -1.2%

Core Revenues $16.25 to 16.45 billion

Annual percent change in
Core Revenues 0.0% to -1.2 %

Operating Cash Flow $7.05 to $7.25 billion

Adjusted Diluted EPS $2.40 to $2.60

Free Cash Flow(5) $2.6 to $2.8 billion
---------------- ---------------
All 2014 guidance figures and 2014 outlook statements included in this release (i) speak as of February 12, 2014 only, (ii) exclude the impact of any share repurchases made after December 31, 2013 and (iii) exclude the effects of special items, future changes in regulation or accounting rules, integration expenses associated with our recent acquisitions, any changes in operating or capital plans or other unforeseen events or circumstances that impact our financial performance, and any future mergers, acquisitions, divestitures 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 12, 2014. Interested parties can access the call by dialing 866-835-8905. The call will be accessible for replay through February 19, 2014, by dialing 888-266-2081 and entering the access code 1630419. Investors can also listen to CenturyLink's earnings conference call and webcast replay by accessing the Investor Relations portion of the Company's Web site at www.centurylink.com through March 5, 2014.

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 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 Web site 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 is the third largest telecommunications company in the United States and is recognized as a leader in the network services market by technology industry analyst firms. The Company is a global leader in cloud infrastructure and hosted IT solutions for enterprise customers. CenturyLink provides data, voice and managed services in local, national and select international markets through its high-quality advanced fiber optic network and multiple data centers for businesses and consumers. The company also offers advanced entertainment services under the CenturyLink® Prism(TM) TV and DIRECTV brands. Headquartered in Monroe, La., CenturyLink is an S&P 500 company and is included among the Fortune 500 list of America's largest corporations. For more information, visit www.centurylink.com.

Forward Looking Statements

Certain non-historical statements made in this release and future oral or written statements or press releases by us or our management are intended to be forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on current expectations only, and are subject to a number of assumptions, risks and uncertainties, many of which are beyond our control. Actual events and results may differ materially from those anticipated, estimated, projected or implied by us if one or more of these risks or uncertainties materialize, or if our underlying assumptions prove incorrect. Factors that could affect actual results include but are not limited to: the timing, success and overall effects of competition from a wide variety of competitive providers; the risks inherent in rapid technological change, including product displacement; the effects of ongoing changes in the regulation of the communications industry, including the outcome of regulatory or judicial proceedings relating to intercarrier compensation, access charges, universal service, broadband deployment, data protection and net neutrality; our ability to effectively adjust to changes in the communications industry, and changes in our markets, product mix and network caused by our recent acquisitions; our ability to successfully integrate recently-acquired operations into our incumbent operations, including the possibility that the anticipated benefits from our recent acquisitions cannot be fully realized in a timely manner or at all; our ability to effectively manage our expansion opportunities, including retaining and hiring key personnel; possible changes in the demand for, or pricing of, our products and services, including our ability to effectively respond to increased demand for high-speed broadband service; our ability to successfully introduce new product or service offerings on a timely and cost-effective basis; the adverse impact on our business and network from possible equipment failures, security breaches or similar attacks on our network; our ability to successfully negotiate collective bargaining agreements on reasonable terms without work stoppages; our ability to use net operating loss carryovers of Qwest in projected amounts; our continued access to credit markets on favorable terms; our ability to collect our receivables from financially troubled communications companies; our ability to maintain favorable relations with our key business partners, suppliers, vendors, landlords and financial institutions; any adverse developments in legal or regulatory proceedings involving us; changes in our operating plans, corporate strategies, dividend payment plans or other capital allocation plans, including those caused by changes in our cash requirements, capital expenditure needs, debt obligations, pension funding requirements, cash flows, or financial position, or other similar changes; the effects of adverse weather; other risks referenced from time to time in our filings with the SEC; and the effects of more general factors such as changes in interest rates, in tax laws, in accounting policies or practices, in operating, medical, pension or administrative costs, in general market, labor or economic conditions, or in legislation, regulation or public policy. These and other uncertainties related to our business and our recent acquisitions are described in greater detail in Item 1A of our Form 10-Q for the quarter ended September 30, 2013, as updated and supplemented by our subsequent SEC reports. You should be aware that new factors may emerge from time to time and it is not possible for us to identify all such factors nor can we predict the impact of each such factor on the business or the extent to which any one or more factors may cause actual results to differ from those reflected in any forward-looking statements. You are further cautioned not to place undue reliance on these forward-looking statements, which are inherently speculative and speak only as of the date made. We undertake no obligation to update any of our forward-looking statements for any reason.




(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) In fourth
quarter
2013, we
reallocated
our bundled
services
and CLEC
revenues
between
their
component
products
and
services.
This change
led to a
net
transfer of
revenue
between
strategic
and legacy
services.
Current and
historical
revenues
have been
restated
for this
change.

4 Multiprotocol
Label
Switching

5 Excludes
approximately
$30 million
of
integration-
related
capital
expenditures











CenturyLink, Inc.

CONSOLIDATED STATEMENTS OF INCOME

THREE MONTHS ENDED DECEMBER 31, 2013 AND 2012

(UNAUDITED)

(Dollars in millions, except per share amounts; shares in thousands)


Three months ended December Three months ended December
31, 2013 31, 2012
--------------------------- ---------------------------


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 $2,260 2,260 2,144 2,144 5.4% 5.4%

Legacy 1,850 1,850 1,983 1,983 (6.7%) (6.7%)

Data integration 186 186 189 189 (1.6%) (1.6%)

Other 246 246 267 267 (7.9%) (7.9%)

4,542 - 4,542 4,583 - 4,583 (0.9%) (0.9%)
----- --- ----- ----- --- -----


OPERATING EXPENSES

Cost of services
and products 1,920 6 (1) 1,914 1,907 9 (5) 1,898 0.7% 0.8%

Selling, general
and
administrative 823 31 (1) 792 790 18 (5) 772 4.2% 2.6%

Depreciation and
amortization 1,166 1,166 1,220 1,220 (4.4%) (4.4%)

Impairment of
goodwill (8) (8) (2) - - - 0.00% 0.00%

3,901 29 3,872 3,917 27 3,890 (0.4%) (0.5%)
----- --- ----- ----- --- -----


OPERATING INCOME 641 (29) 670 666 (27) 693 (3.8%) (3.3%)


OTHER INCOME
(EXPENSE)

Interest expense (328) (328) (315) (315) 4.1% 4.1%

Other income
(expense) 17 10 (3) 7 23 18 (6) 5 (26.1%) 40.0%

Income tax expense (91) 33 (4) (124) (141) 2 (7) (143) (35.5%) (13.3%)


NET INCOME $239 14 225 233 (7) 240 2.6% (6.3%)



BASIC EARNINGS
PER SHARE $0.41 0.02 0.38 0.37 (0.01) 0.39 10.8% (2.6%)

DILUTED EARNINGS
PER SHARE $0.41 0.02 0.38 0.37 (0.01) 0.38 10.8% 0.0%


AVERAGE SHARES
OUTSTANDING

Basic 585,259 585,259 621,578 621,578 (5.8%) (5.8%)

Diluted 586,382 586,382 623,654 623,654 (6.0%) (6.0%)


DIVIDENDS PER
COMMON SHARE $0.540 0.540 0.725 0.725 (25.5%) (25.5%)


SPECIAL ITEMS

(1) - Includes the
Communications
Workers of
America
contract
ratification
bonus ($6
million),
severance
costs
associated
with recent
headcount
reductions
($13
million),
integration,
severance and
retention
costs
associated
with our
acquisition
of Qwest ($20
million) and
integration,
severance and
retention
costs
associated
with our
acquisition
of Savvis $2
million.

(2) - Non-cash,
non-tax
deductible
goodwill
impairment
adjustment of
$8 million.

(3) - Gain on early
retirement of
debt.

(4) - Income tax
benefit of
Item (1) and
(3) and
release of a
tax reserve
($22
million).

(5) - Includes
severance
costs
associated
with
reduction in
force
initiatives
($13
million),
integration,
severance and
retention
costs
associated
with our
acquisition
of Qwest ($9
million) and
integration,
severance,
and retention
costs
associated
with our
acquisition
of Savvis ($5
million).

(6) - Gain on the
sale of non-
operating
investments
($3 million)
and early
retirement of
debt ($15
million).

(7) - Income tax
benefit of
Items (5)
through (6).


*During the fourth quarter of 2013, we reallocated
the discounts on our bundled services (local, long
distance, and broadband) to the component products
and services. The net effect of the bundled
services reallocation was a reclassification of
revenues from legacy services to strategic
services. Also during the fourth quarter of 2013,
we reallocated our CLEC revenues into their
component products and services. The net effect of
this CLEC reallocation was a reclassification of
revenues from strategic services to legacy











CenturyLink, Inc.

CONSOLIDATED STATEMENTS OF (LOSS) INCOME

TWELVE MONTHS ENDED DECEMBER 31, 2013 AND 2012

(UNAUDITED)

(Dollars in millions, except per share amounts; shares in thousands)


Twelve months ended Twelve months ended
December 31, 2013 December 31, 2012
-------------------- --------------------


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 $8,822 8,822 8,427 8,427 4.7% 4.7%

Legacy 7,617 7,617 8,221 8,221 (7.3%) (7.3%)

Data integration 656 656 672 672 (2.4%) (2.4%)

Other 1,000 1,000 1,056 1,056 (5.3%) (5.3%)

18,095 - 18,095 18,376 - 18,376 (1.5%) (1.5%)
------ --- ------ ------ --- ------


OPERATING
EXPENSES

Cost of services and products 7,507 15 (1) 7,492 7,639 34 (5) 7,605 (1.7%) (1.5%)

Selling, general and
administrative 3,502 331 (1) 3,171 3,244 129 (5) 3,115 8.0% 1.8%

Depreciation and amortization 4,541 4,541 4,780 (30) (6) 4,810 (5.0%) (5.6%)

Impairment of goodwill 1,092 1,092 (2) - - - 0.00% 0.00%

16,642 1,438 15,204 15,663 133 15,530 6.3% (2.1%)
------ ----- ------ ------ --- ------


OPERATING
INCOME 1,453 (1,438) 2,891 2,713 (133) 2,846 (46.4%) 1.6%


OTHER INCOME
(EXPENSE)

Interest expense (1,298) (1,298) (1,319) (1,319) (1.6%) (1.6%)

Other income (expense) 69 47 (3) 22 (144) (165) (7) 21 (147.9%) 4.8%

Income tax expense (463) 164 (4) (627) (473) 128 (8) (601) (2.1%) 4.3%


NET (LOSS)
INCOME $(239) (1,227) 988 777 (170) 947 (130.8%) 4.3%



BASIC (LOSS)
EARNINGS
PER SHARE $(0.40) (2.04) 1.64 1.25 (0.27) 1.52 (132.0%) 7.9%

DILUTED
(LOSS)
EARNINGS
PER SHARE $(0.40) (2.04) 1.64 1.25 (0.27) 1.52 (132.0%) 7.9%


AVERAGE SHARES
OUTSTANDING

Basic 600,892 600,892 620,205 620,205 (3.1%) (3.1%)

Diluted 600,892 602,201 622,285 622,285 (3.4%) (3.2%)


DIVIDENDS
PER COMMON
SHARE $2.160 2.160 2.900 2.900 (25.5%) (25.5%)


SPECIAL ITEMS

(1) - Includes a
litigation
reserve ($233
million), the
Communications
Workers of
American
contract
ratification
bonus ($6
million),
severance
costs
associated
with recent
headcount
reductions
($27
million),
integration,
severance and
retention
costs
associated
with our
acquisition
of Qwest ($47
million),
integration,
severance and
retention
costs
associated
with our
acquisition
of Savvis ($6
million), an
accounting
adjustment
($18 million)
and an
impairment of
an office
building ($9
million).

(2) - Non-cash,
non-tax
deductible
goodwill
impairment
charge of
($1.092
billion).

(3) - Gain on the
sale of a
non-
operating
investment
($32
million),
gain on early
retirement of
debt ($10
million) and
settlements
of other non-
operating
issues ($5
million).

(4) - Income tax
benefit of
Items (1) and
(3), a
favorable
federal
income tax
settlement
($33 million)
and release
of a tax
reserve ($22
million).

(5) - Includes
severance
costs
associated
with
reduction in
force
initiatives
($81
million),
integration,
severance and
retention
costs
associated
with our
acquisition
of Qwest ($71
million) and
integration,
severance,
and retention
costs
associated
with our
acquisition
of Savvis
($14
million);
partially
offset with a
$3 million
credit
related to
tax
incentives
for the
Embarq
integration.

(6) - Out-of-
period
depreciation
adjustment
($30 million)
to correct an
overstatement
of
depreciation
in prior
quarters.

(7) - Net loss
associated
with early
retirement of
debt ($179
million),
partially
offset by
gains on the
sales of non-
operating
investments
$14 million.

(8) - Income tax
benefit of
Items (5)
through (7),
partially
offset by the
benefit from
the reversal
of a
valuation
allowance
($14
million).


*During the fourth
quarter of 2013, we
reallocated the
discounts on our
bundled services
(local, long
distance, and
broadband) to the
component products
and services. The
net effect of the
bundled services
reallocation was a
reclassification of
revenues from legacy
services to
strategic services.
Also during the
fourth quarter of
2013, we reallocated
our CLEC revenues
into their component
products and
services. The net
effect of this CLEC
reallocation was a
reclassification of
revenues from
strategic services
to legacy services.
The prior periods
have been restated
to reflect these
reclassifications.











CenturyLink, Inc.

CONDENSED CONSOLIDATED BALANCE SHEETS

DECEMBER 31, 2013 AND DECEMBER 31, 2012

(UNAUDITED)

(Dollars in millions)


December 31, December 31,

2013 2012*
---- ----


ASSETS

CURRENT ASSETS

Cash and cash
equivalents $168 211

Other current assets 3,739 3,427

Total current assets 3,907 3,638
----- -----


NET PROPERTY, PLANT
AND EQUIPMENT

Property, plant and
equipment 34,307 31,933

Accumulated
depreciation (15,661) (13,024)

Net property, plant
and equipment 18,646 18,909
------ ------


GOODWILL AND OTHER
ASSETS

Goodwill 20,674 21,627

Other, net 8,560 9,766

Total goodwill and
other assets 29,234 31,393
------ ------


TOTAL ASSETS $51,787 53,940




LIABILITIES AND
STOCKHOLDERS' EQUITY

CURRENT LIABILITIES

Current maturities
of long-term
debt $785 1,205

Other current
liabilities 3,624 3,390

Total current
liabilities 4,409 4,595


LONG-TERM DEBT 20,181 19,400

DEFERRED CREDITS AND
OTHER LIABILITIES 10,006 10,656

STOCKHOLDERS' EQUITY 17,191 19,289
------ ------


TOTAL LIABILITIES
AND STOCKHOLDERS'
EQUITY $51,787 53,940


*We reclassified $123 million in
software development costs, net
of $30 million in accumulated
amortization, from property,
plant and equipment to other
intangible assets on our
consolidated balance sheet as
of December 31, 2012 to conform
to the current period
presentation.


During the year ended December
31, 2013, we discovered and
corrected an error that
resulted in an understatement
of our deferred tax benefit
recorded in connection with the
purchase accounting of Savvis
and Qwest in 2011. We
recognized a $105 million
increase to our deferred tax
benefit and a $105 million








CenturyLink, Inc.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

TWELVE MONTHS ENDED DECEMBER 31, 2013 AND 2012

(UNAUDITED)

(Dollars in millions)



Twelve Months Twelve Months

ended ended

December 31, 2013 December 31, 2012
----------------- -----------------


OPERATING ACTIVITIES

Net (loss) income $(239) 777

Adjustments to reconcile
net (loss) income to net

cash provided by operating
activities:

Depreciation and
amortization 4,541 4,780

Impairment of goodwill 1,092 -

Deferred income taxes 391 394

Provision for uncollectible
accounts 152 187

Gain on sale of intangible
assets (32) -

Net (gain) loss on early
retirement of debt (10) 179

Changes in current assets
and current liabilities,
net 3 (224)

Retirement benefits (342) (169)

Changes in other noncurrent
assets and liabilities 19 161

Other, net (16) (20)

Net cash provided by operating activities 5,559 6,065
----- -----


INVESTING ACTIVITIES

Payments for property,
plant and equipment and
capitalized software (3,048) (2,919)

Proceeds from sale of
property and intangible
assets 80 191

Cash paid for acquisitions (160) -

Other, net (20) 38

Net cash used in investing activities (3,148) (2,690)
------ ------


FINANCING ACTIVITIES

Net proceeds from issuance
of long-term debt 2,481 3,362

Payments of long-term debt (2,010) (5,118)

Net (payments) borrowings
on credit facility (95) 543

Early retirement of debt
costs (31) (346)

Dividends paid (1,301) (1,811)

Net proceeds from issuance
of common stock 73 110

Repurchases of common stock (1,586) (37)

Other, net 15 2

Net cash used in financing activities (2,454) (3,295)
------ ------


Effect of exchange rate changes on cash and cash equivalents - 3
--- ---


Net (decrease) increase in cash and cash equivalents (43) 83

Cash and cash equivalents at beginning of period 211 128
--- ---


Cash and cash equivalents at end of period $168 211











CenturyLink, Inc.

SELECTED SEGMENT FINANCIAL INFORMATION

THREE MONTHS AND TWELVE MONTHS ENDED DECEMBER 31, 2013 AND 2012

(UNAUDITED)

(Dollars in millions)




Three months ended December Twelve months ended December
31, 31,
---------------------------- -----------------------------

2013 2012* 2013 2012*
---- ---- ---- ----

Total segment revenues $4,296 4,316 17,095 17,320

Total segment expenses 2,140 2,090 8,249 8,244

Total segment income $2,156 2,226 8,846 9,076



Total segment income margin (segment income
divided by segment revenues) 50.2% 51.6% 51.7% 52.4%
==== ==== ==== ====


Consumer
--------

Revenues

Strategic services $683 634 2,650 2,474

Legacy services 812 886 3,349 3,681

Data integration 1 2 5 7

$1,496 1,522 6,004 6,162


Expenses

Direct $454 449 1,758 1,796

Allocated 120 122 473 495

$574 571 2,231 2,291



Segment income $922 951 3,773 3,871


Segment income margin 61.6% 62.5% 62.8% 62.8%
==== ==== ==== ====


Business
--------

Revenues

Strategic services $643 598 2,509 2,356

Legacy services 735 762 2,976 3,112

Data integration 185 187 651 665

$1,563 1,547 6,136 6,133


Expenses

Direct $880 839 3,329 3,285

Allocated 113 115 440 458

$993 954 3,769 3,743



Segment income $570 593 2,367 2,390


Segment income margin 36.5% 38.3% 38.6% 39.0%
==== ==== ==== ====


Wholesale
---------

Revenues

Strategic services $581 572 2,287 2,297

Legacy services 303 335 1,292 1,428

$884 907 3,579 3,725


Expenses

Direct $44 38 169 169

Allocated 246 263 989 1,061

$290 301 1,158 1,230



Segment income $594 606 2,421 2,495


Segment income margin 67.2% 66.8% 67.6% 67.0%
==== ==== ==== ====


Data Hosting
------------

Revenues

Strategic services $353 340 1,376 1,300

$353 340 1,376 1,300


Expenses

Direct $284 266 1,096 987

Allocated (1) (2) (5) (7)

$283 264 1,091 980



Segment income $70 76 285 320


Segment income margin 19.8% 22.4% 20.7% 24.6%
==== ==== ==== ====

Index was outside the bounds of the array.
at XhtmlFactory.XhtmlTableToTextConverter.GetTableRepresentation(Int32 intCallingMethod, List`1 arrMetaData, String strConstructedTableData, Int32 intTotalColumns, Int32[,] arrMergeInfo)
at XhtmlFactory.XhtmlTableToTextConverter.GenerateAsciiTable(List`1 arrTableDetails)
at XhtmlFactory.XhtmlTableToTextConverter.GetDownConvertedText(String strInputHtml, String strWidths, Dictionary`2 dictReplacementCharsInTable)
at PrimaryContent.GenerateASCIIContent()











CenturyLink, Inc.

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES

(UNAUDITED)

(Dollars in millions)



Three months ended December 31, Three months ended December 31,
2013 2012
-------------------------------- --------------------------------

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 $641 (29) (1) 670 666 (27) (3) 693

Add: Depreciation and amortization 1,166 - 1,166 1,220 - 1,220

Add: Impairment of goodwill (8) (8) (2) - - -

Operating cash flow $1,799 (37) 1,836 1,886 (27) 1,913



Revenues $4,542 - 4,542 4,583 - 4,583



Operating income margin (operating income divided by revenues) 14.1% 14.8% 14.5% 15.1%
==== ==== ==== ====


Operating cash flow margin (operating cash flow divided by revenues) 39.6% 40.4% 41.2% 41.7%
==== ==== ==== ====




Free cash flow

Operating cash flow $1,836 1,913

Less: Cash paid for income taxes, net of refunds (3) (23)

Less: Cash paid for interest, net of amounts capitalized (419) (408)

Less: Capital expenditures (4) (820) (877)

Add: Other income 7 5
--- ---

Free cash flow (5) $601 610
==== ===


SPECIAL ITEMS

(1) - Includes a non-cash, non-tax
deductible goodwill impairment charge
of $8 million, the Communications
Workers of America contract
ratification bonus ($6 million),
severance costs associated with recent
headcount reductions ($13 million),
integration, severance and retention
costs associated with our acquisition
of Qwest ($20 million) and integration,
severance and retention costs
associated with our acquisition of
Savvis $2 million.

(2) - Non-cash, non-tax deductible goodwill
impairment charge of $8 million.

(3) - Includes severance costs associated with
reduction in force initiatives ($13
million), integration, severance and
retention costs associated with our
acquisition of Qwest ($9 million) and
integration, severance, and retention
costs associated with our acquisition
of Savvis ($5 million).

(4) - Excludes $17 million in fourth quarter
2013 and $18 million in fourth quarter
2012 of capital expenditures related to
the integration of Embarq, Qwest and
Savvis.

(5) - Excludes special items identified in
items (1) to (3).











CenturyLink, Inc.

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES

(UNAUDITED)

(Dollars in millions)



Twelve months ended December 31, Twelve months ended December 31,
2013 2012
--------------------------------- ---------------------------------

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 $1,453 (1,438) (1) 2,891 2,713 (133) (3) 2,846

Add: Depreciation and amortization 4,541 - 4,541 4,780 (30) (4) 4,810

Add: Impairment of goodwill 1,092 1,092 (2) - - -

Operating cash flow $7,086 (346) 7,432 7,493 (163) 7,656



Revenues $18,095 - 18,095 18,376 - 18,376



Operating income margin (operating income divided by revenues) 8.0% 16.0% 14.8% 15.5%
=== ==== ==== ====


Operating cash flow margin (operating cash flow divided by revenues) 39.2% 41.1% 40.8% 41.7%
==== ==== ==== ====




Free cash flow

Operating cash flow $7,432 7,656

Less: Cash paid for income taxes (48) (82)

Less: Cash paid for interest, net of amounts capitalized (1,334) (1,405)

Less: Capital expenditures (5) (3,001) (2,858)

Add: Other income 22 21

Free cash flow (6) $3,071 3,332
====== =====


SPECIAL ITEMS

(1) - Includes a non-cash, non-tax deductible goodwill impairment charge of ($1.092 billion), a litigation reserve ($233 million), the Communications Workers of America
contract ratification bonus ($6 million), severance costs associated with recent headcount reductions ($27 million), integration, severance and retention costs associated
with our acquisition of Qwest ($47 million), integration, severance and retention costs associated with our acquisition of Savvis ($6 million), an accounting adjustment
($18 million) and an impairment of an office building ($9 million).

(2) - Non-cash, non-tax deductible goodwill impairment charge of ($1.092 billion).

(3) - Includes severance costs associated with reduction in force initiatives ($81 million), integration, severance and retention costs associated with our acquisition of Qwest
($71 million) and integration, severance, and retention costs associated with our acquisition of Savvis ($14 million); partially offset with a $3 million credit related
to tax incentives for the Embarq integration.

(4) - Out-of-period depreciation adjustment ($30 million) to correct an overstatement of depreciation in prior quarters.

(5) - Excludes $47 million for the twelve months ended December 31, 2013 and $61 million for the twelve months ended December 31, 2012 of capital expenditures related to the
integration of Embarq, Qwest and Savvis.

(6) - Excludes special items identified in items (1) to (4) and does not reflect the impact of pension contributions of $147 million for the twelve months ended December 31,
2013 and $32 million for the twelve months ended December 31, 2012.











CenturyLink, Inc.

OPERATING METRICS

(UNAUDITED)

(In thousands)




As of As of As of

December 31, 2013 September 30, 2013 December 31, 2012*
----------------- ------------------ -----------------

Broadband
subscribers 5,991 5,942 5,851

Access
lines 13,002 13,150 13,751



* The December 31, 2012
numbers have been adjusted
to include the operational
metrics of our wholly owned
subsidiary, El Paso County
Telephone Company, which
had been previously
excluded. The increase (in
thousands) related to
including El Paso County
Telephone Company's














CenturyLink, Inc.

SUPPLEMENTAL NON-GAAP INFORMATION - ADJUSTED DILUTED EPS

THREE MONTHS ENDED DECEMBER 31, 2013 AND 2012 AND TWELVE MONTHS ENDED DECEMBER 31, 2013 AND 2012

(UNAUDITED)

(Dollars in millions, except per share amounts)





Three months Twelve months
ended ended
------------- --------------


December 31, 2013 December 31, 2012 December 31, 2013 December 31, 2012

(excluding (excluding (excluding (excluding

special items) special items) special items) special items)


Net income * $225 240 988 947



Add back:

Amortization of customer
base intangibles:

Qwest 223 237 913 966

Embarq 30 34 127 146

Savvis 16 15 61 59


Amortization of trademark
intangibles:

Qwest 7 14 39 63

Savvis 15 2 21 9


Amortization of fair value
adjustment of long-term
debt:

Embarq 1 1 4 4

Qwest (14) (18) (62) (86)


Subtotal 278 285 1,103 1,161

Tax effect of above items (107) (110) (428) (445)
----

Net adjustment, after
taxes $171 175 675 716



Net income, as adjusted
for above items $396 415 1,663 1,663


Weighted average diluted
shares outstanding 586.4 623.7 602.2 622.3


Diluted EPS (excluding
special items) $0.38 0.38 1.64 1.52


Adjusted diluted EPS as
adjusted for the above-
listed purchase accounting
intangible and interest
amortizations (excluding
special items)

$0.68 0.67 2.76 2.67



The above schedule
presents adjusted net
income and adjusted
earnings per share (both
excluding special items)
by adding back to net
income and earnings per
share certain non-cash
expense items that arise
as a result of the
application of business
combination accounting
rules to our recent
acquisitions. 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 the impact of
excluded special
items.


Multimedia Assets associated with this release:

Logo: http://photos.prnewswire.com/prnh/20090602/DA26511LOGO



SOURCE CenturyLink, Inc.

Photo:http://photos.prnewswire.com/prnh/20090602/DA26511LOGO
http://photoarchive.ap.org/
CenturyLink, Inc.

CONTACT: Kristina Waugh, 318.340.5627, kristina.r.waugh@centurylink.com

Web Site: http://www.centurytel.com


-------
Profile: intent