MONROE, La., Nov. 6, 2019 /PRNewswire/ -- CenturyLink,
Inc. (NYSE: CTL) today reported results for the third
quarter ended September 30, 2019.
"CenturyLink continues investing in both growth and operational
efficiency," said Jeff Storey,
president and CEO of CenturyLink. "You can see the benefits of
those investments with the year-over-year growth in Enterprise and
International/Global Accounts business units, along with expansion
of Adjusted EBITDA margins. We remain committed to
delivering an excellent customer experience while enhancing our
product capabilities and expanding what I believe is the world's
best fiber network."
Total revenue was $5.61 billion
for the third quarter 2019, compared to $5.82 billion for the third quarter 2018.
Diluted earnings per share was $0.28 for the third quarter
2019, compared to $0.25 for
third quarter 2018. Diluted earnings per share for the third
quarter 2019 was $0.31 compared to
$0.30 per share for the third quarter
in 2018, excluding the aggregate effects of Integration and
Transformation Costs and the Special Items of $26 million and $55
million, respectively.
Financial Results
Metric
|
Third
Quarter
2019
|
Third
Quarter
2018
|
($ in millions,
except per share data)
|
International and
Global Accounts
|
$
|
899
|
|
892
|
Enterprise
|
1,550
|
1,505
|
Small and Medium
Business
|
734
|
785
|
Wholesale
|
1,025
|
1,097
|
Consumer
|
1,398
|
1,539
|
Total
Revenue
|
$
|
5,606
|
|
5,818
|
Cost of Services and
Products
|
2,590
|
2,672
|
Selling, General and
Administrative Expenses
|
831
|
967
|
Share-based
Compensation Expenses
|
38
|
49
|
Adjusted
EBITDA(1)
|
2,223
|
2,228
|
Adjusted EBITDA,
Excluding Integration and Transformation Costs and Special
Items(1), (2)
|
2,261
|
2,287
|
Adjusted EBITDA
Margin(1)
|
39.7%
|
38.3%
|
Adjusted EBITDA
Margin, Excluding Integration and Transformation Costs and Special
Items(1), (2)
|
40.3%
|
39.3%
|
Net Cash Provided by
Operating Activities
|
1,888
|
1,787
|
Capital
Expenditures
|
957
|
684
|
Unlevered Cash
Flow(1)
|
1,382
|
1,612
|
Unlevered Cash Flow,
Excluding Cash Integration and Transformation Costs and Special
Items(1), (3)
|
1,434
|
1,672
|
Free Cash
Flow(1)
|
931
|
1,103
|
Free Cash Flow,
Excluding Cash Integration and Transformation Costs and Special
Items(1), (3)
|
983
|
1,163
|
Net Income
|
302
|
272
|
Net Income, Excluding
Integration and Transformation Costs and Special
Items(4)
|
328
|
327
|
Net Income per Common
Share - Diluted
|
0.28
|
0.25
|
Net Income per Common
Share - Diluted, Excluding Integration and Transformation Costs and
Special Items(4)
|
0.31
|
0.30
|
Weighted Average
Shares Outstanding (in millions) - Diluted
|
1,074.8
|
1,072.4
|
|
|
|
(1)
See the attached schedules for definitions of non-GAAP metrics and
reconciliation to GAAP figures.
|
|
(2)
Excludes (i) $38 million of integration and transformation costs
and special items for the third quarter of 2019 and (ii) $59
million of integration costs and special items for the third
quarter of 2018.
|
|
(3)
Excludes cash paid (i) for integration and transformation costs and
special items of $52 million for the third quarter of 2019, and
(ii) for integration costs and special items of $60 million for the
third quarter of 2018.
|
|
(4)
Excludes (i) $26 million of integration and transformation costs
and special items for the third quarter of 2019 and (ii) $55
million of integration costs and special items for the third
quarter of 2018.
|
Revenue ($ in millions)
|
Third
Quarter
2019
|
|
Second
Quarter
2019
|
|
QoQ
Percent
Change
|
|
Third
Quarter
2018
|
|
YoY
Percent
Change
|
By Business
Unit
|
|
|
|
|
|
|
International and
Global Accounts
|
$
|
899
|
|
902
|
|
—%
|
|
892
|
|
1%
|
Enterprise
|
1,550
|
|
1,505
|
|
3%
|
|
1,505
|
|
3%
|
Small and Medium
Business
|
734
|
|
736
|
|
—%
|
|
785
|
|
(6)%
|
Wholesale
|
1,025
|
|
1,018
|
|
1%
|
|
1,097
|
|
(7)%
|
Consumer
|
1,398
|
|
1,417
|
|
(1)%
|
|
1,539
|
|
(9)%
|
Total
Revenue
|
$
|
5,606
|
|
5,578
|
|
1%
|
|
5,818
|
|
(4)%
|
Cash Flow
Free Cash Flow, excluding integration and transformation costs
and special items, was $983 million
in the third quarter 2019, compared to $1.163 billion in the third quarter 2018.
As of September 30, 2019, CenturyLink had cash and cash
equivalents of $1.404 billion, which
includes proceeds from Level 3 financing's 4.625% Senior Notes
issued in the third quarter. In October, using those proceeds, the
company paid down $400 million of debt and is scheduled to pay
down an additional $600
million in December.
2019 Business Outlook
"Year-to-date, Adjusted EBITDA grew compared to the same
period in 2018, driven by our continued focus on profitable revenue
and cost transformation initiatives," said Neel Dev, CenturyLink's
executive vice president and chief financial officer. "We are
pleased with our solid performance and are reiterating all of our
financial outlook measures for the full year 2019."
Metric (1),
(2)
|
2019
Outlook
|
Adjusted
EBITDA
|
$9.00 billion to
$9.20 billion
|
Free Cash
Flow
|
$3.10 billion to
$3.40 billion
|
Dividends
(3)
|
$1.095
billion
|
Free Cash Flow after
Dividends
|
$2.005 billion to
$2.305 billion
|
GAAP Interest
Expense
|
$2.100
billion
|
Cash
Interest
|
$2.05 billion to
$2.10 billion
|
Capital
Expenditures
|
$3.50 billion to
$3.80 billion
|
Depreciation and
Amortization
|
$4.75 billion to
$4.85 billion
|
Non-cash Compensation
Expense
|
$210
million
|
Cash Income
Taxes
|
$100
million
|
Full Year Effective
Income Tax Rate
|
~25%
|
|
|
(1)
See the attached schedules for definitions of non-GAAP metrics and
reconciliation to GAAP figures.
|
|
(2)
Outlook measures in this release and the accompanying schedules (i)
exclude integration and transformation costs, (ii) exclude the
effects of special items, future changes in our operating or
capital allocation plans, unforeseen changes in regulation, laws or
litigation, and other unforeseen events or circumstances impacting
our financial performance and (iii) speak only as of November 6,
2019. See "Forward Looking Statements" below.
|
|
(3)
Dividends is defined as dividends paid as disclosed in the
Consolidated Statements of Cash Flows. Assumes payment of
dividends at the rate of $1.00 per share per year, based on the
number of shares outstanding on September 30, 2019. Payments
of all dividends are at the discretion of the board of
directors.
|
Investor Call
CenturyLink's management will host a conference call at
5:00 p.m. ET today, November 6, 2019. The conference call will be
streamed live over CenturyLink's website at ir.centurylink.com.
Additional information regarding third quarter 2019 results,
including the presentation management will review during the
conference call, will be available on the Investor Relations
website prior to the call. If you are unable to join the call via
the Web, the call can be accessed live at +1 877-283-5643 (U.S.
Domestic) or +1 312-281-1200 (International).
A telephone replay of the call will be available beginning at
7:00 p.m. ET on November 6, 2019, and ending February 4, 2020, at 6:00
p.m. ET. The replay can be accessed by dialing +1
800-633-8284 (U.S. Domestic) or +1 402-977-9140 (International),
reservation code 21931504. A webcast replay of the call will also
be available on our website beginning at 7:00 p.m. ET on November
6, 2019 and ending February 4,
2020 at 6:00 p.m. ET.
About CenturyLink
CenturyLink (NYSE: CTL) is a technology leader delivering
hybrid networking, cloud connectivity, and security solutions to
customers located in more than 60 countries. Through its extensive
global fiber network, CenturyLink provides secure and reliable
services to meet the growing digital demands of businesses and
consumers. CenturyLink strives to be the trusted connection to the
networked world and is focused on delivering technology that
enhances the customer experience.
Learn more at http://news.centurylink.com/.
Forward Looking Statements
Except for historical and factual information, the matters
set forth in this release and other of our oral or written
statements identified by words such as "estimates," "expects,"
"anticipates," "believes," "plans," "intends," and similar
expressions are forward-looking statements as defined by the
federal securities laws, and are subject to the "safe harbor"
protections thereunder. These forward-looking statements are not
guarantees of future results and are based on current expectations
only, are inherently speculative, and are subject to a number of
assumptions, risks and uncertainties, many of which are beyond our
control. Actual events and results may differ materially from
those anticipated, estimated, projected or implied by us in those
statements 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 effects of competition from a wide variety of competitive
providers, including decreased demand for our more mature service
offerings and increased pricing pressures; the effects of new,
emerging or competing technologies, including those that could make
our products less desirable or obsolete; our ability to attain our
key operating imperatives, including simplifying and consolidating
our network, simplifying and automating our service support
systems, strengthening our relationships with customers and
attaining projected cost savings; our ability to safeguard our
network, and to avoid the adverse impact on our business from
possible security breaches, service outages, system failures,
equipment breakage or similar events impacting our network or the
availability and quality of our services; the effects of ongoing
changes in the regulation of the communications industry, including
the outcome of regulatory or judicial proceedings relating to
intercarrier compensation, interconnection obligations, special
access, universal service, broadband deployment, data protection
and net neutrality; our ability to effectively adjust to changes in
the communications industry and changes in the composition of our
markets and product mix; possible changes in the demand for our
products and services, including our ability to effectively respond
to increased demand for high-speed data transmission services; our
ability to successfully maintain the quality and profitability of
our existing product and service offerings and to introduce
profitable new offerings on a timely and cost-effective basis; our
ability to generate cash flows sufficient to fund our financial
commitments and objectives, including our capital expenditures,
operating costs, debt repayments, dividends, pension contributions
and other benefits payments; our ability to implement our operating
plans and corporate strategies, including our delevering
strategies; changes in our operating plans, corporate strategies,
dividend payment plans or other capital allocation plans, whether
based upon changes in our cash flows, cash requirements, financial
performance, financial position, market conditions or otherwise;
our ability to effectively retain and hire key personnel and to
successfully negotiate collective bargaining agreements on
reasonable terms without work stoppages; the negative impact of
increases in the costs of our pension, health, post-employment or
other benefits, including those caused by changes in markets,
interest rates, mortality rates, demographics or regulations;
adverse changes in our access to credit markets on favorable terms,
whether caused by changes in our financial position, lower debt
credit ratings, unstable markets or otherwise; our ability to meet
the terms and conditions of our debt obligations, including our
ability to make transfers of cash in compliance therewith; our
ability to maintain favorable relations with our key business
partners, suppliers, vendors, landlords and financial institutions;
our ability to collect our receivables from financially troubled
customers; our ability to use our net operating loss carry forwards
in the amounts projected; any adverse developments in legal or
regulatory proceedings involving us; changes in tax,
communications, pension, healthcare or other laws or regulations,
in governmental support programs, or in general government funding
levels; the effects of changes in accounting policies, practices or
assumptions, including changes that could potentially require
future additional impairment charges; the effects of adverse
weather, terrorism or other natural or man-made disasters; adverse
effects of material weaknesses or any other significant
deficiencies identified in our internal controls over financial
reporting; the effects of more general factors such as changes in
interest rates, in exchange rates, in operating costs, in public
policy, in the views of financial analysts or in general market,
labor, economic or geo-political conditions; and other risks
referenced from time to time in our filings with the U.S.
Securities and Exchange Commission ("SEC"). For all the
reasons set forth above and in our SEC filings, you are cautioned
not to unduly rely upon our forward-looking statements, which speak
only as of the date made. We undertake no obligation to publicly
update or revise any forward-looking statements for any reason,
whether as a result of new information, future events or
developments, changed circumstances, or otherwise. Furthermore, any
information about our intentions contained in any of our
forward-looking statements reflects our intentions as of the date
of such forward-looking statement, and is based upon, among other
things, existing regulatory, technological, industry, competitive,
economic and market conditions, and our assumptions as of such
date. We may change our intentions, strategies or plans without
notice at any time and for any reason.
Reconciliation to GAAP
This release includes certain non-GAAP historical and
forward-looking financial measures, including but not limited to
Adjusted EBITDA, free cash flow, unlevered cash flow, and
adjustments to GAAP and non-GAAP measures to exclude the effect of
integration and transformation costs and 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 historical
financial measures that may be discussed during the call described
above, along with further descriptions of non-GAAP financial
measures, will be available in the Investor Relations portion of
the company's website at ir.centurylink.com. Non-GAAP measures are
not presented to be replacements or alternatives to the GAAP
measures, and investors are urged to consider these non-GAAP
measures in addition to, and not in substitution for, measures
prepared in accordance with GAAP. CenturyLink may present or
calculate its non-GAAP measures differently from other
companies.
CenturyLink,
Inc.
|
CONSOLIDATED
STATEMENTS OF OPERATIONS
|
THREE AND NINE MONTHS
ENDED SEPTEMBER 30, 2019 AND 2018
|
(UNAUDITED)
|
($ in millions,
except per share amounts; shares in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months
ended
September 30,
|
|
Increase /
(decrease)
|
|
Nine months
ended
September 30,
|
|
Increase /
(decrease)
|
|
|
|
2019
|
|
2018
|
|
|
2019
|
|
2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING
REVENUE
|
|
$
|
5,606
|
|
5,818
|
|
(4)%
|
|
16,831
|
|
17,665
|
|
(5)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING
EXPENSES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of services and
products
|
|
2,590
|
|
2,672
|
|
(3)%
|
|
7,556
|
|
8,205
|
|
(8)%
|
|
Selling, general and
administrative
|
|
831
|
|
967
|
|
(14)%
|
|
2,723
|
|
3,191
|
|
(15)%
|
|
Depreciation and
amortization
|
|
1,235
|
|
1,285
|
|
(4)%
|
|
3,619
|
|
3,858
|
|
(6)%
|
|
Goodwill
impairment
|
|
—
|
|
—
|
|
nm
|
|
6,506
|
|
—
|
|
nm
|
|
Total operating
expenses
|
|
4,656
|
|
4,924
|
|
(5)%
|
|
20,404
|
|
15,254
|
|
34%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING INCOME
(LOSS)
|
|
950
|
|
894
|
|
6%
|
|
(3,573)
|
|
2,411
|
|
nm
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER (EXPENSE)
INCOME
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
expense
|
|
(496)
|
|
(557)
|
|
(11)%
|
|
(1,537)
|
|
(1,638)
|
|
(6)%
|
|
Other (expense)
income, net
|
|
(44)
|
|
(8)
|
|
nm
|
|
(5)
|
|
29
|
|
(117)%
|
|
Income tax
expense
|
|
(108)
|
|
(57)
|
|
89%
|
|
(377)
|
|
(123)
|
|
nm
|
NET INCOME
(LOSS)
|
|
$
|
302
|
|
272
|
|
11%
|
|
(5,492)
|
|
679
|
|
nm
|
BASIC EARNINGS (LOSS)
PER SHARE
|
|
$
|
0.28
|
|
0.25
|
|
12%
|
|
(5.13)
|
|
0.64
|
|
nm
|
DILUTED EARNINGS
(LOSS) PER SHARE
|
|
$
|
0.28
|
|
0.25
|
|
12%
|
|
(5.13)
|
|
0.63
|
|
nm
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
WEIGHTED AVERAGE
SHARES OUTSTANDING
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
1,072,543
|
|
1,066,904
|
|
1%
|
|
1,070,921
|
|
1,065,410
|
|
1%
|
|
Diluted
|
|
1,074,790
|
|
1,072,351
|
|
—%
|
|
1,070,921
|
|
1,069,726
|
|
—%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
DIVIDENDS PER COMMON
SHARE
|
|
$
|
0.25
|
|
0.54
|
|
(54)%
|
|
0.75
|
|
1.62
|
|
(54)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exclude: integration
and transformation costs and special items(1)
|
|
26
|
|
55
|
|
(53)%
|
|
6,549
|
|
192
|
|
nm
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET INCOME EXCLUDING
INTEGRATION AND TRANSFORMATION COSTS AND SPECIAL ITEMS
|
|
$
|
328
|
|
327
|
|
—%
|
|
1,057
|
|
871
|
|
21%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
DILUTED EARNINGS PER
SHARE EXCLUDING INTEGRATION AND TRANSFORMATION COSTS AND SPECIAL
ITEMS
|
|
$
|
0.31
|
|
0.30
|
|
3%
|
|
0.99
|
|
0.81
|
|
22%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Excludes the
integration and transformation costs and special items described in
the Non-GAAP Integration and Transformation Costs and Special Items
table, net of the income tax effect thereof.
|
|
|
|
nm - Percentages
greater than 200% and comparisons between positive and negative
values are considered not meaningful.
|
CenturyLink,
Inc.
|
CONDENSED
CONSOLIDATED BALANCE SHEETS
|
AS OF SEPTEMBER 30,
2019 AND DECEMBER 31, 2018
|
(UNAUDITED)
|
($ in
millions)
|
|
September 30,
2019
|
|
December 31,
2018
|
ASSETS
|
|
|
|
CURRENT
ASSETS
|
|
|
|
Cash and cash
equivalents
|
$
|
1,404
|
|
|
488
|
|
Restricted
cash
|
3
|
|
|
4
|
|
Other current
assets
|
3,182
|
|
|
3,328
|
|
Total
current assets
|
4,589
|
|
|
3,820
|
|
|
|
|
|
PROPERTY, PLANT AND
EQUIPMENT, Net of accumulated depreciation of $28,760 and
$26,859
|
25,874
|
|
|
26,408
|
|
|
|
|
|
GOODWILL AND OTHER
ASSETS
|
|
|
|
Goodwill
|
21,507
|
|
|
28,031
|
|
Operating lease
assets (1)
|
1,721
|
|
|
—
|
|
Restricted
cash
|
24
|
|
|
26
|
|
Other, net
|
11,013
|
|
|
11,971
|
|
Total goodwill and other assets
|
34,265
|
|
|
40,028
|
|
|
|
|
|
TOTAL
ASSETS
|
$
|
64,728
|
|
|
70,256
|
|
|
|
|
|
LIABILITIES AND
STOCKHOLDERS' EQUITY
|
|
|
|
CURRENT
LIABILITIES
|
|
|
|
Current maturities of
long-term debt
|
$
|
1,744
|
|
|
652
|
|
Other current
liabilities (1)
|
4,845
|
|
|
4,879
|
|
Total current liabilities
|
6,589
|
|
|
5,531
|
|
|
|
|
|
LONG-TERM
DEBT
|
33,381
|
|
|
35,409
|
|
DEFERRED CREDITS AND
OTHER LIABILITIES (1)
|
11,084
|
|
|
9,488
|
|
STOCKHOLDERS'
EQUITY
|
13,674
|
|
|
19,828
|
|
|
|
|
|
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY
|
$
|
64,728
|
|
|
70,256
|
|
|
(1) The Company adopted Accounting
Standards Update ("ASU") 2016-02, Leases (ASC 842) beginning
January 1, 2019 and recorded operating lease assets and operating
lease liabilities in its Condensed Consolidated Balance Sheets for
2019.
|
|
CenturyLink,
Inc.
|
|
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
|
NINE MONTHS ENDED
SEPTEMBER 30, 2019 AND 2018
|
|
(UNAUDITED)
|
|
($ in
millions)
|
|
|
|
|
|
|
|
Nine months
ended
|
|
|
September 30,
2019
|
|
September 30,
2018
|
|
OPERATING
ACTIVITIES
|
|
|
|
|
Net (Loss)
Income
|
$
|
(5,492)
|
|
|
679
|
|
|
Adjustments to
reconcile net (loss) income to net cash provided by operating
activities:
|
|
|
|
|
Depreciation and amortization
|
3,619
|
|
|
3,858
|
|
|
Impairment of goodwill and other assets
|
6,516
|
|
|
46
|
|
|
Deferred
income taxes
|
350
|
|
|
486
|
|
|
Provision for uncollectible accounts
|
116
|
|
|
119
|
|
|
Net
(gain) loss on early retirement of debt
|
(70)
|
|
|
30
|
|
|
Share-based compensation
|
114
|
|
|
144
|
|
|
Changes
in current assets and liabilities, net
|
(464)
|
|
|
16
|
|
|
Retirement benefits
|
(24)
|
|
|
(639)
|
|
|
Changes
in other noncurrent assets and liabilities, net
|
72
|
|
|
324
|
|
|
Other,
net
|
34
|
|
|
(27)
|
|
|
Net cash
provided by operating activities
|
4,771
|
|
|
5,036
|
|
|
INVESTING
ACTIVITIES
|
|
|
|
|
Capital
expenditures
|
(2,688)
|
|
|
(2,260)
|
|
|
Proceeds
from sale of property, plant and equipment and intangible
assets
|
54
|
|
|
125
|
|
|
Other,
net
|
(37)
|
|
|
(61)
|
|
|
Net cash
used in investing activities
|
(2,671)
|
|
|
(2,196)
|
|
|
FINANCING
ACTIVITIES
|
|
|
|
|
Net
proceeds from issuance of long-term debt
|
988
|
|
|
130
|
|
|
Payments
of long-term debt
|
(1,459)
|
|
|
(1,539)
|
|
|
Net
proceeds on revolving line of credit
|
150
|
|
|
185
|
|
|
Dividends paid
|
(829)
|
|
|
(1,735)
|
|
|
Other,
net
|
(37)
|
|
|
(48)
|
|
|
Net cash
used in financing activities
|
(1,187)
|
|
|
(3,007)
|
|
|
Net increase
(decrease) in cash, cash equivalents and restricted cash
|
913
|
|
|
(167)
|
|
|
Cash, cash
equivalents and restricted cash at beginning of period
|
518
|
|
|
587
|
|
|
Cash, cash
equivalents and restricted cash at end of period
|
$
|
1,431
|
|
|
420
|
|
CenturyLink,
Inc.
|
OPERATING
METRICS
|
(UNAUDITED)
|
(In
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
September 30,
2019
|
|
June 30,
2019
|
|
September 30,
2018
|
|
|
|
|
|
|
|
|
Operating
Metrics
|
|
|
|
|
|
|
Consumer broadband
subscribers
|
|
4,714
|
|
|
4,750
|
|
|
4,843
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer broadband
subscribers are customers that purchase broadband connection
service through their existing telephone lines, stand-alone
telephone lines, or fiber-optic cables. Our methodology for
counting our consumer broadband subscribers includes only those
lines that we use to provide services to external customers and
excludes lines used solely by us and our affiliates. It also
excludes unbundled loops and includes stand-alone consumer
broadband subscribers. We count lines when we install the
service.
|
Description of Non-GAAP Metrics
Pursuant to Regulation G, the company is hereby providing
definitions of non-GAAP financial metrics and reconciliations to
the most directly comparable GAAP measures.
The following describes and reconciles those financial measures
as reported under accounting principles generally accepted in
the United States (GAAP) with
those financial measures as adjusted by the items detailed below
and presented in the accompanying news release. These calculations
are not prepared in accordance with GAAP and should not be viewed
as alternatives to GAAP. In keeping with its historical financial
reporting practices, the company believes that the supplemental
presentation of these calculations provides meaningful non-GAAP
financial measures to help investors understand and compare
business trends among different reporting periods on a consistent
basis.
We use the term Special items as a non-GAAP measure to
describe items that impacted a period's statement of operations for
which investors may want to give special consideration due to their
magnitude, nature or both. We do not call these items
non-recurring because, while some are infrequent, others may
recur in future periods.
Adjusted EBITDA ($) is defined as net income (loss) from
the Statements of Operations before income tax (expense) benefit,
total other income (expense), depreciation and amortization,
share-based compensation expense and impairments.
Adjusted EBITDA Margin (%) is defined as Adjusted EBITDA
divided by total revenue.
Management believes that Adjusted EBITDA and Adjusted EBITDA
Margin are relevant and useful metrics to provide to investors, as
they are an important part of CenturyLink's internal reporting and
are key measures used by Management to evaluate profitability and
operating performance of CenturyLink and to make resource
allocation decisions. Management believes such measures are
especially important in a capital-intensive industry such as
telecommunications. Management also uses Adjusted EBITDA and
Adjusted EBITDA Margin (and similarly uses these terms excluding
integration and transformation costs) to compare CenturyLink's
performance to that of its competitors and to eliminate certain
non-cash and non-operating items in order to consistently measure
from period to period its ability to fund capital expenditures,
fund growth, service debt and determine bonuses. Adjusted
EBITDA excludes non-cash stock compensation expense and impairments
because of the non-cash nature of these items. Adjusted EBITDA also
excludes interest income, interest expense and income taxes, and in
our view constitutes an accrual-based measure that has the effect
of excluding period-to-period changes in working capital and shows
profitability without regard to the effects of capital or tax
structure. Adjusted EBITDA also excludes depreciation and
amortization expense because these non-cash expenses primarily
reflect the impact of historical capital investments, as opposed to
the cash impacts of capital expenditures made in recent periods,
which may be evaluated through cash flow measures. Adjusted
EBITDA excludes the gain (or loss) on extinguishment and
modification of debt and other, net, because these items are not
related to the primary operations of CenturyLink.
There are material limitations to using Adjusted EBITDA as a
financial measure, including the difficulty associated with
comparing companies that use similar performance measures whose
calculations may differ from CenturyLink's calculations.
Additionally, this financial measure does not include certain
significant items such as interest income, interest expense, income
taxes, depreciation and amortization, non-cash stock compensation
expense, the gain (or loss) on extinguishment and modification of
debt and net other income (expense). Adjusted EBITDA and Adjusted
EBITDA Margin (either with or without integration and
transformation costs adjustments and special items) should not be
considered a substitute for other measures of financial performance
reported in accordance with GAAP.
Unlevered Cash Flow is defined as net cash provided
by (used in) operating activities less capital expenditures, plus
cash interest paid and less interest income all as disclosed in the
Statements of Cash Flows or the Statements of Operations.
Management believes that Unlevered Cash Flow is a relevant metric
to provide to investors, because it reflects the operational
performance of CenturyLink and, measured over time, provides
management and investors with a sense of the underlying business'
growth pattern and ability to generate cash. Unlevered Cash
Flow excludes cash used for acquisitions and debt service and the
impact of exchange rate changes on cash and cash equivalents
balances.
There are material limitations to using Unlevered Cash Flow to
measure CenturyLink's cash performance as it excludes certain
material items such as payments on and repurchases of long-term
debt, interest income, cash interest expense and cash used to fund
acquisitions. Comparisons of CenturyLink's Unlevered Cash Flow to
that of some of its competitors may be of limited usefulness since
CenturyLink does not currently pay a significant amount of income
taxes due to net operating loss carryforwards, and therefore,
currently generates higher cash flow than a comparable business
that does pay income taxes. Additionally, this financial measure is
subject to variability quarter over quarter as a result of the
timing of payments related to accounts receivable and accounts
payable and capital expenditures. Unlevered Cash Flow should not be
used as a substitute for net change in cash and cash equivalents in
the Consolidated Statements of Cash Flows.
Free Cash Flow is defined as net cash provided by
(used in) operating activities less capital expenditures as
disclosed in the Statements of Cash Flows. Management believes that
Free Cash Flow is a relevant metric to provide to investors, as it
is an indicator of the CenturyLink's ability to generate cash to
service its debt. Free Cash Flow excludes cash used for
acquisitions, principal repayments and the impact of exchange rate
changes on cash and cash equivalents balances.
There are material limitations to using Free Cash Flow to
measure CenturyLink's performance as it excludes certain material
items such as principal payments on and repurchases of long-term
debt and cash used to fund acquisitions. Comparisons of
CenturyLink's Free Cash Flow to that of some of its competitors may
be of limited usefulness since CenturyLink does not currently pay a
significant amount of income taxes due to net operating loss
carryforwards, and therefore, generates higher cash flow than a
comparable business that does pay income taxes. Additionally, this
financial measure is subject to variability quarter over quarter as
a result of the timing of payments related to interest expense,
accounts receivable and accounts payable and capital expenditures.
Free Cash Flow should not be used as a substitute for net change in
cash and cash equivalents on the Consolidated Statements of Cash
Flows.
CenturyLink,
Inc.
|
Non-GAAP Integration
and Transformation Costs and Special Items
|
(UNAUDITED)
|
($ in
millions)
|
|
|
|
|
|
Actual
QTD
|
|
Actual
YTD
|
Integration and
Transformation Costs(1) and Special Items Impacting
Adjusted EBITDA
|
3Q19
|
3Q18
|
|
3Q19
|
3Q18
|
Consumer litigation
settlement
|
$
|
—
|
|
—
|
|
|
15
|
|
—
|
|
OTT/Stream impairment
of content commitment and hardware, software, and internal
labor
|
—
|
|
18
|
|
|
—
|
|
60
|
|
Total special
items impacting adjusted EBITDA
|
—
|
|
18
|
|
|
15
|
|
60
|
|
Plus: integration and
transformation costs
|
38
|
|
41
|
|
|
111
|
|
266
|
|
Total integration
and transformation costs and special items impacting adjusted
EBITDA
|
$
|
38
|
|
59
|
|
|
126
|
|
326
|
|
|
|
|
|
|
|
|
Actual
QTD
|
|
Actual
YTD
|
Integration and
Transformation Costs and Special Items Impacting Net Income
(Loss)
|
3Q19
|
3Q18
|
|
3Q19
|
3Q18
|
Consumer litigation
settlement
|
$
|
—
|
|
—
|
|
|
15
|
|
—
|
|
Impairment of
goodwill
|
—
|
|
—
|
|
|
6,506
|
|
—
|
|
OTT/Stream impairment
of content commitment and hardware, software, and internal
labor
|
—
|
|
18
|
|
|
—
|
|
60
|
|
(Gain) loss on early
debt retirement
|
(4)
|
|
33
|
|
|
(70)
|
|
33
|
|
Total special
items impacting net income (loss)
|
(4)
|
|
51
|
|
|
6,451
|
|
93
|
|
Plus: integration and
transformation costs
|
38
|
|
43
|
|
|
111
|
|
276
|
|
Total integration
and transformation costs and special items impacting net income
(loss)
|
34
|
|
94
|
|
|
6,562
|
|
369
|
|
Income tax effect of
integration and transformation costs and special items
(2)
|
(8)
|
|
(19)
|
|
|
(13)
|
|
(91)
|
|
Tax benefit from
carryback losses
|
—
|
|
—
|
|
|
—
|
|
(142)
|
|
Impact of tax
reform
|
—
|
|
7
|
|
|
—
|
|
83
|
|
FIN 48 release due to
statute expiration
|
—
|
|
(27)
|
|
|
—
|
|
(27)
|
|
Total integration
and transformation costs and special items impacting net income
(loss), net of tax
|
$
|
26
|
|
55
|
|
|
6,549
|
|
192
|
|
|
|
|
|
|
|
(1) Represents (i) for the third
quarter of 2019, the cost of obtaining the synergy and
transformations savings over 2019-2021 that the Company discussed
in its February 13, 2019 earnings release and (ii) for the third
quarter of 2018, the cost of obtaining the acquisition-related
synergies that the Company captured between November 1, 2017 and
December 31, 2018 following the combination of CenturyLink and
Level 3.
|
|
(2) Tax effect calculated using the
annualized effective statutory tax rate, excluding any
non-recurring discrete items, which was 24.6% for Q3 2018 and 24.3%
for Q3 2019.
|
|
CenturyLink,
Inc.
|
|
Non-GAAP Cash Flow
Reconciliation
|
|
(UNAUDITED)
|
|
($ in
millions)
|
|
|
|
|
|
|
3Q19
|
|
3Q18
|
Net cash provided by
operating activities
|
$
|
1,888
|
|
|
|
1,787
|
|
Capital
expenditures
|
(957)
|
|
|
|
(684)
|
|
Free cash
flow
|
931
|
|
|
|
1,103
|
|
Cash interest
paid
|
456
|
|
|
|
512
|
|
Interest
income
|
(5)
|
|
|
|
(3)
|
|
Unlevered cash
flow
|
$
|
1,382
|
|
|
|
1,612
|
|
|
|
|
|
|
Free cash
flow
|
$
|
931
|
|
|
|
1,103
|
|
Add back: cash
integration and transformation costs
|
52
|
|
|
|
57
|
|
Add back: special
items
|
—
|
|
|
|
3
|
|
Free cash flow
excluding cash integration and transformation costs and special
items
|
$
|
983
|
|
|
|
1,163
|
|
|
|
|
|
|
Unlevered cash
flow
|
$
|
1,382
|
|
|
|
1,612
|
|
Add back: cash
integration and transformation costs
|
52
|
|
|
|
57
|
|
Add back: special
items
|
—
|
|
|
|
3
|
|
Unlevered cash
flow excluding cash integration and transformation costs and
special items
|
$
|
1,434
|
|
|
|
1,672
|
|
|
CenturyLink,
Inc.
|
|
Adjusted EBITDA
Non-GAAP Reconciliation
|
|
(UNAUDITED)
|
|
($ in
millions)
|
|
|
|
3Q19
|
3Q18
|
Net
income
|
$
|
302
|
|
|
272
|
|
Income tax
expense
|
108
|
|
|
57
|
|
Total other expense,
net
|
540
|
|
|
565
|
|
Depreciation and
amortization expense
|
1,235
|
|
|
1,285
|
|
Share-based
compensation expense
|
38
|
|
|
49
|
|
Adjusted
EBITDA
|
$
|
2,223
|
|
|
2,228
|
|
|
|
|
|
|
Add back: integration
and transformation costs(1)
|
$
|
38
|
|
|
41
|
|
Add back: special
items (1)
|
—
|
|
|
18
|
|
Adjusted EBITDA
excluding integration and transformation costs and special
items
|
$
|
2,261
|
|
|
2,287
|
|
|
|
|
|
|
Total
revenue
|
$
|
5,606
|
|
|
5,818
|
|
|
|
|
|
|
Adjusted EBITDA
margin
|
39.7%
|
|
|
38.3%
|
|
Adjusted EBITDA
margin excluding integration and transformation costs and special
items
|
40.3%
|
|
|
39.3%
|
|
|
|
(1) Refer to Non-GAAP Integration
and Transformation Costs and Special Items table for details of
the integration and transformation costs and special items included
above.
|
Outlook
To enhance the information in our outlook with respect to
non-GAAP metrics, we are providing a range for certain GAAP
measures that are components of the reconciliation of the non-GAAP
metrics. The provision of these ranges is in no way meant to
indicate that CenturyLink is explicitly or implicitly providing an
outlook on those GAAP components of the reconciliation. In order to
reconcile the non-GAAP financial metric to GAAP, CenturyLink has to
use ranges for the GAAP components that arithmetically add up to
the non-GAAP financial metric. While CenturyLink feels reasonably
comfortable about the outlook for its non-GAAP financial metrics,
it fully expects that the ranges used for the GAAP components will
vary from actual results. We will consider our outlook of non-GAAP
financial metrics to be accurate if the specific non-GAAP metric is
met or exceeded, even if the GAAP components of the reconciliation
are different from those provided in an earlier reconciliation.
|
CenturyLink,
Inc.
|
|
|
2019 OUTLOOK
(1)
|
|
|
(UNAUDITED)
|
|
|
($ in
millions)
|
|
|
|
|
|
|
|
Adjusted EBITDA
Outlook
|
|
|
|
|
|
Twelve Months Ended
December 31, 2019
|
|
|
|
|
|
|
|
Range
|
|
|
Low
|
|
High
|
Net
loss
|
$
|
(5,320)
|
|
|
|
(4,850)
|
|
Income tax
expense
|
400
|
|
|
|
550
|
|
Total other
expense
|
2,100
|
|
|
|
1,900
|
|
Depreciation and
amortization expense
|
4,850
|
|
|
|
4,750
|
|
Non-cash compensation
expense
|
220
|
|
|
|
200
|
|
Goodwill
impairment
|
6,500
|
|
|
|
6,500
|
|
Integration and
transformation costs
|
250
|
|
|
|
150
|
|
Adjusted
EBITDA
|
$
|
9,000
|
|
|
|
9,200
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Free Cash Flow
Outlook
|
|
|
|
|
|
Twelve Months Ended
December 31, 2019
|
|
|
|
|
|
|
|
Range
|
|
|
Low
|
|
High
|
Net cash provided
by operating activities
|
$
|
6,900
|
|
|
|
6,900
|
|
Capital
expenditures
|
(3,800)
|
|
|
|
(3,500)
|
|
Free cash
flow
|
$
|
3,100
|
|
|
|
3,400
|
|
|
(1)
Footnotes (1) and (2) from the outlook table included at page 4 are
incorporated herein by reference.
|
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SOURCE CenturyLink, Inc.