MONROE, La… CenturyTel, Inc. (NYSE: CTL) announces operating results for first quarter 2007.
Operating revenues, excluding nonrecurring items, were $600.9 million in first quarter 2007 compared to $610.0 million in first quarter 2006. Revenue increases, driven primarily by growth in high-speed Internet customers and demand for fiber transport services, were more than offset by anticipated revenue declines primarily attributable to access line declines and lower access revenues along with lower revenues due to changes in the terms of the Company’s DBS agreement effective January 1, 2007.
Operating expenses, excluding nonrecurring items, for first quarter 2007 were $432.8 million compared to $447.2 million in first quarter 2006. This decrease primarily resulted from lower personnel related costs due to workforce reductions in 2006, lower marketing, information technology and bad debt expenses, lower depreciation and amortization primarily due to fully depreciated assets and lower expenses under the amended DBS agreement. Such decreases more than offset increased expenses driven by growth in high-speed Internet customers and fiber transport services.
Operating cash flow, excluding nonrecurring items, was $295.9 million in first quarter 2007 compared to $297.7 million in first quarter 2006. CenturyTel achieved an operating cash flow margin of 49.2% during the quarter versus 48.8% in first quarter 2006.
“CenturyTel generated quarterly free cash flow of nearly $157 million during the first quarter, reflecting our continued success in aligning our operating costs with revenues and our disciplined approach to making capital investments in our networks,” Post said. “We also returned $171 million to shareholders through dividends and the repurchase of 3.7 million shares of common stock during the quarter.”
Net income, excluding nonrecurring items, grew 7.8% to $77.9 million in first quarter 2007 from $72.3 million in first quarter 2006. Diluted earnings per share, excluding nonrecurring items, increased 19.3% to $.68 in first quarter 2007 from $.57 in first quarter 2006. First quarter 2007 diluted earnings per share was favorably impacted by the increase in net income and 9.1% fewer average diluted shares outstanding due to share repurchases.
Under generally accepted accounting principles (GAAP), CenturyTel reported operating revenues of $600.9 million in first quarter 2007 compared to $611.3 million in first quarter 2006. In first quarter 2007, the Company reported net income of $77.9 million and diluted earnings per share of $.68, compared to $69.3 million and $.55, respectively, in first quarter 2006. Net income and diluted earnings per share in first quarter 2006 include a $3.0 million net after-tax expense related to a reduction in workforce.
For second quarter 2007, CenturyTel expects total revenues of $600 to $610 million and diluted earnings per share of $.62 to $.67. The anticipated decline in diluted earnings per share from first quarter to second quarter 2007 is primarily due to annual wage adjustments effective in the second quarter, anticipated higher marketing expenses and the seasonal impact of outside plant maintenance activities.
For the full year 2007, diluted earnings per share is expected to be in the range of $2.75 to $2.85 versus the previous guidance of $2.60 to $2.70, primarily due to first quarter results exceeding expectations, share repurchases completed through April 30, and the expectation that expenses for the remainder of 2007 will be lower than originally anticipated when 2007 guidance was provided earlier this year.
These outlook figures for the second quarter and full year 2007 exclude nonrecurring items, any share repurchases made after April 30, 2007, and any future mergers, acquisitions, divestitures or other similar business transactions. These outlook figures also exclude any impact of our April 30, 2007 acquisition of Madison River Communications Corp. and a one-time $49 million positive pre-tax settlement related to network access disputes which were finalized during the second quarter.
Other. As previously reported, CenturyTel adopted the requirements of Staff Accounting Bulletin No. 108 (SAB 108) in fourth quarter 2006, which required the results of operations previously reported in the first, second and third quarters of 2006 to be adjusted. First quarter 2006 amounts included in this press release reflect amounts adjusted for the application of SAB 108.
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 866.259.7123. The call will be accessible for replay through May 9, 2007, by calling 888.266.2081 and entering the conference ID number 1067862. 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 prior to May 24, 2007.
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 expansion opportunities, including continued access to capital markets on favorable terms, successfully integrating newly-acquired properties into the Company’s operations, and retaining and hiring key personnel; 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 (the “SEC”); 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, 2006, as updated by the Company’s subsequent SEC reports. 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 May 3, 2007. The Company undertakes no obligation to update any of its forward-looking statements for any reason.
CenturyTel (NYSE: CTL) is a leading provider of communications, high speed Internet and entertainment services in small-to-mid-size cities through our broadband and fiber transport networks. Included in the S&P 500 Index, CenturyTel delivers advanced communications with a personal touch to customers in 25 states. Visit us at http://www.centurytel.com.
