“CenturyTel’s first quarter net income and earnings per share grew nearly 11% and more than 19% year-over-year, respectively,” Glen F. Post, III, chairman and chief executive officer, said. “We are pleased with the integration and performance of the Madison River properties acquired last year, our broadband customer growth, and our ability to continue to repurchase CenturyTel stock, all of which contributed to the first quarter earnings per share growth.”
Operating revenues increased 7.9% to $648.6 million in first quarter 2008 from $600.9 million in first quarter 2007. Revenue increases during the quarter of approximately $71 million resulted primarily from nearly $48 million in revenue contribution from the Madison River properties acquired in second quarter 2007, along with growth in high-speed Internet customers and long distance revenues. These increases were partially offset by revenue declines of approximately $23 million, primarily attributable to access line declines and lower access revenues.
Operating expenses for first quarter 2008 were $465.1 million compared to $432.8 million in first quarter 2007. This increase was principally due to expenses associated with the Madison River properties, growth in high-speed Internet customers and increased marketing expenses, which were partially offset by lower depreciation expense associated with fully depreciated assets and lower bad debt expense and personnel costs.
Operating cash flow increased 7.9% to $319.2 million in first quarter 2008 from $295.9 million in first quarter 2007. CenturyTel achieved an operating cash flow margin of 49.2% during the quarter, the same as in first quarter 2007.
“CenturyTel generated strong free cash flow of more than $167 million during the quarter,” said Post. “We also returned more than $100 million to shareholders through the repurchase of 2.5 million shares for approximately $94 million, along with more than $7 million in cash dividends. Our solid balance sheet and strong cash flows afford us the flexibility to continue to invest in our networks, acquire valuable 700 MHz spectrum and remain committed to completing our current $750 million share repurchase program.”
Net income, excluding nonrecurring items, grew 10.7% to $86.2 million in first quarter 2008 from $77.9 million in first quarter 2007. Diluted earnings per share, excluding nonrecurring items, increased 19.1% to $.81 in first quarter 2008 from $.68 in first quarter 2007. First quarter 2008 diluted earnings per share was favorably impacted by the increase in net income and 8.0% fewer average diluted shares outstanding due to share repurchases during the twelve months ended March 31, 2008.
Under generally accepted accounting principles (GAAP), the Company reported net income of $88.8 million and diluted earnings per share of $.83, in first quarter 2008 compared to $77.9 million and $.68, respectively, in first quarter 2007. Net income and diluted earnings per share in first quarter 2008 include a $2.6 million net after-tax gain on the sale of a non-operating investment during the quarter.
For second quarter 2008, CenturyTel expects total revenues of $647 to $657 million and diluted earnings per share of $.78 to $.82. An expected slight increase in revenues, driven primarily by revenue settlements, is anticipated to be offset primarily by annual wage adjustments effective in the second quarter, higher marketing expenses and the seasonal impact of outside plant maintenance activities.
For the full year 2008, diluted earnings per share is expected to be in the range of $3.05 to $3.20 versus the previous guidance of $2.90 to $3.00, primarily due to first quarter results exceeding expectations, share repurchases completed through April 30, 2008, and the expectation that expenses for the remainder of 2008 will be lower than originally anticipated when 2008 guidance was provided earlier this year.
These outlook figures for the second quarter and full year 2008 exclude nonrecurring items, any share repurchases made after April 30, 2008, and any future 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 866.837.9789. The call will be accessible for replay through May 7, 2008, by calling 888.266.2081 and entering the conference ID number 1222754. 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 21, 2008.
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 adjust to changes in the communications industry; the Company’s ability to effectively manage its expansion opportunities, including 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 continued access to credit markets on favorable terms; 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, 2007, 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 1, 2008. 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 www.centurytel.com.
