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CenturyTel Inc. Reports Operating Results (10-Q)

August 09, 2012 | About:

CenturyTel Inc. (NYSE:CTL) filed Quarterly Report for the period ended 2012-06-30.

Centurylink, Inc. has a market cap of $25.93 billion; its shares were traded at around $42.6 with a P/E ratio of 18.9 and P/S ratio of 1.7. The dividend yield of Centurylink, Inc. stocks is 7%. Centurylink, Inc. had an annual average earning growth of 3.6% over the past 10 years.

Highlight of Business Operations:

As noted in the tables above, total operating revenues for the three months ended June 30, 2012 increased due to our acquisition of Savvis and increased for the six months ended June 30, 2012 due to our acquisitions of Qwest and Savvis. Legacy CenturyLink operating revenues decreased $72 million and $127 million during the three and six months ended June 30, 2012 as compared to the three and six months ended June 30, 2011. This decrease was primarily attributable to declines in legacy services revenues, principally due to the continuing loss of access lines in our markets. We believe the decline in the number of access lines was primarily due to the displacement of traditional wireline telephone services by other competitive products and services. We estimate that our access lines loss will be between 5.7% and 6.3% in 2012. Our legacy services revenues were also negatively impacted in 2012 by the continued migration of customers to bundled service offerings at lower effective rates. The decreases in our legacy services revenues were partially offset by higher revenues from strategic services revenues. Ethernet, MPLS and broadband services accounted for a majority of the growth in strategic services revenues.

Wholesale markets revenues decreased for the three months ended June 30, 2012 compared to the three months ended June 30, 2011 due to decreases in legacy services revenues driven by continuing declines in access, long-distance and local services volumes due to the substitution of cable, wireless and VoIP services for traditional voice telecommunications services. The decrease in legacy services revenues was partially offset by growth in certain strategic services revenues including Ethernet. Excluding revenues attributable to the Qwest and Savvis acquisitions, wholesale markets revenues decreased for the six months ended June 30, 2012 as compared to the six months ended June 30, 2011 due to the same factors discussed for the three months ended June 30, 2012.

Legacy CenturyLink enterprise marketsnetwork segment revenues increased for the three months ended June 30, 2012 as compared to the three months ended June 30, 2011. This increase primarily reflected increased strategic services revenues due to increased volumes of MPLS services and increased data integration services. Lower revenues from legacy services driven by access line losses

The acquisition of Savvis on July 15, 2011 substantially increased the scale of our enterprise marketsdata hosting segment, resulting in an increase in our segment income for the three and six months ended June 30, 2012 as compared to the three and six months ended June 30, 2011. Legacy Savvis operations accounted for 97.1% and 97.0% of our enterprise marketsdata hosting segment revenues for the three and six months ended June 30, 2012, respectively.

Benefits paid by our qualified pension plans are paid through a trust that holds all plan assets. We expect to make a cash contribution of approximately $32 million during the remaining six months of 2012. We currently expect that our required contributions for 2013 will be approximately $100 million, based on current laws and circumstances, including the Moving Ahead for Progress in the 21st Century Act ("MAP-21"), which was signed into law on July 6, 2012. This legislation contains pension-related provisions which, among other things, provide near-term relief from the impact of recent low interest rates on pension funding requirements and an increase in the premiums paid to the Pension Benefit Guaranty Corporation ("PBGC"). Under MAP-21, companies will be permitted to calculate their pension obligations based on 25-year historic average rates, which exceed the two-year average rates being used prior to the legislation. Consequently, this legislation will lower the amount of required pension plan contributions. This relief is available commencing in 2012, but gradually decreases each year through 2016, at which time the reduced level of relief is frozen with respect to future years. Based on several assumptions, we have projected that this relief will reduce our pension plan funding requirements over the next five years by approximately $1 billion, which will correspondingly enhance our cash flows over this period. The legislation will not, however, affect pension liabilities recorded on our financial statements under generally accepted accounting principles. Partially offsetting this relief, MAP-21 provides for an annual increase beginning in 2013 to both the fixed premiums, based on plan participants, and the variable premiums, based on unfunded vested benefits, paid to PBGC. Based on various assumptions, we estimate that our premiums payable to PBGC over the next five years will increase by approximately $60 million as a result of the new legislation. The actual amount of required contributions to our plans, and premiums paid to PBGC, will depend on earnings on plan investments, prevailing interest and discount rates, demographic experience, changes in plan benefits and any further changes in funding laws and regulations.

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About the author:

Charlie Tian, Ph.D. - Founder of GuruFocus. You can now order his book Invest Like a Guru on Amazon.

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