Louisiana
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72-0651161
|
|
(State or other jurisdiction of
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(I.R.S. Employer
|
|
incorporation or organization)
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Identification No.)
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Page No.
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||
Part I.
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Financial Information:
|
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Item 1. Financial Statements
|
||
Consolidated Statements of Income--Three Months and Six Months
|
||
Ended June 30, 2010 and 2009
|
3
|
|
Consolidated Statements of Comprehensive Income--
|
||
Three Months and Six Months Ended June 30, 2010 and 2009
|
4
|
|
Consolidated Balance Sheets--June 30, 2010 and
|
||
December 31, 2009
|
5
|
|
Consolidated Statements of Cash Flows--
|
||
Six Months Ended June 30, 2010 and 2009
|
6
|
|
Consolidated Statements of Stockholders' Equity--
|
||
Six Months Ended June 30, 2010 and 2009
|
7
|
|
Notes to Consolidated Financial Statements*
|
8-15
|
|
Item 2. Management's Discussion and Analysis of Financial
|
||
Condition and Results of Operations
|
16-24
|
|
Item 3. Quantitative and Qualitative Disclosures About Market Risk
|
25
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|
Item 4. Controls and Procedures
|
26
|
|
Part II.
|
Other Information:
|
|
Item 1 Legal Proceedings
|
27
|
|
Item 1A. Risk Factors
|
27-41
|
|
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
|
42
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Item 6. Exhibits
|
42-43
|
|
Signature
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43
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Three months
|
Six months
|
|||||||||||||||
ended June 30,
|
ended June 30,
|
|||||||||||||||
2010
|
2009
|
2010
|
2009
|
|||||||||||||
(Dollars, except per share amounts,
and shares in thousands)
|
||||||||||||||||
OPERATING REVENUES
|
$ | 1,772,030 | 634,469 | 3,572,456 | 1,270,854 | |||||||||||
OPERATING EXPENSES
|
||||||||||||||||
Cost of services and products (exclusive of depreciation and amortization)
|
589,420 | 235,732 | 1,208,525 | 470,363 | ||||||||||||
Selling, general and administrative
|
301,671 | 120,742 | 584,600 | 230,587 | ||||||||||||
Depreciation and amortization
|
357,951 | 128,552 | 711,113 | 256,124 | ||||||||||||
Total operating expenses
|
1,249,042 | 485,026 | 2,504,238 | 957,074 | ||||||||||||
OPERATING INCOME
|
522,988 | 149,443 | 1,068,218 | 313,780 | ||||||||||||
OTHER INCOME (EXPENSE)
|
||||||||||||||||
Interest expense
|
(143,249 | ) | (44,937 | ) | (285,474 | ) | (96,969 | ) | ||||||||
Other income (expense)
|
7,308 | 7,635 | 17,808 | 5,817 | ||||||||||||
Total other income (expense)
|
(135,941 | ) | (37,302 | ) | (267,666 | ) | (91,152 | ) | ||||||||
INCOME BEFORE INCOME TAX EXPENSE
|
387,047 | 112,141 | 800,552 | 222,628 | ||||||||||||
Income tax expense
|
147,921 | 42,813 | 308,469 | 85,920 | ||||||||||||
NET INCOME
|
239,126 | 69,328 | 492,083 | 136,708 | ||||||||||||
Less: Net income attributable to noncontrolling interests
|
(355 | ) | (298 | ) | (711 | ) | (524 | ) | ||||||||
NET INCOME ATTRIBUTABLE TO CENTURYLINK, INC.
|
$ | 238,771 | 69,030 | 491,372 | 136,184 | |||||||||||
BASIC EARNINGS PER SHARE
|
$ | .79 | .68 | 1.63 | 1.35 | |||||||||||
DILUTED EARNINGS PER SHARE
|
$ | .79 | .68 | 1.63 | 1.35 | |||||||||||
DIVIDENDS PER COMMON SHARE
|
$ | .725 | .70 | 1.45 | 1.40 | |||||||||||
AVERAGE BASIC SHARES OUTSTANDING
|
300,058 | 99,414 | 299,736 | 99,270 | ||||||||||||
AVERAGE DILUTED SHARES OUTSTANDING
|
300,605 | 99,450 | 300,301 | 99,297 |
Three months
|
Six months
|
|||||||||||||||
ended June 30,
|
ended June 30,
|
|||||||||||||||
2010
|
2009
|
2010
|
2009
|
|||||||||||||
(Dollars in thousands)
|
||||||||||||||||
NET INCOME
|
$ | 239,126 | 69,328 | 492,083 | 136,708 | |||||||||||
OTHER COMPREHENSIVE INCOME, NET OF TAX:
|
||||||||||||||||
Derivative instruments:
|
||||||||||||||||
Reclassification adjustment for losses included in net income, net of $67, $67, $134 and $134 tax
|
107 | 107 | 214 | 214 | ||||||||||||
Defined benefit pension and postretirement plans, net of $1,510, $1,263, $(12,297) and $5,488 tax
|
2,422 | 2,026 | (6,982 | ) | 8,803 | |||||||||||
Net change in other comprehensive income (loss), net of tax
|
2,529 | 2,133 | (6,768 | ) | 9,017 | |||||||||||
COMPREHENSIVE INCOME
|
241,655 | 71,461 | 485,315 | 145,725 | ||||||||||||
Comprehensive income attributable to noncontrolling interests
|
(355 | ) | (298 | ) | (711 | ) | (524 | ) | ||||||||
COMPREHENSIVE INCOME ATTRIBUTABLE TO CENTURYLINK, INC.
|
$ | 241,300 | 71,163 | 484,604 | 145,201 |
June 30,
|
December 31,
|
|||||||
2010
|
2009
|
|||||||
(Dollars in thousands)
|
||||||||
ASSETS
|
||||||||
CURRENT ASSETS
|
||||||||
Cash and cash equivalents
|
$ | 186,357 | 161,807 | |||||
Accounts receivable, less allowance of $51,436 and $47,450
|
702,030 | 685,589 | ||||||
Income tax receivable
|
42,261 | 115,684 | ||||||
Materials and supplies, at average cost
|
35,599 | 35,755 | ||||||
Deferred income tax asset
|
73,890 | 83,319 | ||||||
Other
|
43,513 | 41,437 | ||||||
Total current assets
|
1,083,650 | 1,123,591 | ||||||
NET PROPERTY, PLANT AND EQUIPMENT
|
||||||||
Property, plant and equipment
|
15,876,487 | 15,556,763 | ||||||
Accumulated depreciation
|
(7,010,016 | ) | (6,459,624 | ) | ||||
Net property, plant and equipment
|
8,866,471 | 9,097,139 | ||||||
GOODWILL AND OTHER ASSETS
|
||||||||
Goodwill
|
10,260,640 | 10,251,758 | ||||||
Other
|
1,988,823 | 2,090,241 | ||||||
Total goodwill and other assets
|
12,249,463 | 12,341,999 | ||||||
TOTAL ASSETS
|
$ | 22,199,584 | 22,562,729 | |||||
LIABILITIES AND EQUITY
|
||||||||
CURRENT LIABILITIES
|
||||||||
Current maturities of long-term debt
|
$ | 496,559 | 500,065 | |||||
Accounts payable
|
299,066 | 394,687 | ||||||
Accrued expenses and other liabilities
|
||||||||
Salaries and benefits
|
243,401 | 255,103 | ||||||
Other taxes
|
148,175 | 98,743 | ||||||
Interest
|
120,163 | 108,020 | ||||||
Other
|
141,169 | 168,203 | ||||||
Advance billings and customer deposits
|
181,053 | 182,374 | ||||||
Total current liabilities
|
1,629,586 | 1,707,195 | ||||||
LONG-TERM DEBT
|
7,178,646 | 7,253,653 | ||||||
DEFERRED CREDITS AND OTHER LIABILITIES
|
||||||||
Deferred income taxes
|
2,216,831 | 2,256,579 | ||||||
Benefit plan obligations
|
1,229,006 | 1,485,643 | ||||||
Other deferred credits
|
394,419 | 392,860 | ||||||
Total deferred credits and other liabilities
|
3,840,256 | 4,135,082 | ||||||
STOCKHOLDERS' EQUITY
|
||||||||
CenturyLink, Inc.
|
||||||||
Common stock, $1.00 par value, authorized 800,000,000 shares, issued and outstanding 301,265,872 and 299,189,279 shares
|
301,266 | 299,189 | ||||||
Paid-in capital
|
6,048,168 | 6,014,051 | ||||||
Accumulated other comprehensive loss, net of tax
|
(92,074 | ) | (85,306 | ) | ||||
Retained earnings
|
3,287,225 | 3,232,769 | ||||||
Preferred stock - non-redeemable
|
236 | 236 | ||||||
Noncontrolling interests
|
6,275 | 5,860 | ||||||
Total stockholders’ equity
|
9,551,096 | 9,466,799 | ||||||
TOTAL LIABILITIES AND EQUITY
|
$ | 22,199,584 | 22,562,729 |
Six months
|
||||||||
ended June 30,
|
||||||||
2010
|
2009
|
|||||||
(Dollars in thousands)
|
||||||||
OPERATING ACTIVITIES
|
||||||||
Net income
|
$ | 492,083 | 136,708 | |||||
Adjustments to reconcile net income to net cash provided by operating activities:
|
||||||||
Depreciation and amortization
|
711,113 | 256,124 | ||||||
Deferred income taxes
|
(17,467 | ) | 25,831 | |||||
Share-based compensation
|
18,126 | 9,859 | ||||||
Income from unconsolidated cellular entity
|
(9,787 | ) | (9,914 | ) | ||||
Distributions from unconsolidated cellular entity
|
9,134 | 9,602 | ||||||
Changes in current assets and current liabilities:
|
||||||||
Receivables
|
(16,441 | ) | 31,192 | |||||
Accounts payable
|
(95,621 | ) | 4,761 | |||||
Accrued income and other taxes
|
114,945 | 31,094 | ||||||
Other current assets and other current liabilities, net
|
(24,240 | ) | (3,425 | ) | ||||
Retirement benefits
|
(279,509 | ) | (14,537 | ) | ||||
Excess tax benefits from share-based compensation
|
(3,636 | ) | (753 | ) | ||||
(Increase) decrease in other noncurrent assets
|
(19,112 | ) | 2,542 | |||||
Increase (decrease) in other noncurrent liabilities
|
1,581 | (4,823 | ) | |||||
Other, net
|
- | 7,944 | ||||||
Net cash provided by operating activities
|
881,169 | 482,205 | ||||||
INVESTING ACTIVITIES
|
||||||||
Payments for property, plant and equipment
|
(362,226 | ) | (130,801 | ) | ||||
Other, net
|
2,263 | 210 | ||||||
Net cash used in investing activities
|
(359,963 | ) | (130,591 | ) | ||||
FINANCING ACTIVITIES
|
||||||||
Payments of debt
|
(78,513 | ) | (394,666 | ) | ||||
Proceeds from issuance of common stock
|
26,432 | 7,295 | ||||||
Repurchase of common stock
|
(13,394 | ) | (4,786 | ) | ||||
Cash dividends
|
(436,916 | ) | (141,105 | ) | ||||
Excess tax benefits from share-based compensation
|
3,636 | 753 | ||||||
Other, net
|
2,099 | (3,288 | ) | |||||
Net cash used in financing activities
|
(496,656 | ) | (535,797 | ) | ||||
Net increase (decrease) in cash and cash equivalents
|
24,550 | (184,183 | ) | |||||
Cash and cash equivalents at beginning of period
|
161,807 | 243,327 | ||||||
Cash and cash equivalents at end of period
|
$ | 186,357 | 59,144 | |||||
Supplemental cash flow information:
|
||||||||
Income taxes paid
|
$ | 247,866 | 24,168 | |||||
Interest paid (net of capitalized interest of $7,483 and $572) | $ | 265,848 | 98,906 |
Six months
|
||||||||
ended June 30,
|
||||||||
2010
|
2009
|
|||||||
(Dollars in thousands)
|
||||||||
COMMON STOCK
|
||||||||
Balance at beginning of period
|
$ | 299,189 | 100,277 | |||||
Issuance of common stock through dividend reinvestment, incentive and benefit plans
|
2,460 | 1,043 | ||||||
Shares withheld to satisfy tax withholdings
|
(383 | ) | (180 | ) | ||||
Balance at end of period
|
301,266 | 101,140 | ||||||
PAID-IN CAPITAL
|
||||||||
Balance at beginning of period
|
6,014,051 | 39,961 | ||||||
Issuance of common stock through dividend reinvestment, incentive and benefit plans
|
23,972 | 6,252 | ||||||
Shares withheld to satisfy tax withholdings
|
(13,011 | ) | (4,606 | ) | ||||
Excess tax benefits from share-based compensation
|
3,636 | 753 | ||||||
Share-based compensation and other
|
19,520 | 10,952 | ||||||
Balance at end of period
|
6,048,168 | 53,312 | ||||||
ACCUMULATED OTHER COMPREHENSIVE LOSS, NET OF TAX
|
||||||||
Balance at beginning of period
|
(85,306 | ) | (123,489 | ) | ||||
Change in other comprehensive loss (net of reclassification adjustment), net of tax
|
(6,768 | ) | 9,017 | |||||
Balance at end of period
|
(92,074 | ) | (114,472 | ) | ||||
RETAINED EARNINGS
|
||||||||
Balance at beginning of period
|
3,232,769 | 3,146,255 | ||||||
Net income attributable to CenturyLink, Inc.
|
491,372 | 136,184 | ||||||
Cash dividends declared
|
||||||||
Common stock - $1.45 and $1.40 per share, respectively
|
(436,910 | ) | (141,099 | ) | ||||
Preferred stock
|
(6 | ) | (6 | ) | ||||
Balance at end of period
|
3,287,225 | 3,141,334 | ||||||
PREFERRED STOCK - NON-REDEEMABLE
|
||||||||
Balance at beginning and end of period
|
236 | 236 | ||||||
NONCONTROLLING INTERESTS
|
||||||||
Balance at beginning of period
|
5,860 | 4,568 | ||||||
Net income attributable to noncontrolling interests
|
711 | 524 | ||||||
Distributions attributable to noncontrolling interests
|
(296 | ) | (320 | ) | ||||
Balance at end of period
|
6,275 | 4,772 | ||||||
TOTAL STOCKHOLDERS' EQUITY
|
$ | 9,551,096 | 3,186,322 |
(1)
|
Basis of Financial Reporting
|
(2)
|
Embarq Acquisition
|
Fair value
|
||||
as of July 1, 2009
|
||||
(Dollars in thousands)
|
||||
Current assets
|
$ | 675,720 | ||
Net property, plant and equipment
|
6,077,672 | |||
Identifiable intangible assets
|
||||
Customer list
|
1,098,000 | |||
Rights of way
|
268,472 | |||
Other (trademarks, internally developed software, licenses)
|
26,817 | |||
Other non-current assets
|
24,131 | |||
Current liabilities
|
(837,132 | ) | ||
Long-term debt, including current maturities
|
(4,886,708 | ) | ||
Other long-term liabilities
|
(2,621,493 | ) | ||
Goodwill
|
6,244,966 | |||
Total purchase price
|
$ | 6,070,445 |
Six months
|
||||
ended June 30,
|
||||
2009
|
||||
(Dollars in thousands,
except per share amounts)
|
||||
Operating revenues
|
$ | 3,942,000 | ||
Net income attributable to CenturyLink, Inc.
|
$ | 519,000 | ||
Basic earnings per share before extraordinary item
|
$ | 1.75 | ||
Diluted earnings per share before extraordinary item
|
$ | 1.75 |
(3)
|
Pending Acquisition of Qwest
|
(4)
|
Goodwill and Other Intangible Assets
|
June 30,
|
Dec. 31,
|
|||||||
2010
|
2009
|
|||||||
(Dollars in thousands)
|
||||||||
Goodwill
|
$ | 10,260,640 | 10,251,758 | |||||
Intangible assets subject to amortization
|
||||||||
Customer list
|
||||||||
Gross carrying amount
|
$ | 1,279,308 | 1,279,308 | |||||
Accumulated amortization
|
(253,726 | ) | (148,491 | ) | ||||
Net carrying amount
|
$ | 1,025,582 | 1,130,817 | |||||
Other
|
||||||||
Gross carrying amount
|
$ | 69,567 | 69,567 | |||||
Accumulated amortization
|
(25,131 | ) | (22,466 | ) | ||||
Net carrying amount
|
$ | 44,436 | 47,101 | |||||
Other intangible assets not subject to amortization
|
$ | 268,500 | 268,500 |
(5)
|
Postretirement Benefits
|
Three months
|
Six months
|
|||||||||||||||
ended June 30,
|
ended June 30,
|
|||||||||||||||
2010
|
2009
|
2010
|
2009
|
|||||||||||||
(Dollars in thousands)
|
||||||||||||||||
Service cost
|
$ | 3,335 | 1,317 | 6,669 | 2,526 | |||||||||||
Interest cost
|
8,187 | 4,899 | 16,375 | 9,797 | ||||||||||||
Expected return on plan assets
|
(981 | ) | (346 | ) | (1,962 | ) | (693 | ) | ||||||||
Amortization of unrecognized prior service cost
|
(343 | ) | (887 | ) | (686 | ) | (1,773 | ) | ||||||||
Net periodic postretirement benefit cost
|
$ | 10,198 | 4,983 | 20,396 | 9,857 |
(6)
|
Defined Benefit Retirement Plans
|
Three months
|
Six months
|
|||||||||||||||
ended June 30,
|
ended June 30,
|
|||||||||||||||
2010
|
2009
|
2010
|
2009
|
|||||||||||||
(Dollars in thousands)
|
||||||||||||||||
Service cost
|
$ | 17,169 | 3,493 | 33,101 | 6,987 | |||||||||||
Interest cost
|
58,384 | 6,621 | 121,661 | 13,252 | ||||||||||||
Expected return on plan assets
|
(71,478 | ) | (6,964 | ) | (141,514 | ) | (13,928 | ) | ||||||||
Settlement loss
|
- | - | - | 7,711 | ||||||||||||
Net amortization and deferral
|
3,307 | 4,176 | 10,224 | 8,352 | ||||||||||||
Net periodic pension expense
|
$ | 7,382 | 7,326 | 23,472 | 22,374 |
(7)
|
Stock-based Compensation
|
(8)
|
Income Taxes
|
(9)
|
Business Segments
|
Three months
|
Six months
|
|||||||||||||||
ended June 30,
|
ended June 30,
|
|||||||||||||||
2010
|
2009
|
2010
|
2009
|
|||||||||||||
(Dollars in thousands)
|
||||||||||||||||
Voice
|
$ | 790,580 | 247,427 | 1,603,456 | 497,621 | |||||||||||
Data
|
472,999 | 142,923 | 940,439 | 282,860 | ||||||||||||
Network access
|
274,956 | 150,542 | 561,184 | 303,110 | ||||||||||||
Other
|
233,495 | 93,577 | 467,377 | 187,263 | ||||||||||||
Total operating revenues
|
$ | 1,772,030 | 634,469 | 3,572,456 | 1,270,854 |
(10)
|
Recent Accounting Pronouncements
|
Balance
|
|||||
Description
|
June 30, 2010
|
Level 1
|
Level 2
|
Level 3
|
|
(Dollars in thousands)
|
|||||
Cash surrender value of life insurance contracts
|
$100,288
|
100,288
|
-
|
-
|
(11)
|
Commitments and Contingencies
|
Three months
|
Six months
|
|||||||||||||||
ended June 30,
|
ended June 30,
|
|||||||||||||||
Description
|
2010
|
2009
|
2010
|
2009
|
||||||||||||
(Dollars in thousands)
|
||||||||||||||||
Integration related costs associated with our acquisition of Embarq
|
$ | 17,949 | 22,498 | 39,456 | 29,427 | |||||||||||
Severance costs and accelerated recognition of share-based compensation
costs due to workforce reductions
|
13,162 | - | 28,144 | - | ||||||||||||
Transaction and other costs associated with our pending acquisition of Qwest
|
10,023 | - | 10,023 | - | ||||||||||||
Income tax charge due to a change in the treatment of Medicare subsidy receipts
|
- | - | 3,965 | - | ||||||||||||
Settlement loss related to supplemental executive retirement plan
|
- | - | - | 7,711 | ||||||||||||
Charge incurred upon termination of our $800 million bridge facility
|
- | - | - | 8,000 | ||||||||||||
Total
|
$ | 41,134 | 22,498 | 81,588 | 45,138 |
Three months
|
||||||||
ended June 30,
|
||||||||
2010
|
2009
|
|||||||
(Dollars, except per share amounts,
and shares in thousands)
|
||||||||
Operating income
|
$ | 522,988 | 149,443 | |||||
Interest expense
|
(143,249 | ) | (44,937 | ) | ||||
Other income (expense)
|
7,308 | 7,635 | ||||||
Income tax expense
|
(147,921 | ) | (42,813 | ) | ||||
Net income
|
239,126 | 69,328 | ||||||
Less: Net income attributable to noncontrolling interests
|
(355 | ) | (298 | ) | ||||
Net income attributable to CenturyLink, Inc.
|
$ | 238,771 | 69,030 | |||||
Basic earnings per share
|
$ | .79 | .68 | |||||
Diluted earnings per share
|
$ | .79 | .68 | |||||
Average basic shares outstanding
|
300,058 | 99,414 | ||||||
Average diluted shares outstanding
|
300,605 | 99,450 |
Three months
|
||||||||
ended June 30,
|
||||||||
2010
|
2009
|
|||||||
(Dollars in thousands)
|
||||||||
Voice
|
$ | 790,580 | 247,427 | |||||
Data
|
472,999 | 142,923 | ||||||
Network access
|
274,956 | 150,542 | ||||||
Other
|
233,495 | 93,577 | ||||||
$ | 1,772,030 | 634,469 |
Three months
|
||||||||
ended June 30,
|
||||||||
2010
|
2009
|
|||||||
(Dollars in thousands)
|
||||||||
Cost of services and products (exclusive of depreciation and amortization)
|
$ | 589,420 | 235,732 | |||||
Selling, general and administrative
|
301,671 | 120,742 | ||||||
Depreciation and amortization
|
357,951 | 128,552 | ||||||
$ | 1,249,042 | 485,026 |
Six months
|
||||||||
ended June 30,
|
||||||||
2010
|
2009
|
|||||||
(Dollars, except per share amounts,
and shares in thousands)
|
||||||||
Operating income
|
$ | 1,068,218 | 313,780 | |||||
Interest expense
|
(285,474 | ) | (96,969 | ) | ||||
Other income (expense)
|
17,808 | 5,817 | ||||||
Income tax expense
|
(308,469 | ) | (85,920 | ) | ||||
Net income
|
492,083 | 136,708 | ||||||
Less: Net income attributable to noncontrolling interests
|
(711 | ) | (524 | ) | ||||
Net income attributable to CenturyLink, Inc.
|
$ | 491,372 | 136,184 | |||||
Basic earnings per share
|
$ | 1.63 | 1.35 | |||||
Diluted earnings per share
|
$ | 1.63 | 1.35 | |||||
Average basic shares outstanding
|
299,736 | 99,270 | ||||||
Average diluted shares outstanding
|
300,301 | 99,297 |
Six months
|
||||||||
ended June 30,
|
||||||||
2010
|
2009
|
|||||||
(Dollars in thousands)
|
||||||||
Voice
|
$ | 1,603,456 | 497,621 | |||||
Data
|
940,439 | 282,860 | ||||||
Network access
|
561,184 | 303,110 | ||||||
Other
|
467,377 | 187,263 | ||||||
$ | 3,572,456 | 1,270,854 |
Six months
|
||||||||
ended June 30,
|
||||||||
2010
|
2009
|
|||||||
(Dollars in thousands)
|
||||||||
Cost of services and products (exclusive of depreciation and amortization)
|
$ | 1,208,525 | 470,363 | |||||
Selling, general and administrative
|
584,600 | 230,587 | ||||||
Depreciation and amortization
|
711,113 | 256,124 | ||||||
$ | 2,504,238 | 957,074 |
Item 1.
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Legal Proceedings.
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See Note 11 to the financial statements included in Part I, Item 1, of this report.
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Item 1A.
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Risk Factors.
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•
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power losses or physical damage to our access lines, whether caused by fire, adverse weather conditions (including those described immediately below), terrorism or otherwise
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•
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capacity limitations
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•
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software and hardware defects or malfunctions
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•
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breaches of security, including sabotage, tampering, computer viruses and break-ins, and
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•
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other disruptions that are beyond our control.
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•
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being required, under certain circumstances, to pay a termination fee of $350 million;
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•
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having to pay certain costs relating to the proposed merger, such as legal, accounting, financial advisor, filing, printing and mailing fees; and
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|
•
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diverting the focus of management from pursuing other opportunities that could be beneficial to us,
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|
•
|
the inability to successfully combine our business and Qwest’s business in a manner that permits the combined company to achieve the cost savings and operating synergies anticipated to result from the merger, which would result in the anticipated benefits of the merger not being realized partly or wholly in the time frame currently anticipated or at all;
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|
•
|
lost sales and customers as a result of certain customers of either of the two companies deciding not to do business with the combined company;
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•
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the complexities associated with managing the combined businesses out of several different locations and integrating personnel from the two companies, while at the same time attempting to provide consistent, high quality products and services under a unified culture;
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|
•
|
the additional complexities of combining two companies with different histories, regulatory restrictions, markets and customer bases, and initiating this process before we have fully completed the integration of our operations with those of Embarq;
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•
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the failure to retain key employees of either of the two companies;
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•
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potential unknown liabilities and unforeseen increased expenses or regulatory conditions associated with the merger; and
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•
|
performance shortfalls at one or both of the two companies as a result of the diversion of management’s attention caused by completing the merger and integrating the companies’ operations.
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•
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we may not have enough cash to pay such dividends due to changes in our cash requirements, capital spending plans, cash flow or financial position;
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•
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decisions on whether, when and in which amounts to make any future distributions will remain at all times entirely at the discretion of our board of directors, which reserves the right to change our dividend practices at any time and for any reason;
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•
|
the effects of regulatory reform, including any changes to intercarrier compensation, Universal Service Fund or special access rules;
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•
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our desire to maintain or improve the credit ratings on our senior debt;
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•
|
the amount of dividends that we may distribute to our shareholders is subject to restrictions under Louisiana law and is limited by restricted payment and leverage covenants in our credit facilities and, potentially, the terms of any future indebtedness that we may incur; and
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|
•
|
the amount of dividends that our subsidiaries may distribute to CenturyLink is subject to restrictions imposed by state law, restrictions that have been or may be imposed by state regulators in connection with obtaining necessary approvals for the Embarq merger and pending Qwest merger, and restrictions imposed by the terms of credit facilities applicable to certain subsidiaries and, potentially, the terms of any future indebtedness that these subsidiaries may incur.
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|
•
|
the extent, timing, success and overall effects of competition from wireless carriers, VoIP providers, CLECs, cable television companies, electric utilities and others, including without limitation the risks that these competitors may offer less expensive or more innovative products and services;
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•
|
the risks inherent in rapid technological change, including without limitation the risk that new technologies will displace our products and services;
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•
|
the effects of ongoing changes in the regulation of the communications industry, including without limitation (i) increased competition resulting from regulatory changes, (ii) the final outcome of various federal, state and local regulatory initiatives and proceedings that could impact our competitive position, revenues, compliance costs, capital expenditures or prospects, (iii) the effect of the National Broadband Plan, (iv) reductions in revenues received from the federal Universal Service Fund or other current or future federal and state support programs designed to compensate ILECs operating in high-cost markets, and (v) changes in the regulation of special access;
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|
•
|
our ability to effectively adjust to changes in the communications industry and changes in the composition of our markets and product mix caused by the Embarq merger and the pending Qwest merger;
|
|
•
|
the possibility that the anticipated benefits from the Embarq merger cannot be fully realized in a timely manner or at all, or that integrating Embarq’s operations into ours will be more difficult, disruptive or costly than anticipated;
|
|
•
|
our ability to (i) successfully complete our pending acquisition of Qwest, including timely receipt of the required shareholder and regulatory approvals for the merger free of detrimental conditions, and (ii) timely realize the anticipated benefits of the transaction, including our ability after the closing to use the net operating losses of Qwest in the amounts projected;
|
|
•
|
our ability to effectively manage our expansion opportunities, including without limitation our ability to (i) effectively integrate newly-acquired or newly-developed businesses into our operations, (ii) attract and retain technological, managerial and other key personnel, (iii) achieve projected growth, revenue and cost savings targets from the Embarq acquisition and the pending Qwest acquisition within the timeframes anticipated, and (iv) otherwise monitor our operations, costs, regulatory compliance, and service quality and maintain other necessary internal controls;
|
|
•
|
possible changes in the demand for, or pricing of, our products and services, including without limitation reduced demand for our traditional telephone or access services caused by greater use of wireless, electronic mail or Internet communications or other factors;
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|
•
|
our ability to successfully introduce new product or service offerings on a timely and cost-effective basis, including without limitation our ability to (i) successfully roll out our new video and broadband services, (ii) expand successfully our full array of service offerings to new or acquired markets and (iii) offer bundled service packages on terms attractive to our customers;
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|
•
|
our continued access to credit markets on favorable terms, including our continued access to financing in amounts, and on terms and conditions, necessary to support our operations and refinance existing indebtedness when it becomes due;
|
|
•
|
our ability to collect receivables from financially troubled communications companies;
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|
•
|
the inability of third parties to discharge their commitments to us;
|
|
•
|
the outcome of pending litigation in which CenturyLink, Embarq or Qwest is involved, including the KPNQwest litigation matters in which plaintiffs have sought, in the aggregate, billions of dollars in damages from Qwest;
|
|
•
|
our ability to pay a $2.90 per common share dividend annually, which may be affected by changes in our cash requirements, capital spending plans, cash flows or financial position;
|
|
•
|
unanticipated increases in our capital expenditures;
|
|
•
|
our ability to successfully negotiate collective bargaining agreements on reasonable terms without work stoppages;
|
|
•
|
our ownership of or access to technology that may be necessary for us to operate or expand our business;
|
|
•
|
regulatory limits on our ability to change the prices for telephone services in response to industry changes;
|
|
•
|
impediments to our ability to expand through attractively priced acquisitions, whether caused by regulatory limits, financing constraints, a decrease in the pool of attractive target companies, or competition for acquisitions from other interested buyers;
|
|
•
|
uncertainties relating to the implementation of our business strategies, including the possible need to make abrupt and potentially disruptive changes in our business strategies due to changes in competition, regulation, technology, product acceptance or other factors;
|
|
•
|
the lack of assurance that we can compete effectively against better-capitalized competitors;
|
|
•
|
the impact of equipment failure, including potential network disruptions;
|
|
•
|
general worldwide economic conditions and related uncertainties;
|
|
•
|
the effects of adverse weather on our customers or properties;
|
|
•
|
other risks referenced in this report and from time to time in our other filings with the SEC;
|
|
•
|
the effects of more general factors, including without limitation:
|
|
•
|
changes in general industry and market conditions and growth rates
|
|
•
|
changes in labor conditions, including workforce levels and labor costs
|
|
•
|
changes in interest rates or other general national, regional or local economic conditions
|
|
•
|
changes in legislation, regulation or public policy, including changes that increase our tax rate
|
|
•
|
increases in capital, operating, medical, pension or administrative costs, or the impact of new business opportunities requiring significant up-front investments
|
|
•
|
changes in our relationships with vendors, or the failure of these vendors to provide competitive products on a timely basis
|
|
•
|
failures in our internal controls that could result in inaccurate public disclosures or fraud
|
|
•
|
changes in our debt ratings
|
|
•
|
unfavorable outcomes of regulatory proceedings and investigations, including rate proceedings and tax audits
|
|
•
|
losses or unfavorable returns on our investments in other communications companies
|
|
•
|
delays in the construction of our networks
|
|
•
|
changes in accounting policies, assumptions, estimates or practices adopted voluntarily or as required by generally accepted accounting principles.
|
Item 2.
|
Unregistered Sales of Equity Securities and Use of Proceeds
|
Item 6.
|
Exhibits
|
A.
|
Exhibits
|
|
2.1
|
Agreement and Plan of Merger, dated as of April 21, 2010, among Registrant, its subsidiary, SB44 Acquisition Company, and Qwest Communications International Inc. (incorporated by reference to Exhibit 2.1 of the Current Report on Form 8-K filed by Registrant with the SEC on April 27, 2010).
|
|
3.1
|
Articles of Incorporation of Registrant, as amended through May 21, 2010.
|
|
3.2
|
Bylaws of the Registrant, as amended through April 7, 2010.
|
|
3.3
|
Corporate Governance Guidelines of Registrant, as amended through April 7, 2010.
|
|
4.1
|
Form of common stock certificate of Registrant.
|
|
10.1
|
Form of Restricted Stock Agreement, pursuant to the CenturyLink 2005 Directors Stock Plan and dated May 21, 2010, entered into between us and seven of our outside directors as of such date.
|
|
10.2
|
Form of Restricted Stock Agreement, pursuant to the CenturyLink Legacy Embarq 2008 Equity Incentive Plan and dated May 21, 2010, entered into between us and four of our outside directors as of such date.
|
|
10.3
|
Form of Restricted Stock Agreement, pursuant to the CenturyLink Legacy Embarq 2008 Equity Incentive Plan and dated May 21, 2010, entered into between us and William A. Owens in payment of Mr. Owens’ 2010 supplemental chairman’s fees.
|
|
10.4
|
2010 Executive Officer Short-Term Incentive Program (incorporated by reference to Registrant’s 2010 Proxy Statement filed on Form 14A with the SEC on April 7, 2010).
|
|
11
|
Computations of Earnings Per Share.
|
|
31.1
|
Registrant’s Chief Executive Officer certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
|
31.2
|
Registrant’s Chief Financial Officer certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
|
32
|
Registrant’s Chief Executive Officer and Chief Financial Officer certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
CenturyLink, Inc.
|
|
Date: August 6, 2010
|
/s/ Neil A. Sweasy
|
Neil A. Sweasy
|
|
Vice President and Controller
|
|
(Principal Accounting Officer)
|