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CenturyLink reports fourth quarter and full year 2017 results
Fourth Quarter and Full Year 2017 Highlights
- Completed acquisition of Level 3 Communications (Level 3), positioning CenturyLink as the second largest domestic communications provider serving global enterprise customers, with 2017 pro forma annual revenue of more than $24 billion
- Increased network scale and enhanced product and services portfolio enables CenturyLink to better meet the connectivity and managed services needs of customers
- Expect 2018 Adjusted EBITDA to be higher than 2017 pro forma Adjusted EBITDA
- Anticipate 2018 Free Cash Flow after Dividends of $850 million to $1.05 billion

MONROE, La., Feb. 14, 2018 /PRNewswire/ -- CenturyLink, Inc. (NYSE: CTL) today reported results for fourth quarter and full year ended December 31, 2017.

CenturyLink logo. (PRNewsfoto/CenturyLink, Inc.)

CenturyLink Reported Results

The reported results on a consolidated basis include two months of Level 3's financial performance, as CenturyLink closed the Level 3 acquisition1 on Nov. 1, 2017.

Consolidated total revenue was $5.323 billion for fourth quarter 2017, compared to $4.289 billion for fourth quarter 2016 and $17.66 billion for full year 2017 compared to  $17.47 billion for full year 2016.

Consolidated diluted earnings per share was $1.26 for fourth quarter 2017, compared to diluted earnings per share of $0.08 for fourth quarter 2016. Excluding special items2 in fourth quarter 2017, the diluted earnings per share was $0.18. Fourth quarter special items included a recognized tax benefit of $1.1 billion from the enactment of the Tax Cuts and Jobs Act, along with $222 million of acquisition and integration-related expenses. For more information on consolidated operating results, see the attachments to this release.

"2017 was a year of significant transformation for CenturyLink. The sale of our data centers and colocation business followed by the acquisition of Level 3 Communications positions CenturyLink as a leading global networking company," said Glen F. Post, III, CenturyLink chief executive officer. "This strategic combination brings significant scale, enhances our products and services portfolio, and improves our long-term financial flexibility.

"We are focused on the successful integration of our businesses and improving our customer experience through simplification and automation while achieving our targeted $975 million in annualized run rate cash savings," Post concluded.

"With this combination, CenturyLink is now better positioned to meet the needs of our customers and drive long-term shareholder return," said Jeff Storey, CenturyLink president and chief operating officer. "We have organized and integrated our sales, operations and service teams to meet the specific needs of our customers - from consumers to small businesses to the largest global enterprises in the world. We are continuing to invest to meet the needs of our customers and to provide them with an improved digital experience."

CenturyLink Standalone Results

The following tables provide CenturyLink results on a standalone unaudited basis and exclude special items (including integration-related expenses), intercompany eliminations and acquisition accounting adjustments associated with the acquisition of Level 3 effective Nov. 1, 2017.

Metrics

Fourth
Quarter

Fourth
Quarter

Full Year

Full Year

($ in millions)

2017

2016

2017

2016

Strategic Revenue3, 4

$

1,905

 

2,028

 

7,725

 

8,098

 

Legacy Revenue3, 4

1,633

 

1,834

 

6,868

 

7,624

 

   Core Revenue3

3,538

 

3,862

 

14,593

 

15,722

 

Data Integration Revenue

113

 

131

 

498

 

533

 

Other Revenue

313

 

296

 

1,206

 

1,215

 

   Total Operating Revenue

$

3,964

 

4,289

 

16,297

 

17,470

 

Adjusted EBITDA2

1,471

 

1,585

 

5,842

 

6,513

 

Adjusted EBITDA2 Margin

37.1

%

37.0

%

35.8

%

37.3

%

Capital Expenditures 5

528

 

963

 

2,886

 

2,958

 

Core revenues were $3.538 billion for fourth quarter 2017, declining 8.4% compared to fourth quarter 2016, primarily due to the decline in legacy revenues, as well as the approximate $150 million revenue reduction due to the May 1, 2017 sale of the legacy CenturyLink data centers and colocation business (Colocation Sale).

Adjusted EBITDA, excluding special items, decreased to $1.471 billion from $1.585 billion in fourth quarter 2016 primarily due to the decline in higher margin legacy revenues, along with the margin impact related to the Colocation Sale.

Level 3 Standalone Results

To enable investors to track the former Level 3's results through the end of 2017, CenturyLink is providing selected, unaudited standalone Level 3 financial and operating metrics for fourth quarter 2017 and full year 2017. These results in the following tables are based on the former Level 3 definitions for these metrics and exclude integration-related expenses, intercompany eliminations and acquisition accounting adjustments associated with the acquisition of Level 3 by CenturyLink effective Nov. 1, 2017.

Metrics

Fourth
Quarter

Fourth
Quarter

Full Year

Full Year

($ in millions)

2017

20166

2017

2016 6

Core Network Services Revenue

$

2,017

 

1,933

 

7,891

 

7,764

 

Wholesale Voice Services and Other Revenue

93

 

99

 

387

 

408

 

   Total Revenue

$

2,110

 

2,032

 

8,278

 

8,172

 

Adjusted EBITDA2

758

 

724

 

2,979

 

2,865

 

Capital Expenditures

301

 

306

 

1,309

 

1,334

 

Unlevered Cash Flow 2

451

 

401

 

1,640

 

1,528

 

Free Cash Flow2

353

 

266

 

1,141

 

1,024

 

Network Access Margin

65.7

%

66.5

%

66.6

%

66.7

%

Adjusted EBITDA2 Margin

35.9

%

35.6

%

36.0

%

35.1

%

Total revenue was $2.110 billion for fourth quarter 2017, compared to $2.032 billion for the fourth quarter 2016. Total Core Network Services (CNS) revenue was $2.017 billion in fourth quarter 2017, increasing 4.3% year-over-year on a reported basis, and 3.8% year-over-year on a constant currency basis.

For fourth quarter 2017, total Enterprise CNS revenue, excluding UK Government revenue, was $1.515 billion, which grew 6.5% year-over-year on a reported basis, and 6.0% year- over-year on a constant currency basis.

The accompanying financial schedules provide additional details regarding CenturyLink's and Level 3's standalone performance and special items and reconciliations of non-GAAP financial measures for the three and twelve months ended December 31, 2017 and 2016.

Pro Forma Combined Company Results 7

The following tables provide selected financial metrics on an unaudited pro forma basis for the combined company as if the Level 3 acquisition and the sale of the data centers and colocation business had been completed on January 1, 2016.

Metrics

Fourth
Quarter

Fourth
Quarter

Full Year

Full Year

($ in millions)

2017

2016

2017

2016

Total Adjusted Pro Forma Revenue 7

$

6,005

 

6,112

 

24,127

 

24,784

 

Adjusted EBITDA 7,8 excluding integration-related expenses

2,211

 

2,235

 

8,698

 

9,079

 

Adjusted EBITDA7,8 including integration-related expenses

1,994

 

1,998

 

8,260

 

8,800

 

Adjusted EBITDA Margin excluding integration-related expenses

36.8

%

36.6

%

36.1

%

36.6

%

Adjusted EBITDA Margin including integration-related expenses

33.2

%

32.7

%

34.2

%

35.5

%

Capital Expenditures

829

 

1,248

 

4,181

 

4,234

 

Capital Expenditures as percent of Total Revenue

13.8

%

20.4

%

17.3

%

17.1

%

 

Adjusted Pro Forma Revenue

Fourth
Quarter

Fourth
Quarter

Full Year

Full Year

($ in millions)

2017

2016

2017

2016

Business

$

4,415

 

4,451

 

17,690

 

18,019

 

Consumer

1,401

 

1,485

 

5,704

 

6,061

 

Regulatory9

189

 

176

 

733

 

704

 

Total Adjusted Pro Forma Revenue

$

6,005

 

6,112

 

24,127

 

24,784

 
         

By Business Unit

       

Medium & Small Business

$

874

 

918

 

3,565

 

3,730

 

Enterprise

1,324

 

1,263

 

5,223

 

5,049

 

International & Global Accounts

941

 

905

 

3,660

 

3,603

 

Wholesale & Indirect

1,276

 

1,365

 

5,242

 

5,637

 

Consumer

1,401

 

1,485

 

5,704

 

6,061

 

Regulatory

189

 

176

 

733

 

704

 

Total Adjusted Pro Forma Revenue

$

6,005

 

6,112

 

24,127

 

24,784

 
         

By Service Type

       

IP & Data Services

$

1,839

 

1,802

 

7,276

 

7,148

 

Transport & Infrastructure

2,092

 

2,128

 

8,411

 

8,675

 

Voice & Collaboration

1,716

 

1,848

 

7,055

 

7,617

 

IT & Managed Services

169

 

158

 

652

 

640

 

Regulatory

189

 

176

 

733

 

704

 

Total Adjusted Pro Forma Revenue

$

6,005

 

6,112

 

24,127

 

24,784

 

Liquidity

As of December 31, 2017, CenturyLink had cash, cash equivalents and marketable securities of $551 million.

Integration Update

During fourth quarter 2017, CenturyLink achieved approximately $75 million of annualized Adjusted EBITDA synergies. Integration-related expenses for fourth quarter 2017 were $62 million. In total, CenturyLink has incurred approximately $170 million in integration-related expenses.

2018 Business Outlook

"We are confident in our 2018 financial outlook with Adjusted EBITDA growth and strong Free Cash Flow, both before and after dividends," said Sunit Patel, CenturyLink executive vice president and chief financial officer. "For the full year 2018, we expect Adjusted EBITDA2 of $8.75 to $8.95 billion and Free Cash Flow2 of $3.15 to $3.35 billion, excluding Level 3 integration-related expenses."

Metrics 10

2018 Outlook

Adjusted EBITDA

$8.75 to $8.95 billion

Free Cash Flow11

$3.15 to $3.35 billion

Dividends12

$2.30 billion

Free Cash Flow after Dividends

$850 million to $1.05 billion

GAAP Interest Expense

$2.25 billion

Cash Interest

$2.10 billion

Capital Expenditures

~16% of Revenue

Depreciation and Amortization

$5.40 to $5.50 billion

Non-cash Compensation Expense

$200 million

Cash Income Taxes

$100 million

Full Year Effective Income Tax Rate

~25%

Investor Call

As previously announced, CenturyLink's management will host a conference call at 4:00 p.m. Central Time today, February 14, 2018. The conference call will be streamed live over CenturyLink's website at ir.centurylink.com. Additional information regarding fourth quarter 2017 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 +1 877-666-4225 (U.S. Domestic) or +1 312-546-6650 (International).

A telephone replay of the call will be available beginning at 6:00 p.m. CST on February 14, 2018, and ending May 8, 2018, at 11:59 p.m. CST. The replay can be accessed by dialing +1 800-633-8284 (U.S. Domestic) or +1 402-977-9140 (International), reservation code 21880624. A webcast replay of the call will also be available on our website beginning at 11:00 a.m. CST on February 15, 2018, and ending May 8, 2018 at 11:59 p.m. CST.

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, adjusted free cash flow, unlevered cash flow, core revenues, adjusted net income, adjusted diluted EPS and adjustments to GAAP measures to exclude the effect of special items or currency fluctuations. 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 www.centurylink.com and in the current report on form 8-K that we intend to file later today. 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 and, as referenced in Note 2 below, calculates certain of its non-GAAP measures differently from Level 3.

About CenturyLink

CenturyLink (NYSE: CTL) is the second largest U.S. communications provider to global enterprise customers. With customers in more than 60 countries and an intense focus on the customer experience, CenturyLink strives to be the world's best networking company by solving customers' increased demand for reliable and secure connections. The company also serves as its customers' trusted partner, helping them manage increased network and IT complexity and providing managed network and cyber security solutions that help protect their business.

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 legacy offerings and increased pricing pressures; the effects of new, emerging or competing technologies, including those that could make our products less desirable or obsolete; 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, universal service, broadband deployment, data protection and net neutrality; our ability to timely realize the anticipated benefits of our recently- completed combination with Level 3, including our ability to attain anticipated cost savings, to use Level 3's net operating losses in the amounts projected, to retain key personnel and to avoid unanticipated integration disruptions; our ability to safeguard our network, and to avoid the adverse impact on our business from possible security breaches, service outages, system failures, equipment breakages or similar events impacting our network or the availability and quality of our services; 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 broadband service; our ability to successfully maintain the quality and profitability of our existing product and service offerings, to provision them efficiently to our customers, 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, periodic share repurchases, dividends, pension contributions and other benefits payments; 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; 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; our ability to maintain favorable relations with our key business partners, customers, suppliers, vendors, landlords and financial institutions; our ability to effectively manage our network buildout projects and our other expansion opportunities; our ability to collect our receivables from financially troubled customers; 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 or practices, including potential future impairment charges; the effects of adverse weather, terrorism or other natural or man-made disasters; the effects of more general factors such as changes in interest rates, in exchange rates, in operating costs, in general market, labor, economic or geo-political conditions, or in public policy; 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.

(1)

On November 1, 2017, CenturyLink acquired Level 3 Communications, Inc. through successive merger transactions, including a merger of Level 3 into its successor-in-interest, Level 3 Parent, LLC.

(2)

See attachments for reconciliations of non-GAAP figures used by CenturyLink and Level 3 to comparable GAAP figures. As illustrated in these attached reconciliation statements, CenturyLink and Level 3 have historically defined their respective non-GAAP measures differently.

(3)

Core revenues is a non-GAAP measure defined as strategic revenues plus legacy revenues (excludes data integration and other revenues) as described further in the attached schedules.  Strategic revenues primarily include broadband, Multiprotocol Label Switching (MPLS), Ethernet, colocation, hosting, cloud, video, VoIP and IT services.  Legacy revenues primarily include voice, private line (including special access), switched access and other ancillary services. The filed SEC reports and accompanying schedules explain these terms in greater detail.

(4)

Beginning second quarter 2017, certain legacy services, specifically dark fiber network leasing, were reclassified from legacy services to strategic services. Beginning second quarter 2016, private line (including special access) revenues were reclassified from strategic services to legacy services. All historical periods have been restated to reflect these changes.

(5)

Capital Expenditures reflects payments for property, plant and equipment and capitalized software, excluding amounts capitalized for integration related projects.

(6)

The reported fourth quarter 2016 and full year 2016 results have been adjusted to reflect changes made to customers assignments between the

wholesale and enterprise channels as of the beginning of 2017.

(7)

Excludes CenturyLink Colocation revenue and Level 3 amortized revenue from pre-acquisition deferred installation charges. For a description of adjustments made in connection with preparing there pro forma figures, see the pro forma information filed with the SEC in a current Report on Form 8-K/A on January 16, 2018.

(8)

Adjusted EBITDA is defined as operating income (loss) from the Pro Forma Combined Company Results plus depreciation and amortization expense, non-cash impairment charges and non-cash stock compensation expense, adjusted for special items and CenturyLink colocation revenue and related estimated costs.

(9)

Regulatory includes CAF Phase 1, CAF Phase 2 and federal and state USF support revenue.

(10)

All outlook measures in this release and the accompanying schedules exclude integration-related expenses and other special items, and are as of February 14, 2018.

(11)

Free Cash Flow is defined as net cash provided by (used in) operating activities less capital expenditures as disclosed in the Consolidated Statements of Cash Flows.

(12)

Dividends is defined as dividends paid as disclosed in the Consolidated Statements of Cash Flows. Payments of all dividends are at the discretion of the board of directors.

 

 

 

 

CenturyLink, Inc.

CONSOLIDATED STATEMENTS OF INCOME

THREE MONTHS AND TWELVE MONTHS ENDED DECEMBER 31, 2017 AND 2016

(UNAUDITED)

(Dollars in millions, except per share amounts; shares in thousands)

                         
   

Three months ended
December 31,

 

Increase /
(decrease)

 

Twelve months ended
December 31,

 

Increase /
(decrease)

   

2017

 

2016

   

2017

 

2016

 
                       

OPERATING REVENUES

$

5,323

   

4,289

   

24

%

 

17,656

   

17,470

   

1

%

                         

OPERATING EXPENSES

                     
 

Cost of services and products

2,498

   

1,929

   

30

%

 

8,203

   

7,774

   

6

%

 

Selling, general and administrative *

1,104

   

997

   

11

%

 

3,508

   

3,447

   

2

%

 

Depreciation and amortization

1,197

   

958

   

25

%

 

3,936

   

3,916

   

1

%

 

Total operating expenses

4,799

   

3,884

   

24

%

 

15,647

   

15,137

   

3

%

                         

OPERATING INCOME

524

   

405

   

29

%

 

2,009

   

2,333

   

(14)

%

                       

OTHER (EXPENSE) INCOME

                     
 

Interest expense

(481)

   

(320)

   

50

%

 

(1,481)

   

(1,318)

   

12

%

 

Other income (expense), net *

11

   

(11)

   

(200)

%

 

12

   

5

   

140

%

 

Income tax benefit (expense)

1,063

   

(32)

   

(3,422)

%

 

849

   

(394)

   

(315)

%

NET INCOME

$

1,117

   

42

   

2,560

%

 

1,389

   

626

   

122

%

BASIC EARNINGS PER SHARE

$

1.26

   

0.08

   

1,475

%

 

2.21

   

1.16

   

91

%

DILUTED EARNINGS PER SHARE

$

1.26

   

0.08

   

1,475

%

 

2.21

   

1.16

   

91

%

                         

WEIGHTED AVERAGE SHARES OUTSTANDING

       
 

Basic

887,890

   

539,965

   

64

%

 

627,808

   

539,549

   

16

%

 

Diluted

889,135

   

541,235

   

64

%

 

628,693

   

540,679

   

16

%

                         

DIVIDENDS PER COMMON SHARE

$

0.54

   

0.54

   

%

 

2.16

   

2.16

   

%

                       
                       

 

 

*

In the first quarter of 2017, CenturyLink adopted ASU 2017-07, "Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost" ("ASU 2017-07"). ASU 2017-07 modified the presentation of net periodic pension and postretirement benefit costs and requires the service cost component to be reported separately from the other components in order to provide more useful information. Under ASU 2017-07, the service cost component of net periodic pension and postretirement benefit costs is required to be presented in the same expense category as the related salary and wages for the employee. The other components of the net periodic pension and postretirement benefit costs are required to be recognized in other (expense) income, net in CenturyLink's consolidated statements of operations. This change was applied on a retrospective basis to all previous periods to match the current period presentation. This retrospective application resulted in a $13 million and $2 million increase in operating income and a corresponding increase in other (expense) income, net for the three and twelve months ended December 31, 2016, respectively.

 

 


 

CenturyLink, Inc.

CONDENSED CONSOLIDATED BALANCE SHEETS

AS OF DECEMBER 31, 2017 AND DECEMBER 31, 2016

(UNAUDITED)

(Dollars in millions)

 

As of
 December 31, 2017

 

As of
 December 31, 2016

ASSETS

     

CURRENT ASSETS

     

Cash and cash equivalents

$

551

   

222

 

Restricted cash

5

   

 

Other current assets

3,638

   

4,940

 

   Total current assets

4,194

   

5,162

 
       

NET PROPERTY, PLANT AND EQUIPMENT

     

Property, plant and equipment

51,204

   

39,194

 

Accumulated depreciation

(24,352)

   

(22,155)

 

   Net property, plant and equipment

26,852

   

17,039

 
       

GOODWILL AND OTHER ASSETS

     

Goodwill

30,409

   

19,650

 

Restricted cash

31

   

2

 

Other, net

14,065

   

5,164

 

    Total goodwill and other assets

44,505

   

24,816

 
       

TOTAL ASSETS

$

75,551

   

47,017

 
       

LIABILITIES AND STOCKHOLDERS' EQUITY

     

CURRENT LIABILITIES

     

Current maturities of long-term debt

$

443

   

1,503

 

Other current liabilities

4,411

   

3,846

 

    Total current liabilities

4,854

   

5,349

 
       

LONG-TERM DEBT

37,283

   

18,185

 

DEFERRED CREDITS AND OTHER LIABILITIES

9,985

   

10,084

 

STOCKHOLDERS' EQUITY

23,429

   

13,399

 
       

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY

$

75,551

   

47,017

 
       

 

 

 

CenturyLink, Inc.

 

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

 

TWELVE MONTHS ENDED DECEMBER 31, 2017 AND 2016

 

(UNAUDITED)

 

(Dollars in millions)

         
   

Twelve months ended

   

December 31, 2017 *

 

December 31, 2016 *

 

OPERATING ACTIVITIES

     
 

Net income

$

1,389

   

626

 
 

Adjustments to reconcile net income to net cash provided by operating activities:

     
 

  Depreciation and amortization

3,936

   

3,916

 
 

  Deferred income taxes

(1,193)

   

6

 
 

  Loss on the sale of data centers and colocation business

82

   

 
 

  Impairment of assets held for sale

   

13

 
 

  Provision for uncollectible accounts

173

   

192

 
 

  Net loss on early retirement of debt

5

   

27

 
 

  Share-based compensation

111

   

80

 
 

  Changes in current assets and liabilities, net

(302)

   

(108)

 
 

  Retirement benefits

(202)

   

(152)

 
 

  Changes in other noncurrent assets and liabilities, net

(197)

   

(18)

 
 

  Other, net

75

   

26

 
 

  Net cash provided by operating activities

3,877

   

4,608

 
 

INVESTING ACTIVITIES

     
 

  Payments for property, plant and equipment and capitalized software

(3,106)

   

(2,981)

 
 

  Cash paid for Level 3 acquisition, net of $2.3 billion cash acquired

(7,289)

   

 
 

  Cash paid for other acquisitions

(5)

   

(39)

 
 

  Proceeds from the sale of data centers and colocation business, less cash sold

1,467

   

 
 

  Proceeds from sale of property and intangible assets

62

   

30

 
 

  Other, net

   

(4)

 
 

  Net cash used in investing activities

(8,871)

   

(2,994)

 
 

FINANCING ACTIVITIES

     
 

Net proceeds from issuance of long-term debt

8,398

   

2,161

 
 

Proceeds from financing obligation

356

   

 
 

Payment of contingent consideration

(3)

   

 
 

Payments of long-term debt

(1,963)

   

(2,462)

 
 

Net payments on 2012 credit facility and revolving line of credit

35

   

(40)

 
 

Dividends paid

(1,453)

   

(1,167)

 
 

Proceeds from issuance of common stock

5

   

6

 
 

Shares withheld to satisfy tax withholdings

(17)

   

(16)

 
 

Net cash provided by (used in) financing activities

5,358

   

(1,518)

 
 

Effect of exchange rate changes on cash and cash equivalents

(1)

   

 
 

Net increase in cash, cash equivalents and restricted cash

363

   

96

 

*

Cash, cash equivalents and restricted cash at beginning of period

224

   

128

 

*

Cash, cash equivalents and restricted cash at end of period

$

587

   

224

 
         

 

 

*

In the second quarter of 2017, CenturyLink adopted Accounting Standards Update ("ASU") 2016-18, "Restricted Cash (a consensus of the FASB Emerging Issues Task Force)" ("ASU 2016-18"), which requires that a statement of cash flows explain the change in the total of cash, cash equivalents and amounts generally described as restricted cash and restricted cash equivalents as compared to the prior presentation, which explained only the change in cash and cash equivalents. ASU 2016-18 is effective January 1, 2018, but early adoption is permitted and requires retrospective application of the requirements to all previous periods presented.  This change was applied on a retrospective basis to all previous periods to match the current period presentation with immaterial impact.

 

 

CenturyLink, Inc.

SELECTED SEGMENT FINANCIAL INFORMATION

THREE MONTHS AND TWELVE MONTHS ENDED DECEMBER 31, 2017 AND 2016

(UNAUDITED)

(Dollars in millions)

                   
     

Three months ended
 December 31,

 

Twelve months ended
December 31,

     

2017

 

2016

 

2017

 

2016

Total segment revenues

 

$

5,135

   

4,115

   

16,924

   

16,766

 

Total segment expenses

 

2,818

   

2,248

   

9,390

   

9,081

 

Total segment income

 

$

2,317

   

1,867

   

7,534

   

7,685

 

Total segment income margin (segment income divided by segment revenues)

 

45.1

%

 

45.4

%

 

44.5

%

 

45.8

%

                   

Business

               

Revenues

 

$

3,734

   

2,630

   

11,220

   

10,704

 

Expenses

 

2,206

   

1,588

   

6,847

   

6,391

 
                   

Segment income

 

$

1,528

   

1,042

   

4,373

   

4,313

 

Segment income margin

 

40.9

%

 

39.6

%

 

39.0

%

 

40.3

%

                   

Consumer

               

Revenues

 

$

1,401

   

1,485

   

5,704

   

6,062

 

Expenses

 

612

   

660

   

2,543

   

2,690

 
                   

Segment income

 

$

789

   

825

   

3,161

   

3,372

 

Segment income margin

 

56.3

%

 

55.6

%

 

55.4

%

 

55.6

%

                   
                   
 

In January 2017, CenturyLink implemented a new organization structure designed to further strengthen its ability to attain our operational, strategic and financial goals. Prior to this reorganization, CenturyLink operated and reported as two segments, business and consumer. As a result of this reorganization, CenturyLink changed the name of the predecessor business segment to "enterprise" segment. Additionally, CenturyLink also reassigned its information technology, managed hosting, cloud hosting and hosting area network services from its former business segment to a new non-reportable operating segment. CenturyLink reported two segments, enterprise and consumer, from January 2017 through October 2017.

   
 

In connection with CenturyLink's acquisition of Level 3, CenturyLink implemented a new organization structure and began managing its operations in two segments: business and consumer. CenturyLink's consumer segment remains substantially unchanged under this reorganization, and CenturyLink's newly reorganized business segment includes the legacy CenturyLink enterprise segment operations and the legacy Level 3 operations. In addition, it reassigned its information technology, managed hosting, cloud hosting and hosting area network operations into the business segment from the former non-reportable operating segment.

 

 

CenturyLink, Inc.

NET DEBT TO LTM PRO FORMA ADJUSTED EBITDA RATIO

AS OF DECEMBER 31, 2017

(UNAUDITED)

(Dollars in millions)

   

Net Debt to LTM Pro Forma Adjusted EBITDA Ratio

 
   

Gross Debt

$

38,053

 

Cash and Cash Equivalents

(551)

 

Net Debt

$

37,502

 

LTM Pro Forma Adjusted EBITDA Excluding Acquisition-Related Expenses

$

8,698

 

Net Debt to LTM Adjusted EBITDA Ratio

4.31

 

 

Gross Debt is defined as total long-term debt, less unamortized discounts, premiums and other, net  of $23 million and unamortized debt issuance costs of $350 million.

Net Debt to Last Twelve Months (LTM) Pro Forma Adjusted EBITDA Ratio is defined as Gross Debt, reduced by cash and cash equivalents and divided by LTM Pro Forma Adjusted EBITDA Excluding Acquisition-Related Expenses.

Adjusted EBITDA is defined as operating income (loss) from the Pro Forma Combined Company Results less depreciation and amortization expense, non-cash impairment charges, non-cash stock compensation expense and special items, excluding CenturyLink colocation revenue and related estimated costs.


 

CenturyLink, Inc.

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES

(UNAUDITED)

(Dollars in millions, except per share amounts and shares in thousands)

       
 

Fourth Quarter 2017

   

Less

As Adjusted

 

As

Special

excluding

 

Reported

Items

Special Items

       

Net Income as reported in Consolidated Statement of Income

$

1,117

 

(956)

 

161

 

Weighted Average Shares Outstanding - Diluted

889,135

   

889,135

 
       

Diluted Earnings Per Share

$

1.26

   

0.18

 
       

Special items include:

     

Integration costs related to CenturyLink's acquisition of Level 3

 

$

206

   

Interest income related to Term Loan B Escrow account for pre-acquisition

 

(4)

   

Interest expense associated with Term Loan B for pre-acquisition

     

  colocation business

 

20

   

Income tax effect of special items

 

(46)

   

Impact of Tax Reform

 

(1,132)

   
   

$

(956)

   

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.

2018 OUTLOOK

(UNAUDITED)

(Dollars in millions)

       

Adjusted EBITDA Outlook

     

Twelve Months Ended December 31, 2018

     
 

Range

 

Low

 

High

Net Income

$

320

   

720

 

Income Tax Expense

120

   

240

 

Total Other Expense

2,300

   

2,200

 

Depreciation and Amortization Expense

5,500

   

5,400

 

Non-Cash Compensation Expense

210

   

190

 

Integration-related expenses

300

   

200

 

Adjusted EBITDA

$

8,750

   

8,950

 
       
       

Free Cash Flow Outlook

     

Twelve Months Ended December 31, 2018

     
 

Range

 

Low

 

High

Net Cash Provided by Operating Activities excluding integration costs

$

7,050

   

7,150

 

Capital Expenditures, excluding: integration projects

(3,900)

   

(3,800)

 

Free Cash Flow

$

3,150

   

3,350

 

CENTURYLINK STANDALONE

DESCRIPTION OF NON-GAAP FINANCIAL MEASURES

To enable investors to track CenturyLink's results through the end of 2017 on a basis that assumes CenturyLink did not acquire Level 3, we are providing selected unaudited results in the format previously used.

We use the term Special items as a non-GAAP measure to describe items that impacted a period's net income and the statement of operations for which investors may want to give special consideration due to their magnitude, nature or both. We do not use the term non-recurring because while some of these items are special because they are unusual and infrequent, others may recur in future periods.

We use Adjusted Earnings before interest, taxes, depreciation and amortization or the term Adjusted EBITDA as a non-GAAP measure to show profitability in our continuing, central business activities, without regard for the effects of special items, capital structure or tax structure, which may be helpful in analyzing trends or making comparisons to other companies that have different capital or tax structures.  Other companies may refer to this measure using the term Operating income before depreciation and amortization (OIBDA).  Adjusted EBITDA is an accrual based measure that has the effect of excluding quarter-to-quarter variances that are caused by changes in working capital. Adjusted EBITDA does not represent the residual cash flow available for discretionary expenditures, as mandatory debt service requirements and other non-discretionary expenditures are not deducted from the measure. It is also not intended to be used as a replacement for the GAAP measures of Operating income or Cash flows provided by operating activities. Rather it is intended to provide additional information to enhance the understanding of CenturyLink's GAAP financial information, and it should be considered by investors in addition to, but not in substitution for, the GAAP measures.

CenturyLink Standalone

REVENUES

(UNAUDITED)

(Dollars in millions)

                   
     

Three months ended

 

Twelve months ended

     

December 31,
2017

 

December 31,
2016

 

December 31,
2017

 

December 31,
2016

Strategic services *

               
 

Enterprise high-bandwidth data services (1)

 

$

773

   

755

   

3,069

   

2,990

 
 

Other enterprise strategic services (2)

 

181

   

331

   

916

   

1,320

 
 

IT and managed services (3)

 

169

   

158

   

652

   

641

 
 

Consumer broadband services (4)

 

688

   

666

   

2,683

   

2,689

 
 

Other consumer strategic services (5)

 

94

   

118

   

405

   

458

 
 

Total strategic services revenues

 

1,905

   

2,028

   

7,725

   

8,098

 
                 

Legacy services *

               
 

Enterprise voice services (6)

 

533

   

579

   

2,215

   

2,413

 
 

Enterprise low-bandwidth data services (7)

 

274

   

325

   

1,179

   

1,381

 
 

Other enterprise legacy services (8)

 

241

   

266

   

995

   

1,075

 
 

Consumer voice services (6)

 

513

   

589

   

2,191

   

2,443

 
 

Other consumer legacy services (9)

 

72

   

75

   

288

   

312

 
 

Total legacy services revenues

 

1,633

   

1,834

   

6,868

   

7,624

 
                   

Data integration

               

  Enterprise data integration

 

109

   

130

   

479

   

528

 

  IT and managed services data integration

 

4

   

   

18

   

3

 

  Consumer data integration

 

   

1

   

1

   

2

 

Total data integration revenues

 

113

   

131

   

498

   

533

 
                 

Other revenues

               

  High-cost support revenue (10)

 

166

   

170

   

667

   

688

 

  Other revenue (11)

 

147

   

126

   

539

   

527

 

Total other revenues

 

313

   

296

   

1,206

   

1,215

 
                 

Total revenues

 

$

3,964

   

4,289

   

16,297

   

17,470

 
                   
                   

 

(1)

Includes MPLS, Ethernet and wavelength revenue

(2)

Includes primarily colocation, broadband, VOIP, video and fiber lease revenue

(3)

Includes primarily IT services, managed hosting, cloud hosting and hosting area network revenue

(4)

Includes broadband and related services revenue

(5)

Includes video and other revenue

(6)

Includes local and long-distance voice revenue

(7)

Includes private line (including special access) revenue

(8)

Includes UNEs, public access, switched access and other ancillary revenue

(9)

Includes other ancillary revenue

(10)

Includes CAF Phase 1, CAF Phase 2 and federal and state USF support revenue

(11)

Includes USF surcharges and failed-sale-leaseback rental income

*

During the second quarter of 2017, CenturyLink determined that certain of its legacy services, specifically its dark fiber network leasing, are more closely aligned with CenturyLink's strategic services than with its legacy services. As a result, CenturyLink now reflects these operating revenues as strategic services, and CenturyLink has reclassified certain prior period amounts to conform to this change. The revision resulted in an increase of revenue from strategic services and a corresponding decrease in revenue from legacy services of $12 million and $48 million for the three and twelve months ended December 31, 2016, respectively.

 

 


 

CenturyLink Standalone

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES

(UNAUDITED)

(Dollars in millions)

                         
   

Three months ended December 31, 2017

 

Three months ended December 31, 2016

           

As adjusted

         

As adjusted

       

Less

 

excluding

     

Less

 

excluding

   

As

 

special

 

special

 

As

 

special

 

special

   

reported

 

items

 

items

 

reported

 

items

 

items

Adjusted EBITDA and adjusted EBITDA margin

                     
 

Operating income *

$

524

   

(206)

 

(1)

730

   

405

   

(186)

 

(3)

591

 
 

Add: Depreciation and amortization

1,197

   

   

1,197

   

958

   

(36)

 

(4)

994

 
 

Less: Operating revenues from Level 3

(1,406)

   

   

(1,406)

   

   

   

 
 

Add: Operating expenses less depreciation and amortization from Level 3

943

   

28

 

(2)

915

   

   

   

 
 

Add: Affiliate eliminations

47

     

47

       
 

Less: CenturyLink expenses billed from Level 3

(12)

     

(12)

       
 

Adjusted EBITDA

$

1,293

   

(178)

   

1,471

   

1,363

   

(222)

   

1,585

 
                         
 

Revenues

$

5,323

   

   

5,323

   

4,289

   

   

4,289

 
 

Less: Revenues from Level 3

(1,406)

   

   

(1,406)

   

   

   

 
 

Add: Affiliate eliminations

47

       

47

             
 

Revenues less Level 3

$

3,964

   

   

3,964

   

4,289

   

   

4,289

 
                         
 

Adjusted EBITDA margin (adjusted EBITDA divided by revenues)

32.6

%

     

37.1

%

 

31.8

%

     

37.0

%

                         

 

                         

SPECIAL ITEMS

                   

(1) -

Acquisition and integration costs associated with CenturyLink's acquisition of Level 3 ($178 million) incurred by CenturyLink and ($28 million) in transaction costs incurred by Level 3.

(2) -

Transaction costs incurred by Level 3 of $28 million.

(3) -

Includes severance costs associated with reduction in force initiatives ($148 million), integration costs associated with CenturyLink's acquisition of Qwest ($2 million), costs associated with a large billing system integration project ($2 million), costs related to our pending acquisition of Level 3 ($52 million), costs associated with our pending sale of the colocation business $7 million) and the impairment of a building ($11 million), offset by the termination of depreciation expense related to CenturyLink's pending sale of the colocation business $36 million.

(4) -

Termination of depreciation and amortization expense related to our sale of the colocation business ($36 million).

*

In the first quarter of 2017, CenturyLink adopted ASU 2017-07, "Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost" ("ASU 2017-07"). ASU 2017-07 modified the presentation of net periodic pension and postretirement benefit costs and requires the service cost component to be reported separately from the other components in order to provide more useful information. Under ASU 2017-07, the service cost component of net periodic pension and postretirement benefit costs is required to be presented in the same expense category as the related salary and wages for the employee. The other components of the net periodic pension and postretirement benefit costs are required to be recognized below operating income in other (expense) income, net in CenturyLink's consolidated statements of operations. This change was applied on a retrospective basis to all previous periods to match the current period presentation. This retrospective application resulted in a $13 million increase in operating income and a corresponding increase in total other expense, net for the three months ended December 31, 2016.

 

 


 

CenturyLink Standalone

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES

(UNAUDITED)

(Dollars in millions)

                         
   

Twelve months ended December 31, 2017

 

Twelve months ended December 31, 2016

           

As adjusted

         

As adjusted

       

Less

 

excluding

     

Less

 

excluding

   

As

 

special

 

special

 

As

 

special

 

special

   

reported

 

items

 

items

 

reported

 

items

 

items

Adjusted EBITDA and adjusted EBITDA margin

                     
 

Operating income *

$

2,009

   

(347)

 

(1)

2,356

   

2,333

   

(228)

 

(4)

2,561

 
 

Add: Depreciation and amortization

3,936

   

(6)

 

(2)

3,942

   

3,916

   

(36)

 

(5)

3,952

 
 

Less: Operating revenues from Level 3

(1,406)

   

   

(1,406)

   

   

   

 
 

Add: Operating expenses less depreciation and amortization from Level 3

943

   

28

 

(3)

915

   

   

   

 
 

Add: Affiliate eliminations

47

   

   

47

   

   

   

 
 

Less: CenturyLink expenses billed from Level 3

(12)

   

   

(12)

   

   

   

 
 

Adjusted EBITDA

$

5,517

   

(325)

   

5,842

   

6,249

   

(264)

   

6,513

 
                         
 

Revenues

$

17,656

   

   

17,656

   

17,470

   

   

17,470

 
 

Less: Revenues from Level 3

(1,406)

   

   

(1,406)

   

   

   

 
 

Add: Affiliate eliminations

47

   

   

47

   

   

   

 
 

Revenues less Level 3

$

16,297

     

   

16,297

   

17,470

   

   

17,470

 
                         
 

Adjusted EBITDA margin (adjusted EBITDA divided by revenues)

33.9

%

     

35.8

%

 

35.8

%

     

37.3

%

                         

 

                         

SPECIAL ITEMS

               

(1) -

Acquisition and integration costs associated with CenturyLink's acquisition of Level 3 ($243 million) incurred by CenturyLink and ($28 million) in transaction costs incurred by Level 3, a loss associated with the sale of CenturyLink's data centers and colocation business ($82 million), partially offset by the termination of depreciation and amortization expense related to CenturyLink's sale of the data centers and colocation business $50 million, which were substantially offset by additional depreciation expense adjustment recorded on real estate assets CenturyLink was required to reflect on its balance sheet as a result of not meeting the requirement of sale leaseback accounting ($44 million).

(2) -

Termination of depreciation and amortization expense related to CenturyLink's sale of the data centers and colocation business ($50 million), which were substantially offset by additional depreciation expense adjustment recorded of $44 million on real estate assets CenturyLink was required to reflect on its balance sheet as a result of not meeting the requirement of sale leaseback accounting.

(3) -

Transaction costs incurred by Level 3 of $28 million.

(4) -

Includes severance costs associated with reduction in force initiatives ($173 million), integration costs associated with CenturyLink's acquisition of Qwest ($10 million) and costs associated with a large billing system integration project ($15 million), less an offsetting gain on the sale of a building $4 million.

(5) -

Termination of depreciation and amortization expense related to our sale of the colocation business ($36 million).

   

*

In the first quarter of 2017, CenturyLink adopted ASU 2017-07, "Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost" ("ASU 2017-07"). ASU 2017-07 modified the presentation of net periodic pension and postretirement benefit costs and requires the service cost component to be reported separately from the other components in order to provide more useful information. Under ASU 2017-07, the service cost component of net periodic pension and postretirement benefit costs is required to be presented in the same expense category as the related salary and wages for the employee. The other components of the net periodic pension and postretirement benefit costs are required to be recognized in other (expense) income, net in CenturyLink's consolidated statements of operations. This change was applied on a retrospective basis to all previous periods to match the current period presentation. This retrospective application resulted in a $2 million increase in operating income and a corresponding increase in total other expense, net for the twelve months ended December 31, 2016.

                                         

 

 


 

CenturyLink Standalone

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES

(UNAUDITED)

(Dollars in millions)

               
 

Fourth
Quarter

 

Fourth
Quarter

 

Full
Year

 

Full
Year

 

2017

 

2016

 

2017

 

2016

               

Consolidated payments for property, plant and equipment and software

$

743

   

971

   

3,106

   

2,981

 
               

Less Two Months Level 3 capital expenditures

(207)

   

   

(207)

   

 
               

Capital Expenditures for CenturyLink Standalone

536

   

971

   

2,899

   

2,981

 
               

Less Capital expenditures related to integration of Qwest and Level 3

(8)

   

(8)

   

(13)

   

(23)

 
               

Capital expenditures excluding integration of Qwest and Level 3

$

528

   

963

   

2,886

   

2,958

 
               

 

 

CenturyLink Standalone

OPERATING METRICS

(UNAUDITED)

               
               
     

As of

 

As of

 

As of

     

December 31, 2017

 

September 30, 2017

 

December 31, 2016

               
     

(In thousands)

Operating Metrics

           

Broadband subscribers

 

5,662

   

5,767

   

5,945

 

Access lines

 

10,282

   

10,506

   

11,090

 
               
               

 

 

 

CenturyLink's methodology for counting broadband subscribers and access lines may not be comparable to those of other companies.

 

Level 3 Standalone

Description of Non-GAAP Metrics

To enable investors to track Level 3's results through the end of 2017 on a basis that assumes CenturyLink did not acquire Level 3, we are providing selected unaudited results in the format previously used.

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.

In addition, measures referred to in the accompanying news release as being calculated "on a constant currency basis" or "in constant currency terms" are non-GAAP metrics intended to present the relevant information assuming a constant exchange rate between the two periods being compared. Such metrics are calculated by applying the currency exchange rates used in the preparation of the prior period financial results to the subsequent period results.

Core Network Services Revenue includes revenue from colocation and datacenter services, transport and fiber, IP and data services, and voice services (local and enterprise).

Network Access Costs includes leased capacity, right-of-way costs, access charges, satellite transponder lease costs and other third party costs directly attributable to providing access to customer locations from the Level 3 network, but excludes Network Related Expenses, and depreciation and amortization. Network Access Costs do not include any employee expenses or impairment expenses; these expenses are allocated to Network Related Expenses or Selling, General and Administrative Expenses.

Network Related Expenses includes certain expenses associated with the delivery of services to customers and the operation and maintenance of the Level 3 network, such as facility rent, utilities, maintenance and other costs, each related to the operation of its communications network, as well as salaries, wages and related benefits (including non-cash share-based compensation expenses) associated with personnel who are responsible for the delivery of services, operation and maintenance of its communications network, and accretion expense on asset retirement obligations, but excludes depreciation and amortization.

Network Access Margin ($) is defined as total Revenue less Network Access Costs from the Statements of Income, and excludes Network Related Expenses.

Network Access Margin (%) is defined as Network Access Margin ($) divided by total Revenue. Management believes that network access margin is a relevant metric to provide to investors, as it is a metric that management uses to measure the margin available to Level 3 after it pays third party network services costs; in essence, a measure of the efficiency of Level 3's network.

Adjusted EBITDA ($) is defined as net income (loss) from the Statements of Income before income tax (expense) benefit, total other income (expense), non-cash impairment charges, depreciation and amortization and non-cash stock compensation expense.

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 Level 3's internal reporting and are key measures used by Management to evaluate profitability and operating performance of Level 3 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 acquisition-related expenses) to compare Level 3'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 impairment charges and non-cash stock compensation expense because of the non-cash nature of these items. Adjusted EBITDA also excludes interest income, interest expense and income taxes because these items are associated with Level 3's capitalization and tax structures. 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 Level 3.

There are 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 Level 3'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 impairment charges, 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 acquisition-related expense adjustments) 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 Income. Management believes that Unlevered Cash Flow is a relevant metric to provide to investors, as it is an indicator of the operational strength and performance of Level 3 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 Level 3'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 Level 3's Unlevered Cash Flow to that of some of its competitors may be of limited usefulness since Level 3 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 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 Level 3'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 Level 3'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 Level 3's Free Cash Flow to that of some of its competitors may be of limited usefulness since Level 3 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.

Level 3 Standalone

FINANCIAL RESULTS

THREE MONTHS ENDED DECEMBER 31, 2017 AND 2016

(UNAUDITED)

(Dollars in millions)

     
   

Three months ended December 31,

   

2017

 

2016 (1)

         

Core Network Services Revenue

$

2,017

   

1,933

 

Wholesale Voice Services Revenue

93

   

99

 
 

Total Revenue

2,110

   

2,032

 

Network Access Costs

724

   

680

 

Network Access Margin

65.7

%

 

66.5

%

Network Related Expenses (NRE) (2)(7)

335

   

327

 

Selling, General & Administrative Expenses (SG&A) (2)

387

   

316

 

Non-cash Compensation Expense

32

   

35

 

Adjusted EBITDA (3)

664

   

709

 

Adjusted EBITDA, excluding acquisition-related expenses (3) (4)

758

   

724

 

Adjusted EBITDA Margin (3)

31.5

%

 

34.9

%

Adjusted EBITDA Margin, excluding acquisition-related expenses (3) (4)

35.9

%

 

35.6

%

Cash Flows from Operating Activities (5)

431

   

557

 

Capital Expenditures

308

   

306

 

Capital Expenditures, excluding acquisition-related capital expenditures (6)

301

   

306

 

Unlevered Cash Flow (3)

221

   

386

 

Unlevered Cash Flow, excluding cash acquisition-related expenses (3) (4) (5)

451

   

401

 

Free Cash Flow (3)

123

   

251

 

Free Cash Flow, excluding cash acquisition-related expenses (3) (5)

353

   

266

 

Net Income

74

   

250

 

 

         

(1) -

The reported fourth quarter 2016 results have been adjusted to reflect changes made to customer assignments between the wholesale and enterprise channels as of the beginning of 2017.

(2) -

Excludes non-cash compensation expense.

(3) -

See schedule of non-GAAP metrics for definitions and reconciliation to GAAP measures.

(4) -

In the fourth quarter 2017, acquisition-related expenses were $87 million and $15 million in fourth quarter 2016. In the fourth quarter 2017, 401K matching contributions of $7 million were funded with cash under the CenturyLink plan

(5) -

In the fourth quarter 2017, cash paid for acquisition-related expenses was $223 million and $15 million in fourth quarter 2016.

(6) -

In the fourth quarter 2017, acquisition-related capital expenditures were $7 million.

(7) -

Included in cost of services and products in statements of income to conform to CentruyLink presention.

 

 


 

Level 3 Standalone

QUARTERLY CONSTANT CURRENCY

(UNAUDITED)

(Dollars in millions)

                       
     

4Q16 FX

3Q17 FX

       

4Q16 FX

 

3Q17 FX

                       
     

4Q17

Constant

Currency

       

4Q17/

4Q16

%
Change

4Q17
Constant
Currency/

4Q16
%
Change(3)

4Q17/

3Q17
%
Change

4Q17
Constant
Currency/

3Q17
%
Change(3)

   

4Q17

4Q17
Constant
Currency

4Q16(2)

3Q17

 
                       

North America

$

1,644

 

1,644

 

1,644

 

1,584

 

1,597

   

3.8

%

3.8

%

2.9

%

2.9

%

 

Wholesale

399

 

399

 

399

 

405

 

404

   

(1.5)

%

(1.5)

%

(1.2)

%

(1.2)

%

 

Enterprise

1,245

 

1,245

 

1,245

 

1,179

 

1,193

   

5.6

%

5.6

%

4.4

%

4.4

%

                     

EMEA

$

188

 

180

 

187

 

179

 

184

   

5.0

%

0.6

%

2.2

%

1.7

%

 

Wholesale

57

 

54

 

57

 

55

 

57

   

3.6

%

(2.1)

%

%

0.5

%

 

Enterprise

118

 

114

 

117

 

108

 

113

   

9.3

%

5.3

%

4.4

%

3.7

%

 

UK Govt

13

 

12

 

13

 

16

 

14

   

(18.8)

%

(22.3)

%

(7.1)

%

(8.9)

%

                       

Latin America

$

185

 

184

 

186

 

170

 

182

   

8.8

%

8.0

%

1.6

%

2.3

%

 

Wholesale

33

 

33

 

34

 

34

 

35

   

(2.9)

%

(3.6)

%

(5.7)

%

(3.4)

%

 

Enterprise

152

 

151

 

152

 

136

 

147

   

11.8

%

11.0

%

3.4

%

3.7

%

                     

Total CNS Revenue

$

2,017

 

2,008

 

2,017

 

1,933

 

1,963

   

4.3

%

3.8

%

2.8

%

2.8

%

 

Wholesale

489

 

486

 

490

 

494

 

496

   

(1.0)

%

(1.8)

%

(1.4)

%

(1.1)

%

 

Enterprise (1)

1,528

 

1,522

 

1,527

 

1,439

 

1,467

   

6.2

%

5.7

%

4.2

%

4.1

%

                       

Total CNS Revenue

$

2,017

 

2,008

 

2,017

 

1,933

 

1,963

   

4.3

%

3.8

%

2.8

%

2.8

%

                     

Wholesale Voice Services

93

 

93

 

93

 

99

 

96

   

(6.1)

%

(5.6)

%

(3.1)

%

(3.6)

%

                     

Total Revenues

$

2,110

 

2,101

 

2,110

 

2,032

 

2,059

   

3.8

%

3.3

%

2.5

%

2.5

%

                       

Total Enterprise CNS Revenue, excluding UK Government revenue

$

1,515

 

1,510

 

1,514

 

1,423

 

1,453

   

6.5

%

6.0

%

4.3

%

4.2

%

                       

 

(1)

Includes EMEA UK Government revenue.

           

(2)

The 2016 results have been adjusted to reflect changes made to customer assignments between the wholesale and enterprise channels as of the beginning of 2017.

 

(3)

Percentages are calculated using whole numbers. Minor differences may exist due to rounding.

 

 

 

 

Level 3 Standalone

Adjusted EBITDA Metric

(UNAUDITED)

(Dollars in millions)

                     
   

Actuals

         
   

Predecessor

 

Successor

           
   

One month
ended
October 31,
2017

 

Two months
ended
December 31,
2017

 

Less
Adjustments

 

Combined
Predecessor
Successor
4Q17

 

Actuals
4Q16

                     
                     
                     

Net income (loss)

$

19

   

(141)

   

(196)

   

74

   

250

 

Income tax (benefit) expense

53

   

234

   

179

   

108

   

(33)

 

Total other expense

41

   

65

   

(10)

   

116

   

137

 

Depreciation and Amortization

104

   

282

   

52

   

334

   

320

 

Non-Cash Stock Compensation

12

   

26

   

6

   

32

   

35

 

Adjusted EBITDA

229

   

466

   

31

   

664

   

709

 
                   

Acquisition-related  Expenses

12

   

28

   

(47)

   

87

   

15

 

401(k) cash matching contributions

   

7

   

   

7

   

 

Adjusted EBITDA excluding acquisition- related expenses

$

241

   

501

   

(16)

   

758

   

724

 
                     

Core Network Service Revenue

$

669

   

1,346

   

(2)

   

2,017

   

1,933

 

Wholesale Voice Services and Other Revenue

32

   

61

   

   

93

   

99

 

Total Revenue

$

701

   

1,407

   

(2)

   

2,110

   

2,032

 
                   

Adjusted EBITDA Margin

32.7

%

 

33.1

%

     

31.5

%

 

34.9

%

                   

Adjusted EBITDA (excluding acquisition related expenses) Margin

34.4

%

 

35.6

%

     

35.9

%

 

35.6

%

 

 

 

Level 3 Standalone

Adjusted EBITDA Metric

(UNAUDITED)

(Dollars in millions)

                     
   

Actuals

         
   

Predecessor

 

Successor

           
   

Ten months
ended
October 31,
2017

 

Two months
ended
December 31,
2017

 

Less
Adjustments

 

Combined

Predecessor

Successor

FY 2017

 

Actuals

FY 2016

                     
                     
                     

Net income

$

425

   

(141)

   

(196)

   

480

   

677

 

Income tax (benefit) expense

268

   

234

   

179

   

323

   

165

 

Total other expense

458

   

65

   

(17)

   

540

   

602

 

Depreciation and Amortization

1,030

   

282

   

(5)

   

1,317

   

1,250

 

Non-Cash Stock Compensation

132

   

26

   

6

   

152

   

156

 

Adjusted EBITDA

2,313

   

466

   

(33)

   

2,812

   

2,850

 
                   

Acquisition-Related Expenses

85

   

28

   

(47)

   

160

   

15

 

401(k) cash matching contributions

   

7

   

   

7

   

 

Adjusted EBITDA excluding acquisition related expenses

$

2,398

   

501

   

(80)

   

2,979

   

2,865

 
                     

Core Network Service Revenue

$

6,543

   

1,346

   

(2)

   

7,891

   

7,764

 

Wholesale Voice Services and Other Revenue

327

   

61

   

1

   

387

   

408

 

Total Revenue

$

6,870

   

1,407

   

(1)

   

8,278

   

8,172

 
                   

Adjusted EBITDA Margin

33.7

%

 

33.1

%

     

34.0

%

 

34.9

%

                   

Adjusted EBITDA (excluding acquisition related expenses) Margin

34.9

%

 

35.6

%

     

36.0

%

 

35.1

%

 

 

 

Level 3 Standalone

Cash Flows

(UNAUDITED)

(Dollars in millions)

                     
   

Actuals

         
   

Predecessor

 

Successor

           
   

One month
ended
October 31,
2017

 

Two months
ended
December 31,
2017

 

Less
Adjustments

 

Combined

Predecessor

Successor

4Q17

 

Actuals

4Q16

                     

Net cash used in Investing Activities

$

(101)

   

(2,032)

   

   

(2,133)

   

(303)

 

Net cash used in Financing Activities

$

   

(251)

   

   

(251)

   

(2)

 

Net cash provided by Operating Activities

$

123

   

308

   

   

431

   

557

 

Capital Expenditures

(101)

   

(207)

   

   

(308)

   

(306)

 

Free Cash Flow

22

   

101

   

   

123

   

251

 

Cash Interest paid

56

   

56

   

   

112

   

136

 

Interest Income

(2)

   

(12)

   

   

(14)

   

(1)

 

Unlevered Cash Flow

$

76

   

145

   

   

221

   

386

 
                     

Free Cash Flow

$

22

   

101

   

   

123

   

251

 

Add back: Cash Acquisition-Related Expenses

14

   

162

   

(47)

   

223

   

15

 

Add back: 401(k) cash funding

   

7

   

   

7

   

Free Cash Flow Excluding Cash Acquisition-Related Expenses

$

36

   

270

   

(47)

   

353

   

266

 
                   

Unlevered Cash Flow

$

76

   

145

   

   

221

   

386

 

Add back: Cash Acquisition-Related Expenses

14

   

162

   

(47)

   

223

   

15

 

Add back: 401(k) cash funding

   

7

   

   

7

   

 

Unlevered Cash Flow Excluding Cash Acquisition-Related Expenses

$

90

   

314

   

(47)

   

451

   

401

 

 

 

 

Level 3 Standalone

Cash Flows

(UNAUDITED)

(Dollars in millions)

                     
   

Actuals

         
   

Predecessor

 

Successor

           
   

Ten months
ended
October 31,
2017

 

Two months
ended
December 31,
2017

 

Less
Adjustments

 

Combined

Predecessor

Successor

FY 2017

 

Actuals

FY 2016

                     

Net cash used in Investing Activities

$

(1,114)

   

(2,032)

   

   

(3,146)

   

(1,319)

 

Net cash used in Financing Activities

$

(348)

   

(251)

   

   

(599)

   

(56)

 

Net cash provided by Operating Activities

$

1,914

   

308

   

   

2,222

   

2,343

 

Capital Expenditures

(1,119)

   

(207)

   

   

(1,326)

   

(1,334)

 

Free Cash Flow

795

   

101

   

   

896

   

1,009

 

Cash Interest paid

468

   

56

   

   

524

   

508

 

Interest Income

(13)

   

(12)

   

   

(25)

   

(4)

 

Unlevered Cash Flow

$

1,250

   

145

   

   

1,395

   

1,513

 
                     

Free Cash Flow

$

795

   

101

   

   

896

   

1,009

 

Add back: Cash Acquisition-Related Expenses

29

   

162

   

(47)

   

238

   

15

 

Add back: 401(k) cash funding

   

7

   

   

7

   

 

Free Cash Flow Excluding Cash Acquisition-Related Expenses

$

824

   

270

   

(47)

   

1,141

   

1,024

 
                   

Unlevered Cash Flow

$

1,250

   

145

   

   

1,395

   

1,513

 

Add back: Cash Acquisition-Related Expenses

29

   

162

   

(47)

   

238

   

15

 

Add back: 401(k) cash funding

   

7

   

   

7

   

 

Unlevered Cash Flow Excluding Cash Acquisition-Related Expenses

$

1,279

   

314

   

(47)

   

1,640

   

1,528

 

 

 

 

 

Level 3 Standalone

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES

(UNAUDITED)

(Dollars in millions)

       
 

Fourth
Quarter

 

Full Year

 

2017

 

2017

       

Consolidated Capital Expenditures through October 31, 2017

$

101

   

1,119

 
       

Add November and December

207

   

207

 
       

Capital expenditures

308

   

1,326

 
       

Less: acquisition-related capital expenditures

(7)

   

(17)

 
       

Capital expenditures less acquisition-related expenditures

$

301

   

1,309

 

 

 

 

CenturyLink, Inc. Pro Forma Combined Company Results

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES

(UNAUDITED)

(Dollars in millions)

                                 
                                 
   

 Three Months ending December 31, 2017

 

 Twelve Months ending December 31, 2017

   

 Reported

 

Add Month

     

 Pro Forma

 

 Reported

 

Predecessor

      Pro Forma
   

Consolidated

 

of October

 

 Pro Forma

 

 Combined

 

Consolidated

 

Level 3

 

 Pro Forma

  Combined
   

 CenturyLink

 

 Level 3

 

 Adjustments

 

 Company

 

 CenturyLink

 

October YTD

 

 Adjustments

 

 Company

                                 

 OPERATING REVENUES

                             
 

 Operating revenues

$

5,323

   

701

   

(21)

 

 (a)

6,003

   

17,656

   

6,870

   

(205)

 

 (a)

24,321

 
 

 Less colocation sold to Cyxtera and not retained

           

2

               

(194)

 
               

6,005

               

24,127

 

 OPERATING EXPENSES

                             
 

 Cost of services and products

2,498

   

361

   

(21)

 

 (a)

2,838

   

8,203

   

3,481

   

(195)

 

 (a)

11,489

 
 

 Selling, general and administrative

1,104

   

123

   

   

1,227

   

3,508

   

1,208

   

   

4,716

 
 

 Depreciation and amortization

1,197

   

104

   

   

1,301

   

3,936

   

1,030

   

172

 

 (b)

5,138

 
 

 Less estimated net costs of colocation sold to Cyxtera and not retained

                           

(100)

 
   

 

   

 

   

 

   

5,366

   

 

   

 

   

 

   

21,243

 
                                 

 OPERATING INCOME

 

   

 

   

 

   

639

   

 

   

 

         

2,884

 
                                 
 

Depreciation and amortization

           

1,301

       

 

       

5,138

 
 

Non Cash Compensation

           

54

               

238

 
                                 

ADJUSTED EBITDA INCLUDING SPECIAL ITEMS AND

           

$

1,994

               

8,260

 

ACQUISITION- RELATED EXPENSES

                             
                                 
 

Level 3 acquisition related expenses

           

$

39

               

113

 
 

CenturyLink special items and acquisition-related expenses

           

178

               

325

 
                                 

ADJUSTED EBITDA EXCLUDING SPECIAL ITEMS AND

           

217

               

438

 

ACQUISITION- RELATED EXPENSES

           

$

2,211

               

8,698

 
                                 

 

 

                                 
 

* Reported in CenturyLink Consolidated Statement of Operations

 

** Reported in Level 3 Consolidated Statement of Operations

                                 

(a)

Adjustment reflects the elimination of operating revenues and expenses for existing commercial transactions between CenturyLink and Level 3 ($19 million) for the three months ending December 31, 2017 and ($193 million) for the twelve months ending December 31, 2017 and elimination of Level 3 deferred revenues ($2 million) for the three months ended December 31, 2017 and ($12 million) for the twelve months ended December  31, 2017.

                                 

(b)

Depreciation expense decreased on Level 3's property, plant and equipment resulting from decreased PP&E fair value; ($303 million) for twelve months ending December 31, 2017. Increase in amortization expense resulting from increase intangible asset fair value and $475 million for the twelve months ending December 31, 2017

 

 


 

CenturyLink, Inc. Pro Forma Combined Company Results

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES

(UNAUDITED)

(Dollars in millions)

                                 
                                 
   

 Three Months ending December 31, 2016

 

 Twelve Months ending December 31, 2016

               

 Pro Forma

              Pro Forma
   

 Reported *

 

 Reported **

 

 Pro Forma

 

 Combined

 

 Reported *

 

 Reported **

 

 Pro Forma

  Combined
   

 CenturyLink

 

 Level 3

 

 Adjustments

 

 Company

 

 CenturyLink

 

 Level 3

 

 Adjustments

 

 Company

                                 

 OPERATING REVENUES

                             
 

 Operating revenues

$

4,289

   

2,032

   

(62)

 

 (a)

6,259

   

17,470

   

8,172

   

(264)

 

 (a)

25,378

 
 

 Less colocation sold to Cyxtera and not retained

           

(147)

               

(594)

 
               

6,112

               

24,784

 

 OPERATING EXPENSES

                             
 

 Cost of services and products

1,929

   

1,029

   

(56)

 

 (a)

2,902

   

7,774

   

4,128

   

(236)

 

 (a)

11,666

 
 

 Selling, general and administrative

997

   

345

   

   

1,342

   

3,447

   

1,407

   

   

4,854

 
 

 Depreciation and amortization

958

   

303

   

67

 

 (b)

1,328

   

3,916

   

1,193

   

408

 

 (b)

5,517

 
 

 Less estimated net costs of colocation sold to Cyxtera and not retained

           

(75)

               

(300)

 
   

 

   

 

   

 

   

5,497

   

 

   

 

   

 

   

21,737

 
                                 

 OPERATING INCOME

 

   

 

   

 

   

615

   

 

         

 

   

3,047

 
                                 
 

Depreciation and amortization

           

1,328

               

5,517

 
 

Non Cash Compensation

           

55

               

236

 
                                 

ADJUSTED EBITDA INCLUDING SPECIAL ITEMS AND

           

$

1,998

               

8,800

 

ACQUISITION- RELATED EXPENSES

                             
                                 
 

Level 3 acquisition related expenses

           

$

15

               

15

 
 

CenturyLink special items and acquisition-related expenses

           

222

               

264

 
               

237

               

279

 
                                 

ADJUSTED EBITDA EXCLUDING SPECIAL ITEMS AND

                             

ACQUISITION- RELATED EXPENSES

           

$

2,235

               

9,079

 
                                 

 

                                 
 

* Reported in CenturyLink Consolidated Statement of Operations

 

** Reported in Level 3 Consolidated Statement of Operations

                                 

(a)

Adjustment reflects the elimination of operating revenues and operating expenses for existing commercial transactions between CenturyLink and Level 3 ($56 million) for the three months ending December 31, 2016 and ($236 million) for the twelve months ending December 31, 2016. The operating revenues recognized by Level 3 associated with the existing deferred revenues from prior installation activities that will likely be assigned little or no value in the purchase price allocation process ($6 million) for the three months ending December 31, 2016 and ($28 million) for the twelve months ending December 31, 2016.

                                 

(b)

Depreciation expense decreased on Level 3's property, plant and equipment resulting from decreased PP&E fair value; ($89 million) for the three months ending December 31, 2016 and ($216 million) for the twelve months ending December 31, 2016. Increase in amortization expense resulting from increased intangible asset fair value; $156 million for the three months ending December 31, 2016 and $624 million for the twelve months ending December 31, 2016

 

 

 

CenturyLink, Inc. Pro Forma Combined Company Results

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES

(UNAUDITED)

(Dollars in millions)

               
 

Fourth
Quarter

 

Fourth
Quarter

 

Full Year

 

Full Year

 

2017

 

2016

 

2017

 

2016

               

CenturyLink Consolidated Capital Expenditures

$

743

   

971

   

3,106

   

2,981

 
               

Capital Expenditures Predecessor Level 3

101

   

306

   

1,119

   

1,334

 
               

Pro Forma Capital Expenditures

844

   

1,277

   

4,225

   

4,315

 
               

Less CenturyLink Standalone Capital Expenditures related to integration of Qwest and Level 3

(8)

   

(8)

   

(13)

   

(23)

 
               

Less Level 3 Standalone Capital Expenditures related to integration

(7)

   

   

(17)

   

 
               

Less Capital Expenditures related to colocation business

   

(21)

   

(14)

   

(58)

 
               

Pro Forma Capital Expenditures excluding colocation business and integration of Qwest and Level 3

$

829

   

1,248

   

4,181

   

4,234

 
               

 

 

 

CenturyLink, Inc. Pro Forma Combined Company Results

ADJUSTED PRO FORMA REVENUE BY QUARTER

(UNAUDITED)

(Dollars in millions)

           
 

Fourth
Quarter

Third
Quarter

Second
Quarter

First
Quarter

Fourth
Quarter

 

2017

2017

2017

2017

2016

Business

$

4,415

 

4,427

 

4,419

 

4,429

 

4,451

 

Consumer

1,401

 

1,420

 

1,436

 

1,447

 

1,485

 

Regulatory

189

 

186

 

185

 

174

 

176

 

Total Adjusted Pro Forma Revenue

$

6,005

 

6,033

 

6,040

 

6,050

 

6,112

 
           

By Business Unit

         

Medium & Small Business

$

874

 

896

 

893

 

901

 

918

 

Enterprise

1,324

 

1,311

 

1,296

 

1,292

 

1,263

 

International & Global Accounts

941

 

918

 

911

 

891

 

905

 

Wholesale & Indirect

1,276

 

1,302

 

1,319

 

1,345

 

1,365

 

Consumer

1,401

 

1,420

 

1,436

 

1,447

 

1,485

 

Regulatory

189

 

186

 

185

 

174

 

176

 

Total Adjusted Pro Forma Revenue

$

6,005

 

6,033

 

6,040

 

6,050

 

6,112

 
           

By Service Type

         

IP & Data Services

$

1,839

 

1,811

 

1,807

 

1,819

 

1,802

 

Transport & Infrastructure

2,092

 

2,108

 

2,119

 

2,092

 

2,128

 

Voice & Collaboration

1,716

 

1,759

 

1,768

 

1,812

 

1,848

 

IT & Managed Services

169

 

169

 

161

 

153

 

158

 

Regulatory

189

 

186

 

185

 

174

 

176

 

Total Adjusted Pro Forma Revenue

$

6,005

 

6,033

 

6,040

 

6,050

 

6,112

 
           
           

 

 

 

 

SOURCE CenturyLink, Inc.

For further information: Investor Relations Contact: Kristina Waugh, 318-340-5627, Kristina.r.waugh@centurylink.com