CenturyLink Reports Strong First Quarter 2014 Results

CenturyLink Reports Strong First Quarter 2014 Results

Achieved operating revenues of $4.54 billion, including core revenues(1) of $4.11 billion

Generated operating cash flow(2) of $1.79 billion, excluding special items

Generated free cash flow(2) of $860 million, excluding special items and integration-related capital expenditures

Achieved Adjusted Net Income(2) of $381 million and Adjusted Diluted EPS(2) of $0.66, excluding special items

Added nearly 66,000 high-speed Internet and 24,000 CenturyLink® Prism(TM) TV customers during first quarter

Repurchased 58.7 million shares through May 6, 2014 for approximately $1.97 billion since inception of $2 billion program in February 2013; representing 9.4% of outstanding shares as of December 31, 2012.

MONROE, La., May 7, 2014 /PRNewswire/ -- CenturyLink, Inc. (NYSE: CTL) today reported strong operating revenues, operating cash flow and free cash flow for first quarter 2014.

http://photos.prnewswire.com/prnvar/20090602/DA26511LOGO

"CenturyLink generated strong first quarter financial and operating results, driven by continued business demand for high-bandwidth data services, consumer demand for high-speed Internet and Prism TV services, hosting revenue growth and a solid improvement in the rate of legacy revenue decline," said Glen F. Post III, chief executive officer and president. "Total operating revenues of $4.54 billion for the quarter exceeded our revenue guidance and our first quarter 2013 total operating revenues of $4.51 billion, reflecting stronger than anticipated Data Integration revenues, while Core Revenues of $4.11 billion were near the top of our guidance. Cash flows for the quarter were also strong, primarily due to our revenue outperformance and disciplined cost containment by our employees.

"We continue to see increasing demand from business customers for our reliable, secure solutions that meet their network and hosting needs. We are pleased with the early success of our Managed Office product suite launch, as well as the continued strength in multi-site MPLS(3) sales. Our integration of Tier 3 continues to progress well as we added our new cloud nodes in two CenturyLink data centers in the first quarter and remain on track to add these nodes in four additional CenturyLink data centers by year-end. We believe this advanced cloud infrastructure technology significantly strengthens our capabilities to meet the growing demand for highly automated cloud and managed services.

"Overall, I'm very pleased with first quarter results and our continued progress toward revenue stability," Post concluded.

First Quarter 2014 Highlights


-- Achieved core revenues of $4.11 billion in first quarter, nearly flat
year-over-year, compared with a 2.0% year-over-year decline in first
quarter 2013; Strategic revenues(4) grew 5.4% from the first quarter a
year-ago.
-- Generated free cash flow of $860 million, excluding special items and
integration-related capital expenditures.
-- Continued strength in sales of high bandwidth data services to business
customers.
-- Added approximately 66,000 high-speed Internet customers during first
quarter, ending the period with more than 6 million customers in
service.
-- Ended the quarter with nearly 200,000 CenturyLink(® )Prism(TM) TV
customers, an increase of approximately 24,000 in first quarter 2014.
-- Purchased and retired an additional 10.4 million shares for $319 million
during first quarter 2014.
Consolidated Financial Results

Operating revenues for first quarter 2014 increased to $4.54 billion from $4.51 billion in first quarter 2013 driven by higher strategic and data integration revenues. The increase in strategic revenues was primarily due to increased business customer demand for high-bandwidth data services and hosting solutions, along with growth in the number of high-speed Internet and CenturyLink(® )Prism(TM) TV customers. This increase was partially offset by lower legacy services revenues, primarily due to the impact of access line losses and lower access revenues.

Operating expenses, excluding special items, increased to $3.86 billion from $3.70 billion in first quarter 2013. The year-over-year increase was primarily driven by higher CPE sales and maintenance costs, employee-related expenses, facility costs, weather-related power costs and expenses related to the growth of Prism(TM) TV. Also contributing to this year-over-year increase was the impact of certain one-time favorable expense reductions experienced during first quarter 2013, which resulted in higher operating margins in the year-ago period.

Operating cash flow (as defined in our attached supplemental schedules), excluding special items, decreased to $1.79 billion from $1.93 billion in first quarter 2013. For first quarter 2014, CenturyLink achieved an operating cash flow margin, excluding special items, of 39.4% versus 42.8% in first quarter 2013. These decreases were primarily driven by the result of lower legacy revenues and the expense impacts described above.

Adjusted Net Income and Adjusted Diluted Earnings Per Share (Adjusted Diluted EPS)

Adjusted Net Income and Adjusted Diluted EPS exclude the after-tax impact of special items, the non-cash after-tax impact of the amortization of intangible assets related to acquisitions since mid-2009, and the non-cash after-tax impact to interest expense of the assignment of fair value to the outstanding debt assumed in connection with those acquisitions.

Excluding the items outlined above, CenturyLink's Adjusted Net Income for first quarter 2014 was $381 million compared to Adjusted Net Income of $475 million in first quarter 2013. First quarter 2014 Adjusted Diluted EPS was $0.66 compared to $0.76 in the year-ago period. See the attached schedules for additional information.

GAAP Results

Under generally accepted accounting principles (GAAP), net income for first quarter 2014 was $203 million compared to $298 million for first quarter 2013, and diluted earnings per share for first quarter 2014 was $0.35 compared to $0.48 for first quarter 2013.

For details regarding the Company's special items for the three months ended March 31, 2014 and 2013, please see the accompanying financial schedules.

Segment Financial Results(5)

Consumer

The Consumer segment achieved strong strategic revenue growth driven by increased high-speed Internet and CenturyLink(® )Prism(TM) TV customers, price increases on certain products and lower customer churn.


-- Strategic revenues were $702 million in the quarter, an 8.8% increase
over first quarter 2013.
-- Generated nearly $1.51 billion in total revenues, approximately flat
from first quarter 2013, reflecting solid growth in strategic services
offset by the continued decline in legacy services.
-- Added nearly 24,000 CenturyLink(® )Prism(TM) TV customers during first
quarter 2014, increasing penetration of the more than 2 million
addressable homes to nearly 10%.
Business

The Business segment achieved year-over-year recurring revenue growth driven by continued demand for high-bandwidth data services and solid sales momentum.


-- Strategic revenues were $655 million in the quarter, a 6.7% increase
over first quarter 2013, driven by strength in high-bandwidth offerings
such as MPLS and Ethernet services.
-- Generated $1.56 billion in total revenues, an increase of 3.6% from
first quarter 2013, as growth in high-bandwidth offerings and data
integration revenues offset lower legacy services revenues. Data
integration revenues were $35 million higher in first quarter 2014
compared to first quarter 2013.
-- Achieved segment margin of 38.0%, which declined from 43.1% a year-ago.
This decrease was primarily due to higher costs related to business
revenue growth such as CPE, facility and sales and marketing costs,
along with the impact of certain favorable one-time expenses experienced
in first quarter 2013 and the decline in legacy revenues.
-- Continued strong sales momentum in first quarter with solid sales funnel
entering second quarter; encouraging early success in sales of Managed
Office solutions.
Wholesale

The Wholesale segment ended the quarter with more than 19,200 fiber-connected towers, an increase of nearly 24% from first quarter 2013.


-- Strategic revenues were $570 million in the quarter, basically flat from
first quarter 2013, as increases in wireless carrier bandwidth demand
and Ethernet sales were offset by declines in copper-based revenue.
-- Generated $862 million in total revenues, a decrease of 4.9% from first
quarter 2013, reflecting the continued decline in legacy revenues,
primarily driven by lower long distance and switched access minutes of
use, along with access rate reductions from implementation of the CAF
Order(6).
-- Completed approximately 395 fiber builds in first quarter 2014 and
lowered the annual estimate for fiber builds to between 2,500 to 3,000
for full-year 2014 due to customer decisions to defer certain sites into
2015.
Hosting

The Hosting segment grew managed hosting (including cloud) and colocation revenues as cross-selling initiatives continue to strengthen sales opportunities.


-- Operating revenues were $354 million in the quarter, a 6.0% increase
from first quarter 2013.
-- Managed hosting revenues(7) were $142 million, representing a 12.7%
increase from first quarter 2013, and colocation revenues were $158
million, a 3.3% increase over the same period a year ago.
-- Expenses increased $26 million from first quarter 2013 primarily due to
higher employee costs, partially related to the AppFog and Tier 3
acquisitions, and weather-related power costs.
-- Added CenturyLink Cloud, the acquired Tier 3 platform, into two
CenturyLink data centers providing strong capabilities to meet growing
demand for highly automated cloud services.
Guidance - Second Quarter 2014

The Company expects second quarter 2014 revenue and operating cash flow to be impacted by lower data integration revenue and the continued decline of legacy revenue.



Second Quarter 2014 (excl. special
items)
----------------------------------


Operating Revenues $4.48 to $4.53 billion

Core Revenues $4.07 to $4.12 billion

Operating Cash Flow $1.75 to $1.80 billion

Adjusted Diluted EPS $0.62 to $0.67
-------------------- -----------
All 2014 guidance figures and 2014 outlook statements included in this release (i) speak as of May 7, 2014 only, (ii) exclude the impact of any share repurchases made after March 31, 2014 and (iii) exclude the effects of special items, future changes in regulation or accounting rules, integration expenses associated with our recent acquisitions, any changes in operating or capital plans or other unforeseen events or circumstances that impact our financial performance, and any future mergers, acquisitions, divestitures or other similar business transactions. See "Forward Looking Statements" below. For additional information on how we define certain of the terms used above, see the attached schedules.

Investor Call

As previously announced, CenturyLink's management will host a conference call at 4:00 p.m. Central Time today, May 7, 2014. Interested parties can access the call by dialing 866-835-8905. The call will be accessible for replay through May 14, 2014, by dialing 888-266-2081 and entering the access code 1635562. Investors can also listen to CenturyLink's earnings conference call and webcast replay by accessing the Investor Relations portion of the Company's website at www.centurylink.com through May 29, 2014.

Reconciliation to GAAP

This release includes certain non-GAAP financial measures, including but not limited to operating cash flow, free cash flow, core revenues, Adjusted Net Income and adjustments to GAAP measures to exclude the effect of special items. 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 financial measures that may be discussed during the earnings call described above will be available in the Investor Relations portion of the Company's website at www.centurylink.com. Investors are urged to consider these non-GAAP measures in addition to, and not in substitution for, measures prepared in accordance with GAAP.

About CenturyLink

CenturyLink is the third largest telecommunications company in the United States and is recognized as a leader in the network services market by technology industry analyst firms. The Company is a global leader in cloud infrastructure and hosted IT solutions for enterprise customers. CenturyLink provides data, voice and managed services in local, national and select international markets through its high-quality advanced fiber optic network and multiple data centers for businesses and consumers. The company also offers advanced entertainment services under the CenturyLink(®) Prism(TM) TV and DIRECTV brands. Headquartered in Monroe, La., CenturyLink is an S&P 500 company and is included among the Fortune 500 list of America's largest corporations. For more information, visit www.centurylink.com.

Forward Looking Statements

Certain non-historical statements made in this release and future oral or written statements or press releases by us or our management are intended to be forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on current expectations only, 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 if one or more of these risks or uncertainties materialize, or if our underlying assumptions prove incorrect. Factors that could affect actual results include but are not limited to: the timing, success and overall effects of competition from a wide variety of competitive providers; the risks inherent in rapid technological change, including product displacement; the effects of ongoing changes in the regulation of the communications industry, including the outcome of regulatory or judicial proceedings relating to intercarrier compensation, access charges, universal service, broadband deployment, data protection and net neutrality; our ability to effectively adjust to changes in the communications industry, and changes in our markets, product mix and network caused by our recent acquisitions; our ability to successfully integrate recently-acquired operations into our incumbent operations, including the possibility that the anticipated benefits from our recent acquisitions cannot be fully realized in a timely manner or at all; our ability to effectively manage our expansion opportunities, including retaining and hiring key personnel; possible changes in the demand for, or pricing of, our products and services, including our ability to effectively respond to increased demand for high-speed broadband service; our ability to successfully introduce new product or service offerings on a timely and cost-effective basis; the adverse impact on our business and network from possible equipment failures, security breaches or similar attacks on our network; our ability to successfully negotiate collective bargaining agreements on reasonable terms without work stoppages; our ability to use net operating loss carryovers of Qwest in projected amounts; our continued access to credit markets on favorable terms; our ability to collect our receivables from financially troubled communications companies; our ability to maintain favorable relations with our key business partners, suppliers, vendors, landlords and financial institutions; any adverse developments in legal or regulatory proceedings involving us; changes in our operating plans, corporate strategies, dividend payment plans or other capital allocation plans, including those caused by changes in our cash requirements, capital expenditure needs, debt obligations, pension funding requirements, cash flows, or financial position, or other similar changes; the effects of adverse weather; other risks referenced from time to time in our filings with the SEC; and the effects of more general factors such as changes in interest rates, in tax laws, in accounting policies or practices, in operating, medical, pension or administrative costs, in general market, labor or economic conditions, or in legislation, regulation or public policy. These and other uncertainties related to our business and our recent acquisitions are described in greater detail in Item 1A of our Form 10-K for the year ended December 31, 2013, as updated and supplemented by our subsequent SEC reports. You should be aware that new factors may emerge from time to time and it is not possible for us to identify all such factors nor can we predict the impact of each such factor on the business or the extent to which any one or more factors may cause actual results to differ from those reflected in any forward-looking statements. You are further cautioned not to place undue reliance on these forward-looking statements, which are inherently speculative and speak only as of the date made. We undertake no obligation to update any of our forward-looking statements for any reason.




(1) Core revenues
defined as
Strategic
revenues
plus Legacy
revenues
(excludes
Data
Integration
and Other
revenues),
as described
further in
the attached
schedules

(2) See
attachments
for non-
GAAP
reconciliations

(3) Multiprotocol
Label
Switching

(4) All
references
to Strategic
and Legacy
revenues
herein
reflect
certain
adjustments
described in
the attached
schedules

(5) All
references
to segment
data herein
reflect
certain
adjustments
described in
the attached
schedules

(6) Federal
Communications
Commission's
Connect
America and
Intercarrier
Compensation
Reform Order
(the CAF
Order)
adopted on
October 27,
2011

(7) Hosting
revenue by
product
category was
restated to
allocate
cross-
connect
revenue with
the
associated
colocation
or managed
service









CenturyLink, Inc.

CONSOLIDATED STATEMENTS OF INCOME

THREE MONTHS ENDED MARCH 31, 2014 AND 2013

(UNAUDITED)

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


Three months ended March Three months ended March
31, 2014 31, 2013
------------------------- -------------------------


As adjusted As adjusted Increase

excluding excluding (decrease)

Less special Less special Increase excluding

As special items As special items (decrease) special

reported items (Non-GAAP) reported items (Non-GAAP) as reported items
-------- ----- --------- -------- ----- --------- ----------- -----


OPERATING
REVENUES*

Strategic $2,281 2,281 2,164 2,164 5.4% 5.4%

Legacy 1,829 1,829 1,952 1,952 (6.3%) (6.3%)

Data integration 174 174 140 140 24.3% 24.3%

Other 254 254 257 257 (1.2%) (1.2%)

4,538 - 4,538 4,513 - 4,513 0.6% 0.6%
----- --- ----- ----- --- -----


OPERATING EXPENSES

Cost of services
and products 1,935 4 (1) 1,931 1,796 2 (3) 1,794 7.7% 7.6%

Selling, general
and
administrative 843 24 (1) 819 818 32 (3) 786 3.1% 4.2%

Depreciation and
amortization 1,107 1,107 1,117 1,117 (0.9%) (0.9%)

3,885 28 3,857 3,731 34 3,697 4.1% 4.3%
----- --- ----- ----- --- -----


OPERATING INCOME 653 (28) 681 782 (34) 816 (16.5%) (16.5%)


OTHER INCOME
(EXPENSE)

Interest expense (331) (331) (316) (316) 4.7% 4.7%

Other income
(expense) 9 - 9 39 37 (4) 2 (76.9%) 350.0%

Income tax expense (128) 11 (2) (139) (207) (8) (5) (199) (38.2%) (30.2%)


NET INCOME $203 (17) 220 298 (5) 303 (31.9%) (27.4%)



BASIC EARNINGS
PER SHARE $0.35 (0.03) 0.38 0.48 (0.01) 0.49 (27.1%) (22.4%)

DILUTED EARNINGS
PER SHARE $0.35 (0.03) 0.38 0.48 (0.01) 0.49 (27.1%) (22.4%)


AVERAGE SHARES
OUTSTANDING

Basic 574,535 574,535 619,423 619,423 (7.2%) (7.2%)

Diluted 575,456 575,456 621,074 621,074 (7.3%) (7.3%)


DIVIDENDS PER
COMMON SHARE $0.540 0.540 0.540 0.540 0.0% 0.0%



SPECIAL ITEMS


(1) - Includes
severance
costs
associated
with
recent
headcount
reductions
($19
million),
integration
and
retention
costs
associated
with our
acquisition
of Qwest
($11
million)
and the
offsetting
impact
of a
litigation
settlement
in the
amount
of $2
million.

(2) - Income
tax
benefit
of Item
(1).

(3) - Includes
severance
costs
associated
with
reduction
in force
initiatives
($7
million),
integration,
severance
and
retention
costs
associated
with our
acquisition
of Qwest
($7
million),
integration,
severance,
and
retention
costs
associated
with our
acquisition
of
Savvis
($3
million)
and an
accounting
adjustment
($17
million).

(4) - Gain on
the sale
of a
non-
operating
investment
($32
million)
and
settlements
of other
non-
operating
issues
($5
million).

(5) - Income
tax
expense
of Items
(3) and
(4).


*During 2013, we reallocated the
discounts on our bundled services
(local, long distance, and broadband)
to the component products and services.
The net effect of the bundled services
reallocation was a reclassification of
certain revenues from legacy services
to strategic services. Also in 2013,
we reallocated our CLEC revenues into
their component products and services.
The net effect of this CLEC






CenturyLink, Inc.

CONDENSED CONSOLIDATED BALANCE SHEETS

MARCH 31, 2014 AND DECEMBER 31, 2013

(UNAUDITED)

(Dollars in millions)


March 31, December 31,

2014 2013
---- ----


ASSETS

CURRENT ASSETS

Cash and cash
equivalents $219 168

Other current assets 3,529 3,739

Total current assets 3,748 3,907
----- -----


NET PROPERTY, PLANT
AND EQUIPMENT

Property, plant and
equipment 34,847 34,307

Accumulated
depreciation (16,354) (15,661)

Net property, plant
and equipment 18,493 18,646
------ ------


GOODWILL AND OTHER
ASSETS

Goodwill 20,674 20,674

Other, net 8,251 8,560

Total goodwill and
other assets 28,925 29,234
------ ------


TOTAL ASSETS $51,166 51,787




LIABILITIES AND
STOCKHOLDERS' EQUITY

CURRENT LIABILITIES

Current maturities
of long-term debt $1,126 785

Other current
liabilities 3,495 3,624

Total current
liabilities 4,621 4,409


LONG-TERM DEBT 19,814 20,181

DEFERRED CREDITS AND
OTHER LIABILITIES 9,933 10,006

STOCKHOLDERS' EQUITY 16,798 17,191
------ ------


TOTAL LIABILITIES
AND STOCKHOLDERS'
EQUITY $51,166 51,787






CenturyLink, Inc.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

THREE MONTHS ENDED MARCH 31, 2014 AND 2013

(UNAUDITED)

(Dollars in millions)



Three Months Three Months

ended ended

March 31, 2014 March 31, 2013
-------------- --------------


OPERATING ACTIVITIES

Net
income $203 298

Adjustments
to
reconcile
net
income
to
net

cash
provided
by
operating
activities:

Depreciation
and
amortization 1,107 1,117

Deferred
income
taxes 106 166

Provision
for
uncollectible
accounts 30 27

Gain
on
sale
of
intangible
assets - (32)

Changes
in
current
assets
and
current
liabilities,
net (47) (29)

Retirement
benefits (28) (178)

Changes
in
other
noncurrent
assets
and
liabilities,
net 3 14

Other,
net 6 4

Net cash provided by operating activities 1,380 1,387
----- -----


INVESTING ACTIVITIES

Payments
for
property,
plant
and
equipment
and
capitalized
software (670) (663)

Proceeds
from
sale
of
intangible
assets
or
property 1 75

Other,
net (13) 4

Net cash used in investing activities (682) (584)
---- ----


FINANCING ACTIVITIES

Net
proceeds
from
issuance
of
long-
term
debt - 988

Payments
of
long-
term
debt (47) (56)

Net
borrowings
(payments)
on
credit
facility 30 (745)

Dividends
paid (309) (341)

Net
proceeds
from
issuance
of
common
stock 7 13

Repurchases
of
common
stock (328) (397)

Net cash used in financing activities (647) (538)
---- ----


Net increase in cash and cash equivalents 51 265

Cash and cash equivalents at beginning of period 168 211
--- ---


Cash and cash equivalents at end of period $219 476






CenturyLink, Inc.

SELECTED SEGMENT FINANCIAL INFORMATION

THREE MONTHS ENDED MARCH 31, 2014 AND 2013

(UNAUDITED)

(Dollars in millions)



Three
months
ended
March 31,
----------

2014 2013*
---- ----

Total segment revenues $4,284 4,256

Total segment expenses 2,099 1,928

Total segment income $2,185 2,328



Total segment income margin (segment income 51.0% 54.7%

divided by segment revenues)



Consumer
--------

Revenues

Strategic services $702 645

Legacy services 806 864

Data integration 1 2

$1,509 1,511
------ -----

Expenses

Direct $466 436

Allocated 117 113

$583 549



Segment income $926 962


Segment income margin 61.4% 63.7%
==== ====


Business
--------

Revenues

Strategic services $655 614

Legacy services 731 753

Data integration 173 138

$1,559 1,505
------ -----

Expenses

Direct $854 753

Allocated 112 104

$966 857
---- ---


Segment income $593 648


Segment income margin 38.0% 43.1%
==== ====


Wholesale
---------

Revenues

Strategic services $570 571

Legacy services 292 335

$862 906
---- ---

Expenses

Direct $41 30

Allocated 235 244

$276 274
---- ---


Segment income $586 632


Segment income margin 68.0% 69.8%
==== ====


Hosting
-------

Revenues

Strategic services $354 334

$354 334


Expenses

Direct $238 209

Allocated 36 39

$274 248



Segment income $80 86


Segment income margin 22.6% 25.7%
==== ====

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CenturyLink, Inc.

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES

(UNAUDITED)

(Dollars in millions)



Three months ended March Three months ended March
31, 2014 31, 2013
------------------------- -------------------------

As adjusted As adjusted

Less excluding Less excluding

As special special As special special

reported items items reported items items
-------- ----- ----- -------- ----- -----

Operating
cash flow
and cash
flow margin

Operating
income $653 (28) (1) 681 782 (34) (2) 816

Add:
Depreciation
and
amortization 1,107 - 1,107 1,117 - 1,117

Operating
cash flow $1,760 (28) 1,788 1,899 (34) 1,933



Revenues $4,538 - 4,538 4,513 - 4,513



Operating
income
margin
(operating
income
divided by
revenues) 14.4% 15.0% 17.3% 18.1%
==== ==== ==== ====


Operating
cash flow
margin
(operating
cash flow
divided by
revenues) 38.8% 39.4% 42.1% 42.8%
==== ==== ==== ====



Free cash
flow

Operating
cash flow $1,788 1,933

Less: Cash
paid for
income
taxes, net
of refunds (10) (8)

Less: Cash
paid for
interest,
net of
amounts
capitalized (265) (265)

Less: Capital
expenditures
(3) (662) (656)

Add: Other
income 9 2
--- ---

Free cash
flow (4) $860 1,006
==== =====


SPECIAL ITEMS


(1) - Includes
severance
costs
associated
with
recent
headcount
reductions
($19
million),
integration
and
retention
costs
associated
with our
acquisition
of Qwest
($11
million)
and the
offsetting
impact of
a
litigation
settlement
in the
amount of
$2
million.

(2) - Includes
severance
costs
associated
with
reduction
in force
initiatives
($7
million),
integration,
severance
and
retention
costs
associated
with our
acquisition
of Qwest
($7
million),
integration,
severance
and
retention
costs
associated
with our
acquisition
of Savvis
($3
million)
and an
accounting
adjustment
($17
million).

(3) - Excludes
$8
million
in first
quarter
2014 and
$7
million
in first
quarter
2013 of
capital
expenditures
related
to the
integration
of
Embarq,
Qwest and
Savvis.

(4) - Excludes
special
items
identified
in items
(1) and
(2).









CenturyLink, Inc.

OPERATING METRICS

(UNAUDITED)

(In thousands)




As of As of As of

March 31, 2014 December 31, 2013 March 31,
2013*
-------------- ----------------- ----------

Broadband subscribers 6,057 5,991 5,917

Access lines 12,882 13,002 13,561



* The March 31, 2013 numbers
have been adjusted to
include the operational
metrics of our wholly owned
subsidiary, El Paso County
Telephone Company, which
had been previously
excluded. The increase (in
thousands) related to
including El Paso County
Telephone Company's






CenturyLink, Inc.

SUPPLEMENTAL NON-GAAP INFORMATION - ADJUSTED DILUTED EPS

THREE MONTHS ENDED MARCH 31, 2014 AND MARCH 31, 2013

(UNAUDITED)

(Dollars in millions, except per share amounts)





Three months Three months

ended ended

March 31, 2014 March 31, 2013

(excluding (excluding

special items) special items)


Net income * $220 303



Add back:

Amortization of
customer base
intangibles:

Qwest 219 234

Embarq 29 34

Savvis 15 15


Amortization of
trademark
intangibles:

Qwest 6 12

Savvis 5 2


Amortization of
fair value
adjustment of
long-term debt:

Embarq 1 1

Qwest (12) (17)


Subtotal 263 281

Tax effect of
above items (102) (109)

Net adjustment,
after taxes 161 172
--- ---


Net income, as
adjusted for
above items $381 475


Weighted average
diluted shares
outstanding 575.5 621.1


Diluted EPS
(excluding
special items) $0.38 0.49


Adjusted diluted
EPS as adjusted
for the above-
listed purchase
accounting
intangible and
interest
amortizations
(excluding
special items)

$0.66 0.76


The above schedule
presents adjusted net
income and adjusted
earnings per share (both
excluding special items)
by adding back to net
income and earnings per
share certain non-cash
expense items that arise
as a result of the
application of business
combination accounting
rules to our recent
acquisitions. Such
presentation is not in
accordance with
generally accepted
accounting principles
but management believes
the presentation is
useful to analysts and
investors to understand
the impacts of growing
our business through
acquisitions.


*See preceding schedules
for a summary
description of special
items.
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SOURCE CenturyLink, Inc.

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CenturyLink, Inc.

CONTACT: Kristina Waugh, 318.340.5627, kristina.r.waugh@centurylink.com

Web Site: http://www.centurytel.com


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