LUMN

Business Context and Reporting Period

This Form 8-K, filed on July 25, 2002, reports the second-quarter 2002 consolidated operating results for CenturyTel, Inc. (now Lumen Technologies, Inc.). The company is the 8th largest local exchange telephone company in the U.S., serving over three million customers in 22 states. The reporting period covers the three and six months ended June 30, 2002. The company is currently undergoing significant structural changes, including the pending divestiture of its wireless business and the acquisition of Verizon Missouri telephone properties.

Key Financial Metrics

Liquidity and Debt: As of June 30, 2002, cash and cash equivalents stood at $302.1 million, a significant increase from $3.5 million at year-end 2001, driven by a $500 million equity units offering in May. Total debt includes $605.8 million in short-term obligations and $2.58 billion in long-term debt. The company recently completed a new $800 million credit facility.

Material Changes vs. Prior Period

• Revenue Growth: Consolidated revenues from continuing operations rose 7.2% to $438.7 million. Telephone revenues grew 3.4%, while "Other Operations" (long distance, Internet, CLEC) surged 40.7% to $58.2 million.
• Profitability: Adjusted income from continuing operations increased 20.2% to $47.5 million. Adjusted diluted EPS rose 17.9% to $0.33.
• Nonrecurring Items: GAAP net income was $78.8 million ($0.55/share), down from $168.4 million ($1.19/share) in Q2 2001. This decline is largely due to a $15 million pre-tax charge for uncollectible revenues (primarily from WorldCom) in 2002, compared to a $100.7 million net favorable impact from PCS license sales in 2001.
• Segment Performance: Internet revenues increased 68.7% to $14.7 million, turning positive operating cash flow ($55,000) compared to a negative $2.7 million in the prior year. Long distance revenues grew 20.9% with over 21,000 new customers added in the quarter.

Guidance, Outlook, and Risks

Q3 2002 Guidance: The company expects revenue from continuing operations of $515-$530 million and operating cash flow of $260-$270 million. Diluted EPS from continuing operations is projected at $0.40-$0.44, with total diluted EPS at $0.49-$0.54. These estimates exclude nonrecurring items and one-time integration costs of $4.0-$6.0 million related to the Verizon Missouri acquisition.

Full Year 2002 Guidance: Total diluted EPS (excluding nonrecurring items and $8-$10 million in integration costs) is expected to be $2.08-$2.20, an increase from prior guidance of $2.06-$2.18.

Strategic Transactions: The company anticipates the sale of its wireless business and the acquisition of Missouri properties to close on August 1 and August 31, 2002, respectively. Management believes the net effect of these transactions will be breakeven to $0.03 accretive to EPS in the first full year of operations.

Risks and Contingencies: Key risks include the ability to successfully integrate acquisitions, obtain necessary regulatory consents, and manage financing for pending deals. The company has $400 million in debt maturing in October 2002 and a significant tax payment due in December 2002 related to the wireless sale, though it believes existing facilities and cash flow are sufficient to fund these obligations.

Investor Verification Checklist

• Verify the closing dates and terms of the wireless divestiture and Verizon Missouri acquisition scheduled for August 2002.
• Confirm the status of the $400 million debt maturing in October 2002 and the funding plan for the December 2002 tax payment.
• Monitor the integration progress of the CLEC assets acquired in Monroe and Shreveport, Louisiana.
• Assess the sustainability of the 40.7% growth in "Other Operations" revenue, particularly in the Internet and long-distance segments.
• Review the impact of the $15 million reserve for uncollectible revenues on future bad debt provisions.