LUMN

Business Context and Reporting Period

This Form 8-K filing by CenturyTel, Inc. (now Lumen Technologies, Inc.) reports fourth-quarter and full-year financial results for the period ended December 31, 2001. The filing includes a correction to the number of wireless units reported in the initial press release. CenturyTel operates as a local exchange telephone company providing local, wireless, long-distance, and data services across 21 states.

Key Financial Metrics

Full Year 2001 Highlights: Consolidated revenues increased 14.7% to $2.117 billion. EBITDA (excluding nonrecurring items) grew 12.3% to $1.068 billion. GAAP Net Income for the year was $343 million, driven significantly by nonrecurring gains of $117.4 million.

Liquidity and Capital: Cash and cash equivalents stood at $13.4 million as of December 31, 2001. Total capital expenditures for the year were $506.7 million. Short-term debt and current maturities of long-term debt totaled $1.009 billion.

Material Changes vs. Prior Period

• Revenue Segments: Telephone revenues grew 3.3% to $388.9 million, driven by network access growth. Wireless revenues declined 3.0% to $108.5 million due to lower roaming revenues. Other operations (long distance and Internet) surged 17.4% to $45.8 million, with Internet revenues up 61.0%.
• Margins: Consolidated EBITDA margin was 49.9%. Telephone EBITDA margin improved to 55.9% from 53.9% in Q2 2001. Wireless EBITDA margin was 38.6%.
• Nonrecurring Items: GAAP results for Q4 2001 were impacted by a $13.3 million pre-tax charge related to a minority interest entity and a $3.0 million pre-tax charge for advisory fees. Full-year GAAP results included a $117.4 million net gain from nonrecurring items, primarily asset sales.
• Customer Metrics: Telephone access lines decreased slightly by 0.2% to 1.798 million. Wireless units in majority-owned markets increased 5.9% to 795,277 (corrected to 797,340 in the filing).

Guidance, Outlook, and Risks

2002 Guidance (Excluding pending Verizon acquisition):

• Total revenues expected to increase 3% to 6%.
• Consolidated EBITDA growth expected at 4% to 7%.
• Diluted EPS expected to range from $2.06 to $2.18.

Q1 2002 Guidance:

• Revenues: $520 million to $540 million.
• Operating cash flow: $245 million to $260 million.
• EPS (excluding nonrecurring items): $0.46 to $0.50.

Management Commentary: CEO Glen F. Post III noted strong free cash flow providing stability despite economic uncertainty. The company expects challenges to continue in the first half of 2002. The guidance incorporates the cessation of goodwill amortization effective January 1, 2002, under SFAS No. 142.

Risks: Key risks include the ability to integrate acquisitions, separation of wireless operations, financing terms for pending acquisitions, rapid technological change, regulatory changes, and increased competition.

Investor Verification Checklist

• Wireless Unit Count: Verify the corrected wireless unit count of 797,340 as of December 31, 2001, which supersedes the initial press release figure of 795,277.
• Nonrecurring Adjustments: Review the specific composition of the $117.4 million nonrecurring gain in 2001 GAAP net income to assess sustainability of earnings.
• Verizon Acquisition: Confirm the status and financial impact of the pending Verizon property acquisition, which is excluded from current guidance but represents a material future event.
• Goodwill Amortization: Verify the impact of SFAS No. 142 on future earnings, as the cessation of goodwill amortization is a key driver of the 2002 EPS guidance.
• Wireless Segment Performance: Monitor the trend in wireless roaming revenues and operating margins, which declined in Q4 2001.