Business Context and Reporting Period
This Form 8-K, filed on January 30, 2003, reports the fourth quarter and full-year 2002 consolidated operating results for CenturyTel, Inc. (Note: The input metadata references "Lumen Technologies," but the filing text identifies the registrant as CenturyTel, Inc., a predecessor entity). The company provides local, long-distance, Internet, and data services to over 3 million customers in 22 states. The reporting period covers the three months and twelve months ended December 31, 2002.
Key Financial Metrics
Fourth Quarter 2002 (vs. Q4 2001)
- Revenues: $585.9 million (up 34.8% from $434.7 million).
- EBITDA: $306.2 million (up 39.5%); EBITDA margin was 52.3%.
- Income from Continuing Operations: $84.0 million (up 67.2% on an adjusted basis).
- Net Income (GAAP): $44.3 million ($0.31 per diluted share).
- Net Income (Adjusted): $85.1 million ($0.59 per diluted share).
- Free Cash Flow: $79.9 million (excluding nonrecurring items).
- Capital Expenditures: $115.5 million for the quarter.
Full Year 2002 (vs. Full Year 2001)
- Revenues: $1.980 billion (up 17.9% from $1.680 billion).
- EBITDA: $1.012 billion (up 20.4% from $840.4 million).
- Net Income (GAAP): $801.6 million ($5.61 per diluted share), driven significantly by discontinued operations.
- Net Income (Adjusted): $325.0 million ($2.27 per diluted share).
- Capital Expenditures: $413.5 million for the year.
Liquidity and Debt
- Cash and Cash Equivalents: $3.7 million as of December 31, 2002.
- Short-term Debt: $70.7 million.
- Long-term Debt: $3.58 billion.
- Total Assets: $7.77 billion.
Material Changes vs. Prior Period
The significant revenue and earnings growth in Q4 2002 was primarily driven by the acquisition of Verizon properties in Alabama and Missouri during the third quarter of 2002, which contributed a full quarter of results. Telephone revenues increased 33.6% to $519.4 million, while Other Operations revenues (including long distance and Internet) grew 45.0% to $66.5 million.
GAAP Net Income for the full year 2002 ($801.6 million) was heavily influenced by a $551.4 million after-tax gain from the sale of wireless operations, classified as discontinued operations. Excluding this and other nonrecurring items, adjusted earnings grew 40.2% year-over-year.
A material nonrecurring charge of $39.0 million (after-tax) was recorded in Q4 2002 associated with the redemption of $400 million in Series I remarketable senior notes.
Guidance, Outlook, and Risks
2003 Guidance
- Full Year 2003 Diluted EPS: Expected to be in the range of $2.05 to $2.15 (excluding nonrecurring items).
- Q1 2003 Outlook: Revenues of $568 million to $583 million; Operating cash flow of $285 million to $295 million; Diluted EPS of $0.49 to $0.53.
Management noted that 2003 results will reflect a full year of operations for the Verizon properties, increased pension and medical costs, and amortization expenses related to the conversion to a new billing and customer care system.
Risks and Contingencies
Forward-looking statements are subject to risks including the ability to integrate acquired businesses, rapid technological change, regulatory changes, competition, and the ability to collect receivables from financially troubled communications companies. The filing specifically highlights the risk of higher-than-anticipated interest rates and general economic conditions.
Investor Verification Checklist
- Verify the impact of the Verizon acquisitions on long-term organic growth versus one-time revenue boosts.
- Confirm the timeline and cost implications of the new billing and customer care system conversion mentioned in the guidance.
- Review the details of the $400 million Series I note redemption and its effect on future interest expense.
- Assess the sustainability of the 52.3% EBITDA margin given the inclusion of acquired assets.
- Monitor the collection of receivables from financially troubled communications companies, as cited as a specific risk.