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EMBARQ Investor Quarterly Update: Fourth Quarter 200611 February 2007
Embarq Corporation (NYSE: EQ) today announced financial and operating results for the fourth quarter and full-year 2006. In the fourth quarter, the company reported diluted earnings per share of $1.28. For the full year, EMBARQ reported strong revenues and operating income relative to the upwardly revised outlook the company provided in the third quarter. The company's operating metrics also were strong for both the fourth quarter and full year, including fourth quarter access line results that were better than expected.
"The fourth quarter capped a very productive seven-month period following our spin-off in May, and I'm proud of what we have been able to accomplish," commented Dan Hesse, EMBARQ Chairman and Chief Executive Officer. "In that short span of time, we met or exceeded expectations on almost every measure, we introduced many innovative new products and services, and we significantly improved customer and employee satisfaction."
GAAP and As Adjusted Reporting
EMBARQ's reported results under generally accepted accounting principles (GAAP) for all periods prior to its May 2006 spin-off from Sprint Nextel do not reflect certain items that are included in its GAAP reporting subsequent to the spin-off. (These items are described in more detail in the section entitled "Financial Measures".) Accordingly, pre-spin-off GAAP results are not fully comparable to post-spin-off GAAP results.
The 'as adjusted' basis of reporting reflects the current composition of EMBARQ's business for all periods before and after its spin-off and is provided to help investors evaluate trends in the company's operating performance. Reconciliations for these non-GAAP measures are provided in Schedules 5 and 6.
RESULTS OVERVIEW
GAAP Results
EMBARQ reported net operating revenues of $1.62 billion in the fourth quarter of 2006 and $6.36 billion for the full year, which was a strong performance compared to the company's GAAP guidance of $6.25 to $6.31 billion. Operating income was $406 million in the fourth quarter and $1.54 billion in 2006, which again was strong relative to the company's GAAP guidance of $1.45 to $1.48 billion. Fourth quarter net income was impacted by non-recurring tax adjustments of approximately $16 million.
As Adjusted Results
Fourth quarter net operating revenues were $1.62 billion and as adjusted net operating revenues totaled $6.52 billion in 2006. Thus, revenues were strong relative to the company's as adjusted guidance of $6.45 to $6.51 billion as well. EMBARQ continues to see growth in high-speed Internet, data and wireless revenues, and benefited from the settlement of several litigated billing disputes in the fourth quarter totaling $34 million. Offsetting this growth were revenue declines in voice and the company's Logistics segment.
EMBARQ's fourth quarter operating income was $406 million and as adjusted operating income totaled $1.61 billion in 2006, which again represents a strong performance relative to as adjusted guidance of $1.55 to $1.58 billion. The company's fourth quarter results were impacted by several non-recurring items, including the $34 million settlement mentioned above and a $7 million pre-tax gain on the sale of 5,000 access lines. Partially offsetting these benefits in the fourth quarter were $17 million of early stage dilution associated with the company's wireless business, separation-related expenses of $13 million and costs associated with the elimination of an executive position of $10 million. For 2006 in total, non-recurring separation-related expenses totaled $116 million, which is lower than the company's original expectation of $125 million.
Capital Expenditures and Cash Flow
Capital expenditures were $214 million in the fourth quarter and $990 million in 2006 on an as adjusted basis, which exceeded the company's guidance of $980 million. Included in fourth quarter and full-year results were non-recurring separation related expenditures of $16 million and $96 million, respectively. Continued strong cash flows enabled EMBARQ to reduce its net debt by approximately $100 million in the fourth quarter, ending 2006 with a net debt balance of $6.4 billion. In addition, the company paid a fourth quarter dividend of 50 cents per share, which equates to approximately $75 million in total.
Reconciliation of Non-GAAP measure-Net Debt
December 31, September 30,
2006 2006 Change
Current maturities $37 $37 $-
Long-term debt 6,421 6,506 (85)
Less: Cash and equivalents (53) (34) (19)
Net Debt $6,405 $6,509 $(104)
Subscriber Results
HSI net additions were 84,000 in the fourth quarter, matching the record for quarterly subscriber additions the company established in the first quarter of 2006 and matched in the third quarter. At the end of the year, EMBARQ had 1,017,000 HSI subscribers, 47 percent more than at the end of 2005.
Access lines declined 6.1 percent year-over-year to 6.9 million at year end, beating the company's guidance of a mid-to-upper-6 percent rate of decline. In the fourth quarter, EMBARQ sold 5,000 access lines. Additionally, EMBARQ lost 85,000 lines to competition and product substitution, which is less than the 89,000 the company lost in the year ago period.
Wireless net additions in the fourth quarter were 24,000, doubling the company's subscriber base to 48,000 at year end.
Video net additions were 16,000 in the fourth quarter and the company ended the year with 162,000 of its customers subscribing to entertainment services, an increase of 86% from year end 2005.
2007 OUTLOOK
EMBARQ provided the following information related to its outlook for 2007:
-- Access lines are expected to decline at a mid to upper 6% rate.
-- Telecommunications segment revenues are expected to be $5.77 billion to
$5.87 billion.
-- Consolidated operating income is expected to be $1.45 billion to
$1.55 billion, including approximately $20 million of non-recurring
separation-related expenses and $50 million to $60 million of early-
stage dilution associated with the company's wireless business.
-- Consolidated depreciation and amortization is expected to be
approximately $1.05 billion.
-- Consolidated capital expenditures are expected to be $870 million to
$890 million, including approximately $30 million of non-recurring
separation-related capital spending.
SELECT FINANCIAL DATA (unaudited)
($ in millions, except per share amounts)
4Q-05
4Q-06 4Q-05 As
Consolidated GAAP Fav/(Unfav) Adjusted Fav/(Unfav)
Voice $1,120 $1,050 $70 6.7% $1,177 (57) -4.8%
Data 183 168 15 8.9% 175 8 4.6%
High-speed Internet 108 88 20 22.7% 88 20 22.7%
Wireless 4 - 4 N/A - 4 N/A
Other services 57 83 (26) -31.3% 67 (10) -14.9%
Service revenue 1472 1389 83 6.0% 1507 (35) -2.3%
EMBARQ Logistics 115 180 (65) -36.1% 180 (65) -36.1%
Other product 30 34 (4) -11.8% 27 3 11.1%
Product revenue 145 214 (69) -32.2% 207 (62) -30.0%
Net Operating
Revenues 1617 1603 14 0.9% 1714 (97) -5.7%
Operating Expenses
Cost of services 411 357 (54) -15.1% 417 6 1.4%
Cost of products 144 206 62 30.1% 200 56 28.0%
Selling, general and
administrative 388 410 22 5.4% 392 4 1.0%
Depreciation and
amortization 268 245 (23) -9.4% 268 0 0.0%
Asset impairment - 80 80 N/A 80 80 N/A
Total Operating
Expenses 1211 1298 87 6.7% 1357 146 10.8%
Operating Income $406 $305 $101 33.1% $357 $49 13.7%
Interest expense 121 20 (101) N/A 129 8 6.2%
Other expense (income),
net (1) 2 3 N/A 1 2 N/A
Income Before Taxes $286 $283 $3 1.1% $227 $59 26.0%
Income tax expense 92 112 20 17.9% 94 2 2.1%
Cumulative effect of
change in accounting
principle - 16 16 N/A 16 (16) N/A
Net Income $194 $155 $39 25.2% $117 $77 65.8%
Diluted Earnings Per
Share $1.28
4Q-05
4Q-05 As
Telecom 4Q-06 GAAP Fav/(Unfav) Adjusted Fav/(Unfav)
Voice $1,120 $1,050 $70 6.7% $1,177 ($57) -4.8%
Data 183 168 15 8.9% 175 8 4.6%
High-speed Internet 108 88 20 22.7% 88 20 22.7%
Wireless 4 0 4 N/A 0 4 N/A
Other services 57 83 (26) -31.3% 67 (10) -14.9%
Service revenue $1,472 $1,389 83 6.0% $1,507 (35) -2.3%
Product revenue 30 34 (4) -11.8% 27 3 11.1%
Net Operating
Revenues $1,502 $1,423 79 5.6% $1,534 (32) -2.1%
Operating Expenses
Cost of services 411 357 (54) -15.1% 417 6 1.4%
Cost of products 39 36 (3) -8.3% 30 (9) -30.0%
Selling, general and
administrative 379 388 9 2.3% 370 (9) -2.4%
Depreciation and
amortization 265 242 (23) -9.5% 265 - 0.0%
Asset impairment - 80 80 N/A 80 80 N/A
Total Operating
Expenses 1,094 1,103 9 0.8% 1,162 68 5.9%
Operating Income $408 $320 88 27.5% $372 36 9.7%
4Q-05
4Q-05 As
Logistics 4Q-06 GAAP Fav/(Unfav) Adjusted Fav/(Unfav)
Net Operating Revenues 115 180 (65) -36.1% 180 (65) -36.1%
Operating Expenses
Cost of services &
products 105 170 65 38.2% 170 65 38.2%
Selling, general and
administrative 9 22 13 59.1% 22 13 59.1%
Depreciation and
amortization 3 3 - 0.0% 3 - 0.0%
Total Operating Expenses 117 195 78 40.0% 195 78 40.0%
Operating Income (2) (15) 13 86.7% (15) 13 86.7%
CONFERENCE CALL
Thursday, February 8, 2007, EMBARQ will hold a conference call beginning at 4:30 p.m. EST. Dial-in numbers for the conference call are (866) 245-2310 (in the U.S. and Canada) and (706) 679-0843 (outside the U.S. and Canada). The code required to access the call is 5586452. Please plan to dial-in at least five minutes before the scheduled start time. A simultaneous audio Web cast of the call and a downloadable presentation will be available at http://www.embarq.com/investors .
For those unable to participate live, a replay of the call will be available until March 8, 2007 by dialing (800) 642-1687 (toll free in the U.S. and Canada) or (706) 645-9291 (outside the U.S. and Canada) as well as at http://www.embarq.com/investors . The accompanying presentation will also be archived and available for download at this Web site.
CAUTIONARY STATEMENT
This news release contains "forward-looking statements" within the meaning of the securities laws, including statements relating to EMBARQ's outlook or expectations for earnings, revenues, expenses, depreciation and amortization, asset quality, access lines declines, customer growth or other future financial or business performance, strategies or expectations. The words "estimate," "plan," "project," "forecast," "expect," "intend," "anticipate," "believe," "seek," "target," "guidance," "outlook" and similar expressions are intended to identify forward-looking statements. These statements reflect management's judgment based on currently available information and involve a number of risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements. With respect to these forward-looking statements, management has made assumptions regarding, among other things, customer and network usage, customer retention, pricing, operating costs, technology, the competitive and regulatory environment and general economic conditions. Future performance cannot be ensured. Actual results may differ materially from those in the forward-looking statements. Some factors that could cause actual results to differ include: economic, competitive, regulatory, technological, capital market and other factors, and the risks that are described in the sections entitled "Risk Factors" and "Cautionary Statement Regarding Forward-Looking Statements" contained in EMBARQ's Registration Statement on Form 10, as amended, as filed with the Securities and Exchange Commission (SEC) and in EMBARQ's other filings with the SEC.
Forward-looking statements speak only as of the date they were made, and EMBARQ undertakes no obligation to update or revise any forward-looking statements in light of new information or future events. You should not place undue reliance on any forward-looking statements, which speak only as of the date of this press release. EMBARQ is not obligated to publicly update or release any revisions to these forward-looking statements to reflect any events or circumstances after the date of this news release.
FINANCIAL MEASURES
As Adjusted Basis of Reporting (for prior period comparisons).
For periods prior to and including May 17, 2006, the date of EMBARQ's spin-off from Sprint Nextel, reported operating income reflects the combined performance of the specific legal entities that were spun-off from Sprint Nextel in accordance with GAAP. The reported information for these entities prior to and including the date of separation does not include certain items that will be reflected in EMBARQ's reported operating income for periods subsequent to May 17, 2006. These items primarily consist of the following:
-- In-territory consumer and business long-distance customers transferred
to EMBARQ by Sprint Nextel, as well as certain in-territory equipment
and professional service customers transferred to Sprint Nextel by
EMBARQ; and
-- Other assets and liabilities related to ongoing business operations
transferred to EMBARQ by Sprint Nextel.
In order to facilitate a comparison of EMBARQ's historical operating performance to its performance subsequent to the spin-off, Schedule 5 provides an as adjusted view of EMBARQ's quarterly operating income for 2005 and the first half of 2006, including reconciliations to GAAP. The as adjusted financial information assumes the spin-off from Sprint Nextel had occurred on January 1, 2005 and includes the items described above. The as adjusted financial information are non-GAAP measures and should be considered in addition to, but not as a substitute for, the information contained in our financial reporting.
Definitions
Net Debt is consolidated debt, including current maturities, less cash and equivalents. This non-GAAP measure should be used in addition to, but not as a substitute for, the information provided in the balance sheets and statements of cash flows. We believe that Net Debt provides useful information to investors, analysts and credit rating agencies about the capacity of the company to reduce the debt load and improve its capital structure.
Free Cash Flow is defined as the change in cash and equivalents less cash provided or used by financing activities. This non-GAAP measure should be used in addition to, but not as a substitute for the information provided in the statement of cash flows. We believe that Free Cash Flow provides useful information to investors, analysts, credit rating agencies and our management about the cash generated from our core operations and our ability to fund dividends, scheduled debt maturities and other financing activities.
Reconciliation of Free Cash Flow December 31, September 30,
2006 2006 Change
Change in cash and equivalents $(50) $(69) $19
Less: Net cash used by financing
activities 1,223 $1,079 144
Free Cash Flow $1,173 $1,010 $163
Consumer Average Revenue per Household is calculated by dividing consumer revenues by average primarily consumer access lines. While this measure is not defined under accounting principles generally accepted in the United States, the measure uses a GAAP measure as the basis for the calculation. We believe Consumer Average Revenue per Household provides useful information concerning the success of our bundling initiatives and our performance in attracting and retaining high-value customers.
HSI Average Revenue per Subscriber is calculated by dividing HSI revenues by average HSI subscribers. While this measure is not defined under accounting principles generally accepted in the United States, the measure uses a GAAP measure as the basis for the calculation. We believe HSI Average Revenue per Subscriber provides useful information concerning the appeal of our HSI pricing plans and our performance in attracting and retaining high-value customers.
ABOUT EMBARQ
EMBARQ (NYSE: EQ), headquartered in Overland Park, Kansas, offers a complete suite of common-sense communications services. The company has approximately 20,000 employees and operates in 18 states. EMBARQ, which is expected to rank among the Fortune 500, is included in the S&P 500.
For consumers, EMBARQ offers an innovative portfolio of services that includes reliable local and long distance home phone service, high-speed Internet, wireless, and satellite TV from DISH Network - all on one monthly bill.
For businesses, EMBARQ has a comprehensive range of flexible and integrated services designed to help businesses of all sizes be more productive and communicate with their customers. This service portfolio includes local voice and data services, long distance, Business Class DSL, wireless, enhanced data network services, voice and data communication equipment and managed network services.
EMBARQ believes that by focusing on the communities the company serves and by employing common sense and practical ingenuity, it is able to provide customers with a committed partner, dedicated customer service and innovative products for work and home. For more information, visit embarq.com.
Embarq Corporation
Consolidated Statements of Operations
($ in millions, except per share amounts)
Schedule 1 Quarter Ended December 31, Year Ended December 31,
2006 2005 2006 2005
(unaudited) (unaudited)
Net Operating Revenues
Service revenues $1,472 $1,389 $5,722 $5,566
Product revenues 145 214 641 688
Net operating revenues 1,617 1,603 6,363 6,254
Operating Expenses
Cost of services 411 357 1,594 1,417
Cost of products 144 206 598 632
Selling, general and
administrative 388 410 1,600 1,594
Depreciation 268 245 1,027 979
Asset impairment - 80 - 80
Total Operating Expenses 1,211 1,298 4,819 4,702
Operating Income 406 305 1,544 1,552
Interest expense 121 20 324 83
Other (income) expense,
net (1) 2 (14) (3)
Income Before Taxes 286 283 1,234 1,472
Income tax expense 92 112 450 578
Income from Continuing
Operations 194 171 784 894
Cumulative effect of change
in accounting principle,
net - 16 - 16
Net Income $194 $155 $784 $878
Basic Earnings Per
Share (1) $1.30 $5.26
Basic weighted average
shares (1) 149.6 149.2
Diluted Earnings Per
Share (1) $1.28 $5.21
Diluted weighted average
shares (1) 151.4 150.4
(1) Basic and diluted earnings per share and weighted average shares
outstanding have been presented on a pro forma basis for the year
ended December 31, 2006. Shares outstanding and dilution effects at
the spin-off date of May 17, 2006 were assumed to be outstanding at
January 1, 2006.
Embarq Corporation
Consolidated Balance Sheets
($ in millions)
Schedule 2 December 31, December 31,
2006 2005
(unaudited)
Assets
Cash and equivalents $53 $103
Accounts receivable, net 660 660
Inventories 179 174
Prepaid expenses and other current assets 131 135
Total current assets 1,023 1,072
Property, plant and equipment, net 7,988 7,804
Prepaid pension asset - 219
Other non-current assets 80 126
Total non-current assets 8,068 8,149
Total assets $9,091 $9,221
Liabilities and stockholders' equity
Current maturities $37 $2
Accounts payable 503 528
Accrued payroll & benefits 198 118
Accrued taxes 164 104
Deferred revenue 211 215
Accrued interest 52 35
Other current liabilities 99 82
Total current liabilities 1,264 1,084
Long-term debt 6,421 1,123
Postretirement and other benefit
obligations 685 793
Deferred income taxes 1,082 1,290
Other non-current liabilities 107 79
Total non-current liabilities 8,295 3,285
Stockholders' equity
Business equity - 5,377
Common stock 1 -
Paid in capital (414) -
Retained earnings 308 -
Accumulated other comprehensive
income (loss) (363) (525)
Total stockholders' equity (468) 4,852
Total liabilities and stockholders' equity $9,091 $9,221
Embarq Corporation
Consolidated Statements of Cash Flows
($ in millions)
Schedule 3 Year Ended December 31,
2006 2005
(unaudited)
Operating Activities
Net income $784 $878
Depreciation 1,027 979
Deferred income taxes (69) 33
Provision for losses on accounts receivable 55 54
Stock-based compensation expense 31 -
Net losses (gains) on sales of assets (17) 1
Other, net 39 34
Changes in assets and liabilities:
Accounts receivable (35) (78)
Inventories and other current assets 29 (14)
Accounts payable and other current liabilities 235 93
Noncurrent assets and liabilities, net (26) (81)
Net cash provided by operating activities 2,053 1,899
Investing Activities
Capital expenditures (923) (828)
Proceeds from sales of assets 43 17
Net cash used by investing activities (880) (811)
Financing Activities
Changes in debt, net 1,308 (115)
Net cash paid to Sprint Nextel associated
with the spin off (2,208) -
Dividends paid to stockholders (150) -
Dividends paid to Sprint Nextel (194) (983)
Other, net 21 -
Net cash used by financing activities (1,223) (1,098)
Change in cash and equivalents (50) (10)
Cash and equivalents at beginning of period 103 113
Cash and equivalents at end of period $53 $103
Supplemental Cash Flow Information
Non-cash transactions with Sprint Nextel:
Distribution of senior notes $(4,485) $-
Transfer of notes receivable 460 -
Transfer of property, plant and equipment, net 313 -
Transfer of pension assets, net of post-
retirement benefit obligations 479 -
Transfer of other assets and liabilities, net 35 -
Deferred taxes related to assets and
liabilities transferred (53) -
Total non-cash activities associated with the
spin off $(3,251) $-
Net cash paid to Sprint Nextel associated
with the spin-off (2,208) -
Combined cash and non-cash activities
associated with the spin off $(5,459) $-
Embarq Corporation
Operating Statistics - As Adjusted* (unaudited)
(Revenues in millions; lines and subscribers in thousands)
(* Note: As adjusted is a non-GAAP measure. See Schedule 5 for a
reconciliation to GAAP.)
Schedule 4
2006 4Q-06(1) 3Q-06(1) 2Q-06 1Q-06
Service and Product Revenues (2)
Voice $4,519 $1,120 $1,109 $1,129 $1,161
Data 716 183 180 178 175
High-speed Internet 393 108 98 95 92
Wireless 7 4 3 - -
Other 248 57 64 61 66
Service revenues 5,883 1,472 1,454 1,463 1,494
EMBARQ Logistics 530 115 125 138 152
Other 106 30 27 29 20
Product revenues 636 145 152 167 172
Net operating revenues $6,519 $1,617 $1,606 $1,630 $1,666
Operating Unit Revenues
Consumer $2,726 $671 $668 $686 $701
Business 1,522 381 389 379 373
Wholesale 1,741 450 424 427 440
Telecommunications 5,989 1,502 1,481 1,492 1,514
EMBARQ Logistics 530 115 125 138 152
Net operating revenues $6,519 $1,617 $1,606 $1,630 $1,666
Consumer Average Revenue per
Household
Consumer revenue $2,726 $671 $668 $686 $701
Average households served 4,446 4,316 4,384 4,482 4,571
Monthly revenue per average HH $51.10 $51.83 $50.79 $51.02 $51.12
Access Lines (3)
Consumer 4,659 4,731 4,835 4,970
Business 2,059 2,069 2,074 2,079
Wholesale 190 198 208 219
Total 6,908 6,998 7,117 7,268
High-speed Internet Lines
Consumer 838 763 690 625
Business 142 135 127 121
Wholesale 37 35 32 31
Total 1,017 933 849 777
HSI Average Revenue per Subscriber
High-speed Internet revenue $108 $98 $95 $92
Average HSI subscribers 975 891 813 735
Monthly revenue per average
subscriber $36.92 $36.66 $38.95 $41.72
Wireless Subscribers
Consumer 44 21 4 -
Business 4 3 1 -
Total 48 24 5 -
Entertainment Subscribers 162 146 131 109
2005 4Q-05 3Q-05 2Q-05 1Q-05
Service and Product Revenues (2)
Voice $4,779 $1,177 $1,194 $1,194 $1,214
Data 684 175 171 170 168
High-speed Internet 310 88 80 73 69
Wireless - - - - -
Other 268 67 68 67 66
Service revenues 6,041 1,507 1,513 1,504 1,517
EMBARQ Logistics 563 180 175 109 99
Other 97 27 27 21 22
Product revenues 660 207 202 130 121
Net operating revenues $6,701 $1,714 $1,715 $1,634 $1,638
Operating Unit Revenues
Consumer $2,834 $707 $708 $705 $714
Business 1,492 381 378 368 365
Wholesale 1,812 446 454 452 460
Telecommunications 6,138 1,534 1,540 1,525 1,539
EMBARQ Logistics 563 180 175 109 99
Net operating revenues $6,701 $1,714 $1,715 $1,634 $1,638
Consumer Average Revenue per
Household
Consumer revenue $2,834 $707 $708 $705 $714
Average households served 4,705 4,634 4,695 4,764 4,805
Monthly revenue per average HH $50.19 $50.86 $50.27 $49.33 $49.53
Access Lines (3)
Consumer 5,056 5,135 5,215 5,312
Business 2,086 2,093 2,096 2,100
Wholesale 217 220 229 237
Total 7,359 7,448 7,540 7,649
High-speed Internet Lines
Consumer 552 507 469 440
Business 114 107 99 92
Wholesale 27 24 22 19
Total 693 638 590 551
HSI Average Revenue per Subscriber
High-speed Internet revenue $88 $80 $73 $69
Average HSI subscribers 666 614 571 522
Monthly revenue per average
subscriber $44.08 $43.43 $42.65 $44.10
Wireless Subscribers
Consumer - - - -
Business - - - -
Total - - - -
Entertainment Subscribers 87 64 43 29
(1) As Embarq completed the separation from Sprint-Nextel on May 17,
2006, the 2006 third and fourth quarters represent GAAP results
(2) Embarq offers a service discount for high speed Internet consumer
customers that purchase qualifying voice bundles. Previously
reported results reflected this discount evenly split between voice
revenues and high speed Internet revenues. In the 2006 fourth
quarter, a decision was made to reflect this discount entirely in
high speed internet revenues, which management believes is more
accurate in light of the current pricing models. As a result, prior
period voice revenues and high speed Internet revenues have been
recast to be comparable to the current period presentation.
(3) In the 2006 fourth quarter, certain payphone lines were moved out of
Business and into Wholesale to better align with the reporting of the
associated revenue streams. Prior period access lines have been
recast to be comparable with the current period presentation.
Embarq Corporation
Reconciliations of Non-GAAP Measures (unaudited)
($ in millions)
Schedule 5
LD Shared
Year Ended Customer Assets / As
December 31, 2006 GAAP Transfers Pension Liabilities Other Adjusted
Net Operating Revenues
Voice $4,346 $172 $- $- $1 $4,519
Data 706 6 - - 4 716
High-speed
Internet 393 - - - - 393
Wireless 7 - - - - 7
Other 270 (22) - - - 248
Service revenues 5,722 156 - - 5 5,883
EMBARQ Logistics 530 - - - - 530
Other 111 (5) - - - 106
Product revenues 641 (5) - - - 636
Net operating
revenues $6,363 $151 $- $- $5 $6,519
Operating Expenses
Cost of services 1,594 73 - - 1 1,668
Cost of products 598 (4) - - - 594
Selling, general
and
administrative 1,600 35 - (52) 1 1,584
Depreciation 1,027 - - 38 - 1,065
Total Operating
Expenses 4,819 104 - (14) 2 4,911
Operating Income $1,544 $47 $- $14 $3 $1,608
Operating Unit
Revenues
Consumer $2,590 $136 $- $- $- $2,726
Business 1,492 28 - - 2 1,522
Wholesale 1,751 (13) - - 3 1,741
Telecommunications 5,833 151 - - 5 5,989
EMBARQ Logistics 530 - - - - 530
Net operating
revenues $6,363 $151 $- $- $5 $6,519
Capital
Expenditures $923 $- $- $67 $- $990
Embarq Corporation
Reconciliations of Non-GAAP Measures (unaudited)
($ in millions)
Schedule 5
LD Shared
Quarter Ended Customer Assets / As
June 30, 2006 GAAP Transfers Pension Liabilities Other Adjusted
Net Operating Revenues
Voice $1,073 $56 $- $- $- $1,129
Data 174 2 - - 2 178
High-speed
Internet 95 - - - - 95
Wireless - - - - - -
Other 68 (7) - - - 61
Service revenues 1,410 51 - - 2 1,463
EMBARQ Logistics 138 - - - - 138
Other 31 (2) - - - 29
Product revenues 169 (2) - - - 167
Net operating
revenues $1,579 $49 $- $- $2 $1,630
Operating Expenses
Cost of services 367 23 - - - 390
Cost of products 149 (1) - - - 148
Selling, general
and
administrative 403 13 - (18) - 398
Depreciation 254 - - 13 - 267
Total Operating
Expenses 1,173 35 - (5) - 1,203
Operating Income $406 $14 $- $5 $2 $427
Operating Unit
Revenues
Consumer $642 $44 $- $- $- $686
Business 369 9 - - 1 379
Wholesale 430 (4) - - 1 427
Telecommunications 1,441 49 - - 2 1,492
EMBARQ Logistics 138 - - - - 138
Net operating
revenues $1,579 $49 $- $- $2 $1,630
Capital
Expenditures $265 $- $- $47 $- $312
Embarq Corporation
Reconciliations of Non-GAAP Measures (unaudited)
($ in millions)
Schedule 5
LD Shared
Quarter Ended Customer Assets / As
March 31, 2006 GAAP Transfers Pension Liabilities Other Adjusted
Net Operating Revenues
Voice $1,044 $116 $- $- $1 $1,161
Data 169 4 - - 2 175
High-speed
Internet 92 - - - - 92
Wireless - - - - - -
Other 81 (15) - - - 66
Service revenues 1,386 105 - - 3 1,494
EMBARQ Logistics 152 - - - - 152
Other 23 (3) - - - 20
Product revenues 175 (3) - - - 172
Net operating
revenues $1,561 $102 $- $- $3 $1,666
Operating Expenses
Cost of services 378 50 - - 1 429
Cost of products 160 (3) - - - 157
Selling, general
and
administrative 419 22 - (34) 1 408
Depreciation 238 - - 25 - 263
Total Operating
Expenses 1,195 69 - (9) 2 1,257
Operating Income $366 $33 $- $9 $1 $409
Operating Unit
Revenues
Consumer $609 $92 $- $- $- $701
Business 353 19 - - 1 373
Wholesale 447 (9) - - 2 440
Telecommunications 1,409 102 - - 3 1,514
EMBARQ Logistics 152 - - - - 152
Net operating
revenues $1,561 $102 $- $- $3 $1,666
Capital
Expenditures $184 $- $- $20 $- $204
Embarq Corporation
Reconciliations of Non-GAAP Measures (unaudited)
($ in millions)
Schedule 5
LD Shared
Year Ended Customer Assets / As
December 31, 2005 GAAP Transfers Pension Liabilities Other Adjusted
Net Operating Revenues
Voice $4,265 $512 $- $- $2 $4,779
Data 657 16 - - 11 684
High-speed
Internet 310 - - - - 310
Wireless - - - - - -
Other 334 (66) - - - 268
Service revenues 5,566 462 - - 13 6,041
EMBARQ Logistics 563 - - - - 563
Other 125 (28) - - - 97
Product revenues 688 (28) - - - 660
Net operating
revenues $6,254 $434 $- $- $13 $6,701
Operating Expenses
Cost of services 1,417 239 - - 5 1,661
Cost of products 632 (24) - - - 608
Selling, general
and
administrative 1,594 85 (15) (147) 3 1,520
Depreciation 979 - - 90 1 1,070
Asset impairments 80 - - - - 80
Total Operating
Expenses 4,702 300 (15) (57) 9 4,939
Operating Income $1,552 $134 $15 $57 $4 $1,762
Operating Unit
Revenues
Consumer $2,421 $413 $- $- $- $2,834
Business 1,426 60 - - 6 1,492
Wholesale 1,844 (39) - - 7 1,812
Telecommunications 5,691 434 - - 13 6,138
EMBARQ Logistics 563 - - - - 563
Net operating
revenues $6,254 $434 $- $- $13 $6,701
Capital
Expenditures $828 $- $- $66 $- $894
Embarq Corporation
Reconciliations of Non-GAAP Measures (unaudited)
($ in millions)
Schedule 5
LD Shared
Quarter Ended Customer Assets / As
December 31, 2005 GAAP Transfers Pension Liabilities Other Adjusted
Net Operating Revenues
Voice $1,050 $126 $- $- $1 $1,177
Data 168 4 - - 3 175
High-speed
Internet 88 - - - - 88
Wireless - - - - - -
Other 83 (16) - - - 67
Service revenues 1,389 114 - - 4 1,507
EMBARQ Logistics 180 - - - - 180
Other 34 (7) - - - 27
Product revenues 214 (7) - - - 207
Net operating
revenues $1,603 $107 $- $- $4 $1,714
Operating Expenses
Cost of services 357 59 - - 1 417
Cost of products 206 (6) - - - 200
Selling, general
and
administrative 410 21 (3) (37) 1 392
Depreciation 245 - - 22 1 268
Asset impairments 80 - - - - 80
Total Operating
Expenses 1,298 74 (3) (15) 3 1,357
Operating Income $305 $33 $3 $15 $1 $357
Operating Unit
Revenues
Consumer $608 $99 $- $- $- $707
Business 362 17 - - 2 381
Wholesale 453 (9) - - 2 446
Telecommunications 1,423 107 - - 4 1,534
EMBARQ Logistics 180 - - - - 180
Net operating
revenues $1,603 $107 $- $- $4 $1,714
Capital
Expenditures $285 $- $- $33 $- $318
Embarq Corporation
Reconciliations of Non-GAAP Measures (unaudited)
($ in millions)
Schedule 5
LD Shared
Quarter Ended Customer Assets / As
September 30, 2005 GAAP Transfers Pension Liabilities Other Adjusted
Net Operating Revenues
Voice $1,065 $129 $- $- $- $1,194
Data 164 4 - - 3 171
High-speed
Internet 80 - - - - 80
Wireless - - - - - -
Other 85 (17) - - - 68
Service revenues 1,394 116 - - 3 1,513
EMBARQ Logistics 175 - - - - 175
Other 34 (7) - - - 27
Product revenues 209 (7) - - - 202
Net operating
revenues $1,603 $109 $- $- $3 $1,715
Operating Expenses
Cost of services 360 60 - - 1 421
Cost of products 189 (6) - - - 183
Selling, general
and
administrative 390 21 (4) (37) 1 371
Depreciation 243 - - 23 - 266
Total Operating
Expenses 1,182 75 (4) (14) 2 1,241
Operating Income $421 $34 $4 $14 $1 $474
Operating Unit
Revenues
Consumer $603 $105 $- $- $- $708
Business 362 15 - - 1 378
Wholesale 463 (11) - - 2 454
Telecommunications 1,428 109 - - 3 1,540
EMBARQ Logistics 175 - - - - 175
Net operating
revenues $1,603 $109 $- $- $3 $1,715
Capital
Expenditures $201 $- $- $13 $- $214
Embarq Corporation
Reconciliations of Non-GAAP Measures (unaudited)
($ in millions)
Schedule 5
LD Shared
Quarter Ended Customer Assets / As
June 30, 2005 GAAP Transfers Pension Liabilities Other Adjusted
Net Operating Revenues
Voice $1,065 $128 $- $- $1 $1,194
Data 163 4 - - 3 170
High-speed
Internet 73 - - - - 73
Wireless - - - - - -
Other 83 (16) - - - 67
Service revenues 1,384 116 - - 4 1,504
EMBARQ Logistics 109 - - - - 109
Other 28 (7) - - - 21
Product revenues 137 (7) - - - 130
Net operating
revenues $1,521 $109 $- $- $4 $1,634
Operating Expenses
Cost of services 349 59 - - 2 410
Cost of products 120 (6) - - - 114
Selling, general
and
administrative 379 22 (4) (37) 1 361
Depreciation 246 - - 23 - 269
Total Operating
Expenses 1,094 75 (4) (14) 3 1,154
Operating Income $427 $34 $4 $14 $1 $480
Operating Unit
Revenues
Consumer $601 $104 $- $- $- $705
Business 351 15 - - 2 368
Wholesale 460 (10) - - 2 452
Telecommunications 1,412 109 - - 4 1,525
EMBARQ Logistics 109 - - - - 109
Net operating
revenues $1,521 $109 $- $- $4 $1,634
Capital
Expenditures $194 $- $- $9 $- $203
Embarq Corporation
Reconciliations of Non-GAAP Measures (unaudited)
($ in millions)
Schedule 5
LD Shared
Quarter Ended Customer Assets / As
March 31, 2005 GAAP Transfers Pension Liabilities Other Adjusted
Net Operating Revenues
Voice $1,085 $129 $- $- $- $1,214
Data 162 4 - - 2 168
High-speed
Internet 69 - - - - 69
Wireless - - - - - -
Other 83 (17) - - - 66
Service revenues 1,399 116 - - 2 1,517
EMBARQ Logistics 99 - - - - 99
Other 29 (7) - - - 22
Product revenues 128 (7) - - - 121
Net operating
revenues $1,527 $109 $- $- $2 $1,638
Operating Expenses
Cost of services 351 61 - - 1 413
Cost of products 117 (6) - - - 111
Selling, general
and
administrative 415 21 (4) (36) - 396
Depreciation 245 - - 22 - 267
Total Operating
Expenses 1,128 76 (4) (14) 1 1,187
Operating Income $399 $33 $4 $14 $1 $451
Operating Unit
Revenues
Consumer $609 $105 $- $- $- $714
Business 351 13 - - 1 365
Wholesale 468 (9) - - 1 460
Telecommunications 1,428 109 - - 2 1,539
EMBARQ Logistics 99 - - - - 99
Net operating
revenues $1,527 $109 $- $- $2 $1,638
Capital
Expenditures $148 $- $- $11 $- $159
Telecommunications Segment
Reconciliations of Non-GAAP Measures (unaudited)
($ in millions)
Schedule 6
LD Shared
Year Ended Customer Assets / As
December 31, 2006 GAAP Transfers Pension Liabilities Other Adjusted
Net Operating Revenues
Voice $4,346 $172 $- $- $1 $4,519
Data 706 6 - - 4 716
High speed
Internet 393 - - - - 393
Wireless 7 - - - - 7
Other 270 (22) - - - 248
Service revenues 5,722 156 - - 5 5,883
Product revenues 111 (5) - - - 106
Net operating
revenues $5,833 $151 $- $- $5 $5,989
Operating Expenses
Cost of services 1,593 73 - - 1 1,667
Cost of products 116 (4) - - - 112
Selling, general
and
administrative 1,548 35 - (52) 1 1,532
Depreciation 1,016 - - 38 - 1,054
Total Operating
Expenses 4,273 104 - (14) 2 4,365
Operating Income $1,560 $47 $- $14 $3 $1,624
Operating Unit
Revenues
Consumer $2,590 $136 $- $- $- $2,726
Business 1,492 28 - - 2 1,522
Wholesale 1,751 (13) - - 3 1,741
Telecommunications 5,833 $151 $- $- $5 5,989
Capital
Expenditures $921 $- $- $67 $- $988
Telecommunications Segment
Reconciliations of Non-GAAP Measures (unaudited)
($ in millions)
Schedule 6
LD Shared
Year Ended Customer Assets / As
December 31, 2005 GAAP Transfers Pension Liabilities Other Adjusted
Net Operating Revenues
Voice $4,265 $512 $- $- $2 $4,779
Data 657 16 - - 11 684
High speed
Internet 310 - - - - 310
Wireless - - - - - -
Other 334 (66) - - - 268
Service revenues 5,566 462 - - 13 6,041
Product revenues 125 (28) - - - 97
Net operating
revenues $5,691 $434 $- $- $13 $6,138
Operating Expenses
Cost of services 1,415 239 - - 5 1,659
Cost of products 117 (24) - - - 93
Selling, general
and
administrative 1,519 85 (15) (147) 3 1,445
Depreciation 967 - - 90 1 1,058
Asset impairments 80 - - - - 80
Total Operating
Expenses 4,098 300 (15) (57) 9 4,335
Operating Income $1,593 $134 $15 $57 $4 $1,803
Operating Unit
Revenues
Consumer $2,421 $413 $- $- $- $2,834
Business 1,426 60 - - 6 1,492
Wholesale 1,844 (39) - - 7 1,812
Telecommunications 5,691 $434 $- $- $13 6,138
Capital
Expenditures $823 $- $- $66 $- $889
Telecommunications Segment
Reconciliations of Non-GAAP Measures (unaudited)
($ in millions)
Schedule 6
LD Shared
Quarter Ended Customer Assets / As
December 31, 2005 GAAP Transfers Pension Liabilities Other Adjusted
Net Operating Revenues
Voice $1,050 $126 $- $- $1 $1,177
Data 168 4 - - 3 175
High speed
Internet 88 - - - - 88
Wireless - - - - - -
Other 83 (16) - - - 67
Se
Source: prnewswire
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