Q3 2010 Earnings Call
November 03, 2010 11:30 am ET
Tony Davis - Vice President of Investor Relations
Glen Post - Chief Executive Officer, President and Director
R. Ewing - Chief Financial Officer and Executive Vice President
Karen Puckett - Chief Operating Officer and Executive Vice President
Batya Levi - UBS Investment Bank
Frank Louthan - Raymond James & Associates
Timothy Horan - Oppenheimer & Co. Inc.
Simon Flannery - Morgan Stanley
Scott Goldman - Bear Stearns
Previous Statements by CTL
» CenturyLink Q2 2010 Earnings Call Transcript
» CenturyTel Q1 2010 Earnings Call Transcript
» CenturyLink and Qwest Agree to Merge Call Transcript
Thank you, Sayeed. Good morning, everyone, and welcome to our call today to discuss CenturyLink's third quarter 2010 results released earlier this morning.
For those of you who have access to the Internet, the slide presentation we will be reviewing during the prepared remarks portion of today's call is available on CenturyLink's IR website at ir.centurylink.com or the Investor Relations section of our corporate website at www.centurylink.com.
At the conclusion of our prepared remarks today, we will open the call for Q&A.
Turning to Slide 2. Slide 2 contains our Safe Harbor language for your information. We will be making certain forward-looking statements today, particularly as they pertain to guidance for fourth quarter and full year 2010, selected information regarding 2011, the Embarq integration and the pending acquisition of Qwest and other outlooks in our business.
Please review our Safe Harbor language found in our press release and in our SEC filings, which describe factors that could cause our actual results to differ materially from those projected by us and our forward-looking statements.
Now moving to Slide 3. We asked that you note that our earnings release issued earlier this morning and the slide presentation and remarks made during this call contain certain non-GAAP financial measures. Reconciliations between the non-GAAP financial measures and the GAAP financial measures are available in our earnings release and on our website at www.centurylink.com.
Turning to Slide 4. Your host for today's call is Glen Post, Chief Executive Officer and President of CenturyLink. Joining Glen on our call today is Stewart Ewing, CenturyLink's Chief Financial Officer. And also available during the question-and-answer period of today's call is Karen Puckett, CenturyLink's Chief Operating Officer.
Our call today will be accessible for telephone replay through November 9, 2010, and available for webcast replay through November 23, 2010.
For anyone listening to a taped or webcast replay of this call, or for anyone reviewing a written transcript of today's call, please note that all information presented is current only as of November 3, 2010, and should be considered valid only as of today regardless of the date listened to or reviewed.
As you turn to Slide 5, I will now turn the call over to your host, Glen Post. Glen?
Thank you, Tony. We appreciate you joining us today as we discuss CenturyLink's third quarter 2010 operating results and selected operational updates, as well as guidance for the remainder of 2010.
Reported solid results for the quarter achieved operating revenues above the top end of guidance range and diluted earnings per share that exceeded previous guidance and first call consensus for the quarter. We also achieved solid high-speed Internet additions and continue to see significant improvement in year-over-year access line losses, primarily driven by improved line loss results in the legacy Embarq markets.
The integration of Embarq continues to proceed well, and we continue to make good progress in obtaining approvals necessary to complete the pending Qwest transaction, another transformative acquisition for CenturyLink.
Moving to Slide 6 from the deck. We are pleased to report solid financial and operating results for the third quarter. Operating revenues were $1.75 billion for the quarter, and diluted earnings per share excluding nonrecurring items is $0.83 per share for the quarter. A primary contribution to our solid results during the quarter was our employees' ongoing efforts to contain operating costs across our business while at the same time, working on the Embarq integration preparing for the Qwest transaction.
Our cash flows remained strong as we generated free cash flow of more than $380 million, excluding nonrecurring items during the quarter. Additionally, we achieved over $80 million of total operating expense synergies associated with the Embarq integration during the third quarter, and we continue to expect to exit 2010 at our current $330 million annualized operating expense synergy run rate.
Turning to Slide 7 in the deck. We continue to see an improvement in our year-over-year revenue mix as the Embarq acquisition and our market specific marketing strategies are decreasing our reliance on access revenues. Revenues from data services accounted for 27.5% of the third quarter 2010 total operating revenues compared to 24.6% in the third quarter of 2009.
Access service revenues represented only 15.1% of total operating revenues in the third quarter 2010, reflecting the company's lowering by on network access related revenues during the quarter.
We'll continue to experience growth and data revenues, driven primarily by the year-over-year growth in high-speed Internet customers increased demand by business and wholesale customers for high-speed for high-bandwidth services. We remained focused on positioning CenturyLink as the broadband provider of choice in our markets. We continue to enhance our broadband product portfolio to deploying higher speeds and key markets, as well as offering incremental value to broadband features such as computer support and online backup.