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| EMBARQ Posts Solid Third Quarter Results Highlighted by Strong Cash Flow and Continued Revenue Growth in High-Speed Internet, Data and Wireless |
Company Improves 2007 Capital Spending Outlook and Reaffirms Other Forecast Measures OVERLAND PARK, Kan., Nov. 1 /PRNewswire-FirstCall/ -- EMBARQ (NYSE: EQ) today announced results for the third quarter of 2007, which were highlighted by strong free cash flow and continued progress toward Telecommunications revenue growth. The company reported total revenues of $1.59 billion, operating income of $363 million and diluted earnings per share of $1.01. Third quarter results were unfavorably impacted by $33 million, or $0.13 per diluted share, in severance charges related to recent workforce reductions and $4 million of non-recurring spin-off related expenses. "We were pleased with the continued growth in average revenue per household and our strong free cash flow performance during the quarter, so we are reaffirming our recently improved forecast for the year," said Dan Hesse, EMBARQ Chairman and Chief Executive Officer. "We intend to build on these results, continue to improve the efficiency and effectiveness of our operations and fortify our long-term competitive position."
Third Quarter Highlights
* Average revenue per household increased 7% compared to the year-ago
period, the largest increase on record.
* High-speed Internet revenue grew 27% year-over-year.
* Data revenue grew 8% year-over-year.
* Free cash flow increased by $77 million year-over-year to $330 million.
* The company improved its 2007 outlook for capital expenditures and
reaffirmed other forecast measures.
Financial Results
EMBARQ reported total net operating revenues of $1.594 billion for the third quarter of 2007, a decrease of 0.7% sequentially and 0.7% from the year- ago period. Third quarter Telecommunications segment revenues declined 0.6% compared to the previous quarter and 0.5% year-over-year to $1.473 billion. Within Telecommunications, growth in high-speed Internet, data and wireless revenues partially offset a decline in voice revenue. Revenue for the Logistics segment was $121 million, a decrease of 1.6% compared to the second quarter and 3.2% below the year-ago period. Operating income results for the third quarter were negatively impacted by $33 million of severance expenses and $4 million of non-recurring spin-off charges. The company also reported that dilution related to its wireless business was $21 million in the period. Due in part to these items, third quarter consolidated operating income decreased by 9.3% from the previous quarter and 0.8% from the year-ago period to $363 million. The $33 million severance charge in the third quarter arose from the company's decision to close two call centers and reduce staffing in several functional areas. An additional severance charge of more than $20 million is expected in the fourth quarter. In 2008, the company expects to realize recurring expense savings of approximately $75 million. Capital Expenditures and Cash Flow Capital expenditures were $195 million in the third quarter, including $2 million of non-recurring spin-off related capital spending. Free cash flow before dividends was $330 million in the quarter, compared to $253 million in the prior year period. The increase was driven primarily by lower capital spending and working capital requirements, partially offset by lower operating income and a $75 million contribution to the company's defined benefit pension plan. Year-to-date, the company has generated free cash flow of $687 million. As a result of the strong cash flow generated during the period, EMBARQ reduced its net debt by $246 million to $5.86 billion. In addition, the company paid a third quarter dividend of $0.625 per share. Subscriber Results EMBARQ reported a decline of 126,000 access lines in the third quarter. The company added 60,000 high-speed Internet subscribers, bringing the total to over 1.2 million at quarter end. The company's wireless business grew by 19,000 subscribers, reaching 108,000 at quarter end. Video net additions totaled 12,000, and the company ended the quarter with 190,000 of its customers subscribing to video services. 2007 Outlook EMBARQ improved its 2007 outlook for capital expenditures, due partly to the slowdown in residential construction. The company reaffirmed other expectations provided on July 26, 2007. Current expectations for the year are as follows:
* Access lines are expected to decline at a low-to-mid 6% rate,
consistent with the company's prior forecast.
* Telecommunications segment revenues are expected to be $5.87 to
$5.92 billion, which is also unchanged from previous expectations.
* Consolidated operating income is expected to be $1.51 to $1.56 billion,
consistent with the previous outlook.
* The company's operating income guidance includes approximately
$30 million of non-recurring spin-off expenses, approximately
$80 million of wireless dilution, and depreciation of approximately
$1.06 billion.
* The outlook for operating income does not include the $33 million
severance charge EMBARQ reported this quarter or the more than
$20 million in severance the company expects to report next quarter.
* Capital expenditures are expected to be approximately $840 million,
including approximately $15 million of non-recurring spin-off related
capital spending. Previously the company expected capital spending of
approximately $865 million, including $15 million of non-recurring
spin-off related capital spending.
GAAP and 'As Adjusted' Reporting
EMBARQ's reported results under generally accepted accounting principles (GAAP) for periods prior to its May 2006 spin-off from Sprint Nextel do not reflect certain items that are included in its GAAP reporting for periods subsequent to the spin-off. (These items are described in more detail in the "Financial Measures" section on page 4.) Accordingly, the company's pre spin- off GAAP results are not fully comparable to its post spin-off GAAP results. The company's as adjusted basis of reporting reflects the current composition of its business for all periods prior and subsequent to its spin- off. Thus, as adjusted results are provided to help investors evaluate trends in the company's performance. Reconciliations between EMBARQ's GAAP and as adjusted results are provided in Schedule 5. Conference Call On Thursday, Nov. 1, 2007 EMBARQ will hold a conference call beginning at 4:30 p.m. EDT. Dial-in numbers for the conference call are (866) 245-2310 (U.S. and Canada) and (706) 679-0843 (International). The code required to access the call is 17792767. Please plan to dial in at least five minutes before the scheduled start time. A simultaneous audio webcast of the call and a downloadable presentation will be available at www.embarq.com/investors. For those unable to participate live, a replay of the call will be available until Nov. 16, 2007, by dialing (800) 642-1687 (U.S. and Canada) or (706) 645-9291 (International) as well as at www.embarq.com/investors. The accompanying presentation will also be archived and available for download at this website. 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 line 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, and the economic and regulatory environment. 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 Annual Report on Form 10-K, 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 release. EMBARQ is not obligated to publicly update or news release any revisions to these forward-looking statements to reflect any events or circumstances after the date of this news release. Financial Measures 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 are 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 2006, including reconciliations to GAAP. The as adjusted financial information assumes the spin-off from Sprint Nextel had occurred on Jan. 1, 2006, and includes the items described above. The as adjusted financial information is a non-GAAP measure and should be considered in addition to, but not as a substitute for, the information contained in the company's financial reporting.
Selected Financial Data (Unaudited) - Current Period Results Compared to
Prior Year
Embarq Corporation Consolidated
Selected Unaudited Financial Data
($ in millions, except per share amounts)
Consolidated 3Q-07 3Q-06 Fav/(Unfav)
Voice $1,051 $1,109 ($58) -5.2%
Data 195 180 15 8.3%
High-speed Internet 124 98 26 26.5%
Wireless 15 3 12 400.0%
Other services 61 64 (3) -4.7%
Service revenues 1,446 1,454 (8) -0.6%
EMBARQ Logistics 121 125 (4) -3.2%
Other product 27 27 - 0.0%
Product revenues 148 152 (4) -2.6%
Net Operating Revenues 1,594 1,606 (12) -0.7%
Operating Expenses
Cost of services 417 438 21 4.8%
Cost of products 149 145 (4) -2.8%
Selling, general and
administrative 405 390 (15) -3.8%
Depreciation 260 267 7 2.6%
Total Operating Expenses 1,231 1,240 9 0.7%
Operating Income $363 $366 ($3) -0.8%
Interest expense 108 116 8 6.9%
Other expense (income), net (2) (5) (3) -60.0%
Income Before Taxes $257 $255 $2 0.8%
Income tax expense 100 95 (5) -5.3%
Net Income $157 $160 ($3) -1.9%
Diluted Earnings Per Share $1.01 $1.06 ($0.05) -4.8%
Embarq Telecommunications Segment
Selected Unaudited Financial Data
($ in millions, except per share amounts)
Telecom 3Q-07 3Q-06 Fav/(Unfav)
Voice $1,051 $1,109 ($58) -5.2%
Data 195 180 15 8.3%
High-speed Internet 124 98 26 26.5%
Wireless 15 3 12 400.0%
Other services 61 64 (3) -4.7%
Service revenues 1,446 1,454 (8) -0.6%
Product revenues 27 27 - 0.0%
Net Operating Revenues 1,473 1,481 (8) -0.5%
Operating Expenses
Cost of services 417 436 19 4.4%
Cost of products 41 31 (10) -32.3%
Selling, general and
administrative 393 379 (14) -3.7%
Depreciation 257 265 8 3.0%
Total Operating Expenses 1,108 1,111 3 0.3%
Operating Income $365 $370 ($5) -1.4%
Embarq Logistics Segment
Selected Unaudited Financial Data
($ in millions, except per share amounts)
Logistics 3Q-07 3Q-06 Fav/(Unfav)
Net Operating Revenues 121 125 (4) -3.2%
Operating Expenses
Cost of services & products 108 116 8 6.9%
Selling, general and
administrative 12 11 (1) -9.1%
Depreciation 3 2 (1) -50.0%
Total Operating Expenses 123 129 6 4.7%
Operating Income ($2) ($4) $2 50.0%
Selected Financial Data (Unaudited) - Current Period Results Compared to
Prior Quarter
Embarq Corporation Consolidated
Selected Unaudited Financial Data
($ in millions, except per share amounts)
Consolidated 3Q-07 2Q-07 Fav/(Unfav)
Voice $1,051 $1,071 ($20) -1.9%
Data 195 188 7 3.7%
High-speed Internet 124 121 3 2.5%
Wireless 15 11 4 36.4%
Other services 61 63 (2) -3.2%
Service revenues 1,446 1,454 (8) -0.6%
EMBARQ Logistics 121 123 (2) -1.6%
Other product 27 28 (1) -3.6%
Product revenues 148 151 (3) -2.0%
Net Operating Revenues 1,594 1,605 (11) -0.7%
Operating Expenses
Cost of services 417 404 (13) -3.2%
Cost of products 149 142 (7) -4.9%
Selling, general and
administrative 405 395 (10) -2.5%
Depreciation 260 264 4 1.5%
Total Operating Expenses 1,231 1,205 (26) -2.2%
Operating Income $363 $400 ($37) -9.3%
Interest expense 108 111 3 2.7%
Other expense (income), net (2) - 2 N/A
Income Before Taxes $257 $289 ($32) -11.1%
Income tax expense 100 113 13 11.5%
Net Income $157 $176 ($19) -10.8%
Diluted Earnings Per Share $1.01 $1.15 ($0.14) -11.7%
Embarq Telecommunications Segment
Selected Unaudited Financial Data
($ in millions, except per share amounts)
Telecom 3Q-07 2Q-07 Fav/(Unfav)
Voice $1,051 $1,071 ($20) -1.9%
Data 195 188 7 3.7%
High-speed Internet 124 121 3 2.5%
Wireless 15 11 4 36.4%
Other services 61 63 (2) -3.2%
Service revenues 1,446 1,454 (8) -0.6%
Product revenues 27 28 (1) -3.6%
Net Operating Revenues 1,473 1,482 (9) -0.6%
Operating Expenses
Cost of services 417 404 (13) -3.2%
Cost of products 41 33 (8) -24.2%
Selling, general and
administrative 393 387 (6) -1.6%
Depreciation 257 262 5 1.9%
Total Operating Expenses 1,108 1,086 (22) -2.0%
Operating Income $365 $396 ($31) -7.8%
Embarq Logistics Segment
Selected Unaudited Financial Data
($ in millions, except per share amounts)
Logistics 3Q-07 2Q-07 Fav/(Unfav)
Net Operating Revenues 121 123 (2) -1.6%
Operating Expenses
Cost of services & products 108 109 1 0.9%
Selling, general and
administrative 12 8 (4) -50.0%
Depreciation 3 2 (1) -50.0%
Total Operating Expenses 123 119 (4) -3.4%
Operating Income ($2) $4 ($6) -150.0%
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. EMBARQ believes that Net Debt provides useful information about its capacity to reduce debt and improve its capital structure.
Reconciliation of Non-GAAP
measure - Net Debt September 30, June 30,
2007 2007 Change
Current maturities $99 $54 $45
Long-term debt 5,774 6,069 (295)
Less: Cash and equivalents (10) (14) 4
Net Debt $5,863 $6,109 $(246)
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. EMBARQ believes that Free Cash Flow provides useful information about the cash generated from core operations and its ability to fund dividends, scheduled debt maturities and other financing activities.
Reconciliation of Free Cash QTD QTD YTD
Flow September 30, September 30, September 30,
2006 2007 2007
Current maturities
Change in cash and equivalents $(16) $(4) $(43)
Net cash used by investing
activities
Less: Net cash used by
financing activities 269 334 730
Free Cash Flow $253 $330 $687
Average Revenue per Household is calculated by dividing consumer revenues by average primary consumer access lines. While this measure is not defined under accounting principles generally accepted in the United States, the measure uses a GAAP measure as the basis for the calculation. EMBARQ believes Average Revenue per Household provides useful information concerning the success of its bundling initiatives and performance in attracting and retaining high value customers. HSI Average Revenue per Subscriber is calculated by dividing high-speed Internet revenues by average high-speed Internet subscribers. While this measure is not defined under accounting principles generally accepted in the United States, the measure uses a GAAP measure as the basis for the calculation. EMBARQ believes HSI Average Revenue per Subscriber provides useful information concerning the appeal of its high-speed Internet pricing plans and performance in attracting and retaining high value customers. About EMBARQ Embarq Corporation (NYSE: EQ), headquartered in Overland Park, Kansas, offers a complete suite of communications services. The company has approximately 19,000 employees and operates in 18 states. EMBARQ is included in the S&P 500. For consumers, EMBARQ offers an innovative portfolio of services that includes reliable local and long distance home phone service, high-speed Internet, wireless, and satellite TV from DISH Network(R) -- all on one monthly bill. For businesses, EMBARQ has a comprehensive range of flexible and integrated services designed to help businesses of all sizes be more productive and communicate with their customers. This service portfolio includes local voice and data services, long distance, Business Class DSL, wireless, enhanced data network services, voice and data communication equipment and managed network services. For more information, visit embarq.com.
Embarq Corporation
Consolidated Statements of Operations
($ in millions, except per share amounts)
(unaudited)
Schedule 1 Quarter Ended Nine Months Ended
September 30, September 30,
2007 2006 2007 2006
Net Operating Revenues
Service revenues $1,446 $1,454 $4,358 $4,250
Product revenues 148 152 430 496
Net operating revenues 1,594 1,606 4,788 4,746
Operating Expenses
Cost of services 417 438 1,238 1,183
Cost of products 149 145 418 454
Selling, general and
administrative 405 390 1,204 1,212
Depreciation 260 267 794 759
Total Operating Expenses 1,231 1,240 3,654 3,608
Operating Income 363 366 1,134 1,138
Interest expense 108 116 328 203
Other (income) expense, net (2) (5) (2) (13)
Income Before Taxes 257 255 808 948
Income tax expense 100 95 315 358
Net Income $157 $160 $493 $590
Basic Earnings Per Share (1) $1.02 $1.07 $3.25 $3.96
Basic weighted average
shares (1) 152.8 149.2 151.6 149.1
Diluted Earnings Per Share (1) $1.01 $1.06 $3.21 $3.93
Diluted weighted average
shares (1) 154.5 150.5 153.5 150.1
(1) Basic and diluted earnings per share and weighted average shares
outstanding have been presented on as adjusted basis for the nine
months ended September 30, 2006. Shares outstanding and dilution
effects at the spin-off date of May 17, 2006 were assumed to be
outstanding at January 1, 2006.
Embarq Corporation
Consolidated Balance Sheets
($ in millions)
Schedule 2 September 30, December 31,
2007 2006
(unaudited)
Assets
Cash and equivalents $10 $53
Accounts receivable, net 672 660
Inventories 160 179
Prepaid expenses and other current assets 150 131
Total current assets 992 1,023
Property, plant and equipment, net 7,761 7,988
Prepaid pension asset 58 -
Other non-current assets 60 80
Total non-current assets 7,879 8,068
Total assets $8,871 $9,091
Liabilities and stockholders' equity
Current maturities $99 $37
Accounts payable 407 503
Accrued payroll & benefits 183 198
Accrued taxes 169 164
Deferred revenue 206 211
Accrued interest 136 52
Other current liabilities 131 99
Total current liabilities 1,331 1,264
Long-term debt 5,774 6,421
Postretirement and other benefit obligations 336 685
Deferred income taxes 1,104 1,039
Other non-current liabilities 204 150
Total non-current liabilities 7,418 8,295
Stockholders' equity
Common stock 2 1
Treasury stock, at cost - -
Paid in capital (246) (414)
Retained earnings 529 308
Accumulated other comprehensive income (loss) (163) (363)
Total stockholders' equity 122 (468)
Total liabilities and stockholders' equity $8,871 $9,091
Embarq Corporation
Consolidated Statements of Cash Flows
($ in millions)
(unaudited)
Schedule 3 Nine Months Ended September 30,
2007 2006
Operating Activities
Net income $493 $590
Depreciation 794 759
Deferred and uncertain income tax provisions (18) (36)
Provision for losses on accounts receivable 67 40
Stock-based compensation expense 46 9
Net losses (gains) on sales of assets (7) (12)
Other, net 32 27
Changes in assets and liabilities:
Accounts receivable (72) (39)
Inventories and other current assets (17) 27
Accounts payable and other current
liabilities (24) 341
Noncurrent assets and liabilities, net (67) (25)
Net cash provided by operating activities 1,227 1,681
Investing Activities
Capital expenditures (566) (709)
Proceeds from construction reimbursements 7 8
Proceeds from sales of assets 19 30
Net cash used by investing activities (540) (671)
Financing Activities
Changes in debt, net (582) 1,393
Net cash paid to Sprint Nextel associated
with the spin off - (2,208)
Dividends paid to stockholders (271) (75)
Common stock issued 95 10
Dividends paid to Sprint Nextel - (194)
Other, net 28 (5)
Net cash used by financing activities (730) (1,079)
Change in cash and equivalents (43) (69)
Cash and equivalents at beginning of period 53 103
Cash and equivalents at end of period $10 $34
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
3Q-07 (1) 2Q-07 (1) 1Q-07 (1) 2006
Service and Product Revenues
Voice $1,051 $1,071 $1,084 $4,519
Data 195 188 189 716
High-speed Internet 124 121 116 393
Wireless 15 11 9 7
Other 61 63 60 248
Service revenues 1,446 1,454 1,458 5,883
EMBARQ Logistics 121 123 109 530
Other 27 28 22 106
Product revenues 148 151 131 636
Net operating revenues $1,594 $1,605 $1,589 $6,519
Operating Unit Revenues
Consumer $665 $675 $682 $2,726
Business 391 385 384 1,522
Wholesale 417 422 414 1,741
Telecommunications 1,473 1,482 1,480 5,989
EMBARQ Logistics 121 123 109 530
Net operating revenues $1,594 $1,605 $1,589 $6,519
Access Lines
Consumer 4,345 4,461 4,588
Business 2,049 2,054 2,065
Wholesale 171 176 184
Total 6,565 6,691 6,837
Average Revenue per Household
Consumer revenue $665 $675 $682
Average primary consumer
access lines 4,076 4,180 4,261
Monthly revenue per average HH $54.38 $53.83 $53.35
High-speed Internet Lines
Consumer 1,017 963 916
Business 160 154 149
Wholesale 39 39 39
Total 1,216 1,156 1,104
HSI Average Revenue per
Subscriber
High-speed Internet revenue $124 $121 $116
Average HSI subscribers 1,186 1,130 1,061
Monthly revenue per average
subscriber $34.85 $35.69 $36.44
Wireless Subscribers
Consumer 98 81 65
Business 10 8 6
Total 108 89 71
Entertainment Subscribers 190 178 170
(1) As Embarq completed the spin-off from Sprint-Nextel on May 17, 2006,
periods subsequent to the second quarter 2006 represent GAAP results
Schedule 4
4Q-06 (1) 3Q-06 (1) 2Q-06 1Q-06
Service and Product Revenues
Voice $1,120 $1,109 $1,129 $1,161
Data 183 180 178 175
High-speed Internet 108 98 95 92
Wireless 4 3 - -
Other 57 64 61 66
Service revenues 1,472 1,454 1,463 1,494
EMBARQ Logistics 115 125 138 152
Other 30 27 29 20
Product revenues 145 152 167 172
Net operating revenues $1,617 $1,606 $1,630 $1,666
Operating Unit Revenues
Consumer $671 $668 $686 $701
Business 381 389 379 373
Wholesale 450 424 427 440
Telecommunications 1,502 1,481 1,492 1,514
EMBARQ Logistics 115 125 138 152
Net operating revenues $1,617 $1,606 $1,630 $1,666
Access Lines
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
Average Revenue per Household
Consumer revenue $671 $668 $686 $701
Average primary consumer
access lines 4,316 4,384 4,482 4,571
Monthly revenue per average HH $51.82 $50.79 $51.02 $51.12
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 $41.72
Wireless Subscribers
Consumer 44 21 4 -
Business 4 3 1 -
Total 48 24 5 -
Entertainment Subscribers 162 146 131 109
(1) As Embarq completed the spin-off from Sprint-Nextel on May 17, 2006,
periods subsequent to the second quarter 2006 represent GAAP results
Embarq Corporation
Reconciliations of Non-GAAP Measures (unaudited)
($ 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 $- $204
Embarq Corporation
Supplemental Cash Flow Data
($ in millions)
(unaudited)
Schedule 6 Quarter Ended
September 30, 2007
Operating Activities
Net income $157
Depreciation 260
Deferred and uncertain income tax provisions 34
Provision for losses on accounts receivable 30
Stock-based compensation expense 16
Net losses (gains) on sales of assets -
Other, net 10
Changes in assets and liabilities:
Accounts receivable (46)
Inventories and other current assets 13
Accounts payable and other current liabilities 122
Noncurrent assets and liabilities, net (74)
Net cash provided by operating activities 522
Investing Activities
Capital expenditures (195)
Proceeds from construction reimbursements 2
Proceeds from sales of assets 1
Net cash used by investing activities (192)
Financing Activities
Changes in debt, net (250)
Dividends paid to stockholders (97)
Common stock issued 7
Other, net 6
Net cash used by financing activities (334)
Change in cash and equivalents (4)
Cash and equivalents at beginning of period 14
Cash and equivalents at end of period $10
SOURCE Embarq Corporation
-0- 11/01/2007
/CONTACT: Investor Relations, Trevor Erxleben, +1-866-591-1964,
investorrelations@embarq.com, or Media, Debra Peterson, +1-913-323-4881,
debra.d.peterson@embarq.com, both of Embarq Corporation/
/Photo: NewsCom: http://www.newscom.com/cgi-bin/prnh/20060516/EMBARQLOGO
AP Archive: http://photoarchive.ap.org
PRN Photo Desk, photodesk@prnewswire.com/
/Web site: http://www.embarq.com
http://www.embarq.com/investors /
(EQ)
CO: Embarq Corporation
ST: Kansas
IN: TLS CPR ITE
SU: ERN ERP CCA
CM-JC
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1670 11/01/2007 16:05 EDT http://www.prnewswire.com
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