CenturyLink 2015 Annual Report Download - page 129

Segment Revenues
Consumer segment revenues increased by $27 million, or less than 1%, for year ended December 31, 2015
as compared to the year ended December 31, 2014. The increase in strategic services revenues was primarily due
to increases in the number of Prism TV customers, as well as from 2015 price increases on various services. The
decline in legacy services revenues was primarily due to declines in local and long-distance services volumes
associated with access line losses resulting from the competitive and technological changes as further described
above. Consumer segment revenues decreased by $10 million, or less than 1%, for the year ended December 31,
2014 as compared to the year ended December 31, 2013. The decline in legacy services revenues was due to the
same reasons noted above. The increase in strategic services revenues was primarily due to growth in the number
of high-speed Internet subscribers and increases in the number of Prism TV customers, as well as from 2014
price increases on various services. The increase in consumer segment revenues during 2015 as compared to the
decline in revenues for 2014 was primarily attributable to the above-noted price increases.
Segment Expenses
Consumer segment expenses increased by $5 million, or less than 1%, for the year ended December 31,
2015 as compared to the year ended December 31, 2014. This increase was primarily due to increases in Prism
TV content costs (resulting from higher volume and rates) and bad debt expense, which were partially offset by
reductions in employee-related costs, marketing and advertising expenses and fleet expenses. Consumer segment
expenses increased by $61 million, or 3%, for the year ended December 31, 2014 as compared to the year ended
December 31, 2013. This increase was primarily due to increases in marketing and advertising expenses, Prism
TV content costs resulting from subscriber growth in our Prism TV markets and the number of modems shipped
for Prism TV customers, which were partially offset by reductions in employee-related costs and facility costs.
Segment Income
Consumer segment income increased by $22 million, or 1%, for the year ended December 31, 2015 as
compared to the year ended December 31, 2014. This increase was primarily due to price increases on various
services and reduction of costs. Consumer segment income decreased by $71 million, or 2%, for the year ended
December 31, 2014 as compared to the year ended December 31, 2013. This decrease was primarily due to
customers migrating from legacy services to lower margin strategic services, and the increase in Prism TV
content costs.
Critical Accounting Policies and Estimates
Our consolidated financial statements are prepared in accordance with accounting principles that are
generally accepted in the United States. The preparation of these consolidated financial statements requires
management to make estimates and assumptions that affect the reported amounts of our assets, liabilities,
revenues and expenses. We have identified certain policies and estimates as critical to our business operations
and the understanding of our past or present results of operations related to (i) goodwill, customer relationships
and other intangible assets; (ii) property, plant and equipment; (iii) pension and post-retirement benefits; (iv) loss
contingencies and litigation reserves; (v) Connect America Fund support payments; and (vi) income taxes. These
policies and estimates are considered critical because they had a material impact, or they have the potential to
have a material impact, on our consolidated financial statements and because they require us to make significant
judgments, assumptions or estimates. We believe that the estimates, judgments and assumptions made when
accounting for the items described below were reasonable, based on information available at the time they were
made. However, there can be no assurance that actual results will not differ from those estimates.
Goodwill, Customer Relationships and Other Intangible Assets
We amortize customer relationships primarily over an estimated life of 10 to 15 years, using either the sum-
of-the-years-digits or the straight-line methods, depending on the type of customer. We amortize capitalized
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