CenturyLink 2015 Annual Report Download - page 194

(13) Quarterly Financial Data (Unaudited)
First
Quarter
Second
Quarter
Third
Quarter
Fourth
Quarter Total
(Dollars in millions, except per share amounts)
2015
Operating revenues ..................................... $4,451 4,419 4,554 4,476 17,900
Operating income ...................................... 649 549 656 751 2,605
Net income ............................................ 192 143 205 338 878
Basic earnings per common share .......................... 0.34 0.26 0.37 0.62 1.58
Diluted earnings per common share ........................ 0.34 0.26 0.37 0.62 1.58
2014
Operating revenues ..................................... $4,538 4,541 4,514 4,438 18,031
Operating income ...................................... 653 655 619 483 2,410
Net income ............................................ 203 193 188 188 772
Basic earnings per common share .......................... 0.35 0.34 0.33 0.33 1.36
Diluted earnings per common share ........................ 0.35 0.34 0.33 0.33 1.36
During the third quarter of 2015, we recognized an incremental $158 million of revenue associated with the
FCC’s CAF Phase 2 support program, and an additional incremental $57 million in the fourth quarter of 2015.
During the fourth quarter of 2015, we also recognized a tax benefit of approximately $34 million related to
affiliate debt rationalization, research and development tax credits of $28 million for 2011 through 2015, and a
$16 million tax decrease due to changes in state taxes caused by apportionment changes, state tax rate changes
and the changes in the expected utilization of net operating losses (“NOLs”).
During the fourth quarter of 2014, we recognized a $60 million tax benefit associated with a deduction for
the tax basis for worthless stock in a wholly-owned foreign subsidiary as a result of developments in bankruptcy
proceedings involving its sole asset that occurred in the first quarter of 2014. During the fourth quarter of 2014,
we also recognized a pension settlement charge of $63 million.
(14) Commitments and Contingencies
We are vigorously defending against all of the matters described below under the headings “Pending
Matters” and “Other Proceedings and Disputes.” As a matter of course, we are prepared both to litigate these
matters to judgment, as well as to evaluate and consider all reasonable settlement opportunities. In this Note,
when we refer to a class action as “putative” it is because a class has been alleged, but not certified in that matter.
We have established accrued liabilities for these matters described below where losses are deemed probable and
reasonably estimable.
Pending Matters
In William Douglas Fulghum, et al. v. Embarq Corporation, et al., filed on December 28, 2007 in the
United States District Court for the District of Kansas, a group of retirees filed a class action lawsuit challenging
the decision to make certain modifications in retiree benefits programs relating to life insurance, medical
insurance and prescription drug benefits, generally effective January 1, 2006 and January 1, 2008 (which, at the
time of the modifications, was expected to reduce estimated future expenses for the subject benefits by more than
$300 million). Defendants include Embarq, certain of its benefit plans, its Employee Benefits Committee and the
individual plan administrator of certain of its benefits plans. Additional defendants include Sprint Nextel and
certain of its benefit plans. The Court certified a class on certain of plaintiffs’ claims, but rejected class
certification as to other claims. On October 14, 2011, the Fulghum lawyers filed a new, related lawsuit, Abbott et
al. v. Sprint Nextel et al. In Abbott, approximately 1,500 plaintiffs allege breach of fiduciary duty in connection
with the changes in retiree benefits that also are at issue in the Fulghum case. The Abbott plaintiffs are all
members of the class that was certified in Fulghum on claims for allegedly vested benefits (Counts I and III), and
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