CENTURYLINK, INC, 10-K/A filed on 3/30/2011
Amended Annual Report
Document And Entity Information
Year Ended
Dec. 31, 2010
Feb. 28, 2011
Jun. 30, 2010
Document And Entity Information [Abstract]
 
 
 
Entity Registrant Name
CENTURYLINK, INC 
 
 
Entity Central Index Key
0000018926 
 
 
Current Fiscal Year End Date
12/31 
 
 
Entity Well-known Seasoned Issuer
Yes 
 
 
Entity Voluntary Filers
No 
 
 
Entity Current Reporting Status
Yes 
 
 
Entity Filer Category
Large Accelerated Filer 
 
 
Entity Public Float
 
 
8,700,000,000 
Entity Common Stock, Shares Outstanding (in shares)
 
305,609,343 
 
Document Fiscal Year Focus
2010 
 
 
Document Fiscal Period Focus
FY 
 
 
Document Type
10-K 
 
 
Amendment Flag
FALSE 
 
 
Document Period End Date
2010-12-31 
 
 
Consolidated Statements of Income (USD $)
In Thousands, except Per Share data
Year Ended
Dec. 31,
2010
2009
2008
Income Statement [Abstract]
 
 
 
OPERATING REVENUES
$ 7,041,534 
$ 4,974,239 
$ 2,599,747 
OPERATING EXPENSES
 
 
 
Cost of services and products (exclusive of depreciation and amortization)
2,410,048 
1,752,087 
955,473 
Selling, general and administrative
1,137,989 
1,014,341 
399,136 
Depreciation and amortization
1,433,553 
974,710 
523,786 
Total operating expenses
4,981,590 
3,741,138 
1,878,395 
OPERATING INCOME
2,059,944 
1,233,101 
721,352 
OTHER INCOME (EXPENSE)
 
 
 
Interest expense
(557,478)
(370,414)
(202,217)
Other income (expense)
29,619 
(48,175)
42,252 
Total other income (expense)
(527,859)
(418,589)
(159,965)
INCOME BEFORE INCOME TAX EXPENSE
1,532,085 
814,512 
561,387 
Income tax expense
582,951 
301,881 
194,357 
INCOME BEFORE NONCONTROLLING INTERESTS AND EXTRAORDINARY ITEM
949,134 
512,631 
367,030 
Noncontrolling interests
(1,429)
(1,377)
(1,298)
NET INCOME BEFORE EXTRAORDINARY ITEM
947,705 
511,254 
365,732 
Extraordinary item, net of income tax expense and noncontrolling interests (see Note 16)
0 
135,957 
0 
NET INCOME ATTRIBUTABLE TO CENTURYLINK,INC.
947,705 
647,211 
365,732 
BASIC EARNINGS PER SHARE
 
 
 
Before extraordinary item (in dollars per share)
3.13 
2.55 
3.53 
Extraordinary item (in dollars per share)
0 
0.68 
0 
Basic earnings per share (in dollars per share)
3.13 
3.23 
3.53 
DILUTED EARNINGS PER SHARE
 
 
 
Before extraordinary item (in dollars per share)
3.13 
2.55 
3.52 
Extraordinary item (in dollars per share)
0 
0.68 
0 
Diluted earnings per share (in dollars per share)
3.13 
3.23 
3.52 
DIVIDENDS PER COMMON SHARE (in dollars per share)
$ 2.90 
$ 2.80 
$ 2.1675 
AVERAGE BASIC SHARES OUTSTANDING (in shares)
300,619 
198,813 
102,268 
AVERAGE DILUTED SHARES OUTSTANDING (in shares)
301,297 
199,057 
102,560 
Consolidated Statements of Comprehensive Income (USD $)
In Thousands
Year Ended
Dec. 31,
2010
2009
2008
Statement Of Income And Comprehensive Income [Abstract]
 
 
 
NET INCOME BEFORE NONCONTROLLING INTERESTS
$ 949,134 
$ 650,133 
$ 367,030 
Marketable securities:
 
 
 
Unrealized gain (loss) on investments, net of ($332) tax
0 
0 
(533)
Reclassification adjustment for gain included in net income, net of ($1,730) tax
0 
0 
(2,776)
Derivative instruments:
 
 
 
Reclassification adjustment for gains included in net income, net of $267, $267 and $267 tax
429 
429 
429 
Items related to employee benefit plans:
 
 
 
Change in net actuarial loss, net of ($37,908), $30,100 and ($48,656) tax
(62,321)
39,209 
(82,505)
Change in net prior service credit, net of ($1,328), ($5,798) and ($589) tax
(2,130)
(9,301)
(945)
Reclassification adjustment for gains (losses) included in net income:
 
 
 
Amortization of net actuarial loss, net of $5,845, $6,161 and $1,198 tax
9,376 
9,883 
1,921 
Amortization of net prior service credit, net of ($749), ($1,270) and $2,261 tax
(1,201)
(2,037)
3,627 
Net change in other comprehensive income (loss) (net of reclassification adjustment), net of taxes
(55,847)
38,183 
(80,782)
COMPREHENSIVE INCOME
893,287 
688,316 
286,248 
Comprehensive income attributable to noncontrolling interests
(1,429)
(2,922)
(1,298)
COMPREHENSIVE INCOME ATTRIBUTABLE TO CENTURYLINK, INC.
$ 891,858 
$ 685,394 
$ 284,950 
Consolidated Statements of Comprehensive Income (Parenthetical) (USD $)
In Thousands
Year Ended
Dec. 31,
2010
2009
2008
Marketable securities:
 
 
 
Unrealized gain (loss) on investments, tax
 
 
(332)
Reclassification adjustment for gain included in net income, tax
 
 
(1,730)
Derivative instruments:
 
 
 
Reclassification adjustment for gains included in net income, tax
267 
267 
267 
Items related to employee benefit plans:
 
 
 
Change in net actuarial loss, tax
(37,908)
30,100 
(48,656)
Change in net prior service credit, tax
(1,328)
(5,798)
(589)
Reclassification adjustment for gains (losses) included in net income:
 
 
 
Amortization of net actuarial loss, tax
5,845 
6,161 
1,198 
Amortization of net prior service credit, tax
$ (749)
$ (1,270)
$ 2,261 
Consolidated Balance Sheets (USD $)
In Thousands
Dec. 31, 2010
Dec. 31, 2009
CURRENT ASSETS
 
 
Cash and cash equivalents
$ 172,943 
$ 161,807 
Accounts receivable, less allowance of $60,086 and $47,450
712,814 
685,589 
Income tax receivable
102,465 
115,684 
Materials and supplies, at average cost
32,717 
35,755 
Deferred income tax asset
81,341 
83,319 
Other
40,849 
41,437 
Total current assets
1,143,129 
1,123,591 
NET PROPERTY, PLANT AND EQUIPMENT
8,754,476 
9,097,139 
GOODWILL AND OTHER ASSETS
 
 
Goodwill
10,260,640 
10,251,758 
Other intangible assets
 
 
Customer list
929,907 
1,130,817 
Other
310,170 
315,601 
Other assets
639,776 
643,823 
Total goodwill and other assets
12,140,493 
12,341,999 
TOTAL ASSETS
22,038,098 
22,562,729 
CURRENT LIABILITIES
 
 
Current maturities of long-term debt
11,583 
500,065 
Accounts payable
299,619 
394,687 
Accrued expenses and other current liabilities
 
 
Salaries and benefits
159,258 
255,103 
Other taxes
124,155 
98,743 
Interest
104,156 
108,020 
Other
121,828 
168,203 
Advance billings and customer deposits
190,443 
182,374 
Total current liabilities
1,011,042 
1,707,195 
LONG-TERM DEBT
7,316,004 
7,253,653 
DEFERRED CREDITS AND OTHER LIABILITIES
 
 
Deferred income taxes
2,368,698 
2,256,579 
Benefit plan obligations
1,305,997 
1,485,643 
Other deferred credits
389,198 
392,860 
Total deferred credits and other liabilities
4,063,893 
4,135,082 
STOCKHOLDERS' EQUITY
 
 
Common stock, $1.00 par value, authorized 800,000,000 shares, issued and outstanding 304,947,538 and 299,189,279 shares
304,948 
299,189 
Paid-in capital
6,174,741 
6,014,051 
Accumulated other comprehensive loss, net of tax
(141,153)
(85,306)
Retained earnings
3,302,469 
3,232,769 
Preferred stock - non-redeemable
236 
236 
Noncontrolling interests
5,918 
5,860 
Total stockholders' equity
9,647,159 
9,466,799 
TOTAL LIABILITIES AND EQUITY
$ 22,038,098 
$ 22,562,729 
Consolidated Balance Sheets (Parenthetical) (USD $)
In Thousands, except Share data
Dec. 31, 2010
Dec. 31, 2009
CURRENT ASSETS
 
 
Accounts receivable, allowance
$ 60,086 
$ 47,450 
STOCKHOLDERS' EQUITY
 
 
Common stock, par value (in dollars per share)
$ 1 
$ 1 
Common stock, authorized shares (in shares)
800,000,000 
800,000,000 
Common stock, issued shares (in shares)
304,947,538 
299,189,279 
Common stock, outstanding shares (in shares)
304,947,538 
299,189,279 
Consolidated Statements of Cash Flows (USD $)
In Thousands
Year Ended
Dec. 31,
2010
2009
2008
OPERATING ACTIVITIES
 
 
 
Net Income
$ 949,134 
$ 648,588 
$ 367,030 
Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
Depreciation and amortization
1,433,553 
974,710 
523,786 
Extraordinary item
0 
(135,957)
0 
Gains on asset dispositions and liquidation of marketable securities
0 
0 
(12,452)
Deferred income taxes
131,768 
153,950 
67,518 
Share-based compensation
38,168 
55,153 
16,390 
Income from unconsolidated cellular entity
(16,369)
(19,087)
(12,045)
Distributions from unconsolidated cellular entity
16,029 
20,100 
15,960 
Changes in current assets and current liabilities:
 
 
 
Receivables
(27,225)
(23,778)
(7,978)
Accounts payable
(95,068)
(32,209)
14,043 
Accrued taxes
38,194 
(150,073)
(64,778)
Other current assets and other current liabilities, net
(127,539)
121,380 
(15,612)
Retirement benefits
(271,308)
(82,114)
(26,066)
Excess tax benefits from share-based compensation
(11,884)
(4,194)
(1,123)
(Increase) decrease in noncurrent assets
(22,980)
(2,347)
9,744 
Increase (decrease) in other noncurrent liabilities
10,231 
41,649 
(27,561)
Other, net
0 
7,944 
6,444 
Net cash provided by operating activities
2,044,704 
1,573,715 
853,300 
INVESTING ACTIVITIES
 
 
 
Payments for property, plant and equipment
(863,769)
(754,544)
(286,817)
Cash acquired from Embarq acquisition
0 
76,906 
0 
Purchase of wireless spectrum
0 
(2,000)
(148,964)
Proceeds from liquidation of marketable securities
0 
0 
34,945 
Proceeds from sale of assets
0 
1,595 
15,809 
Other, net
4,716 
(801)
(3,968)
Net cash used in investing activities
(859,053)
(678,844)
(388,995)
FINANCING ACTIVITIES
 
 
 
Payments of debt
(499,931)
(1,097,064)
(285,401)
Net proceeds from issuance of debt
73,800 
644,423 
563,115 
Cash dividends
(878,005)
(560,697)
(220,266)
Repurchase of common stock
(16,515)
(15,563)
(347,264)
Net proceeds from settlement of hedges
0 
0 
20,745 
Proceeds from issuance of common stock
130,260 
56,823 
14,599 
Excess tax benefits from share-based compensation
11,884 
4,194 
1,123 
Other, net
3,992 
(8,507)
(2,031)
Net cash used in financing activities
(1,174,515)
(976,391)
(255,380)
Net increase (decrease) in cash and cash equivalents
11,136 
(81,520)
208,925 
Cash and cash equivalents at beginning of year
161,807 
243,327 
34,402 
CASH AND CASH EQUIVALENTS AT END OF YEAR
$ 172,943 
$ 161,807 
$ 243,327 
Consolidated Statements of Stockholders' Equity (USD $)
In Thousands, except Share data
COMMON STOCK
PAID-IN CAPITAL
ACCUMULATED OTHER COMPREHENSIVE LOSS, NET OF TAX
RETAINED EARNINGS
PREFERRED STOCK NON REDEEMABLE
NONCONTROLLING INTERESTS
Total
Balance at beginning of year at Dec. 31, 2007
$ 108,492 
$ 91,147 
$ (42,707)
$ 3,245,302 
$ 6,971 
$ 6,605 
$ 3,415,810 
Balance at beginning of year (in shares) at Dec. 31, 2007
108,492,000 
 
 
 
 
 
108,492,000 
Issuance of common stock to acquire Embarq Corporation
0 
 
 
 
 
 
0 
Issuance of common stock to acquire Embarq Corporation (in shares)
0 
 
 
 
 
 
0 
Issuance of common stock to acquire Embarq Corporation, including portion of share-based compensation awards assumed by Centurylink
 
0 
 
 
 
 
0 
Net income attributable to Centurylink,Inc.
 
 
 
365,732 
 
 
365,732 
Net income attributable to noncontrolling interests
 
 
 
 
 
1,298 
1,298 
Extraordinary gain attributable to noncontrolling interests
 
 
 
 
 
0 
0 
Distributions attributable to noncontrolling interests
 
 
 
 
 
(3,335)
(3,335)
Repurchase of common stock
(9,626)
(91,408)
 
(244,513)
 
 
(345,547)
Repurchase of common stock (in shares)
(9,626,000)
 
 
 
 
 
(9,626,000)
Cash dividends declared
 
 
 
 
 
 
 
Common stock - $2.90 and $2.80 and $2.1675 per share
 
 
 
(220,086)
 
 
(220,086)
Preferred stock
 
 
 
(180)
 
 
(180)
Conversion of preferred stock into common stock
367 
6,368 
 
 
(6,735)
 
0 
Conversion of preferred stock into common stock (in shares)
367,000 
 
 
 
 
 
367,000 
Shares withheld to satisfy tax withholdings
(50)
(1,667)
 
 
 
 
(1,717)
Shares withheld to satisfy tax withholdings (in shares)
(50,000)
 
 
 
 
 
(50,000)
Issuance of common stock through dividend reinvestment, incentive and benefit plans
1,094 
13,505 
 
 
 
 
14,599 
Issuance of common stock through dividend reinvestment , incentive and benefit plans (in shares)
1,094,000 
 
 
 
 
 
1,094,000 
Excess tax benefits from share-based compensation
 
1,123 
 
 
 
 
1,123 
Share-based compensation
 
16,390 
 
 
 
 
16,390 
Other
 
4,503 
 
 
 
 
4,503 
Net change in other comprehensive loss (net of reclassification adjustment), net of tax
 
 
(80,782)
 
 
 
(80,782)
Balance at end of year at Dec. 31, 2008
100,277 
39,961 
(123,489)
3,146,255 
236 
4,568 
3,167,808 
Balance at end of year (in shares) at Dec. 31, 2008
100,277,000 
 
 
 
 
 
100,277,000 
Issuance of common stock to acquire Embarq Corporation
196,083 
 
 
 
 
 
196,083 
Issuance of common stock to acquire Embarq Corporation (in shares)
196,083,000 
 
 
 
 
 
196,083,000 
Issuance of common stock to acquire Embarq Corporation, including portion of share-based compensation awards assumed by Centurylink
 
5,873,904 
 
 
 
 
5,873,904 
Net income attributable to Centurylink,Inc.
 
 
 
647,211 
 
 
647,211 
Net income attributable to noncontrolling interests
 
 
 
 
 
1,377 
1,377 
Extraordinary gain attributable to noncontrolling interests
 
 
 
 
 
1,545 
1,545 
Distributions attributable to noncontrolling interests
 
 
 
 
 
(1,630)
(1,630)
Repurchase of common stock
0 
0 
 
0 
 
 
0 
Repurchase of common stock (in shares)
0 
 
 
 
 
 
0 
Cash dividends declared
 
 
 
 
 
 
 
Common stock - $2.90 and $2.80 and $2.1675 per share
 
 
 
(560,685)
 
 
(560,685)
Preferred stock
 
 
 
(12)
 
 
(12)
Conversion of preferred stock into common stock
0 
0 
 
 
0 
 
0 
Conversion of preferred stock into common stock (in shares)
0 
 
 
 
 
 
0 
Shares withheld to satisfy tax withholdings
(503)
(15,060)
 
 
 
 
(15,563)
Shares withheld to satisfy tax withholdings (in shares)
(503,000)
 
 
 
 
 
(503,000)
Issuance of common stock through dividend reinvestment, incentive and benefit plans
3,332 
53,491 
 
 
 
 
56,823 
Issuance of common stock through dividend reinvestment , incentive and benefit plans (in shares)
3,332,000 
 
 
 
 
 
3,332,000 
Excess tax benefits from share-based compensation
 
4,194 
 
 
 
 
4,194 
Share-based compensation
 
55,153 
 
 
 
 
55,153 
Other
 
2,408 
 
 
 
 
2,408 
Net change in other comprehensive loss (net of reclassification adjustment), net of tax
 
 
38,183 
 
 
 
38,183 
Balance at end of year at Dec. 31, 2009
299,189 
6,014,051 
(85,306)
3,232,769 
236 
5,860 
9,466,799 
Balance at end of year (in shares) at Dec. 31, 2009
299,189,000 
 
 
 
 
 
299,189,279 
Issuance of common stock to acquire Embarq Corporation
0 
 
 
 
 
 
0 
Issuance of common stock to acquire Embarq Corporation (in shares)
0 
 
 
 
 
 
0 
Issuance of common stock to acquire Embarq Corporation, including portion of share-based compensation awards assumed by Centurylink
 
0 
 
 
 
 
0 
Net income attributable to Centurylink,Inc.
 
 
 
947,705 
 
 
947,705 
Net income attributable to noncontrolling interests
 
 
 
 
 
1,429 
1,429 
Extraordinary gain attributable to noncontrolling interests
 
 
 
 
 
0 
0 
Distributions attributable to noncontrolling interests
 
 
 
 
 
(1,371)
(1,371)
Repurchase of common stock
0 
0 
 
0 
 
 
0 
Repurchase of common stock (in shares)
0 
 
 
 
 
 
0 
Cash dividends declared
 
 
 
 
 
 
 
Common stock - $2.90 and $2.80 and $2.1675 per share
 
 
 
(877,993)
 
 
(877,993)
Preferred stock
 
 
 
(12)
 
 
(12)
Conversion of preferred stock into common stock
0 
0 
 
 
0 
 
0 
Conversion of preferred stock into common stock (in shares)
0 
 
 
 
 
 
0 
Shares withheld to satisfy tax withholdings
(460)
(16,055)
 
 
 
 
(16,515)
Shares withheld to satisfy tax withholdings (in shares)
(460,000)
 
 
 
 
 
(460,000)
Issuance of common stock through dividend reinvestment, incentive and benefit plans
6,219 
124,041 
 
 
 
 
130,260 
Issuance of common stock through dividend reinvestment , incentive and benefit plans (in shares)
6,219,000 
 
 
 
 
 
6,219,000 
Excess tax benefits from share-based compensation
 
11,884 
 
 
 
 
11,884 
Share-based compensation
 
38,168 
 
 
 
 
38,168 
Other
 
2,652 
 
 
 
 
2,652 
Net change in other comprehensive loss (net of reclassification adjustment), net of tax
 
 
(55,847)
 
 
 
(55,847)
Balance at end of year at Dec. 31, 2010
$ 304,948 
$ 6,174,741 
$ (141,153)
$ 3,302,469 
$ 236 
$ 5,918 
$ 9,647,159 
Balance at end of year (in shares) at Dec. 31, 2010
304,948,000 
 
 
 
 
 
304,947,538 
Consolidated Statements of Stockholders' Equity (Parenthetical) (USD $)
Year Ended
Dec. 31,
2010
2009
2008
Consolidated Statements of Stockholders' Equity, Parenthetical Data [Abstract]
 
 
 
Common stock, dividends per share (in dollars per share)
$ 2.90 
$ 2.80 
$ 2.1675 
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(1)           SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES


Principles of consolidation - Our consolidated financial statements include the accounts of CenturyLink, Inc. (“CenturyLink”) and its majority-owned subsidiaries.

Embarq acquisition - On July 1, 2009, we acquired Embarq Corporation (“Embarq”) through a merger transaction, with Embarq surviving the merger as a wholly-owned subsidiary of CenturyLink.  The results of operations of Embarq are included in our consolidated results of operations beginning July 1, 2009.  See Note 2 for additional information related to the Embarq acquisition.

Discontinuance of regulatory accounting – Through June 30, 2009, CenturyLink accounted for its regulated telephone operations (except for the properties acquired from Verizon in 2002) in accordance with the provisions of regulatory accounting under which certain of our assets and liabilities were required to be recorded and, accordingly, reflected in the balance sheets of our regulated entities.  On July 1, 2009, we discontinued the accounting requirements of regulatory accounting upon the conversion of substantially all of our rate-of-return study areas to federal price cap regulation.  In the third quarter of 2009, upon the discontinuance of regulatory accounting, we recorded a non-cash extraordinary gain in our consolidated statements of income of $136.0 million after-tax.  See Note 16 for additional information.

Subsequent to the July 1, 2009 discontinuance of regulatory accounting, all intercompany transactions with affiliates have been eliminated from the consolidated financial statements.  Prior to July 1, 2009, intercompany transactions with regulated affiliates subject to regulatory accounting were not eliminated in connection with preparing the consolidated financial statements, as allowed by the provisions of regulatory accounting.   The amount of intercompany revenues and costs that were not eliminated related to the first half of 2009 approximated $114 million.
 
Estimates - The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.  Actual results may differ from those estimates.

Revenue recognition - Revenues are generally recognized when services are provided or when products are delivered to customers.  Revenue that is billed in advance includes monthly recurring network access services, special access services and monthly recurring local line charges.  The unearned portion of this revenue is initially deferred as a component of advance billings and customer deposits on our balance sheet and recognized as revenue over the period that the services are provided.  Revenue that is billed in arrears includes switched access services, nonrecurring network access services, nonrecurring local services and long distance services.  The earned but unbilled portion of this revenue is recognized as revenue in the period that the services are provided.  We offer bundle discounts to our customers who receive certain groupings of services.  These bundle discounts are recognized concurrently with the associated revenues and are allocated to the various services in the bundled offering based on the relative fair value of services included in each bundled combination.  Revenues from installation activities are deferred and recognized as revenue over the estimated life of the customer relationship.  The costs associated with such installation activities, up to the related amount of deferred revenue, are deferred and recognized as an operating expense over the same period.  We offer some products and services that are provided by third-party vendors.  We review the relationship between us, the vendor and the end customer to assess whether revenue should be reported on a gross or net basis.  In assessing whether revenue should be reported on a gross or net basis, we consider whether we act as a principal in the transaction, take title to the products, have risk and rewards of ownership, and act as an agent or broker.
 
Allowance for doubtful accounts.  In evaluating the collectibility of our accounts receivable, we assess a number of factors, including a specific customer’s or carrier’s ability to meet its financial obligations to us, the length of time the receivable has been past due and historical collection experience.  Based on these assessments, we record both specific and general reserves for uncollectible accounts receivable to reduce the stated amount of applicable accounts receivable to the amount we ultimately expect to collect.

Property, plant and equipment – As discussed in Note 2, the property acquired in connection with the acquisition of Embarq was recorded based on its fair value.  Substantially all other telephone plant is stated at original cost.  Normal retirements of telephone plant are charged against accumulated depreciation, along with the costs of removal, less salvage, with no gain or loss recognized.  Renewals and betterments of plant and equipment are capitalized while repairs, as well as renewals of minor items, are charged to operating expense.  Depreciation of telephone plant is provided on the straight line method using class or overall group rates; such average annual rates range from 2% to 29%.
 
    Non-telephone property is stated at cost and, when sold or retired, a gain or loss is recognized.  We depreciate such property on the straight line method over estimated service lives ranging from two to 35 years.

We perform annual internal studies to determine the depreciable lives for our property, plant and equipment.  Our studies utilize models that take into account actual usage, replacement history and assumptions about technology evolution to estimate the remaining life of our asset base.  The changes in our estimates incorporated as a result of our 2010 internal study did not have a material impact on the level of our depreciation expense.
 
Goodwill and other long-lived assets – Goodwill recorded in a business combination is required to be reviewed for impairment and to be written down only in periods in which the recorded amount of goodwill exceeds its fair value.  Applicable accounting guidance also stipulates certain factors to consider regarding whether or not a triggering event has occurred that would require performance of an interim goodwill impairment test.  We test impairment of goodwill at least annually by comparing the fair value of the reporting unit to its carrying value (including goodwill). We base our estimates of the fair value of the reporting unit on valuation models using criterion such as multiples of earnings.  See Note 4 for additional information.  Other long-lived assets (exclusive of goodwill) are reviewed for impairment whenever events and circumstances indicate that such carrying amount cannot be recoverable by assessing the recoverability of the carrying value through undiscounted net cash flows expected to be generated by the assets.
 
Income taxes - We file a consolidated federal income tax return with our eligible subsidiaries.  We use the asset and liability method of accounting for income taxes under which deferred tax assets and liabilities are established for the future tax consequences attributable to differences between the financial statement carrying amounts of assets and liabilities and their respective tax bases.   We establish valuation allowances when necessary to reduce deferred income tax assets to the amounts that we believe are more likely than not to be recovered.  
 
Postretirement and pension plans – We recognize the overfunded or underfunded status of our defined benefit and postretirement plans as an asset or a liability on our balance sheet, with an adjustment to stockholders’ equity (reflected as an increase or decrease in accumulated other comprehensive income or loss) for the accumulated actuarial gains or losses.   Pension and postretirement benefit expenses are recognized over the period in which the employee renders service and becomes eligible to receive benefits.   We make significant assumptions (including the discount rate, expected rate of return on plan assets and health care trend rates) in computing the pension and postretirement benefits expense and obligations.  See Notes 11 and 12 for additional information.

Stock-based compensation – We measure our cost of awarding employees with equity instruments based upon allocations of the fair value of the award on the grant date.  See Note 15 for additional information.

Derivative financial instruments – We account for derivative instruments and hedging activities in accordance with applicable accounting guidance which requires that all derivative instruments, such as interest rate swaps, be recognized in the financial statements and measured at fair value regardless of the purpose or intent of holding them.  On the date a derivative contract is entered into, we designate the derivative as either (i) a fair value hedge, which involves a hedge of the fair value of a recognized asset or liability or of an unrecognized firm commitment or (ii) a cash flow hedge, which involves a hedge of a forecasted transaction or the variability of cash flows to be received or paid related to a recognized asset or liability.  We also formally assess, both at the hedge's inception and on an ongoing basis, whether the derivatives that are used in hedging transactions are highly effective in offsetting changes in fair values or cash flows of hedged items. If we determine that a derivative is not, or is no longer, highly effective as a hedge, we would discontinue hedge accounting prospectively.  We recognize all derivatives on the balance sheet at their fair value.  Changes in the fair value of derivative financial instruments are either recognized in income or stockholders’ equity (as a component of accumulated other comprehensive income (loss)), depending on the use of the derivative and whether it qualifies for hedge accounting.  We do not hold or issue derivative financial instruments for trading or speculative purposes.  Management periodically reviews our exposure to interest rate fluctuations and implements strategies to manage the exposure.  See Note 7 for additional information.
 
Earnings per share – We determine basic earnings per share amounts on the basis of the weighted average number of common shares outstanding during the applicable accounting period.  Diluted earnings per share gives effect to all potential dilutive common shares that were outstanding during the period.  See Note 14 for additional information.     

Cash equivalents - We consider short-term investments with a maturity at date of purchase of three months or less to be cash equivalents.

Recent accounting pronouncements - In September 2009, the Financial Accounting Standards Board updated the accounting standard regarding revenue recognition for multiple deliverable arrangements, such as the service bundles we offer to our customers. This update requires the use of the relative selling price method when allocating revenue in these types of arrangements. This method allows a vendor to use its best estimate of selling price if neither vendor specific objective evidence nor third party evidence of selling price exists when evaluating multiple deliverable arrangements. This standard update is effective January 1, 2011 and may be adopted prospectively for revenue arrangements entered into or materially modified after the date of adoption or retrospectively for all revenue arrangements for all periods presented. We currently do not expect this standard update to have a material impact on our consolidated financial statements.

In January 2010, we adopted the accounting standard update regarding fair value measurements and disclosures, which requires additional disclosures and explanations for transfers of financial assets and liabilities between certain levels in the fair value hierarchy.  The adoption of this accounting standard update did not have a material impact on our consolidated financial statements.

Reclassifications – Certain amounts for prior periods have been reclassified to conform to current year presentation, including the reclassification of certain revenue components as more fully described in Note 20.
EMBARQ ACQUISITION
EMBARQ ACQUISITION
(2)           EMBARQ ACQUISITION
 
On July 1, 2009, we acquired Embarq through a merger transaction, with Embarq surviving the merger as a wholly-owned subsidiary of CenturyLink.  We accounted for such acquisition pursuant to Financial Accounting Standards Board guidance on business combinations, which requires an acquiring entity to recognize all of the assets acquired and liabilities assumed in a transaction at the acquisition date fair value with limited exceptions.  Such guidance also changed the accounting treatment for certain specific items, including acquisition costs, acquired contingent liabilities, restructuring costs, deferred tax asset valuation allowances and income tax uncertainties after the acquisition date and is effective for us for all business combinations with acquisition dates after January 1, 2009.
 
As a result of the acquisition, each outstanding share of Embarq common stock was converted into the right to receive 1.37 shares of CenturyLink common stock (“CTL common stock”), with cash paid in lieu of fractional shares. Based on the number of CenturyLink common shares issued to consummate the merger (196.1 million), the closing stock price of CTL common stock as of June 30, 2009 ($30.70) and the pre-combination portion of share-based compensation awards assumed by CenturyLink ($50.2 million), the aggregate merger consideration approximated $6.1 billion.  The premium paid by us in this transaction is attributable to strategic benefits, including enhanced financial and operational scale, market diversification, leveraged combined networks and improved competitive positioning.  None of the goodwill associated with this transaction is deductible for income tax purposes.
 
The results of operations of Embarq are included in our consolidated results of operations beginning July 1, 2009.  Approximately $4.866 billion and $2.563 billion of operating revenues of Embarq are included in our consolidated results of operations for 2010 and 2009, respectively.  CenturyLink was the accounting acquirer in this transaction.  We have recognized Embarq’s assets and liabilities at their acquisition date estimated fair values.  The assignment of a fair value to the assets acquired and liabilities assumed of Embarq (and the related estimated lives of depreciable tangible and identifiable intangible assets) require a significant amount of judgment.  The fair value of property, plant and equipment and identifiable intangible assets were determined based upon analysis performed by an independent valuation firm.  The fair value of pension and postretirement obligations was determined by independent actuaries.  The fair value of long-term debt was determined by management based on a discounted cash flow analysis, using the rates and maturities of these obligations compared to terms and rates currently available in the long-term financing markets at the time of acquisition.  All other fair value determinations, which consisted primarily of Embarq’s current assets, current liabilities and deferred income taxes, were made by management.  Upon the end of the measurement period in June 2010, we assigned the following final fair value amounts to the assets acquired and liabilities assumed for the Embarq acquisition.
 
 
   
Fair value
 
   
as of July 1, 2009
 
   
(Dollars in thousands)
 
     
Current assets*
 $675,720 
Property, plant and equipment
  6,077,672 
Identifiable intangible assets
    
      Customer list
  1,098,000 
      Rights of way
  268,472 
      Other (trademarks, internally developed software, licenses)
  26,817 
Other non-current assets
  24,131 
Current liabilities
  (837,132)
Long-term debt, including current maturities
  (4,886,708)
Other long-term liabilities
  (2,621,493)
Goodwill
  6,244,966 
Total purchase price
 $6,070,445 
_________________
* Includes a fair value of $440 million assigned to accounts receivable which had a gross contractual value of $492 million as of July 1, 2009. The $52 million difference represents our best estimate as of July 1, 2009 of the contractual cash flows that would not be collected.

We recognized approximately $88 million of liabilities arising from contingencies as of the acquisition date on the basis that it was probable that a liability had been incurred and the amount could be reasonably estimated.  Such contingencies primarily relate to transaction and property tax contingencies and contingencies arising from billing disputes with various parties in the communications industry.

The following unaudited pro forma financial information presents the combined results of CenturyLink and Embarq as though the acquisition had been consummated as of January 1, 2009 and 2008, respectively, for the two periods presented below.

   
Twelve months
 
   
ended December 31,
 
   
2009
  
2008
 
   
(Dollars, except per share
amounts, in thousands)
 
        
Operating revenues
 $7,645,000   8,289,000 
Income before extraordinary item
 $895,000   1,087,000 
Basic earnings per share before extraordinary item
 $3.00   3.55 
Diluted earnings per share before extraordinary item
 $2.99   3.53 
 
These results include certain adjustments, primarily due to adjustments to depreciation and amortization associated with the property, plant and equipment and identifiable intangible assets, increased retiree benefit costs due to the remeasurement of the benefit obligations, and the related income tax effects.  Pro forma operating revenues for the year ended December 31, 2009 include approximately $104 million of revenues that would have been eliminated had our July 1, 2009 discontinuance of the application of regulatory accounting been effective as of January 1, 2009.  The pro forma information does not necessarily reflect the actual results of operations had the acquisition been consummated at the beginning of the period indicated nor is it necessarily indicative of future operating results.  Other than those actually realized during the last half of 2009, the pro forma information does not give effect to any potential revenue enhancements or cost synergies or other operating efficiencies that have resulted or could result from the acquisition.
 
 
During 2010 and 2009, we recognized an aggregate of approximately $121.7 million and $253.7 million, respectively, of integration, transaction and other costs related to the Embarq acquisition, including costs associated with system and customer conversions, employee-related severance and benefit costs, investment banker and legal fees associated with the merger closing, and branding costs associated with changing our trade name to CenturyLink.
 
In connection with consummating the Embarq acquisition, on July 1, 2009, we amended our charter to (i) eliminate our time-phase voting structure, which previously entitled persons who beneficially owned shares of our common stock continuously since May 30, 1987 to ten votes per share, and (ii) increase the authorized number of shares of our common stock from 350 million to 800 million.  As so amended and restated, our charter provides that each share of our common stock is entitled to one vote per share with respect to each matter properly submitted to shareholders for their vote, consent, waiver, release or other action.
 
On January 23, 2009, Embarq amended its Credit Agreement to effect, upon completion of the merger, a waiver of the event of default that would have arisen under the Credit Agreement solely as a result of the merger and enabled the Credit Agreement, as amended, to remain in place after the merger.  Previously, in connection with agreeing to acquire Embarq, we had entered into a commitment letter with various lenders which provided for an $800 million bridge facility that would have been available to, among other things, refinance borrowings under the Credit Agreement in the event a waiver of the event of default arising from the consummation of the merger could not have been obtained and other financing was unavailable.  On January 23, 2009, we terminated the commitment letter and paid an aggregate of $8.0 million to the lenders.  Such amount is reflected as an expense (in Other income (expense)) in 2009.
PENDING ACQUISITION OF QWEST
PENDING ACQUISITION OF QWEST
(3)           PENDING ACQUISITION OF QWEST

On April 21, 2010, we entered into a definitive agreement under which we propose to acquire Qwest Communications International Inc. (“Qwest”) in a tax-free stock-for-stock transaction.  Under the terms of the agreement, Qwest shareholders will receive 0.1664 CenturyLink shares for each share of Qwest common stock they own at closing.  CenturyLink shareholders are expected to own approximately 50.5% and Qwest shareholders are expected to own approximately 49.5% of the combined company at closing.  As of December 31, 2010, Qwest had outstanding approximately (i) 1.764 billion shares of common stock and (ii) $11.947 billion of long-term debt.

Completion of the transaction is subject to the receipt of regulatory approvals, including approvals from the Federal Communications Commission and certain state public service commissions, as well as other customary closing conditions.  Subject to these conditions, we anticipate closing this transaction on April 1, 2011.  If the merger agreement is terminated under certain circumstances, we may be obligated to pay Qwest a termination fee of $350 million or Qwest may be obligated to pay CenturyLink a termination fee of $350 million.
GOODWILL AND OTHER ASSETS
GOODWILL AND OTHER ASSETS
(4)           GOODWILL AND OTHER ASSETS
 
           Goodwill and other assets at December 31, 2010 and 2009 were composed of the following:

December 31,
 
2010
  
2009
 
   
(Dollars in thousands)
 
        
Goodwill
 $10,260,640   10,251,758 
Intangible assets subject to amortization
        
      Customer list, less accumulated amortization of $349,402 and $148,491
  929,907   1,130,817 
      Other, less accumulated amortization of $8,297 and $22,466
  41,670   47,101 
Intangible assets not subject to amortization
  268,500   268,500 
Billing system development costs, less accumulated amortization
   of $73,735 and $61,672
  162,809   174,872 
Investment in 700 MHz wireless spectrum licenses
  149,425   149,425 
Deferred costs associated with installation activities
  114,375   91,865 
Cash surrender value of life insurance contracts
  99,462   100,945 
Investment in unconsolidated cellular partnership
  33,019   32,679 
Other
  80,686   94,037 
   $12,140,493   12,341,999 
 
Our goodwill was derived from numerous previous acquisitions whereby the purchase price exceeded the fair value of the net assets acquired.   The change in the balance of goodwill from December 31, 2009 is attributable to the finalization of the assignment of fair value to Embarq’s assets and liabilities acquired (primarily certain contingent liabilities and deferred income taxes finalized within the measurement period) in connection with our July 1, 2009 acquisition of Embarq.

The vast majority of our goodwill is attributable to our telephone operations, which we internally operate and manage based on five geographic regions which were established in connection with our acquisition of Embarq.   We test for goodwill impairment for our telephone operations at the region level due to the similar economic characteristics of the individual reporting units that comprise each region.  Impairment of goodwill is tested by comparing the fair value of the reporting unit to its carrying value (including goodwill).  Estimates of the fair value of the reporting unit of our telephone operations are based on valuation models using techniques such as multiples of earnings (before interest, taxes and depreciation and amortization).  We also evaluate goodwill impairment of our other operations primarily based on multiples of earnings and revenues.  If the fair value of the reporting unit is less than the carrying value, a second calculation is required in which the implied fair value of goodwill is compared to its carrying value.  If the implied fair value of goodwill is less than its carrying value, goodwill must be written down to its implied fair value.

As of September 30, 2010, we completed our annual impairment test of goodwill and concluded that our goodwill was not impaired as of that date and we believe that no events have occurred subsequent to that date that would impact our analysis.  However, as of September 30, 2010, the estimated fair value of the Southern region exceeded its carrying value by less than 10%.  Should events occur (such as continued access line losses or other revenue reductions) that would cause the fair value to decline below its carrying value, we may be required to record a non-cash charge to earnings during the period in which the impairment is determined.
 
We are amortizing our customer list intangible asset associated with our Embarq acquisition over an average of 10 years using an accelerated method of amortization (sum-of-the-years digits) to more closely match the estimated cash flow generated by such asset.  Our remaining customer list intangible assets are being amortized over a range of 5-15 years using the straight-line amortization method.  Effective July 1, 2009 we changed the assessment of useful life for our franchise rights from indefinite to 20 years (straight-line).  We periodically evaluate our customer list intangible asset to insure that our current amortization method and remaining useful lives are appropriate.

Total amortization expense related to the intangible assets subject to amortization for 2010 was $206.3 million and is expected to be $185.6 million for 2011, $164.5 million for 2012, $145.2 million for 2013, $126.0 million in 2014 and $106.9 million in 2015 (based on intangible assets held at December 31, 2010).
 
In connection with our acquisition of Embarq, we established an intangible asset associated with right-of-way and other real estate agreements of approximately $268.5 million.  We have concluded that such asset has an indefinite life and therefore is currently not being amortized.  We annually review this asset for potential impairment.

We accounted for the costs to develop an integrated billing and customer care system in accordance with applicable accounting guidance related to internally developed software.  Aggregate capitalized costs (before accumulated amortization) totaled $236.5 million and are being amortized over a twenty-year period.

The costs associated with installation activities are deferred and recognized as an operating expense over the estimated life of the customer relationship (10 years).  Such costs are only deferred to the extent of the related deferred revenue.

During 2008, we paid an aggregate of approximately $149 million for 69 licenses in the FCC’s auction of 700 megahertz wireless spectrum.    We annually review this asset for potential impairment.
PROPERTY, PLANT AND EQUIPMENT
PROPERTY, PLANT AND EQUIPMENT
(5)           PROPERTY, PLANT AND EQUIPMENT

    Net property, plant and equipment at December 31, 2010 and 2009 was composed of the following:
 
December 31,
 
2010
  
2009
 
   
(Dollars in thousands)
 
        
Cable and wire
 $8,194,393   8,133,830 
Central office
  5,082,850   4,611,407 
General support
  2,199,525   1,873,525 
Fiber transport
  370,196   343,208 
Information origination/termination
  104,831   85,029 
Construction in progress
  271,736   430,119 
Other
  105,713   79,645 
    16,329,244   15,556,763 
Accumulated depreciation
  (7,574,768)  (6,459,624)
Net property, plant and equipment
 $8,754,476   9,097,139 
 
Depreciation expense was $1.227 billion, $838.8 million and $506.9 million in 2010, 2009 and 2008, respectively.
LONG-TERM DEBT
LONG-TERM DEBT
(6)           Long-term Debt
 
           Our long-term debt as of December 31, 2010 and 2009 was as follows:
 
December 31,
 
2010
  
2009
 
   
(Dollars in thousands)
 
CenturyLink
      
      .82%* Senior credit facility
 $365,000   291,200 
      Senior notes and debentures:
        
              7.20% Series D, due 2025
  100,000   100,000 
              6.875% Series G, due 2028
  425,000   425,000 
              8.375% Series H
  -   482,470 
              7.875% Series L, due 2012
  317,530   317,530 
              5.0% Series M, due 2015
  350,000   350,000 
              6.0% Series N, due 2017
  500,000   500,000 
              5.5% Series O, due 2013
  175,665   175,665 
              7.6% Series P, due 2039
  400,000   400,000 
              6.15% Series Q, due 2019
  250,000   250,000 
      Unamortized net discount
  (4,205)  (5,331)
      Unamortized premium associated with derivative instruments:
        
              Series H senior notes
  -   2,240 
              Series L senior notes
  5,739   9,182 
                      Total CenturyLink
  2,884,729   3,297,956 
          
Subsidiaries
        
      Embarq Corporation
        
              Senior notes
        
                      6.738% due 2013
  528,256   528,256 
                      7.1%, due 2016
  2,000,000   2,000,000 
                      8.0%, due 2036
  1,485,000   1,485,000 
              8.1%* Other, due through 2025
  522,223   524,273 
              Unamortized net discount
  (174,991)  (178,155)
      First mortgage debt
        
              5.40%* notes, payable to agencies of the U. S. government and
                cooperative lending associations, due in installments through 2028
  82,270   94,603 
      Other debt
        
              10.0% notes
  100   100 
              Capital lease obligations
  -   1,685 
                      Total subsidiaries
  4,442,858   4,455,762 
Total long-term debt
  7,327,587   7,753,718 
Less current maturities
  11,583   500,065 
Long-term debt, excluding current maturities
 $7,316,004   7,253,653 
* Weighted average interest rate at December 31, 2010
 
The approximate annual debt maturities for the five years subsequent to December 31, 2010 are as follows: 2011 - $11.6 million; 2012 - $327.6 million; 2013 - $818.5 million; 2014 - $31.5 million and 2015 $715.3 million.
 
            Certain of our loan agreements contain various restrictions, among which are limitations regarding issuance of additional debt, payment of cash dividends, reacquisition of capital stock and other matters.  In addition, the transfer of funds from certain consolidated subsidiaries to CenturyLink is restricted by various loan agreements.  Subsidiaries which have loans from government agencies and cooperative lending associations, or have issued first mortgage bonds, generally may not loan or advance any funds to CenturyLink, but may pay dividends if certain financial ratios are met.  At December 31, 2010, all of our consolidated retained earnings reflected on the balance sheet was available under our loan agreements for the declaration of dividends.
 
The senior notes and debentures of CenturyLink referred to above were issued under an indenture dated March 31, 1994.  This indenture does not contain any financial covenants, but does include restrictions that limit our ability to (i) incur, issue or create liens upon our property and (ii) consolidate with or merge into, or transfer or lease all or substantially all of its assets to, any other party.  The indenture does not contain any provisions that are impacted by our credit ratings, or that restrict the issuance of new securities in the event of a material adverse change to us.

Embarq’s senior notes were issued pursuant to an indenture dated as of May 17, 2006.  While Embarq is generally prohibited from creating liens on its property unless its senior notes are secured equally and ratably, Embarq can create liens on its property without equally and ratably securing its senior notes so long as the sum of all indebtedness so secured does not exceed 15% of Embarq’s consolidated net tangible assets.  The indenture contains customary events of default, none of which are impacted by Embarq’s credit rating.  The indenture does not contain any financial covenants or restrictions on the ability to issue new securities in accordance with the terms of the indenture.

Various of our other subsidiaries have outstanding first mortgage bonds or unsecured debentures.  Each issue of these first mortgage bonds are secured by substantially all of the property, plant and equipment of the issuing subsidiary. Approximately 50% of our property, plant and equipment is pledged to secure the long-term debt of subsidiaries.

In September 2009, CenturyLink and its wholly-owned subsidiary, Embarq, commenced joint debt tender offers under which they offered to purchase up to $800 million of their outstanding notes.   In October 2009, (i) Embarq purchased for cash $471.7 million principal amount of its 6.738% Notes due 2013 and (ii) CenturyLink purchased for cash $74.3 million principal amount of its 5.5% Series O Senior Notes, due 2013, $182.5 million principal amount of its 7.875% Series L Senior Notes, due 2012, and $17.5 million principal amount of its 8.375% Series H Senior Notes, due 2010.  Due primarily to the premiums paid in connection with these debt extinguishments, we recorded a one-time pre-tax charge of approximately $61 million in the fourth quarter of 2009 related to the completion of the tender offers (which is reflected in other income (expense) and interest expense on our consolidated statements of income).

We funded these debt tender offers with net proceeds of $644.4 million from the September 2009 issuance of (i) $250 million of 10-year, 6.15% Series Q senior notes and $400 million of 30-year, 7.6% Series P senior notes and (ii) additional borrowings under our existing revolving credit facility.
 
As of December 31, 2010, we had available two unsecured revolving credit facilities, (i) a five-year, $750 million facility of CenturyLink and (ii) an $800 million facility of Embarq.   As of December 31, 2010, we had approximately $365.0 million outstanding under these credit facilities (all of which related to CenturyLink’s facility).

In January 2011, we entered into a new four-year revolving credit facility that allows us to borrow up to $1.0 billion initially with the total capacity of the credit facility increasing to $1.7 billion upon the consummation of our pending acquisition of Qwest.  Up to $400 million of this new credit facility can be used for letters of credit.  Interest will be assessed on future borrowings using the London Interbank Offered Rate (LIBOR) plus an applicable margin between .5% and 2.5% per annum depending on the type of loan and our then current senior unsecured long-term debt rating.  Upon the execution of the new credit facility, the two credit facilities mentioned above were terminated.  As a result of the execution of the new credit facility in early 2011, the amount outstanding under our predecessor credit facility as of December 31, 2010 has been reflected in long-term debt.  As of February 28, 2011, we had $280 million outstanding under the new credit facility.  For additional information regarding our new replacement credit facility, see Note 22.

As was the case with our predecessor credit facilities, (i) outstanding letters of credit directly reduce the amount available for other extensions of credit under our new credit facility and (ii) outstanding borrowings under our commercial paper program, which effectively cannot exceed the amount available under our new facility, effectively have the same result on our borrowing capacity under the new facility.  As of February 28, 2011, approximately $61 million of letters of credit were outstanding and no amounts were outstanding under our commercial paper program.

DERIVATIVE INSTRUMENTS
DERIVATIVE INSTRUMENTS
(7)           DERIVATIVE INSTRUMENTS

    In 2003, we entered into four separate fair value interest rate hedges associated with the full $500 million principal amount of our Series L senior notes, due 2012, that pay interest at a fixed rate of 7.875%.  These hedges were “fixed to variable” interest rate swaps that effectively converted our fixed rate interest payment obligations under these notes into obligations to pay variable rates.  In January 2008, we terminated all of our existing “fixed to variable” interest rate swaps associated with the full $500 million principal amount of our Series L senior notes.  In connection with the termination of these derivatives, we received aggregate cash payments of approximately $25.6 million, which has been reflected as a premium of the associated long-term debt and is being amortized as a reduction of interest expense through 2012 using the effective interest method.  In addition, in January 2008, we also terminated certain other derivatives that were not deemed to be effective hedges.  Upon the termination of these derivatives, we paid an aggregate of approximately $4.9 million (and recorded a $3.4 million pre-tax charge in the first quarter of 2008 related to the settlement of these derivatives).  During 2010 and as of December 31, 2010, we had no derivative instruments outstanding.
DEFERRED CREDITS AND OTHER LIABILITIES
DEFERRED CREDITS AND OTHER LIABILITIES
(8)           DEFERRED CREDITS AND OTHER LIABILITIES
 
    Deferred credits and other liabilities at December 31, 2010 and 2009 were composed of the following:

December 31,
 
2010
  
2009
 
   
(Dollars in thousands)
 
        
Deferred federal and state income taxes
 $2,368,698   2,256,579 
Accrued pension costs
  802,090   960,610 
Accrued postretirement benefit costs
  503,907   525,033 
Deferred revenue
  147,759   136,969 
Unrecognized tax benefits for uncertain tax positions
  66,501   83,931 
Casualty insurance reserves
  64,183   60,666 
Other
  110,755   111,294 
   $4,063,893   4,135,082 
 
    For additional information on deferred federal and state income taxes, accrued pension costs and accrued postretirement benefit costs, see Notes 13, 12 and 11, respectively.
REDUCTIONS IN WORKFORCE
REDUCTIONS IN WORKFORCE
(9)           REDUCTIONS IN WORKFORCE

During each of the last three years, we have announced workforce reductions primarily due to (i) increased competitive pressures and the loss of access lines over the last several years; (ii) progression or completion of our Embarq and Madison River integration plans; and (iii) the elimination of certain customer service personnel due to reduced call volumes.  In connection therewith, we incurred pre-tax operating expense charges of approximately $27.3 million in 2010, $80.6 million in 2009 and $2.0 million in 2008 for severance and related costs.

The following table reflects additional information regarding the severance-related liability for 2010, 2009 and 2008 (in thousands):

Balance at December 31, 2007
 $1,835 
Amount accrued to expense
  2,046 
Amount paid
  (2,083)
Balance at December 31, 2008
  1,798 
Severance-related liability assumed   in Embarq acquisition
  31,086 
Amount accrued to expense
  80,580 
Amount paid
  (44,895)
Balance at December 31, 2009
  68,569 
Amount accrued to expense
  27,258 
Amount paid
  (77,823)
Balance at December 31, 2010
 $18,004 
 
STOCKHOLDERS' EQUITY
STOCKHOLDERS' EQUITY
(10)           STOCKHOLDERS’ EQUITY

Common stock - Unissued shares of CenturyLink common stock were reserved as follows:

December 31,
 
2010
 
   
(In thousands)
 
     
Incentive compensation programs
  25,245 
Acquisitions
  4,064 
Employee stock purchase plan
  3,990 
Dividend reinvestment plan
  595 
Conversion of convertible preferred stock
  13 
    33,907 
 
In January 2009, in connection with the special meeting of shareholders to approve share issuances in connection with our acquisition of Embarq, our shareholders approved a charter amendment to eliminate certain special voting rights of long-term shareholders upon the consummation of the Embarq acquisition. On July 1, 2009, we issued 196.1 million shares of CenturyLink common stock in connection with the acquisition of Embarq.    See Note 2 for additional information.
 
    In accordance with previously-announced stock repurchase programs, we repurchased 9.7 million shares (for $347.3 million) in 2008.

    In December 2007, the Financial Accounting Standards Board issued guidance regarding noncontrolling interests in consolidated financial statements, which requires noncontrolling interests to be recognized as equity in the consolidated financial statements.  In addition, net income attributable to such noncontrolling interests is required to be included in consolidated net income.  This guidance was effective for our 2009 fiscal year and prior periods have been adjusted to reflect this presentation.
 
Preferred stock - As of December 31, 2010, we had 2.0 million shares of authorized preferred stock, $25 par value per share.  At December 31, 2010 and 2009, there were approximately 9,400 shares of outstanding convertible preferred stock.  Holders of outstanding CenturyLink preferred stock are entitled to receive cumulative dividends, receive preferential distributions equal to $25 per share plus unpaid dividends upon CenturyLink’s liquidation and vote as a single class with the holders of common stock.
POSTRETIREMENT BENEFITS
POSTRETIREMENT BENEFITS
(11)           POSTRETIREMENT BENEFITS

Our postretirement health care plan provides postretirement benefits to qualified retirees.  The postretirement health care plan we assumed as part of our acquisition of Embarq provides postretirement benefits to qualified legacy Embarq retirees and allows (i) eligible employees retiring before certain dates to receive benefits at no or reduced cost and (ii) eligible employees retiring after certain dates to receive benefits on a shared cost basis.  The postretirement health care plan is generally funded by us and we expect to continue funding these postretirement obligations as benefits are paid.  Our plan uses a December 31 measurement date.
 
The following is a reconciliation of the beginning and ending balances for the benefit obligation and the plan assets.
 
December 31,
 
2010
  
2009
  
2008
 
   
(Dollars in thousands)
 
Change in benefit obligation
         
         Benefit obligation at beginning of year
 $582,345   292,887   306,633 
         Service cost
  14,680   8,764   4,926 
         Interest cost
  32,118   26,693   19,395 
         Participant contributions
  14,382   3,013   2,789 
         Plan amendments
  (846)  -   (9,093)
         Acquisitions
  -   228,200   - 
         Direct subsidy receipts
  1,092   626   1,092 
         Actuarial (gain) loss
  (31,977)  58,455   (11,992)
         Benefits paid
  (54,073)  (36,293)  (20,863)
Benefit obligation at end of year
 $557,721   582,345   292,887 
              
Change in plan assets
            
         Fair value of plan assets at beginning of year
 $57,312   16,805   28,324 
         Return (loss) on plan assets
  5,916   6,405   (6,166)
         Acquisitions
  -   33,200   - 
         Employer contributions
  30,277   34,182   12,721 
         Participant contributions
  14,382   3,013   2,789 
         Benefits paid
  (54,073)  (36,293)  (20,863)
Fair value of plan assets at end of year
 $53,814   57,312   16,805 
 
The following table sets forth the amounts recognized as liabilities on the balance sheet for postretirement benefits at December 31, 2010, 2009 and 2008.

December 31,
 
2010
  
2009
  
2008
 
   
(Dollars in thousands)
 
           
Benefit obligation
 $(557,721)  (582,345)  (292,887)
Fair value of plan assets
  53,814   57,312   16,805 
Accrued benefit cost
 $(503,907)  (525,033)  (276,082) 
 
    Net periodic postretirement benefit cost for 2010, 2009 (which only includes the effects of our Embarq acquisition subsequent to July 1, 2009) and 2008 included the following components:

Year ended December 31,
 
2010
  
2009
  
2008
 
   
(Dollars in thousands)
 
           
Service cost
 $14,680   8,764   4,926 
Interest cost
  32,118   26,693   19,395 
Expected return on plan assets
  (3,435)  (2,386)  (2,337)
Amortization of unrecognized prior service credit
  (3,433)  (3,546)  (2,606)
Amortization of unrecognized net loss
  942   -   - 
Net periodic postretirement benefit cost
 $40,872   29,525   19,378 
 
 
    The unamortized prior service credit ($11.7 million as of December 31, 2010) and unrecognized net actuarial loss ($30.6 million as of December 31, 2010) components have been reflected as a $12.3 million after-tax decrease to accumulated other comprehensive loss within stockholders’ equity.  The estimated amount of net amortization income of the above unrecognized items that will be amortized from accumulated other comprehensive loss and reflected as a component of net periodic postretirement cost during 2011 is $2.3 million income for the prior service credit.

    Assumptions used in accounting for postretirement benefits as of December 31, 2010 and 2009 were:

   
2010
  
2009
 
Determination of benefit obligation
      
         Discount rate
  5.30%  5.7-5.8%
         Healthcare cost increase trend rates
        
             Following year
  8.50%  8.0%
             Rate to which the cost trend rate is assumed to decline (the ultimate cost trend rate)
  5.0%  5.0%
             Year that the rate reaches the ultimate cost trend rate
  2018   2014 
          
Determination of benefit cost
        
         Discount rate
  5.7-5.8%  6.4-6.90%
         Expected return on plan assets
  7.25%  8.25-8.50%
 
Our discount rate is based on a hypothetical portfolio of bonds rated AA- or better that produces a cash flow matching the projected benefit payments of the plans.  In determining the expected return on plan assets, we study historical markets and apply the widely-accepted capital market principle that assets with higher volatility and risk generate a greater return over the long term.  We evaluate current market factors such as inflation and interest rates before determining long-term capital market assumptions.  We also review peer data and historical returns to check for reasonableness.

Assumed health care cost trends have an impact on the amounts reported for postretirement benefit plans.  A one-percentage-point change in assumed health care cost rates would have the following effects:

   
1-Percentage
  
1-Percentage
 
   
Point Increase
  
Point Decrease
 
   
(Dollars in thousands)
 
        
Effect on annual total of service and interest cost components
 $108   (132)
Effect on postretirement benefit obligation
 $1,285   (1,527)
 
We employ a total return investment approach whereby a mix of equities and fixed income investments are used to maximize the long-term return of plan assets for a prudent level of risk.  Risk tolerance is established through careful consideration of plan liabilities, plan funded status and corporate financial condition.  We measure and monitor investment risk on an ongoing basis through annual liability measurements, periodic asset studies and periodic portfolio reviews.
 

 
Our weighted-average asset allocations at December 31, 2010 and 2009 by asset category are as follows:
 
   
2010
  
2009
 
Equity securities
  19.9%  18.6 
Debt securities
  72.2   64.5 
Cash and cash equivalents
  7.9   16.9 
Total
  100.0%  100.0 

 
As of December 31, 2010, we used the following valuation techniques to measure fair value for assets.  There were no changes to these methodologies during 2010:
 
Level 1 - Assets were valued using the closing price reported in the active market in which the individual security was traded.
 
Level 2 - Assets were valued using quoted prices in markets that are not active, broker dealer quotations, net asset value of shares held by the plans and other methods by which all significant input were observable at the measurement date.
 
Level 3 - Assets were valued using valuation reports from the respective institutions at the measurement date.
 
    The following table presents the hierarchy levels for our postretirement benefit plan’s investments as of December 31, 2010:
 
   
Level 1
  
Level 2
  
Level 3
  
Total
 
   
(Dollars in thousands)
 
Equity securities
            
       Common stocks, preferred stocks, equity funds and related securities
 $5,204   5,487   -   10,691 
Debt securities
  35,222   3,648   -   38,870 
Cash
  4,253   -   -   4,253 
Total
 $44,679   9,135   -   53,814 
 
 
The following table presents the hierarchy levels for our postretirement benefit plan’s investments as of December 31, 2009:
 
   
Level 1
  
Level 2
  
Level 3
  
Total
 
   
(Dollars in thousands)
 
Equity securities
            
       Common stocks, preferred stocks, equity funds and related securities
 $4,967   5,688   -   10,655 
Debt securities
  32,900   4,075   -   36,975 
Cash
  9,682   -   -   9,682 
Total
 $47,549   9,763   -   57,312 

Our plan invests in various securities, some of which are exposed to various risks such as interest rate, market and credit risks.  Due to the level of risk associated with certain investment securities, it is at least reasonably possible that changes in the values of investment securities will occur in the near term and that those changes could materially affect the amounts reported in the statement of net assets available for benefits.
 
Based on current estimates, we expect to contribute approximately $47.9 million to our postretirement benefit plan in 2011.

Our estimated future projected benefit payments under our postretirement benefit plan are as follows:
 
   
Before Medicare
  
Medicare
  
Net of
 
Year
 
Subsidy
  
Subsidy
  
Medicare Subsidy
 
   (Dollars in thousands) 
           
2011
 $49,206   (1,351)  47,855 
2012
 $51,186   (1,600)  49,586 
2013
 $47,751   (1,852)  45,899 
2014
 $46,281   (2,099)  44,182 
2015
 $45,620   (2,351)  43,269 
2016-2020
 $203,780   (5,537)  198,243 

DEFINED BENEFIT AND OTHER RETIREMENT PLANS
DEFINED BENEFIT AND OTHER RETIREMENT PLANS
(12)           DEFINED BENEFIT AND OTHER RETIREMENT PLANS

We sponsor defined benefit pension plans for substantially all employees, including separate plans for legacy CenturyLink employees and legacy Embarq employees.   Until such time as we elect to integrate Embarq’s benefit plans with ours, we plan to continue to operate these plans independently.  Pension benefits for participants of these plans who are represented by a collective bargaining agreement are based on negotiated schedules.  All other participants’ pension benefits are based on each individual participant’s years of service and compensation.  Both CenturyLink and Embarq have previously sponsored, or continue to sponsor, supplemental executive retirement plans providing certain officers with supplemental retirement, death and disability benefits.  We use a December 31 measurement date for all our plans.

To align our benefit structure closer to those offered by our competitors, in late 2010 we froze pension benefit accruals for our non-represented employees as of December 31, 2010.  Such action resulted in a reduction of our benefit obligation of approximately $110.2 million and resulted in the recognition of a curtailment gain of approximately $20.9 million in 2010.

In late February 2008, our Board of Directors approved certain actions related to CenturyLink’s Supplemental Executive Retirement Plan, including (i) freezing benefit accruals effective February 29, 2008 and (ii) amending the plan in the second quarter of 2008 to permit participants to receive in 2009 a lump sum distribution of the present value of their accrued plan benefits based on their election.  We also enhanced plan termination benefits by (i) crediting each active participant with three additional years of service and (ii) crediting each participant who was not in pay status under the plan with three additional years of age in connection with calculating the present value of any lump sum distribution.  We recorded an aggregate curtailment loss of approximately $8.2 million in 2008 related to the above-described items.  In addition, principally due to the payment of the lump sum distributions in early 2009, we also recognized a settlement loss (which is included in selling, general and administrative expense) of approximately $7.7 million in 2009.
 
Due to change of control provisions that were triggered upon the consummation of the Embarq acquisition on July 1, 2009, certain retirees who were receiving monthly annuity payments under a CenturyLink supplemental executive retirement plan were paid a lump sum distribution calculated in accordance with the provisions of the plan.  A settlement expense of approximately $8.9 million was recognized in the third quarter of 2009 as a result of these actions.

The legacy Embarq pension plan contains a provision that grants early retirement benefits for certain participants affected by workforce reductions.  During 2009, we recognized approximately $14.7 million of additional pension expense related to these contractual benefits.
 
    The following is a reconciliation of the beginning and ending balances for the aggregate benefit obligation and the assets for our above-referenced defined benefit plans.
 
December 31,
 
2010
  
2009
  
2008
 
   
(Dollars in thousands)
 
Change in benefit obligation
         
         Benefit obligation at beginning of year
 $4,181,582   462,701   469,437 
         Service cost
  61,156   36,223   13,761 
         Interest cost
  245,753   134,898   29,373 
         Plan amendments
  4,304   16,016   2,393 
         Acquisitions
  -   3,467,260   - 
         Actuarial (gain) loss
  426,700   231,663   (24,819)
         Contractual retirement benefits
  -   14,676   - 
         Curtailment (gain) loss
  (110,169)  -   8,235 
         Settlements
  -   8,294   (1,945)
         Benefits paid
  (275,357)  (190,149)  (33,734)
Benefit obligation at end of year
 $4,533,969   4,181,582   462,701 
              
Change in plan assets
            
         Fair value of plan assets at beginning of year
 $3,219,706   352,830   459,198 
         Return (loss) on plan assets
  482,709   473,878   (123,210)
         Acquisitions
  -   2,407,200   - 
         Employer contributions
  304,811   175,946   52,521 
         Settlements
  -   -   (1,945)
         Benefits paid
  (275,357)  (190,148)  (33,734)
Fair value of plan assets at end of year
 $3,731,869   3,219,706   352,830 
 
 
The following table sets forth the combined plans’ funded status and amounts recognized in our consolidated balance sheet at December 31, 2010, 2009 and 2008.

December 31,
 
2010
  
2009
  
2008
 
   
(Dollars in thousands)
 
           
Benefit obligation
 $(4,533,969)  (4,181,582)  (462,701)
Fair value of plan assets
  3,731,869   3,219,706   352,830 
Net amount recognized
 $(802,100)  (961,876)  (109,871)
 
Amounts recognized on the balance sheet consist of:

December 31,
 
2010
  
2009
 
        
   
(Dollars in thousands)
 
        
Accrued expenses and other current liabilities
 $(10)  (1,266)
Other deferred credits
  (802,090)  (960,610)
Net amount recognized
 $(802,100)  (961,876)
 
    Our aggregate accumulated benefit obligation as of December 31, 2010 and 2009 was $4.509 billion and $4.042 billion, respectively.

Net periodic pension expense for 2010, 2009 (which only includes the effects of our Embarq acquisition subsequent to July 1, 2009) and 2008 included the following components:
 

Year ended December 31,
 
2010
  
2009
  
2008
 
   
(Dollars in thousands)
 
           
Service cost
 $61,156   36,223   13,761 
Interest cost
  245,753   134,898   29,373 
Expected return on plan assets
  (283,026)  (127,613)  (36,667)
Curtailment (gain) loss
  (20,908)  -   8,235 
Settlements
  -   17,834   410 
Contractual retirement benefits
  -   14,676   - 
Net amortization and deferral
  18,765   16,271   3,377 
Net periodic pension expense
 $21,740   92,289   18,489 
 
The unamortized prior service cost ($18.9 million as of December 31, 2010) and unrecognized net actuarial loss ($187.5 million as of December 31, 2010) components have been reflected as a $206.4 million net reduction ($127.1 million after-tax) to accumulated other comprehensive loss within stockholders’ equity.  The estimated amount of amortization expense of the above unrecognized amounts that will be amortized from accumulated other comprehensive loss and reflected as a component of net periodic pension cost for 2011 are (i) $2.4 million for the prior service cost and (ii) $13.4 million for the net actuarial loss.
 

Assumptions used in accounting for pension plans as of December 31, 2010 and 2009 were:

   
2010
  
2009
 
Determination of benefit obligation
      
     Discount rate
  5.0-5.5%  5.5-6.0 
     Weighted average rate of compensation increase
  3.25-4.0%  3.5-4.0 
          
Determination of benefit cost
        
     Discount rate
  5.5-6.0%  6.60-6.90 
     Weighted average rate of compensation increase
  3.5-4.0%  4.0 
     Expected return on plan assets*
  8.25-8.50%  8.25-8.50 
*  For 2011, we are reducing our long-term assumed rate of return assumption to 7.5% for our legacy CenturyLink pension plan and 8.0% for our legacy Embarq pension plan.
 
Our discount rate is based on a hypothetical portfolio of bonds rated AA- or better that produces a cash flow matching the projected benefit payments of the plans.  In determining the expected return on plan assets, we study historical markets and apply the widely-accepted capital market principle that assets with higher volatility and risk generate a greater return over the long term.  We evaluate current market factors such as inflation and interest rates before determining long-term capital market assumptions.  We also review peer data and historical returns to check for reasonableness.
 
    We employ a total return investment approach whereby a mix of equities and fixed income investments are used to maximize the long-term return of plan assets for a prudent level of risk.  Risk tolerance is established through careful consideration of plan liabilities, plan funded status and corporate financial condition.  We measure and monitor investment risk on an ongoing basis through annual liability measurements, periodic asset studies and periodic portfolio reviews.  The fair value of most of our pension plan assets is determined by reference to observable market data consisting of published market quotes.

    Our pension plans weighted-average asset allocations at December 31, 2010 and 2009 by asset category are as follows:
 
   
2010
  
2009
 
Equity securities
  52.3%  49.3 
Debt securities
  33.4   28.8 
Hedge funds
  4.3   8.5 
Real estate
  4.9   5.0 
Cash equivalents and other
  5.1   8.4 
Total
  100.0%  100.0 
 
As of December 31, 2010, we used the following valuation techniques to measure fair value for assets.  There were no changes to these methodologies during 2010:
 
Level 1 - Assets were valued using the closing price reported in the active market in which the individual security was traded.
 
Level 2 - Assets were valued using quoted prices in markets that are not active, broker dealer quotations, net asset value of shares held by the plans and other methods by which all significant input were observable at the measurement date.
 
Level 3 - Assets were valued using valuation reports from the respective institutions at the measurement date.
 
The following table presents the hierarchy levels for our defined benefit pension plans’ investments as of December 31, 2010:
 
   
Level 1
  
Level 2
  
Level 3
  
Total
 
   
(Dollars in thousands)
 
Equity securities
            
    Common stocks, preferred stocks, equity funds and related securities
 $1,675,565   277,269   -   1,952,834 
Debt securities
                
    Corporate bonds and related securities
  -   911,122   1,589   912,711 
    Government bonds, municipal bonds and related securities
  -   331,937   2,899   334,836 
Hedge funds
  -    -   161,612   161,612 
Real estate
  -   -   181,581   181,581 
Cash and cash equivalents
  26,041   -   -   26,041 
Other
  13,473   146,172   2,609   162,254 
Total
 $1,715,079   1,666,500   350,290   3,731,869 


 
The following table presents the hierarchy levels for our defined benefit pension plans’ investments as of December 31, 2009:
 
   
Level 1
  
Level 2
  
Level 3
  
Total
 
   
(Dollars in thousands)
 
Equity securities
            
    Common stocks, preferred stocks, equity funds and related securities
 $1,345,669   242,852   -   1,588,521 
Debt securities
                
    Corporate bonds and related securities
  -   798,143   1,005   799,148 
    Government bonds, municipal bonds and related securities
  -   129,129   -   129,129 
Hedge funds
  -   113,340   159,886   273,226 
Real estate
  -   -   161,336   161,336 
Cash and cash equivalents
  21,210   -   -   21,210 
Other
  67,156   181,116   (1,136)  247,136 
Total
 $1,434,035   1,464,580   321,091   3,219,706 
 
 
The following sets forth a summary of changes in the fair value of our defined benefit pension plans’ Level 3 assets for the year ended December 31, 2010:
 
      
Hedge
  
All
    
   
Real estate
  
funds
  
other
  
Total
 
   
(Dollars in thousand)
 
              
Balance, beginning of year
 $161,336   159,886   (131)  321,091 
Realized gain (loss) in investments, net
  (1,677)  2,102   92   517 
Unrealized gain (loss) in investments, net
  20,038   8,851   169   29,058 
Purchases and sales, net
  1,884   (9,227)  6,967   (376)
Balance, end of year
 $181,581   161,612   7,097   350,290 
 
The following sets forth a summary of changes in the fair value of our defined benefit pension plans’ Level 3 assets for the year ended December 31, 2009:
 
      
Hedge
  
All
    
   
Real estate
  
funds
  
other
  
Total
 
   
(Dollars in thousand)
 
              
Balance, beginning of year
 $-   -   -   - 
                  
Level 3 assets acquired in the Embarq acquisition
  182,819   146,335   (4,875)  324,279 
Transfers to (from) Level 3
  -   -   (3,458)  (3,458)
Realized gain (loss) in investments, net
  21   -   70   91 
Unrealized gain (loss) in investments, net
  (24,223)  13,551   31   (10,641)
Purchases and sales, net
  2,719   -   8,101   10,820 
Balance, end of year
 $161,336   159,886   (131)  321,091 
 
Our plans invest in various securities, some of which are exposed to various risks such as interest rate, market and credit risks.  Due to the level of risk associated with certain investment securities, it is at least reasonably possible that changes in the values of investment securities will occur in the near term and that those changes could materially affect the value of our pension plan assets.

Some of our plans’ investment securities have contractual cash flows, such as asset backed securities, collateralized mortgage obligations, and commercial and government mortgage backed securities, including securities backed by sub-prime mortgage loans.  The value, liquidity, and related income of these securities are sensitive to changes in economic conditions, including real estate values, delinquencies or defaults, or both, and may be adversely affected by shifts in the market’s perception of the issuers and changes in interest rates.
 
During 2010, we contributed $300 million to the legacy Embarq pension plan.  Based on current actuarial estimates, we expect to contribute approximately $100 million to the legacy Embarq pension plan in 2011.  

Our estimated future projected benefit payments under our defined benefit pension plans are as follows: 2011 - $268.0 million; 2012 - $272.6 million; 2013 - $280.3 million; 2014 - $284.7 million; 2015 - $289.8 million; and 2016-2020 - $1.526 billion.
 
We also sponsor qualified profit sharing plans pursuant to Section 401(k) of the Internal Revenue Code which are available to substantially all employees.  Our matching contributions to these plans were $16.7 million in 2010, $13.8 million in 2009 and $10.5 million in 2008.
INCOME TAXES
INCOME TAXES
(13)           INCOME TAXES

Income tax expense included in the Consolidated Statements of Income was as follows:
 
Year ended December 31,
 
2010
  
2009
  
2008
 
   
(Dollars in thousands)
 
Federal
         
     Current
 $384,443   158,248   141,604 
     Deferred
  145,166   210,202   59,669 
State
            
     Current
  66,740   2,285   (14,765)
     Deferred
  (13,398)  12,206   7,849 
   $582,951   382,941   194,357 
 
Income tax expense was allocated as follows:
 
Year ended December 31,
 
2010
  
2009
  
2008
 
   
(Dollars in thousands)
 
Income tax expense in the consolidated statements of income:
         
     Attributable to income before extraordinary item
 $582,951   301,881   194,357 
     Attributable to extraordinary item
  -   81,060   - 
Stockholders’ equity:
            
     Compensation expense for tax purposes  in excess of amounts recognized for financial reporting purposes
  (11,884)  (4,194)  (1,123)
     Tax effect of the change in accumulated other comprehensive loss
  (33,873)  29,460   (47,581)
 
    The following is a reconciliation from the statutory federal income tax rate to our effective income tax rate:
 
Year ended December 31,
 
2010
  
2009
  
2008
 
   
(Percentage of pre-tax income)
 
           
Statutory federal income tax rate
  35.0%  35.0   35.0 
State income taxes, net of federal income tax benefit
  1.9   2.0   2.0 
Change in tax treatment of Medicare subsidy
  0.3   -   - 
Nondeductible acquisition related costs
  0.2   0.7   0.3 
Nondeductible compensation pursuant to executive compensation limitations
  0.2   0.9   0.2 
Recognition of previously unrecognized tax benefits
  -   (1.5)  (2.3)
Other, net
  0.5   0.1   (0.5)
Effective income tax rate
  38.1%  37.2   34.7 
 
 
Included in income tax expense in 2010 is a $4.0 million charge related to the change in the tax treatment of the Medicare Part D subsidy as a result of the comprehensive health care reform legislation signed into law in March 2010.  In addition, a portion of our transaction costs associated with our pending acquisition of Qwest is considered non-deductible for income tax purposes.  The treatment of these costs as non-deductible resulted in the recognition of approximately $3.9 million of higher income tax expense in 2010 than would have been recognized had such costs been deductible for income tax purposes.  Certain executive compensation amounts, including the lump sum distributions paid to certain executive officers upon discontinuing the Supplemental Executive Retirement Plan (see Note 12), are reflected as nondeductible for income tax purposes pursuant to executive compensation limitations of the Internal Revenue Code.  The treatment of these amounts as non-deductible resulted in the recognition of approximately $3.3 million and $9.8 million of income tax expense in 2010 and 2009, respectively, above amounts that would have been recognized had such payments been deductible for income tax purposes.  Our 2009 effective tax rate was also higher because a portion of our Embarq merger-related transaction costs incurred during 2009 are nondeductible for income tax purposes (with such treatment resulting in a $7.4 million increase to income tax expense).

In 2009, our effective tax rate was reduced by a $7.0 million reduction to our net deferred tax asset valuation allowance associated with state operating loss carryforwards.

During 2009 and 2008, we recognized net after-tax benefits of approximately $15.7 million and $12.8 million, respectively, which include (i) the recognition of previously unrecognized tax benefits primarily due to certain issues being effectively settled through examinations or the lapse of statute of limitations and (ii) other adjustments needed upon finalization of tax returns.

    The tax effects of temporary differences that gave rise to significant portions of the deferred tax assets and deferred tax liabilities at December 31, 2010 and 2009 were as follows:

December 31,
 
2010
  
2009
 
   
(Dollars in thousands)
 
Deferred tax assets
      
      Postretirement and pension benefit costs
 $509,950   479,163 
      Net state operating loss carryforwards
  74,933   64,782 
      Other employee benefits
  45,458   67,048 
      Other
  115,750   127,306 
         Gross deferred tax assets
  746,091   738,299 
         Less valuation allowance
  (42,894)  (41,533)
         Net deferred tax assets
  703,197   696,766 
          
Deferred tax liabilities
        
      Property, plant and equipment, primarily due to depreciation differences
  (1,761,500)  (1,573,986)
      Goodwill and other intangible assets
  (1,158,525)  (1,189,141)
      Other
  (70,529)  (106,900)
         Gross deferred tax liabilities
  (2,990,554)  (2,870,027)
Net deferred tax liability
 $(2,287,357)  (2,173,261)
 
 
 
    Of the $2.287 billion net deferred tax liability as of December 31, 2010, approximately $2.369 billion is reflected as a long-term liability and approximately $81.3 million is reflected as a net current deferred tax asset.

We establish valuation allowances when necessary to reduce the deferred tax assets to amounts we expect to realize.  As of December 31, 2010, we had available tax benefits associated with net state operating loss carryforwards, which expire through 2030, of $74.9 million.  The ultimate realization of the benefits of the carryforwards is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible.  We consider our scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies in making this assessment.  As of December 31, 2010, a valuation allowance of $42.9 million was established as it is more likely than not that this amount of net operating loss carryforwards will not be utilized prior to expiration.
 
The following table reflects the activity of our gross unrecognized tax benefits (excluding both interest and any related federal benefit) during 2010 (amounts expressed in thousands).

Unrecognized tax benefits at December 31, 2009
 $327,227 
Increase in tax positions taken in the current year
  320 
Increase due to tax positions taken in a prior year
  7,272 
Decrease due to the reversal of tax positions taken in a prior year
  (22,525)
Decrease from the lapse of statute of limitations
  (1,232)
Unrecognized tax benefits at December 31, 2010
 $311,062 
 
Approximately $246 million of the above unrecognized tax benefits represents refund claims related to the treatment of universal service fund receipts of certain subsidiaries acquired in connection with our Embarq acquisition, which due to the uncertainty of these claims have not been recognized in current or deferred taxes in our consolidated financial statements.  Of the remaining gross balance of $65.5 million, approximately $58.2 million is included as a component of “Deferred credits and other liabilities” and the remainder is included in “Accrued income taxes”.  If we were to prevail on all unrecognized tax benefits recorded on our balance sheet, we would recognize approximately $37.0 million (including interest and net of federal benefit), which would lower our effective tax rate.

Our policy is to reflect interest expense associated with unrecognized tax benefits in income tax expense.  We had accrued interest (presented before related tax benefits) of approximately $11.5 million and $9.9 million as of December 31, 2010 and December 31, 2009.

We file income tax returns, including returns for our subsidiaries, with federal, state and local jurisdictions.  Our uncertain income tax positions are related to tax years that are currently under or remain subject to examination by the relevant taxing authorities.  Our open income tax years by major jurisdiction are as follows.
 
Jurisdiction
 
Open tax years
Federal
 
2007-current
State
  
    Florida
 
2006-current
    Georgia
 
2003-current
    Louisiana
 
2007-current
    North Carolina
 
2003-current
    Oregon
 
2002-current
    Texas
 
2001-current
    Other states
 
2002-current
 
Additionally, Embarq, its subsidiaries, and their predecessors have filed amended returns on a specific tax issue relating to years as early as 1990. These amended returns have been audited by the IRS, and the refund claims contained therein have all been denied by the Exam Division and the Appeals Division of the IRS.  Embarq has filed suit for refund in U.S. District Court for a portion of the years, and is considering litigation for the rest.

Since the period for assessing additional liability typically begins upon the filing of a return, it is possible that certain jurisdictions could assess tax for years prior to the open tax years disclosed above.  Additionally, it is possible that certain jurisdictions in which we do not believe we have an income tax filing responsibility, and accordingly did not file a return, may attempt to assess a liability, or that other jurisdictions to which we pay taxes may attempt to assert that we owe additional taxes.

Based on our current assessment of various factors, including (i) the potential outcomes of these ongoing examinations, (ii) the expiration of statute of limitations for specific jurisdictions, (iii) the negotiated settlement of certain disputed issues, and (iv) the administrative practices of applicable taxing jurisdictions, it is reasonably possible that the related unrecognized tax benefits for uncertain tax positions previously taken may decrease by up to $213.0 million within the next 12 months.  The actual amount of such decrease, if any, will depend on several future developments and events, many of which are outside our control.
EARNINGS PER SHARE
EARNINGS PER SHARE
(14)             EARNINGS PER SHARE

    The following is a reconciliation of the numerators and denominators of the basic and diluted earnings per share computations:
 
Year ended December 31,
 
2010
  
2009
  
2008
 
   
(Dollars, except per share amounts, and shares in thousands)
 
Income (Numerator):
         
Net income before extraordinary item
 $947,705   511,254   365,732 
Extraordinary item, net of income tax expense and noncontrolling interests
  -   135,957   - 
Net income attributable to CenturyLink, Inc.
  947,705   647,211   365,732 
Dividends applicable to preferred stock
  (12)  (12)  (155)
Earnings applicable to unvested restricted stock awards:
            
    Income before extraordinary item
  (5,525)  (3,559)  (4,240)
    Extraordinary item
  -   (946)  - 
Net income as adjusted for purposes of computing basic earnings per share
  942,168   642,694   361,337 
Dividends applicable to preferred stock
  12   12   155 
Net income as adjusted for purposes of computing diluted earnings per share
 $942,180   642,706   361,492 
              
Shares (Denominator):
            
Weighted average number of shares:
            
    Outstanding during period
  301,428   199,177   103,467 
    Unvested restricted stock
  (1,756)  (1,387)  (1,199)
    Unvested restricted stock units
  947   1,023   - 
Weighted average number of shares outstanding during period for computing basic earnings per share
  300,619   198,813   102,268 
              
Incremental common shares attributable to dilutive securities:
            
    Shares issuable under convertible securities
  13   13   169 
    Shares issuable under incentive compensation plans
  665   231   123 
Number of shares as adjusted for purposes of computing diluted earnings per share
  301,297   199,057   102,560 
              
Basic earnings per share
            
    Before extraordinary item
 $3.13   2.55   3.53 
    Extraordinary item
 $-   .68   - 
    Basic earnings per share
 $3.13   3.23   3.53 
              
              
Diluted earnings per share
            
    Before extraordinary item
 $3.13   2.55   3.52 
    Extraordinary item
 $-   .68   - 
    Diluted earnings per share
 $3.13   3.23   3.52 
 

The weighted average number of shares of common stock subject to issuance under outstanding options that were excluded from the computation of diluted earnings per share (because the exercise price of the option was greater than the average market price of the common stock) was 2.9 million for 2010, 4.1 million for 2009 and 2.1 million for 2008.

 
In June 2008, the Financial Accounting Standards Board issued guidance in determining whether instruments granted in share-based payment transactions are participating securities.  Based on this guidance, we have concluded that our outstanding non-vested restricted stock is a participating security and therefore should be included in the earnings allocation in computing earnings per share using the two-class method.  The guidance was effective for us beginning in first quarter 2009 and required us to adjust our previously reported earnings per share.  
STOCK COMPENSATION PROGRAMS
STOCK COMPENSATION PROGRAMS
(15)           STOCK COMPENSATION PROGRAMS
 
    We recognize as compensation expense our cost of awarding employees with equity instruments by allocating the fair value of the award on the grant date over the period during which the employee is required to provide service in exchange for the award.

We currently maintain programs which allow the Board of Directors (through its Compensation Committee) and the Chief Executive Officer to grant incentives to certain employees and our outside directors in any one or a combination of several forms, including incentive and non-qualified stock options; stock appreciation rights; restricted stock; restricted stock units and performance shares.  As of December 31, 2010, we had reserved approximately 25.2 million shares of common stock which may be issued in connection with awards under our current incentive programs.  We also offer an Employee Stock Purchase Plan whereby employees can purchase our common stock at a 15% discount based on the lower of the beginning or ending stock price during recurring six-month periods stipulated in such program.

Upon the consummation of the Embarq acquisition on July 1, 2009 (see Note 2), outstanding Embarq stock options and restricted stock units were converted to 7.2 million CenturyLink stock options and 2.4 million restricted stock units based on the exchange ratio stipulated in the Embarq merger agreement.  The fair value of the former Embarq stock option awards that were converted to CenturyLink stock options was estimated as of the July 1, 2009 conversion date using a Black-Scholes option pricing model using the following assumptions: dividend yield – 9.12%; expected volatility – 27-50%; weighted average risk free interest rate – 0.5-2.6% and expected term - 0.3-6 years.  Other than in connection with converting the former Embarq stock options into CenturyLink stock options, we did not grant any stock options to employees in 2010 or 2009.

In late February 2008, the Compensation Committee authorized all long-term incentive grants for 2008 to be in the form of restricted stock instead of a mix of stock options and restricted stock as had been granted in recent years.  During 2008, prior to this authorization, 25,700 options were granted with a weighted average grant date fair value of $8.85 per share using a Black-Scholes option pricing model using the following assumptions:  dividend yield - 0.6%; expected volatility - 25%; weighted average risk free interest rate - 2.9%; and expected term - 4.5 years.  The expected volatility was based on the historical volatility of our common stock over the 4.5- year term mentioned above.  The expected term was determined based on the historical exercise and forfeiture rates for similar grants.
 
  
Our outstanding stock options have been granted with an exercise price equal to the market price of CenturyLink’s shares at the date of grant.  The exercise price of former Embarq stock options were converted by applying the exchange ratio stipulated in the Embarq merger agreement.  Our outstanding options generally have a three-year vesting period and all of them expire ten years after the date of grant.  The fair value of each stock option award is estimated as of the date of grant using a Black-Scholes option pricing model.

Stock option transactions during 2010 were as follows:
 
      
Average
  
Remaining
  
Aggregate
 
   
Number
  
exercise
  
contractual
  
intrinsic
 
   
of options
  
price
  
term (in years)
  
value*
 
              
Outstanding December 31, 2009
  9,318,553  $37.85       
Exercised
  (3,507,895)  32.25       
Forfeited/Cancelled
    (770,373)  55.40       
Outstanding December 31, 2010
  5,040,285  $39.06   4.16  $49,225,000 
Exercisable December 31, 2010
  4,739,732  $39.60   3.97  $44,554,000 
________________________
* Equals the difference between the market price on such date and the average exercise price multiplied by the number of shares subject to the options.
 
Our outstanding restricted stock awards generally vest over a three- or five-year period (for employees) or a three-year period (for outside directors).

During the first quarter of 2010, we granted 396,753 shares of restricted stock to certain executive-level employees, of which 198,374 were time-vested restricted stock that vests over a three-year period and 198,379 were performance-based restricted stock.   The performance-based restricted stock will vest over time only if specific performance measures are met for the applicable periods.  One half of the performance-based restricted stock will vest in March 2012 based on our two-year total shareholder return for 2010 and 2011 as measured against the total shareholder return of the companies comprising the S&P 500 Index for the same period.  The other half will vest in March 2013 based on our three-year total shareholder return for 2010, 2011 and 2012 as measured against the total shareholder return of the companies comprising the S&P 500 Index for the same period.  The 198,379 shares of performance-based restricted stock issued represent the target award.  Each recipient has the opportunity to ultimately receive between 0% and 200% of the target restricted stock award depending on our total shareholder return in relation to that of the S&P 500 Index.   We valued these performance-based awards using Monte-Carlo simulations.  In addition, we granted 525,377 shares of time-vested restricted stock during 2010 (which, subject to certain limited exceptions, vest over a three-year period) to certain other key employees and our outside directors as part of our normal recurring annual equity compensation programs.

During the third quarter of 2010, we granted 407,236 shares of restricted stock and approximately $15.2 million of deferred cash compensation awards to certain executive officers and other key employees as part of a retention program in connection with our pending acquisition of Qwest.  The shares of restricted stock will vest in equal installments on the first, second and third anniversaries of the closing date.  Each employee receiving a deferred cash award will be entitled to receive one-half of the award on the closing date of the Qwest merger and the other half on the first anniversary of the closing date.  Both the restricted stock grant and the deferred cash award will accelerate if we terminate the recipient without cause or under certain other conditions, and will be forfeited if the Qwest merger is not consummated.  No compensation expense has been recorded to date related to the retention program since recognition is contingent upon consummation of the Qwest merger.  In addition to the above retention awards, 75,000 shares of restricted stock were granted to an incoming executive officer during the third quarter of 2010 (which vests fully at the end of the officer’s term of employment).
 
 
Nonvested restricted stock and restricted stock unit transactions during 2010 were as follows:
 
   
Number
  
Average grant
 
   
of shares
  
date fair value
 
Nonvested at December 31, 2009
  2,922,855  $31.04 
Granted
  1,404,366   36.56 
Vested
  (1,343,171)  31.04 
Forfeited
  (92,391)  31.79 
Nonvested at December 31, 2010
  2,891,659  $33.69 
 
During 2009, we issued 820,234 shares of restricted stock to certain employees and our outside directors at a weighted-average price of $27.34 per share.  During 2008, we issued 643,397 shares of restricted stock to certain employees and our outside directors at a weighted-average price of $34.86 per share.

The total compensation cost for all share-based payment arrangements in 2010, 2009 and 2008 was $38.2 million, $55.2 million and $16.4 million, respectively.  Upon the consummation of the acquisition of Embarq on July 1, 2009, the vesting schedules of certain of our equity-based grants issued prior to 2009 were accelerated due to change of control provisions in the respective share-based compensation plans (with the exception of grants to certain officers who waived such acceleration right).  In addition, the vesting of certain other awards was accelerated upon the termination of employment of certain employees.  As a result of accelerating the vesting schedules of these awards, we recorded share-based compensation expense of approximately $21.2 million in 2009 above amounts that would have been recognized absent the triggering of these acceleration provisions.

We recognized a tax benefit related to such arrangements of approximately $14.1 million in 2010, $20.5 million in 2009 and $5.8 million in 2008.  As of December 31, 2010, there was $60.8 million of total unrecognized compensation cost related to the share-based payment arrangements, which is expected to be recognized over a weighted-average period of 2.1 years.

We received net cash proceeds of $113.1 million during 2010 in connection with option exercises.  The total intrinsic value of options exercised (the amount by which the market price of the stock on the date of exercise exceeded the market price of the stock on the date of grant) was $28.1 million during 2010, $6.0 million during 2009 and $208,000 during 2008.  The excess tax benefit realized from share-based compensation transactions during 2010 was $11.9 million. The total fair value of restricted stock that vested during 2010, 2009 and 2008 was $47.9 million, $45.2 million and $6.2 million, respectively.
DISCONTINUANCE OF REGULATORY ACCOUNTING
DISCONTINUANCE OF REGULATORY ACCOUNTING
(16)          DISCONTINUANCE OF REGULATORY ACCOUNTING

Through June 30, 2009, we accounted for our regulated telephone operations (except for the properties acquired from Verizon in 2002) in accordance with the provisions of regulatory accounting under which actions by regulators can provide reasonable assurance of the recognition of an asset, reduce or eliminate the value of an asset and impose a liability on a regulated enterprise.  Such regulatory assets and liabilities were required to be recorded and, accordingly, reflected in the balance sheet of entities subject to regulatory accounting.

On July 1, 2009, we discontinued the accounting requirements of regulatory accounting upon the conversion of substantially all of our rate-of-return study areas to federal price cap regulation (based on the FCC’s approval of our petition to convert our study areas to price cap regulation).

Upon the discontinuance of regulatory accounting, we reversed previously established regulatory assets and liabilities.  Depreciation rates of certain assets established by regulatory authorities for our telephone operations subject to regulatory accounting have historically included a component for removal costs in excess of the related salvage value.  Notwithstanding the adoption of accounting guidance related to the accounting for asset retirement obligations, regulatory accounting required us to continue to reflect this accumulated liability for removal costs in excess of salvage value even though there was no legal obligation to remove the assets.  Therefore, we did not adopt the asset retirement obligation provisions for our telephone operations that were subject to regulatory accounting.  Upon the discontinuance of regulatory accounting, such accumulated liability for removal costs included in accumulated depreciation was removed and an asset retirement obligation was established.  Upon the discontinuance of regulatory accounting, we were required to adjust the carrying amounts of property, plant and equipment only to the extent the assets are impaired, as judged in the same manner applicable to nonregulated enterprises. We did not record an impairment charge related to the carrying value of the property, plant and equipment of our regulated telephone operations as a result of the discontinuance of regulatory accounting.
 
In the third quarter of 2009, upon the discontinuance of regulatory accounting, we recorded a non-cash extraordinary gain in our consolidated statements of income comprised of the following components (dollars, except per share amounts, in thousands):
 
   
Gain (loss)
 
Elimination of removal costs embedded in accumulated depreciation
 $222,703 
Establishment of asset retirement obligation
  (1,556)
Elimination of other regulatory assets and liabilities
  (2,585)
Net extraordinary gain before income tax expense and noncontrolling interests
  218,562 
Income tax expense associated with extraordinary gain
  (81,060)
Net extraordinary gain before noncontrolling interests
  137,502 
Less: extraordinary gain attributable to noncontrolling interests
  (1,545)
Extraordinary gain attributable to CenturyLink, Inc.
 $135,957 
      
Basic earnings per share of extraordinary gain
 $.68 
Diluted earnings per share of extraordinary gain
 $.68 
 
Upon the discontinuance of regulatory accounting, we revised the lives of our property, plant and equipment to reflect the economic estimated remaining useful lives of the assets.  In general, the estimated remaining useful lives of our telephone property were lengthened as compared to the rates used that were established by regulatory authorities.

Upon the discontinuance of regulatory accounting, we eliminated certain intercompany transactions with regulated affiliates that previously were not eliminated under the application of regulatory accounting.  This has caused our operating revenues and operating expenses to be lower by equivalent amounts beginning in the third quarter of 2009.
GAIN ON ASSET DISPOSITIONS
GAIN ON ASSET DISPOSITIONS
(17)           GAIN ON ASSET DISPOSITIONS
 
In third quarter 2008, we sold our interest in a non-operating investment for approximately $7.2 million and recorded a pre-tax gain of approximately $3.2 million.  In anticipation of making the lump sum plan distributions in early 2009 discussed in Note 12, we liquidated our investments in marketable securities in the SERP trust and recognized a $4.5 million pre-tax gain in the second quarter of 2008.  In first quarter 2008, we sold a non-operating investment for approximately $4.2 million and recorded a pre-tax gain of approximately $4.1 million.  Such gains are included in “Other income (expense)” on our Consolidated Statements of Income.
SUPPLEMENTAL CASH FLOW AND OTHER DISCLOSURES
SUPPLEMENTAL CASH FLOW AND OTHER DISCLOSURES
(18)           SUPPLEMENTAL CASH FLOW AND OTHER DISCLOSURES
 
    The amount of interest actually paid, net of amounts capitalized of $12.9 million, $3.5 million, and $2.4 million during 2010, 2009 and 2008, respectively, was $548.4 million, $391.8 million, and $204.1 million during 2010, 2009 and 2008, respectively.  Income taxes paid were $431.7 million in 2010, $258.9 million in 2009, and $208.8 million in 2008.  Income tax refunds totaled $7.6 million in 2010, $2.1 million in 2009, and $4.6 million in 2008.
 
    In connection with our July 1, 2009 acquisition of Embarq, the following assets were acquired and liabilities assumed:
 
Year ended December 31,
 
2009
 
   
(Dollars in thousands)
 
     
Property, plant and equipment, net
 $6,077,672 
Goodwill
  6,236,084 
Long-term debt, deferred credits and other liabilities
  (7,508,066)
Other assets and liabilities, excluding  cash and cash equivalents
  1,187,849 
Common equity issued for acquisition
  (6,070,445)
Increase in cash due to acquisition
 $(76,906)

See Note 2 for additional information related to our acquisition of Embarq in 2009.

We collect various taxes from our customers and subsequently remit such funds to governmental authorities.  Substantially all of these taxes are recorded through the balance sheet.  We are required to contribute to several universal service fund programs and generally include a surcharge amount on our customers’ bills which is designed to recover our contribution costs.  Such amounts are reflected on a gross basis in our statement of income (included in both operating revenues and expenses) and aggregated approximately $115 million for 2010, $84 million for 2009 and $42 million for 2008.
FAIR VALUE OF FINANCIAL INSTRUMENTS
FAIR VALUE OF FINANCIAL INSTRUMENTS
 
(19)           FAIR VALUE OF FINANCIAL INSTRUMENTS
 
    The following table presents the carrying amounts and estimated fair values of certain of our financial instruments at December 31, 2010 and 2009.

 
   
Carrying
  
Fair
 
   
Amount
  
value
 
   
(Dollars in thousands)
 
December 31, 2010
      
        
Financial assets
      
         Other
 $110,178   110,178(2)
Financial liabilities
        
         Long-term debt (including current maturities)
 $7,327,587   8,006,508(1)
         Other
 $190,443   190,443(2)
          
December 31, 2009
        
          
Financial assets
        
         Other
 $111,809   111,809(2)
Financial liabilities
        
         Long-term debt (including current maturities)
 $7,753,718   8,408,943(1)
         Other
 $182,374   182,374(2)
 
(1)  
Fair value was estimated by discounting the scheduled payment streams to present value based upon
 
rates currently available to us for similar debt.
(2)
Fair value was estimated by us to approximate carrying value or is based on current market information.
 
We believe the carrying amount of cash and cash equivalents, accounts receivable, short-term debt, accounts payable and accrued expenses approximates the fair value due to the short maturity of these instruments, which have not been reflected in the above table.

We are subject to certain accounting standards that define fair value, establish a framework for measuring fair value and expand the disclosures about fair value measurements required or permitted under other accounting pronouncements.  The fair value accounting guidance establishes a three-tier fair value hierarchy, which prioritizes the inputs used to measure fair value.  These tiers include: Level 1 (defined as observable inputs such as quoted market prices in active markets); Level 2 (defined as inputs other than quoted prices in active markets that are either directly or indirectly observable); and Level 3 (defined as unobservable inputs in which little or no market data exists).

As of December 31, 2010, we held life insurance contracts with cash surrender value that are required to be measured at fair value on a recurring basis.  The following table depicts those assets held and the related tier designation pursuant to the accounting guidance related to fair value disclosure.
 
 
   
Balance
          
Description
 
Dec. 31, 2010
  
Level 1
  
Level 2
  
Level 3
 
   
(Dollars in thousands)
 
              
Cash surrender value of life insurance contracts
 $99,462   99,462   -   - 
 
See Notes 11 and 12 for the tier designation related to our postretirement and pension plan assets.
BUSINESS SEGMENTS
BUSINESS SEGMENTS
(20)           BUSINESS SEGMENTS
 
    We re an integrated communications company engaged primarily in providing an array of communications services to our customers, including local exchange, long distance, Internet access and broadband services.  We strive to maintain our customer relationships by, among other things, bundling our service offerings to provide our customers with a complete offering of integrated communications services.  Because of the similar economic characteristics of our operations, we have utilized the aggregation criteria specified in the segment accounting guidance and concluded that we operate as one reportable segment.

Our operating revenues for our products and services include the following components:

Year ended December 31,
 
2010
  
2009
  
2008
 
   (Dollars in thousands) 
           
Voice
 $3,137,921   2,168,480   1,043,386 
Data
  1,908,901   1,202,284   524,194 
Network access
  1,079,678   927,905   651,038 
Other
  915,034   675,570   381,129 
Total operating revenues
 $7,041,534   4,974,239   2,599,747 
 
    Beginning in 2010, we have reclassified revenues generated from subscriber line charges to “Voice” revenues from “Network access” revenues to better align our presentation of such revenues with others in our industry and we have included revenues generated from our fiber transport, CLEC and security monitoring operations in “Other” revenues.  Prior periods have been adjusted to reflect this new presentation.
COMMITMENTS AND CONTINGENCIES
COMMITMENTS AND CONTINGENCIES
(21)           COMMITMENTS AND CONTINGENCIES

    Over 60 years ago, one of our indirect subsidiaries, Centel Corporation, acquired entities that may have owned or operated seven former plant sites that produced “manufactured gas” under a process widely used through the mid-1900s.  Centel has been a subsidiary of Embarq since being spun-off in 2006 from Sprint Nextel, which acquired Centel in 1993.  None of these plant sites are currently owned or operated by either Sprint Nextel, Embarq or their subsidiaries.  On three sites, Embarq and the current landowners are working with the Environmental Protection Agency (“EPA”) pursuant to administrative consent orders.  Remediation expenditures pursuant to the orders are not expected to be material. On five sites, including the three sites where the EPA is involved, Centel has entered into agreements with other potentially responsible parties to share remediation costs. Further, Sprint Nextel has agreed to indemnify Embarq for most of any eventual liability arising from all seven of these sites.  Based upon current circumstances, we do not expect this issue to have a material adverse impact on our results of operations or financial condition.
 
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 (Civil Action No. 07-CV-2602), a group of retirees filed a putative class action lawsuit challenging the decision to make certain modifications to Embarq’s retiree benefits programs generally effective January 1, 2008 (which resulted in a $300 million reduction to the liability for retiree benefits at the time of the modifications). 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.  Recently, the Court certified a class on certain of plaintiffs’ claims, but rejected class certification as to other claims.  Embarq and other defendants continue to vigorously contest these claims and charges.   Given that this litigation is still in discovery, it is premature to estimate the impact this lawsuit could have to our results of operation or financial condition.  In 2009, a ruling in Embarq’s favor was entered in an arbitration proceeding filed by 15 former Centel executives, similarly challenging the benefits changes.
 
In April 2010, a series of lawsuits were filed by shareholders of Qwest Communications International Inc. in Colorado state and federal courts and in Delaware federal court, alleging that Qwest’s officers and directors breached their fiduciary duties by failing to maximize the value to be received by Qwest’s stockholders in connection with CenturyLink’s recently announced acquisition of Qwest.  CenturyLink was also named as a defendant in most of the lawsuits.  On July 16, 2010, the parties entered into a memorandum of understanding reflecting the terms of their agreement-in-principle for a settlement of all of the claims asserted in these actions. Pursuant to this agreement, defendants included additional disclosures in the final joint proxy statement-prospectus dated July 19, 2010, in response to allegations and claims asserted in certain of the complaints.  At a hearing in late February 2011, the Court gave final approval to this settlement, and all lawsuits challenging the transaction will be dismissed with prejudice effective March 17, 2011.  We do not expect the settlement to have a material adverse impact to our results of operations or financial condition.

In December 2009, subsidiaries of CenturyLink filed two lawsuits against subsidiaries of Sprint Nextel to recover terminating access charges for VoIP traffic owed under various interconnection agreements and tariffs which presently approximate $33 million.  The lawsuits allege that Sprint Nextel has breached contracts, violated tariffs, and violated the Federal Communications Act by failing to pay these charges.  One lawsuit, filed on behalf of all legacy Embarq operating entities, was tried in federal court in Virginia in August 2010 and a ruling is expected in the first quarter of 2011.  The other lawsuit, filed on behalf of all legacy CenturyLink operating entities, is pending in federal court in Louisiana.  In that case, the Court recently dismissed certain of CenturyLink’s claims, referred other claims to the FCC, and stayed the litigation for 12 months.  We have not recorded a reserve related to these lawsuits.
 
From time to time, we are involved in other proceedings incidental to our business, including administrative hearings of state public utility commissions relating primarily to rate making, actions relating to employee claims, various tax issues, occasional grievance hearings before labor regulatory agencies and miscellaneous third party tort actions.   The outcome of these other proceedings is not predictable.  However, based on current circumstances, we do not believe that the ultimate resolution of these other proceedings, after considering available insurance coverage and current levels of reserves, will have a material adverse effect on our financial position, results of operations or cash flows.
SUBSEQUENT EVENT
SUBSEQUENT EVENT
(22)           SUBSEQUENT EVENT

On January 19, 2011, we entered into a four-year revolving credit facility with various lenders.  This credit facility allows CenturyLink to borrow up to $1.0 billion initially with the total capacity of the credit facility increasing to $1.7 billion upon the consummation of our pending acquisition of Qwest.  Up to $400 million of the credit facility can be used for letters of credit, which reduces the amount available for other extensions of credit.

Interest will be assessed on future borrowings using the London Interbank Offered Rate (LIBOR) plus an applicable margin between .5% to 2.5% per annum depending on the type of loan and CenturyLink’s then current senior unsecured long-term debt rating.  CenturyLink’s obligations under the credit facility are currently guaranteed by its wholly-owned subsidiary, Embarq Corporation, and upon consummation of the Qwest acquisition will also be guaranteed by Qwest and one of its wholly-owned subsidiaries.

CenturyLink’s ability to borrow under the credit facility is conditioned upon its continued compliance with various loan covenants, including financial covenants that stipulate that CenturyLink shall not permit (i) the ratio of consolidated debt to consolidated EBITDA to exceed 4.0 to 1.0 and (ii) the ratio of consolidated EBITDA to the sum of consolidated interest expense and preferred stock dividends to be less than 1.5 to 1.0 (with all of the above terms having the meanings stipulated in the agreement).  Amounts outstanding under the credit facility may be accelerated upon specified events of default, including failures to make payments when due, defaults of obligations under certain other debt, breaches of representations, warranties or covenants, commencement of bankruptcy proceedings and certain other failures to discharge specified obligations or comply with specified laws.

CenturyLink’s previously existing $750 million credit facility and Embarq’s previously existing $800 million credit facility (which CenturyLink assumed upon its acquisition of Embarq on July 1, 2009) were both terminated upon the execution of this new credit facility.
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
CENTURYLINK, INC.

For the years ended December 31, 2010, 2009 and 2008
 
      
Additions
          
   
Balance at
  
charged to
  
Deductions
     
Balance
 
   
beginning
  
costs and
  
from
  
Other
  
at end
 
Description
 
of period
  
expenses
  
allowance
  
changes
  
of period
 
   
(Dollars in thousands)
 
Year ended December 31, 2010
               
Allowance for doubtful accounts
 $47,450   91,202   (78,566) (1)  -   60,086 
                     
 Valuation allowance for deferred tax assets
 $41,533   3,681   (2,320)  -   42,894 
                      
Year ended December 31, 2009
                    
Allowance for doubtful accounts
 $16,290   56,609   (25,449) (1)  -   47,450 
                     
Valuation allowance for deferred tax assets
 $33,858   3,886   (6,329)  10,118  (2)  41,533 
                      
Year ended December 31, 2008
                    
Allowance for doubtful accounts
 $20,361   9,866   (13,524) (1)  (413) (2)  16,290 
                     
Valuation allowance for deferred tax assets
 $30,907   1,603   -   1,348   33,858 
 
(1)
Customers’ accounts written-off, net of recoveries.
 
(2)
Allowances at the date of acquisition of purchased subsidiaries, net of allowances at the date of disposition of subsidiaries sold.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies)
Principles of consolidation 
Principles of consolidation - Our consolidated financial statements include the accounts of CenturyLink, Inc. (“CenturyLink”) and its majority-owned subsidiaries.
Embarq acquisition 
Embarq acquisition - On July 1, 2009, we acquired Embarq Corporation (“Embarq”) through a merger transaction, with Embarq surviving the merger as a wholly-owned subsidiary of CenturyLink.  The results of operations of Embarq are included in our consolidated results of operations beginning July 1, 2009.  See Note 2 for additional information related to the Embarq acquisition.
Discontinuance of regulatory accounting 
Discontinuance of regulatory accounting – Through June 30, 2009, CenturyLink accounted for its regulated telephone operations (except for the properties acquired from Verizon in 2002) in accordance with the provisions of regulatory accounting under which certain of our assets and liabilities were required to be recorded and, accordingly, reflected in the balance sheets of our regulated entities.  On July 1, 2009, we discontinued the accounting requirements of regulatory accounting upon the conversion of substantially all of our rate-of-return study areas to federal price cap regulation.  In the third quarter of 2009, upon the discontinuance of regulatory accounting, we recorded a non-cash extraordinary gain in our consolidated statements of income of $136.0 million after-tax.  See Note 16 for additional information.

Subsequent to the July 1, 2009 discontinuance of regulatory accounting, all intercompany transactions with affiliates have been eliminated from the consolidated financial statements.  Prior to July 1, 2009, intercompany transactions with regulated affiliates subject to regulatory accounting were not eliminated in connection with preparing the consolidated financial statements, as allowed by the provisions of regulatory accounting.   The amount of intercompany revenues and costs that were not eliminated related to the first half of 2009 approximated $114 million.
Estimates 
Estimates - The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.  Actual results may differ from those estimates.

Revenue recognition 
Revenue recognition - Revenues are generally recognized when services are provided or when products are delivered to customers.  Revenue that is billed in advance includes monthly recurring network access services, special access services and monthly recurring local line charges.  The unearned portion of this revenue is initially deferred as a component of advance billings and customer deposits on our balance sheet and recognized as revenue over the period that the services are provided.  Revenue that is billed in arrears includes switched access services, nonrecurring network access services, nonrecurring local services and long distance services.  The earned but unbilled portion of this revenue is recognized as revenue in the period that the services are provided.  We offer bundle discounts to our customers who receive certain groupings of services.  These bundle discounts are recognized concurrently with the associated revenues and are allocated to the various services in the bundled offering based on the relative fair value of services included in each bundled combination.  Revenues from installation activities are deferred and recognized as revenue over the estimated life of the customer relationship.  The costs associated with such installation activities, up to the related amount of deferred revenue, are deferred and recognized as an operating expense over the same period.  We offer some products and services that are provided by third-party vendors.  We review the relationship between us, the vendor and the end customer to assess whether revenue should be reported on a gross or net basis.  In assessing whether revenue should be reported on a gross or net basis, we consider whether we act as a principal in the transaction, take title to the products, have risk and rewards of ownership, and act as an agent or broker.
Allowance for doubtful accounts 
Allowance for doubtful accounts.  In evaluating the collectibility of our accounts receivable, we assess a number of factors, including a specific customer’s or carrier’s ability to meet its financial obligations to us, the length of time the receivable has been past due and historical collection experience.  Based on these assessments, we record both specific and general reserves for uncollectible accounts receivable to reduce the stated amount of applicable accounts receivable to the amount we ultimately expect to collect.
Property, plant and equipment 
Property, plant and equipment – As discussed in Note 2, the property acquired in connection with the acquisition of Embarq was recorded based on its fair value.  Substantially all other telephone plant is stated at original cost.  Normal retirements of telephone plant are charged against accumulated depreciation, along with the costs of removal, less salvage, with no gain or loss recognized.  Renewals and betterments of plant and equipment are capitalized while repairs, as well as renewals of minor items, are charged to operating expense.  Depreciation of telephone plant is provided on the straight line method using class or overall group rates; such average annual rates range from 2% to 29%.
 
    Non-telephone property is stated at cost and, when sold or retired, a gain or loss is recognized.  We depreciate such property on the straight line method over estimated service lives ranging from two to 35 years.

We perform annual internal studies to determine the depreciable lives for our property, plant and equipment.  Our studies utilize models that take into account actual usage, replacement history and assumptions about technology evolution to estimate the remaining life of our asset base.  The changes in our estimates incorporated as a result of our 2010 internal study did not have a material impact on the level of our depreciation expense.
Goodwill and other long-lived assets 
Goodwill and other long-lived assets – Goodwill recorded in a business combination is required to be reviewed for impairment and to be written down only in periods in which the recorded amount of goodwill exceeds its fair value.  Applicable accounting guidance also stipulates certain factors to consider regarding whether or not a triggering event has occurred that would require performance of an interim goodwill impairment test.  We test impairment of goodwill at least annually by comparing the fair value of the reporting unit to its carrying value (including goodwill). We base our estimates of the fair value of the reporting unit on valuation models using criterion such as multiples of earnings.  See Note 4 for additional information.  Other long-lived assets (exclusive of goodwill) are reviewed for impairment whenever events and circumstances indicate that such carrying amount cannot be recoverable by assessing the recoverability of the carrying value through undiscounted net cash flows expected to be generated by the assets.
Income taxes 
Income taxes - We file a consolidated federal income tax return with our eligible subsidiaries.  We use the asset and liability method of accounting for income taxes under which deferred tax assets and liabilities are established for the future tax consequences attributable to differences between the financial statement carrying amounts of assets and liabilities and their respective tax bases.   We establish valuation allowances when necessary to reduce deferred income tax assets to the amounts that we believe are more likely than not to be recovered.  
Postretirement and pension plans 
Postretirement and pension plans – We recognize the overfunded or underfunded status of our defined benefit and postretirement plans as an asset or a liability on our balance sheet, with an adjustment to stockholders’ equity (reflected as an increase or decrease in accumulated other comprehensive income or loss) for the accumulated actuarial gains or losses.   Pension and postretirement benefit expenses are recognized over the period in which the employee renders service and becomes eligible to receive benefits.   We make significant assumptions (including the discount rate, expected rate of return on plan assets and health care trend rates) in computing the pension and postretirement benefits expense and obligations.  See Notes 11 and 12 for additional information.
Stock-based compensation 
Stock-based compensation – We measure our cost of awarding employees with equity instruments based upon allocations of the fair value of the award on the grant date.  See Note 15 for additional information.

Derivative financial instruments 
Derivative financial instruments – We account for derivative instruments and hedging activities in accordance with applicable accounting guidance which requires that all derivative instruments, such as interest rate swaps, be recognized in the financial statements and measured at fair value regardless of the purpose or intent of holding them.  On the date a derivative contract is entered into, we designate the derivative as either (i) a fair value hedge, which involves a hedge of the fair value of a recognized asset or liability or of an unrecognized firm commitment or (ii) a cash flow hedge, which involves a hedge of a forecasted transaction or the variability of cash flows to be received or paid related to a recognized asset or liability.  We also formally assess, both at the hedge's inception and on an ongoing basis, whether the derivatives that are used in hedging transactions are highly effective in offsetting changes in fair values or cash flows of hedged items. If we determine that a derivative is not, or is no longer, highly effective as a hedge, we would discontinue hedge accounting prospectively.  We recognize all derivatives on the balance sheet at their fair value.  Changes in the fair value of derivative financial instruments are either recognized in income or stockholders’ equity (as a component of accumulated other comprehensive income (loss)), depending on the use of the derivative and whether it qualifies for hedge accounting.  We do not hold or issue derivative financial instruments for trading or speculative purposes.  Management periodically reviews our exposure to interest rate fluctuations and implements strategies to manage the exposure.  See Note 7 for additional information.
 
Earnings per share 
Earnings per share – We determine basic earnings per share amounts on the basis of the weighted average number of common shares outstanding during the applicable accounting period.  Diluted earnings per share gives effect to all potential dilutive common shares that were outstanding during the period.  See Note 14 for additional information.     

Cash equivalents 
Cash equivalents - We consider short-term investments with a maturity at date of purchase of three months or less to be cash equivalents.
Recent accounting pronouncements 
Recent accounting pronouncements - In September 2009, the Financial Accounting Standards Board updated the accounting standard regarding revenue recognition for multiple deliverable arrangements, such as the service bundles we offer to our customers. This update requires the use of the relative selling price method when allocating revenue in these types of arrangements. This method allows a vendor to use its best estimate of selling price if neither vendor specific objective evidence nor third party evidence of selling price exists when evaluating multiple deliverable arrangements. This standard update is effective January 1, 2011 and may be adopted prospectively for revenue arrangements entered into or materially modified after the date of adoption or retrospectively for all revenue arrangements for all periods presented. We currently do not expect this standard update to have a material impact on our consolidated financial statements.

In January 2010, we adopted the accounting standard update regarding fair value measurements and disclosures, which requires additional disclosures and explanations for transfers of financial assets and liabilities between certain levels in the fair value hierarchy.  The adoption of this accounting standard update did not have a material impact on our consolidated financial statements.
Reclassifications 
Reclassifications – Certain amounts for prior periods have been reclassified to conform to current year presentation, including the reclassification of certain revenue components as more fully described in Note 20.
 
EMBARQ ACQUISITION (Tables)
Fair Value of the assets acquired and liabilities assumed for Embarq acquisition 
 
   
Fair value
 
   
as of July 1, 2009
 
   
(Dollars in thousands)
 
     
Current assets*
 $675,720 
Property, plant and equipment
  6,077,672 
Identifiable intangible assets
    
      Customer list
  1,098,000 
      Rights of way
  268,472 
      Other (trademarks, internally developed software, licenses)
  26,817 
Other non-current assets
  24,131 
Current liabilities
  (837,132)
Long-term debt, including current maturities
  (4,886,708)
Other long-term liabilities
  (2,621,493)
Goodwill
  6,244,966 
Total purchase price
 $6,070,445 
_________________
* Includes a fair value of $440 million assigned to accounts receivable which had a gross contractual value of $492 million as of July 1, 2009. The $52 million difference represents our best estimate as of July 1, 2009 of the contractual cash flows that would not be collected.

Combined results of CenturyLink and Embarq 
The following unaudited pro forma financial information presents the combined results of CenturyLink and Embarq as though the acquisition had been consummated as of January 1, 2009 and 2008, respectively, for the two periods presented below.

   
Twelve months
 
   
ended December 31,
 
   
2009
  
2008
 
   
(Dollars, except per share
amounts, in thousands)
 
        
Operating revenues
 $7,645,000   8,289,000 
Income before extraordinary item
 $895,000   1,087,000 
Basic earnings per share before extraordinary item
 $3.00   3.55 
Diluted earnings per share before extraordinary item
 $2.99   3.53 
GOODWILL AND OTHER ASSETS (Tables)
Schedule of goodwill and other assets
Goodwill and other assets at December 31, 2010 and 2009 were composed of the following:

December 31,
 
2010
  
2009
 
   
(Dollars in thousands)
 
        
Goodwill
 $10,260,640   10,251,758 
Intangible assets subject to amortization
        
      Customer list, less accumulated amortization of $349,402 and $148,491
  929,907   1,130,817 
      Other, less accumulated amortization of $8,297 and $22,466
  41,670   47,101 
Intangible assets not subject to amortization
  268,500   268,500 
Billing system development costs, less accumulated amortization
   of $73,735 and $61,672
  162,809   174,872 
Investment in 700 MHz wireless spectrum licenses
  149,425   149,425 
Deferred costs associated with installation activities
  114,375   91,865 
Cash surrender value of life insurance contracts
  99,462   100,945 
Investment in unconsolidated cellular partnership
  33,019   32,679 
Other
  80,686   94,037 
   $12,140,493   12,341,999 
PROPERTY, PLANT AND EQUIPMENT (Tables)
Net property, plant and equipment
Net property, plant and equipment at December 31, 2010 and 2009 was composed of the following:
 
December 31,
 
2010
  
2009
 
   
(Dollars in thousands)
 
        
Cable and wire
 $8,194,393   8,133,830 
Central office
  5,082,850   4,611,407 
General support
  2,199,525   1,873,525 
Fiber transport
  370,196   343,208 
Information origination/termination
  104,831   85,029 
Construction in progress
  271,736   430,119 
Other
  105,713   79,645 
    16,329,244   15,556,763 
Accumulated depreciation
  (7,574,768)  (6,459,624)
Net property, plant and equipment
 $8,754,476   9,097,139 
LONG-TERM DEBT (Tables)
Schedule of long term debt
Our long-term debt as of December 31, 2010 and 2009 was as follows:
 
December 31,
 
2010
  
2009
 
   
(Dollars in thousands)
 
CenturyLink
      
      .82%* Senior credit facility
 $365,000   291,200 
      Senior notes and debentures:
        
              7.20% Series D, due 2025
  100,000   100,000 
              6.875% Series G, due 2028
  425,000   425,000 
              8.375% Series H
  -   482,470 
              7.875% Series L, due 2012
  317,530   317,530 
              5.0% Series M, due 2015
  350,000   350,000 
              6.0% Series N, due 2017
  500,000   500,000 
              5.5% Series O, due 2013
  175,665   175,665 
              7.6% Series P, due 2039
  400,000   400,000 
              6.15% Series Q, due 2019
  250,000   250,000 
      Unamortized net discount
  (4,205)  (5,331)
      Unamortized premium associated with derivative instruments:
        
              Series H senior notes
  -   2,240 
              Series L senior notes
  5,739   9,182 
                      Total CenturyLink
  2,884,729   3,297,956 
          
Subsidiaries
        
      Embarq Corporation
        
              Senior notes
        
                      6.738% due 2013
  528,256   528,256 
                      7.1%, due 2016
  2,000,000   2,000,000 
                      8.0%, due 2036
  1,485,000   1,485,000 
              8.1%* Other, due through 2025
  522,223   524,273 
              Unamortized net discount
  (174,991)  (178,155)
      First mortgage debt
        
              5.40%* notes, payable to agencies of the U. S. government and
                cooperative lending associations, due in installments through 2028
  82,270   94,603 
      Other debt
        
              10.0% notes
  100   100 
              Capital lease obligations
  -   1,685 
                      Total subsidiaries
  4,442,858   4,455,762 
Total long-term debt
  7,327,587   7,753,718 
Less current maturities
  11,583   500,065 
Long-term debt, excluding current maturities
 $7,316,004   7,253,653 
* Weighted average interest rate at December 31, 2010
DEFERRED CREDITS AND OTHER LIABILITIES (Tables)
Deferred credits and other liabilities
Deferred credits and other liabilities at December 31, 2010 and 2009 were composed of the following:

December 31,
 
2010
  
2009
 
   
(Dollars in thousands)
 
        
Deferred federal and state income taxes
 $2,368,698   2,256,579 
Accrued pension costs
  802,090   960,610 
Accrued postretirement benefit costs
  503,907   525,033 
Deferred revenue
  147,759   136,969 
Unrecognized tax benefits for uncertain tax positions
  66,501   83,931 
Casualty insurance reserves
  64,183   60,666 
Other
  110,755   111,294 
   $4,063,893   4,135,082 
REDUCTIONS IN WORKFORCE (Tables)
Severance related liability
The following table reflects additional information regarding the severance-related liability for 2010, 2009 and 2008 (in thousands):

Balance at December 31, 2007
 $1,835 
Amount accrued to expense
  2,046 
Amount paid
  (2,083)
Balance at December 31, 2008
  1,798 
Severance-related liability assumed   in Embarq acquisition
  31,086 
Amount accrued to expense
  80,580 
Amount paid
  (44,895)
Balance at December 31, 2009
  68,569 
Amount accrued to expense
  27,258 
Amount paid
  (77,823)
Balance at December 31, 2010
 $18,004 
STOCKHOLDERS' EQUITY (Tables)
Schedule of unissued shares of common stock reserved for future issuance
Common stock - Unissued shares of CenturyLink common stock were reserved as follows:

December 31,
 
2010
 
   
(In thousands)
 
     
Incentive compensation programs
  25,245 
Acquisitions
  4,064 
Employee stock purchase plan
  3,990 
Dividend reinvestment plan
  595 
Conversion of convertible preferred stock
  13 
    33,907 
POSTRETIREMENT BENEFITS (Tables)
Change in postretirement benefit obligation and plan assets 
The following is a reconciliation of the beginning and ending balances for the benefit obligation and the plan assets.
 
December 31,
 
2010
  
2009
  
2008
 
   
(Dollars in thousands)
 
Change in benefit obligation
         
         Benefit obligation at beginning of year
 $582,345   292,887   306,633 
         Service cost
  14,680   8,764   4,926 
         Interest cost
  32,118   26,693   19,395 
         Participant contributions
  14,382   3,013   2,789 
         Plan amendments
  (846)  -   (9,093)
         Acquisitions
  -   228,200   - 
         Direct subsidy receipts
  1,092   626   1,092 
         Actuarial (gain) loss
  (31,977)  58,455   (11,992)
         Benefits paid
  (54,073)  (36,293)  (20,863)
Benefit obligation at end of year
 $557,721   582,345   292,887 
              
Change in plan assets
            
         Fair value of plan assets at beginning of year
 $57,312   16,805   28,324 
         Return (loss) on plan assets
  5,916   6,405   (6,166)
         Acquisitions
  -   33,200   - 
         Employer contributions
  30,277   34,182   12,721 
         Participant contributions
  14,382   3,013   2,789 
         Benefits paid
  (54,073)  (36,293)  (20,863)
Fair value of plan assets at end of year
 $53,814   57,312   16,805 
Amounts recognized as liabilities for postretirement benefits 
The following table sets forth the amounts recognized as liabilities on the balance sheet for postretirement benefits at December 31, 2010, 2009 and 2008.

December 31,
 
2010
  
2009
  
2008
 
   
(Dollars in thousands)
 
           
Benefit obligation
 $(557,721)  (582,345)  (292,887)
Fair value of plan assets
  53,814   57,312   16,805 
Accrued benefit cost
 $(503,907)  (525,033)  (276,082) 
Components of net periodic postretirement benefit cost 
 Net periodic postretirement benefit cost for 2010, 2009 (which only includes the effects of our Embarq acquisition subsequent to July 1, 2009) and 2008 included the following components:

Year ended December 31,
 
2010
  
2009
  
2008
 
   
(Dollars in thousands)
 
           
Service cost
 $14,680   8,764   4,926 
Interest cost
  32,118   26,693   19,395 
Expected return on plan assets
  (3,435)  (2,386)  (2,337)
Amortization of unrecognized prior service credit
  (3,433)  (3,546)  (2,606)
Amortization of unrecognized net loss
  942   -   - 
Net periodic postretirement benefit cost
 $40,872   29,525   19,378 
Significant assumptions used in accounting for postretirement benefits 
Assumptions used in accounting for postretirement benefits as of December 31, 2010 and 2009 were:

   
2010
  
2009
 
Determination of benefit obligation
      
         Discount rate
  5.30%  5.7-5.8%
         Healthcare cost increase trend rates
        
             Following year
  8.50%  8.0%
             Rate to which the cost trend rate is assumed to decline (the ultimate cost trend rate)
  5.0%  5.0%
             Year that the rate reaches the ultimate cost trend rate
  2018   2014 
          
Determination of benefit cost
        
         Discount rate
  5.7-5.8%  6.4-6.90%
         Expected return on plan assets
  7.25%  8.25-8.50%
 
Effect of one-percentage-point change in assumed health care cost trend rates 
Assumed health care cost trends have an impact on the amounts reported for postretirement benefit plans.  A one-percentage-point change in assumed health care cost rates would have the following effects:

   
1-Percentage
  
1-Percentage
 
   
Point Increase
  
Point Decrease
 
   
(Dollars in thousands)
 
        
Effect on annual total of service and interest cost components
 $108   (132)
Effect on postretirement benefit obligation
 $1,285   (1,527)
Postretirement benefit plan weighted-average asset allocations 
Our weighted-average asset allocations at December 31, 2010 and 2009 by asset category are as follows:
 
   
2010
  
2009
 
Equity securities
  19.9%  18.6 
Debt securities
  72.2   64.5 
Cash and cash equivalents
  7.9   16.9 
Total
  100.0%  100.0 
Hierarchy levels for postretirement benefit plans' investment 
 The following table presents the hierarchy levels for our postretirement benefit plan’s investments as of December 31, 2010:
 
   
Level 1
  
Level 2
  
Level 3
  
Total
 
   
(Dollars in thousands)
 
Equity securities
            
       Common stocks, preferred stocks, equity funds and related securities
 $5,204   5,487   -   10,691 
Debt securities
  35,222   3,648   -   38,870 
Cash
  4,253   -   -   4,253 
Total
 $44,679   9,135   -   53,814 
 
 
The following table presents the hierarchy levels for our postretirement benefit plan’s investments as of December 31, 2009:
 
   
Level 1
  
Level 2
  
Level 3
  
Total
 
   
(Dollars in thousands)
 
Equity securities
            
       Common stocks, preferred stocks, equity funds and related securities
 $4,967   5,688   -   10,655 
Debt securities
  32,900   4,075   -   36,975 
Cash
  9,682   -   -   9,682 
Total
 $47,549   9,763   -   57,312 
Estimated future projected benefit payments under postretirement benefit plans 
Our estimated future projected benefit payments under our postretirement benefit plan are as follows:
 
   
Before Medicare
  
Medicare
  
Net of
 
Year
 
Subsidy
  
Subsidy
  
Medicare Subsidy
 
   (Dollars in thousands) 
           
2011
 $49,206   (1,351)  47,855 
2012
 $51,186   (1,600)  49,586 
2013
 $47,751   (1,852)  45,899 
2014
 $46,281   (2,099)  44,182 
2015
 $45,620   (2,351)  43,269 
2016-2020
 $203,780   (5,537)  198,243 

DEFINED BENEFIT AND OTHER RETIREMENT PLANS (Tables)
Change in defined benefit obligation and plan assets 
 The following is a reconciliation of the beginning and ending balances for the aggregate benefit obligation and the assets for our above-referenced defined benefit plans.
 
December 31,
 
2010
  
2009
  
2008
 
   
(Dollars in thousands)
 
Change in benefit obligation
         
         Benefit obligation at beginning of year
 $4,181,582   462,701   469,437 
         Service cost
  61,156   36,223   13,761 
         Interest cost
  245,753   134,898   29,373 
         Plan amendments
  4,304   16,016   2,393 
         Acquisitions
  -   3,467,260   - 
         Actuarial (gain) loss
  426,700   231,663   (24,819)
         Contractual retirement benefits
  -   14,676   - 
         Curtailment (gain) loss
  (110,169)  -   8,235 
         Settlements
  -   8,294   (1,945)
         Benefits paid
  (275,357)  (190,149)  (33,734)
Benefit obligation at end of year
 $4,533,969   4,181,582   462,701 
              
Change in plan assets
            
         Fair value of plan assets at beginning of year
 $3,219,706   352,830   459,198 
         Return (loss) on plan assets
  482,709   473,878   (123,210)
         Acquisitions
  -   2,407,200   - 
         Employer contributions
  304,811   175,946   52,521 
         Settlements
  -   -   (1,945)
         Benefits paid
  (275,357)  (190,148)  (33,734)
Fair value of plan assets at end of year
 $3,731,869   3,219,706   352,830 
Funded status and net amounts recognized 
The following table sets forth the combined plans’ funded status and amounts recognized in our consolidated balance sheet at December 31, 2010, 2009 and 2008.

December 31,
 
2010
  
2009
  
2008
 
   
(Dollars in thousands)
 
           
Benefit obligation
 $(4,533,969)  (4,181,582)  (462,701)
Fair value of plan assets
  3,731,869   3,219,706   352,830 
Net amount recognized
 $(802,100)  (961,876)  (109,871)
Net amount recognized as accrued expenses, other current liabilities and other deferred credits 
Amounts recognized on the balance sheet consist of:

December 31,
 
2010
  
2009
 
        
   
(Dollars in thousands)
 
        
Accrued expenses and other current liabilities
 $(10)  (1,266)
Other deferred credits
  (802,090)  (960,610)
Net amount recognized
 $(802,100)  (961,876)
Components of net periodic pension expense 
Net periodic pension expense for 2010, 2009 (which only includes the effects of our Embarq acquisition subsequent to July 1, 2009) and 2008 included the following components:
 

Year ended December 31,
 
2010
  
2009
  
2008
 
   
(Dollars in thousands)
 
           
Service cost
 $61,156   36,223   13,761 
Interest cost
  245,753   134,898   29,373 
Expected return on plan assets
  (283,026)  (127,613)  (36,667)
Curtailment (gain) loss
  (20,908)  -   8,235 
Settlements
  -   17,834   410 
Contractual retirement benefits
  -   14,676   - 
Net amortization and deferral
  18,765   16,271   3,377 
Net periodic pension expense
 $21,740   92,289   18,489 
Significant assumptions used in accounting for pension plans 
Assumptions used in accounting for pension plans as of December 31, 2010 and 2009 were:

   
2010
  
2009
 
Determination of benefit obligation
      
     Discount rate
  5.0-5.5%  5.5-6.0 
     Weighted average rate of compensation increase
  3.25-4.0%  3.5-4.0 
          
Determination of benefit cost
        
     Discount rate
  5.5-6.0%  6.60-6.90 
     Weighted average rate of compensation increase
  3.5-4.0%  4.0 
     Expected return on plan assets*
  8.25-8.50%  8.25-8.50 
Pension plans weighted-average asset allocations 
  Our pension plans weighted-average asset allocations at December 31, 2010 and 2009 by asset category are as follows:
 
   
2010
  
2009
 
Equity securities
  52.3%  49.3 
Debt securities
  33.4   28.8 
Hedge funds
  4.3   8.5 
Real estate
  4.9   5.0 
Cash equivalents and other
  5.1   8.4 
Total
  100.0%  100.0 
Hierarchy levels for defined benefit pension plans' investment 
The following table presents the hierarchy levels for our defined benefit pension plans’ investments as of December 31, 2010:
 
   
Level 1
  
Level 2
  
Level 3
  
Total
 
   
(Dollars in thousands)
 
Equity securities
            
    Common stocks, preferred stocks, equity funds and related securities
 $1,675,565   277,269   -   1,952,834 
Debt securities
                
    Corporate bonds and related securities
  -   911,122   1,589   912,711 
    Government bonds, municipal bonds and related securities
  -   331,937   2,899   334,836 
Hedge funds
  -    -   161,612   161,612 
Real estate
  -   -   181,581   181,581 
Cash and cash equivalents
  26,041   -   -   26,041 
Other
  13,473   146,172   2,609   162,254 
Total
 $1,715,079   1,666,500   350,290   3,731,869 


 
The following table presents the hierarchy levels for our defined benefit pension plans’ investments as of December 31, 2009:
 
   
Level 1
  
Level 2
  
Level 3
  
Total
 
   
(Dollars in thousands)
 
Equity securities
            
    Common stocks, preferred stocks, equity funds and related securities
 $1,345,669   242,852   -   1,588,521 
Debt securities
                
    Corporate bonds and related securities
  -   798,143   1,005   799,148 
    Government bonds, municipal bonds and related securities
  -   129,129   -   129,129 
Hedge funds
  -   113,340   159,886   273,226 
Real estate
  -   -   161,336   161,336 
Cash and cash equivalents
  21,210   -   -   21,210 
Other
  67,156   181,116   (1,136)  247,136 
Total
 $1,434,035   1,464,580   321,091   3,219,706 
Summary of changes in fair value of defined benefit pension plans' (Level 3 assets) 
The following sets forth a summary of changes in the fair value of our defined benefit pension plans’ Level 3 assets for the year ended December 31, 2010:
 
      
Hedge
  
All
    
   
Real estate
  
funds
  
other
  
Total
 
   
(Dollars in thousand)
 
              
Balance, beginning of year
 $161,336   159,886   (131)  321,091 
Realized gain (loss) in investments, net
  (1,677)  2,102   92   517 
Unrealized gain (loss) in investments, net
  20,038   8,851   169   29,058 
Purchases and sales, net
  1,884   (9,227)  6,967   (376)
Balance, end of year
 $181,581   161,612   7,097   350,290 
 
The following sets forth a summary of changes in the fair value of our defined benefit pension plans’ Level 3 assets for the year ended December 31, 2009:
 
      
Hedge
  
All
    
   
Real estate
  
funds
  
other
  
Total
 
   
(Dollars in thousand)
 
              
Balance, beginning of year
 $-   -   -   - 
                  
Level 3 assets acquired in the Embarq acquisition
  182,819   146,335   (4,875)  324,279 
Transfers to (from) Level 3
  -   -   (3,458)  (3,458)
Realized gain (loss) in investments, net
  21   -   70   91 
Unrealized gain (loss) in investments, net
  (24,223)  13,551   31   (10,641)
Purchases and sales, net
  2,719   -   8,101   10,820 
Balance, end of year
 $161,336   159,886   (131)  321,091 
INCOME TAXES (Tables)
Income tax expense 
Income tax expense included in the Consolidated Statements of Income was as follows:
 
Year ended December 31,
 
2010
  
2009
  
2008
 
   
(Dollars in thousands)
 
Federal
         
     Current
 $384,443   158,248   141,604 
     Deferred
  145,166   210,202   59,669 
State
            
     Current
  66,740   2,285   (14,765)
     Deferred
  (13,398)  12,206   7,849 
   $582,951   382,941   194,357 
Income tax expense allocation 
Income tax expense was allocated as follows:
 
Year ended December 31,
 
2010
  
2009
  
2008
 
   
(Dollars in thousands)
 
Income tax expense in the consolidated statements of income:
         
     Attributable to income before extraordinary item
 $582,951   301,881   194,357 
     Attributable to extraordinary item
  -   81,060   - 
Stockholders’ equity:
            
     Compensation expense for tax purposes  in excess of amounts recognized for financial reporting purposes
  (11,884)  (4,194)  (1,123)
     Tax effect of the change in accumulated other comprehensive loss
  (33,873)  29,460   (47,581)
Income tax rate reconciliation 
  The following is a reconciliation from the statutory federal income tax rate to our effective income tax rate:
 
Year ended December 31,
 
2010
  
2009
  
2008
 
   
(Percentage of pre-tax income)
 
           
Statutory federal income tax rate
  35.0%  35.0   35.0 
State income taxes, net of federal income tax benefit
  1.9   2.0   2.0 
Change in tax treatment of Medicare subsidy
  0.3   -   - 
Nondeductible acquisition related costs
  0.2   0.7   0.3 
Nondeductible compensation pursuant to executive compensation limitations
  0.2   0.9   0.2 
Recognition of previously unrecognized tax benefits
  -   (1.5)  (2.3)
Other, net
  0.5   0.1   (0.5)
Effective income tax rate
  38.1%  37.2   34.7 
Net deferred tax assets and liabilities 
  The tax effects of temporary differences that gave rise to significant portions of the deferred tax assets and deferred tax liabilities at December 31, 2010 and 2009 were as follows:

December 31,
 
2010
  
2009
 
   
(Dollars in thousands)
 
Deferred tax assets
      
      Postretirement and pension benefit costs
 $509,950   479,163 
      Net state operating loss carryforwards
  74,933   64,782 
      Other employee benefits
  45,458   67,048 
      Other
  115,750   127,306 
         Gross deferred tax assets
  746,091   738,299 
         Less valuation allowance
  (42,894)  (41,533)
         Net deferred tax assets
  703,197   696,766 
          
Deferred tax liabilities
        
      Property, plant and equipment, primarily due to depreciation differences
  (1,761,500)  (1,573,986)
      Goodwill and other intangible assets
  (1,158,525)  (1,189,141)
      Other
  (70,529)  (106,900)
         Gross deferred tax liabilities
  (2,990,554)  (2,870,027)
Net deferred tax liability
 $(2,287,357)  (2,173,261)
Gross unrecognized tax benefits 
The following table reflects the activity of our gross unrecognized tax benefits (excluding both interest and any related federal benefit) during 2010 (amounts expressed in thousands).

Unrecognized tax benefits at December 31, 2009
 $327,227 
Increase in tax positions taken in the current year
  320 
Increase due to tax positions taken in a prior year
  7,272 
Decrease due to the reversal of tax positions taken in a prior year
  (22,525)
Decrease from the lapse of statute of limitations
  (1,232)
Unrecognized tax benefits at December 31, 2010
 $311,062 
Open income tax years by jurisdiction 
We file income tax returns, including returns for our subsidiaries, with federal, state and local jurisdictions.  Our uncertain income tax positions are related to tax years that are currently under or remain subject to examination by the relevant taxing authorities.  Our open income tax years by major jurisdiction are as follows.
 
Jurisdiction
 
Open tax years
Federal
 
2007-current
State
  
    Florida
 
2006-current
    Georgia
 
2003-current
    Louisiana
 
2007-current
    North Carolina
 
2003-current
    Oregon
 
2002-current
    Texas
 
2001-current
    Other states
 
2002-current
EARNINGS PER SHARE (Tables)
Schedule of earnings per share
 The following is a reconciliation of the numerators and denominators of the basic and diluted earnings per share computations:
 
Year ended December 31,
 
2010
  
2009
  
2008
 
   
(Dollars, except per share amounts, and shares in thousands)
 
Income (Numerator):
         
Net income before extraordinary item
 $947,705   511,254   365,732 
Extraordinary item, net of income tax expense and noncontrolling interests
  -   135,957   - 
Net income attributable to CenturyLink, Inc.
  947,705   647,211   365,732 
Dividends applicable to preferred stock
  (12)  (12)  (155)
Earnings applicable to unvested restricted stock awards:
            
    Income before extraordinary item
  (5,525)  (3,559)  (4,240)
    Extraordinary item
  -   (946)  - 
Net income as adjusted for purposes of computing basic earnings per share
  942,168   642,694   361,337 
Dividends applicable to preferred stock
  12   12   155 
Net income as adjusted for purposes of computing diluted earnings per share
 $942,180   642,706   361,492 
              
Shares (Denominator):
            
Weighted average number of shares:
            
    Outstanding during period
  301,428   199,177   103,467 
    Unvested restricted stock
  (1,756)  (1,387)  (1,199)
    Unvested restricted stock units
  947   1,023   - 
Weighted average number of shares outstanding during period for computing basic earnings per share
  300,619   198,813   102,268 
              
Incremental common shares attributable to dilutive securities:
            
    Shares issuable under convertible securities
  13   13   169 
    Shares issuable under incentive compensation plans
  665   231   123 
Number of shares as adjusted for purposes of computing diluted earnings per share
  301,297   199,057   102,560 
              
Basic earnings per share
            
    Before extraordinary item
 $3.13   2.55   3.53 
    Extraordinary item
 $-   .68   - 
    Basic earnings per share
 $3.13   3.23   3.53 
              
              
Diluted earnings per share
            
    Before extraordinary item
 $3.13   2.55   3.52 
    Extraordinary item
 $-   .68   - 
    Diluted earnings per share
 $3.13   3.23   3.52 
STOCK COMPENSATION PROGRAMS (Tables)
Summary of stock option transactions 
Stock option transactions during 2010 were as follows:
 
        
Average
   
Remaining
   
Aggregate
 
   
Number
   
exercise
   
contractual
   
intrinsic
 
   
of options
   
price
   
term (in years)
   
value*
 
                     
Outstanding December 31, 2009
   
9,318,553
   
$
37.85
           
Exercised
   
(3,507,895
)
   
32.25
           
Forfeited/Cancelled
   
  (770,373
)
   
55.40
           
Outstanding December 31, 2010
   
5,040,285
   
$
39.06
     
4.16
   
$
49,225,000
 
Exercisable December 31, 2010
   
4,739,732
   
$
39.60
     
3.97
   
$
44,554,000
 
________________________
* Equals the difference between the market price on such date and the average exercise price multiplied by the number of shares subject to the options.
 
Summary of nonvested restricted stock and restricted stock units transactions 
Nonvested restricted stock and restricted stock unit transactions during 2010 were as follows:
 
   
Number
  
Average grant
 
   
of shares
  
date fair value
 
Nonvested at December 31, 2009
  2,922,855  $31.04 
Granted
  1,404,366   36.56 
Vested
  (1,343,171)  31.04 
Forfeited
  (92,391)  31.79 
Nonvested at December 31, 2010
  2,891,659  $33.69 
DISCONTINUANCE OF REGULATORY ACCOUNTING (Tables)
Components of non-cash extraordinary gain
In the third quarter of 2009, upon the discontinuance of regulatory accounting, we recorded a non-cash extraordinary gain in our consolidated statements of income comprised of the following components (dollars, except per share amounts, in thousands):
 
   
Gain (loss)
 
Elimination of removal costs embedded in accumulated depreciation
 $222,703 
Establishment of asset retirement obligation
  (1,556)
Elimination of other regulatory assets and liabilities
  (2,585)
Net extraordinary gain before income tax expense and noncontrolling interests
  218,562 
Income tax expense associated with extraordinary gain
  (81,060)
Net extraordinary gain before noncontrolling interests
  137,502 
Less: extraordinary gain attributable to noncontrolling interests
  (1,545)
Extraordinary gain attributable to CenturyLink, Inc.
 $135,957 
      
Basic earnings per share of extraordinary gain
 $.68 
Diluted earnings per share of extraordinary gain
 $.68 
SUPPLEMENTAL CASH FLOW AND OTHER DISCLOSURES (Tables)
Assets and liabilities assumed with acquisition of Embarq
 In connection with our July 1, 2009 acquisition of Embarq, the following assets were acquired and liabilities assumed:
 
Year ended December 31,
 
2009
 
   
(Dollars in thousands)
 
     
Property, plant and equipment, net
 $6,077,672 
Goodwill
  6,236,084 
Long-term debt, deferred credits and other liabilities
  (7,508,066)
Other assets and liabilities, excluding  cash and cash equivalents
  1,187,849 
Common equity issued for acquisition
  (6,070,445)
Increase in cash due to acquisition
 $(76,906)
FAIR VALUE OF FINANCIAL INSTRUMENTS (Tables)
Fair value of other financial instruments 
The following table presents the carrying amounts and estimated fair values of certain of our financial instruments at December 31, 2010 and 2009.

 
   
Carrying
  
Fair
 
   
Amount
  
value
 
   
(Dollars in thousands)
 
December 31, 2010
      
        
Financial assets
      
         Other
 $110,178   110,178(2)
Financial liabilities
        
         Long-term debt (including current maturities)
 $7,327,587   8,006,508(1)
         Other
 $190,443   190,443(2)
          
December 31, 2009
        
          
Financial assets
        
         Other
 $111,809   111,809(2)
Financial liabilities
        
         Long-term debt (including current maturities)
 $7,753,718   8,408,943(1)
         Other
 $182,374   182,374(2)
 
(1)  
Fair value was estimated by discounting the scheduled payment streams to present value based upon
 
rates currently available to us for similar debt.
(2)
Fair value was estimated by us to approximate carrying value or is based on current market information.
Fair value of life insurance contracts with cash surrender value 
As of December 31, 2010, we held life insurance contracts with cash surrender value that are required to be measured at fair value on a recurring basis.  The following table depicts those assets held and the related tier designation pursuant to the accounting guidance related to fair value disclosure.
 
 
   
Balance
          
Description
 
Dec. 31, 2010
  
Level 1
  
Level 2
  
Level 3
 
   
(Dollars in thousands)
 
              
Cash surrender value of life insurance contracts
 $99,462   99,462   -   - 
BUSINESS SEGMENTS (Tables)
Operating revenues by products and services
Our operating revenues for our products and services include the following components:

Year ended December 31,
 
2010
  
2009
  
2008
 
   (Dollars in thousands) 
           
Voice
 $3,137,921   2,168,480   1,043,386 
Data
  1,908,901   1,202,284   524,194 
Network access
  1,079,678   927,905   651,038 
Other
  915,034   675,570   381,129 
Total operating revenues
 $7,041,534   4,974,239   2,599,747 
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS (Tables)
Changes in valuation allowances
For the years ended December 31, 2010, 2009 and 2008
 
      
Additions
          
   
Balance at
  
charged to
  
Deductions
     
Balance
 
   
beginning
  
costs and
  
from
  
Other
  
at end
 
Description
 
of period
  
expenses
  
allowance
  
changes
  
of period
 
   
(Dollars in thousands)
 
Year ended December 31, 2010
               
Allowance for doubtful accounts
 $47,450   91,202   (78,566) (1)  -   60,086 
                     
 Valuation allowance for deferred tax assets
 $41,533   3,681   (2,320)  -   42,894 
                      
Year ended December 31, 2009
                    
Allowance for doubtful accounts
 $16,290   56,609   (25,449) (1)  -   47,450 
                     
Valuation allowance for deferred tax assets
 $33,858   3,886   (6,329)  10,118  (2)  41,533 
                      
Year ended December 31, 2008
                    
Allowance for doubtful accounts
 $20,361   9,866   (13,524) (1)  (413) (2)  16,290 
                     
Valuation allowance for deferred tax assets
 $30,907   1,603   -   1,348   33,858 
 
(1)
Customers’ accounts written-off, net of recoveries.
 
(2)
Allowances at the date of acquisition of purchased subsidiaries, net of allowances at the date of disposition of subsidiaries sold.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details)
In Thousands, unless otherwise specified
6 Months Ended
Jun. 30, 2009
Year Ended
Dec. 31, 2010
Notes To Financial Statements [Abstract]
 
 
Non-cash extraordinary gain recorded upon discontinuance of regulatory accounting
 
0 
Amount of intercompany revenues and costs that were not eliminated, as allowed by the provisions of regulatory accounting
114,000,000 
 
Maximum maturity at date of purchase to be considered as cash equivalents (in months)
 
3M 
Telephone Plant Member
 
 
Property, plant and equipment [Line Items]
 
 
Minimum straight line depreciation average rate (in hundredths)
 
0.02 
Maximum straight line depreciation average rate (in hundredths)
 
0.29 
Non Telephone Property Member
 
 
Property, plant and equipment [Line Items]
 
 
Minimum estimated service life (in years)
 
2 
Maximum estimated service life (in years)
 
35 
EMBARQ ACQUISITION (Details)
In Thousands, except Share data
Year Ended
Dec. 31,
2010
2009
2008
Jul. 02, 2009
Notes To Financial Statements [Abstract]
 
 
 
 
Company shares issued to acquire one share of Embarq common stock
 
1.37 
 
 
Common shares issued to consummate the merger (in shares)
0 
196,083,000 
0 
 
Company closing stock price at acquisition (in dollars per share)
 
 
 
30.70 
Pre-combination portion of share-based compensation awards assumed
 
 
 
50,200 
Embarq operating revenues included in the consolidated results of operations
4,866,000 
2,563,000 
 
 
Fair value of assets acquired and liabilities assumed [Abstract]
 
 
 
 
Net property, plant and equipment
 
6,077,672 
 
 
Identifiable intangible assets
 
 
 
 
Goodwill
 
6,236,084 
 
 
Fair value assigned to accounts receivable
 
 
 
440,000 
Gross contractual value of accounts receivables acquired
 
 
 
492,000 
Estimated contractual cash flows that will not be collected
 
 
 
52,000 
Contingent liabilities recorded due to the Embarq acquisition
 
 
 
88,000 
Pro forma financial information [Abstract]
 
 
 
 
Operating revenues
 
7,645,000 
8,289,000 
 
Income before extraordinary item
 
895,000 
1,087,000 
 
Basic earnings per share before extraordinary item (in dollars per share)
 
3 
3.55 
 
Diluted earnings per share before extraordinary item (in dollars per share)
 
2.99 
3.53 
 
Revenue that would have been eliminated if the application of regulatory accounting was discontinued
 
104,000 
 
 
Integration, transaction and other costs related to the Embarq acquisition
121,700 
253,700 
 
 
Votes per common share prior to the filing of Amended and Restated Articles of Incorporation (in votes)
 
 
 
10 
Common shares authorized prior to the Amended and Restated Articles of Incorporation (in shares)
 
 
 
350,000,000 
Common shares authorized (in shares)
800,000,000 
800,000,000 
 
800,000,000 
Number of vote(s) entitled per common share (in votes)
 
 
 
1 
Commitment letter bridge facility
 
 
800,000 
 
Payment to lenders upon terminating the commitment letter
 
8,000 
 
 
Embarq Member
 
 
 
 
Fair value of assets acquired and liabilities assumed [Abstract]
 
 
 
 
Current assets
 
 
 
675,720 
Net property, plant and equipment
 
 
 
6,077,672 
Identifiable intangible assets
 
 
 
 
Customer list
 
 
 
1,098,000 
Rights of way
 
 
 
268,472 
Other (trademarks, internally developed software, licenses)
 
 
 
26,817 
Other non-current assets
 
 
 
24,131 
Current liabilities
 
 
 
(837,132)
Long-term debt, including current maturities
 
 
 
(4,886,708)
Other long-term liabilities
 
 
 
(2,621,493)
Goodwill
 
 
 
6,244,966 
Total purchase price
 
 
 
6,070,445 
PENDING ACQUISITION OF QWEST (Details) ( Qwest Member, USD $)
In Thousands, except Share data
Year Ended
Dec. 31, 2010
Apr. 21, 2010
Business Acquisition [Line Items]
 
 
Number of CenturyLink shares shareholders will receive for each share of common stock owned at closing (in shares)
 
0.1664 
Percentage of ownership expected by CenturyLink shareholders at closing (in hundredths)
0.505 
 
Percentage of ownership expected by shareholders at closing (in hundredths)
0.495 
 
Approximate shares of common stock outstanding (in shares)
1,764,000,000 
 
Long-term debt outstanding
11,947,000,000 
 
Anticipated closing date to acquire Qwest
2011-04-01 
 
Termination fee if the merger agreement is terminated under certain circumstances
350,000,000 
 
GOODWILL AND OTHER ASSETS (Details)
Year Ended
Dec. 31,
2010
2008
Sep. 30, 2010
Dec. 31, 2009
Jul. 02, 2009
Goodwill and other assets [Abstract]
 
 
 
 
 
Goodwill
10,260,640,000 
 
 
10,251,758,000 
 
Intangible assets subject to amortization
 
 
 
 
 
Customer list, less accumulated amortization of $349,402 and $148,491
929,907,000 
 
 
1,130,817,000 
 
Other, less accumulated amortization of $8,297 and $22,466
41,670,000 
 
 
47,101,000 
 
Intangible assets not subject to amortization
268,500,000 
 
 
268,500,000 
 
Billing system development costs, less accumulated amortization of $73,735 and $61,672
162,809,000 
 
 
174,872,000 
 
Investment in 700 MHz wireless spectrum licenses
149,425,000 
 
 
149,425,000 
 
Deferred costs associated with installation activities
114,375,000 
 
 
91,865,000 
 
Cash surrender value of life insurance contracts
99,462,000 
 
 
100,945,000 
 
Investment in unconsolidated cellular partnership
33,019,000 
 
 
32,679,000 
 
Other
80,686,000 
 
 
94,037,000 
 
Total Goodwill and other assets
12,140,493,000 
 
 
12,341,999,000 
 
Customer list, accumulated amortization
349,402,000 
 
 
148,491,000 
 
Other finite-lived intangible assets, accumulated amortization
8,297,000 
 
 
22,466,000 
 
Billing system development costs, accumulated amortization
73,735,000 
 
 
61,672,000 
 
Number of geographic regions established in connection with Embarq acquisition (in regions)
 
 
 
 
5 
Intangible assets subject to amortization [Line Items]
 
 
 
 
 
Percentage by which the fair value of Southern region exceeded its carrying value, maximum (in hundredths)
 
 
0.10 
 
 
Amortization expense related to intangible assets
206,300,000 
 
 
 
 
Expected amortization expense [Abstract]
 
 
 
 
 
2011
185,600,000 
 
 
 
 
2012
164,500,000 
 
 
 
 
2013
145,200,000 
 
 
 
 
2014
126,000,000 
 
 
 
 
2015
106,900,000 
 
 
 
 
Intangible assets associated with right of way
268,500,000 
 
 
 
 
Billing system development costs, gross
236,500,000 
 
 
 
 
Billing system development costs, period of amortization (in years)
20Y  
 
 
 
 
Deferred costs associated with installation activities, period of recognition (in years)
10Y 
 
 
 
 
Amount paid for licenses in the FCC's auction of 700 megahertz wireless spectrum
 
149,000,000 
 
 
 
Number of licenses acquired (in licenses)
 
69 
 
 
 
Embarq Member | Customer list [Member]
 
 
 
 
 
Intangible assets subject to amortization [Line Items]
 
 
 
 
 
Average useful life of intangible asset acquired (in years)
10 
 
 
 
 
All Other Acquisitions Member | Customer list [Member]
 
 
 
 
 
Intangible assets subject to amortization [Line Items]
 
 
 
 
 
Average useful life, minimum (in years)
5 
 
 
 
 
Average useful life, maximum (in years)
15 
 
 
 
 
Franchise rights [Member]
 
 
 
 
 
Intangible assets subject to amortization [Line Items]
 
 
 
 
 
Average useful life (in years)
20 
 
 
 
 
PROPERTY, PLANT AND EQUIPMENT (Details) (USD $)
In Thousands
Year Ended
Dec. 31,
2010
2009
2008
Net property, plant and equipment [Abstract]
 
 
 
Cable and wire
8,194,393 
8,133,830 
 
Central office
5,082,850 
4,611,407 
 
General support
2,199,525 
1,873,525 
 
Fiber transport
370,196 
343,208 
 
Information origination/termination
104,831 
85,029 
 
Construction in progress
271,736 
430,119 
 
Other
105,713 
79,645 
 
Gross property, plant and equipment
16,329,244 
15,556,763 
 
Accumulated depreciation
7,574,768 
6,459,624 
 
Net property, plant and equipment
8,754,476 
9,097,139 
 
Depreciation expense
$ 1,227,000 
$ 838,800 
$ 506,900 
LONG-TERM DEBT (Details)
In Thousands
Year Ended
Dec. 31,
3 Months Ended
Dec. 31, 2009
2010
2009
Feb. 28, 2011
Sep. 30, 2009
Dec. 31, 2010
Dec. 31, 2009
Oct. 31, 2009
Oct. 31, 2009
Oct. 31, 2009
Sep. 30, 2009
Sep. 30, 2009
Year Ended
Dec. 31, 2010
Jan. 31, 2011
Feb. 28, 2011
Dec. 31, 2010
Dec. 31, 2009
Dec. 31, 2010
Dec. 31, 2009
Dec. 31, 2010
Dec. 31, 2009
Dec. 31, 2010
Dec. 31, 2009
Dec. 31, 2010
Dec. 31, 2009
Dec. 31, 2010
Dec. 31, 2009
Dec. 31, 2010
Dec. 31, 2009
Dec. 31, 2010
Dec. 31, 2009
Dec. 31, 2010
Dec. 31, 2009
Dec. 31, 2010
Dec. 31, 2009
Dec. 31, 2010
Dec. 31, 2009
Oct. 31, 2009
Dec. 31, 2010
Dec. 31, 2010
Dec. 31, 2009
Dec. 31, 2010
Dec. 31, 2009
Dec. 31, 2010
Dec. 31, 2009
Dec. 31, 2010
Dec. 31, 2009
Dec. 31, 2010
Dec. 31, 2009
Dec. 31, 2010
Dec. 31, 2009
Dec. 31, 2010
Dec. 31, 2009
Debt Instrument [Line Items]
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Maturity date
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2025 
2025 
2028 
2028 
2010 
2010 
2012 
2012 
2015 
2015 
2017 
2017 
2013 
2013 
2039 
2039 
2019 
2019 
 
 
 
 
2013 
2013 
2016 
2016 
2036 
2036 
2025 
2025 
2028 
2028 
 
 
 
 
Weighted average interest rate (in hundredths)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
0.0082 1
0.0082 1
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
0.081 1
0.081 1
0.054 1
0.054 1
 
 
 
 
Interest rate, stated percentage (in hundredths)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
0.072 
0.072 
0.06875 
0.06875 
0.08375 
0.08375 
0.07875 
0.07875 
0.05 
0.05 
0.06 
0.06 
0.055 
0.055 
0.076 
0.076 
0.0615 
0.0615 
 
 
 
 
0.06738 
0.06738 
0.071 
0.071 
0.08 
0.08 
 
 
 
 
0.10 
0.10 
 
 
Long-term debt, before deducting unamortized net discount
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
365,000 
291,200 
100,000 
100,000 
425,000 
425,000 
0 
482,470 
317,530 
317,530 
350,000 
350,000 
500,000 
500,000 
175,665 
175,665 
400,000 
400,000 
250,000 
250,000 
 
 
 
 
528,256 
528,256 
2,000,000 
2,000,000 
1,485,000 
1,485,000 
522,223 
524,273 
82,270 
94,603 
100 
100 
0 
1,685 
Unamortized net discount
 
 
 
 
 
(4,205)
(5,331)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(174,991)
(178,155)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Unamortized premium associated with derivative instruments
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
0 
2,240 
5,739 
9,182 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total long-term debt
7,753,718 
7,327,587 
7,753,718 
 
 
2,884,729 
3,297,956 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Less current maturities
500,065 
11,583 
500,065 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Long-term debt, excluding current maturities
7,253,653 
7,316,004 
7,253,653 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Approximate annual debt maturities for the subsequent five years [Abstract]
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2011
 
11,600 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2012
 
327,600 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2013
 
818,500 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2014
 
31,500 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2015
 
715,300 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Maximum percentage of net intangible assets allowed to secure senior notes (in hundredths)
 
0.15 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Percentage of property, plant and equipment of parent company that is pledged to secure long-term debt of subsidiaries (in hundredths)
 
0.50 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Extinguishment of debt disclosures [Abstract]
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Maximum amount of offer to purchase outstanding notes
 
 
 
 
800,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Extinguishment of debt [Line Items]
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Principal amount extinguished
 
 
 
 
 
 
 
74,300 
182,500 
17,500 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
471,700 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Pre-tax charge related to completion of tender offers
61,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Proceeds from issuance of long term debt used to fund debt tender offers
 
 
644,423 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Duration of senior notes issued used to fund debt tender offers (in years)
 
 
 
 
 
 
 
 
 
 
10Y 
30Y 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Line of credit facilities [Abstract]
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Number of unsecured revolving credit facilities (in facilities)
 
2 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Line of credit facility [Line Items]
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Maximum borrowing capacity
 
 
 
 
 
 
 
 
 
 
 
 
750,000 
1,000,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
800,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Maximum borrowing capacity with acquisition of Qwest
 
 
 
 
 
 
 
 
 
 
 
 
 
1,700,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Duration of facility (in years)
 
 
 
 
 
 
 
 
 
 
 
 
5Y 
4Y 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Maximum amount of credit facilities that can be used as letters of credit
 
 
 
 
 
 
 
 
 
 
 
 
 
400,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Applicable per annum interest rate margin, minimum (in hundredths)
 
 
 
 
 
 
 
 
 
 
 
 
 
0.005 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Applicable per annum interest rate margin, maximum (in hundredths)
 
 
 
 
 
 
 
 
 
 
 
 
 
0.025 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Letters of credit outstanding
 
 
 
61,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Credit facility, amount outstanding
 
 
 
 
 
 
 
 
 
 
 
 
365,000 
 
280,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
DERIVATIVE INSTRUMENTS (Details)
In Thousands
Year Ended
Dec. 31, 2003
Jan. 31, 2008
3 Months Ended
Mar. 31, 2008
Derivative [Line Items]
 
 
 
Number of instruments held (in instruments)
4 
 
 
Hedge designation
fair value hedge 
 
 
Amount of hedged item
500,000 
 
 
Description of hedged item
Series L senior notes, due 2012 
 
 
Fixed interest rate (in hundredths)
0.07875 
 
 
Type of interest rate paid on swap
variable 
 
 
Aggregate amount of cash (received) paid upon termination
 
(25,600)
4,900 
Pre-tax charge related to settlement of derivatives
 
 
3,400 
DEFERRED CREDITS AND OTHER LIABILITIES (Details) (USD $)
In Thousands
Dec. 31, 2010
Dec. 31, 2009
Deferred credits and other liabilities [Abstract]
 
 
Deferred federal and state income taxes
$ 2,368,698 
$ 2,256,579 
Accrued pension costs
802,090 
960,610 
Accrued postretirement benefit costs
503,907 
525,033 
Deferred revenue
147,759 
136,969 
Unrecognized tax benefits for uncertain tax positions
66,501 
83,931 
Casualty insurance reserves
64,183 
60,666 
Other
110,755 
111,294 
Total deferred credits and other liabilities
$ 4,063,893 
$ 4,135,082 
REDUCTIONS IN WORKFORCE (Details) (USD $)
In Thousands
Year Ended
Dec. 31,
2010
2009
2008
Notes To Financial Statements [Abstract]
 
 
 
Severance and related costs, pre-tax
$ 27,300 
$ 80,600 
$ 2,000 
Severance-related liability [Member]
 
 
 
Restructuring reserve [Roll Forward]
 
 
 
Beginning balance
68,569 
1,798 
1,835 
Severance-related liability assumed in Embarq acquisition
 
31,086 
 
Amount accrued to expense
27,258 
80,580 
2,046 
Amount paid
(77,823)
(44,895)
(2,083)
Ending balance
$ 18,004 
$ 68,569 
$ 1,798 
STOCKHOLDERS' EQUITY (Details) (USD $)
In Thousands, except Per Share data
Year Ended
Dec. 31,
2010
2009
2008
Unissued shares of CenturyLink common stock were reserved as follows [Abstract]
 
 
 
Incentive compensation programs (in shares)
25,245 
 
 
Acquisitions (in shares)
4,064 
 
 
Employee stock purchase plan (in shares)
3,990 
 
 
Dividend reinvestment plan (in shares)
595 
 
 
Conversion of convertible preferred stock (in shares)
13 
 
 
Unissued shares of CenturyLink common stock (in shares)
33,907 
 
 
Common stock issued in connection with Embarq acquisition (in shares)
0 
196,083 
0 
Stock repurchased during period (in shares)
 
 
9,700 
Repurchase of common stock
$ 16,515 
$ 15,563 
$ 347,264 
Preferred stock [Member]
 
 
 
Class of Stock [Line Items]
 
 
 
Authorized (in shares)
2,000 
 
 
Par value (in dollars per share)
25 
 
 
Preferential distributions (in dollars per share)
25 
 
 
Convertible preferred stock [Member]
 
 
 
Class of Stock [Line Items]
 
 
 
Outstanding (in shares)
9,400 
9,400 
 
POSTRETIREMENT BENEFITS (Details) (Postretirement Benefit Plans [Member], USD $)
In Thousands
Year Ended
Dec. 31,
2010
2009
2008
Change in benefit obligation [Roll Forward]
 
 
 
Benefit obligation at beginning of year
$ 582,345 
$ 292,887 
$ 306,633 
Service cost
14,680 
8,764 
4,926 
Interest cost
32,118 
26,693 
19,395 
Participant contributions
14,382 
3,013 
2,789 
Plan amendments
(846)
0 
(9,093)
Acquisitions
0 
228,200 
0 
Direct subsidy receipts
1,092 
626 
1,092 
Actuarial (gain) loss
(31,977)
58,455 
(11,992)
Benefits paid
(54,073)
(36,293)
(20,863)
Benefit obligation at end of year
557,721 
582,345 
292,887 
Change in fair value of plan assets [Roll Forward]
 
 
 
Fair value of plan assets at beginning of year
57,312 
16,805 
28,324 
Return (loss) on plan assets
5,916 
6,405 
(6,166)
Acquisitions
0 
33,200 
0 
Employer contributions
30,277 
34,182 
12,721 
Participant contributions
14,382 
3,013 
2,789 
Benefits paid
(54,073)
(36,293)
(20,863)
Fair value of plan assets at end of year
53,814 
57,312 
16,805 
Amounts recognized as liabilities on the balance sheet [Abstract]
 
 
 
Benefit obligation
(557,721)
(582,345)
(292,887)
Fair value of plan assets
53,814 
57,312 
16,805 
Accrued benefit cost
(503,907)
(525,033)
(276,082)
Components of net periodic benefit cost [Abstract]
 
 
 
Service cost
14,680 
8,764 
4,926 
Interest cost
32,118 
26,693 
19,395 
Expected return on assets
(3,435)
(2,386)
(2,337)
Amortization of unrecognized prior service credit
(3,433)
(3,546)
(2,606)
Amortization of unrecognized net loss
942 
0 
0 
Net periodic postretirement benefit cost
40,872 
29,525 
19,378 
Amounts recognized in accumulated other comprehensive loss [Abstract]
 
 
 
Unamortized prior service credit
11,700 
 
 
Unrecognized net actuarial loss
30,600 
 
 
Total accumulated other comprehensive loss, net of tax
12,300 
 
 
Amounts that will be amortized from accumulated other comprehensive loss in next fiscal year [Abstract]
 
 
 
Prior service credit
2,300 
 
 
POSTRETIREMENT BENEFITS, ADDITIONAL DISCLOSURES (Details) (Postretirement Benefit Plans [Member], USD $)
In Thousands
Year Ended
Dec. 31,
2010
2009
Significant assumptions used in determination of benefit obligation [Abstract]
 
 
Discount rate, minimum (in hundredths)
 
0.057 
Discount rate, maximum (in hundredths)
 
0.058 
Discount rate (in hundredths)
0.053 
 
Health care cost increase trend rates for following year (in hundredths)
0.085 
0.08 
Rate to which the cost trend rate is assumed to decline (the ultimate cost trend rate) (in hundredths)
0.05 
0.05 
Year that the rate reaches ultimate trend rate
2018 
2014 
Significant assumptions used in determination of net periodic benefit cost [Abstract]
 
 
Discount rate, minimum (in hundredths)
0.057 
0.064 
Discount rate, maximum (in hundredths)
0.058 
0.069 
Expected return on plan assets, minimum (in hundredths)
 
0.0825 
Expected return on plan assets, maximum (in hundredths)
 
0.085 
Expected return on plan assets for next fiscal year (in hundredths)
0.0725 
 
Effect of one-percentage-point change in assumed health care cost trend rates [Abstract]
 
 
Effect of 1% increase on annual total of service and interest cost components
108 
 
Effect of 1% decrease on annual total of service and interest cost components
(132)
 
Effect of 1% increase on postretirement benefit obligation
1,285 
 
Effect of 1% decrease on postretirement benefit obligation
(1,527)
 
Weighted-average asset allocations [Abstract]
 
 
Equity securities (in hundredths)
0.199 
0.186 
Debt securities (in hundredths)
0.722 
0.645 
Cash and cash equivalents (in hundredths)
0.079 
0.169 
Total weighted-average asset allocation (in hundredths)
1 
1 
Hierarchy levels of benefit plans' investments [Abstract]
 
 
Fair value of plan assets at end of year
53,814 
57,312 
Estimated employer contributions in next fiscal year
47,900 
 
Postretirement Benefit Plans [Member] | Equity securities - Common stocks, preferred stocks, equity funds and related securities [Member]
 
 
Hierarchy levels of benefit plans' investments [Abstract]
 
 
Fair value of plan assets at end of year
10,691 
10,655 
Postretirement Benefit Plans [Member] | Equity securities - Common stocks, preferred stocks, equity funds and related securities [Member] | Level 1 [Member]
 
 
Hierarchy levels of benefit plans' investments [Abstract]
 
 
Fair value of plan assets at end of year
5,204 
4,967 
Postretirement Benefit Plans [Member] | Equity securities - Common stocks, preferred stocks, equity funds and related securities [Member] | Level 2 [Member]
 
 
Hierarchy levels of benefit plans' investments [Abstract]
 
 
Fair value of plan assets at end of year
5,487 
5,688 
Postretirement Benefit Plans [Member] | Equity securities - Common stocks, preferred stocks, equity funds and related securities [Member] | Level 3 [Member]
 
 
Hierarchy levels of benefit plans' investments [Abstract]
 
 
Fair value of plan assets at end of year
0 
0 
Postretirement Benefit Plans [Member] | Debt securities [Member]
 
 
Hierarchy levels of benefit plans' investments [Abstract]
 
 
Fair value of plan assets at end of year
38,870 
36,975 
Postretirement Benefit Plans [Member] | Debt securities [Member] | Level 1 [Member]
 
 
Hierarchy levels of benefit plans' investments [Abstract]
 
 
Fair value of plan assets at end of year
35,222 
32,900 
Postretirement Benefit Plans [Member] | Debt securities [Member] | Level 2 [Member]
 
 
Hierarchy levels of benefit plans' investments [Abstract]
 
 
Fair value of plan assets at end of year
3,648 
4,075 
Postretirement Benefit Plans [Member] | Debt securities [Member] | Level 3 [Member]
 
 
Hierarchy levels of benefit plans' investments [Abstract]
 
 
Fair value of plan assets at end of year
0 
0 
Postretirement Benefit Plans [Member] | Cash and cash equivalents [Member]
 
 
Hierarchy levels of benefit plans' investments [Abstract]
 
 
Fair value of plan assets at end of year
4,253 
9,682 
Postretirement Benefit Plans [Member] | Cash and cash equivalents [Member] | Level 1 [Member]
 
 
Hierarchy levels of benefit plans' investments [Abstract]
 
 
Fair value of plan assets at end of year
4,253 
9,682 
Postretirement Benefit Plans [Member] | Cash and cash equivalents [Member] | Level 2 [Member]
 
 
Hierarchy levels of benefit plans' investments [Abstract]
 
 
Fair value of plan assets at end of year
0 
0 
Postretirement Benefit Plans [Member] | Cash and cash equivalents [Member] | Level 3 [Member]
 
 
Hierarchy levels of benefit plans' investments [Abstract]
 
 
Fair value of plan assets at end of year
0 
0 
Postretirement Benefit Plans [Member] | Level 1 [Member]
 
 
Hierarchy levels of benefit plans' investments [Abstract]
 
 
Fair value of plan assets at end of year
44,679 
47,549 
Postretirement Benefit Plans [Member] | Level 2 [Member]
 
 
Hierarchy levels of benefit plans' investments [Abstract]
 
 
Fair value of plan assets at end of year
9,135 
9,763 
Postretirement Benefit Plans [Member] | Level 3 [Member]
 
 
Hierarchy levels of benefit plans' investments [Abstract]
 
 
Fair value of plan assets at end of year
0 
0 
Postretirement Benefit Plans [Member] | Before Medicare Subsidy Member
 
 
Estimated future projected benefit payments [Abstract]
 
 
2011
49,206 
 
2012
51,186 
 
2013
47,751 
 
2014
46,281 
 
2015
45,620 
 
2016 - 2020
203,780 
 
Postretirement Benefit Plans [Member] | Medicare Subsidy Member
 
 
Estimated future projected benefit payments [Abstract]
 
 
2011
(1,351)
 
2012
(1,600)
 
2013
(1,852)
 
2014
(2,099)
 
2015
(2,351)
 
2016 - 2020
(5,537)
 
Postretirement Benefit Plans [Member] | Net Of Medicare Subsidy Member
 
 
Estimated future projected benefit payments [Abstract]
 
 
2011
47,855 
 
2012
49,586 
 
2013
45,899 
 
2014
44,182 
 
2015
43,269 
 
2016 - 2020
198,243 
 
DEFINED BENEFIT AND OTHER RETIREMENT PLANS (Details)
In Thousands
Year Ended
Dec. 31,
Year Ended
Dec. 31, 2009
Feb. 29, 2008
3 Months Ended
Sep. 30, 2009
2009
2010
2009
2008
Defined Benefit Plan Disclosure [Line Items]
 
 
 
 
 
 
 
Reduction of benefit obligation
 
 
 
 
(110,169)
0 
8,235 
Curtailment (gain) loss
 
 
 
 
(20,908)
0 
8,235 
Plan amendments, additional years of service
 
3Y 
 
 
 
 
 
Plan amendments, additional years of age
 
3Y 
 
 
 
 
 
Settlement loss
 
 
 
7,700 
0 
17,834 
410 
Settlement expense
 
 
8,900 
 
 
 
 
Pension expense related to contractual benefits
14,700 
 
 
 
 
 
 
Change in benefit obligation [Roll Forward]
 
 
 
 
 
 
 
Benefit obligation at beginning of year
 
 
 
 
4,181,582 
462,701 
469,437 
Service cost
 
 
 
 
61,156 
36,223 
13,761 
Interest cost
 
 
 
 
245,753 
134,898 
29,373 
Plan amendments
 
 
 
 
4,304 
16,016 
2,393 
Acquisitions
 
 
 
 
0 
3,467,260 
0 
Actuarial (gain) loss
 
 
 
 
426,700 
231,663 
(24,819)
Contractual retirement benefits
 
 
 
 
0 
14,676 
0 
Curtailment (gain) loss
 
 
 
 
(110,169)
0 
8,235 
Settlements
 
 
 
 
0 
8,294 
(1,945)
Benefits paid
 
 
 
 
(275,357)
(190,149)
(33,734)
Benefit obligation at end of year
 
 
 
 
4,533,969 
4,181,582 
462,701 
Change in fair value of plan assets [Roll Forward]
 
 
 
 
 
 
 
Fair value of plan assets at beginning of year
 
 
 
 
3,219,706 
352,830 
459,198 
Return (loss) on plan assets
 
 
 
 
482,709 
473,878 
(123,210)
Acquisitions
 
 
 
 
0 
2,407,200 
0 
Employer contributions
 
 
 
 
304,811 
175,946 
52,521 
Settlements
 
 
 
 
0 
0 
(1,945)
Benefits paid
 
 
 
 
(275,357)
(190,149)
(33,734)
Fair value of plan assets at end of year
 
 
 
 
3,731,869 
3,219,706 
352,830 
Funded status and net amounts recognized [Abstract]
 
 
 
 
 
 
 
Benefit obligation
 
 
 
 
(4,533,969)
(4,181,582)
(462,701)
Fair value of plan assets
 
 
 
 
3,731,869 
3,219,706 
352,830 
Net amount recognized
 
 
 
 
(802,100)
(961,876)
(109,871)
Amount recognized on balance sheet for pension benefits consist of: [Abstract]
 
 
 
 
 
 
 
Accrued expenses and other current liabilities
 
 
 
 
(10)
(1,266)
 
Other deferred credits
 
 
 
 
(802,090)
(960,610)
 
Net amount recognized
 
 
 
 
(802,100)
(961,876)
 
Aggregate accumulated benefit obligation
 
 
 
 
4,509,000 
4,042,000 
 
Components of net periodic pension expense [Abstract]
 
 
 
 
 
 
 
Service cost
 
 
 
 
61,156 
36,223 
13,761 
Interest cost
 
 
 
 
245,753 
134,898 
29,373 
Expected return on assets
 
 
 
 
(283,026)
(127,613)
(36,667)
Curtailment (gain) loss
 
 
 
 
(20,908)
0 
8,235 
Settlements
 
 
 
7,700 
0 
17,834 
410 
Contractual retirement benefits
 
 
 
 
0 
14,676 
0 
Net amortization and deferral
 
 
 
 
18,765 
16,271 
3,377 
Net periodic pension expense
 
 
 
 
21,740 
92,289 
18,489 
Amounts recognized in accumulated other comprehensive loss [Abstract]
 
 
 
 
 
 
 
Unamortized prior service cost
 
 
 
 
18,900 
 
 
Unrecognized net actuarial loss
 
 
 
 
187,500 
 
 
Accumulated other comprehensive loss, before tax
 
 
 
 
206,400 
 
 
Total accumulated other comprehensive loss, net of tax
 
 
 
 
127,100 
 
 
Amounts that will be amortized from accumulated other comprehensive loss in next fiscal year [Abstract]
 
 
 
 
 
 
 
Prior service cost
 
 
 
 
2,400 
 
 
Net actuarial loss
 
 
 
 
13,400 
 
 
DEFINED BENEFIT AND OTHER RETIREMENT PLANS, ADDITIONAL DISCLOSURES (Details)
In Thousands
Year Ended
Dec. 31,
2010
2009
2008
Estimated future projected benefit payments [Abstract]
 
 
 
2011
268,000 
 
 
2012
272,600 
 
 
2013
280,300 
 
 
2014
284,700 
 
 
2015
289,800 
 
 
2016 - 2020
1,526,000 
 
 
Defined contribution plans [Abstract]
 
 
 
Matching contributions to 401(k) plans
16,700 
13,800 
10,500 
Legacy Embarq Pension Plan Member
 
 
 
Significant assumptions used in determination of net periodic benefit cost [Abstract]
 
 
 
Expected return on plan assets for next fiscal year (in hundredths)
0.08 
 
 
Employer contributions [Abstract]
 
 
 
Contribution to legacy Embarq pension plan
300,000 
 
 
Estimated employer contributions in next fiscal year
100,000 
 
 
Pension Plans [Member]
 
 
 
Significant assumptions used in determination of benefit obligation [Abstract]
 
 
 
Discount rate, minimum (in hundredths)
0.05 
0.055 
 
Discount rate, maximum (in hundredths)
0.055 
0.06 
 
Weighted-average rate of compensation increase, minimum (in hundredths)
0.0325 
0.035 
 
Weighted-average rate of compensation increase, maximum (in hundredths)
0.04 
0.04 
 
Significant assumptions used in determination of net periodic benefit cost [Abstract]
 
 
 
Discount rate, minimum (in hundredths)
0.055 
0.066 
 
Discount rate, maximum (in hundredths)
0.06 
0.069 
 
Weighted-average rate of compensation increase (in hundredths)
 
0.04 
 
Weighted-average rate of compensation increase, maximum (in hundredths)
0.04 
 
 
Weighted-average rate of compensation increase, minimum (in hundredths)
0.035 
 
 
Expected return on plan assets, minimum (in hundredths)
0.0825 
0.0825 
 
Expected return on plan assets, maximum (in hundredths)
0.085 
0.085 
 
Expected return on plan assets for next fiscal year (in hundredths)
0.075 
 
 
Weighted-average asset allocations [Abstract]
 
 
 
Equity securities (in hundredths)
0.523 
0.493 
 
Debt securities (in hundredths)
0.334 
0.288 
 
Hedge funds (in hundredths)
0.043 
0.085 
 
Real estate (in hundredths)
0.049 
0.05 
 
Cash equivalents and other (in hundredths)
0.051 
0.084 
 
Total weighted-average asset allocation (in hundredths)
1 
1 
 
Hierarchy levels of benefit plans' investments [Abstract]
 
 
 
Total fair value of investment
3,731,869 
3,219,706 
352,830 
Plan assets measured using significant unobservable inputs (Level 3 assets) [Roll Forward]
 
 
 
Fair value of plan assets at beginning of year
3,219,706 
352,830 
459,198 
Level 3 assets acquired in Embarq acquisition
0 
2,407,200 
0 
Fair value of plan assets at end of year
3,731,869 
3,219,706 
352,830 
Employer contributions [Abstract]
 
 
 
Contribution to legacy Embarq pension plan
304,811 
175,946 
52,521 
Pension Plans [Member] | Equity securities - Common stocks, preferred stocks, equity funds and related securities [Member]
 
 
 
Hierarchy levels of benefit plans' investments [Abstract]
 
 
 
Total fair value of investment
1,952,834 
1,588,521 
 
Pension Plans [Member] | Equity securities - Common stocks, preferred stocks, equity funds and related securities [Member] | Level 1 [Member]
 
 
 
Hierarchy levels of benefit plans' investments [Abstract]
 
 
 
Total fair value of investment
1,675,565 
1,345,669 
 
Pension Plans [Member] | Equity securities - Common stocks, preferred stocks, equity funds and related securities [Member] | Level 2 [Member]
 
 
 
Hierarchy levels of benefit plans' investments [Abstract]
 
 
 
Total fair value of investment
277,269 
242,852 
 
Pension Plans [Member] | Equity securities - Common stocks, preferred stocks, equity funds and related securities [Member] | Level 3 [Member]
 
 
 
Hierarchy levels of benefit plans' investments [Abstract]
 
 
 
Total fair value of investment
0 
0 
 
Pension Plans [Member] | Debt securities - Corporate bonds and related securities [Member]
 
 
 
Hierarchy levels of benefit plans' investments [Abstract]
 
 
 
Total fair value of investment
912,711 
799,148 
 
Pension Plans [Member] | Debt securities - Corporate bonds and related securities [Member] | Level 1 [Member]
 
 
 
Hierarchy levels of benefit plans' investments [Abstract]
 
 
 
Total fair value of investment
0 
0 
 
Pension Plans [Member] | Debt securities - Corporate bonds and related securities [Member] | Level 2 [Member]
 
 
 
Hierarchy levels of benefit plans' investments [Abstract]
 
 
 
Total fair value of investment
911,122 
798,143 
 
Pension Plans [Member] | Debt securities - Corporate bonds and related securities [Member] | Level 3 [Member]
 
 
 
Hierarchy levels of benefit plans' investments [Abstract]
 
 
 
Total fair value of investment
1,589 
1,005 
 
Pension Plans [Member] | Cash and cash equivalents [Member]
 
 
 
Hierarchy levels of benefit plans' investments [Abstract]
 
 
 
Total fair value of investment
26,041 
21,210 
 
Pension Plans [Member] | Cash and cash equivalents [Member] | Level 1 [Member]
 
 
 
Hierarchy levels of benefit plans' investments [Abstract]
 
 
 
Total fair value of investment
26,041 
21,210 
 
Pension Plans [Member] | Cash and cash equivalents [Member] | Level 2 [Member]
 
 
 
Hierarchy levels of benefit plans' investments [Abstract]
 
 
 
Total fair value of investment
0 
0 
 
Pension Plans [Member] | Cash and cash equivalents [Member] | Level 3 [Member]
 
 
 
Hierarchy levels of benefit plans' investments [Abstract]
 
 
 
Total fair value of investment
0 
0 
 
Pension Plans [Member] | Debt Securities Us Government Bonds Municipal Bonds And Related Securities Member
 
 
 
Hierarchy levels of benefit plans' investments [Abstract]
 
 
 
Total fair value of investment
334,836 
129,129 
 
Pension Plans [Member] | Debt Securities Us Government Bonds Municipal Bonds And Related Securities Member | Level 1 [Member]
 
 
 
Hierarchy levels of benefit plans' investments [Abstract]
 
 
 
Total fair value of investment
0 
0 
 
Pension Plans [Member] | Debt Securities Us Government Bonds Municipal Bonds And Related Securities Member | Level 2 [Member]
 
 
 
Hierarchy levels of benefit plans' investments [Abstract]
 
 
 
Total fair value of investment
331,937 
129,129 
 
Pension Plans [Member] | Debt Securities Us Government Bonds Municipal Bonds And Related Securities Member | Level 3 [Member]
 
 
 
Hierarchy levels of benefit plans' investments [Abstract]
 
 
 
Total fair value of investment
2,899 
0 
 
Pension Plans [Member] | Hedge funds [Member]
 
 
 
Hierarchy levels of benefit plans' investments [Abstract]
 
 
 
Total fair value of investment
161,612 
273,226 
 
Pension Plans [Member] | Hedge funds [Member] | Level 1 [Member]
 
 
 
Hierarchy levels of benefit plans' investments [Abstract]
 
 
 
Total fair value of investment
0 
0 
 
Pension Plans [Member] | Hedge funds [Member] | Level 2 [Member]
 
 
 
Hierarchy levels of benefit plans' investments [Abstract]
 
 
 
Total fair value of investment
0 
113,340 
 
Pension Plans [Member] | Hedge funds [Member] | Level 3 [Member]
 
 
 
Hierarchy levels of benefit plans' investments [Abstract]
 
 
 
Total fair value of investment
161,612 
159,886 
 
Plan assets measured using significant unobservable inputs (Level 3 assets) [Roll Forward]
 
 
 
Fair value of plan assets at beginning of year
159,886 
0 
 
Level 3 assets acquired in Embarq acquisition
 
146,335 
 
Transfer to (from) Level 3
 
0 
 
Realized gains (loss) in investment, net
2,102 
0 
 
Unrealized gain (loss) in investment, net
8,851 
13,551 
 
Purchases and sales, net
(9,227)
0 
 
Fair value of plan assets at end of year
161,612 
159,886 
 
Pension Plans [Member] | Real Estate [Member]
 
 
 
Hierarchy levels of benefit plans' investments [Abstract]
 
 
 
Total fair value of investment
181,581 
161,336 
 
Pension Plans [Member] | Real Estate [Member] | Level 1 [Member]
 
 
 
Hierarchy levels of benefit plans' investments [Abstract]
 
 
 
Total fair value of investment
0 
0 
 
Pension Plans [Member] | Real Estate [Member] | Level 2 [Member]
 
 
 
Hierarchy levels of benefit plans' investments [Abstract]
 
 
 
Total fair value of investment
0 
0 
 
Pension Plans [Member] | Real Estate [Member] | Level 3 [Member]
 
 
 
Hierarchy levels of benefit plans' investments [Abstract]
 
 
 
Total fair value of investment
181,581 
161,336 
 
Plan assets measured using significant unobservable inputs (Level 3 assets) [Roll Forward]
 
 
 
Fair value of plan assets at beginning of year
161,336 
0 
 
Level 3 assets acquired in Embarq acquisition
 
182,819 
 
Transfer to (from) Level 3
 
0 
 
Realized gains (loss) in investment, net
(1,677)
21 
 
Unrealized gain (loss) in investment, net
20,038 
(24,223)
 
Purchases and sales, net
1,884 
2,719 
 
Fair value of plan assets at end of year
181,581 
161,336 
 
Pension Plans [Member] | Other Investments Member
 
 
 
Hierarchy levels of benefit plans' investments [Abstract]
 
 
 
Total fair value of investment
162,254 
247,136 
 
Pension Plans [Member] | Other Investments Member | Level 1 [Member]
 
 
 
Hierarchy levels of benefit plans' investments [Abstract]
 
 
 
Total fair value of investment
13,473 
67,156 
 
Pension Plans [Member] | Other Investments Member | Level 2 [Member]
 
 
 
Hierarchy levels of benefit plans' investments [Abstract]
 
 
 
Total fair value of investment
146,172 
181,116 
 
Pension Plans [Member] | Other Investments Member | Level 3 [Member]
 
 
 
Hierarchy levels of benefit plans' investments [Abstract]
 
 
 
Total fair value of investment
2,609 
(1,136)
 
Plan assets measured using significant unobservable inputs (Level 3 assets) [Roll Forward]
 
 
 
Fair value of plan assets at beginning of year
(131)
0 
 
Level 3 assets acquired in Embarq acquisition
 
(4,875)
 
Transfer to (from) Level 3
 
(3,458)
 
Realized gains (loss) in investment, net
92 
70 
 
Unrealized gain (loss) in investment, net
169 
31 
 
Purchases and sales, net
6,967 
8,101 
 
Fair value of plan assets at end of year
7,097 
(131)
 
Pension Plans [Member] | Level 1 [Member]
 
 
 
Hierarchy levels of benefit plans' investments [Abstract]
 
 
 
Total fair value of investment
1,715,079 
1,434,035 
 
Pension Plans [Member] | Level 2 [Member]
 
 
 
Hierarchy levels of benefit plans' investments [Abstract]
 
 
 
Total fair value of investment
1,666,500 
1,464,580 
 
Pension Plans [Member] | Level 3 [Member]
 
 
 
Hierarchy levels of benefit plans' investments [Abstract]
 
 
 
Total fair value of investment
350,290 
321,091 
 
Plan assets measured using significant unobservable inputs (Level 3 assets) [Roll Forward]
 
 
 
Fair value of plan assets at beginning of year
321,091 
0 
 
Level 3 assets acquired in Embarq acquisition
 
324,279 
 
Transfer to (from) Level 3
 
(3,458)
 
Realized gains (loss) in investment, net
517 
91 
 
Unrealized gain (loss) in investment, net
29,058 
(10,641)
 
Purchases and sales, net
(376)
10,820 
 
Fair value of plan assets at end of year
350,290 
321,091 
 
INCOME TAXES (Details) (USD $)
In Thousands
Year Ended
Dec. 31,
2010
2009
2008
Federal
 
 
 
Current
$ 384,443 
$ 158,248 
$ 141,604 
Deferred
145,166 
210,202 
59,669 
State
 
 
 
Current
66,740 
2,285 
(14,765)
Deferred
(13,398)
12,206 
7,849 
Total income tax expense
582,951 
382,941 
194,357 
Income tax expense in the consolidated statements of income:
 
 
 
Attributable to income before extraordinary item
582,951 
301,881 
194,357 
Attributable to extraordinary item
0 
81,060 
0 
Stockholders' equity:
 
 
 
Compensation expense for tax purposes in excess of amounts recognized for financial reporting purposes
(11,884)
(4,194)
(1,123)
Tax effect of the change in accumulated other comprehensive loss
(33,873)
29,460 
(47,581)
Income tax rate reconciliation [Abstract]
 
 
 
Statutory federal income tax rate (in hundredths)
0.35 
0.35 
0.35 
State income taxes, net of federal income tax benefit (in hundredths)
0.019 
0.02 
0.02 
Change in tax treatment of Medicare subsidy (in hundredths)
0.003 
0 
0 
Nondeductible acquisition related costs (in hundredths)
0.002 
0.007 
0.003 
Nondeductible compensation pursuant to executive compensation limitations (in hundredths)
0.002 
0.009 
0.002 
Recognition of previously unrecognized tax benefits (in hundredths)
0 
(0.015)
(0.023)
Other, net (in hundredths)
0.005 
0.001 
(0.005)
Effective income tax rate (in hundredths)
0.381 
0.372 
0.347 
Charge related to the change in tax treatment of Medicare Part D
4,000 
 
 
Recognition of additional income tax expense due to non-deductible transaction cost related to pending acquisition of Qwest
3,900 
 
 
Recognition of additional income tax expense related to non-deductible Embarq merger-related cost
3,300 
9,800 
 
Recognition of additional income tax expense related to non-deductible lump sum distribution under the Supplemental Executive Retirement Plan
 
7,400 
 
Reduction in income tax expense
 
7,000 
 
Income tax expense (benefit) recognized upon tax settlements
 
15,700 
12,800 
Deferred tax assets
 
 
 
Postretirement and pension benefit costs
509,950 
479,163 
 
Net state operating loss carryforwards
74,933 
64,782 
 
Other employee benefits
45,458 
67,048 
 
Other
115,750 
127,306 
 
Gross deferred tax assets
746,091 
738,299 
 
Less valuation allowance
(42,894)
(41,533)
 
Net deferred tax assets
703,197 
696,766 
 
Deferred tax liabilities
 
 
 
Property, plant and equipment, primarily due to depreciation differences
(1,761,500)
(1,573,986)
 
Goodwill and other intangible assets
(1,158,525)
(1,189,141)
 
Other
(70,529)
(106,900)
 
Gross deferred tax liabilities
(2,990,554)
(2,870,027)
 
Net deferred tax liability
(2,287,357)
(2,173,261)
 
Long-term deferred tax liability
2,368,698 
2,256,579 
 
Net current deferred tax assets
81,341 
83,319 
 
Operating loss carryforwards [Line Items]
 
 
 
Tax benefits associated with operating loss carryforwards
74,933 
64,782 
 
Valuation allowance for operating loss carryforwards
42,894 
41,533 
 
Gross unrecognized tax benefit [Roll Forward]
 
 
 
Unrecognized tax benefits, beginning of year
327,227 
 
 
Increase in tax positions taken in the current year
320 
 
 
Increase in tax positions taken in a prior year
7,272 
 
 
Decrease due to the reversal of tax positions taken in a prior year
(22,525)
 
 
Decrease from the lapse of statute of limitations
(1,232)
 
 
Unrecognized tax benefits, end of year
311,062 
327,227 
 
Amount representing refund claims
246,000 
 
 
Remaining gross balance, other than refund claims
65,500 
 
 
Portion of gross unrecognized tax benefits included as a component of deferred credits and other liabilities
58,200 
 
 
Unrecognized tax benefits that would impact effective tax rate
37,000 
 
 
Accrued interest associated with unrecognized tax benefits
11,500 
9,900 
 
Positions for which significant change in unrecognized tax benefits is reasonably possible [Abstract]
 
 
 
Amount of unrecognized tax benefit that may decrease within the next twelve months
213,000 
 
 
State Jurisdiction [Member]
 
 
 
Operating loss carryforwards [Line Items]
 
 
 
Expiration date
2030 
 
 
Federal Jurisdiction [Member]
 
 
 
Income tax examination [Line Items]
 
 
 
Open tax years
2007-current 
 
 
State Jurisdiction Florida Member
 
 
 
Income tax examination [Line Items]
 
 
 
Open tax years
2006-current 
 
 
State Jurisdiction Georgia Member
 
 
 
Income tax examination [Line Items]
 
 
 
Open tax years
2003-current 
 
 
State Jurisdiction Louisiana Member
 
 
 
Income tax examination [Line Items]
 
 
 
Open tax years
2007-current 
 
 
State Jurisdiction North Carolina Member
 
 
 
Income tax examination [Line Items]
 
 
 
Open tax years
2003-current 
 
 
State Jurisdiction Oregon Member
 
 
 
Income tax examination [Line Items]
 
 
 
Open tax years
2002-current 
 
 
State Jurisdiction Texas Member
 
 
 
Income tax examination [Line Items]
 
 
 
Open tax years
2001-current 
 
 
State Jurisdiction Other States Member
 
 
 
Income tax examination [Line Items]
 
 
 
Open tax years
2002-current 
 
 
EARNINGS PER SHARE (Details) (USD $)
In Thousands, except Per Share data
Year Ended
Dec. 31,
2010
2009
2008
Income (Numerator):
 
 
 
Net income before extraordinary item
$ 947,705 
$ 511,254 
$ 365,732 
Extraordinary item
0 
135,957 
0 
NET INCOME ATTRIBUTABLE TO CENTURYLINK,INC.
947,705 
647,211 
365,732 
Dividends applicable to preferred stock
(12)
(12)
(155)
Earnings applicable to unvested restricted stock awards:
 
 
 
Income before extraordinary item
(5,525)
(3,559)
(4,240)
Extraordinary item
0 
(946)
0 
Net income as adjusted for purposes of computing basic earnings per share
942,168 
642,694 
361,337 
Dividends applicable to preferred stock
12 
12 
155 
Net income as adjusted for purposes of computing diluted earnings per share
942,180 
642,706 
361,492 
Shares (Denominator):
 
 
 
Weighted average number of shares, outstanding during period (in shares)
301,428 
199,177 
103,467 
Weighted average number of shares, unvested restricted stock (in shares)
(1,756)
(1,387)
(1,199)
Weighted average number of shares, unvested restricted stock units (in shares)
947 
1,023 
0 
Weighted average number of shares outstanding during period for computing basic earnings per share (in shares)
300,619 
198,813 
102,268 
Incremental common shares attributable to dilutive securities:
 
 
 
Shares issuable under convertible securities (in shares)
13 
13 
169 
Shares issuable under incentive compensation plans (in shares)
665 
231 
123 
Number of shares as adjusted for purposes of computing diluted earnings per share (in shares)
301,297 
199,057 
102,560 
Basic earnings per share
 
 
 
Income before extraordinary item (in dollars per share)
3.13 
2.55 
3.53 
Extraordinary item (in dollars per share)
0 
0.68 
0 
Basic earnings per share (in dollars per share)
3.13 
3.23 
3.53 
Diluted earnings per share
 
 
 
Income before extraordinary item (in dollars per share)
3.13 
2.55 
3.52 
Extraordinary item (in dollars per share)
0 
0.68 
0 
Diluted earnings per share (in dollars per share)
$ 3.13 
$ 3.23 
$ 3.52 
Stock options [Member]
 
 
 
Antidilutive securities excluded from computation of earnings per share [Line Items]
 
 
 
Weighted average number of shares of common stock excluded from the computation of diluted earnings per share (in shares)
2,900 
4,100 
2,100 
STOCK COMPENSATION PROGRAMS (Details)
Year Ended
Dec. 31,		 Year Ended
Dec. 31,		 Year Ended
Dec. 31,
2010
2009
2008
6 Months Ended
Dec. 31, 2009
Jul. 02, 2009
Jul. 02, 2009
2010
2008
3 Months Ended
Mar. 31, 2010
Year Ended
Dec. 31, 2010
3 Months Ended
Sep. 30, 2010
2009
2008
3 Months Ended
Sep. 30, 2010
3 Months Ended
Mar. 31, 2010
Year Ended
Dec. 31, 2010
3 Months Ended
Mar. 31, 2010
Year Ended
Dec. 31, 2010
3 Months Ended
Sep. 30, 2010
Year Ended
Dec. 31, 2010
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Number of shares reserved for incentive compensation programs (in shares)
25,245,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Discount offered to employees for Employee Stock Purchase Plan (in hundredths)
0.15 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Number of recurring months during which the discount on stock price for the Employee Stock Purchase Plan is based (in months)
6M 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Conversion of outstanding stock awards to CenturyLink stock awards upon acquisition (in shares)
 
 
 
 
7,200,000 
2,400,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Number of options granted (in shares)
 
 
 
 
 
 
 
25,700 
 
 
 
 
 
 
 
 
 
 
 
 
Weighted-average fair value per option granted (in dollars per share)
 
 
 
 
 
 
 
8.85 
 
 
 
 
 
 
 
 
 
 
 
 
Assumptions used for stock-based incentive compensation plans [Abstract]
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Dividend yield (in hundredths)
 
 
 
0.0912 
 
 
 
0.006 
 
 
 
 
 
 
 
 
 
 
 
 
Expected volatility (in hundredths)
 
 
 
 
 
 
 
0.25 
 
 
 
 
 
 
 
 
 
 
 
 
Expected volatility, minimum (in hundredths)
 
 
 
0.27 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Expected volatility, maximum (in hundredths)
 
 
 
0.5 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Weighted average risk-free interest rate (in hundredths)
 
 
 
 
 
 
 
0.029 
 
 
 
 
 
 
 
 
 
 
 
 
Weighted average risk-free interest rate, minimum (in hundredths)
 
 
 
0.005 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Weighted average risk-free interest rate, maximum (in hundredths)
 
 
 
0.026 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Expected term (in years)
 
 
 
 
 
 
 
4.5 
 
 
 
 
 
 
 
 
 
 
 
 
Expected term, minimum (in years)
 
 
 
0.3 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Expected term, maximum (in years)
 
 
 
6 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Vesting period of outstanding options
 
 
 
 
 
 
3Y 
 
 
 
 
 
 
 
 
 
 
 
 
 
Expiration term of the stock options after the grant date
 
 
 
 
 
 
10Y 
 
 
 
 
 
 
 
 
 
 
 
 
 
Summary of stock option plan activity [Roll Forward]
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Outstanding, beginning of period (in shares)
 
 
 
 
 
 
9,318,553 
 
 
 
 
 
 
 
 
 
 
 
 
 
Exercised (in shares)
 
 
 
 
 
 
(3,507,895)
 
 
 
 
 
 
 
 
 
 
 
 
 
Forfeited/Cancelled (in shares)
 
 
 
 
 
 
(770,373)
 
 
 
 
 
 
 
 
 
 
 
 
 
Outstanding, end of period (in shares)
 
 
 
 
 
 
5,040,285 
 
 
 
 
 
 
 
 
 
 
 
 
 
Exercisable, end of period (in shares)
 
 
 
 
 
 
4,739,732 
 
 
 
 
 
 
 
 
 
 
 
 
 
Additional disclosures pertaining to stock options [Abstract]
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Average exercise price, options outstanding - beginning of period (in dollars per share)
 
 
 
 
 
 
37.85 
 
 
 
 
 
 
 
 
 
 
 
 
 
Average exercise price - options exercised (in dollars per share)
 
 
 
 
 
 
32.25 
 
 
 
 
 
 
 
 
 
 
 
 
 
Average exercise price - options forfeited/cancelled (in dollars per share)
 
 
 
 
 
 
55.40 
 
 
 
 
 
 
 
 
 
 
 
 
 
Average exercise price, options outstanding - end of period (in dollars per share)
 
 
 
 
 
 
39.06 
 
 
 
 
 
 
 
 
 
 
 
 
 
Average exercise price - options exercisable (in dollars per share)
 
 
 
 
 
 
39.60 
 
 
 
 
 
 
 
 
 
 
 
 
 
Remaining contractual term - options outstanding (in years)
 
 
 
 
 
 
4.16 
 
 
 
 
 
 
 
 
 
 
 
 
 
Remaining contractual term - options exercisable (in years)
 
 
 
 
 
 
3.97 
 
 
 
 
 
 
 
 
 
 
 
 
 
Aggregate intrinsic value, options outstanding - end of period
 
 
 
 
 
 
49,225,000 1
 
 
 
 
 
 
 
 
 
 
 
 
 
Aggregate intrinsic value of options exercisable - end of period
 
 
 
 
 
 
44,554,000 1
 
 
 
 
 
 
 
 
 
 
 
 
 
Restricted stock awards [Abstract]
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Awards granted (in shares)
 
 
 
 
 
 
 
 
396,753 
 
407,236 
820,234 
643,397 
75,000 
198,374 
525,377 
198,379 
 
 
 
Minimum vesting period for employees (in years)
 
 
 
 
 
 
 
 
 
3Y 
 
 
 
 
 
 
 
 
 
 
Maximum vesting period for employees (in years)
 
 
 
 
 
 
 
 
 
5Y 
 
 
 
 
3Y 
3Y 
 
 
 
 
Vesting period for outside directors (in years)
 
 
 
 
 
 
 
 
 
3Y 
 
 
 
 
 
3Y 
 
 
 
 
Fraction of awards scheduled to vest in March 2012, with the remainder to vest in March 2013
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
One half 
 
 
Period of total shareholder return on which awards will vest in March 2012 (in years)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2Y 
 
 
Period of total shareholder return on which awards will vest in March 2013 (in years)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
3Y 
 
 
Percentage of target award, minimum range (in hundredths)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
0 
 
 
Percentage of target award, maximum range (in hundredths)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2 
 
 
Deferred cash compensation awards granted as part of a retention program in connection with the pending acquisition of Qwest
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
15,200,000 
 
Fraction of deferred cash award each recipient will receive on the closing date of the Qwest merger
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
one-half 
Weighted-average price of awards issued during the period (in dollars per share)
 
 
 
 
 
 
 
 
 
 
 
27.34 
34.86 
 
 
 
 
 
 
 
Summary of nonvested restricted stock and restricted stock units [Roll Forward]
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Nonvested, beginning of period (in shares)
 
 
 
 
 
 
 
 
2,922,855 
2,922,855 
 
 
 
 
 
 
 
 
 
 
Granted (in shares)
 
 
 
 
 
 
 
 
 
1,404,366 
 
 
 
 
 
 
 
 
 
 
Vested (in shares)
 
 
 
 
 
 
 
 
 
(1,343,171)
 
 
 
 
 
 
 
 
 
 
Forfeited (in shares)
 
 
 
 
 
 
 
 
 
(92,391)
 
 
 
 
 
 
 
 
 
 
Nonvested, end of period (in shares)
 
 
 
 
 
 
 
 
 
2,891,659 
 
 
 
 
 
 
 
 
 
 
Additional disclosures pertaining to restricted stock awards [Abstract]
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Weighted average grant date fair value - nonvested, beginning of period (in dollars per share)
 
 
 
 
 
 
 
 
31.04 
31.04 
 
 
 
 
 
 
 
 
 
 
Weighted average grant date fair value, granted (in dollars per share)
 
 
 
 
 
 
 
 
 
36.56 
 
 
 
 
 
 
 
 
 
 
Weighted average grant date fair value, vested (in dollars per share)
 
 
 
 
 
 
 
 
 
31.04 
 
 
 
 
 
 
 
 
 
 
Weighted average grant date fair value, forfeited (in dollars per share)
 
 
 
 
 
 
 
 
 
31.79 
 
 
 
 
 
 
 
 
 
 
Weighted average grant date fair value - nonvested, end of period (in dollars per share)
 
 
 
 
 
 
 
 
 
33.69 
 
 
 
 
 
 
 
 
 
 
Share based compensation, aggregate disclosures [Abstract]
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Compensation costs
38,200,000 
55,200,000 
16,400,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Compensation expense as a result of accelerating the vesting schedules
 
21,200,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Recognized tax benefit
14,100,000 
20,500,000 
5,800,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Unrecognized compensation cost
60,800,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Weighted average recognition period (in years)
2.1 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash proceeds in connection with option exercises
113,100,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total Intrinsic value of options exercised
28,100,000 
6,000,000 
208,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Excess tax benefit realized from share-based compensation transactions
11,900,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total fair value of restricted stock vested in the period
47,900,000 
45,200,000 
6,200,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
DISCONTINUANCE OF REGULATORY ACCOUNTING (Details) (USD $)
In Thousands, except Per Share data
3 Months Ended
Sep. 30, 2009
Components of non-cash extraordinary gain [Abstract]
 
Elimination of removal costs embedded in accumulated depreciation
$ 222,703 
Establishment of asset retirement obligation
(1,556)
Elimination of other regulatory assets and liabilities
(2,585)
Net extraordinary gain before income tax expense and noncontrolling interest
218,562 
Income tax expense associated with extraordinary gain
(81,060)
Net extraordinary gain before noncontrolling interests
137,502 
Less: extraordinary gain attributable to noncontrolling interests
1,545 
Extraordinary gain attributable to CenturyLink, Inc.
135,957 
Basic earnings per share of extraordinary gain (in dollars per share)
0.68 
Diluted earnings per share of extraordinary gain (in dollars per share)
$ 0.68 
GAIN ON ASSET DISPOSITIONS (Details)
In Millions
3 Months Ended
Sep. 30, 2008
3 Months Ended
Jun. 30, 2008
3 Months Ended
Mar. 31, 2008
Notes To Financial Statements [Abstract]
 
 
 
Proceeds from sale of interest in a non-operating investment
7 
 
4 
Gain on sale of interest in non-operating investment, pre-tax
3 
 
4 
Gain on liquidation of marketable securities, pre-tax
 
5 
 
SUPPLEMENTAL CASH FLOW AND OTHER DISCLOSURES (Details) (USD $)
Year Ended
Dec. 31,
2010
2009
2008
Notes To Financial Statements [Abstract]
 
 
 
Amount of interest capitalized
$ 12,900,000 
$ 3,500,000 
$ 2,400,000 
Actual interest paid, net of amount capitalized
548,400,000 
391,800,000 
204,100,000 
Income taxes paid during the year
431,700,000 
258,900,000 
208,800,000 
Income tax refunds during the year
7,600,000 
2,100,000 
4,600,000 
Business Acquisition [Line Items]
 
 
 
Property, plant and equipment, net
 
6,077,672,000 
 
Goodwill
 
6,236,084,000 
 
Long term debt, deferred credits and other liabilities
 
(7,508,066,000)
 
Other assets and liabilities, excluding cash and cash equivalents
 
1,187,849,000 
 
Common equity issued for acquisition
 
(6,070,445,000)
 
Increase in cash due to acquisition
 
(76,906,000)
 
Universal service taxes and surcharges
$ 115,000,000 
$ 84,000,000 
$ 42,000,000 
FAIR VALUE OF FINANCIAL INSTRUMENTS (Details)
In Thousands
Dec. 31, 2010
Dec. 31, 2010
Dec. 31, 2010
Dec. 31, 2010
Dec. 31, 2010
Dec. 31, 2009
Dec. 31, 2010
Dec. 31, 2009
Financial assets
 
 
 
 
 
 
 
 
Other
 
 
 
 
110,178 
111,809 
110,178 1
111,809 1
Financial liabilities
 
 
 
 
 
 
 
 
Long term debt (including current maturities)
 
 
 
 
7,327,587 
7,753,718 
8,006,508 2
8,408,943 2
Other
 
 
 
 
190,443 
182,374 
190,443 1
182,374 1
Fair value, assets measured on recurring basis [Line Items]
 
 
 
 
 
 
 
 
Cash surrender value of life insurance contracts
99,462 
99,462 
0 
0 
 
 
 
 
BUSINESS SEGMENTS (Details) (USD $)
In Thousands
Year Ended
Dec. 31,
2010
2009
2008
Notes To Financial Statements [Abstract]
 
 
 
Number of reportable segments (in segments)
1 
 
 
Operating revenues by products and services [Line Items]
 
 
 
Total operating revenues
$ 7,041,534 
$ 4,974,239 
$ 2,599,747 
Voice Member
 
 
 
Operating revenues by products and services [Line Items]
 
 
 
Total operating revenues
3,137,921 
2,168,480 
1,043,386 
Data Member
 
 
 
Operating revenues by products and services [Line Items]
 
 
 
Total operating revenues
1,908,901 
1,202,284 
524,194 
Network Access Member
 
 
 
Operating revenues by products and services [Line Items]
 
 
 
Total operating revenues
1,079,678 
927,905 
651,038 
Other Products And Services Member
 
 
 
Operating revenues by products and services [Line Items]
 
 
 
Total operating revenues
$ 915,034 
$ 675,570 
$ 381,129 
COMMITMENTS AND CONTINGENCIES (Details)
In Millions
Year Ended
Dec. 31,
2010
2009
Former Centel Plant Sites Member
 
 
Loss Contingencies [Line Items]
 
 
Number of indirect subsidiaries that acquired entities with plant sites (in subsidiaries)
1 
 
Number of former plant sites acquired by Centel Corporation (in plant sites)
7 
 
Number of sites on which Embarq and current landowners are working with the EPA (in sites)
3 
 
Number of sites where Centel has agreed to share remediation cost (in sites)
5 
 
Civil Action No07 Cv2602 Member
 
 
Loss Contingencies [Line Items]
 
 
Effect of modifications made to Embarq's benefits program
300 
 
Number of former Centel executives involved in arbitration proceeding (in executives)
 
15 
Pending Litigation Related To Federal Communications Act Member
 
 
Loss Contingencies [Line Items]
 
 
Number of lawsuits pending (in lawsuits)
2 
 
Charges claimed against Sprint Nextel
33 
 
Number of lawsuits tried (in lawsuits)
1 
 
Period litigation is stayed (in months)
12M 
 
SUBSEQUENT EVENT (Details) (Revolving Credit Facility Member, USD $)
In Thousands, unless otherwise specified
Year Ended
Dec. 31, 2010
Subsequent Event [Line Items]
 
Subsequent event date
2011-01-19 
Maximum borrowing capacity
$ 1,000,000 
Maximum borrowing capacity with acquisition of Qwest
1,700,000 
Amount of borrowing capacity available for letters of credit
400,000 
Applicable per annum interest rate margin, minimum (in hundredths)
0.005 
Applicable per annum interest rate margin, maximum (in hundredths)
0.025 
Maximum ratio of consolidated debt to consolidated EBITDA
4 
Minimum ratio of consolidated EBITDA to consolidated interest expense and preferred stock dividends
1.5 
Credit facility of CenturyLink terminated upon execution of new facility
750,000 
Credit facility of Embarq terminated upon execution of new facility
$ 800,000 
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS (Details) (USD $)
In Thousands
Year Ended
Dec. 31,
2010
2009
2008
Allowance for doubtful accounts [Member]
 
 
 
Changes in valuation allowances [Roll Forward]
 
 
 
Balance at beginning of period
$ 47,450 
$ 16,290 
$ 20,361 
Additions charged to costs and expenses
91,202 
56,609 
9,866 
Deductions from allowance
(78,566)1
(25,449)1
(13,524)1
Other changes
0 
0 
(413)2
Balance at end of period
60,086 
47,450 
16,290 
Valuation allowance for deferred tax assets [Member]
 
 
 
Changes in valuation allowances [Roll Forward]
 
 
 
Balance at beginning of period
41,533 
33,858 
30,907 
Additions charged to costs and expenses
3,681 
3,886 
1,603 
Deductions from allowance
(2,320)
(6,329)
0 
Other changes
0 
10,118 2
1,348 
Balance at end of period
$ 42,894 
$ 41,533 
$ 33,858