UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended June 30, 2002
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Commission File Number: 1-7784
CenturyTel, Inc.
(Exact name of registrant as specified in its charter)
Louisiana 72-0651161
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
100 CenturyTel Drive, Monroe, Louisiana 71203
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (318) 388-9000
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
[X] Yes [ ] No
As of July 31, 2002, there were 141,871,426 shares of common stock
outstanding.
CenturyTel, Inc.
TABLE OF CONTENTS
Page No.
Part I. Financial Information:
Item 1. Financial Statements
Consolidated Statements of Income--Three Months and
Six Months Ended June 30, 2002 and 2001 3-4
Consolidated Statements of Comprehensive Income--
Three Months and Six Months Ended June 30, 2002 and 2001 5
Consolidated Balance Sheets--June 30, 2002 and
December 31, 2001 6
Consolidated Statements of Stockholders' Equity--
Six Months Ended June 30, 2002 and 2001 7
Consolidated Statements of Cash Flows--
Six Months Ended June 30, 2002 and 2001 8
Notes to Consolidated Financial Statements 9-14
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 15-28
Item 3. Quantitative and Qualitative Disclosures About Market Risk 29
Part II. Other Information:
Item 1. Legal Proceedings 30
Item 4. Submission of Matters to a Vote of Security Holders 30
Item 6. Exhibits and Reports on Form 8-K 31
Signature 31
PART I. FINANCIAL INFORMATION
CenturyTel, Inc.
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
Three months Six months
ended June 30, ended June 30,
- -------------------------------------------------------------------------------------------------------------------
2002 2001 2002 2001
- -------------------------------------------------------------------------------------------------------------------
(Dollars, except per share amounts,
and shares in thousands)
OPERATING REVENUES
Telephone $ 380,499 367,884 753,230 739,133
Other 58,203 41,366 108,390 81,719
- -------------------------------------------------------------------------------------------------------------------
Total operating revenues 438,702 409,250 861,620 820,852
- -------------------------------------------------------------------------------------------------------------------
OPERATING EXPENSES
Cost of sales and operating expenses (exclusive
of depreciation and amortization) 230,033 204,472 436,877 407,968
Corporate overhead costs allocable to
discontinued operations (See Note 3) 5,134 4,979 9,932 9,958
Depreciation and amortization 94,004 100,590 186,231 199,408
- -------------------------------------------------------------------------------------------------------------------
Total operating expenses 329,171 310,041 633,040 617,334
- -------------------------------------------------------------------------------------------------------------------
OPERATING INCOME 109,531 99,209 228,580 203,518
- -------------------------------------------------------------------------------------------------------------------
OTHER INCOME (EXPENSE)
Interest expense (54,157) (57,358) (104,805) (119,061)
Nonrecurring gains and losses 3,709 (10,500) 3,709 (10,500)
Other income and expense 2,485 1,783 217 4,250
- -------------------------------------------------------------------------------------------------------------------
Total other income (expense) (47,963) (66,075) (100,879) (125,311)
- -------------------------------------------------------------------------------------------------------------------
INCOME FROM CONTINUING OPERATIONS
BEFORE INCOME TAX EXPENSE 61,568 33,134 127,701 78,207
Income tax expense 21,360 12,066 44,636 30,288
- -------------------------------------------------------------------------------------------------------------------
INCOME FROM CONTINUING OPERATIONS 40,208 21,068 83,065 47,919
DISCONTINUED OPERATIONS (See Note 3)
Income from discontinued operations, net of
$21,574, $79,988, $37,244 and $93,144 tax 38,555 133,173 66,465 153,044
- -------------------------------------------------------------------------------------------------------------------
NET INCOME $ 78,763 154,241 149,530 200,963
===================================================================================================================
NET INCOME, AS ADJUSTED FOR GOODWILL
AMORTIZATION (See Notes 1 and 4) $ 78,763 168,376 149,530 229,181
===================================================================================================================
See accompanying notes to consolidated financial statements.
CenturyTel, Inc.
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
(Continued)
Three months Six months
ended June 30, ended June 30,
- -------------------------------------------------------------------------------------------------------------------
2002 2001 2002 2001
- -------------------------------------------------------------------------------------------------------------------
(Dollars, except per share amounts,
and shares in thousands)
BASIC EARNINGS PER SHARE
From continuing operations $ .28 .15 .59 .34
From continuing operations, as adjusted* $ .28 .23 .59 .51
From discontinued operations $ .27 .95 .47 1.09
From discontinued operations, as adjusted* $ .27 .96 .47 1.12
Basic earnings per share $ .56 1.10 1.06 1.43
Basic earning per share, as adjusted* $ .56 1.20 1.06 1.63
DILUTED EARNINGS PER SHARE
From continuing operations $ .28 .15 .58 .34
From continuing operations, as adjusted* $ .28 .23 .58 .50
From discontinued operations $ .27 .94 .47 1.08
From discontinued operations, as adjusted* $ .27 .95 .47 1.11
Diluted earnings per share $ .55 1.09 1.05 1.41
Diluted earnings per share, as adjusted* $ .55 1.19 1.05 1.61
DIVIDENDS PER COMMON SHARE $ .0525 .05 .105 .10
===================================================================================================================
AVERAGE BASIC SHARES OUTSTANDING 141,243 140,720 141,136 140,656
===================================================================================================================
AVERAGE DILUTED SHARES OUTSTANDING 142,705 142,059 142,679 142,271
===================================================================================================================
* As adjusted to reflect the after-tax effect of eliminating goodwill
amortization in accordance with SFAS 142 (See Notes 1 and 4).
See accompanying notes to consolidated financial statements.
CenturyTel, Inc.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(UNAUDITED)
Three months Six months
ended June 30, ended June 30,
- ----------------------------------------------------------------------------------------------------------------
2002 2001 2002 2001
- --------------------------------------------------------------------------------------------------------------
(Dollars in thousands)
NET INCOME $ 78,763 154,241 149,530 200,963
OTHER COMPREHENSIVE INCOME,
NET OF TAX:
Unrealized holding gain arising during period,
net of $7,109 and $5,560 tax - 13,202 - 10,325
- ----------------------------------------------------------------------------------------------------------------
COMPREHENSIVE INCOME $ 78,763 167,443 149,530 211,288
================================================================================================================
COMPREHENSIVE INCOME,
AS ADJUSTED FOR GOODWILL
AMORTIZATION (See Notes 1 and 4) $ 78,763 181,578 149,530 239,506
================================================================================================================
See accompanying notes to consolidated financial statements.
CenturyTel, Inc.
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
June 30, December 31,
2002 2001
- -----------------------------------------------------------------------------------------------------------------
(Dollars in thousands)
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 302,070 3,496
Accounts receivable, less allowance of $27,162 and $13,908 174,837 205,990
Materials and supplies, at average cost 9,848 10,916
Other 9,063 9,511
- -----------------------------------------------------------------------------------------------------------------
Total current assets 495,818 229,913
- -----------------------------------------------------------------------------------------------------------------
NET PROPERTY, PLANT AND EQUIPMENT 2,725,096 2,736,142
- -----------------------------------------------------------------------------------------------------------------
INVESTMENTS AND OTHER ASSETS
Goodwill 2,115,313 2,087,158
Other 439,555 420,043
- -----------------------------------------------------------------------------------------------------------------
Total investments and other assets 2,554,868 2,507,201
- -----------------------------------------------------------------------------------------------------------------
ASSETS HELD FOR SALE (See Note 3) 861,526 845,428
- -----------------------------------------------------------------------------------------------------------------
TOTAL ASSETS $ 6,637,308 6,318,684
=================================================================================================================
LIABILITIES AND EQUITY
CURRENT LIABILITIES
Current maturities of long-term debt $ 432,397 955,834
Short-term debt - 53,000
Accounts payable 81,087 61,056
Accrued expenses and other liabilities
Salaries and benefits 49,496 46,588
Taxes 37,982 27,937
Interest 52,938 49,191
Other 12,460 15,968
Advance billings and customer deposits 30,194 29,308
- -----------------------------------------------------------------------------------------------------------------
Total current liabilities 696,554 1,238,882
- -----------------------------------------------------------------------------------------------------------------
LONG-TERM DEBT 2,750,188 2,087,500
- -----------------------------------------------------------------------------------------------------------------
DEFERRED CREDITS AND OTHER LIABILITIES 560,797 506,052
- -----------------------------------------------------------------------------------------------------------------
LIABILITIES RELATED TO ASSETS HELD FOR SALE (See Note 3) 171,680 148,870
- -----------------------------------------------------------------------------------------------------------------
STOCKHOLDERS' EQUITY
Common stock, $1.00 par value, authorized 350,000,000 shares,
issued and outstanding 141,660,660 and 141,232,806 shares 141,661 141,233
Paid-in capital 509,939 524,668
Retained earnings 1,800,514 1,666,004
Unearned ESOP shares (2,000) (2,500)
Preferred stock - non-redeemable 7,975 7,975
- -----------------------------------------------------------------------------------------------------------------
Total stockholders' equity 2,458,089 2,337,380
- -----------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND EQUITY $ 6,637,308 6,318,684
=================================================================================================================
See accompanying notes to consolidated financial statements.
CenturyTel, Inc.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(UNAUDITED)
Six months
ended June 30,
- -------------------------------------------------------------------------------------------------------------------
2002 2001
- -------------------------------------------------------------------------------------------------------------------
(Dollars in thousands)
COMMON STOCK
Balance at beginning of period $ 141,233 140,667
Conversion of convertible securities into common stock - 254
Issuance of common stock through dividend reinvestment,
incentive and benefit plans 428 99
- -------------------------------------------------------------------------------------------------------------------
Balance at end of period 141,661 141,020
- -------------------------------------------------------------------------------------------------------------------
PAID-IN CAPITAL
Balance at beginning of period 524,668 509,840
Equity unit issuance costs and contract adjustment payments (24,271) -
Conversion of convertible securities into common stock - 3,046
Issuance of common stock through dividend
reinvestment, incentive and benefit plans 8,149 1,835
Amortization of unearned compensation and other 1,393 1,986
- -------------------------------------------------------------------------------------------------------------------
Balance at end of period 509,939 516,707
- -------------------------------------------------------------------------------------------------------------------
UNREALIZED HOLDING GAIN ON INVESTMENTS, NET OF TAXES
Balance at beginning of period - 25,471
Change in unrealized holding gain on investments, net of tax - 10,325
- -------------------------------------------------------------------------------------------------------------------
Balance at end of period - 35,796
- -------------------------------------------------------------------------------------------------------------------
RETAINED EARNINGS
Balance at beginning of period 1,666,004 1,351,626
Net income 149,530 200,963
Cash dividends declared
Common stock-$.105 and $.10 per share, respectively (14,821) (14,169)
Preferred stock (199) (199)
- -------------------------------------------------------------------------------------------------------------------
Balance at end of period 1,800,514 1,538,221
- -------------------------------------------------------------------------------------------------------------------
UNEARNED ESOP SHARES
Balance at beginning of period (2,500) (3,500)
Release of ESOP shares 500 500
- -------------------------------------------------------------------------------------------------------------------
Balance at end of period (2,000) (3,000)
- -------------------------------------------------------------------------------------------------------------------
PREFERRED STOCK - NON-REDEEMABLE
Balance at beginning and end of period 7,975 7,975
- -------------------------------------------------------------------------------------------------------------------
TOTAL STOCKHOLDERS' EQUITY $ 2,458,089 2,236,719
===================================================================================================================
See accompanying notes to consolidated financial statements.
CenturyTel, Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Six months
ended June 30,
- -------------------------------------------------------------------------------------------------------------------
2002 2001
- -------------------------------------------------------------------------------------------------------------------
(Dollars in thousands)
OPERATING ACTIVITIES FROM CONTINUING OPERATIONS
Net income $ 149,530 200,963
Adjustments to reconcile net income to net cash provided by
operating activities from continuing operations:
Income from discontinued operations, net of tax (66,465) (153,044)
Depreciation and amortization 186,231 199,408
Deferred income taxes 29,259 (20,133)
Nonrecurring gains and losses (3,709) 10,500
Changes in current assets and current liabilities:
Accounts receivable 34,958 38,281
Accounts payable 7,610 (21,116)
Other accrued taxes 10,045 46,211
Other current assets and other current liabilities, net 19,423 (2,390)
Increase in other noncurrent assets (14,408) (41,815)
Increase (decrease) in other noncurrent liabilities 12,393 (2,333)
Other, net 14,256 10,817
- -------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities from continuing operations 379,123 265,349
- -------------------------------------------------------------------------------------------------------------------
INVESTING ACTIVITIES FROM CONTINUING OPERATIONS
Payments for property, plant and equipment (179,033) (209,722)
Acquisitions, net of cash acquired (43,768) (47,131)
Other, net 3,413 (1,812)
- --------------------------------------------------------------------------------------------------------------------
Net cash used in investing activities from continuing operations (219,388) (258,665)
- --------------------------------------------------------------------------------------------------------------------
FINANCING ACTIVITIES FROM CONTINUING OPERATIONS
Proceeds from issuance of debt 503,249 1,367
Payments of debt (416,498) (142,086)
Proceeds from issuance of common stock 8,577 1,934
Cash dividends (15,020) (14,368)
Equity units issuance costs (15,867) -
Other, net 1,221 1,106
- -------------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) financing activities from continuing operations 65,662 (152,047)
- -------------------------------------------------------------------------------------------------------------------
Net cash provided by discontinued operations (See Note 3) 73,177 165,506
- -------------------------------------------------------------------------------------------------------------------
Net increase in cash and cash equivalents 298,574 20,143
Cash and cash equivalents at beginning of period 3,496 11,523
- -------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of period $ 302,070 31,666
===================================================================================================================
Supplemental cash flow information:
Income taxes paid $ 25,389 13,726
===================================================================================================================
Interest paid (net of capitalized interest of $840 and $2,942) $ 100,260 117,900
===================================================================================================================
See accompanying notes to consolidated financial statements.
CenturyTel, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2002
(UNAUDITED)
(1) Basis of Financial Reporting
The consolidated financial statements of CenturyTel, Inc. and its
subsidiaries (the "Company") include the accounts of CenturyTel, Inc.
("CenturyTel") and its majority-owned subsidiaries and partnerships. Certain
information and footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles have been
condensed or omitted pursuant to rules and regulations of the Securities and
Exchange Commission; however, in the opinion of management, the disclosures
which are made are adequate to make the information presented not misleading.
The consolidated financial statements and footnotes included in this Form 10-Q
should be read in conjunction with the consolidated financial statements and
notes thereto included in the Company's current report on Form 8-K dated March
19, 2002 and filed August 13, 2002. Certain 2001 amounts have been reclassified
to be consistent with the Company's 2002 presentation.
The unaudited financial information for the three months and six months
ended June 30, 2002 and 2001 has not been audited by independent certified
public accountants; however, in the opinion of management, all adjustments
(which include only normal recurring adjustments) necessary to present fairly
the results of operations for the three-month and six-month periods have been
included therein. The results of operations for the first six months of the year
are not necessarily indicative of the results of operations which might be
expected for the entire year.
In July 2001, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 142, "Goodwill and Other Intangible Assets"
("SFAS 142"). Under SFAS 142, effective January 1, 2002, systematic amortization
of goodwill is no longer permitted; instead, SFAS 142 requires goodwill recorded
in a business combination to be reviewed for impairment and to be written down
only in periods in which the recorded amount of goodwill exceeds its fair value.
Each adjustment reflected in the consolidated statements of income and
comprehensive income by use of the term "as adjusted for goodwill amortization"
reflects the effects of SFAS 142, as more fully described in Note 4.
In October 2001, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 144, "Accounting for the Impairment or
Disposal of Long-Lived Assets" ("SFAS 144"). SFAS 144 addresses financial
accounting and reporting for the impairment or disposal of long-lived assets and
also broadens the reporting of discontinued operations to include all components
of an entity with operations that can be distinguished from the rest of the
entity and that will be eliminated from the ongoing operations of the entity in
a disposal transaction. As a result of the Company's agreement in March 2002 to
sell its wireless operations (which was consummated on August 1, 2002) (see Note
3), such operations have been reflected as discontinued operations for the three
months and six months ended June 30, 2002. Assets and liabilities related to the
Company's wireless operations are reflected as "Held for sale" on the
accompanying consolidated balance sheets. Results of operations for 2001 have
been restated to conform to this presentation.
(2) Net Property, Plant and Equipment
Net property, plant and equipment is composed of the following:
June 30, Dec. 31,
2002 2001
- ----------------------------------------------------------------------------
(Dollars in thousands)
Telephone, at original cost $ 5,385,714 5,292,255
Accumulated depreciation (2,971,117) (2,839,268)
- ----------------------------------------------------------------------------
2,414,597 2,452,987
- ----------------------------------------------------------------------------
Other, at cost 488,999 446,920
Accumulated depreciation (178,500) (163,765)
- ----------------------------------------------------------------------------
310,499 283,155
- ----------------------------------------------------------------------------
$ 2,725,096 2,736,142
============================================================================
(3) Discontinued Operations
On August 1, 2002 (pursuant to a definitive agreement signed March 19,
2002), the Company sold substantially all of its wireless operations to an
affiliate of ALLTEL Corporation ("Alltel") and certain partners in the Company's
markets that exercised "first refusal" purchase rights for an aggregate of
approximately $1.58 billion in cash (see Note 7 for additional information). As
a result, the Company's wireless operations have been reflected as discontinued
operations and as assets and liabilities held for sale in the Company's
consolidated financial statements as of and for the six months ended June 30,
2002. Amounts reported for 2001 have been restated to conform to the 2002
presentation. The depreciation and amortization of long-lived and intangible
assets related to the wireless operations ceased on March 19, 2002, the date of
the definitive agreement to sell such operations.
The following table represents certain summary income statement
information related to the Company's wireless operations reflected as
discontinued operations.
Three months Six months
ended June 30, ended June 30,
- ---------------------------------------------------------------------------------------------------------
2002 2001 2002 2001
- ---------------------------------------------------------------------------------------------------------
(Dollars in thousands)
Operating revenues $ 106,272 109,686 208,693 214,092
- ----------------------------------------------------------------------------------------------------------
Operating income (1) $ 51,409 35,996 86,425 65,895
Income from unconsolidated cellular entities 12,682 10,705 24,196 16,026
Minority interest expense (4,039) (3,064) (6,910) (5,701)
Nonrecurring gains and losses - 166,928 - 166,928
Other income and (expense) 77 2,596 (2) 3,040
- ----------------------------------------------------------------------------------------------------------
Pre-tax income from discontinued operations 60,129 213,161 103,709 246,188
Income tax expense (21,574) (79,988) (37,244) (93,144)
- ----------------------------------------------------------------------------------------------------------
Income from discontinued operations $ 38,555 133,173 66,465 153,044
==========================================================================================================
(1) Excludes corporate overhead costs of $5.1 million, $5.0 million, $9.9
million, and $10.0 million for the three months ended June 30, 2002 and
2001 and the six months ended June 30, 2002 and 2001, respectively,
allocated to the wireless operations that the Company expects to continue
to incur subsequent to the disposal of the wireless operations.
The following table represents certain summary cash flow statement
information related to the Company's wireless operations reflected as
discontinued operations.
Six months
ended June 30,
- --------------------------------------------------------------------------------------
2002 2001
- --------------------------------------------------------------------------------------
(Dollars in thousands)
Net cash provided by operating activities $ 83,078 79,765
Net cash provided by (used in) investing activities (9,901) 85,741
Net cash used in financing activities - -
- --------------------------------------------------------------------------------------
Net cash provided by discontinued operations $ 73,177 165,506
======================================================================================
The following table represents the net assets of the discontinued wireless
operations as of June 30, 2002 and December 31, 2001, which are classified as
held for sale on the consolidated balance sheets.
June 30, Dec. 31,
2002 2001
- ----------------------------------------------------------------------------------------------
(Dollars in thousands)
Current assets $ 67,070 70,360
Net property, plant and equipment 271,578 263,421
Goodwill 384,446 384,326
Other assets 138,432 127,321
- ----------------------------------------------------------------------------------------------
Assets held for sale $ 861,526 845,428
==============================================================================================
Current liabilities $ 73,944 55,074
Deferred credits and other liabilities 97,736 93,796
- ----------------------------------------------------------------------------------------------
Liabilities related to assets held for sale $ 171,680 148,870
==============================================================================================
(4) Goodwill and other intangible assets
The following information relates to the Company's goodwill as of June
30, 2002 and December 31, 2001:
June 30, Dec. 31,
2002 2001
- --------------------------------------------------------------------------------
(Dollars in thousands)
Carrying amount of goodwill
Telephone segment $ 2,075,886 2,074,036
Other operations 39,427 13,122
- --------------------------------------------------------------------------------
Total goodwill $ 2,115,313 2,087,158
================================================================================
Under SFAS 142, 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 were based on valuation
models using techniques such as multiples of earnings. The Company has
completed the initial transitional goodwill impairment test of SFAS 142 and
has determined its goodwill is not impaired.
Certain customer base assets in the Company's wireless operations (which
are reflected as assets held for sale) constitute intangible assets that, prior
to March 19, 2002, were subject to amortization in accordance with SFAS 142. The
gross carrying amount (and accumulated amortization) of these assets was $22.7
million ($19.6 million) as of June 30, 2002 and $22.7 million ($18.5 million) as
of December 31, 2001. Total amortization expense for the first six months of
2002 (which is reflected in discontinued operations) was $1.1 million. Such
amortization was ceased upon the classification of such assets as held for sale
on March 19, 2002.
The following is a reconciliation of reported net income and reported
earnings per share to the amounts that would have been reported for periods
ending prior to December 31, 2001 had the Company been subject to SFAS 142
during 2001.
Three months Six months
ended June 30, ended June 30,
- ----------------------------------------------------------------------------------------------------
2002 2001 2002 2001
- ----------------------------------------------------------------------------------------------------
(Dollars in thousands, except per share amounts)
Net income, as reported $ 78,763 154,241 149,530 200,963
Goodwill amortization, net of taxes - 14,135 - 28,218
- ----------------------------------------------------------------------------------------------------
Net income, as adjusted $ 78,763 168,376 149,530 229,181
====================================================================================================
Basic earnings per share, as reported $ .56 1.10 1.06 1.43
Goodwill amortization, net of taxes - .10 - .20
- ----------------------------------------------------------------------------------------------------
Basic earnings per share, as adjusted $ .56 1.20 1.06 1.63
====================================================================================================
Diluted earnings per share, as reported $ .55 1.09 1.05 1.41
Goodwill amortization, net of taxes - .10 - .20
- ----------------------------------------------------------------------------------------------------
Diluted earnings per share, as adjusted $ .55 1.19 1.05 1.61
====================================================================================================
(5) Business Segments
The Company's only separately reportable business segment is its telephone
operations. The operating income of this segment is reviewed by the Company's
chief operating decision maker to assess performance and make business
decisions. Due to the sale of the Company's wireless operations, such operations
(which were previously reported as a separate segment) are classified as
discontinued operations (see Note 3). Other operations include, but are not
limited to, the Company's non-regulated long distance operations, Internet
operations, competitive local exchange carrier operations and security
monitoring operations.
Three months Six months
ended June 30, ended June 30,
- ---------------------------------------------------------------------------------------------------------
2002 2001 2002 2001
- ---------------------------------------------------------------------------------------------------------
(Dollars in thousands)
Operating revenues
Telephone $ 380,499 367,884 753,230 739,133
Other operations 58,203 41,366 108,390 81,719
- ---------------------------------------------------------------------------------------------------------
Total operating revenues $ 438,702 409,250 861,620 820,852
=========================================================================================================
Operating income
Telephone $ 103,709 99,382 221,677 203,363
Other operations 10,956 4,806 16,835 10,113
Corporate overhead costs allocable to
discontinued operations (See Note 3) (5,134) (4,979) (9,932) (9,958)
- ---------------------------------------------------------------------------------------------------------
Total operating income $ 109,531 99,209 228,580 203,518
=========================================================================================================
Operating income $ 109,531 99,209 228,580 203,518
Interest expense (54,157) (57,358) (104,805) (119,061)
Nonrecurring gains and losses 3,709 (10,500) 3,709 (10,500)
Other income and expense 2,485 1,783 217 4,250
- ---------------------------------------------------------------------------------------------------------
Income from continuing operations
before income tax expense $ 61,568 33,134 127,701 78,207
=========================================================================================================
June 30, Dec. 31,
2002 2001
- --------------------------------------------------------------------------------
(Dollars in thousands)
Assets
Telephone $ 4,677,059 4,754,522
Other operations 1,098,723 718,734
Assets held for sale (See Note 3) 861,526 845,428
- --------------------------------------------------------------------------------
Total assets $ 6,637,308 6,318,684
================================================================================
(6) Financing Arrangements
On May 6, 2002, the Company issued and sold in an underwritten public
offering $500 million of Equity Units. Net proceeds to the Company from this
issuance were approximately $483.4 million. Each of the 20 million Equity Units
issued was priced at $25 and consists initially of a beneficial interest in a
CenturyTel senior unsecured note with a principal amount of $25 and a contract
to purchase shares of CenturyTel common stock no later than May 2005. The senior
notes will mature in May 2007. The total distributions on the Equity Units will
be at an initial annual rate of 6.875%, consisting of interest (6.02%) and
contract adjustment payments (0.855%). Each stock purchase contract will
generally require the holder to purchase between .6944 and .8741 of a share of
CenturyTel common stock in May 2005 in exchange for $25, subject to certain
adjustments and exceptions.
The Equity Units are reflected on the balance sheet as long-term debt in
the amount of $500 million. Interest expense is accrued at a rate of 6.02%, the
initial interest rate of the senior notes. The present value of the contract
adjustment payments was recorded as a reduction to paid-in capital and as a
liability upon the issuance of the Equity Units. Subsequent contract adjustment
payments will be allocated between the liability and interest expense based on
the effective interest method over the three-year life of the purchase contract.
The issuance costs were allocated to the debt and equity components of the
Equity Units. The debt issuance costs ($3.3 million) were computed based on
typical costs of a debt transaction and will be amortized to interest expense
over the term of the senior notes. The remainder of the issuance costs ($12.6
million) were treated as a cost of raising equity and recorded as a charge to
paid-in capital.
On July 22, 2002, the Company entered into $800 million of credit
facilities, consisting of a $533 million three-year facility and a $267 million
364-day revolving facility with a one-year term out option. The agents for these
credit facilities are JP Morgan Chase Bank, Wachovia Bank, Bank of America, Bank
One and SunTrust Bank. These facilities are designed to replace maturing credit
facilities.
As a result of entering into the above $800 million long-term credit
facilities (which will be used to refinance a credit facility expiring in late
August 2002), $173.4 million of indebtedness that would otherwise have been
classified as short-term has been classified as long-term on the Company's
accompanying consolidated balance sheet as of June 30, 2002.
(7) Subsequent Events
On July 1, 2002, the Company completed the acquisition of approximately
300,000 telephone access lines in the state of Alabama from Verizon for
approximately $1.0 billion cash. The assets purchased include (i) all telephone
access lines (which numbered nearly 300,000) and related property and equipment
comprising Verizon's local exchange operations in 90 exchanges in predominantly
rural markets throughout Alabama, (ii) Verizon's assets used to provide digital
subscriber line ("DSL") and other high speed data services within the purchased
exchanges and (iii) approximately 1,400 route miles of fiber optic cable within
the purchased exchanges. The acquired assets do not include Verizon's cellular,
personal communications services ("PCS"), long distance, dial-up Internet, or
directory publishing operations, or rights under various Verizon contracts,
including those relating to customer premise equipment. The Company will not
assume any liabilities of Verizon other than (i) those associated with
contracts, facilities and certain other assets transferred in connection with
the purchase and (ii) certain employee-related liabilities, including
liabilities for postretirement health benefits. To finance this acquisition on a
short-term basis, the Company (i) utilized net proceeds of approximately $483.4
million from the issuance of Equity Units in early May 2002, (ii) borrowed
$395 million on a floating rate basis under its $600 million short-term bridge
loan facility, (iii) utilized approximately $85 million of available cash on
hand and (iv) financed the remainder of the purchase price from the issuance
of commercial paper.
On August 1, 2002, the Company sold substantially all of its wireless
operations to Alltel and certain other purchasers for an aggregate of
approximately $1.58 billion cash. In connection with this transaction, the
Company divested its (i) interests in its majority-owned and operated cellular
systems, which at June 30, 2002 served approximately 783,000 customers and had
access to approximately 7.8 million pops, (ii) minority cellular equity
interests representing approximately 1.8 million pops at June 30, 2002, and
(iii) licenses to provide PCS covering 1.3 million pops in Wisconsin and Iowa.
Proceeds from the sale of the wireless operations are expected to ultimately be
used to finance the Company's pending acquisition of telephone access lines in
Missouri from Verizon for approximately $1.159 billion (which is expected to
close on or about August 31, 2002) and to reduce outstanding indebtedness.
(8) Commitments and Contingencies
From time to time, the Company is involved in various claims and legal
actions relating to the conduct of its business. In the opinion of management,
the ultimate disposition of these matters will not have a material adverse
effect on the Company's consolidated financial position or results of
operations.
CenturyTel, Inc.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Management's Discussion and Analysis of Financial Condition and Results of
Operations ("MD&A") included herein should be read in conjunction with MD&A and
the other information included in the Company's current report on Form 8-K dated
March 19, 2002 and filed August 13, 2002. The results of operations for the
three months and six months ended June 30, 2002 are not necessarily indicative
of the results of operations which might be expected for the entire year.
CenturyTel, Inc. and its subsidiaries (the "Company") is a regional
integrated communications company engaged primarily in providing local exchange,
long distance, Internet access and data services to customers in 21 states. On
August 1, 2002 (pursuant to a definitive agreement signed March 19, 2002), the
Company sold its wireless operations to an affiliate of ALLTEL Corporation
("Alltel") and certain other purchasers in exchange for an aggregate of
approximately $1.58 billion in cash. As a result, the Company's wireless
operations for the three months and six months ended June 30, 2002 and 2001 have
been reflected as discontinued operations on the Company's consolidated
statements of income and cash flows. For further information, see "Discontinued
Operations" below.
In addition to historical information, management's discussion and
analysis includes certain forward-looking statements regarding events and
financial trends that may affect the Company's future operating results and
financial position. Such forward-looking statements are subject to uncertainties
that could cause the Company's actual results to differ materially from such
statements. Such uncertainties include but are not limited to: the Company's
ability to effectively manage its growth, including successfully financing and
timely consummating its pending Missouri Verizon acquisition, integrating
newly-acquired businesses into the Company's operations, hiring adequate numbers
of qualified staff and successfully upgrading its billing and other information
systems; the risks inherent in rapid technological change; the effects of
ongoing changes in the regulation of the communications industry; the effects of
greater than anticipated competition in the Company's markets; possible changes
in the demand for, or pricing of, the Company's products and services; the
Company's ability to successfully introduce new product or service offerings on
a timely and cost-effective basis; the direct and indirect effects on the
Company's business resulting from the financial difficulties of other
communications companies, including the effect on the Company's ability to
collect receivables from financially troubled carriers and its ability to access
the capital markets on the same terms as in the past; and the effects of more
general factors such as changes in interest rates, in the capital markets, in
general market or economic conditions or in legislation, regulation or public
policy. These and other uncertainties related to the business are described in
greater detail in Item 1 to the Company's Annual Report on Form 10-K for the
year ended December 31, 2001. You are cautioned not to place undue reliance on
these forward-looking statements, which speak only as of the date hereof. The
Company undertakes no obligation to update any of its forward-looking statements
for any reason.
RESULTS OF OPERATIONS
Three Months Ended June 30, 2002 Compared
to Three Months Ended June 30, 2001
Net income (and diluted earnings per share) was $78.8 million ($.55) and
$154.2 million ($1.09) for the second quarter of 2002 and 2001, respectively.
Income from continuing operations was $40.2 million for the second quarter of
2002 and $21.1 million for the second quarter of 2001. Diluted earnings per
share from continuing operations was $.28 during the second quarter of 2002
compared to $.15 during the second quarter of 2001. In accordance with the
provisions of Statement of Financial Accounting Standards No. 142, "Goodwill and
Other Intangible Assets" ("SFAS 142"), amortization of goodwill ceased effective
January 1, 2002. Had the results of operations for the three months ended June
30, 2001 been subject to SFAS 142, income from continuing operations (and
diluted earnings per share) would have been $32.7 million ($.23) and net income
(and diluted earnings per share) would have been $168.4 million ($1.19).
Exclusive of the effects of nonrecurring items, diluted earnings per share
(as adjusted for goodwill amortization) would have been $.60 and $.48 for the
second quarter of 2002 and 2001, respectively. Nonrecurring items in the second
quarter of 2002 include a net negative impact ($7.3 million; $.05 per share) of
nonrecurring items consisting of a $15.0 million pre-tax charge ($.07 per share)
for uncollectible receivables primarily related to the bankruptcy of WorldCom,
Inc. and a $3.7 million pre-tax gain ($.02 per share) on the sale of certain
non-strategic assets. Net income in the second quarter of 2001 includes a net
favorable impact of nonrecurring items ($100.7 million; $.71 per share)
consisting of a gain on sale of PCS licenses ($.76 per share) and the write-down
of certain non-operating investments ($.05 per share).
Three months
ended June 30,
- -------------------------------------------------------------------------------------------------------
2002 2001
- -------------------------------------------------------------------------------------------------------
(Dollars, except per share
amounts, and
shares in thousands)
Operating income
Telephone $ 103,709 99,382
Other 10,956 4,806
Corporate overhead costs allocable to discontinued operations (5,134) (4,979)
- ------------------------------------------------------------------------------------------------------
109,531 99,209
Interest expense (54,157) (57,358)
Nonrecurring gains and losses 3,709 (10,500)
Other income and expense 2,485 1,783
Income tax expense (21,360) (12,066)
- ------------------------------------------------------------------------------------------------------
Income from continuing operations 40,208 21,068
Discontinued operations, net of tax 38,555 133,173
- ------------------------------------------------------------------------------------------------------
Net income $ 78,763 154,241
======================================================================================================
Net income, as adjusted for goodwill amortization $ 78,763 168,376
======================================================================================================
Basic earnings per share
From continuing operations $ .28 .15
From continuing operations, as adjusted for goodwill amortization $ .28 .23
From discontinued operations $ .27 .95
From discontinued operations, as adjusted for goodwill amortization $ .27 .96
Basic earnings per share $ .56 1.10
Basic earnings per share, as adjusted for goodwill amortization $ .56 1.20
Diluted earnings per share
From continuing operations $ .28 .15
From continuing operations, as adjusted for goodwill amortization $ .28 .23
From discontinued operations $ .27 .94
From discontinued operations, as adjusted for goodwill amortization $ .27 .95
Diluted earnings per share $ .55 1.09
Diluted earnings per share, as adjusted for goodwill amortization $ .55 1.19
Average basic shares outstanding 141,243 140,720
======================================================================================================
Average diluted shares outstanding 142,705 142,059
======================================================================================================
Contributions to operating revenues and operating income by the Company's
telephone and other operations for the three months ended June 30, 2002 and 2001
were as follows:
Three months
ended June 30,
- ----------------------------------------------------------------------------------
2002 2001
- ----------------------------------------------------------------------------------
Operating revenues
Telephone operations 86.7% 89.9
Other operations 13.3% 10.1
Operating income
Telephone operations 94.7% 100.2
Other operations 10.0% 4.8
Corporate overhead costs allocable to
discontinued operations (4.7)% (5.0)
- ---------------------------------------------------------------------------------
Telephone Operations
Three months
ended June 30,
- -------------------------------------------------------------------------
2002 2001
- -------------------------------------------------------------------------
(Dollars in thousands)
Operating revenues
Local service $ 125,357 123,293
Network access 220,702 212,570
Other 34,440 32,021
- -------------------------------------------------------------------------
380,499 367,884
- -------------------------------------------------------------------------
Operating expenses
Plant operations 96,147 93,490
Customer operations 32,385 28,814
Corporate and other 58,099 47,271
Depreciation and amortization 90,159 98,927
- -------------------------------------------------------------------------
276,790 268,502
- -------------------------------------------------------------------------
Operating income $ 103,709 99,382
=========================================================================
The Company conducts its telephone operations in rural, suburban and
small urban communities in 21 states. As of June 30, 2002, approximately 87% of
the Company's 1.8 million access lines were in Wisconsin, Arkansas, Washington,
Missouri, Michigan, Louisiana, Colorado, Ohio and Oregon.
Telephone operating income increased $4.3 million (4.4%) due to an
increase in operating revenues of $12.6 million (3.4%) partially offset by an
increase in operating expenses of $8.3 million (3.1%).
Of the $2.1 million (1.7%) increase in local service revenues, $1.7
million was due to the increased provision of custom calling features.
Network access revenues increased $8.1 million (3.8%) in the second
quarter of 2002 primarily due to a $5.8 million increase in revenues from the
federal Universal Service Fund, a $3.0 million increase in the partial recovery
of increased operating expenses through revenue sharing arrangements in which
the Company participates with other telephone companies, a $2.5 million increase
in rates in certain jurisdictions, and a $1.0 million increase due to revisions
of prior year revenue settlement agreements. Such increases were partially
offset by a $5.9 million decrease in intrastate revenues due to a reduction in
intrastate minutes (partially due to the displacement of minutes by wireless
services).
Other revenues increased $2.4 million (7.6%) due to a $1.2 million
increase in directory revenue and a $1.5 million increase due to revisions of
prior year revenue settlement agreements.
Access lines declined 0.1% during the three months ended June 30, 2002.
Access line growth during the three months ended June 30, 2001 was 1.1%. The
Company believes the decline in the number of access lines during 2002 is
primarily due to general economic conditions in the Company's markets,
disconnecting service to customers for non-payment and the displacement of
traditional wireline telephone services by other services.
During the second quarter of 2002, the Company incurred aggregate
operating expenses of approximately $3.1 million associated with two pending
Verizon acquisitions, one of which was completed July 1, 2002 and the other of
which is expected to be completed on or about August 31, 2002.
Plant operations expenses increased $2.7 million (2.8%), of which $4.9
million related to increases in salaries and benefits and $3.4 million related
to an increase in network costs. Such increases were partially offset by a $4.7
million decrease in access expense primarily as a result of changes in certain
optional calling plans in Arkansas approved in late 2001.
During the second quarter of 2002 customer operations expenses increased
$3.6 million (12.4%) primarily due to a $2.7 million increase in salaries and
benefits.
Corporate and other expenses increased $10.8 million (22.9%) primarily
due to an $8.1 million increase in the provision for doubtful accounts and a
$1.8 million increase in salaries and benefits. The Company recorded a provision
for uncollectible receivables, primarily related to the bankruptcy of WorldCom,
Inc., in the amount of $15.0 million during the second quarter of 2002.
Depreciation and amortization decreased $8.8 million (8.9%), of which
$14.7 million related to ceasing amortization of goodwill effective January 1,
2002 in accordance with the provisions of SFAS 142. Such decrease was partially
offset by a $6.4 million increase in depreciation expense due to higher levels
of plant in service.
Other Operations
Three months
ended June 30,
- --------------------------------------------------------------------------------
2002 2001
- --------------------------------------------------------------------------------
(Dollars in thousands)
Operating revenues
Long distance $ 34,462 28,514
Internet 14,706 8,718
Other 9,035 4,134
- --------------------------------------------------------------------------------
58,203 41,366
- --------------------------------------------------------------------------------
Operating expenses
Cost of sales and operating expenses 43,402 34,897
Depreciation and amortization 3,845 1,663
- --------------------------------------------------------------------------------
47,247 36,560
- --------------------------------------------------------------------------------
Operating income $ 10,956 4,806
================================================================================
Other operations include the results of continuing operations of the
Company which are not included in the telephone segment including, but not
limited to, the Company's non-regulated long distance operations, Internet
operations, competitive local exchange carrier operations and security
monitoring operations.
The $5.9 million increase in long distance revenues was primarily
attributable to the growth in the number of customers and increased minutes of
use. The number of long distance customers as of June 30, 2002 and 2001 was
536,400 and 414,500, respectively. Internet revenues increased $6.0 million due
to growth in the number of customers, primarily due to the expansion of the
Company's digital subscriber line ("DSL") product offering. Other revenues
increased $4.9 million primarily due to increased revenues in the Company's
competitive local exchange carrier ("CLEC") business primarily due to an
acquisition of certain CLEC operations in the first quarter of 2002.
Cost of sales and operating expenses increased $8.5 million primarily due
to (i) a $5.7 million increase in expenses associated with the Company's long
distance operations (of which $2.9 million was due to increased minutes of use;
$1.0 million was due to an increase in the provision for doubtful accounts; and
$828,000 related to increased sales and marketing costs); (ii) a $3.4 million
increase in expenses associated with the Company's CLEC operations primarily due
to the expansion of the business and operations acquired in the first quarter of
2002; and (iii) a $3.3 million increase associated with expanding the Company's
Internet operations. Such increases were partially offset by a $2.3 million
reduction in expenses due to the increased intercompany profit with regulated
affiliates (the recognition of which in accordance with regulatory accounting
principles acts to offset operating expenses).
Depreciation and amortization increased $2.2 million primarily due to
increased depreciation expense in the Company's CLEC (primarily due to the
acquisition consummated in the first quarter of 2002) and fiber network
businesses.
Interest Expense
Interest expense decreased $3.2 million (5.6%) in the second quarter of
2002 compared to the second quarter of 2001 substantially due to decreased debt
outstanding.
Nonrecurring gains and losses
In the second quarter of 2002, the Company recorded a pre-tax gain of
$3.7 million from the sale of a Personal Communication Services ("PCS") license.
In the second quarter of 2001, the Company recorded a $10.5 million
pre-tax charge due to the write-down in the value of a non-operating investment.
Income Tax Expense
Income tax expense from continuing operations increased $9.3 million in
the second quarter of 2002 compared to the second quarter of 2001 primarily due
to an increase in income before taxes. The effective income tax rate (from
continuing operations) was 34.7% and 36.4% for the three months ended June 30,
2002 and 2001, respectively. Such decrease in the effective tax rate is
primarily attributable to the effect of ceasing amortization of goodwill (some
of which was nondeductible for tax purposes) effective January 1, 2002 in
accordance with the provisions of SFAS 142.
Discontinued Operations
On August 1, 2002 (pursuant to a definitive agreement signed March 19,
2002), the Company sold substantially all of its wireless operations to Alltel
and certain other purchasers for an aggregate of approximately $1.58 billion in
cash. As a result, the Company's wireless operations for the three months ended
June 30, 2002 have been reflected as discontinued operations in the Company's
consolidated financial statements. The results of operations for the three
months ended June 30, 2001 have been restated to conform to the 2002
presentation. The following table summarizes certain information concerning the
Company's wireless operations for the periods presented.
Three months
ended June 30,
- -----------------------------------------------------------------------------------------
2002 2001
- -----------------------------------------------------------------------------------------
(Dollars in thousands)
Operating revenues $ 106,272 109,686
Operating expenses, exclusive of corporate overhead costs $ (54,863) (73,690)
Income from unconsolidated cellular entities $ 12,682 10,705
Minority interest expense $ (4,039) (3,064)
Nonrecurring gains and losses $ - 166,928
Other income and (expense) $ 77 2,596
Income tax expense $ (21,574) (79,988)
Income from discontinued operations, net of tax $ 38,555 133,173
Wireless operating revenues decreased $3.4 million (3.1%) primarily due
to a $1.7 million decrease in roaming revenues due to a reduction in roaming
rates (which was partially offset by an increase in roaming minutes of use), a
$941,000 decrease in service revenues associated principally with a reduction in
rates, and a $731,000 decrease in equipment sales.
Operating expenses, exclusive of corporate overhead costs, decreased
$18.8 million (25.5%) primarily due to (i) a decrease in depreciation and
amortization expense of $15.6 million primarily due to a $12.9 million decrease
resulting from the ceasing of depreciation and amortization of long-lived and
intangible assets in connection with the announced sale of the wireless business
(effective March 19, 2002) and a $2.7 million decrease resulting from the
ceasing of goodwill amortization in accordance with SFAS 142 (effective January
1, 2002); (ii) a $1.8 million decrease in cost of sales due to a decrease in
units sold and cost per unit; and (iii) a $1.9 million decrease in sales and
marketing expenses.
Nonrecurring gains and losses in the second quarter of 2001 relate to the
sale of 30 PCS licenses to Leap Wireless, Inc.
Six Months Ended June 30, 2002 Compared
to Six Months Ended June 30, 2001
Net income (and diluted earnings per share) was $149.5 million ($1.05) and
$201.0 million ($1.41) for the first six months of 2002 and 2001, respectively.
Income from continuing operations was $83.1 million for the first six months of
2002 and $47.9 million for the first six months of 2001. Diluted earnings per
share from continuing operations was $.58 during the first six months of 2002
compared to $.34 during the first six months of 2001. In accordance with the
provisions of Statement of Financial Accounting Standards No. 142, "Goodwill and
Other Intangible Assets" ("SFAS 142"), amortization of goodwill ceased effective
January 1, 2002. Had the results of operations for the six months ended June 30,
2001 been subject to SFAS 142, income from continuing operations (and diluted
earnings per share) would have been $71.2 million ($.50) and net income (and
diluted earnings per share) would have been $229.2 million ($1.61).
Exclusive of nonrecurring items, diluted earnings per share (as adjusted
for goodwill amortization) would have been $1.11 and $.91 for the six months
ended June 30, 2002 and 2001, respectively. Nonrecurring items for the first six
months of 2002 include a net negative impact ($9.3 million; $.06 per share) of
nonrecurring items consisting of (i) a $15.0 million pre-tax charge ($.07 per
share) for uncollectible receivables primarily related to the bankruptcy of
WorldCom, Inc., (ii) a $3.0 million charge ($.01 per share) associated with
responding to an unsolicited takeover proposal and (iii) a $3.7 million pre-tax
gain ($.02 per share) on the sale of certain non-strategic assets. Net income
for the first six months of 2001 includes a net favorable impact ($99.5 million;
$.70 per share) of nonrecurring items consisting of (i) gain on sale of PCS
licenses ($.76 per share), (ii) the write-down of certain non-operating
investments ($.05 per share) and (iii) costs incurred related to an ice storm
($.01 per share).
Six months
ended June 30,
- ------------------------------------------------------------------------------------------------------------
2002 2001
- ------------------------------------------------------------------------------------------------------------
(Dollars, except per share amounts,
and shares in thousands)
Operating income
Telephone $ 221,677 203,363
Other 16,835 10,113
Corporate overhead costs allocable to discontinued operations (9,932) (9,958)
- -------------------------------------------------------------------------------------------------------------
228,580 203,518
Interest expense (104,805) (119,061)
Nonrecurring gains and losses 3,709 (10,500)
Other income and expense 217 4,250
Income tax expense (44,636) (30,288)
- -------------------------------------------------------------------------------------------------------------
Income from continuing operations 83,065 47,919
Discontinued operations, net of tax 66,465 153,044
- -------------------------------------------------------------------------------------------------------------
Net income $ 149,530 200,963
=============================================================================================================
Net income, as adjusted for goodwill amortization $ 149,530 229,181
=============================================================================================================
Basic earnings per share
From continuing operations $ .59 .34
From continuing operations, as adjusted for goodwill amortization $ .59 .51
From discontinued operations $ .47 1.09
From discontinued operations, as adjusted for goodwill amortization $ .47 1.12
Basic earnings per share $ 1.06 1.43
Basic earnings per share, as adjusted for goodwill amortization $ 1.06 1.63
Diluted earnings per share
From continuing operations $ .58 .34
From continuing operations, as adjusted for goodwill amortization $ .58 .50
From discontinued operations $ .47 1.08
From discontinued operations, as adjusted for goodwill amortization $ .47 1.11
Diluted earnings per share $ 1.05 1.41
Diluted earnings per share, as adjusted for goodwill amortization $ 1.05 1.61
Average basic shares outstanding 141,136 140,656
============================================================================================================
Average diluted shares outstanding 142,679 142,271
============================================================================================================
Contributions to operating revenues and operating income by the Company's
telephone and other operations for the six months ended June 30, 2002 and 2001
were as follows:
Six months
ended June 30,
- ---------------------------------------------------------------------------------------------
2002 2001
- ---------------------------------------------------------------------------------------------
Operating revenues
Telephone operations 87.4% 90.0
Other operations 12.6% 10.0
Operating income
Telephone operations 97.0% 99.9
Other operations 7.4% 5.0
Corporate overhead costs allocable to discontinued operations (4.4)% (4.9)
- ---------------------------------------------------------------------------------------------
Telephone Operations
Six months
ended June 30,
- --------------------------------------------------------------------------------
2002 2001
- --------------------------------------------------------------------------------
(Dollars in thousands)
Operating revenues
Local service $ 249,234 244,454
Network access 437,278 426,437
Other 66,718 68,242
- --------------------------------------------------------------------------------
753,230 739,133
- --------------------------------------------------------------------------------
Operating expenses
Plant operations 187,233 187,375
Customer operations 62,323 58,071
Corporate and other 102,495 94,036
Depreciation and amortization 179,502 196,288
- --------------------------------------------------------------------------------
531,553 535,770
- --------------------------------------------------------------------------------
Operating income $ 221,677 203,363
================================================================================
The Company conducts its telephone operations in rural, suburban and
small urban communities in 21 states. As of June 30, 2002, approximately 87% of
the Company's 1.8 million access lines were in Wisconsin, Arkansas, Washington,
Missouri, Michigan, Louisiana, Colorado, Ohio and Oregon.
Telephone operating income increased $18.3 million (9.0%) due to an
increase in operating revenues of $14.1 million (1.9%) and a decrease in
operating expenses of $4.2 million (.8%).
The $4.8 million (2.0%) increase in local service revenues was primarily
due to a $3.3 million increase in the provision of custom calling features.
Network access revenues increased $10.8 million (2.5%) in the first six
months of 2002 primarily due to a $7.3 million increase in the partial recovery
of increased operating expenses through revenue sharing arrangements in which
the Company participates with other telephone companies, a $5.8 million increase
in revenues from the federal Universal Service Fund, and a $5.3 million increase
in rates in certain jurisdictions. Such increases were partially offset by a
$10.6 million decrease in intrastate revenues due to a reduction in
intrastate minutes (partially due to the displacement of minutes by wireless
services).
Access lines declined 0.3% during the six months ended June 30, 2002.
Access line growth during the six months ended June 30, 2001 was .8%. The
Company believes the decline in the number of access lines during 2002 is
primarily due to general economic conditions in the Company's markets,
disconnecting service to customers for non-payment and the displacement of
traditional wireline telephone services by other services.
During the first six months of 2002, the Company incurred aggregate
operating expenses of approximately $3.7 million associated with two pending
Verizon acquisitions, one of which was completed July 1, 2002 and the other of
which is expected to be completed on or about August 31, 2002.
Plant operations expenses decreased $142,000 (.1%), of which $10.1
million related to a decrease in access expenses primarily as a result of
changes in certain optional calling plans in Arkansas approved in late 2001 and
$3.1 million related to a decrease in repair and maintenance costs. Such
decreases were substantially offset by a $8.0 million increase in salaries and
benefits and a $4.6 million increase in network costs.
During the first six months of 2002 customer operations expenses
increased $4.3 million (7.3%) primarily due to a $2.3 million increase in
salaries and benefits and $1.3 million increase in customer service expenses.
Corporate and other expenses increased $8.5 million (9.0%) primarily due
to a $8.6 million increase in the provision for doubtful accounts and a $3.2
million increase in salaries and benefits. The Company recorded a provision for
uncollectible receivables, primarily related to the bankruptcy of WorldCom,
Inc., in the amount of $15.0 million during the first six months of 2002. Such
increases were partially offset by a $1.8 million decrease in expenses related
to the provision of CPE services.
Depreciation and amortization decreased $16.8 million (8.6%), of which
$29.3 million related to ceasing amortization of goodwill effective January 1,
2002 in accordance with the provisions of SFAS 142. Such decrease was partially
offset by a $13.3 million increase in depreciation expense due to higher levels
of plant in service.
Other Operations
Six months
ended June 30,
- -----------------------------------------------------------------------------
2002 2001
- -----------------------------------------------------------------------------
(Dollars in thousands)
Operating revenues
Long distance $ 66,279 56,114
Internet 27,267 17,117
Other 14,844 8,488
- -----------------------------------------------------------------------------
108,390 81,719
- -----------------------------------------------------------------------------
Operating expenses
Cost of sales and operating expenses 84,826 68,486
Depreciation and amortization 6,729 3,120
- -----------------------------------------------------------------------------
91,555 71,606
- -----------------------------------------------------------------------------
Operating income $ 16,835 10,113
=============================================================================
Other operations include the results of continuing operations of the
Company which are not included in the telephone segment including, but not
limited to, the Company's non-regulated long distance operations, Internet
operations, competitive local exchange carrier operations and security
monitoring operations.
The $10.2 million increase in long distance revenues was primarily
attributable to the growth in the number of customers and increased minutes of
use. The number of long distance customers as of June 30, 2002 and 2001 was
536,400 and 414,500, respectively. Internet revenues increased $10.2 million due
to growth in the number of customers, primarily due to the expansion of the
Company's DSL product offering. Other revenues increased $6.4 million primarily
due to increased revenues in the Company's CLEC business primarily due to an
acquisition of certain CLEC operations in the first quarter of 2002.
Cost of sales and operating expenses increased $16.3 million primarily
due to (i) an $11.3 million increase in expenses associated with the Company's
long distance operations (of which $4.9 million was due to increased minutes of
use; $2.6 million related to increased sales and marketing costs; $2.5 million
was due to an increase in the provision for doubtful accounts; and $1.0 million
was due to an increase in billing and collection costs); (ii) a $6.2 million
increase in expenses associated with the Company's CLEC operations primarily due
to the expansion of the business and operations acquired in the first quarter of
2002; and (iii) a $5.9 million increase associated with expanding the Company's
Internet operations. Such increases were partially offset by a $4.0 million
reduction in expenses due to the increased intercompany profit with regulated
affiliates (the recognition of which in accordance with regulatory accounting
principles acts to offset operating expenses).
Depreciation and amortization increased $3.6 million (115.7%) primarily
due to increased depreciation expense in the Company's fiber network and CLEC
businesses.
Interest Expense
Interest expense decreased $14.3 million (12.0%) in the first six months
of 2002 compared to the first six months of 2001 due to decreased debt
outstanding and decreased rates.
Nonrecurring gains and losses
In the second quarter of 2002, the Company recorded a pre-tax gain of
$3.7 million from the sale of a PCS license.
In the second quarter of 2001, the Company recorded a $10.5 million
pre-tax charge due to the write-down in the value of a non-operating investment.
Other Income and Expense
Other income decreased $4.0 million (94.9%) primarily due to $3.0 million
of costs recorded in the first quarter of 2002 associated with responding to an
unsolicited takeover proposal and a $2.1 million reduction in capitalized
interest.
Income Tax Expense
Income tax expense from continuing operations increased $14.3 million in
the first six months of 2002 compared to the first six months of 2001 primarily
due to an increase in income before taxes. The effective income tax rate (from
continuing operations) was 35.0% and 38.7% for the six months ended June 30,
2002 and 2001, respectively. Such decrease in the effective tax rate is
primarily attributable to the effect of ceasing amortization of goodwill (some
of which was nondeductible for tax purposes) effective January 1, 2002 in
accordance with the provisions of SFAS 142.
Discontinued Operations
On August 1, 2002 (pursuant to a definitive agreement signed March 19,
2002), the Company sold substantially all of its wireless operations to Alltel
and certain other purchasers for an aggregate of approximately $1.58 billion in
cash. As a result, the Company's wireless operations for the six months ended
June 30, 2002 have been reflected as discontinued operations in the Company's
consolidated financial statements. The results of operations for the six months
ended June 30, 2001 have been restated to conform to the 2002 presentation. The
following table summarizes certain information concerning the Company's wireless
operations for the periods presented.
Six months
ended June 30,
- -----------------------------------------------------------------------------------------
2002 2001
- -----------------------------------------------------------------------------------------
(Dollars in thousands)
Operating revenues $ 208,693 214,092
Operating expenses, exclusive of corporate overhead costs $ (122,268) (148,197)
Income from unconsolidated cellular entities $ 24,196 16,026
Minority interest expense $ (6,910) (5,701)
Nonrecurring gains and losses $ - 166,928
Other income and (expense) $ (2) 3,040
Income tax expense $ (37,244) (93,144)
Income from discontinued operations, net of tax $ 66,465 153,044
Wireless operating revenues decreased $5.4 million (2.5%) primarily due
to a $3.1 million decrease in roaming revenues due to a reduction in roaming
rates (which was partially offset by an increase in roaming minutes of use) and
a $1.8 million decrease in equipment sales.
Operating expenses, exclusive of corporate overhead costs, decreased
$25.9 million (17.5%) primarily due to (i) a decrease in depreciation and
amortization expense of $19.3 million primarily due to a $15.0 million decrease
resulting from the ceasing of depreciation and amortization of long-lived and
intangible assets in connection with the announced sale of the wireless business
(effective March 19, 2002) and a $4.3 million decrease resulting from the
ceasing of goodwill amortization in accordance with SFAS 142 (effective January
1, 2002); (ii) a $3.3 million decrease in cost of sales due to a decrease in
units sold; and (iii) a $1.0 million decrease in sales and marketing expenses.
Income from unconsolidated cellular entities increased $8.2 million
primarily due to increased earnings of certain cellular entities in which the
Company owns a minority interest.
Nonrecurring gains and losses for the first six months of 2001 relate
to the sale of 30 PCS licenses to Leap Wireless, Inc.
Accounting Pronouncements
In July 2001, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 141, "Business Combinations" ("SFAS 141") and
SFAS 142. SFAS 141 requires all business combinations consummated after June 30,
2001 to be accounted for under the purchase method of accounting; the pooling of
interests method is no longer permitted. Under SFAS 142, effective January 1,
2002, systematic amortization of goodwill is no longer permitted; instead, SFAS
142 requires goodwill recorded in a business combination to be reviewed for
impairment and to be written down only in periods in which the recorded amount
of goodwill exceeds its fair value. The Company has completed the initial
transitional goodwill impairment test of SFAS 142 and has determined its
goodwill is not impaired.
In October 2001, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 144, "Accounting for the Impairment or
Disposal of Long-Lived Assets" ("SFAS 144"). SFAS 144 addresses financial
accounting and reporting for the impairment or disposal of long-lived assets and
also broadens the reporting of discontinued operations to include all components
of an entity with operations that can be distinguished from the rest of the
entity and that will be eliminated from the ongoing operations of the entity in
a disposal transaction. The provisions of SFAS 144 are effective for financial
statements issued for fiscal years beginning after December 15, 2001. The
Company's wireless operations have been reflected as discontinued operations for
the first six months of 2002 in accordance with the provisions of SFAS 144. The
adoption of the impairment portion of SFAS 144 is not expected to have a
material effect on the results of operations of the Company.
LIQUIDITY AND CAPITAL RESOURCES
Excluding cash used for acquisitions, the Company relies on cash provided
by operations to fund its operating and capital expenditures. The Company's
operations have historically provided a stable source of cash flow which has
helped the Company continue its long-term program of capital improvements.
Net cash provided by operating activities from continuing operations was
$379.1 million during the first six months of 2002 compared to $265.3 million
during the first six months of 2001. The Company's accompanying consolidated
statements of cash flows identify major differences between net income and net
cash provided by operating activities from continuing operations for each of
these periods. For additional information relating to the continuing operations
of the Company, see Results of Operations.
Net cash used in investing activities from continuing operations was
$219.4 million and $258.7 million for the six months ended June 30, 2002 and
2001, respectively. Payments for property, plant and equipment were $30.7
million less in the first six months of 2002 than in the comparable period
during 2001. Capital expenditures from continuing operations for the six months
ended June 30, 2002 were $145.8 million for telephone operations and $33.2
million for other operations. During the first quarter of 2002, the Company
acquired the assets of certain CLEC operations for $43.8 million cash. During
the first quarter of 2001, the Company paid $47.1 million cash to acquire an
additional 18.6% interest in Spectra Communication Group, LLC, the entity
organized in 2000 to acquire and operate former Verizon properties in Missouri.
Budgeted capital expenditures from continuing operations for 2002 total
$315 million for telephone operations and $45 million for other operations.
Net cash provided by (used in) financing activities from continuing
operations was $65.7 million during the first six months of 2002 compared to
($152.0) million during the first six months of 2001. Proceeds from the issuance
of debt, net of debt payments, were $86.8 million during the first six months of
2002, compared to net payments of debt of $140.7 million during the first six
months of 2001. For additional information, see the Company's accompanying
consolidated statements of cash flows.
On May 6, 2002, the Company issued and sold in an underwritten public
offering $500 million of Equity Units. Net proceeds to the Company from this
issuance were approximately $483.4 million. Each of the 20 million Equity Units
issued was priced at $25 and consists initially of a beneficial interest in a
CenturyTel senior unsecured note with a principal amount of $25 and a contract
to purchase shares of CenturyTel common stock no later than May 2005. The senior
notes will mature in May 2007. The total distributions on the Equity Units will
be at an initial annual rate of 6.875%, consisting of interest (6.02%) and
contract adjustment payments (0.855%). Each stock purchase contract will
generally require the holder to purchase between .6944 and .8741 of a share of
CenturyTel common stock in May 2005 in exchange for $25, subject to certain
adjustments and exceptions.
On May 31, 2002, the Company entered into a $600 million short-term
bridge loan facility with Goldman Sachs Credit Partners L.P. and other lenders.
Approximately $395 million of borrowings under such credit facility, along with
$483.4 million of net proceeds from the above-mentioned issuance of Equity
Units, approximately $85 million of available cash and $37 million of commercial
paper, was used to fund the $1.0 billion cash purchase of local exchange
telephone assets in Alabama from Verizon on July 1, 2002. On August 1, 2002, all
indebtedness under this $600 million bridge loan facility was repaid, and this
facility was terminated.
On July 22, 2002, the Company entered into $800 million of credit
facilites, consisting of a $533 million three-year facility and a $267 million
364-day revolving facility with a one-year term out option. The agents for these
credit facilities are JP Morgan Chase Bank, Wachovia Bank, Bank of America, Bank
One and SunTrust Bank. These facilities are designed to replace maturing credit
facilities.
On August 1, 2002, the Company sold substanially all of its wireless
operations to Alltel and certain other purchasers for an aggregate of
approximately $1.58 billion cash. Such proceeds are expected to be used to
finance the pending acquisition of telephone access lines in Missouri from
Verizon for approximately $1.159 billion (which is expected to close on or about
August 31, 2002) and to reduce outstanding indebtedness.
Over the next several months, the Company has several material
commitments, including commitments to (i) pay Verizon approximately $1.159
billion (subject to adjustments) in exchange for telephone assets in Missouri
and (ii) pay taxes estimated at $325 million owed in December 2002 in connection
with the Company's sale of its wireless operations. The Company also has $400
million principal amount in remarketable debt securities which, depending on
market conditions, will either be remarketed by the Company's remarketing dealer
or redeemed by the Company in October 2002. The following table contains certain
information concerning the Company's material obligations as of August 1, 2002.
Payments due by period
- ----------------------------------------------------------------------------------------------------------
Less than After
Total obligations Total 1 year 1-3 years 4-5 years 5 years
- ----------------------------------------------------------------------------------------------------------
(Dollars in thousands)
Long-term debt,
including current
maturities $3,007,089 432,326 (1) 740,818 260,472 1,573,473
Verizon purchase
price obligation $1,159,000 1,159,000 - - -
Estimated income
tax payment as a
result of the sale
of wireless operations $325,000 325,000 - - -
- ----------------------------------------------------------------------------------------------------------
(1) Includes $400 million principal amount due under the Company's
remarketable debt securities described above.
As of the close of business on August 1, 2002, (i) CenturyTel had $800
million of undrawn committed bank lines of credit and (ii) CenturyTel's
subsidiaries had available $123.0 million of commitments for long-term financing
from the Rural Utilities Service and the Rural Telephone Bank for use in making
capital improvements to the Company's telephone plant and equipment. As of the
close of business on August 1, 2002, the Company had $710 million of excess cash
after receiving the proceeds from the sale of its wireless operations ($1.58
billion) less amounts utilized to repay indebtedness ($870 million). CenturyTel
also has a commercial paper program that authorizes it to have outstanding up to
$1.5 billion in commercial paper at any one time. At August 1, 2002, CenturyTel
had no commercial paper outstanding under such program.
CenturyTel believes that its $800 million of existing credit facilities,
together with available cash, will be sufficient to fund its pending Missouri
Verizon acquisition, and may be sufficient to fund its December 2002 tax
payment. If these sources do not fully fund the December 2002 tax payment or if
CenturyTel is required to redeem its remarketable debt securities in October
2002, CenturyTel will be required to seek additional financing. Based on
conversations with its lenders and financial advisors, the Company believes that
sufficient financing should be available. However, given the recent decrease in
financing available for communications companies generally, there can be no
assurance that sufficient financing will be available on attractive terms.
Following CenturyTel's issuance of Equity Units in May 2002, Moody's
Investors Service affirmed its rating of CenturyTel's long-term debt of Baa2
(with a stable outlook) and Standard & Poor's improved its rating of
CenturyTel's long-term debt to BBB+ (with a stable outlook) from BBB+ (with a
negative outlook).
OTHER MATTERS
Accounting for the Effects of Regulation
The Company currently accounts for its regulated telephone operations in
accordance with the provisions of Statement of Financial Accounting Standards
No. 71 ("SFAS 71"), "Accounting for the Effects of Certain Types of Regulation."
While the ongoing applicability of SFAS 71 to the Company's telephone operations
is being monitored due to the changing regulatory, competitive and legislative
environments, the Company believes that SFAS 71 still applies. However, it is
possible that changes in regulation or legislation or anticipated changes in
competition or in the demand for regulated services or products could result in
the Company's telephone operations not being subject to SFAS 71 in the near
future. In that event, implementation of Statement of Financial Accounting
Standards No. 101 ("SFAS 101"), "Regulated Enterprises - Accounting for the
Discontinuance of Application of FASB Statement No. 71," would require the
write-off of previously established regulatory assets and liabilities, along
with an adjustment of certain accumulated depreciation accounts to reflect the
difference between recorded depreciation and the amount of depreciation that
would have been recorded had the Company's telephone operations not been subject
to rate regulation. Such discontinuance of the application of SFAS 71 may result
in a material, noncash charge against earnings which would be reported as an
extraordinary item.
The properties to be acquired from Verizon in 2002 will not be accounted
for under the provisions of SFAS 71.
Other
The Company is in the process of developing an integrated billing and
customer care system. The costs to develop such system have been capitalized in
accordance with Statement of Position 98-1, "Accounting for the Costs of
Computer Software Developed or Obtained for Internal Use," and aggregated $153.9
million at June 30, 2002. Such costs are expected to aggregate approximately
$200 million upon completion and are expected to be amortized over a twenty-year
period. A portion of these billing system costs that relate to the wireless
business (currently estimated to be between $30 and $50 million) will be written
off in the third quarter of 2002 as a result of the sale of the Company's
wireless operations on August 1, 2002.
The system remains in the development stage, and has required
substantially more time and money to develop than originally anticipated.
Although the Company expects to complete the system in early 2004, there is no
assurance that this deadline will be met or that the system will function as
anticipated.
CenturyTel, Inc.
QUANTITATIVE AND QUALITATIVE
DISCLOSURES ABOUT MARKET RISK
Market Risk
At June 30, 2002, the fair value of the Company's long-term debt was
estimated to be $3.2 billion based on the overall weighted average rate of the
Company's long-term debt of 6.9% and an overall weighted maturity of 10 years
compared to terms and rates currently available in long-term financing markets.
Market risk is estimated as the potential decrease in fair value of the
Company's long-term debt resulting from a hypothetical increase of 69 basis
points in interest rates (ten percent of the Company's overall weighted average
borrowing rate). Such an increase in interest rates would result in
approximately a $107.4 million decrease in fair value of the Company's long-term
debt. As of June 30, 2002, all of the Company's long-term debt obligations were
fixed rate.
At the end of the second quarter of 2002, the Company had outstanding an
interest rate swap relating to $173.4 million of short-term floating rate debt
designed to eliminate the variability of cash flows in the payment of interest
related to such debt. Under this swap, which expires in August 2002, the Company
realizes a fixed effective rate of 4.845% and receives or makes settlement
payments based upon the 3-month London InterBank Offered Rate, with settlement
and rate reset dates at three-month intervals through the expiration date.
PART II. OTHER INFORMATION
CenturyTel, Inc.
Item 1: Legal Proceedings
On March 13, 2002, the Arkansas Court of Appeals vacated two orders issued
by the Arkansas Public Utility Commission ("APUC") in connection with the
Company's acquisition of its Arkansas LECs from Verizon in July 2000, and
remanded the case back to the APUC for further hearings. The Court took these
actions in response to challenges to the rates the Company has charged other
LECs for intrastate switched access service. On May 13, 2002, the APUC
reaffirmed its prior orders and the Company's intrastate switched access rates
on an interim basis subject to further rehearing and appeal proceedings. Further
rulings by the APUC are expected in the third quarter of 2002.
For information on other legal proceedings, see the Company's Annual
Report on Form 10-K for the year ended December 31, 2001 and its Quarterly
Report on Form 10-Q for the quarter ended March 31, 2002.
Item 4: Submission of Matters to a Vote of Security Holders
At the Company's annual meeting of shareholders on May 9, 2002, the
shareholders elected five Class II directors to serve until the 2005 annual
meeting of shareholders and until their successors are duly elected and
qualified, and approved the proposals set forth in the Company's proxy statement
dated March 27, 2002.
The following number of votes were cast for or were withheld from the
following nominees:
Class II Nominees For Withheld
----------------- ----------- ----------
Virginia Boulet 203,436,038 8,532,546
Ernest Butler, Jr. 200,567,132 11,401,452
James B. Gardner 202,533,891 9,434,693
R.L. Hargrove, Jr. 200,111,648 11,856,936
Johnny Hebert 199,525,520 12,443,064
The Class I and Class III directors whose terms continued after the
meeting are:
Class I Class III
----------- -------------
William R. Boles, Jr. Calvin Czeschin
W. Bruce Hanks F. Earl Hogan
C.G. Melville, Jr. Harvey P. Perry
Glen F. Post, III Jim D. Reppond
Clarke M. Williams (deceased June 5, 2002)
The following number of votes were cast in the manner indicated below
with respect to the proposal to approve the Company's 2002 Directors Stock
Option Plan:
For Against Abstain Broker No-Votes
------------ ---------- --------- ---------------
185,536,576 24,522,484 1,909,524 -0-
The following number of votes were cast in the manner indicated below
with respect to the proposal to approve the Company's 2002 Management Incentive
Compensation Plan:
For Against Abstain Broker No-Votes
------------ ---------- --------- ---------------
185,405,099 24,649,137 1,914,348 -0-
Item 6: Exhibits and Reports on Form 8-K
A. Exhibits
10.1 $533 Million Three-Year Revolving Credit Facility, dated July
22, 2002, between CenturyTel, Inc. and lenders named therein.
10.2 $267 Million 364-Day Revolving Credit Facility, dated July 22,
2002, between CenturyTel, Inc. and lenders named therein.
11 Computations of Earnings Per Share.
B. Reports on Form 8-K
The following item was reported in the Form 8-K filed April 25, 2002:
Item 5. Other Events and Regulation FD Disclosure - News
release announcing first quarter 2002 operating results.
The following item was reported in the Form 8-K filed April 29, 2002:
Item 5. Other Events and Regulation FD Disclosure -
Unaudited pro forma consolidated condensed financial
information.
The following item was reported in the Form 8-K filed May 3, 2002:
Item 5. Other Events and Regulation FD Disclosure - News
release announcing $500 million Equity Units offering.
The following item was reported in the Form 8-K filed June 28, 2002:
Item 5. Other Events and Regulation FD Disclosure - Five
executive officers or directors entered into 10b5-1
sales plan with Morgan Stanley DW Inc.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CenturyTel, Inc.
Date: August 14, 2002 /s/ Neil A. Sweasy
--------------------------
Neil A. Sweasy
Vice President and Controller
(Principal Accounting Officer)