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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q

	(MARK ONE)

For the quarterly period ended March 31, 2003

OR
(  ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ____ to ____

Commission file number 0-19179

CT COMMUNICATIONS, INC.
(Exact name of registrant as specified in its charter)

(704)722-2500
(Registrant’s telephone number, including area code)

(Former name, former address and former fiscal year,
if changed since last report)

     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. Yes [X] No [  ]

     Indicate by check mark whether the Registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes [X] No [  ]

APPLICABLE ONLY TO CORPORATE ISSUERS:

     Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

     18,739,485 shares of Common Stock outstanding as of May 1, 2003.

CT COMMUNICATIONS, INC. AND SUBSIDIARIES

INDEX

1

CT COMMUNICATIONS, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(in thousands)

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

See accompanying notes to condensed consolidated financial statements (unaudited).

2

CT COMMUNICATIONS, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets (Continued)
(in thousands, except share data)

See accompanying notes to condensed consolidated financial statements (unaudited).

3

CT COMMUNICATIONS, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Income (Unaudited)
(in thousands, except share and per share data)

See accompanying notes to condensed consolidated financial statements (unaudited).

4

CT COMMUNICATIONS, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Comprehensive Income (Loss) (Unaudited)
(in thousands)

See accompanying notes to condensed consolidated financial statements (unaudited).

5

CT COMMUNICATIONS, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows (Unaudited)
(in thousands)

See accompanying notes to condensed consolidated financial statements (unaudited).

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CT COMMUNICATIONS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

1.		In the opinion of management of CT Communications, Inc. (the “Company”), the accompanying unaudited financial statements contain all adjustments consisting of only normal recurring accruals necessary to present fairly the Company’s financial position as of March 31, 2003 and 2002, and the results of its operations and cash flows for the three months then ended. These unaudited financial statements should be read along with the Company’s Annual Report on Form 10-K for the year ended December 31, 2002 and do not include all disclosures associated with the Company’s annual financial statements.
2.		In certain instances, amounts previously reported in the 2002 consolidated financial statements have been reclassified to conform with the 2003 consolidated financial statements presentation. Such reclassifications have no effect on net income or retained earnings as previously reported.
3.		The results of operations for the three months ended March 31, 2003 and 2002 are not necessarily indicative of the results to be expected for the full year.
4.		RESTATEMENT
		In the course of the preparation of its financial statements for the year 2002, the Company identified accounting errors in estimating certain revenues and expenses in prior periods. Specifically, the Company determined that estimates for certain access revenues and network expenses, as well as several settlement processes with other telephone companies, were incorrect. The cumulative after-tax effect of these errors for the three months ended March 31, 2002, resulted in the Company recording additional net loss of $(57,542). The accompanying financial statements for three months ended March 31, 2002, have been restated to reflect the corrected calculations.
		The correction of the above items resulted in the restatement of certain amounts on the statements of income for the three months ended March 31, 2002. These items are as follows (in thousands):

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CT COMMUNICATIONS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

5.		DISCONTINUED OPERATIONS
		On December 9, 2002 the Company discontinued its wireless broadband commercial trial operations in Fayetteville, North Carolina. These operations were provided by Wavetel. The Company ceased operations due to significant operating losses, limited coverage area provided by the technology available at the time and inability to obtain outside investment. Complete disposal of the business through sale and disposal of assets is expected by June 30, 2003. As a result, Wavetel’s operations have been reflected as discontinued operations and as assets and liabilities held for sale in accordance with SFAS No. 144. Wavetel’s revenue, reported in discontinued operations was $35,203 for the three months ended March 31, 2002. Wavetel’s loss before income taxes, reported in discontinued operations, for the three months ended March 31, 2002 was $1.4 million. The Company had no outstanding indebtedness directly related to the Wavetel operations; therefore, no interest expense was allocated to discontinued operations.
		In connection with the discontinuance of operations, the Company recognized a loss of $4.4 million in 2002 to write-down the related carrying amounts of assets to their fair values less cost to sell in accordance with SFAS No. 144 and recorded related liabilities for estimated severance costs, lease termination costs, and other exit costs in accordance with Emerging Issues Task Force (“EITF”) Issue No. 94-3, “Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in Restructuring).” The assets and liabilities of the discontinued operations are presented separately under the captions “Assets of discontinued operations” and “Liabilities of discontinued operations,” respectively, in the accompanying balance sheets at March 31, 2003 and December 31, 2002, and consist of the following (in thousands):

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CT COMMUNICATIONS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

A summary of restructuring liability activity related to the discontinued operations for the three months ended March 31, 2003 is as follows (in thousands):

6.		COMMON STOCK
		The following is a summary of Common Stock transactions during the three months ended March 31, 2003:

		The Company began a stock repurchase program in March 2001, which was extended in March 2002, that authorized the repurchase of up to 1,000,000 shares of its outstanding Common Stock. In April 2003, the Board of Directors approved the continuation of the stock repurchase program through April 27, 2004 and authorized the repurchase of up to 1,000,000 shares of its outstanding Common Stock. As of March 31, 2003, 322,950 shares had been repurchased since March 2001, at a cost of approximately $4.7 million.
		Outstanding options to purchase approximately 654,000 shares of Common Stock for the three months ended March 31, 2003 and approximately 430,000 shares of Common Stock for the three months ended March 31, 2002 were not included in the computation of diluted earnings per share and diluted weighted shares outstanding because the exercise price of these options was greater than the average market price of the Common Stock during the respective periods.

9

CT COMMUNICATIONS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

7.		SECURITIES AVAILABLE-FOR-SALE
		The amortized cost, gross unrealized holding gains, gross unrealized holding losses and fair value for the Company’s investments by major security type and class of security at March 31, 2003 and December 31, 2002 were as follows (in thousands):

8.		INVESTMENTS IN UNCONSOLIDATED COMPANIES
		Investments in unconsolidated companies consist of the following (in thousands):

		On September 14, 2001, the Company’s wholly-owned subsidiary, CT Wireless Cable, Inc. (“CTWC”), and Wireless One of North Carolina, L.L.C. (“WONC”), entered into a Limited Liability Company Interest Purchase Agreement (the “Purchase Agreement”) with Wireless One, Inc., a subsidiary of WorldCom, Inc. (“Wireless One”), and Worldcom Broadband Solutions, Inc. pursuant to which WONC would purchase from Wireless One its entire 50% interest in WONC. The FCC approved this transaction on March 28, 2002 and the transaction was closed on April 5, 2002. At December 31, 2002, CTWC held 100% of the equity interest in WONC. This transaction has been accounted for using the purchase method of accounting. As a result, the results of WONC have been consolidated with the Company’s results from the beginning of the second quarter 2002. Pro forma results for WONC are not material to the Company’s consolidated financial statements.
		The total purchase price for Wireless One’s interest in WONC was $20.7 million, $3.0 million of which was paid in cash at the closing and the remainder of which was paid in the form of an interest bearing promissory note of WONC. The promissory note is payable over the 10 year period following the closing, with a $7.0 million payment due by 12 months from the closing date (which payment may be deferred for up to an additional two years) and the remainder payable in equal annual installments beginning after six years. In the event the $7.0 million payment is not made when due, either CTWC or Wireless One may cause WONC to transfer certain of its licensed frequencies to Wireless One in payment of the outstanding principal amount of the promissory note. The promissory note is secured by a pledge of WONC’s channel rights.

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CT COMMUNICATIONS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

The total purchase price of $20.7 million was allocated as follows (in thousands):

		On July 19, 2002, WONC delivered a “Split-Up Notice” to Wireless One pursuant to the Purchase Agreement. This notice sets into motion a process under the Purchase Agreement pursuant to which WONC will transfer to Wireless One certain of WONC’s licensed frequencies.
		On April 22, 2003, WONC executed an agreement that results in the cancellation of a $17.7 million promissory note payable to Wireless One. The agreement unwinds WONC’s purchase of Wireless One’s interest in WONC in exchange for the payment of accrued interest due under the promissory note and transfer of certain licensed frequencies to Wireless One and the cancellation of the $17.7 million promissory note payable to Wireless One. The cancellation of the promissory note will occur in the second quarter of 2003.
		On May 9, 2003, West Corporation purchased the stock of ITC Holding Company, Inc. (“ITC”). The Company had a 4.4% equity interest in ITC. This transaction resulted in a distribution to the Company of $13.4 million in cash plus stock in a newly formed company that will hold certain assets not acquired by West Corporation.
9.		LONG-TERM DEBT
		Long-term debt consists of the following:
		The Company has a $90.0 million revolving five year line of credit with interest at three month LIBOR plus a spread based on various financial ratios. The interest rate on March 31, 2003 was 2.79%. The credit facility provides for quarterly payments of interest until maturity on March 31, 2006. As of March 31, 2003, $60.0 million was outstanding under the revolving credit agreement. The Company also has a 7.32% fixed rate $50.0 million term loan that matures on December 31, 2014. All $50.0 million was outstanding as of March 31, 2003. The Company also has an additional line of credit for $10.0 million at one month LIBOR plus 1.25%. As of March 31, 2003, the Company had no amounts outstanding under this credit line.
		At March 31, 2003, the Company has a $17.7 million note payable to Wireless One that bears interest at 9% annually with principal payments due over the 10 year period ending March 2012. A $7.0 million principal payment was due by March 2003 (which payment may be deferred until March 2005 with the payment of accrued interest) and the remainder payable in equal annual installments beginning in March 2008. As discussed in Note 8, on April 22, 2003, WONC executed an agreement that results in the cancellation of a $17.7 million promissory note payable to Wireless One.
		The Company has three interest rate swap transactions to fix $10.0 million, $5.0 million, and $5.0 million of the amounts outstanding under the $90.0 million revolving line of credit at rates of 5.9%, 4.53%, and 3.81%, respectively, plus a current spread of 1.25%. The fair value of each of the swaps as of March 31, 2003 was ($469,790), ($372,917), and ($204,540), respectively.

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CT COMMUNICATIONS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

10.		GOODWILL
		On January 1, 2002, the Company adopted Statement of Financial Accounting Standards (“SFAS”) No. 142, “Goodwill and Other Intangible Assets.” In accordance with SFAS No. 142, the Company discontinued goodwill amortization and tested goodwill for impairment as of January 1, 2002, determining that the recognition of an impairment loss was not necessary. The Company will continue to test goodwill for impairment at least annually. Goodwill was $9.9 million as of March 31, 2003, and was unchanged for the quarter then ended. No impairment was required based on the test performed in accordance with SFAS No. 142.
11.		RECENT ACCOUNTING PRONOUNCEMENTS
		In April 2002, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 145, “Rescission of FASB Statements No. 4, 44 and 64, Amendment of FASB Statement No. 13, and Technical Corrections”. This statement eliminates extraordinary accounting treatment for a gain or loss reported on the extinguishment of debt and amends other existing authoritative pronouncements to make technical corrections, clarify meanings, or describe their applicability under changed conditions. The provisions of this statement are effective for the Company with the beginning of fiscal year 2003. The adoption of this statement did not have a material impact on the Company’s overall financial position or results of operations.
		In June 2002, the FASB issued SFAS No. 146, “Accounting for Costs Associated with Exit or Disposal Activities”. SFAS No. 146 requires that the fair value of a liability associated with an exit or disposal activity be recognized when the liability is incurred. Prior to the adoption of SFAS No. 146, certain exit costs were recognized when the Company committed to a restructuring plan, which may have been before the liability was incurred. The Company will apply the provisions of SFAS No. 146 for all exit or disposal activities initiated after December 31, 2002.
		In December 2002, the FASB issued Statement No. 148, “Accounting for Stock-Based Compensation—Transition and Disclosure”. SFAS No. 148 presents additional alternatives for transitioning to the fair value method of accounting for stock-based compensation, prescribes the format to be used for pro forma disclosures and requires the inclusion of similar pro forma disclosures in interim financial statements. SFAS No. 148 is effective for fiscal years ending after December 15, 2002. The interim disclosure provisions are effective for financial reports containing financial statements for interim periods beginning after December 15, 2002. The adoption of this statement did not have a significant effect on the Company’s financial position or results of operations.
		In January 2003, the FASB issued Interpretation No. 46, “Consolidation of Variable Interest Entities,” (“Interpretation 46”) to clarify the conditions under which assets, liabilities and activities of another entity should be consolidated into the financial statements of a company. Interpretation 46 requires the consolidation of a variable interest entity (including a special purpose entity such as that utilized in an accounts receivable securitization transaction) by a company that bears the majority of the risk of loss from the variable interest entity’s activities, is entitled to receive a majority of the variable interest entity’s residual returns or both. The provisions of Interpretation 46 are required to be adopted by the Company in 2003. The Company does not believe the adoption of Interpretation 46 will have a material impact on its overall financial position or results of operations.
12.		STOCK OPTIONS
		The Company applies the intrinsic value-based method of accounting prescribed by Accounting Principles Board (“APB”) Opinion No. 25, “Accounting for Stock Issued to Employees,” and related interpretations including FASB Interpretation No. 44, “Accounting for Certain Transactions Involving Stock Compensation an Interpretation of APB Opinion No. 25” issued in March 2000 to account for its fixed plan stock options. Under this method, compensation expense is recorded on the date of grant only if the current market price of the underlying stock exceeded the exercise price. SFAS No. 123, “Accounting for Stock-Based Compensation,” established accounting and disclosure requirements using a fair value-based method of accounting for stock-based employee compensation plans. As allowed by SFAS No. 123, the Company has elected to continue to apply the intrinsic value-based method of accounting described above, and has adopted the disclosure requirements of SFAS No. 123 and SFAS No. 148.

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CT COMMUNICATIONS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

The Company applies APB Opinion No. 25 and related Interpretations in accounting for its plans. Accordingly, no compensation cost has been recognized for its fixed stock option plans and its stock purchase plan. Had compensation cost for the Company’s stock-based compensation plans been determined consistent with SFAS No. 123, the Company’s net income and earnings per share would have been reduced to the pro forma amounts indicated below (in thousands except per share data):

13.		SEGMENT INFORMATION
		The Company has six reportable segments, each of which are strategic businesses that are managed separately due to certain fundamental differences such as regulatory environment or services offered. The segments and a description of their businesses are as follows: the incumbent local exchange carrier (“ILEC”), which provides local telephone services, the digital wireless group (“Digital Wireless”), which provides wireless phone services, the competitive local exchange carrier (“CLEC”), which provides competitive local telephone services to customers outside the ILEC’s operating area, the Greenfield business (“Greenfield”), which provides full telecommunications services to mixed-use developments outside the ILEC’s operating area, internet and data services (“IDS”), which provides dial-up and high-speed internet access and other data related services, Palmetto MobileNet, L.P. (“Palmetto”), which is a limited partnership with interests in wireless phone service in North and South Carolina of which the Company has an equity interest through CT Cellular, and all other business units, investments and operations of the Company (“Other”). Quarterly information for the Palmetto reporting segment is not shown separately below due to the lack of availability of timely financial information. Palmetto is not a public company and therefore, is not subject to the same reporting deadlines as the Company. The Company will continue to include the financial information for Palmetto on an annual basis as presented in the Form 10-K for the year ended December 31, 2002.

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CT COMMUNICATIONS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

Accounting policies of the segments are the same as those described in the summary of significant accounting policies included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2002. The Company evaluates performance based on operating income. Intersegment transactions have been eliminated for purposes of calculating operating income. All segments provide services primarily within North Carolina. Greenfield also provides service in Georgia. Selected data by business segment for the three months ended March 31, 2003 and 2002, is as follows (in thousands):