Louisiana
|
72-0651161
|
|
(State
or other jurisdiction of
|
(I.R.S.
Employer
|
|
incorporation
or organization)
|
Identification
No.)
|
Large
accelerated filer [X]
|
Accelerated
filer [ ]
|
Non-accelerated
filer [ ]
|
Part
I.
|
Financial
Information:
|
|||
Item
1.
|
Financial
Statements
|
|||
Consolidated
Statements of Income--Three Months
|
||||
Ended
March 31, 2007 and 2006
|
3
|
|||
Consolidated
Statements of Comprehensive Income--
|
||||
Three
Months Ended March 31, 2007 and 2006
|
4
|
|||
Consolidated
Balance Sheets--March 31, 2007 and
|
||||
December
31, 2006
|
5
|
|||
Consolidated
Statements of Cash Flows--
|
||||
Three
Months Ended March 31, 2007 and 2006
|
6
|
|||
Consolidated
Statements of Stockholders' Equity--
|
||||
Three
Months Ended March 31, 2007 and 2006
|
7
|
|||
Notes
to Consolidated Financial Statements
|
8-13
|
|||
Item
2.
|
Management's
Discussion and Analysis of Financial
|
|||
Condition
and Results of Operations
|
14-18
|
|||
Item
3.
|
Quantitative
and Qualitative Disclosures About Market Risk
|
19
|
||
Item
4.
|
Controls
and Procedures
|
20
|
||
Part
II.
|
|
Other
Information
|
||
Item
1.
|
Legal
Proceedings
|
21
|
||
Item
2.
|
Unregistered
Sales of Equity Securities and Use of Proceeds
|
21
|
||
Item
6.
|
Exhibits
and Reports on Form 8-K
|
22
|
||
Signature
|
23
|
Three
months
|
||||||||
ended
March 31,
|
||||||||
2007
|
2006
|
|||||||
(Dollars,
except per
share
amounts, and
shares
in thousands)
|
||||||||
OPERATING
REVENUES
|
$ |
600,855
|
611,291
|
|||||
OPERATING
EXPENSES
|
||||||||
Cost
of services and products (exclusive of depreciation and
amortization)
|
213,531
|
222,555
|
||||||
Selling,
general and administrative
|
91,457
|
95,940
|
||||||
Depreciation
and amortization
|
127,784
|
134,872
|
||||||
Total
operating expenses
|
432,772
|
453,367
|
||||||
OPERATING
INCOME
|
168,083
|
157,924
|
||||||
OTHER
INCOME (EXPENSE)
|
||||||||
Interest
expense
|
(46,961 | ) | (50,086 | ) | ||||
Other
income (expense)
|
5,290
|
4,597
|
||||||
Total
other income (expense)
|
(41,671 | ) | (45,489 | ) | ||||
INCOME
BEFORE INCOME TAX EXPENSE
|
126,412
|
112,435
|
||||||
Income
tax expense
|
48,542
|
43,175
|
||||||
NET
INCOME
|
$ |
77,870
|
69,260
|
|||||
BASIC
EARNINGS PER SHARE
|
.70
|
.57
|
||||||
DILUTED
EARNINGS PER SHARE
|
$ |
.68
|
.55
|
|||||
DIVIDENDS
PER COMMON SHARE
|
$ |
.065
|
.0625
|
|||||
AVERAGE
BASIC SHARES OUTSTANDING
|
111,031
|
122,394
|
||||||
AVERAGE
DILUTED SHARES OUTSTANDING
|
116,308
|
127,959
|
||||||
Three
months
|
||||||||
ended
March 31,
|
||||||||
2007
|
2006
|
|||||||
(Dollars
in thousands)
|
||||||||
NET
INCOME
|
$ |
77,870
|
69,260
|
|||||
OTHER
COMPREHENSIVE INCOME, NET OF TAX:
|
||||||||
Minimum
pension liability adjustment, net of ($824) tax
|
-
|
(1,322 | ) | |||||
Unrealized
gain (loss) on investments, net of ($51) and $41 tax
|
(82 | ) |
65
|
|||||
Derivative
instruments:
|
||||||||
Net
gains on derivatives hedging the variability of cash flows, net
of $294
tax
|
471
|
-
|
||||||
Reclassification
adjustment for losses included in net income, net of $59
and $59
tax
|
94
|
94
|
||||||
Items
related to employee benefit plans*:
|
||||||||
Change
in net actuarial loss, net of $218 tax
|
349
|
-
|
||||||
Amortization
of net actuarial loss, net of $907 tax
|
1,456
|
-
|
||||||
Amortization
of net prior service credit, net of ($178) tax
|
(286 | ) |
-
|
|||||
Amortization
of unrecognized transition asset, net of ($14) tax
|
(22 | ) |
-
|
|||||
Net
change in other comprehensive income (loss), net of tax
|
1,980
|
(1,163 | ) | |||||
COMPREHENSIVE
INCOME
|
$ |
79,850
|
68,097
|
March
31,
|
December
31,
|
|||||||
2007
|
2006
|
|||||||
(Dollars
in thousands)
|
||||||||
ASSETS
|
||||||||
CURRENT
ASSETS
|
||||||||
Cash
and cash equivalents
|
$ |
763,749
|
25,668
|
|||||
Accounts
receivable, less allowance of $19,013 and $20,905
|
211,534
|
227,346
|
||||||
Materials
and supplies, at average cost
|
6,994
|
6,628
|
||||||
Other
|
30,586
|
30,475
|
||||||
Total
current assets
|
1,012,863
|
290,117
|
||||||
NET
PROPERTY, PLANT AND EQUIPMENT
|
||||||||
Property,
plant and equipment
|
7,919,996
|
7,893,760
|
||||||
Accumulated
depreciation
|
(4,885,439 | ) | (4,784,483 | ) | ||||
Net
property, plant and equipment
|
3,034,557
|
3,109,277
|
||||||
GOODWILL
AND OTHER ASSETS
|
||||||||
Goodwill
|
3,431,136
|
3,431,136
|
||||||
Other
|
611,555
|
610,477
|
||||||
Total
goodwill and other assets
|
4,042,691
|
4,041,613
|
||||||
TOTAL
ASSETS
|
$ |
8,090,111
|
7,441,007
|
|||||
LIABILITIES
AND EQUITY
|
||||||||
CURRENT
LIABILITIES
|
||||||||
Current
maturities of long-term debt
|
$ |
360,749
|
155,012
|
|||||
Short-term
debt
|
-
|
23,000
|
||||||
Accounts
payable
|
126,765
|
129,350
|
||||||
Accrued
expenses and other liabilities
|
||||||||
Salaries
and benefits
|
45,077
|
54,100
|
||||||
Income
taxes
|
40,138
|
60,522
|
||||||
Other
taxes
|
55,416
|
46,890
|
||||||
Interest
|
55,985
|
73,725
|
||||||
Other
|
28,729
|
23,352
|
||||||
Advance
billings and customer deposits
|
57,237
|
51,614
|
||||||
Total
current liabilities
|
770,096
|
617,565
|
||||||
LONG-TERM
DEBT
|
2,916,511
|
2,412,852
|
||||||
DEFERRED
CREDITS AND OTHER LIABILITIES
|
1,276,274
|
1,219,639
|
||||||
STOCKHOLDERS'
EQUITY
|
||||||||
Common
stock, $1.00 par value, authorized 350,000,000 shares, issued
and outstanding 110,311,175 and 113,253,889 shares
|
110,311
|
113,254
|
||||||
Paid-in
capital
|
50,771
|
24,256
|
||||||
Accumulated
other comprehensive loss, net of tax
|
(102,962 | ) | (104,942 | ) | ||||
Retained
earnings
|
3,061,660
|
3,150,933
|
||||||
Preferred
stock - non-redeemable
|
7,450
|
7,450
|
||||||
Total
stockholders’ equity
|
3,127,230
|
3,190,951
|
||||||
TOTAL
LIABILITIES AND EQUITY
|
$ |
8,090,111
|
7,441,007
|
Three
months
|
||||||||
ended
March 31,
|
||||||||
2007
|
2006
|
|||||||
(Dollars
in thousands)
|
||||||||
OPERATING
ACTIVITIES
|
||||||||
Net
income
|
$ |
77,870
|
69,260
|
|||||
Adjustments
to reconcile net income to net cash provided by operating
activities:
|
||||||||
Depreciation
and amortization
|
127,784
|
134,872
|
||||||
Deferred
income taxes
|
13,371
|
9,419
|
||||||
Changes
in current assets and current liabilities:
|
||||||||
Accounts
receivable
|
15,812
|
23,618
|
||||||
Accounts
payable
|
(2,585 | ) | (4,711 | ) | ||||
Accrued
income and other taxes
|
35,695
|
(37,072 | ) | |||||
Other
current assets and other current liabilities, net
|
(15,030 | ) | (13,892 | ) | ||||
Retirement
benefits
|
5,636
|
7,378
|
||||||
Excess
tax benefits from share-based compensation
|
(3,032 | ) | (4,186 | ) | ||||
Increase
(decrease) in other noncurrent assets
|
1,032
|
(2,590 | ) | |||||
Increase
(decrease) in other noncurrent liabilities
|
(401 | ) |
1,392
|
|||||
Other,
net
|
2,558
|
542
|
||||||
Net
cash provided by operating activities
|
258,710
|
184,030
|
||||||
INVESTING
ACTIVITIES
|
||||||||
Payments
for property, plant and equipment
|
(48,880 | ) | (60,088 | ) | ||||
Investment
in unconsolidated cellular entity
|
-
|
(5,222 | ) | |||||
Other,
net
|
(1,635 | ) | (408 | ) | ||||
Net
cash used in investing activities
|
(50,515 | ) | (65,718 | ) | ||||
FINANCING
ACTIVITIES
|
||||||||
Net
proceeds from the issuance of long-term debt
|
741,840
|
-
|
||||||
Payments
of debt
|
(64,955 | ) | (8,002 | ) | ||||
Proceeds
from issuance of short-term debt
|
-
|
291,000
|
||||||
Proceeds
from issuance of common stock
|
20,031
|
32,623
|
||||||
Repurchase
of common stock
|
(164,009 | ) | (573,888 | ) | ||||
Cash
dividends
|
(7,309 | ) | (7,301 | ) | ||||
Excess
tax benefits from share-based compensation
|
3,032
|
4,186
|
||||||
Other,
net
|
1,256
|
(456 | ) | |||||
Net
cash provided by (used in) financing activities
|
529,886
|
(261,838 | ) | |||||
Net
increase (decrease) in cash and cash equivalents
|
738,081
|
(143,526 | ) | |||||
Cash
and cash equivalents at beginning of period
|
25,668
|
158,846
|
||||||
Cash
and cash equivalents at end of period
|
$ |
763,749
|
15,320
|
|||||
Supplemental
cash flow information:
|
||||||||
Income
taxes paid
|
$ |
8,022
|
69,376
|
|||||
Interest
paid (net of capitalized interest of $267 and $536)
|
$ |
64,434
|
66,586
|
|||||
Three
months
|
||||||||
ended
March 31,
|
||||||||
2007
|
2006
|
|||||||
(Dollars
in thousands)
|
||||||||
COMMON
STOCK
|
||||||||
Balance
at beginning of period
|
$ |
113,254
|
131,074
|
|||||
Issuance
of common stock through dividend reinvestment, incentive
and
benefit plans and other
|
754
|
1,433
|
||||||
Repurchase
of common stock
|
(3,697 | ) | (16,523 | ) | ||||
Balance
at end of period
|
110,311
|
115,984
|
||||||
PAID-IN
CAPITAL
|
||||||||
Balance
at beginning of period
|
24,256
|
129,806
|
||||||
Issuance
of common stock through dividend reinvestment, incentive and
benefit plans
|
19,277
|
31,190
|
||||||
Repurchase
of common stock
|
-
|
(71,362 | ) | |||||
Excess
tax benefits from share-based compensation
|
3,032
|
4,186
|
||||||
Share-based
compensation and other
|
4,206
|
1,626
|
||||||
Balance
at end of period
|
50,771
|
95,446
|
||||||
ACCUMULATED
OTHER COMPREHENSIVE LOSS, NET OF TAX
|
||||||||
Balance
at beginning of period
|
(104,942 | ) | (9,619 | ) | ||||
Net
change in other comprehensive income (loss), net of reclassification
adjustment, net of tax
|
1,980
|
(1,163 | ) | |||||
Balance
at end of period
|
(102,962 | ) | (10,782 | ) | ||||
RETAINED
EARNINGS
|
||||||||
Balance
at beginning of period
|
3,150,933
|
3,358,162
|
||||||
Net
income
|
77,870
|
69,260
|
||||||
Repurchase
of common stock
|
(160,312 | ) | (486,003 | ) | ||||
Cumulative
effect of adoption of SAB 108 (see Note 1)
|
-
|
9,705
|
||||||
Cumulative
effect of adoption of FIN 48 (see Note 6)
|
478
|
-
|
||||||
Cash
dividends declared
|
||||||||
Common
stock - $.065 and $.0625 per share, respectively
|
(7,216 | ) | (7,203 | ) | ||||
Preferred
stock
|
(93 | ) | (98 | ) | ||||
Balance
at end of period
|
3,061,660
|
2,943,823
|
||||||
PREFERRED
STOCK - NON-REDEEMABLE
|
||||||||
Balance
at beginning and end of period
|
7,450
|
7,850
|
||||||
TOTAL
STOCKHOLDERS' EQUITY
|
$ |
3,127,230
|
3,152,321
|
(1)
|
Basis
of Financial Reporting
|
March
31,
|
Dec.
31,
|
|||||||
2007
|
2006
|
|||||||
(Dollars
in thousands)
|
||||||||
Goodwill
|
$ |
3,431,136
|
3,431,136
|
|||||
Intangible
assets subject to amortization
|
||||||||
Customer
base
|
||||||||
Gross
carrying amount
|
$ |
25,094
|
25,094
|
|||||
Accumulated
amortization
|
(7,441 | ) | (7,022 | ) | ||||
Net
carrying amount
|
$ |
17,653
|
18,072
|
|||||
Contract
rights
|
||||||||
Gross
carrying amount
|
$ |
4,187
|
4,187
|
|||||
Accumulated
amortization
|
(3,605 | ) | (3,257 | ) | ||||
Net
carrying amount
|
$ |
582
|
930
|
|||||
Intangible
asset not subject to amortization
|
$ |
36,690
|
36,690
|
(3)
|
Postretirement
Benefits
|
Three
months
|
||||||||
ended
March 31,
|
||||||||
2007
|
2006
|
|||||||
(Dollars
in thousands)
|
||||||||
Service
cost
|
$ |
1,718
|
1,708
|
|||||
Interest
cost
|
5,018
|
4,644
|
||||||
Expected
return on plan assets
|
(621 | ) | (596 | ) | ||||
Amortization
of unrecognized actuarial loss
|
899
|
910
|
||||||
Amortization
of unrecognized prior service cost
|
(505 | ) | (212 | ) | ||||
Net
periodic postretirement benefit cost
|
$ |
6,509
|
6,454
|
(4)
|
Defined
Benefit Retirement Plans
|
Three
months
|
||||||||
ended
March 31,
|
||||||||
2007
|
2006
|
|||||||
(Dollars
in thousands)
|
||||||||
Service
cost
|
4,617
|
4,263
|
||||||
Interest
cost
|
6,905
|
6,217
|
||||||
Expected
return on plan assets
|
(9,049 | ) | (8,184 | ) | ||||
Net
amortization and deferral
|
2,224
|
2,008
|
||||||
Net
periodic pension expense
|
$ |
4,697
|
4,304
|
(5)
|
Stock-based
Compensation
|
Average
|
|||||
remaining
|
Aggregate
|
||||
Number
|
Average
|
contractual
|
intrinsic
|
||
of
options
|
price
|
term
(in years)
|
value
|
||
Outstanding
|
3,810,745
|
$35.11
|
6.9
|
$38,412,000
|
|
Exercisable
|
2,653,950
|
$32.86
|
5.8
|
$32,723,000
|
(6)
|
Income
Tax Uncertainties
|
Jurisdiction
|
Open
tax years
|
||
Federal
|
2001-current
|
||
State
|
|||
Louisiana
|
1997-current
|
||
Montana
|
2000-current
|
||
Minnesota
|
2001-current
|
||
Oregon
|
2001-current
|
||
Wisconsin
|
2001-current
|
||
All
other 22 states
|
2002-current
|
(7)
|
Debt
Offerings
|
(8)
|
Business
Segments
|
Three
months
|
|||||||||
ended
March 31,
|
|||||||||
2007
|
2006
|
||||||||
(Dollars
in thousands)
|
|||||||||
Voice
|
$ |
209,075
|
217,014
|
||||||
Network
access
|
211,399
|
225,323
|
|||||||
Data
|
95,864
|
83,238
|
|||||||
Fiber
transport and CLEC
|
38,326
|
35,780
|
|||||||
Other
|
46,191
|
49,936
|
|||||||
Total
operating revenues
|
$ |
600,855
|
|
611,291
|
(9)
|
Recent
Accounting Pronouncement
|
(10)
|
Commitments
and Contingencies
|
(11)
|
Subsequent
Events
|
Three
months
|
||||||||
ended
March 31,
|
||||||||
2007
|
2006
|
|||||||
(Dollars,
except per share amounts,
and
shares
in thousands)
|
||||||||
Operating
income
|
$ |
168,083
|
157,924
|
|||||
Interest
expense
|
(46,961 | ) | (50,086 | ) | ||||
Other
income (expense)
|
5,290
|
4,597
|
||||||
Income
tax expense
|
(48,542 | ) | (43,175 | ) | ||||
Net
income
|
$ |
77,870
|
69,260
|
|||||
Basic
earnings per share
|
$ |
.70
|
.57
|
|||||
Diluted
earnings per share
|
$ |
.68
|
.55
|
|||||
Average
basic shares outstanding
|
111,031
|
122,394
|
||||||
Average
diluted shares outstanding
|
116,308
|
127,959
|
Three
months
|
||||||||
ended
March 31,
|
||||||||
2007
|
2006
|
|||||||
(Dollars
in thousands)
|
||||||||
Voice
|
$ |
209,075
|
217,014
|
|||||
Network
access
|
211,399
|
225,323
|
||||||
Data
|
95,864
|
83,238
|
||||||
Fiber
transport and CLEC
|
38,326
|
35,780
|
||||||
Other
|
46,191
|
49,936
|
||||||
$ |
600,855
|
611,291
|
Three
months
|
||||||||
ended
March 31,
|
||||||||
2007
|
2006
|
|||||||
(Dollars
in thousands)
|
||||||||
Cost
of services and products (exclusive of depreciation and
amortization)
|
$ |
213,531
|
222,555
|
|||||
Selling,
general and administrative
|
91,457
|
95,940
|
||||||
Depreciation
and amortization
|
127,784
|
134,872
|
||||||
$ |
432,772
|
453,367
|
Item
1.
|
Legal
Proceedings.
|
Item
2.
|
Unregistered
Sales of Equity Securities and Use of
Proceeds
|
Total
|
Approximate
|
|||||||||||||||
Number
of
|
Dollar
Value
|
|||||||||||||||
Shares
|
of
Shares (or
|
|||||||||||||||
Purchased
as
|
Units)
that
|
|||||||||||||||
Part
of Publicly
|
May
Yet Be
|
|||||||||||||||
Total
Number
|
Announced
|
Purchased
|
||||||||||||||
of
Shares
|
Average
Price
|
Plans
or
|
Under
the Plans
|
|||||||||||||
Period
|
Purchased
|
Per
Share
|
Programs
|
or
Programs*
|
||||||||||||
January
1 - January 31, 2007
|
1,426,508
|
$ |
43.71
|
1,424,626
|
$ |
237,888,964
|
||||||||||
February
1 – February 28, 2007
|
1,048,577
|
$ |
45.03
|
1,048,577
|
$ |
190,672,323
|
||||||||||
March
1 – March 31, 2007
|
1,222,400
|
$ |
44.47
|
1,222,400
|
$ |
136,310,623
|
||||||||||
Total
|
3,697,485
|
$ |
44.34
|
3,695,603
|
||||||||||||
Item
6.
|
Exhibits
and Reports on Form 8-K
|
||
A.
|
Exhibits
|
||
3.4
|
Charter
of the Compensation Committee of the Board of Directors, as
amended
through February 27, 2007.
|
||
10.1
|
Form
of Stock Option Agreement, pursuant to the 2005 Management
Incentive
Compensation Plan and dated as of February 26, 2007, entered
into between
CenturyTel and its executive officers.
|
||
10.2
|
Form
of Restricted Stock Agreement, pursuant to the 2005 Management
Incentive
Compensation Plan and dated as of February 26, 2007, entered
into between
CenturyTel and its executive officers.
|
||
11
|
Computations
of Earnings Per Share.
|
||
31.1
|
Registrant’s
Chief Executive Officer certification pursuant to Section 302
of the
Sarbanes-Oxley Act of 2002
|
||
31.2
|
Registrant’s
Chief Financial Officer certification pursuant to Section 302
of the
Sarbanes-Oxley Act of 2002.
|
||
32
|
Registrant’s
Chief Executive Officer and Chief Financial Officer certification
pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002
|
||
B.
|
Reports
on Form 8-K
|
||
The
following items were reported in the Form 8-K filed February
15,
2007:
|
|||
Items
2.02 and 9.01 - Results of Operations and Financial Condition
and
Financial Statements and Exhibits. News release announcing
fourth quarter
2006 operating results.
|
|||
The
following item was reported in the Form 8-K filed March 26,
2007:
|
|||
Items
9.01 – Financial Statements and Exhibits. Ratio of Earnings to
Fixed Charges.
|
|||
The
following items were reported in the Form 8-K filed March 29,
2007:
|
|||
Items
1.01, 2.03 and 9.01 – Entry Into a Material Definitive Agreement, Creation
of a Direct Financial Obligation or an Obligation under an
Off-Balance
Sheet Arrangement of the Registrant and Financial Statements
and
Exhibits. Completion of the issuance of $500 million of
6.0% Senior Notes, Series N, due 2017, and $250 million of
5.5% Senior
Notes, Series O, due 2013.
|
CenturyTel, Inc. | |
Date:
May 9, 2007
|
/s/
Neil A. Sweasy
|
Neil
A. Sweasy
|
|
Vice
President and Controller
|
|
(Principal
Accounting Officer)
|