Louisiana
|
72-0651161
|
|||
(State or other jurisdiction
of
|
(IRS
Employer
|
|||
incorporation
or organization)
|
Identification
No.)
|
100
CenturyTel Drive, Monroe, Louisiana
|
71203
|
|
(Address
of principal executive offices)
|
(Zip
Code)
|
Title of each
class
|
Name of each exchange
on which registered
|
Common
Stock, par value $1.00
|
New
York Stock Exchange
Berlin
Stock Exchange
|
Page
|
||
Part
I.
|
||
Item
1.
|
Business
|
4
|
Item
1A.
|
Risk
Factors
|
25
|
Item
1B.
|
Unresolved
Staff Comments
|
38
|
Item
2.
|
Properties
|
39
|
Item
3.
|
Legal
Proceedings
|
39
|
Item
4.
|
Submission
of Matters to a Vote of Security Holders and Executive Officers
of the Registrant
|
40
|
Part
II.
|
||
Item
5.
|
Market
for Registrant’s Common Equity, Related Stockholder Matters
and Issuer Purchases of Equity Securities
|
41
|
Item
6.
|
Selected
Financial Data
|
42
|
Item
7.
|
Management’s
Discussion and Analysis of Financial Condition and
Results of Operations
|
44
|
Item
7A.
|
Quantitative
and Qualitative Disclosures About Market Risk
|
66
|
Item
8.
|
Financial
Statements and Supplementary Data
|
67
|
Item
9.
|
Changes
in and Disagreements with Accountants on Accounting and
Financial Disclosure
|
109
|
Item
9A.
|
Controls
and Procedures
|
109
|
Item
9B.
|
Other
Information
|
109
|
Part
III.
|
||
Item
10.
|
Directors,
Executive Officers and Corporate Governance
|
111
|
Item
11.
|
Executive
Compensation
|
112
|
Item
12.
|
Security
Ownership of Certain Beneficial Owners and Management
|
112
|
Item
13.
|
Certain
Relationships and Related Transactions
|
112
|
Item
14.
|
Principal
Accountant Fees and Services
|
112
|
Part
IV.
|
||
Item
15.
|
Exhibits,
Financial Statement Schedules and Reports on Form 8-K
|
113
|
Signatures
|
125
|
Item
1.
|
Business
|
December 31, 2007
|
December
31, 2006
|
|||
Number
of
|
Percent
of
|
Number
of
|
Percent
of
|
|
State
|
access lines
|
access lines
|
access lines
|
access lines
|
Missouri
|
408,000
|
19%
|
424,000
|
20%
|
Wisconsin
(1)
|
387,000
|
18
|
413,000
|
20
|
Alabama
(2)
|
290,000
|
14
|
249,000
|
12
|
Arkansas
|
211,000
|
10
|
227,000
|
11
|
Washington
|
157,000
|
7
|
166,000
|
8
|
Michigan
|
91,000
|
4
|
96,000
|
5
|
Colorado
|
86,000
|
4
|
90,000
|
4
|
Louisiana
|
84,000
|
4
|
90,000
|
4
|
Oregon
|
66,000
|
3
|
70,000
|
3
|
Ohio
|
64,000
|
3
|
72,000
|
3
|
Illinois
(2)
|
57,000
|
3
|
-
|
-
|
Montana
|
57,000
|
3
|
60,000
|
3
|
Georgia
(2)
|
34,000
|
2
|
-
|
-
|
Texas
|
33,000
|
2
|
37,000
|
2
|
Minnesota
|
27,000
|
1
|
28,000
|
1
|
Tennessee
|
23,000
|
1
|
25,000
|
1
|
Mississippi
|
22,000
|
1
|
23,000
|
1
|
North
Carolina (2)
|
14,000
|
*
|
-
|
-
|
New
Mexico
|
6,000
|
*
|
6,000
|
*
|
Wyoming
|
6,000
|
*
|
6,000
|
*
|
Idaho
|
5,000
|
*
|
5,000
|
*
|
Indiana
|
5,000
|
*
|
5,000
|
*
|
Iowa
|
2,000
|
*
|
2,000
|
*
|
Nevada
|
*
|
*
|
*
|
*
|
2,135,000
|
100%
|
2,094,000
|
100%
|
(1)
|
As
of December 31, 2007 and 2006, approximately 51,000 and 53,000,
respectively, of these lines were owned and operated by our 89%-owned
affiliate.
|
(2)
|
In
connection with our acquisition of Madison River in April 2007, we
acquired an aggregate of approximately 164,000 access lines in Illinois,
Alabama, Georgia and North
Carolina.
|
Year
ended or as of December 31,
|
||||||||||||||||||||
2007
|
2006
|
2005
|
2004
|
2003
|
||||||||||||||||
(Dollars
in thousands)
|
||||||||||||||||||||
Access
lines
|
2,135,000 | 2,094,000 | 2,214,000 | 2,314,000 | 2,376,000 | |||||||||||||||
% Residential
|
73 | % | 74 | 75 | 75 | 76 | ||||||||||||||
% Business
|
27 | % | 26 | 25 | 25 | 24 | ||||||||||||||
Internet
customers
|
623,000 | 459,000 | 357,000 | 271,000 | 223,000 | |||||||||||||||
% High-speed Internet service
|
89 | % | 80 | 70 | 53 | 37 | ||||||||||||||
% Dial-up service
|
11 | % | 20 | 30 | 47 | 63 | ||||||||||||||
Operating
revenues
|
$ | 2,656,241 | 2,447,730 | 2,479,252 | 2,407,372 | 2,367,610 | ||||||||||||||
Capital expenditures
|
$ | 326,045 | 314,071 | 414,872 | 385,316 | 377,939 |
2007
|
2006
|
2005
|
||||||||||
Voice
|
33.5 | % | 35.6 | 36.4 | ||||||||
Network
access
|
35.4 | 35.9 | 38.7 | |||||||||
Data
|
17.4 | 14.4 | 12.9 | |||||||||
Fiber
transport and CLEC
|
6.0 | 6.1 | 4.7 | |||||||||
Other
|
7.7 | 8.0 | 7.3 | |||||||||
100.0 | % | 100.0 | 100.0 |
Year ended December 31,
|
||||||||||||||||
2007
|
2006
|
|||||||||||||||
%
of Total
|
%
of Total
|
|||||||||||||||
2007
|
2006
|
|||||||||||||||
Amount
|
Operating
|
Amount
|
Operating
|
|||||||||||||
Support Program
|
Received
|
Revenues
|
Received
|
Revenues
|
||||||||||||
(amounts
in millions)
|
||||||||||||||||
USF
High Cost Loop Support
|
$ | 166.5 | 6.3 | % | $ | 163.1 | 6.6 | % | ||||||||
Other Federal Support
Programs
|
133.9 | 5.0 | % | 134.6 | 5.5 | % | ||||||||||
Total Federal Support
Receipts
|
300.4 | 11.3 | % | 297.7 | 12.1 | % | ||||||||||
State Support Programs
|
35.6 | 1.3 | % | 36.2 | 1.5 | % | ||||||||||
TOTAL
|
$ | 336.0 | 12.6 | % | $ | 333.9 | 13.6 | % |
·
|
retain
and attract key personnel that have the skills necessary to implement and
manage the new business
opportunities
|
·
|
effectively
manage our day to day operations while attempting to execute our strategy
of expanding our business
|
·
|
realize
the projected growth and revenue targets developed by management for our
newly acquired and emerging businesses,
and
|
·
|
continue
to identify new acquisition or growth opportunities that we can finance,
consummate and operate on attractive
terms.
|
·
|
power
losses or physical damage to our access lines, whether caused by fire,
adverse weather conditions, terrorism or
otherwise
|
·
|
capacity
limitations
|
·
|
software
and hardware defects
|
·
|
breaches
of security, including sabotage, tampering, computer viruses and
break-ins, and
|
·
|
other
disruptions that are beyond our
control.
|
·
|
the
extent, timing, success and overall effects of competition from wireless
carriers, VoIP providers, CLECs, cable television companies, electric
utilities and others, including without limitation the risks that these
competitors may offer less expensive or more innovative products and
services
|
·
|
the
risks inherent in rapid technological change, including without limitation
the risk that new technologies will displace our products and
services
|
·
|
the
effects of ongoing changes in the regulation of the communications
industry, including without limitation (i) increased competition resulting
from the FCC’s regulations relating to interconnection and other matters,
(ii) the final outcome of various federal, state and local regulatory
initiatives and proceedings that could impact our competitive position,
revenues, compliance costs, capital expenditures or prospects, and (iii)
reductions in revenues received from the federal Universal Service Fund or
other current or future federal and state support programs designed to
compensate LECs operating in high-cost
markets
|
·
|
our
ability to effectively adjust to changes in the communications
industry
|
·
|
our
ability to effectively manage our growth, including without limitation our
ability to (i) effectively manage our expansion opportunities, including
successfully integrating newly-acquired businesses into our operations,
(ii) attract and retain technological, managerial and other key personnel,
(iii) achieve projected growth, revenue and cost savings targets, and (iv)
otherwise monitor our operations, costs, regulatory compliance, and
service quality and maintain other necessary internal
controls
|
·
|
possible
changes in the demand for, or pricing of, our products and services,
including without limitation reduced demand for traditional telephone
services caused by greater use of wireless or Internet communications or
other factors and reduced demand for our access
services
|
·
|
our
ability to successfully introduce new product or service offerings on a
timely and cost-effective basis, including without limitation our ability
to (i) successfully roll out our new video, voice and broadband services,
(ii) expand successfully our long distance, Internet access and fiber
transport service offerings to new or acquired markets and (iii) offer
bundled service packages on terms attractive to our
customers
|
·
|
our
continued access to credit markets on favorable terms, including our
continued access to financing in amounts, and on terms and conditions,
necessary to support our operations and refinance existing indebtedness
when it becomes due
|
·
|
our
ability to collect receivables from financially troubled communications
companies
|
·
|
our
ability to successfully negotiate collective bargaining agreements on
reasonable terms without work
stoppages
|
·
|
regulatory
limits on our ability to change the prices for telephone services in
response to industry changes
|
·
|
impediments
to our ability to expand through attractively priced acquisitions, whether
caused by regulatory limits, financing constraints, a decrease in the pool
of attractive target companies, or competition for acquisitions from other
interested buyers
|
·
|
the
possible need to make abrupt and potentially disruptive changes in our
business strategies due to changes in competition, regulation, technology,
product acceptance or other factors
|
·
|
the
lack of assurance that we can compete effectively against
better-capitalized competitors
|
·
|
the
impact of network disruptions on our
business
|
·
|
the
effects of adverse weather on our customers or
properties
|
·
|
other
risks referenced in this report and from time to time in our other filings
with the Securities and Exchange
Commission
|
·
|
the
effects of more general factors, including without
limitation:
|
Item
1B.
|
Unresolved
Staff Comments
|
Item
2.
|
Properties.
|
December
31,
|
||||||||
2007
|
2006
|
|||||||
Cable
and wire
|
52.8 | % | 53.5 | |||||
Central
office
|
32.0 | 32.0 | ||||||
General
support
|
9.4 | 9.6 | ||||||
Fiber
transport
|
3.3 | 2.8 | ||||||
Construction
in progress
|
1.1 | 0.7 | ||||||
Other
|
1.4 | 1.4 | ||||||
100.0 | 100.0 |
Item
3.
|
Legal
Proceedings.
|
Item
4.
|
Submission
of Matters to a Vote of Security
Holders.
|
|
PART
II
|
Item
5.
|
Market
for Registrant’s Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities
|
Sales prices
|
Dividend
per
|
||||||||||||
High
|
Low
|
common share
|
|||||||||||
2007:
|
|||||||||||||
First
quarter
|
$ | 46.80 | 42.66 | .0650 | |||||||||
Second
quarter
|
$ | 49.94 | 45.14 | .0650 | |||||||||
Third
quarter
|
$ | 49.91 | 41.10 | .0650 | |||||||||
Fourth
quarter
|
$ | 46.90 | 39.91 | .0650 | |||||||||
2006:
|
|||||||||||||
First
quarter
|
$ | 39.90 | 32.54 | .0625 | |||||||||
Second
quarter
|
$ | 40.00 | 34.79 | .0625 | |||||||||
Third
quarter
|
$ | 40.14 | 35.38 | .0625 | |||||||||
Fourth
quarter
|
$ | 44.11 | 39.34 | .0625 | |||||||||
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*
|
||||||||||||
October
1 – October 31, 2007
|
830,500 | $ | 45.64 | 830,500 | $ | 675,700,931 | ||||||||||
November
1 – November 30, 2007
|
1,013,381 | $ | 43.02 | 1,013,381 | $ | 632,103,121 | ||||||||||
December
1 – December 31, 2007
|
975,520 | $ | 41.63 | 975,520 | $ | 591,496,447 | ||||||||||
Total
|
2,819,401 | $ | 43.31 | 2,819,401 | $ | 591,496,447 |
Item
6.
|
Selected
Financial Data.
|
Year
ended December 31,
|
||||||||||||||||||||
2007
|
2006
|
2005
|
2004
|
2003
|
||||||||||||||||
(Dollars,
except per share amounts, and shares expressed in
thousands)
|
||||||||||||||||||||
Operating
revenues
|
$ | 2,656,241 | 2,447,730 | 2,479,252 | 2,407,372 | 2,367,610 | ||||||||||||||
Operating
income
|
$ | 793,078 | 665,538 | 736,403 | 753,953 | 750,396 | ||||||||||||||
Net
income
|
$ | 418,370 | 370,027 | 334,479 | 337,244 | 344,707 | ||||||||||||||
Basic
earnings per share
|
$ | 3.82 | 3.17 | 2.55 | 2.45 | 2.40 | ||||||||||||||
Diluted
earnings per share
|
$ | 3.72 | 3.07 | 2.49 | 2.41 | 2.35 | ||||||||||||||
Dividends
per common share
|
$ | .26 | .25 | .24 | .23 | .22 | ||||||||||||||
Average
basic shares outstanding
|
109,360 | 116,671 | 130,841 | 137,215 | 143,583 | |||||||||||||||
Average
diluted shares outstanding
|
113,094 | 122,229 | 136,087 | 142,144 | 148,779 |
December 31,
|
||||||||||||||||||||
2007
|
2006
|
2005
|
2004
|
2003
|
||||||||||||||||
(Dollars
in thousands)
|
||||||||||||||||||||
|
||||||||||||||||||||
Net
property, plant and equipment
|
$ | 3,108,376 | 3,109,277 | 3,304,486 | 3,341,401 | 3,455,481 | ||||||||||||||
Goodwill
|
$ | 4,010,916 | 3,431,136 | 3,432,649 | 3,433,864 | 3,425,001 | ||||||||||||||
Total
assets
|
$ | 8,184,553 | 7,441,007 | 7,762,707 | 7,796,953 | 7,895,852 | ||||||||||||||
Long-term
debt
|
$ | 2,734,357 | 2,412,852 | 2,376,070 | 2,762,019 | 3,109,302 | ||||||||||||||
Stockholders'
equity
|
$ | 3,409,205 | 3,190,951 | 3,617,273 | 3,409,765 | 3,478,516 |
December 31,
|
||||||||||||||||||||
2007
|
2006
|
2005
|
2004
|
2003
|
||||||||||||||||
Telephone
access lines (1) (2)
|
2,135,000 | 2,094,000 | 2,214,000 | 2,314,000 | 2,376,000 | |||||||||||||||
High-speed
Internet customers (1)
|
555,000 | 369,000 | 249,000 | 143,000 | 83,000 |
Item
7.
|
Management’s
Discussion and Analysis of Financial Condition and Results of
Operations
|
Year ended December 31,
|
2007
|
2006
|
2005
|
|||||||||
(Dollars,
except per share amounts, and shares in thousands)
|
||||||||||||
Operating
income
|
$ | 793,078 | 665,538 | 736,403 | ||||||||
Interest
expense
|
(212,906 | ) | (195,957 | ) | (201,801 | ) | ||||||
Other
income (expense)
|
38,770 | 121,568 | 3,168 | |||||||||
Income tax expense
|
(200,572 | ) | (221,122 | ) | (203,291 | ) | ||||||
Net income
|
$ | 418,370 | 370,027 | 334,479 | ||||||||
Basic
earnings per share
|
$ | 3.82 | 3.17 | 2.55 | ||||||||
Diluted
earnings per share
|
$ | 3.72 | 3.07 | 2.49 | ||||||||
Average basic shares
outstanding
|
109,360 | 116,671 | 130,841 | |||||||||
Average diluted shares
outstanding
|
113,094 | 122,229 | 136,087 |
Year ended December 31,
|
2007
|
2006
|
2005
|
|||||||||
(Dollars
in thousands)
|
||||||||||||
Voice
|
$ | 889,960 | 871,767 | 902,510 | ||||||||
Network
access
|
941,506 | 878,702 | 959,838 | |||||||||
Data
|
460,755 | 351,495 | 318,770 | |||||||||
Fiber
transport and CLEC
|
159,317 | 149,088 | 115,454 | |||||||||
Other
|
204,703 | 196,678 | 182,680 | |||||||||
Operating revenues
|
$ | 2,656,241 | 2,447,730 | 2,479,252 |
2007
|
2006
|
|||||||
increase
|
increase
|
|||||||
(decrease)
|
(decrease)
|
|||||||
(Dollars
in thousands)
|
||||||||
Settlement
of a dispute with a carrier
|
$ | 48,987 | - | |||||
Acquisition
of Madison River
|
33,923 | - | ||||||
Expiration
of regulatory monitoring periods
|
25,402 | (24,556 | ) | |||||
Intrastate
revenues due to decreased minutes of use, decreased access
rates in certain states and recovery
from state support funds
|
(20,912 | ) | (19,201 | ) | ||||
Partial
recovery of operating costs through revenue sharing arrangements
with other telephone
companies, interstate
access
revenues and return on rate base
|
(21,311 | ) | (16,825 | ) | ||||
Recovery
from the federal Universal Service
|
||||||||
High Cost Loop support program
|
2,231 | (11,637 | ) | |||||
Prior
year revenue settlement agreements
|
(2,346 | ) | (6,663 | ) | ||||
Other, net
|
(3,170 | ) | (2,254 | ) | ||||
$ | 62,804 | (81,136 | ) |
Year ended December 31,
|
2007
|
2006
|
2005
|
|||||||||
(Dollars
in thousands)
|
||||||||||||
Cost
of services and products (exclusive of depreciation and
amortization)
|
$ | 937,375 | 888,414 | 821,929 | ||||||||
Selling,
general and administrative
|
389,533 | 370,272 | 388,989 | |||||||||
Depreciation and
amortization
|
536,255 | 523,506 | 531,931 | |||||||||
Operating expenses
|
$ | 1,863,163 | 1,782,192 | 1,742,849 |
Payments due by period
|
||||||||||||||||||||
|
After
|
|||||||||||||||||||
Contractual obligations
|
Total
|
2008
|
2009-2010
|
2011-2012
|
2012 and Other
|
|||||||||||||||
(Dollars
in thousands)
|
||||||||||||||||||||
Long-term
debt, including current maturities and capital lease
obligations (1)
|
$ | 3,014,255 | 279,898 | 528,143 | 522,587 | 1,683,627 | ||||||||||||||
Interest
on long-term debt obligations
|
$ | 1,525,455 | 187,192 | 359,314 | 266,915 | 712,034 | ||||||||||||||
Unrecognized
tax benefits (2)
|
$ | 31,981 | - | - | - | 31,981 |
2007
|
2006
|
2005
|
||||||||||
Debt
to total capitalization
|
46.9 | % | 44.8 | 42.3 | ||||||||
Ratio of earnings to fixed charges and preferred
stock dividends*
|
3.87 | 3.97 | 3.60 |
Item
7A.
|
Quantitative
and Qualitative Disclosure About Market
Risk
|
Year ended December 31,
|
||||||||||||
2007
|
2006
|
2005
|
||||||||||
(Dollars,
except per share amounts, and shares in thousands)
|
||||||||||||
OPERATING REVENUES
|
$ | 2,656,241 | 2,447,730 | 2,479,252 | ||||||||
OPERATING
EXPENSES
|
||||||||||||
Cost
of services and products (exclusive of depreciation and
amortization)
|
937,375 | 888,414 | 821,929 | |||||||||
Selling,
general and administrative
|
389,533 | 370,272 | 388,989 | |||||||||
Depreciation and
amortization
|
536,255 | 523,506 | 531,931 | |||||||||
Total operating expenses
|
1,863,163 | 1,782,192 | 1,742,849 | |||||||||
OPERATING INCOME
|
793,078 | 665,538 | 736,403 | |||||||||
OTHER
INCOME (EXPENSE)
|
||||||||||||
Interest
expense
|
(212,906 | ) | (195,957 | ) | (201,801 | ) | ||||||
Other income (expense)
|
38,770 | 121,568 | 3,168 | |||||||||
Total other income
(expense)
|
(174,136 | ) | (74,389 | ) | (198,633 | ) | ||||||
INCOME
BEFORE INCOME TAX EXPENSE
|
618,942 | 591,149 | 537,770 | |||||||||
Income tax expense
|
200,572 | 221,122 | 203,291 | |||||||||
NET INCOME
|
$ | 418,370 | 370,027 | 334,479 | ||||||||
BASIC EARNINGS PER SHARE
|
$ | 3.82 | 3.17 | 2.55 | ||||||||
DILUTED EARNINGS PER SHARE
|
$ | 3.72 | 3.07 | 2.49 | ||||||||
DIVIDENDS PER COMMON SHARE
|
$ | .26 | .25 | .24 | ||||||||
AVERAGE BASIC SHARES
OUTSTANDING
|
109,360 | 116,671 | 130,841 | |||||||||
AVERAGE DILUTED SHARES
OUTSTANDING
|
113,094 | 122,229 | 136,087 |
Year ended December 31,
|
||||||||||||
2007
|
2006
|
2005
|
||||||||||
(Dollars
in thousands)
|
||||||||||||
NET INCOME
|
$ | 418,370 | 370,027 | 334,479 | ||||||||
OTHER
COMPREHENSIVE INCOME, NET OF TAXES
|
||||||||||||
Minimum pension liability adjustment, net of $965 and $1,438
tax
|
- | 1,548 | 2,307 | |||||||||
Unrealized holding gains related to marketable securities arising during
the period, net of $547, $411 and $165 tax
|
877 | 659 | 264 | |||||||||
Derivative instruments:
|
||||||||||||
Net gains (losses) on derivatives hedging variability of cash flows, net
of $294 and ($2,606) tax
|
471 | - | (4,180 | ) | ||||||||
Reclassification adjustment for gains (losses) included in net income, net
of $254, $234 and $202 tax
|
407 | 375 | 324 | |||||||||
Items related to employee benefit plans*:
|
||||||||||||
Change in net actuarial loss, net of $28,583 tax
|
52,485 | - | - | |||||||||
Change in net prior service credit, net of $1,724 tax
|
2,766 | - | - | |||||||||
Reclassification
adjustment for gains (losses) included in net income:
|
||||||||||||
Amortization
of net actuarial loss, net of $4,409 tax
|
6,554 | - | - | |||||||||
Amortization
of net prior service credit, net of ($771) tax
|
(1,236 | ) | - | - | ||||||||
Amortization
of unrecognized transition asset, net of ($55) tax
|
(89 | ) | - | - | ||||||||
Net
change in other comprehensive income (loss)
(net of reclassification adjustment), net of taxes
|
62,235 | 2,582 | (1,285 | ) | ||||||||
COMPREHENSIVE INCOME
|
$ | 480,605 | 372,609 | 333,194 |
December 31,
|
||||||||
2007
|
2006
|
|||||||
(Dollars
in thousands)
|
||||||||
ASSETS
|
||||||||
CURRENT
ASSETS
|
||||||||
Cash and cash equivalents
|
$ | 34,402 | 25,668 | |||||
Accounts receivable
|
||||||||
Customers, less allowance of $12,129 and $11,321
|
152,809 | 150,892 | ||||||
Interexchange carriers and other, less allowance of $8,232 and
$9,584
|
70,218 | 76,454 | ||||||
Materials and supplies, at average cost
|
8,558 | 6,628 | ||||||
Other
|
26,412 | 30,475 | ||||||
Total current assets
|
292,399 | 290,117 | ||||||
NET PROPERTY, PLANT AND
EQUIPMENT
|
3,108,376 | 3,109,277 | ||||||
GOODWILL
AND OTHER ASSETS
|
||||||||
Goodwill
|
4,010,916 | 3,431,136 | ||||||
Other
|
772,862 | 610,477 | ||||||
Total goodwill and other assets
|
4,783,778 | 4,041,613 | ||||||
TOTAL ASSETS
|
$ | 8,184,553 | 7,441,007 | |||||
LIABILITIES
AND EQUITY
|
||||||||
CURRENT
LIABILITIES
|
||||||||
Current maturities of long-term debt
|
$ | 279,898 | 155,012 | |||||
Short-term debt
|
- | 23,000 | ||||||
Accounts payable
|
120,381 | 129,350 | ||||||
Accrued expenses and other current liabilities
|
||||||||
Salaries and benefits
|
64,380 | 54,100 | ||||||
Income taxes
|
54,233 | 60,522 | ||||||
Other taxes
|
48,961 | 46,890 | ||||||
Interest
|
80,103 | 73,725 | ||||||
Other
|
30,942 | 23,352 | ||||||
Advance billings
and customer deposits
|
57,637 | 51,614 | ||||||
Total current liabilities
|
736,535 | 617,565 | ||||||
LONG-TERM DEBT
|
2,734,357 | 2,412,852 | ||||||
DEFERRED CREDITS AND OTHER
LIABILITIES
|
1,304,456 | 1,219,639 | ||||||
STOCKHOLDERS'
EQUITY
|
||||||||
Common stock, $1.00 par value, authorized 350,000,000
shares, issued and outstanding 108,491,736 and 113,253,889
shares
|
108,492 | 113,254 | ||||||
Paid-in capital
|
91,147 | 24,256 | ||||||
Accumulated other comprehensive loss, net of tax
|
(42,707 | ) | (104,942 | ) | ||||
Retained earnings
|
3,245,302 | 3,150,933 | ||||||
Preferred stock -
non-redeemable
|
6,971 | 7,450 | ||||||
Total stockholders' equity
|
3,409,205 | 3,190,951 | ||||||
TOTAL LIABILITIES AND
EQUITY
|
$ | 8,184,553 | 7,441,007 |
Year ended December 31,
|
||||||||||||
2007
|
2006
|
2005
|
||||||||||
(Dollars
in thousands)
|
||||||||||||
OPERATING
ACTIVITIES
|
||||||||||||
Net income
|
$ | 418,370 | 370,027 | 334,479 | ||||||||
Adjustments to reconcile net income to net cash provided by operating
activities
|
||||||||||||
Depreciation and amortization
|
536,255 | 523,506 | 531,931 | |||||||||
Gains on asset dispositions
|
(15,643 | ) | (118,649 | ) | (3,500 | ) | ||||||
Deferred income taxes
|
1,018 | 49,685 | 69,530 | |||||||||
Share-based compensation
|
19,962 | 11,904 | 4,721 | |||||||||
Income from unconsolidated cellular entity
|
(14,578 | ) | (5,861 | ) | (4,910 | ) | ||||||
Distributions from unconsolidated cellular entity
|
10,229 | - | 2,339 | |||||||||
Changes in current assets and current liabilities
|
||||||||||||
Accounts receivable
|
15,920 | 7,909 | (685 | ) | ||||||||
Accounts payable
|
(13,698 | ) | 24,906 | (37,174 | ) | |||||||
Accrued taxes
|
11,604 | (49,735 | ) | 72,971 | ||||||||
Other current assets and other current liabilities,
net
|
23,782 | 10,269 | (8,111 | ) | ||||||||
Retirement benefits
|
27,350 | 5,963 | (16,815 | ) | ||||||||
Excess tax benefits from share-based compensation
|
(6,427 | ) | (12,034 | ) | - | |||||||
Decrease in noncurrent assets
|
12,718 | 9,078 | 1,973 | |||||||||
Increase (decrease) in other noncurrent liabilities
|
(20,781 | ) | 709 | 2,638 | ||||||||
Other, net
|
23,905 | 13,042 | 17,691 | |||||||||
Net cash provided by operating activities
|
1,029,986 | 840,719 | 967,078 | |||||||||
INVESTING
ACTIVITIES
|
||||||||||||
Payments for property, plant and equipment
|
(326,045 | ) | (314,071 | ) | (414,872 | ) | ||||||
Proceeds from redemption of Rural Telephone Bank stock
|
5,206 | 122,819 | - | |||||||||
Proceeds from sale of assets
|
8,231 | 5,865 | 4,000 | |||||||||
Acquisitions, net of cash acquired
|
(306,805 | ) | - | (75,453 | ) | |||||||
Investment in unconsolidated cellular entity
|
(2,667 | ) | (5,222 | ) | - | |||||||
Other,
net
|
2,892 | (3,122 | ) | 2,594 | ||||||||
Net cash used in investing activities
|
(619,188 | ) | (193,731 | ) | (483,731 | ) | ||||||
FINANCING
ACTIVITIES
|
||||||||||||
Payments of debt
|
(712,980 | ) | (81,995 | ) | (693,345 | ) | ||||||
Proceeds from issuance of debt
|
741,840 | 23,000 | 344,173 | |||||||||
Repurchase of common stock
|
(460,676 | ) | (802,188 | ) | (551,759 | ) | ||||||
Settlement of equity units
|
- | - | 398,164 | |||||||||
Proceeds from issuance of common stock
|
49,404 | 97,803 | 50,374 | |||||||||
Settlements of interest rate hedge contracts
|
765 | - | (7,357 | ) | ||||||||
Excess tax benefits from share-based compensation
|
6,427 | 12,034 | - | |||||||||
Cash
dividends
|
(29,052 | ) | (29,203 | ) | (31,862 | ) | ||||||
Other,
net
|
2,208 | 383 | (104 | ) | ||||||||
Net cash used in financing activities
|
(402,064 | ) | (780,166 | ) | (491,716 | ) | ||||||
Net
increase (decrease) in cash and cash equivalents
|
8,734 | (133,178 | ) | (8,369 | ) | |||||||
Cash and cash equivalents at beginning of
year
|
25,668 | 158,846 | 167,215 | |||||||||
CASH AND CASH EQUIVALENTS AT END OF
YEAR
|
$ | 34,402 | 25,668 | 158,846 |
Year ended December 31,
|
||||||||||||
2007
|
2006
|
2005
|
||||||||||
(Dollars,
except per share amounts, and shares in thousands)
|
||||||||||||
COMMON
STOCK (represents dollars and shares)
|
||||||||||||
Balance at beginning of year
|
$ | 113,254 | 131,074 | 132,374 | ||||||||
Repurchase of common stock
|
(10,213 | ) | (21,432 | ) | (16,409 | ) | ||||||
Conversion
of debt into common stock
|
3,699 | - | - | |||||||||
Issuance of common stock upon settlement of equity units
|
- | - | 12,881 | |||||||||
Conversion of preferred stock into common stock
|
26 | 22 | 7 | |||||||||
Issuance
of common stock through dividend reinvestment, incentive and
benefit plans
|
1,726 | 3,590 | 2,221 | |||||||||
Balance
at end of year
|
108,492 | 113,254 | 131,074 | |||||||||
PAID-IN
CAPITAL
|
||||||||||||
Balance at beginning of year
|
24,256 | 129,806 | 222,205 | |||||||||
Repurchase of common stock
|
(155,036 | ) | (222,998 | ) | (535,350 | ) | ||||||
Conversion of debt into common stock
|
142,732 | - | - | |||||||||
Issuance of common stock upon settlement of equity units
|
- | - | 385,283 | |||||||||
Issuance of common stock through dividend reinvestment, incentive and
benefit plans
|
47,678 | 94,213 | 48,153 | |||||||||
Conversion of preferred stock into common stock
|
453 | 378 | 118 | |||||||||
Excess tax benefits from share-based compensation
|
6,427 | 12,034 | - | |||||||||
Share based
compensation and other
|
24,637 | 10,823 | 9,397 | |||||||||
Balance at end of year
|
91,147 | 24,256 | 129,806 | |||||||||
ACCUMULATED
OTHER COMPREHENSIVE LOSS, NET
OF TAX
|
||||||||||||
Balance at beginning of year
|
(104,942 | ) | (9,619 | ) | (8,334 | ) | ||||||
Effect of adoption of SFAS 158, net of tax (see Note 1)
|
- | (97,905 | ) | - | ||||||||
Net change in other
comprehensive income (loss) (net of reclassification adjustment), net
of tax
|
62,235 | 2,582 | (1,285 | ) | ||||||||
Balance at end of year
|
(42,707 | ) | (104,942 | ) | (9,619 | ) | ||||||
RETAINED
EARNINGS
|
||||||||||||
Balance at beginning of year
|
3,150,933 | 3,358,162 | 3,055,545 | |||||||||
Net income
|
418,370 | 370,027 | 334,479 | |||||||||
Repurchase of common stock
|
(295,427 | ) | (557,758 | ) | - | |||||||
Cumulative effect of adoption of SAB 108 (see Note 1)
|
- | 9,705 | - | |||||||||
Cumulative effect of adoption of FIN 48 (see Note 12)
|
478 | - | - | |||||||||
Cash dividends declared
|
||||||||||||
Common stock - $.26, $.25 and $.24 per share
|
(28,684 | ) | (28,823 | ) | (31,466 | ) | ||||||
Preferred stock
|
(368 | ) | (380 | ) | (396 | ) | ||||||
Balance at end of year
|
3,245,302 | 3,150,933 | 3,358,162 | |||||||||
PREFERRED
STOCK - NON-REDEEMABLE
|
||||||||||||
Balance at beginning of year
|
7,450 | 7,850 | 7,975 | |||||||||
Conversion of
preferred stock into common stock
|
(479 | ) | (400 | ) | (125 | ) | ||||||
Balance at end of year
|
6,971 | 7,450 | 7,850 | |||||||||
TOTAL STOCKHOLDERS' EQUITY
|
$ | 3,409,205 | 3,190,951 | 3,617,273 |
(1)
|
SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES
|
Before
|
After
|
|||||||||||
Application
of
|
Application
of
|
|||||||||||
SFAS 158
|
Adjustments
|
SFAS 158
|
||||||||||
(Dollars
in thousands)
|
||||||||||||
Other
assets
|
$ | 675,215 | (64,738 | ) | 610,477 | |||||||
Total
assets
|
$ | 7,505,745 | (64,738 | ) | 7,441,007 | |||||||
Accrued
expenses and other current liabilities
|
$ | 259,487 | (898 | ) | 258,589 | |||||||
Deferred
credits and other liabilities (excluding deferred income
taxes)
|
$ | 447,066 | 99,512 | 546,578 | ||||||||
Deferred
income taxes
|
$ | 738,508 | (65,447 | ) | 673,061 | |||||||
Total
liabilities
|
$ | 4,216,889 | 33,167 | 4,250,056 | ||||||||
Accumulated
other comprehensive loss, net of tax
|
$ | (7,037 | ) | (97,905 | ) | (104,942 | ) | |||||
Total
stockholders’ equity
|
$ | 3,288,856 | (97,905 | ) | 3,190,951 |
(2)
|
ACQUISITIONS
|
Cash
paid (1)
|
$ | 321,516 | ||
Closing
costs (2)
|
5,268 | |||
Total
purchase price
|
$ | 326,784 |
(1)
|
Reflects
the cash payment of $671,000 we received in third quarter 2007 in
accordance with the purchase agreement upon finalization of the working
capital portion of the purchase
price.
|
(2)
|
Closing
costs primarily consist of advisory and legal fees incurred in connection
with the acquisition.
|
Current
assets (1)
|
$ | 33,761 | ||
Net
property, plant and equipment
|
208,317 | |||
Identifiable
intangible assets
|
||||
Customer list
|
156,800 | |||
Franchise
|
6,400 | |||
Goodwill
|
579,780 | |||
Other
assets
|
21,998 | |||
Current
liabilities (2)
|
(25,578 | ) | ||
Long-term
debt (2)
|
(520,000 | ) | ||
Deferred
income taxes
|
(105,168 | ) | ||
Other
liabilities
|
(29,526 | ) | ||
Total
purchase price
|
$ | 326,784 |
(1)
|
Includes
approximately $20.0 million of acquired cash and cash
equivalents.
|
(2)
|
We
paid all the long-term debt and $2.2 million of related accrued interest
(included in “current liabilities” in the above table) immediately after
closing.
|
(3)
|
GOODWILL
AND OTHER ASSETS
|
December 31,
|
2007
|
2006
|
||||||
(Dollars
in thousands)
|
||||||||
Goodwill
|
$ | 4,010,916 | 3,431,136 | |||||
Billing
system development costs, less accumulated amortization of $38,285 and
$26,752
|
192,904 | 204,597 | ||||||
Cash
surrender value of life insurance contracts
|
95,654 | 94,788 | ||||||
Deferred
costs associated with installation activities
|
81,908 | 73,256 | ||||||
Pension
asset
|
28,536 | 16,187 | ||||||
Intangible
assets not subject to amortization
|
42,750 | 36,690 | ||||||
Marketable
securities
|
35,811 | 32,235 | ||||||
Investment
in unconsolidated cellular partnership
|
33,714 | 29,364 | ||||||
Deferred
interest rate hedge contracts
|
23,692 | 23,134 | ||||||
Investment
in debt security
|
22,807 | 22,209 | ||||||
Intangible
assets subject to amortization
|
||||||||
Customer list, less accumulated amortization of $18,149 and
$7,022
|
163,160 | 18,072 | ||||||
Contract rights, less accumulated amortization of $4,186 and
$3,256
|
- | 930 | ||||||
Other
|
51,926 | 59,015 | ||||||
$ | 4,783,778 | 4,041,613 |
(4)
|
PROPERTY,
PLANT AND EQUIPMENT
|
December 31,
|
2007
|
2006
|
||||||
(Dollars
in thousands)
|
||||||||
Cable
and wire
|
$ | 4,570,930 | 4,224,453 | |||||
Central
office
|
2,775,479 | 2,522,940 | ||||||
General
support
|
811,488 | 760,170 | ||||||
Fiber
transport
|
289,392 | 222,595 | ||||||
Information
origination/termination
|
78,981 | 62,060 | ||||||
Construction
in progress
|
99,641 | 59,198 | ||||||
Other
|
40,195 | 42,344 | ||||||
8,666,106 | 7,893,760 | |||||||
Accumulated depreciation
|
(5,557,730 | ) | (4,784,483 | ) | ||||
Net property, plant and
equipment
|
$ | 3,108,376 | 3,109,277 |
(5)
|
LONG-TERM
DEBT
|
December 31,
|
2007
|
2006
|
||||||
(Dollars
in thousands)
|
||||||||
CenturyTel
|
||||||||
Senior notes and debentures:
|
||||||||
7.20% Series D, due 2025
|
$ | 100,000 | 100,000 | |||||
6.30% Series F, due 2008
|
240,000 | 240,000 | ||||||
6.875% Series G, due 2028
|
425,000 | 425,000 | ||||||
8.375% Series H, due 2010
|
500,000 | 500,000 | ||||||
6.02% Series J
|
- | 100,908 | ||||||
4.75% Series K
|
- | 165,000 | ||||||
7.875% Series L, due 2012
|
500,000 | 500,000 | ||||||
5.0%
Series M, due 2015
|
350,000 | 350,000 | ||||||
6.0%
Series N, due 2017
|
500,000 | - | ||||||
5.5% Series O, due 2013
|
250,000 | - | ||||||
Unamortized net discount
|
(7,840 | ) | (5,640 | ) | ||||
Net fair value of derivative instruments:
|
||||||||
Series H senior notes
|
7,991 | 10,853 | ||||||
Series L senior notes
|
3,048 | (20,593 | ) | |||||
Total CenturyTel
|
2,868,199 | 2,365,528 | ||||||
Subsidiaries
|
||||||||
First mortgage debt
|
||||||||
5.35%* notes, payable to agencies of the U. S. government and cooperative
lending
associations, due in installments through 2028
|
120,788 | 133,738 | ||||||
7.98% notes
|
- | 4,420 | ||||||
Other debt
|
||||||||
7.1% unsecured medium-term notes, due through 2008
|
25,000 | 61,499 | ||||||
10.0% notes
|
100 | 971 | ||||||
7.3%*
capital lease obligations, due through 2008
|
168 | 1,708 | ||||||
Total subsidiaries
|
146,056 | 202,336 | ||||||
Total
long-term debt
|
3,014,255 | 2,567,864 | ||||||
Less current maturities
|
279,898 | 155,012 | ||||||
Long-term debt, excluding current
maturities
|
$ | 2,734,357 | 2,412,852 |
(6)
|
DERIVATIVE
INSTRUMENTS
|
(7)
|
DEFERRED
CREDITS AND OTHER LIABILITIES
|
December 31,
|
2007
|
2006
|
||||||
(Dollars
in thousands)
|
||||||||
Deferred
federal and state income taxes
|
$ | 810,571 | 673,061 | |||||
Accrued
postretirement benefit costs
|
278,230 | 327,337 | ||||||
Deferred
revenue
|
105,491 | 99,669 | ||||||
Accrued
pension costs
|
37,296 | 36,784 | ||||||
Fair
value of interest rate swap
|
834 | 20,593 | ||||||
Minority
interest
|
7,818 | 9,226 | ||||||
Other
|
64,216 | 52,969 | ||||||
$ | 1,304,456 | 1,219,639 |
(8)
|
REDUCTIONS
IN WORKFORCE
|
Balance
at December 31, 2005
|
$ | - | ||
Amount
accrued to expense
|
9,431 | |||
Adjustments
to accrual amounts
|
(529 | ) | ||
Amount
paid
|
(8,445 | ) | ||
Balance
at December 31, 2006
|
$ | 457 | ||
Amount
accrued to expense
|
2,741 | |||
Amount
paid
|
(1,363 | ) | ||
Balance
at December 31, 2007
|
$ | 1,835 |
(9)
|
STOCKHOLDERS’
EQUITY
|
December 31,
|
2007
|
|||
(In thousands)
|
||||
Incentive
compensation programs
|
6,185 | |||
Acquisitions
|
4,064 | |||
Employee
stock purchase plan
|
4,480 | |||
Dividend
reinvestment plan
|
298 | |||
Conversion of convertible preferred
stock
|
380 | |||
15,407 |
(10)
|
POSTRETIREMENT
BENEFITS
|
December 31,
|
2007
|
2006
|
2005
|
|||||||||
(Dollars
in thousands)
|
||||||||||||
Change
in benefit obligation
|
||||||||||||
Benefit obligation at beginning of year
|
$ | 357,417 | 353,942 | 305,720 | ||||||||
Service cost
|
6,923 | 6,982 | 6,289 | |||||||||
Interest cost
|
20,133 | 18,980 | 16,718 | |||||||||
Participant contributions
|
2,016 | 1,583 | 1,637 | |||||||||
Plan amendments
|
(4,552 | ) | (7,978 | ) | 23,289 | |||||||
Acquisition
|
2,277 | - | - | |||||||||
Direct subsidy receipts
|
1,299 | 717 | - | |||||||||
Actuarial (gain) loss
|
(60,312 | ) | 319 | 16,391 | ||||||||
Benefits
paid
|
(18,568 | ) | (17,128 | ) | (16,102 | ) | ||||||
Benefit obligation at end of
year
|
$ | 306,633 | 357,417 | 353,942 | ||||||||
Change
in plan assets
|
||||||||||||
Fair value of plan assets at beginning of year
|
$ | 30,080 | 29,545 | 29,570 | ||||||||
Return on plan assets
|
1,916 | 3,280 | 1,440 | |||||||||
Employer contributions
|
12,880 | 12,800 | 13,000 | |||||||||
Participant contributions
|
2,016 | 1,583 | 1,637 | |||||||||
Benefits
paid
|
(18,568 | ) | (17,128 | ) | (16,102 | ) | ||||||
Fair value of plan assets at end of
year
|
$ | 28,324 | 30,080 | 29,545 |
Year ended December 31,
|
2007
|
2006
|
2005
|
|||||||||
(Dollars
in thousands)
|
||||||||||||
Service
cost
|
$ | 6,923 | 6,982 | 6,289 | ||||||||
Interest
cost
|
20,133 | 18,980 | 16,718 | |||||||||
Expected
return on plan assets
|
(2,482 | ) | (2,437 | ) | (2,440 | ) | ||||||
Amortization
of unrecognized actuarial loss
|
3,595 | 3,719 | 2,916 | |||||||||
Amortization of unrecognized prior service
credit
|
(2,020 | ) | (855 | ) | (1,876 | ) | ||||||
Net periodic postretirement benefit
cost
|
$ | 26,149 | 26,389 | 21,607 |
December 31,
|
2007
|
2006
|
2005
|
|||||||||
(Dollars
in thousands)
|
||||||||||||
Benefit
obligation
|
$ | (306,633 | ) | (357,417 | ) | (353,942 | ) | |||||
Fair
value of plan assets
|
28,324 | 30,080 | 29,545 | |||||||||
Unamortized
prior service credit
|
- | - | (1,726 | ) | ||||||||
Unrecognized net actuarial
loss
|
- | - | 82,660 | |||||||||
Accrued benefit cost
|
$ | (278,309 | ) | (327,337 | ) | (243,463 | ) |
2007
|
2006
|
|||||||
Determination
of benefit obligation
|
||||||||
Discount rate
|
6.50 | % | 5.75 | |||||
Healthcare cost increase trend rates (Medical/Prescription
Drug)
|
||||||||
Following year
|
7.0%/10.0 | % | 8.0/11.0 | |||||
Rate to which the cost trend rate is assumed to decline (the ultimate
cost trend rate)
|
5.0%/5.0 | % | 5.0/5.0 | |||||
Year that the rate reaches the ultimate cost trend rate
|
2010/2013 | 2010/2013 | ||||||
Determination
of benefit cost
|
||||||||
Discount rate
|
5.75 | % | 5.50 | |||||
Expected return on
plan assets
|
8.25 | % | 8.25 |
2007
|
2006
|
|||||||
Equity
securities
|
55.8 | % | 60.1 | |||||
Debt
securities
|
26.8 | 27.9 | ||||||
Other
|
17.4 | 12.0 | ||||||
Total
|
100.0 | % | 100.0 |
1-Percentage
|
1-Percentage
|
|||||||
Point Increase
|
Point Decrease
|
|||||||
(Dollars
in thousands)
|
||||||||
Effect
on annual total of service and interest cost components
|
$ | 279 | (339 | ) | ||||
Effect on postretirement benefit
obligation
|
$ | 3,943 | (4,791 | ) |
Before
Medicare
|
Medicare
|
Net
of
|
||||||||||
Year
|
Subsidy
|
Subsidy
|
Medicare Subsidy
|
|||||||||
(Dollars
in thousands)
|
||||||||||||
2008
|
$ | 18,163 | 1,419 | 16,744 | ||||||||
2009
|
$ | 19,973 | 1,624 | 18,349 | ||||||||
2010
|
$ | 22,043 | 1,833 | 20,210 | ||||||||
2011
|
$ | 23,916 | 2,059 | 21,857 | ||||||||
2012
|
$ | 24,968 | 2,300 | 22,668 | ||||||||
2013-2017
|
$ | 136,357 | 8,236 | 128,121 |
(11)
|
DEFINED
BENEFIT AND OTHER RETIREMENT PLANS
|
December 31,
|
2007
|
2006
|
2005
|
|||||||||
(Dollars
in thousands)
|
||||||||||||
Change
in benefit obligation
|
||||||||||||
Benefit obligation at beginning of year
|
$ | 474,302 | 460,599 | 418,630 | ||||||||
Service cost
|
16,431 | 17,679 | 15,332 | |||||||||
Interest cost
|
28,180 | 25,935 | 23,992 | |||||||||
Plan amendments
|
61 | (3,827 | ) | 31 | ||||||||
Acquisition
|
15,266 | - | - | |||||||||
Actuarial (gain) loss
|
(16,153 | ) | 6,789 | 28,016 | ||||||||
Settlements
|
(410 | ) | (13,232 | ) | - | |||||||
Benefits
paid
|
(48,240 | ) | (19,641 | ) | (25,402 | ) | ||||||
Benefit obligation at end of
year
|
$ | 469,437 | 474,302 | 460,599 | ||||||||
Change
in plan assets
|
||||||||||||
Fair value of plan assets at beginning of year
|
$ | 452,293 | 407,367 | 363,981 | ||||||||
Return on plan assets
|
41,537 | 46,297 | 25,453 | |||||||||
Acquisition
|
12,502 | - | - | |||||||||
Employer contributions
|
1,516 | 31,502 | 43,335 | |||||||||
Benefits
paid
|
(48,650 | ) | (32,873 | ) | (25,402 | ) | ||||||
Fair value of plan assets at end of
year
|
$ | 459,198 | 452,293 | 407,367 |
Year ended December 31,
|
2007
|
2006
|
2005
|
|||||||||
(Dollars
in thousands)
|
||||||||||||
Service
cost
|
$ | 16,431 | 17,679 | 15,332 | ||||||||
Interest
cost
|
28,180 | 25,935 | 23,992 | |||||||||
Expected
return on plan assets
|
(36,780 | ) | (32,706 | ) | (29,225 | ) | ||||||
Settlements
|
410 | 3,344 | - | |||||||||
Recognized
net losses
|
7,367 | 9,670 | 6,328 | |||||||||
Net amortization and
deferral
|
(131 | ) | 19 | 289 | ||||||||
Net periodic pension
expense
|
$ | 15,477 | 23,941 | 16,716 |
December 31,
|
2007
|
2006
|
2005
|
|||||||||
(Dollars
in thousands)
|
||||||||||||
Benefit
obligation
|
$ | (469,437 | ) | (474,302 | ) | (460,599 | ) | |||||
Fair
value of plan assets
|
459,198 | 452,293 | 407,367 | |||||||||
Unrecognized
transition asset
|
- | - | (396 | ) | ||||||||
Unamortized
prior service cost
|
- | - | 3,109 | |||||||||
Unrecognized net actuarial
loss
|
- | - | 123,879 | |||||||||
Net amount recognized
|
$ | (10,239 | ) | (22,009 | ) | 73,360 |
December 31,
|
2007
|
2006
|
||||||
(Dollars
in thousands)
|
||||||||
Pension
asset (reflected in Other Assets)*
|
$ | 28,536 | 16,187 | |||||
Accrued
expenses and other current liabilities*
|
(1,479 | ) | (1,412 | ) | ||||
Other deferred credits*
|
(37,296 | ) | (36,784 | ) | ||||
Net amount recognized
|
$ | (10,239 | ) | (22,009 | ) |
2007
|
2006
|
|||||||
Determination
of benefit obligation
|
||||||||
Discount rate
|
6.30 | % | 5.80 | |||||
Weighted average rate of compensation increase
|
4.0 | % | 4.0 | |||||
Determination
of benefit cost
|
||||||||
Discount rate
|
5.80 | % | 5.50 | |||||
Weighted average rate of compensation increase
|
4.0 | % | 4.0 | |||||
Expected return on
plan assets
|
8.25 | % | 8.25 |
2007
|
2006
|
|||||||
Equity
securities
|
70.8 | % | 72.2 | |||||
Debt
securities
|
27.2 | 25.8 | ||||||
Other
|
2.0 | 2.0 | ||||||
Total
|
100.0 | % | 100.0 |
(12)
|
INCOME
TAXES
|
Year ended December 31,
|
2007
|
2006
|
2005
|
|||||||||
(Dollars
in thousands)
|
||||||||||||
Federal
|
||||||||||||
Current
|
$ | 192,424 | 146,201 | 139,836 | ||||||||
Deferred
|
2,220 | 37,687 | 35,499 | |||||||||
State
|
||||||||||||
Current
|
7,130 | 25,236 | (6,075 | ) | ||||||||
Deferred
|
(1,202 | ) | 11,998 | 34,031 | ||||||||
$ | 200,572 | 221,122 | 203,291 |
Year ended December 31,
|
2007
|
2006
|
2005
|
|||||||||
(Dollars
in thousands)
|
||||||||||||
Income
tax expense in the consolidated statements of income
|
$ | 200,572 | 221,122 | 203,291 | ||||||||
Stockholders’
equity:
|
||||||||||||
Compensation expense for tax purposes in excess of amounts recognized for
financial reporting purposes
|
(6,427 | ) | (12,034 | ) | (6,261 | ) | ||||||
Tax
effect of the change in accumulated other comprehensive income
(loss)
|
34,985 | (63,837 | ) | (801 | ) |
Year ended December 31,
|
2007
|
2006
|
2005
|
|||||||||
(Percentage
of pre-tax income)
|
||||||||||||
Statutory
federal income tax rate
|
35.0 | % | 35.0 | 35.0 | ||||||||
State
income taxes, net of federal income tax benefit
|
2.8 | 4.1 | 3.4 | |||||||||
Release
of previously unrecognized tax benefits
|
(5.3 | ) | - | - | ||||||||
Other, net
|
(0.1 | ) | (1.7 | ) | (.6 | ) | ||||||
Effective income tax rate
|
32.4 | % | 37.4 | 37.8 |
December 31,
|
2007
|
2006
|
||||||
(Dollars
in thousands)
|
||||||||
Deferred
tax assets
|
||||||||
Postretirement and pension benefit costs
|
$ | 109,182 | 131,890 | |||||
Net state operating loss carryforwards
|
31,646 | 61,875 | ||||||
Other employee benefits
|
32,166 | 24,907 | ||||||
Other
|
49,841 | 45,628 | ||||||
Gross deferred tax assets
|
222,835 | 264,300 | ||||||
Less valuation allowance
|
(30,907 | ) | (61,049 | ) | ||||
Net deferred tax assets
|
191,928 | 203,251 | ||||||
Deferred
tax liabilities
|
||||||||
Property, plant and equipment, primarily due to depreciation
differences
|
(373,181 | ) | (334,521 | ) | ||||
Goodwill and other intangible assets
|
(604,809 | ) | (503,126 | ) | ||||
Other
|
(12,900 | ) | (27,010 | ) | ||||
Gross deferred tax liabilities
|
(990,890 | ) | (864,657 | ) | ||||
Net deferred tax liability
|
$ | (798,962 | ) | (661,406 | ) |
Unrecognized
tax benefits at January 1, 2007
|
$ | 55,905 | ||
Increase
in tax positions taken in the current year
|
500 | |||
Decrease
due to the reversal of tax positions taken in a prior year
|
(19,617 | ) | ||
Decrease
from the lapse of statute of limitations
|
(2,353 | ) | ||
Decrease
from settlements paid
|
(8,653 | ) | ||
Increase from unrecognized tax benefits of
acquired company
|
8,047 | |||
Unrecognized tax benefits at December 31,
2007
|
$ | 33,829 |
Jurisdiction
|
Open tax
years
|
||
Federal
|
1998-current
|
||
State
|
|||
Georgia
|
2002-current
|
||
Louisiana
|
2003-current
|
||
Oregon
|
2001-current
|
||
Wisconsin
|
2001-current
|
||
Other states
|
2002-current
|
(13)
|
EARNINGS
PER SHARE
|
Year ended December 31,
|
2007
|
2006
|
2005
|
|||||||||
(Dollars,
except per share amounts, and shares in thousands)
|
||||||||||||
Income
(Numerator):
|
||||||||||||
Net
income
|
$ | 418,370 | 370,027 | 334,479 | ||||||||
Dividends applicable to preferred
stock
|
(368 | ) | (380 | ) | (396 | ) | ||||||
Net
income applicable to common stock for computing basic earnings per
share
|
418,002 | 369,647 | 334,083 | |||||||||
Interest
on convertible debentures, net of tax
|
2,832 | 4,828 | 4,875 | |||||||||
Dividends applicable to preferred
stock
|
368 | 380 | 396 | |||||||||
Net
income as adjusted for purposes of computing diluted earnings per share
|
$ | 421,202 | 374,855 | 339,354 | ||||||||
Shares
(Denominator):
|
||||||||||||
Weighted
average number of shares:
|
||||||||||||
Outstanding during period
|
110,183 | 117,363 | 131,044 | |||||||||
Nonvested restricted stock
|
(823 | ) | (692 | ) | (203 | ) | ||||||
Weighted
average number of shares outstanding during period for computing
basic earnings per share
|
109,360 | 116,671 | 130,841 | |||||||||
Incremental
common shares attributable to dilutive securities:
|
||||||||||||
Shares issuable under convertible securities
|
2,951 | 4,493 | 4,511 | |||||||||
Shares
issuable upon settlement of accelerated share repurchase
agreements
|
- | 365 | 378 | |||||||||
Shares issuable under incentive compensation plans
|
783 | 700 | 357 | |||||||||
Number
of shares as adjusted for purposes of computing diluted earnings per
share
|
113,094 | 122,229 | 136,087 | |||||||||
Basic earnings per share
|
$ | 3.82 | 3.17 | 2.55 | ||||||||
Diluted earnings per share
|
$ | 3.72 | 3.07 | 2.49 |
Remaining
|
Aggregate
|
|||||||||
Number
|
Average
|
contractual
|
intrinsic
|
|||||||
of options
|
price
|
term (in years)
|
value
|
|||||||
Outstanding
December 31, 2004
|
6,713,558 | $ | 28.79 | |||||||
Granted
|
1,015,025 | 25.04 | ||||||||
Exercised
|
(1,664,625 | ) | 33.69 | |||||||
Forfeited/Cancelled
|
(68,500 | ) | 31.40 | |||||||
Outstanding
December 31, 2005
|
5,995,458 | $ | 30.63 | |||||||
Granted
|
1,007,175 | 35.98 | ||||||||
Exercised
|
(3,047,918 | ) | 29.15 | |||||||
Forfeited/Cancelled
|
(58,916 | ) | 32.54 | |||||||
Outstanding
December 31, 2006
|
3,895,799 | $ | 33.14 | |||||||
Granted
|
983,920 | 45.76 | ||||||||
Exercised
|
(1,204,164 | ) | 32.15 | |||||||
Forfeited/Cancelled
|
(43,350 | ) | 40.72 | |||||||
Outstanding
December 31, 2007
|
3,632,205 | $ | 36.80 |
6.8
|
$
16,926,000
|
|||||
Exercisable
December 31, 2007
|
2,094,378 | $ | 32.98 |
5.3
|
$
17,752,000
|
Number
|
Average
grant
|
|||||||
of shares
|
date fair value
|
|||||||
Nonvested
at January 1, 2007
|
712,088 | $ | 32.84 | |||||
Granted
|
288,896 | 45.89 | ||||||
Vested
|
(142,821 | ) | 35.13 | |||||
Forfeited
|
(11,283 | ) | 37.10 | |||||
Nonvested
at December 31, 2007
|
846,880 | $ | 36.85 |
(15)
|
GAIN
ON ASSET DISPOSITIONS
|
(16)
|
SUPPLEMENTAL
CASH FLOW AND OTHER DISCLOSURES
|
Year ended December 31,
|
2007
|
2006
|
2005
|
|||||||||
(Dollars
in thousands)
|
||||||||||||
Property,
plant and equipment, net
|
$ | 208,317 | - | 66,450 | ||||||||
Goodwill
|
579,780 | - | - | |||||||||
Long-term
debt, deferred credits and other liabilities
|
(654,694 | ) | - | - | ||||||||
Other
assets and liabilities, excluding cash and
cash equivalents
|
173,402 | 5,222 | 9,003 | |||||||||
Decrease
in cash due to acquisitions
|
$ | 306,805 | 5,222 | 75,453 |
(17)
|
FAIR
VALUE OF FINANCIAL
INSTRUMENTS
|
Carrying
|
Fair
|
|||||||||||
Amount
|
value
|
|||||||||||
(Dollars
in thousands)
|
||||||||||||
December 31, 2007
|
||||||||||||
Financial
assets
|
||||||||||||
Interest rate swaps
|
$ | 3,048 | 3,048 | (2 | ) | |||||||
Other
|
$ | 106,099 | 110,235 | (2 | ) | |||||||
Financial
liabilities
|
||||||||||||
Long-term debt (including current maturities)
|
$ | 3,014,255 | 2,975,707 | (1 | ) | |||||||
Interest rate swaps
|
$ | 834 | 834 | (2 | ) | |||||||
Other
|
$ | 57,637 | 57,637 | (2 | ) | |||||||
December 31, 2006
|
||||||||||||
Financial
assets
|
$ | 110,134 | 110,134 | (2 | ) | |||||||
Financial
liabilities
|
||||||||||||
Long-term debt (including current maturities)
|
$ | 2,567,864 | 2,522,347 | (1 | ) | |||||||
Interest rate swaps
|
$ | 20,593 | 20,593 | (2 | ) | |||||||
Other
|
$ | 51,614 | 51,614 | (2 | ) |
(1)
|
Fair
value was estimated by discounting the scheduled payment streams to
present value based upon rates
currently available to us for similar
debt.
|
(2)
|
Fair value was estimated by us to approximate
carrying value or is based on current market
information.
|
(18)
|
BUSINESS
SEGMENTS
|
Year ended December 31,
|
2007
|
2006
|
2005
|
|||||||||
(Dollars
in thousands)
|
||||||||||||
Voice
|
$ | 889,960 | 871,767 | 902,510 | ||||||||
Network
access
|
941,506 | 878,702 | 959,838 | |||||||||
Data
|
460,755 | 351,495 | 318,770 | |||||||||
Fiber
transport and CLEC
|
159,317 | 149,088 | 115,454 | |||||||||
Other
|
204,703 | 196,678 | 182,680 | |||||||||
Total operating revenues
|
$ | 2,656,241 | 2,447,730 | 2,479,252 |
(19)
|
COMMITMENTS
AND CONTINGENCIES
|
(20)
|
SUBSEQUENT
EVENT
|
First
|
Second
|
Third
|
Fourth
|
|||||||||||||
quarter
|
quarter
|
quarter
|
quarter
|
|||||||||||||
(Dollars
in thousands, except per share amounts)
|
||||||||||||||||
2007
|
(unaudited)
|
|||||||||||||||
Operating
revenues
|
$ | 600,855 | 689,991 | 708,833 | 656,562 | |||||||||||
Operating
income
|
$ | 168,083 | 231,836 | 224,185 | 168,974 | |||||||||||
Net
income
|
$ | 77,870 | 112,265 | 113,202 | 115,033 | |||||||||||
Basic
earnings per share
|
$ | .70 | 1.03 | 1.04 | 1.05 | |||||||||||
Diluted
earnings per share
|
$ | .68 | 1.00 | 1.01 | 1.04 | |||||||||||
2006
|
||||||||||||||||
Operating
revenues
|
$ | 611,291 | 608,907 | 619,837 | 607,695 | |||||||||||
Operating
income
|
$ | 157,924 | 164,993 | 168,942 | 173,679 | |||||||||||
Net
income
|
$ | 69,260 | 152,210 | 76,324 | 72,233 | |||||||||||
Basic
earnings per share
|
$ | .57 | 1.32 | .66 | .63 | |||||||||||
Diluted
earnings per share
|
$ | .55 | 1.26 | .64 | .62 | |||||||||||
2005
|
||||||||||||||||
Operating
revenues
|
$ | 595,282 | 606,413 | 657,085 | 620,472 | |||||||||||
Operating
income
|
$ | 176,860 | 185,882 | 201,242 | 172,419 | |||||||||||
Net
income
|
$ | 79,616 | 85,118 | 91,411 | 78,334 | |||||||||||
Basic
earnings per share
|
$ | .60 | .65 | .70 | .60 | |||||||||||
Diluted
earnings per share
|
$ | .59 | .64 | .68 | .59 |
Item
9.
|
Changes
in and Disagreements With Accountants on
Accounting
|
|
and
Financial Disclosure
|
Item
9A.
|
Controls
and Procedures
|
Item
9B.
|
Other
Information
|
Item
10.
|
Directors,
Executive Officers and Corporate
Governance
|
Name
|
Age
|
Office(s) held with
CenturyTel
|
Glen
F. Post, III
|
55
|
Chairman
of the Board of Directors
|
and Chief Executive Officer
|
||
Karen
A. Puckett
|
47
|
President
and Chief Operating Officer
|
R.
Stewart Ewing, Jr.
|
56
|
Executive
Vice President and
|
Chief Financial Officer
|
||
David
D. Cole
|
50
|
Senior
Vice President –
|
Operations Support
|
||
Stacey
W. Goff
|
42
|
Senior
Vice President, General Counsel
|
and Secretary
|
||
Michael
Maslowski
|
60
|
Senior
Vice President and
|
Chief Information Officer
|
Item
11.
|
Executive
Compensation
|
Item
12.
|
Security
Ownership of Certain Beneficial Owners and
Management
|
(c)
|
||||||||||||
Number
of securities
|
||||||||||||
remaining
available for
|
||||||||||||
(a)
|
(b)
|
future
issuance under
|
||||||||||
Number
of securities to
|
Weighted-average
|
plans
(excluding
|
||||||||||
be
issued upon conversion
|
exercise
price of
|
securities
reflected in
|
||||||||||
Plan category
|
of outstanding options
|
outstanding options
|
column (a))
|
|||||||||
Equity
compensation plans approved by security holders
|
3,632,205 | $ | 36.80 | 2,552,618 | ||||||||
Employee
Stock Purchase Plan approved by shareholders
|
- | - | 4,479,612 | |||||||||
Equity compensation plans not approved by security
holders
|
- | - | - | |||||||||
Totals
|
3,632,205 | $ | 36.80 | 7,032,230 | ||||||||
Item
13.
|
Certain
Relationships and Related
Transactions
|
Item
14.
|
Principal
Accountant Fees and Services
|
(a).
|
Documents
filed as a part of this report
|
||
(1)
|
The
following Consolidated Financial Statements are included in Part II, Item
8:
|
||
Report
of Management, including its assessment of the effectiveness of its
internal control over financial reporting
|
|||
Reports
of Independent Registered Public Accounting Firm on Consolidated Financial
Statements, Financial Statement Schedule and Effectiveness of the
Company’s Internal Control
over Financial Reporting
|
|||
Consolidated
Statements of Income for the years endedDecember 31, 2007, 2006 and
2005
|
|||
Consolidated
Statements of Comprehensive Income for the years ended December 31, 2007,
2006 and 2005
|
|||
Consolidated
Balance Sheets - December 31, 2007 and 2006
|
|||
Consolidated
Statements of Cash Flows for the years ended December 31, 2007, 2006 and
2005
|
|||
Consolidated
Statements of Stockholders' Equity for the years ended December 31, 2007,
2006 and 2005
|
|||
Notes
to Consolidated Financial Statements
|
|||
Consolidated
Quarterly Income Statement Information (unaudited)
|
|||
(2)
|
The
attached Schedule II, Valuation and Qualifying Accounts, is the only
applicable schedule that we are required to file.
|
||
(3)
|
Exhibits:
|
||
3.1
|
Amended
and Restated Articles of Incorporation, dated as of May 6, 1999
(incorporated by reference to Exhibit 3(i) to our Quarterly Report on Form
10-Q
for
the quarter ended
June 30, 1999).
|
||
3.2
|
Bylaws,
as amended through August 26, 2003 (incorporated by reference to Exhibit
3.1 of our Current Report on Form 8-K dated August 29, 2003 and filed
on
September 2, 2003).
|
||
3.3
|
Corporate
Governance Guidelines, as amended through August 21, 2007 (incorporated by
reference to Exhibit 3 of our Quarterly Report on Form 10-Q for the
quarter
ended September
30, 2007).
|
||
3.4
|
Charters
of Committees of Board of Directors
|
||
(a)
Charter of the Audit Committee of the Board of Directors, as amended
through November 15, 2006 (incorporated by reference to Exhibit 3.4(a) of
our
Annual Report on Form
10-K for the year ended December 31, 2006).
|
|||
(b)
Charter of the Compensation Committee of the Board of Directors, as
amended through February 27, 2007 (incorporated by reference to Exhibit
3.4 of our
Quarterly Report on
Form 10-Q for the quarter ended March 31, 2007).
|
|||
(c)
Charter of the Nominating and Corporate Governance Committee of the Board
of Directors, as amended through February 25, 2004 (incorporated by
reference
to Exhibit 3.3 of our Annual Report on Form 10-K for the year
ended December 31, 2003).
|
|||
(d)
Charter of the Risk Evaluation Committee of the Board of Directors, as
amended through February 26, 2008, included elsewhere herein.
|
|||
4.1
|
Form
of common stock certificate (incorporated by reference to Exhibit 4.3 of
our Annual Report on Form 10-K for the year ended December 31,
2000).
|
||
4.2
|
Instruments
relating to our public senior debt
|
||
(a)
Indenture dated as of March 31, 1994 between CenturyTel and Regions Bank
(formerly First American Bank & Trust of Louisiana), as Trustee
(incorporated
by reference to
Exhibit 4.1 of our Registration Statement on Form S-3, Registration No.
33-52915).
|
|||
(b)
Resolutions designating the terms and conditions of CenturyTel’s 7.2%
Senior Notes, Series D, due 2025 (incorporated by reference to Exhibit
4.27 to
our Annual Report on Form
10-K for the year ended December 31, 1995).
|
|||
(c)
Resolutions designating the terms and conditions of CenturyTel’s 6.30%
Senior Notes, Series F, due 2008; and 6.875% Debentures, Series G, due
2028,
(incorporated by reference
to Exhibit 4.9 to our Annual Report on Form 10-K for the year ended
December 31, 1997).
|
|||
(d)
Form of 8.375% Senior Notes, Series H, Due 2010, issued October 19, 2000
(incorporated by reference to Exhibit 4.2 of our Quarterly Report on Form
10-Q for the quarter
ended September 30, 2000).
|
|||
(e)
Board resolutions designating the terms and conditions of CenturyTel’s
7.875% Senior Notes, Series L, due 2012 (incorporated by reference to
Exhibit
4.2 of our
Registration Statement on Form S-4, File No. 333-100480).
|
|||
(f) Form
of 7.875% Senior Notes, Series L, due 2012 (included in Exhibit
4.2(e)).
|
|||
(g)
Third Supplemental Indenture dated as of February 14, 2005 between
CenturyTel and Regions Bank (successor-in-interest to First American Bank
&
Trust of Louisiana and
Regions Bank of Louisiana), as Trustee, designating and outlining the
terms and conditions of CenturyTel’s 5% Senior
Notes, Series M, due 2015 (incorporated by
reference to Exhibit 4.1 of our Current Report on Form 8-K dated February
15, 2005).
|
|||
(h)
Form of 5% Senior Notes, Series M, due 2015 (included in Exhibit
4.2(g)).
|
|||
(i)
Fourth Supplemental Indenture dated as of March 26, 2007 between
CenturyTel and Regions Bank, as Trustee, designating and outlining the
terms
and conditions of
CenturyTel’s 6.0% Senior Notes, Series N, due 2017 and 5.5% Senior Notes,
Series O, due 2013 (incorporated by reference
to Exhibit 4.1 of our Current Report on Form
8-K dated March 29, 2007).
|
|||
(j)
Form of 6.0% Senior Notes, Series N, due 2017 and 5.5% Senior Notes,
Series O, due 2013 (included in Exhibit 4.2(i)).
|
|||
4.3
|
$750
Million Five-Year Revolving Credit Facility, dated December 14, 2006,
between CenturyTel and the lenders named therein (incorporated by
reference
to
Exhibit 4.3 of
our Annual Report on Form 10-K for the year ended December 31,
2006).
|
||
4.4
|
First
Supplemental Indenture, dated as of November 2, 1998, to Indenture between
CenturyTel of the Northwest, Inc. and The First National Bank
of
Chicago (incorporated
by reference to Exhibit 10.2 to our Quarterly Report on Form 10-Q for the
quarter ended September 30, 1998).
|
||
10.1
|
Qualified
Employee Benefit Plans (excluding several narrow-based qualified plans
that cover union employees or other limited groups of
employees)
|
||
(a)
CenturyTel Dollars & Sense 401(k) Plan and Trust, as amended and
restated as of December 31, 2006 (incorporated by reference to Exhibit
10.1(a)
of our Annual Report on
Form 10-K for the year ended December 31, 2006) and amendments thereto
dated December 31, 2007, included elsewhere herein.
|
|||
(b)
CenturyTel Union 401(k) Plan and Trust, as amended and restated through
December 31, 2006 (incorporated by reference to Exhibit 10.1(b) of our
Annual Report on Form
10-K for the year ended December 31, 2006) and amendment thereto dated
December 31, 2007, included elsewhere herein.
|
|||
(c)
Amended and Restated Retirement Plan, effective as of December 31, 2006
(incorporated by reference to Exhibit 10.1(c) of our Annual Report on
Form 10-K for the
year ended December 31, 2006) and amendment thereto dated December 31,
2007, included elsewhere herein.
|
|||
10.2
|
Stock-based
Incentive Plans
|
||
(a)
1983 Restricted Stock Plan, dated February 21, 1984, as amended and
restated as of November 16, 1995 (incorporated by reference to Exhibit
10.1(e)
to our Annual Report on
Form 10-K for the year ended December 31, 1995) and amendment thereto
dated November 21, 1996, (incorporated by reference
to Exhibit 10.1(e) to our Annual Report on
Form 10-K for the year ended December 31, 1996), and amendment thereto
dated February 25, 1997
(incorporated by reference to Exhibit 10.3 to our Quarterly Report
on Form
10-Q for the quarter ended March 31, 1997), and amendment
thereto
dated April 25, 2001 (incorporated by reference to Exhibit 10.1 of
our Quarterly Report on Form 10-Q
for the quarter ended March 31, 2001), and
amendment thereto dated April 17, 2000 (incorporated by reference to
Exhibit 10.2(a) to our Annual Report on Form 10-K for
the year ended
December 31, 2001).
|
|||
(b)
1995 Incentive Compensation Plan approved by CenturyTel’s
shareholders on May 11, 1995 (incorporated by reference to Exhibit 4.4 to
Registration
No. 33-60061) and amendment
thereto dated November 21, 1996 (incorporated by Reference to Exhibit 10.1
(l) to our Annual Report on Form 10-K for
the year ended December 31, 1996), and amendment
thereto dated February 25, 1997 (incorporated by reference to Exhibit 10.1
to our Quarterly Report
on Form 10-Q for the quarter ended March 31, 1997) and
amendment thereto dated May 29, 2003 (incorporated by reference to Exhibit
10.1 to our
Quarterly Report on Form 10-Q for the quarter ended June 30,
2003).
|
|||
(i)
Form of Stock Option Agreement, pursuant to 1995 Incentive
Compensation Plan and dated as of February 24, 1997, entered into by
CenturyTel and its officers (incorporated
by reference to Exhibit 10.4 to our Quarterly Report on Form 10-Q for the
quarter ended
June 30, 1997).
|
|||
(ii)
Form of Stock Option Agreement, pursuant to 1995 Incentive
Compensation Plan and dated as of February 21, 2000, entered into
by
CenturyTel and its officers (incorporated
by reference to Exhibit 10.1 (t) to our Annual Report on Form 10-K for the
year ended
December 31, 1999).
|
|||
(c)
Amended and Restated 2000 Incentive Compensation Plan, as amended through
May 23, 2000 (incorporated by reference to Exhibit 10.2 to
our Quarterly Report on Form 10-Q
for the quarter ended June 30, 2000) and amendment thereto dated May 29,
2003 (incorporated by reference to
Exhibit 10.2 to our Quarterly Report on Form 10-Q for the
quarter ended June 30, 2003).
|
|||
(i)
Form of Stock Option Agreement, pursuant to the 2000 Incentive
Compensation Plan and dated as of May 21, 2001, entered into
by
CenturyTel and its officers (incorporated
by reference to Exhibit 10.2(e) to our Annual Report on Form 10-K
for the year ended
December 31, 2001).
|
|||
(ii)
Form of Stock Option Agreement, pursuant to the 2000 Incentive
Compensation Plan and dated as of February 25, 2002, entered into
by CenturyTel and its officers
(incorporated by reference to Exhibit 10.2(d)(ii) of our Annual Report on
Form 10-K for the year ended
December 31, 2002).
|
|||
(d) Amended
and Restated 2002 Directors Stock Option Plan, dated as of February 25,
2004 (incorporated by reference to Exhibit 10.2(e) of our
Annual Report on Form 10-K for
the year ended December 31, 2003).
|
|||
(i)
Form of Stock Option Agreement, pursuant to the foregoing plan, entered
into by CenturyTel in connection with options granted to the
outside directors as of May 10,
2002 (incorporated by reference to Exhibit 10.2 of Registrant’s
Quarterly Report on Form 10-Q for the
period ended September 30, 2002).
|
|||
(ii)
Form of Stock Option Agreement, pursuant to the foregoing plan, entered
into by CenturyTel in connection with options granted to
the outside directors as of
May 9, 2003 (incorporated by reference to Exhibit 10.2(e)(ii) of our
Annual Report on Form 10-K for the
year ended December 31, 2003).
|
|||
(iii)
Form of Stock Option Agreement, pursuant to the foregoing plan, entered
into by CenturyTel in connection with optionsgranted to
the outside directors as of May
7, 2004 (incorporated by reference to Exhibit 10.2(d)(iii) of our Annual
Report on Form 10-K for the year
ended December 31, 2005).
|
|||
(e)
Amended and Restated 2002 Management Incentive Compensation Plan, dated as
of February 25, 2004 (incorporated by reference to Exhibit 10.2(f)
of our Annual Report on
Form 10-K for the year ended December 31, 2003).
|
|||
(i)
Form of Stock Option Agreement, pursuant to the foregoing plan, entered
into between CenturyTel and certain of its officers and key
employees at various dates since
May 9, 2002 (incorporated by reference to Exhibit 10.4 of our Quarterly
Report on Form 10-Q for the
period ended September 30, 2002).
|
|||
(ii)
Form of Stock Option Agreement, pursuant to the foregoing plan and dated
as of February 24, 2003, entered into by CenturyTel
and its officers (incorporated by
reference to Exhibit 10.2(f)(ii) of our Annual Report on Form 10-K for the
year ended December 31, 2002).
|
|||
(iii) Form
of Stock Option Agreement, pursuant to the foregoing plan and dated as of
February 25, 2004, entered into by CenturyTel and its
officers (incorporated by
reference to Exhibit 10.2(f)(iii) of our Annual Report on Form 10-K for
the year ended December 31, 2003).
|
|||
(iv)
Form of Restricted Stock Agreement, pursuant to the foregoing plan and
dated as of February 24, 2003, entered into by CenturyTel
and its executive officers
(incorporated by reference to Exhibit 10.1 of our Quarterly Report on Form
10-Q for the period ended March 31, 2003).
|
|||
(v)
Form of Restricted Stock Agreement, pursuant to the foregoing plan and
dated as of February 25, 2004, entered into by CenturyTel and its
executive officers (incorporated by reference to Exhibit 10.2(f)(v) of our
Quarterly Report on Form 10-Q for the period ended March 31,
2004).
|
|||
(vi)
Form of Stock Option Agreement, pursuant to the foregoing plan and dated
as of February 17, 2005, entered into by CenturyTel and its
executive officers (incorporated
by reference to Exhibit 10.2(e)(v) of our Annual Report on From 10-K
for the year ended December 31, 2004).
|
|||
(vii) Form
of Restricted Stock Agreement, pursuant to the foregoing plan and dated as
of February 17, 2005, entered into by CenturyTel
and its executive officers
(incorporated by reference to Exhibit 10.2(e)(vi) of our Annual Report on
Form 10-K for the year ended
December 31, 2004).
|
|||
(f)
2005 Directors Stock Option Plan (incorporated by reference to our 2005
Proxy Statement filed April 15, 2005).
|
|||
(i)
Form of Restricted Stock Agreement, pursuant to the foregoing plan,
entered into between CenturyTel and each of its outside directors as
of May 13, 2005 (incorporated
by reference to Exhibit 10.4 of our Current Report on Form 8-K dated May
13, 2005).
|
|||
(ii)
Form of Restricted Stock Agreement, pursuant to the foregoing plan,
entered into between CenturyTel and each of its outside
directors as of May 12, 2006.
|
|||
(g) 2005
Management Incentive Compensation Plan (incorporated by reference to our
2005 Proxy Statement filed April 15, 2005).
|
|||
(i)
Form of Stock Option Agreement, pursuant to the foregoing plan, entered
into between CenturyTel and certain officers and key employees
at various dates since May
12, 2005 (incorporated by reference to Exhibit 10.2 of our Quarterly
Report on Form 10-Q for the period ended
September 30, 2005)
|
|||
(ii)
Form of Restricted Stock Agreement, pursuant to the foregoing plan,
entered into between CenturyTel and certain officers and key employees
at various dates since
May 12, 2005 (incorporated by reference to Exhibit 10.3 of our Quarterly
Report on Form 10-Q for the period ended
September 30, 2005).
|
|||
(iii)
Form of Stock Option Agreement, pursuant to the foregoing plan and dated
as of February 21, 2006, entered into between CenturyTel
and its executive officers (incorporated
by reference to Exhibit 10.2(g)(iii) of our Annual Report on Form 10-K for
the year ended
December 31, 2005).
|
|||
(iv) Form
of Restricted Stock Agreement, pursuant to the foregoing plan and dated as
of February 21, 2006, entered into between CenturyTel
and its executive Officers
(incorporated by reference to Exhibit 10.2(g)(iv) of our Annual Report on
Form 10-K for the year ended December
31, 2005).
|
|||
(v)
Form of Stock Option Agreement, pursuant to the foregoing plan and dated
as of February 26, 2007, entered into between CenturyTel and
its executive offices
(incorporated by reference to Exhibit 10.1 of our Quarterly Report on Form
10-Q for the quarter ended March 31, 2007).
|
|||
(vi) Form
of Restricted Stock Agreement, pursuant to the foregoing plan and dated as
of February 26, 2007, entered into between CenturyTel
and
its executive officers
(incorporated by reference to Exhibit 10.2 of our Quarterly Report on Form
10-Q for the quarter ended March 31, 2007).
|
|||
10.3
|
Other
Non-Qualified Employee Benefit Plans
|
||
(a)
Key Employee Incentive Compensation Plan, dated January 1, 1984, as
amended and restated as of November 16, 1995 (incorporated by reference to
Exhibit 10.1(f) to our Annual
Report on Form 10-K for the year ended December 31, 1995) and amendment
thereto dated November 21, 1996
(incorporated by reference
to Exhibit 10.1 (f) to our
Annual Report on Form 10-K for the year ended December 31, 1996),
amendment thereto
dated February 25, 1997 (incorporated by
reference to Exhibit 10.2 to our Quarterly Report
on Form 10-Q for the quarter ended March
31, 1997), amendment thereto dated April
25, 2001 (incorporated
by reference to Exhibit 10.2 of our Quarterly Report on Form
10-Q for
the quarter ended March 31, 2001), amendment thereto dated April
17, 2000 (incorporated by reference to Exhibit 10.3(a) to our Annual
Report on Form 10-K for
the year ended December 31, 2001) and amendment thereto
dated February 27, 2007 (incorporated by reference to
Exhibit 10.1 of our Quarterly Report on Form 10-Q for
the quarter ended June 30, 2007).
|
|||
(b)
Supplemental Executive Retirement Plan, 2008 Restatement, effective
January 1, 2008, included elsewhere herein.
|
|||
(c)
Supplemental Dollars & Sense Plan, 2008 Restatement, effective January
1, 2008, included elsewhere herein.
|
|||
(d)
Supplemental Defined Benefit Plan, 2008 Restatement, effective as of
January 1, 2008, included elsewhere herein.
|
|||
(e)
Amended and Restated Salary Continuation (Disability) Plan for Officers,
dated November 26, 1991 (incorporated by reference to Exhibit 10.16
of
our Annual Report on
Form 10-K for the year ended December 31, 1991).
|
|||
(f)
2005 Executive Officer Short-Term Incentive Program (incorporated by
reference to our 2005 Proxy Statement filed April 5, 2005).
|
|||
(g) 2001
Employee Stock Purchase Plan (incorporated by reference to our 2001 Proxy
Statement).
|
|||
10.4
|
Employment,
Severance and Related Agreements
|
||
(a)
Amended and Restated Change of Control Agreement, effective January 1,
2008, by and between Glen F. Post, III and CenturyTel, included
elsewhere herein.
|
|||
(b)
Form of Amended and Restated Change of Control Agreement, effective
January 1, 2008, by and between CenturyTel and each of its other
executive
officers, included elsewhere
herein.
|
|||
(c)
Form of Indemnification Agreement for Officers and Directors (incorporated
by reference to Exhibit 10.4(e) of our Annual Report on Form 10-K
for the year ended December
31, 2005).
(d)
CenturyTel, Inc. Bonus Life Insurance Plan for Executive Officers,
effective January 1, 2006, included elsewhere herein.
|
|||
14
|
Corporate
Compliance Program (incorporated by reference to Exhibit 14 of
our Annual Report on Form 10-K for the year ended December 31,
2003).
|
||
21
|
Subsidiaries
of CenturyTel, included elsewhere herein.
|
||
23
|
Independent
Registered Public Accounting Firm Consent, included elsewhere
herein.
|
||
31.1
|
Chief
Executive Officer certification pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002, included elsewhere herein.
|
||
31.2
|
Chief
Financial Officer certification pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002, included elsewhere herein.
|
||
32 |
Chief
Executive Officer and Chief Financial Officer certification pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002, included elsewhere
herein.
|
||
(b)
|
Reports
on Form 8-K.
|
||
The
following Form 8-Ks were filed on the dates indicated during the fourth
quarter of 2007.
|
|||
November 1,
2007
Items
2.02 and 9.01. Results of Operations and Financial
Condition – News release announcing third quarter 2007 operating
results.
|
|
CenturyTel,
Inc.,
|
|
|
|
|
Date:
February 29, 2008
|
By: /s/
Glen F. Post, III
|
Glen F. Post,
III
|
|
|
Chairman of the Board
and
|
|
Chief Executive
Officer
|
|
Chairman of the Board
and
|
|
/s/
Glen F. Post, III
|
Chief
Executive Officer
|
|
Glen F. Post,
III
|
|
February 29,
2008
|
|
|
|
|
Executive Vice President
and
|
|
/s/ R. Stewart Ewing, Jr.
|
Chief
Financial Officer
|
|
R. Stewart Ewing,
Jr.
|
|
February 29,
2008
|
|
|
|
/s/
Neil A. Sweasy
|
Vice President and
Controller
|
|
Neil A. Sweasy
|
|
February 29,
2008
|
|
|
|
/s/ William R. Boles, Jr.
|
Director
|
|
William R. Boles,
Jr.
|
|
February 29,
2008
|
|
|
|
/s/
Virginia Boulet
|
Director
|
|
Virginia Boulet
|
|
February 29,
2008
|
|
|
|
/s/
Calvin Czeschin
|
Director
|
|
Calvin Czeschin
|
|
February 29,
2008
|
|
|
|
/s/ James B. Gardner
|
Director
|
|
James B.
Gardner
|
|
February 29,
2008
|
|
|
|
/s/
W. Bruce Hanks
|
Director
|
|
W. Bruce Hanks
|
|
February 29,
2008
|
|
|
|
/s/ Gregory J. McCray
|
Director
|
|
Gregory J.
McCray
|
|
February
29, 2008
|
|
|
|
/s/ C. G. Melville, Jr.
|
Director
|
|
C. G. Melville,
Jr.
|
|
February 29,
2008
|
|
|
|
/s/ Fred R.
Nichols
|
Director
|
|
Fred R.
Nichols
|
|
February
29, 2008
|
|
|
|
/s/ Harvey P. Perry
|
Director
|
|
Harvey P.
Perry
|
|
February
29, 2008
|
|
|
|
|
Director
|
|
Jim D. Reppond
|
|
February ___,
2008
|
|
|
|
/s/
Joseph R. Zimmel
|
Director
|
|
Joseph R.
Zimmel
|
|
February 29,
2008
|
|
|
|
Additions
|
||||||||||||||||||||
Balance
at
|
charged
to
|
Deductions
|
Balance
|
|||||||||||||||||
beginning
|
costs
and
|
from
|
Other
|
at
end
|
||||||||||||||||
Description
|
of period
|
expenses
|
allowance
|
changes
|
of period
|
|||||||||||||||
(Dollars
in thousands)
|
||||||||||||||||||||
Year
ended December 31, 2007
|
||||||||||||||||||||
Allowance
for doubtful accounts
|
$ | 20,905 | 14,466 | (16,617 | ) (1) | 1,607 | (2) | 20,361 | ||||||||||||
Valuation
allowance for deferred tax
assets
|
$ | 61,049 | 3,744 | (33,886) | - | 30,907 | ||||||||||||||
Year
ended December 31, 2006
|
||||||||||||||||||||
Allowance
for doubtful accounts
|
$ | 21,721 | 20,199 | (21,009 | ) (1) | (6 | )(2) | 20,905 | ||||||||||||
Valuation
allowance for deferred tax
assets
|
$ | 54,412 | 6,637 | - | - | 61,049 | ||||||||||||||
Year
ended December 31, 2005
|
||||||||||||||||||||
Allowance
for doubtful accounts
|
$ | 21,187 | 30,945 | (30,880 | ) (1) | 469 | (2) | 21,721 | ||||||||||||
Valuation
allowance for deferred tax assets
|
$ | 27,112 | 27,300 | - | - | 54,412 | ||||||||||||||