SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 8-K
CURRENT REPORT
Pursuant to Section 13 of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) January 13, 1994
CENTURY TELEPHONE ENTERPRISES, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<C> <C> <C>
Louisiana 1-7784 72-0651161
(State or other jurisdiction (Commission File Number) (IRS Employer Identification No.)
of incorporation)
</TABLE>
100 Century Park Drive, Monroe, Louisiana 71203
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (318) 388-9500
<PAGE>
Item 5. Other Events
On October 8, 1993, Century Telephone Enterprises, Inc.
("Century") entered into a definitive merger agreement (the
"Merger Agreement") with Celutel, Inc. ("Celutel"), pursuant to
which Century proposes to acquire all of the capital stock of
Celutel pursuant to a statutory merger (the "Merger").
Consummation of the Merger is subject to the approval of
Celutel's stockholders at a meeting scheduled for February 10,
1994, the absence of any material adverse changes in Century or
any of Celutel's cellular subsidiaries, and the fulfillment of
other closing conditions specified in the Merger Agreement.
The aggregate merger consideration to be paid by Century to
Celutel's stockholders will be dependent upon Century's stock
trading price and the actual amount of Celutel's long-term
indebtedness and working capital on the date the Merger is
consummated, and, accordingly, cannot be definitively calculated
until immediately prior to such date. Based upon certain
assumptions (including assumptions regarding Century's stock
trading price and the accuracy of certain estimates of Celutel's
management regarding Celutel's long-term debt and working
capital), the aggregate merger consideration is expected to
consist of approximately 1.9 million shares of Century common
stock and approximately $51 million cash. The actual number of
shares of Century common stock issuable at the closing will be
determined by dividing 50% of the amount used in calculating the
aggregate merger consideration by the average per share closing
price of such stock for a 10-day period prior to closing, subject
to a ceiling price of $33 per share (which, based on the
anticipated consideration described above, fixes the minimum
number of shares of Century common stock at 1,555,000) and a
floor price of $27 per share (which, based on the anticipated
consideration described above, fixes the maximum number of shares
of Century common stock at 1,900,000). At this time, Century
expects to fund the cash portion of the merger consideration from
proceeds to be received from the issuance of long-term debt, the
terms and conditions of which have not yet been determined.
Celutel is a telecommunications company based in Annapolis,
Maryland that provides cellular service in five metropolitan
statistical areas in Mississippi and Texas. Celutel presently
serves an area having an aggregate population of approximately
1.4 million and controls approximately 1.1 million pops.
The Celutel acquisition, which will be accounted for as a
purchase, would have resulted in an estimated increase of
Century's excess cost of net assets acquired of approximately
$127 million if the acquisition had occurred as of January 1,
1992. In addition, if the acquisition had occurred as of January
1, 1992, fully diluted earnings per common share on a pro forma
basis for the nine-month period ended September 30, 1993 would
have decreased approximately $.11 per share.
On April 21, 1993, Century and Celutel, among others,
entered into a purchase agreement pursuant to which Century
agreed to acquire Celutel's interests in the Biloxi-Gulfport and
Pascagoula, Mississippi nonwireline cellular operating systems
for a total purchase price of approximately $36 million. The
Merger Agreement provides that this agreement will remain in full
force and effect until consummation of the Merger, but suspends
the obligations of the parties thereunder unless the Merger
Agreement is duly terminated in accordance with its terms, in
which event Celutel and Century will be obligated to complete the
transactions contemplated thereby.
Century has filed a registration statement under the
Securities Act of 1933 registering the shares of Century common
stock to be issued in connection with the Merger. This
registration statement was declared effective January 10, 1994.
<PAGE>
Consolidated Financial Statements of Celutel, Inc. and
Subsidiaries
1. Consolidated Balance Sheets as of October 31, 1993
(unaudited) and April 30, 1993.
2. Consolidated Statements of Operations for the three
months and the six months ended October 31, 1993 and
1992 (unaudited).
3. Consolidated Statements of Cash Flows for the six
months ended October 31, 1993 and 1992 (unaudited).
4. Notes to Consolidated Financial Statements.
For additional consolidated financial statements of Celutel,
see Century's Current Report on Form 8-K dated October 8, 1993.
<PAGE>
CELUTEL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
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OCTOBER 31, APRIL 30,
1993 1993
-------------- --------------
(UNAUDITED)
ASSETS
Current assets:
Cash........................................................................... $ 1,195,643 $ 632,479
Accounts receivable (less allowance for doubtful accounts of $264,231 and
$208,937 at October 31, 1993 and April 30, 1993, respectively).............. 4,416,609 3,993,242
Inventory...................................................................... 530,526 575,378
Prepaid expenses and other..................................................... 199,200 160,196
-------------- --------------
Total current assets...................................................... 6,341,978 5,361,295
-------------- --------------
Investments in cellular telephone licenses:
License acquisition cost (less accumulated amortization of $4,538,424 and
$3,835,433 at October 31, 1993 and April 30, 1993, respectively)............ 22,176,336 21,873,667
-------------- --------------
22,176,336 21,873,667
Property, plant and equipment, at cost........................................... 19,309,313 18,227,044
Less accumulated depreciation and amortization................................... (5,545,256) (4,758,067)
-------------- --------------
Property, plant and equipment, net........................................ 13,764,057 13,468,977
-------------- --------------
Debt issuance costs (less accumulated amortization of $462,616 and $369,776 at
October 31, 1993 and April 30, 1993, respectively)............................. 928,605 1,021,446
Other assets..................................................................... 738,518 442,423
-------------- --------------
Total assets.............................................................. $ 43,949,494 $ 42,167,808
-------------- --------------
-------------- --------------
LIABILITIES AND SHAREHOLDERS' DEFICIT
Current liabilities:
Accounts payable............................................................... $ 1,309,597 $ 1,195,463
Accounts payable to related parties............................................ 123,401 148,017
Accrued liabilities............................................................ 1,855,411 1,514,114
Accrued interest............................................................... 393,845 248,829
Accrued dealer commissions..................................................... 181,884 301,444
Current portion of notes payable............................................... 12,300 1,255
-------------- --------------
Total current liabilities................................................. 3,876,438 3,409,122
Notes payable.................................................................... 41,263,525 39,792,000
-------------- --------------
45,139,963 43,201,122
-------------- --------------
Minority interest................................................................ 5,435,218 5,233,739
-------------- --------------
Commitments and contingencies
Redeemable preferred stock
18% Senior Convertible Preferred, $.20 par value; 50,000 shares authorized;
issued and outstanding, October 31, 1993-- 4,123.9792 shares, April 30,
1993--3,773.7794 shares..................................................... 38,424,777 34,372,793
-------------- --------------
Shareholders' deficit:
Class A Common Stock, $.20 par value; 35,000,000 shares authorized; issued and
outstanding, October 31, 1993--3,516,188 shares, April 30, 1993--3,516,188
shares...................................................................... 703,238 703,238
Additional paid-in capital..................................................... -- --
Accumulated deficit............................................................ (45,753,702) (41,343,084)
-------------- --------------
Total shareholders' deficit............................................... (45,050,464) (40,639,846)
-------------- --------------
Total liabilities and shareholders' deficit............................... $ 43,949,494 $ 42,167,808
-------------- --------------
-------------- --------------
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
<PAGE>
CELUTEL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<S> <C> <C> <C> <C>
THREE MONTHS ENDED SIX MONTHS ENDED
OCTOBER 31, OCTOBER 31,
------------------------------ ------------------------------
1993 1992 1993 1992
-------------- -------------- -------------- --------------
Operating revenue:
Cellular service revenue....................... $ 6,740,594 $ 4,154,172 $ 13,167,433 $ 7,867,305
Equipment sales revenue........................ 836,295 771,927 1,744,268 1,491,684
Other.......................................... 48,177 38,122 89,749 77,386
-------------- -------------- -------------- --------------
Total operating revenue................... 7,625,066 4,964,221 15,001,450 9,436,375
-------------- -------------- -------------- --------------
Cost and expenses:
Operating expenses............................. 1,424,375 881,005 2,855,539 1,695,898
Depreciation and amortization.................. 740,283 693,278 1,491,305 1,372,119
Cost of equipment sold......................... 836,295 771,927 1,744,268 1,491,684
Marketing and sales expense.................... 1,814,103 1,279,917 3,728,845 2,603,104
General and administrative expense............. 1,598,062 1,430,955 3,139,689 2,627,278
Provision for doubtful accounts................ 388,204 272,615 742,119 468,291
Operating loss from discontinued subsidiary.... -- 105,193 -- 173,684
-------------- -------------- -------------- --------------
Total costs and expenses.................. 6,801,322 5,434,890 13,701,765 10,432,058
-------------- -------------- -------------- --------------
Income (loss) from operations.................... 823,744 (470,669) 1,299,685 (995,683)
-------------- -------------- -------------- --------------
Other income (expense):
Gain on sale of asset.......................... -- -- 15,000 --
Interest income................................ 2,110 562 4,634 1,473
Interest expense............................... (749,886) (794,276) (1,476,482) (1,658,655)
-------------- -------------- -------------- --------------
Total other income (expense).............. (747,776) (793,714) (1,456,848) (1,657,182)
-------------- -------------- -------------- --------------
Minority Interest................................ (170,328) 119,274 (201,479) 276,569
-------------- -------------- -------------- --------------
Net loss......................................... (94,360) (1,145,109) (358,642) (2,376,296)
Preferred stock dividend requirement and
amortization of warrants and issuance costs.... (2,064,832) (1,787,540) (4,051,984) (3,486,626)
-------------- -------------- -------------- --------------
Loss applicable to common shareholders........... $ (2,159,192) $ (2,932,649) $ (4,410,626) $ (5,862,922)
-------------- -------------- -------------- --------------
-------------- -------------- -------------- --------------
Per Share Data:
Average Shares Outstanding..................... 3,516,188 3,516,190 3,516,188 3,516,190
Net (loss)..................................... $ (0.03) $ (0.33) $ (0.10) $ (0.68)
Preferred stock dividend requirement and
amortization of warrants and issuance
costs....................................... (0.59) (0.51) (1.15) (0.99)
-------------- -------------- -------------- --------------
Loss applicable to common shareholders......... $ (0.61) $ (0.84) $ (1.25) $ (1.67)
-------------- -------------- -------------- --------------
-------------- -------------- -------------- --------------
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
<PAGE>
CELUTEL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<S> <C> <C>
SIX MONTHS ENDED
OCTOBER 31,
------------------------------
1993 1992
-------------- --------------
Cash flows from operating activities:
Net loss........................................................................ $ (358,642) $ (2,376,296)
Adjustments to reconcile net loss to cash used by operations:
Depreciation and amortization................................................ 1,491,305 1,372,119
Amortization of debt issuance costs.......................................... 92,841 92,841
Provision for doubtful accounts.............................................. 742,119 468,291
Minority interest in net losses of consolidated subsidiaries................. 201,479 (276,569)
(Gain) loss on sale of asset................................................. (15,000) --
Changes in operating assets and liabilities:
Accounts receivable.......................................................... (1,165,485) (874,028)
Inventory.................................................................... 44,851 41,782
Other assets................................................................. (325,545) (438,325)
Accounts payable............................................................. 114,134 820,617
Accounts payable to related parties.......................................... (24,616) (63,476)
Accrued liabilities.......................................................... 366,752 589,376
-------------- --------------
Net Cash provided (used) by operations............................................ 1,164,193 (643,668)
-------------- --------------
Cash flows from investing activities:
Proceeds from sale of subsidiary................................................ -- 400,000
Purchase of property, plant and equipment....................................... (1,005,660) (1,440,323)
Purchase of minority interest in partnerships................................... -- (1,524)
Increase in license acquisition costs........................................... (1,082,269) (700,540)
-------------- --------------
Net cash used by investing activities............................................. (2,087,929) (1,742,387)
-------------- --------------
Cash flows from financing activities:
Principal payments on notes payable............................................. $ -- $ (86,813)
Proceeds from borrowings........................................................ 1,486,900 2,195,878
Minority shareholder capital contributions in subsidiaries...................... -- 529,710
-------------- --------------
Net cash provided by financing activities......................................... 1,486,900 2,638,775
-------------- --------------
Net increase in cash.............................................................. 563,164 252,720
Cash at beginning of period (May 1)............................................... 632,479 319,023
-------------- --------------
Cash at end of period (October 31)................................................ $ 1,195,643 $ 571,743
-------------- --------------
-------------- --------------
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest--Other................................................................. $ 1,331,467 $ 1,565,815
Supplemental schedule of non-cash investing and financing activities:
During the six months ended October 31,1993 and 1992, the Company had the
following noncash financing and investing activities:
Dividends paid-in-kind shares of Celutel, Inc.
Preferred Stock............................................................ $ 3,501,998 $ 2,936,642
Accretion of common stock warrants and issuance costs........................ 549,986 549,984
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
<PAGE>
CELUTEL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. NATURE OF BUSINESS AND BASIS OF PRESENTATION
Celutel, Inc. was incorporated in Arizona on December 3, 1982. On July 19,
1988, Celutel, Inc. was reincorporated, in Delaware, by merger into a newly
formed wholly-owned subsidiary. Herein, unless the context should otherwise
indicate, Celutel, Inc. and its subsidiaries are referred to as the "Company".
The principal activity of the Company is the construction, development and
operation of cellular telephone systems.
As of October 31, 1993, the Company had majority interests in five
Metropolitan Statistical Area ("MSA") cellular telephone systems, and owned a
100% interest in Celutel Holdings Inc., and Skywalker Cellucom Inc., and its
wholly-owned subsidiaries, Skywalker 1990-1 Limited Partnership and Skywalker
Investment Corporation. The Company has completed the development and commenced
cellular telephone operations in all five of its majority-owned MSA systems.
The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with generally accepted accounting principles for
interim financial reporting and in accordance to the rules and regulations of
the Security and Exchange Commission prescribed in Form 10-QSB. Accordingly,
they do not include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. Certain
information and note disclosures normally included in the financial statements
prepared in accordance with generally accepted accounting principles have been
condensed or omitted. It is suggested that these statements be read in
conjunction with the financial statements and notes thereto in the Company's
April 30, 1993 Annual Report on Form 10-KSB (as amended).
It is the opinion of management, that all adjustments (consisting only of
normal recurring accruals) necessary to present fairly the financial position as
of October 31, 1993, the results of operations for the three and six months
ended October 31, 1993 and 1992, and cash flows for the six months ended October
31, 1993 and 1992 have been made and consistently applied with those used in the
preparation of the Company's 1993 Annual Report on Form 10-KSB (as amended). The
results of operations for the three and six months ended October 31, 1993 are
not necessarily indicative of the results of operations for the full year.
2. PURCHASE AGREEMENT
On October 8, 1993, the Company entered into an Agreement and Plan of
Merger (the "Merger") with Century Telephone Enterprises, Inc. whereby the
Company and its subsidiaries (including Biloxi-Gulfport, Mississippi and
Pascagoula, Mississippi, the "MGC Agreement"), will be acquired by merger. The
purchase price will be paid 50% in cash and 50% in Century Common Stock. The net
consideration to the Company's public common shareholders, depending upon
certain assumptions regarding the various closing costs and other price
adjustments, is estimated by management of the Company to consist of
approximately 0.15 shares of Century common stock and approximately $4.05 cash
(before deducting a cash holdback estimated at $.32 per share for possible
post-closing liabilities). The per share price utilized to determine the number
of shares of Century Common Stock to be delivered at closing will be an average
of its closing price for a ten day period prior to closing, subject to floor and
ceiling prices of $27 and $33, respectively. Approximately $40 million of the
Company's debt will be assumed by Century in the merger. The transaction is
expected to close during the third fiscal quarter and is subject to the approval
of the Company's shareholders and the fulfillment of other closing conditions.
<PAGE>
CELUTEL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
3. NOTES PAYABLE
The Company entered into a bank loan agreement (the "Bank Loan Agreement")
with PNC Bank, (the "Bank"), formerly Provident National Bank, on April 2, 1991
whereby, through December 31, 1994, the Company is able to borrow up to
$40,000,000, subject to the Company's continuing compliance with the covenants
and conditions of the Bank Loan Agreement. Borrowings under the Bank Loan
Agreement bear interest at the Bank's prime interest rate plus 2% or LIBOR plus
3% and are collateralized by substantially all of the Company's majority-owned
cellular system assets. Commencing on March 31, 1995, the Company is required to
make payments of principal on the loan so as to repay the outstanding principal
in full in quarterly installments over the following four years with the final
payment due on December 31, 1998. The loan is subject to certain mandatory
prepayment provisions out of the proceeds of the sale of certain assets and
commencing with the fiscal year beginning May 1, 1995 out of excess cash flow,
as defined.
The principal balance outstanding as of October 31, 1993 was $38,550,000 at
an average interest rate of 6.33%. Accrued interest at October 31, 1993 was
$375,898.
4. PASCAGOULA CELLULAR TELEPHONE CO., INC.
Pascagoula Cellular Telephone Company, Inc. ("Pascagoula"), a wholly-owned
subsidiary of the Company, was incorporated in Delaware on July 12, 1989. On
October 3, 1990, Pascagoula purchased 100% of the capital stock of the
corporation holding a 50.01% interest in the partnership that owned the FCC
permit to construct a cellular radio system in Pascagoula, Mississippi MSA. The
purchase price was originally $13,091,418, not including closing costs and other
adjustments. Of the total purchase price, $1,000,000 was paid on September 13,
1990, $1,200,000 at closing on October 3, 1990, $97,000 by the assignment of the
Company's minority interest in Richland/Kennewick/Pasco, Washington MSA, and the
remaining $10,845,990 paid by the issuance of a promissory note bearing interest
on the unpaid principal amount at prime plus 2% due February 15, 1991
collateralized by a senior security interest in the 50.01% interest in the
Pascagoula system. On February 12, 1991, the Company reached an agreement in
principle to reduce the purchase price in the transaction. The note for
$10,845,990 was canceled and in exchange $1,750,000 paid in cash by the Company
concurrently with the closing of the Continental transaction and the Company was
issued a new note in the principal amount of $3,550,000 payable on May 1, 1996.
The interest rate on the new note is prime plus 2% and is collateralized by a
senior security interest in the 50.01% interest in the Pascagoula system. The
principal balance outstanding as of October 31, 1993 was $2,692,000 at an
average interest rate of 8%. Accrued interest as of October 31, 1993 was
$17,947.
5. PURCHASE OF MINORITY INTEREST
On June 15, 1993, the Company entered into an agreement with PriCellular
Corporation to purchase an 8.7% minority interest in the Company's Biloxi
subsidiary. By letter agreement dated August 30, 1993, the Company assigned to
Century its right to acquire approximately 54% of this 8.7% interest. The
Company and Century completed the purchase of these shares on August 31, 1993.
The August 30, 1993 letter agreement provides that if neither the Merger nor the
MGC Agreement is completed, the Company will purchase the shares that Century
acquired thereunder at a price equal to Century's purchase price of $594,340.
The aggregate purchase price of the Company's interest was $505,660.
<PAGE>
CELUTEL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
5. PURCHASE OF MINORITY INTEREST--(CONTINUED)
On July 26, 1993, the Company entered into a purchase agreement with a
minority shareholder in the Company's McAllen subsidiary. Whereby on August 16,
1993 the Company purchased his 3.7274% minority interest in the McAllen
subsidiary. The aggregate purchase price of this interest was $500,000.
On November 3, 1993, the Company entered into an agreement with McCaw
Cellular Communications, Inc. to purchase 1.8%, 1.9469% and 1.526% minority
interests in the Company's McAllen, Brownsville and Biloxi subsidiaries,
respectively. By letter agreement dated November 3, 1993, the Company assigned
to Century its right to acquire the 1.526% interest in the Biloxi subsidiary.
The Company and Century completed the purchase of these shares on November 4,
1993. The November 3, 1993 letter agreement provides that if neither the Merger
nor the MGC Agreement is completed, the Company will purchase the shares that
Century acquired thereunder at a price equal to Century's purchase price of
$242,700. The aggregate purchase price of the Company's interests in the McAllen
and Brownsville subsidiaries was $953,000.
6. INCOME TAXES
In February 1992, the Financial Accounting Standards Board issued statement
No. 109 (SFAS 109), "Accounting for Income Taxes". SFAS No. 109 requires
recognition of deferred tax liabilities and assets for expected future tax
consequences of events that have been included in financial statements or tax
returns. Under this method, deferred tax liabilities and assets are determined
based on the difference between the financial statements and tax bases of assets
and liabilities using the enacted tax rates in effect for the year in which the
differences are expected to reverse. The Company adopted SFAS No. 109 effective
May 1, 1993. Under the provisions of SFAS No. 109, the Company elected not to
restate prior years and has determined that the cumulative effect of
implementation was immaterial.
As of October 31, 1993 the Company and its subsidiaries, of which the
following are not consolidated for federal income tax purposes, The McAllen
Cellular Telephone Co., Brownsville Cellular Telephone Co., Inc., had the
following for components of net deferred tax assets:
<TABLE>
<S> <C> <C>
DEFERRED TAX DEFERRED TAX
ASSETS LIABILITIES
------------- -------------
Celutel, Inc. and Consolidated Subsidiaries:
Current
Allowance for uncollectible accounts receivable..................................... $ 41,758 $ --
Obligation for consulting agreement................................................. 12,467 --
------------- -------------
Total Current.................................................................. $ 54,225 $ --
------------- -------------
------------- -------------
Noncurrent
Accumulated depreciation and amortization........................................... $ -- $ 1,708,964
Tax basis of intangible assets...................................................... 525,730 --
Tax basis of property, plant and equipment.......................................... -- 2,700
Net operating loss carryforwards.................................................... 6,062,346 --
------------- -------------
Total Noncurrent............................................................... $ 6,588,076 $ 1,711,664
------------- -------------
------------- -------------
</TABLE>
At October 31, 1993 Celutel, Inc. and its consolidated subsidiaries had net
current deferred tax assets of $54,225 and net noncurrent tax assets of
$4,876,412. A valuation allowance, as prescribed by SFAS No. 109, in the amount
of $4,930,637 has been established, which reduces the carrying value of the net
deferred tax assets to zero.
<PAGE>
CELUTEL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
6. INCOME TAXES--(CONTINUED)
<TABLE>
<S> <C> <C>
DEFERRED TAX DEFERRED TAX
ASSETS LIABILITIES
------------- -------------
The McAllen Cellular Telephone Company, Inc.:
Current
Allowance for uncollectible accounts receivable..................................... $ 31,462 $ --
Obligation for consulting agreement................................................. -- --
------------- -------------
Total Current.................................................................. $ 31,462 $ --
------------- -------------
------------- -------------
Noncurrent
Accumulated depreciation and amortization........................................... $ 59,963 $ --
Tax basis of intangible assets...................................................... 7,303 --
Tax basis of property, plant and equipment.......................................... -- 76,956
Net operating loss carryforwards.................................................... 2,467,110 --
------------- -------------
Total Noncurrent............................................................... $ 2,534,376 $ 76,956
------------- -------------
------------- -------------
</TABLE>
At October 31, 1993 The McAllen Cellular Telephone Company had net current
deferred tax assets of $31,462, and net noncurrent tax assets of $2,457,420. A
valuation allowance, as prescribed by SFAS No. 109, in the amount of $2,488,882
has been established, which reduces the carrying value of the net deferred tax
assets to zero.
<TABLE>
<S> <C> <C>
Brownsville Cellular Telephone Company, Inc.:
Current
Allowance for uncollectible accounts receivable..................................... $ 15,628 $ --
Obligation for consulting agreement................................................. -- --
------------- -------------
Total Current.................................................................. $ 15,628 $ --
------------- -------------
------------- -------------
Noncurrent
Accumulated depreciation and amortization........................................... $ 23,525 $ --
Tax basis of intangible assets...................................................... 7,877 --
Tax basis of property, plant and equipment.......................................... -- 62,181
Net operating loss carryforwards.................................................... 2,285,821 --
------------- -------------
Total Noncurrent............................................................... $ 2,317,223 $ 62,181
------------- -------------
------------- -------------
</TABLE>
At October 31, 1993 the Brownsville Cellular Telephone Company, Inc. had
net current deferred tax assets of $15,628, and net noncurrent tax assets of
$2,255,042. A valuation allowance, as prescribed by SFAS No. 109, in the amount
of $2,270,670 has been established, which reduces the carrying value of the net
deferred tax assets to zero.
<PAGE>
CELUTEL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
6. INCOME TAXES--(CONTINUED)
A significant portion of the loss carryforwards are not consolidated net
operating loss carryforwards and can only be utilized by the specific entities
which generated the losses and are also subject to tax filing limitations
pursuant to a change in control due to the Continental transaction.
<TABLE>
<S> <C> <C>
CARRY FORWARD
EXPIRING FINANCIAL FEDERAL
APRIL 30, REPORTING INCOME TAX
- --------------------------------------------------------------- -------------- --------------
1999........................................................... $ 23,400 $ --
2000........................................................... 430,100 --
2001........................................................... 401,700 --
2002........................................................... 271,000 --
2003........................................................... 2,180,000 2,435,000
2004........................................................... 4,553,900 3,273,800
2005........................................................... 4,991,500 5,392,700
2006........................................................... 10,509,500 7,466,400
2007........................................................... 6,791,000 6,716,000
2008........................................................... 4,751,400 5,959,100
2009........................................................... 358,600 556,500
-------------- --------------
$ 35,262,100 $ 31,799,500
-------------- --------------
-------------- --------------
</TABLE>
The differences between the net operating loss carryforwards for financial
reporting purposes and for income tax purposes are primarily attributable to the
capitalization of start up costs and non-deductible expenses for income tax
purposes which were expenses for financial reporting purposes of approximately
$1,070,400, the tax gain on the Parkersburg exchange of approximately
$6,600,000, the tax gain on the incorporation of an unconsolidated subsidiary of
approximately $894,300, the tax gain on an exchange of partnership interests,
accounted for as a like-kind exchange for financial reporting purposes of
approximately $1,696,300, the differences resulting from using different book
and tax amortization periods for license acquisition costs of approximately
$5,122,900, minority interest in Celutel of Biloxi, Inc., Jackson Cellular
Telephone Co., Inc., The McAllen Cellular Telephone Co., Inc. and Brownsville
Cellular Telephone Co., Inc., of approximately $1,741,800, deferred compensation
of approximately $36,700 and other miscellaneous items of approximately $29,600.
7. CONTINGENCIES
On May 5, 1992, a shareholder of the Company initiated an action in the
United States District Court for the District of New Jersey seeking to recover
damages and punitive damages from the Company and others for delay in removing a
restrictive legend from share certificates and allegedly seeking to delay the
sale by the shareholder of shares in stock of the Company. The Company believes
it has no liability and it intends to vigorously defend itself in the action.
Since discovery is still proceeding and the ultimate outcome of this litigation
is unknown at the present time, no provision for any liability that might result
has been made in the accompanying consolidated financial statements.
The Company is subject to other legal proceedings and claims which have
arisen in the ordinary course of its business and have not been finally
adjudicated. These actions, when ultimately concluded and determined, will not,
in the opinion of management, have a material effect upon the financial position
of the Company.
<PAGE>
Item 7. Exhibits
2 Agreement and Plan of Merger dated as of October
8, 1993, by and among Century Telephone
Enterprises, Inc., Celutel Acquisition Corp.,
Celutel, Inc. and the Principal Stockholders of
Celutel, Inc., as amended by Amendment No. 1
thereto dated as of January 5, 1994 (incorporated
by reference to Exhibit 2 of Amendment No. 2 to
Century's Registration Statement on Form S-4
(Registration No. 33-50791)).
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act
of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned thereunto duly authorized.
CENTURY TELEPHONE ENTERPRISES, INC.
By: /s/ Murray H. Greer
Murray H. Greer
Controller
Dated: January 13, 1994
