UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended March 31, 1996
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
Commission File Number: 1-7784
CENTURY TELEPHONE ENTERPRISES, INC.
(Exact name of registrant as specified in its charter)
Louisiana 72-0651161
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
100 Century Park Drive, Monroe, Louisiana 71203
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (318) 388-9500
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
[X] Yes [ ] No
As of April 30, 1996, there were 59,677,276 shares of common stock
outstanding.
CENTURY TELEPHONE ENTERPRISES, INC.
TABLE OF CONTENTS
Page No.
--------
Part I. Financial Information:
Consolidated Statements of Income--Three Months
Ended March 31, 1996 and 1995 3
Consolidated Balance Sheets--March 31, 1996 and
December 31, 1995 4
Consolidated Statements of Stockholders' Equity--
Three Months Ended March 31, 1996 and 1995 5
Consolidated Statements of Cash Flows--
Three Months Ended March 31, 1996 and 1995 6
Notes to Consolidated Financial Statements 7-8
Management's Discussion and Analysis of Financial
Condition and Results of Operations 9-14
Part II. Other Information 15
Signature 16
Index to Exhibits 17
2
PART I. FINANCIAL INFORMATION
CENTURY TELEPHONE ENTERPRISES, INC.
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
Three months
ended March 31,
--------------------
1996 1995
-------- --------
(Dollars, except per
share amounts, and
shares in thousands)
OPERATING REVENUES
Telephone $110,631 100,563
Mobile Communications 55,004 42,149
Other 10,179 6,067
-------- --------
Total operating revenues 175,814 148,779
-------- --------
OPERATING EXPENSES
Cost of sales and operating expenses 89,560 74,660
Depreciation and amortization 30,739 26,158
-------- --------
Total operating expenses 120,299 100,818
-------- --------
OPERATING INCOME 55,515 47,961
-------- --------
OTHER INCOME (EXPENSE)
Interest expense (11,596) (11,396)
Income from unconsolidated cellular entities 5,634 4,724
Gain on sales of assets - 5,909
Minority interest (2,556) (1,946)
Other income and expense 147 443
-------- --------
Total other income (expense) (8,371) (2,266)
-------- --------
INCOME BEFORE INCOME TAXES 47,144 45,695
Income tax expense 17,479 18,695
-------- --------
NET INCOME $ 29,665 27,000
======== ========
PRIMARY EARNINGS PER SHARE $ .50 .48
======== ========
FULLY DILUTED EARNINGS PER SHARE $ .50 .47
======== ========
DIVIDENDS PER COMMON SHARE $ .09 .0825
======== ========
AVERAGE PRIMARY SHARES OUTSTANDING 59,478 56,184
======== ========
AVERAGE FULLY DILUTED SHARES OUTSTANDING 60,204 58,660
======== ========
See accompanying notes to consolidated financial statements.
3
CENTURY TELEPHONE ENTERPRISES, INC.
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
March 31, December 31,
1996 1995
---------- -----------
(Dollars in thousands)
ASSETS
- ------
CURRENT ASSETS
Cash and cash equivalents $ 12,085 8,540
Accounts receivable
Customers, less allowance of
$3,522 and $2,768 51,478 50,943
Other 41,341 24,219
Materials and supplies, at average cost 6,249 6,608
Other 5,143 5,019
---------- ----------
116,296 95,329
---------- ----------
NET PROPERTY, PLANT AND EQUIPMENT 1,060,234 1,047,808
---------- ----------
INVESTMENTS AND OTHER ASSETS
Excess cost of net assets acquired,
less accumulated amortization of
$56,364 and $52,944 490,810 493,655
Other 217,459 225,629
---------- ----------
708,269 719,284
---------- ----------
$1,884,799 1,862,421
========== ==========
LIABILITIES AND EQUITY
- ----------------------
CURRENT LIABILITIES
Current maturities of long-term debt $ 19,523 15,325
Notes payable - 14,199
Accounts payable 46,029 55,329
Accrued expenses and other liabilities
Salaries and benefits 16,363 18,178
Taxes 21,145 12,489
Interest 11,562 6,024
Other 5,976 5,337
Advance billings and customer deposits 13,971 13,043
---------- ----------
134,569 139,924
---------- ----------
LONG-TERM DEBT 613,732 622,904
---------- ----------
DEFERRED CREDITS AND OTHER LIABILITIES 216,400 211,169
---------- ----------
STOCKHOLDERS' EQUITY
Common stock, $1.00 par value, authorized
175,000,000 shares, issued and outstanding
59,424,868 and 59,113,670 shares 59,425 59,114
Paid-in capital 460,060 453,584
Retained earnings 411,742 387,424
Unearned ESOP shares (13,270) (13,960)
Preferred stock - non-redeemable 2,141 2,262
---------- ----------
920,098 888,424
---------- ----------
$1,884,799 1,862,421
========== ==========
See accompanying notes to consolidated financial statements.
4
CENTURY TELEPHONE ENTERPRISES, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(UNAUDITED)
Three months
ended March 31,
------------------------
1996 1995
---------- ----------
(Dollars in thousands)
COMMON STOCK
Balance at beginning of period $ 59,114 53,574
Conversion of debentures into common stock - 4,540
Issuance of common stock through dividend
reinvestment, incentive and benefit plans 265 204
Issuance of common stock for acquisition 15 -
Conversion of preferred stock into common stock 31 -
---------- ----------
Balance at end of period 59,425 58,318
---------- ----------
PAID-IN CAPITAL
Balance at beginning of period 453,584 319,235
Conversion of debentures into common stock - 108,596
Issuance of common stock through dividend
reinvestment, incentive and benefit plans 5,520 2,379
Issuance of common stock for acquisition 468 -
Conversion of preferred stock into common stock 90 -
Amortization of unearned compensation and other 398 204
---------- ---------
Balance at end of period 460,060 430,414
---------- ----------
RETAINED EARNINGS
Balance at beginning of period 387,424 291,999
Net income 29,665 27,000
Cash dividends declared
Common stock-$.09 and $.0825 per share,
respectively (5,311) (4,770)
Preferred stock (36) (31)
---------- ----------
Balance at end of period 411,742 314,198
---------- ----------
UNEARNED ESOP SHARES
Balance at beginning of period (13,960) (16,840)
Release of ESOP shares 690 690
---------- ----------
Balance at end of period (13,270) (16,150)
---------- ----------
PREFERRED STOCK - NON-REDEEMABLE
Balance at beginning of period 2,262 2,268
Conversion of preferred stock into
common stock (121) -
---------- ----------
Balance at end of period 2,141 2,268
---------- ----------
TOTAL STOCKHOLDERS' EQUITY $ 920,098 789,048
========== ==========
See accompanying notes to consolidated financial statements.
5
CENTURY TELEPHONE ENTERPRISES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Three months
ended March 31,
---------------------
1996 1995
-------- --------
(Dollars in thousands)
OPERATING ACTIVITIES
Net income $ 29,665 27,000
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 30,739 26,158
Deferred income taxes 1,554 747
Income from unconsolidated cellular
entities (5,634) (4,724)
Minority interest 2,556 1,946
Loss on investment in unconsolidated
personal communications services entity 1,100 -
Gain on sales of assets - (5,909)
Changes in current assets and current
liabilities:
Decrease in accounts receivable 1,243 4,244
Increase (decrease) in accounts payable (9,300) 1,766
Increase in other accrued taxes 8,656 13,500
Increase in accrued interest payable 5,538 281
Changes in other current assets and other
current liabilities, net 1,691 (543)
Increase in other noncurrent liabilities 1,121 1,415
Other, net 892 1,845
-------- --------
Net cash provided by operating
activities 69,821 67,726
-------- --------
INVESTING ACTIVITIES
Payments for property, plant and equipment (41,212) (53,499)
Acquisitions, net of cash acquired - (6,009)
Proceeds from sales of assets - 17,922
Investments in unconsolidated cellular
entities - (1,678)
Purchase of life insurance investment (5,018) (4,756)
Other, net 1,925 (179)
-------- --------
Net cash used in investing activities (44,305) (48,199)
-------- --------
FINANCING ACTIVITIES
Proceeds from issuance of long-term debt 40,000 6,498
Payments of long-term debt (48,215) (2,266)
Notes payable, net (14,199) (18,000)
Proceeds from issuance of common stock 5,770 2,432
Cash dividends (5,347) (4,801)
Other, net 20 55
-------- --------
Net cash used in financing activities (21,971) (16,082)
-------- --------
Net increase in cash and cash equivalents 3,545 3,445
Cash and cash equivalents at beginning
of period 8,540 7,154
-------- --------
Cash and cash equivalents at end of period $ 12,085 10,599
======== ========
Supplemental cash flow information:
Income taxes paid $ 4,169 6,391
======== ========
Interest paid $ 6,058 11,115
======== ========
See accompanying notes to consolidated financial statements.
6
CENTURY TELEPHONE ENTERPRISES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1996
(UNAUDITED)
(1) Basis of Financial Reporting
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to rules and regulations of
the Securities and Exchange Commission; however, the Company believes the
disclosures which are made are adequate to make the information presented not
misleading. The financial statements and footnotes included in this Form 10-Q
should be read in conjunction with the financial statements and notes thereto
included in the Company's annual report on Form 10-K for the year ended December
31, 1995. Certain 1995 amounts have been reclassified to be consistent with the
1996 presentation.
The unaudited financial information for the three months ended March 31,
1996 and 1995 has not been audited by independent public accountants; however,
in the opinion of management, all adjustments (which include only normal
recurring adjustments) necessary to present fairly the results of operations for
the three-month periods have been included therein. The results of operations
for the first three months of the year are not necessarily indicative of the
results of operations which might be expected for the entire year.
(2) Net Property, Plant and Equipment
Net property, plant and equipment is composed of the following:
March 31, December 31,
1996 1995
---------- ------------
(Dollars in thousands)
Telephone, at original cost $1,224,825 1,207,347
Accumulated depreciation (374,569) (357,633)
---------- ----------
850,256 849,714
---------- ----------
Mobile Communications, at cost 205,808 191,594
Accumulated depreciation (59,856) (54,927)
---------- ----------
145,952 136,667
---------- ----------
Corporate and other, at cost 102,435 100,613
Accumulated depreciation (38,409) (39,186)
---------- ----------
64,026 61,427
---------- ----------
$1,060,234 1,047,808
========== ==========
7
(3) Earnings from Unconsolidated Cellular Entities
The following summarizes the unaudited combined results of operations of
the cellular entities in which the Company's investments (as of March 31, 1996
and 1995) are accounted for by the equity method.
Three months
ended March 31,
-------------------
1996 1995
-------- --------
(Dollars in thousands)
Results of operations
Revenues $205,504 149,254
Operating income $ 63,439 47,854
Net income $ 64,024 48,525
(4) Sales of Assets
In the first quarter of 1995 the Company sold, for an aggregate of
approximately $17.9 million, its ownership interests in certain non-strategic
cellular Rural Service Areas located primarily in western states and three
Metropolitan Statistical Areas in the midwest, which represented an aggregate of
approximately 253,000 pops. These transactions resulted in a pre-tax gain of
$5.9 million ($2.0 million after-tax).
(5) Accounting Pronouncements
The Company adopted Statement of Financial Accounting Standards No. 121
("SFAS 121"), "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of," during the first quarter of 1996. SFAS 121
establishes accounting standards for the impairment of long-lived assets,
certain identifiable intangibles, and goodwill related to those assets to be
held and used, and for long-lived assets and certain identifiable intangibles to
be disposed of. SFAS 121 also requires that a rate-regulated enterprise
recognize an impairment for the amount of costs excluded when a regulator
excludes all or part of a cost from the enterprise's rate base. The effect of
the adoption of SFAS 121 did not materially affect the Company's consolidated
financial position or results of operations.
In October 1995, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 123 ("SFAS 123"), "Accounting
for Stock-Based Compensation." SFAS 123 establishes financial accounting and
reporting standards for stock-based employee compensation plans. As allowed by
SFAS 123, the Company plans to continue to measure compensation cost for
employee stock compensation plans using the method prescribed by Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees," and
will provide pro forma disclosures in the Notes to the Consolidated Financial
Statements as required by SFAS 123.
8
CENTURY TELEPHONE ENTERPRISES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Management's Discussion and Analysis of Financial Condition and Results
of Operations ("MD&A") included herein should be read in conjunction with MD&A
and the other information included in the Company's annual report on Form 10-K
for the year ended December 31, 1995. The results of operations for the three
months ended March 31, 1996 are not necessarily indicative of the results of
operations which might be expected for the entire year.
RESULTS OF OPERATIONS
Three Months Ended March 31, 1996 Compared
to Three Months Ended March 31, 1995
Net income for the first quarter of 1996 was $29.7 million compared to
$27.0 million during the first quarter of 1995. The $27.0 million in 1995
included a $5.9 million pre-tax gain on the sale of certain cellular properties,
$2.0 million after-tax. Exclusive of such gain, net income increased $4.7
million (18.7%), principally due to the after-tax effect of the $7.6 million
increase in operating income.
Three months
ended March 31,
------------------
1996 1995
------- -------
(Dollars, except per
share amounts, and
shares in thousands)
Operating income
Telephone $38,619 34,345
Mobile Communications 16,170 13,211
Other 726 405
------- -------
55,515 47,961
Interest expense (11,596) (11,396)
Income from unconsolidated cellular
entities 5,634 4,724
Gain on sales of assets - 5,909
Minority interest (2,556) (1,946)
Other income and expense 147 443
Income taxes (17,479) (18,695)
------- -------
Net income $29,665 27,000
======= =======
Fully diluted earnings per share $ .50 .47
======= =======
Average fully diluted shares outstanding 60,204 58,660
======= =======
Fully diluted earnings per share increased to $.50 for the three months
ended March 31, 1996 from $.47 ($.44 exclusive of the gain on sales of assets)
during the three months ended March 31, 1995, a 6.4% increase. The average
number of fully diluted shares outstanding increased 2.6%, primarily as a result
of shares issued for acquisitions and through the Company's dividend
reinvestment, incentive and benefit plans.
9
Contributions to operating revenues and operating income by the Company's
telephone, mobile communications, and other operations for the three months
ended March 31, 1996 and 1995 were as follows:
Three months
ended March 31,
-------------------
1996 1995
------- --------
Operating revenues
Telephone operations 62.9% 67.6
Mobile Communications operations 31.3% 28.3
Other operations 5.8% 4.1
Operating income
Telephone operations 69.6% 71.6
Mobile Communications operations 29.1% 27.5
Other operations 1.3% .9
Telephone Operations
Three months
ended March 31,
-------------------
1996 1995
------- --------
(Dollars in thousands)
Operating revenues
Local service $29,085 26,840
Network access and long distance 68,363 61,585
Other 13,183 12,138
------- -------
110,631 100,563
------- -------
Operating expenses
Plant operations 22,379 21,635
Customer operations 9,908 9,150
Corporate and other 16,814 15,162
Depreciation and amortization 22,911 20,271
------- -------
72,012 66,218
------- -------
Operating income $38,619 34,345
======= =======
Telephone operating income increased $4.3 million (12.4%) due to an
increase in operating revenues of $10.1 million (10.0%) which more than offset
an increase in operating expenses of $5.8 million (8.7%).
The increase in revenues was partially due to a $2.9 million increase in
revenues based on minutes of use, of which approximately $1.6 million was
associated with a change, effective in the third quarter of 1995, in the
methodology applied in the network access revenue billing process. Also
contributing to the increase in revenues was a $1.6 million increase which
resulted from the increase in the number of customer access lines; a $1.6
million increase in amounts received from the Federal Communications Commission
mandated Universal Service Fund; a $1.6 million increase in the partial recovery
of increased operating expenses through revenue pools in which the Company
participates with other telephone companies; and a $1.3 million increase in
revenues related to leasing, selling, installing, maintaining and repairing
customer premise telecommunications equipment and wiring ("CPE services").
During the first quarter of 1996, operating expenses, exclusive of
depreciation and amortization, increased $3.2 million (6.9%) substantially due
to a $1.3 million increase in expenses related to providing CPE services (of
which $200,000 was due to increases in sales and marketing costs), a $596,000
increase in salaries and wages, and a $474,000 increase in the provision for
doubtful accounts. The remainder of the increase was due to increases in other
general operating expenses.
Depreciation and amortization increased $2.6 million (13.0%) primarily
due to higher levels of plant in service.
10
Mobile Communications Operations
Three months
ended March 31,
--------------------
1996 1995
-------- --------
(Dollars in thousands)
Operating revenues
Cellular service $54,043 40,821
Equipment and other 961 1,328
------- -------
55,004 42,149
------- -------
Operating expenses
Cost of sales 2,857 1,922
Other operating expenses 6,896 5,610
General, administrative and customer
service 12,199 8,780
Sales and marketing 9,479 7,044
Depreciation and amortization 7,403 5,582
------- -------
38,834 28,938
------- -------
Operating income $16,170 13,211
======= =======
The mobile communications segment reflects 100% of the results of
operations of the cellular entities in which the Company has a majority
interest. The minority interest owners' share of the income of such entities was
$2.6 million during the first three months of 1996 and $1.9 million during the
first three months of 1995 and is reflected as an expense in "Minority
interest."
The Company's share of earnings from the cellular entities in which it has
less than a majority interest (which is not included in the mobile
communications segment) is accounted for using the equity method and is
reflected in "Income from unconsolidated cellular entities." The Company's share
of income from such entities was $5.6 million and $4.7 million during the three
months ended March 31, 1996 and 1995, respectively.
Mobile communications operating income increased $3.0 million (22.4%) to
$16.2 million in the first quarter of 1996 from $13.2 million in the first
quarter of 1995. Mobile communications operating revenues increased $12.9
million (30.5%) which more than offset an increase in operating expenses of $9.9
million (34.2%).
The increase in cellular service revenues was primarily due to the
increase in the number of cellular customers. The average number of cellular
units in service in majority-owned markets during the first quarter of 1996 and
1995 was 297,800 and 216,500, respectively. Exclusive of acquisitions, access
and usage revenues increased $7.5 million (25.8%) in the first quarter of 1996
and roaming and toll revenues increased $2.3 million (22.4%). Acquisitions
consummated during the last half of 1995 contributed $2.4 million of service
revenues during the first quarter of 1996.
The average monthly cellular service revenue per customer declined to
$60 during the first quarter of 1996 from $63 during the first quarter of 1995.
It has been an industry-wide trend that early subscribers have normally been the
heaviest users and that a higher percentage of new subscribers tend to be lower
usage customers. The average monthly service revenue per customer may further
decline (i) as market penetration increases and additional lower usage customers
are activated and (ii) as competitive pressures intensify and place additional
pressure on rates. The Company is responding to such competitive pressures by,
among other things, modifying certain of its price plans and implementing
certain other plans and promotions, all of which may result in lower average
revenue per customer. The Company will continue
11
to focus on customer service and attempt to stimulate cellular usage by
promoting the availability of certain enhanced services and by improving the
quality of its service through the construction of additional cell sites and
enhancements to its system.
Equipment and other revenues decreased $367,000 in the first quarter of
1996 compared to the first quarter of 1995. Although the Company sold more
phones in the first quarter of 1996 than in the first quarter of 1995, revenues
decreased because the Company has increasingly sold phones below cost, a
practice which is common in the cellular industry. The increase in cost of sales
during the first quarter of 1996 resulted from the increase in the number of
cellular phones sold.
Other operating expenses increased $1.3 million (22.9%) in the first
quarter of 1996 primarily due to a $1.0 million increase in costs paid to other
carriers related to (i) the provision of cellular service by such other carriers
to the Company's customers who roam in the other carriers' service areas in
excess of the amounts the Company bills its customers (such costs are expected
to increase as the Company continues to expand its reduced rate calling areas)
and (ii) cellular fraud. In addition, a $500,000 increase in expenses resulted
from the interconnection of new cell sites.
General, administrative and customer service expenses increased $3.4
million (38.9%) primarily due to increased expenses resulting from a larger
customer base, such as customer service ($1.1 million), billing costs ($440,000)
and provision for doubtful accounts ($808,000). The remainder of the increase
was primarily due to increases in general office expenses.
During the first quarter of 1996, sales and marketing expenses increased
$2.4 million (34.6%) primarily due to a $1.1 million increase in commissions
paid to agents for selling cellular service to new customers and a $906,000
increase in advertising and sales promotions expenses.
Depreciation and amortization increased $1.8 million (32.6%) due
primarily to a higher level of plant in service.
Other Operations
Other operations includes the results of operations of subsidiaries of
the Company which are not included in the telephone or mobile communications
segments, including, but not limited to, the Company's competitive access
subsidiary and the Company's nonregulated long distance operations. Of the $4.1
million increase in operating revenues, $2.8 million was applicable to the long
distance operations. Of the $3.8 million increase in operating expenses, $2.2
million was incurred by the long distance operations.
Income from Unconsolidated Cellular Entities
Earnings from unconsolidated cellular entities, net of the amortization
of associated goodwill, increased $910,000 (19.3%) during the first quarter of
1996 compared to the first quarter of 1995 due to improvement in profitability
of the cellular entities in which the Company owns less than a majority
interest.
Gain on Sales of Assets
During the first quarter of 1995, the Company sold its ownership
interests in certain non-strategic cellular entities which resulted in a pre-tax
gain of $5.9 million ($2.0 million after-tax; $.03 per fully diluted share). For
additional information, see Note 4 of Notes to Consolidated Financial
Statements.
12
Minority Interest
The increased profitability during the first three months of 1996 of the
Company's majority-owned and operated cellular entities resulted in a
corresponding increase of $610,000 (31.3%) in the expense recorded by the
Company to reflect the minority interest owners' share of the profits.
Other Income and Expense
Other income and expense for the first quarter of 1996 was $147,000
compared to $443,000 during the first quarter of 1995. During 1995 the Company
invested $20.0 million in exchange for a minority equity interest in an entity
formed for the purpose of participating in the Federal Communications Commission
auction of one 30MHz Personal Communications Services ("PCS") license for each
Basic Trading Area. In April 1996, such entity withdrew from participating in
the auction and, as a result thereof, the Company withdrew its equity investment
in such entity and recorded a $1.1 million loss during the first quarter of
1996. The $1.1 million was the portion of the Company's investment which, under
the terms of its agreement with such entity, it was not entitled to recoup.
Income Tax Expense
Although income before taxes increased during the first quarter of 1996
compared to the first quarter of 1995, income tax expense decreased $1.2 million
(6.5%) primarily because the effective income tax rate attributable to the gain
on sales of assets in the first quarter of 1995 was considerably higher than the
Company's consolidated effective income tax rate.
LIQUIDITY AND CAPITAL RESOURCES
Excluding cash used for acquisitions, the Company relies on cash
provided by operations to provide a substantial portion of its cash needs. The
Company's telephone operations have historically provided a stable source of
cash flow which has helped the Company continue its long-term program of capital
improvements. Cash provided by mobile communications operations has increased
each year since that segment became cash-flow positive.
Net cash provided by operating activities was $69.8 million during the
first three months of 1996 compared to $67.7 million during the first three
months of 1995. The Company's accompanying consolidated statements of cash flows
identifies major differences between net income and net cash provided by
operating activities for each of these periods. For additional information
relating to the telephone operations, mobile communications operations, and
other operations of the Company, see Results of Operations.
Net cash used in investing activities was $44.3 million and $48.2
million for the three months ended March 31, 1996 and 1995, respectively.
Payments for property, plant and equipment were $12.3 million less in the first
quarter of 1996 than in the comparable period during 1995. Capital expenditures
for the three months ended March 31, 1996 were $22.0 million for telephone,
$15.6 million for mobile communications and $3.6 million for other operations.
The $48.2 million of net cash used in investing activities in 1995 was net of
$17.9 million of proceeds from the sale of certain cellular properties. Cash
used in connection with the acquisition of a local exchange telephone company
was $6.0 million in the first three months of 1995.
13
Net cash used in financing activities was $22.0 million during the first
three months of 1996 compared to $16.1 million during the first three months of
1995. Net payments, including notes payable and long-term debt, were $8.6
million more during the first quarter of 1996 compared to the first quarter of
1995.
Budgeted capital expenditures for 1996 total $102 million for telephone
operations, $61 million for mobile communications operations and $26 million for
corporate and other operations.
As of March 31, 1996, Century's telephone subsidiaries had available for
use $142.6 million of commitments for long-term financing from the Rural
Utilities Service and the Company had $113.1 million of undrawn committed bank
lines of credit. In addition, approximately $125.0 million of uncommitted credit
facilities were available to Century at March 31, 1996. The Company has
experienced no significant problems in obtaining funds through the issuance of
debt or equity for capital expenditures or other purposes.
OTHER MATTERS
The Company currently accounts for its regulated telephone operations in
accordance with the provisions of Statement of Financial Accounting Standards
No. 71 ("SFAS 71"), "Accounting for the Effects of Certain Types of Regulation."
While the ongoing applicability of SFAS 71 to the Company's telephone operations
is being monitored due to the changing regulatory, competitive and legislative
environments, the Company believes that SFAS 71 still applies. However, it is
possible that changes in regulation or legislation or anticipated changes in
competition or in the demand for regulated services or products could result in
the Company's telephone operations not being subject to SFAS 71 in the near
future. In that event, implementation of Statement of Financial Accounting
Standards No. 101 ("SFAS 101"), "Regulated Enterprises - Accounting for the
Discontinuance of Application of FASB Statement No. 71," would require the
write-off of previously established regulatory assets and liabilities, along
with an adjustment of certain accumulated depreciation accounts to reflect the
difference between recorded depreciation and the amount of depreciation that
would have been recorded had the Company's telephone operations not been subject
to rate regulation. Such discontinuance of the application of SFAS 71 would
result in a material, noncash charge against earnings which would be reported as
an extraordinary item. While the effect of implementing SFAS 101 cannot be
precisely estimated at this time, management believes that the noncash,
after-tax, extraordinary charge would be between $100 million and $150 million.
14
PART II. OTHER INFORMATION
CENTURY TELEPHONE ENTERPRISES, INC.
Item 6. Exhibits and Reports on Form 8-K
- ------- --------------------------------
A. Exhibits
--------
11 Computations of Earnings Per Share.
27 Financial Data Schedule.
B. Reports on Form 8-K
-------------------
There were no reports on Form 8-K filed during the quarter
ended March 31, 1996.
15
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.
Date: May 8, 1996 /s/ Murray H. Greer
-------------------
Murray H. Greer
Controller
(Principal Accounting Officer)
16
CENTURY TELEPHONE ENTERPRISES, INC.
INDEX TO EXHIBITS
Exhibit
Number
- -------
11 Computations of Earnings Per Share, included herein.
27 Financial Data Schedule, included herein.
17
EXHIBIT 11
CENTURY TELEPHONE ENTERPRISES, INC.
COMPUTATIONS OF EARNINGS PER SHARE
(UNAUDITED)
Three months
ended March 31,
------------------
1996 1995
------- -------
(Dollars, except per
share amounts, and
shares in thousands)
Net income $29,665 27,000
Dividends applicable to preferred stock (28) (29)
------- -------
Net income applicable to common stock 29,637 26,971
Dividends applicable to preferred stock 28 29
Interest on convertible securities,
net of taxes 145 526
------- -------
Net income as adjusted for purposes of
computing fully diluted earnings per
share $29,810 27,526
======= =======
Weighted average number of shares:
Outstanding during period 59,273 55,922
Common stock equivalent shares 556 655
Employee Stock Ownership Plan shares not
committed to be released (351) (393)
------- -------
Number of shares for computing primary
earnings per share 59,478 56,184
Incremental common shares attributable
to additional dilutive effect of
convertible securities 726 2,476
------- -------
Number of shares as adjusted for purposes
of computing fully diluted earnings
per share 60,204 58,660
======= =======
Earnings per average common share $ .50 .48
======= =======
Primary earnings per share $ .50 .48
======= =======
Fully diluted earnings per share $ .50 .47
======= =======
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
UNAUDITED CONSOLIDATED BALANCE SHEET OF CENTURY TELEPHONE ENTERPRISES, INC.
AND SUBSIDIARIES AS OF MARCH 31, 1996 AND THE RELATED UNAUDITED CONSOLIDATED
STATEMENT OF INCOME FOR THE THREE MONTH PERIOD THEN ENDED AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 12,085
<SECURITIES> 0
<RECEIVABLES> 55,000
<ALLOWANCES> 3,522
<INVENTORY> 6,249
<CURRENT-ASSETS> 116,296
<PP&E> 1,533,068
<DEPRECIATION> 472,834
<TOTAL-ASSETS> 1,884,799
<CURRENT-LIABILITIES> 134,569
<BONDS> 613,732
<COMMON> 59,425
0
2,141
<OTHER-SE> 858,532
<TOTAL-LIABILITY-AND-EQUITY> 1,884,799
<SALES> 0
<TOTAL-REVENUES> 175,814
<CGS> 0
<TOTAL-COSTS> 120,299
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 11,596
<INCOME-PRETAX> 47,144
<INCOME-TAX> 17,479
<INCOME-CONTINUING> 29,665
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 29,665
<EPS-PRIMARY> .50
<EPS-DILUTED> .50
</TABLE>
