UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[ X ] Annual Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the fiscal year ended December 31, 1995
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.
A Louisiana Corporation I.R.S. Employer Identification
No. 72-0651161
100 Century Park Drive, Monroe, Louisiana 71203
Telephone number (318) 388-9500
Securities registered pursuant to Section 12(b) of the Act: Common Stock,
par value $1.00
Exchange on which registered: New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
As of February 29, 1996, the aggregate market value of voting stock held by
non-affiliates (affiliates being for these purposes only directors, executive
officers and holders of more than five percent of the Company's outstanding
voting securities) was $2.0 billion.
As of February 29, 1996, there were 59,339,041 shares of common stock
outstanding.
DOCUMENTS INCORPORATED BY REFERENCE:
Portions of the Proxy Statement prepared in connection with the 1996 annual
meeting of shareholders are incorporated in Part III of this Report.
PART I
Item 1. Business
General. Century Telephone Enterprises, Inc. ("Century") is a regional
diversified telecommunications company that is primarily engaged in providing
traditional telephone services and cellular telephone communications services.
For the year ended December 31, 1995, telephone operations and mobile
communications operations (cellular operations) provided 65% and 31%,
respectively, of the consolidated revenues of Century and its subsidiaries (the
"Company"). All of the Company's operations are conducted within the continental
United States.
At December 31, 1995, the Company's telephone subsidiaries operated over
480,000 telephone access lines, primarily in rural, suburban and small urban
areas in 14 states, with the largest customer bases located in Wisconsin,
Louisiana, Michigan and Ohio. According to published sources, the Company is the
sixteenth largest local exchange telephone company in the United States based on
the number of access lines served.
Whenever used herein with respect to the Company, the term "pops" means the
population of licensed cellular telephone markets (based on independent
third-party population estimates) multiplied by the Company's proportionate
equity interests in the licensed operators thereof. The term "MSA" means a
Metropolitan Statistical Area for which the Federal Communications Commission
(the "FCC") has granted a cellular operating license. The term "RSA" means a
Rural Service Area for which the FCC has granted a cellular operating license.
The term "wireline license" refers to the cellular operating license initially
reserved by the FCC for companies providing local telephone service in the
licensed market and the term "non-wireline license" refers to the license
initially reserved for licensees unaffiliated with such local telephone
companies.
At December 31, 1995, the Company, through its cellular operations, owned
approximately 7.6 million pops in 27 MSAs, primarily concentrated in Michigan,
Louisiana, Mississippi and Texas, and 29 RSAs, most of which are in Michigan,
Louisiana and Arkansas. The Company is the majority owner and operator in 19 of
the MSAs and 18 of the RSAs, which collectively represent 6.4 million pops, and
has minority interests in the other MSAs and RSAs, which collectively represent
1.2 million pops. Of the Company's 7.6 million pops, approximately 72% are
attributable to the Company's MSA interests, with the balance attributable to
its RSA interests. According to data derived from published sources, at
September 30, 1995 the Company was the fifteenth largest cellular telephone
company in the United States based on the Company's owned pops. At December 31,
1995, the Company's majority-owned and operated cellular systems had more than
290,000 cellular subscribers. Except for five MSAs and two RSAs, all of the
cellular systems operated by the Company are operated under wireline licenses.
The Company also provides long distance, operator and interactive services
in certain local and regional markets, as well as certain printing and related
services, and has recently entered the competitive access business.
Recent Acquisitions and Dispositions. In January 1995 Century acquired
Tele-Max, Inc. and its affiliates. In connection with this acquisition, Century
acquired approximately 5,300 telephone access lines in a suburban community
north of Dallas, Texas and a one-half of one percent interest in the Dallas MSA
wireline cellular system (which represented approximately 20,000 pops). In the
third quarter of 1995 the Company acquired 100% of the Michigan RSA #4 wireline
cellular system, along with the non-wireline cellular systems in Mississippi RSA
#2 and Mississippi RSA #6, which, at December 31, 1995, had populations of
131,100, 242,800 and 182,600, respectively. Mississippi RSA #6 is adjacent to
the Jackson, Mississippi MSA that the Company operates; Mississippi RSA #2 is
located in northeastern Mississippi between Memphis, Tennessee and Birmingham,
Alabama. Michigan RSA #4 is located in northeastern Michigan and is adjacent to
other markets the Company operates.
In accordance with its strategy of clustering its telephone and cellular
businesses, during 1995 the Company sold its ownership interests in several RSAs
located primarily in western states and three MSAs located in the midwest, which
in the aggregate represented approximately 250,000 pops.
The Company is continually evaluating the possibility of acquiring
additional telephone access lines and cellular interests in exchange for cash,
securities or both. Although the Company's primary focus will continue to be on
acquiring telephone and cellular interests that are proximate to its properties
or that serve a customer base large enough for the Company to operate
efficiently, other communications interests may also be acquired.
Other. As of December 31, 1995, the Company employed approximately 3,100
persons, of which approximately 200 employees located in Ohio are covered by a
three-year collective bargaining agreement between the Company and the
Communications Workers of America. The agreement lapses on March 30, 1997.
Century was incorporated under Louisiana law in 1968 to serve as a holding
company for several telephone companies acquired over the previous 15 to 20
years. Century's principal executive offices are located at 100 Century Park
Drive, Monroe, Louisiana 71203 and its telephone number is (318) 388-9500.
TELEPHONE OPERATIONS
The Company is the sixteenth largest local exchange telephone company in the
United States, based on the more than 480,000 access lines it served at December
31, 1995. Currently, the Company operates over 500 central office and remote
switching centers in its telephone operating areas. Over the past decade,
Century has installed digital switching platforms throughout most of its
switching network. At December 31, 1995, 99% of Century's total access lines
were digitally switched. Through its operating telephone subsidiaries, Century
provides services to predominately rural, suburban and small urban markets in 14
states. The table below sets forth certain information with respect to Century's
access lines as of December 31, 1995:
<TABLE>
<CAPTION>
Number of Percent of Percent
State access lines access lines digital
- ---------------------------------------------------------------------------
<S> <C> <C> <C>
Wisconsin 101,119 21% 100%
Louisiana 87,733 18 100
Michigan 83,657 18 100
Ohio 72,719 15 100
Arkansas 39,185 8 100
Texas 37,434 8 100
Tennessee 22,514 5 100
Mississippi 14,635 3 100
Colorado 6,370 1 100
New Mexico 4,927 1 74
Indiana 4,734 1 100
Idaho 4,051 1 100
Arizona 1,503 0 0
Iowa 176 0 100
- --------------------------------------------------------------------------
480,757 100% 99%
==========================================================================
</TABLE>
As indicated in the following table, Century has experienced growth in its
telephone operations over the past several years, a substantial portion of which
was attributable to acquisitions of other telephone companies and to the
expansion of services:
<TABLE>
<CAPTION>
Year Ended or As of December 31,
- --------------------------------------------------------------------------------
1995 1994 1993 1992 1991
- --------------------------------------------------------------------------------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
Access lines 480,757 454,963 434,691 397,300 314,819
% Residential 78% 79 80 81 81
% Business 22% 21 20 19 19
Operating revenues $ 419,242 391,265 350,330 298,812 236,408
Capital expenditures $ 136,006 152,336 131,180 108,974 73,913
</TABLE>
Future growth in telephone operations is expected to be derived from (i)
acquiring additional telephone companies, (ii) providing service to new
customers, (iii) increasing network usage and (iv) providing additional services
made possible by advances in technology and changes in regulation. For
information on developing competitive trends, see "-Regulation and Competition."
Services
The Company's telephone subsidiaries derive revenue from providing (i) local
telephone services, (ii) network access and long distance services and (iii)
other related services. The following table reflects the percentage of telephone
operating revenues derived from these respective services:
1995 1994 1993
- ------------------------------------------------------------------------
Local service 26.6% 25.6 25.3
Network access and long distance 61.7 62.3 62.0
Other 11.7 12.1 12.7
- ------------------------------------------------------------------------
100.0% 100.0 100.0
========================================================================
Local service revenues are generated by the provision of local exchange
telephone services in the Company's franchised service areas.
Network access and long distance revenues primarily relate to services
provided by the Company to interexchange carriers (long distance carriers) in
connection with the use of the Company's facilities to originate and complete
interstate and intrastate long distance telephone calls. Most of the Company's
interstate network access revenues are derived through pooling arrangements
administered by the National Exchange Carrier Association ("NECA"). The NECA
receives access charges billed by the Company and other participating local
exchange carriers ("LECs") to interstate long distance carriers and other LEC
customers for their use of the local exchange network to complete long distance
calls and subsequently distributes these revenues to such LECs based primarily
on cost separation studies. The charges billed to the long distance carriers and
other LEC customers are based on tariffed access rates filed with the FCC by the
NECA on behalf of the Company and other participating LECs. Interstate revenues
as a percentage of telephone operating revenues amounted to 34.6%, 33.5% and
32.0% in 1995, 1994 and 1993, respectively.
Certain of the Company's intrastate network access revenues are derived
through access charges billed by the Company directly to intrastate long
distance carriers and other LEC customers. Such intrastate network access
charges are based on access tariffs which are subject to state regulatory
commission approval. Additionally, certain of the Company's intrastate network
access revenues, along with intrastate long distance revenues, are derived
through state pooling arrangements and are determined based on cost separation
studies or special settlement arrangements.
The installation of digital switches and related software has been an
important component of the Company's growth strategy because it allows the
Company to offer enhanced services (such as call forwarding, conference calling,
caller identification, selective call ringing and call waiting) and to thereby
increase utilization of existing access lines. In 1995 and early 1996, the
Company continued to expand its list of premium services (such as voice mail and
internet access) offered in certain service areas and aggressively marketed
these services.
The Company is installing fiber optic cable in high traffic routes in
certain areas in which it operates and has provided alternative routing of
telephone service over fiber optic cable networks in several of its strategic
operating areas. At December 31, 1995, the Company had over 2,000 miles of fiber
optic cable in place.
Other revenues include revenues related to (i) leasing, selling, installing,
maintaining and repairing customer premise telecommunications equipment and
wiring, (ii) providing billing and collection services for interexchange
carriers, (iii) leasing network facilities and (iv) participating in the
publication of local directories. Certain large telecommunications companies for
which the Company currently provides billing and collection services continue to
indicate their desire to reduce their billing and collection expenses, which is
expected to result in future reductions of billing and collection revenues.
For further information on the regulation of the Company's revenues,
see "-Regulation and Competition."
Federal Financing Programs
Certain of the Company's telephone subsidiaries receive long-term financing
from the Rural Utilities Service ("RUS") and the Rural Telephone Bank ("RTB").
The RUS has made long-term loans to telephone companies since 1949 for the
purpose of improving telephone service in rural areas. The RUS continues to make
new loans at interest rates that range from 5% to 7% based on borrower
qualifications and the cost of money to the United States government. The RTB,
established in 1971, makes long-term loans at interest rates based on its
average cost of funds as determined by statutory formula (such rates ranged from
6.04% to 6.88% for the fiscal year ended September 30, 1995), and in some cases
makes loans concurrently with RUS loans. Most of the Company's telephone plant
is pledged or mortgaged to secure obligations of the Company's telephone
subsidiaries to the RUS and RTB. The Company's telephone subsidiaries which have
borrowed from government agencies generally may not loan or advance any funds to
Century, but may pay dividends if certain financial ratios are met.
For additional information regarding the Company's financing, see the
Company's consolidated financial statements included in Item 8 herein.
Regulation and Competition
Traditionally, LECs have operated as regulated monopolies. Consequently, the
majority of the Company's telephone operations are regulated extensively by
various state regulatory agencies (generally called public service commissions
or public utility commissions) and by the FCC. As discussed in greater detail
below, passage of the Telecommunications Act of 1996 (the "1996 Act"), coupled
with state legislative and regulatory initiatives and technological changes, has
fundamentally altered the telephone industry by reducing the regulation of LECs
and permitting competition in each segment of the telecommunications industry.
Although Century anticipates that these trends towards reduced regulation and
increased competition will continue, the form and degree of future regulation
and competition in the Company's franchised service areas cannot be ascertained
at this time.
State Regulation. The local service rates and intrastate access charges of
substantially all of the Company's telephone subsidiaries are regulated by state
regulatory commissions that traditionally have regulated pricing through "rate
of return" regulation that focuses on authorized levels of earnings by LECs.
Most of these commissions also (i) regulate the purchase and sale of LECs, (ii)
prescribe depreciation rates and certain accounting procedures and (iii)
regulate various other matters, including certain service standards and
operating procedures. In certain states, construction and/or financing plans are
also subject to regulatory approval.
In recent years, Ohio, Michigan, Wisconsin, Louisiana and other state
legislatures and regulatory commissions having jurisdiction over the Company's
telephone subsidiaries have either begun to reduce the regulation of LECs or
have announced their intention to review such regulation, and it is expected
that this trend will continue. This reduced regulatory oversight of certain of
the Company's telephone operations may allow the Company to offer new and
competitive services faster than under the traditional regulatory process.
Coincident with these efforts is the introduction of competition into
traditionally monopolistic segments of the industry. For a discussion of
legislative, regulatory and technological changes that have introduced
competition into the local exchange industry, see "-Developments Affecting
Competition."
Substantially all of the state regulatory commissions have statutory
authority, the specific limits of which vary, to initiate and conduct earnings
reviews of the LECs that they regulate. As part of the movement towards
deregulation, several states are moving away from traditional rate of return
regulation towards price cap regulation and incentive regulation (which are
similar to the FCC regulations discussed below), and are actively encouraging
larger LECs to adopt these newer forms of price regulation. The continuation of
this trend may lead to fewer earnings reviews in the future. Currently, however,
most of the Company's LECs continue to be regulated under rate of return
regulation. During 1995 the Louisiana Public Service Commission ("LPSC")
culminated its two-year investigation into the earnings of independent telephone
companies in Louisiana by adopting a new regulatory plan for such companies
effective July 1, 1995. For additional information, see Regulation and
Competition in Item 7 herein. As stated in Item 7, the Company anticipates that
the impact of these changes will adversely affect its results of operations and
there is no assurance that the effect will not be material. In addition, there
is no assurance that future reviews, in Louisiana or in other states, will not
lead to future revenue reductions or customer refunds. Also, in light of the
movement away from traditional rate of return regulation, no assurance can be
given that the Company's LECs will continue to earn the same rate of return that
they achieved in recent years.
FCC Regulation. The FCC regulates the interstate services provided by the
Company's telephone subsidiaries primarily by regulating the interstate access
charges that are billed to interexchange carriers and other LEC customers by the
Company for use of its local network in connection with the origination and
termination of interstate telephone calls. Additionally, the FCC has prescribed
certain rules and regulations for telephone companies, including regulations
regarding the use of radio frequencies; a uniform system of accounts; and rules
regarding the separation of costs between jurisdictions and, ultimately, between
services.
Effective January 1, 1991, the FCC adopted price-cap regulation relating to
interstate access rates for the Regional Bell Operating Companies ("RBOCs") and
GTE Corporation. An annual opportunity to elect price-cap regulation is
available for other LECs. Under price-cap regulation, limits imposed on a
company's interstate rates will be adjusted periodically to reflect inflation,
productivity improvement and changes in certain non-controllable costs. In May
1993 the FCC adopted an optional incentive regulatory plan for LECs not subject
to price-cap regulation. A LEC electing the optional incentive regulatory plan
would, among other things, file tariffs based primarily on historical costs and
not be allowed to participate in the relevant NECA pooling arrangements. The
Company has not elected price-cap regulation or the incentive regulatory plan,
but will continue to evaluate its options on a periodic basis. Consequently, the
authorized interstate access rate of return for the Company's telephone
subsidiaries is 11.25%, which is the authorized rate established by the FCC for
LECs not governed by price-cap regulation or the optional incentive regulatory
plan.
In February 1996 the FCC sought public comments on whether it should
initiate a rate of return represcription proceeding for LECs that are subject to
rate of return regulation for interstate access revenues.
High-Cost Support Funds, Revenue Pools and Related Matters. A significant
number of the Company's telephone subsidiaries recover a portion of their costs
under federal and state cost recovery mechanisms that traditionally have allowed
LECs serving small communities and rural areas to provide access to
telecommunications services reasonably comparable to those available in urban
areas and at reasonably comparable prices.
The FCC and certain state regulatory commissions have recently explored or
implemented initiatives to evaluate or reduce the funding of certain of these
cost recovery mechanisms. In December 1993 the FCC adopted interim provisions
which placed certain limitations on the FCC's Universal Service Fund ("USF")
growth rate, including a cap which has been extended through mid-1996. The
Company anticipates that revenues from the USF under these interim provisions
will continue to increase in the near term, but at a lesser percentage rate than
that associated with recent prior periods. In July 1995 the FCC sought comments
on proposals and policy changes relating to certain federal high-cost assistance
mechanisms that provide substantial revenues to the Company, including the USF.
The FCC's stated goals are to ensure that universal service can be maintained,
but still hold the total level of assistance to a reasonable level and, where
possible, reduce barriers to competitive entry and to promote efficient
investment in and operation of local service networks.
In February 1996 the United States Congress enacted the 1996 Act which
provides, among other things, that a federal-state joint board review existing
universal service support mechanisms and recommend changes to the FCC
regulations in order that such regulations will be consistent with the universal
service principles in the 1996 Act. The 1996 Act provides that all
telecommunications carriers providing interstate services shall contribute to
universal service support mechanisms. The 1996 Act provides that only eligible
telecommunications carriers designated by a state shall be eligible to receive
specific federal universal service support and that any eligible
telecommunications carrier that receives such support shall only use that
support to provide, maintain and upgrade facilities and services for universal
service in the area for which the support is received. Although the Company
anticipates that the FCC's proposed rulemaking and the 1996 Act may result in a
reduction of its federal support revenues, management believes it is premature
to assess or estimate the ultimate impact thereof. There can be no assurance,
however, that such impact will not be material.
Some of the Company's telephone subsidiaries operate in states where
traditional cost recovery mechanisms, including rate structures, are under
evaluation or have been modified. There can be no assurance that these states
will continue to provide for cost recovery at current levels.
Certain revenues determined under the FCC's cost separation rules are
affected by the number of access lines served by a specific telephone company.
During 1995 the customer base of one of the Company's telephone subsidiaries in
Michigan increased above 50,000 access lines, which resulted in a decrease in
revenues of approximately $700,000. An additional decrease in revenues of that
subsidiary of approximately $500,000 is expected in 1996. In addition, in early
1996 another of the Company's telephone subsidiaries reached 50,000 access lines
and it is anticipated that revenues for that subsidiary will decrease
approximately $1.5 million in 1996 as a result thereof.
Most of the Company's LECs concur with the common line and traffic sensitive
tariffs filed by the NECA and participate in the access revenue pools
administered by the NECA for interstate services. All of the long distance and
intrastate network access revenues of the Company's LECs are based on access
charges, cost separation studies or special settlement arrangements. See
"-Services."
Certain long distance carriers continue to request that certain of the
Company's LECs reduce access tariffed rates. There is no assurance that these
requests will not result in decreased access revenues.
Developments Affecting Competition. The communications industry is currently
undergoing fundamental changes which may have a significant impact on the future
operations and financial performance of telecommunications companies. Primarily
as a result of legislative and regulatory initiatives and technological changes,
competition has been introduced and encouraged in each sector of the telephone
industry, including, most recently, local service. As a result, the number of
companies offering competitive services has increased.
As indicated above, in February 1996 Congress enacted the 1996 Act, which
obligates LECs to permit competitors to interconnect their facilities to the
LEC's network and to take various other steps that are designed to lower
barriers of entry to competitors. The 1996 Act imposes a general duty to
interconnect with other telecommunications carriers and to forego the
installation or implementation of network features or functions that do not
comply with guidelines and standards established under the 1996 Act. The 1996
Act imposes several duties on a LEC if it receives a specific request from
another entity which seeks to connect with or provide services using the LEC's
network. These include the duties (i) not to prohibit resale of its service,
(ii) to provide number portability, (iii) to provide dialing parity, (iv) to
afford access to poles, ducts, conduits, and rights-of-way, and (v) to establish
reciprocal compensation arrangements for the transport and termination of
traffic. In addition, each incumbent LEC is obligated to (i) negotiate
interconnection agreements in good faith, (ii) provide "unbundled" access to all
aspects of the LEC's network, (iii) offer resale of its telecommunications
services at wholesale rates and (iv) permit competitors to collocate its
physical plant on the LEC's property, or provide virtual collocation if physical
collocation is not practicable. Under the 1996 Act's rural telephone company
exemption, all of the Company's telephone subsidiaries will be exempt from the
foregoing itemized obligations of incumbent LECs until such time as the state
regulatory commission with jurisdiction over any such company receives notice
that a bona fide request has been presented to such company for interconnection,
services or network elements and such commission determines that the request is
technically feasible, not unduly economically burdensome and is consistent with
the universal service provisions contained in the 1996 Act. Facility
interconnection charges are required to be based on cost (to be determined
without a rate-of-return or other rate-based proceeding) and may include a
reasonable profit. The 1996 Act provides that each LEC, to the extent that it
provides wireline services, shall have a statutory duty to provide equal access
and nondiscrimination to interexchange carriers and information service
providers. The 1996 Act requires the FCC to adopt regulations to implement the
provisions contained therein. Management believes that the 1996 Act will
ultimately increase competition in its franchised telephone service areas,
although the form and degree of competition cannot be ascertained until such
time as the FCC (and, in certain instances, state regulatory commissions) adopts
implementing regulations.
Of the 14 states in which the Company provides telephone services, most
(including Wisconsin, Louisiana, Ohio and Michigan) have taken legislative or
regulatory steps to introduce competition into the local exchange business.
Largely as a result thereof, several well-established interexchange carriers and
cable television companies have accelerated their development of networks and
facilities designed to provide local exchange services, principally in larger
cities. A cable company has requested authorization to provide local exchange
service in a portion of the Company's franchised service area in Ohio, and it is
anticipated that similar action may be taken by others in the Company's
franchised service areas. States can, if they so desire, introduce more
competition than is authorized under the 1996 Act.
Competition from competitive access providers and others has increased and
is expected to continue to increase. Competitive access providers, which
originally were formed in the 1980's to provide redundancy services, now provide
access competition with LECs in most larger urban areas, principally by
targeting large business customers. With the passage of the 1996 Act,
competitive access providers are expected to be active competitors to provide
local telephone service. Although there has been activity by competitive access
providers in certain of the Company's operating areas, such activity has thus
far not significantly affected the Company. The Company expects to increasingly
face competition from competitive access providers in its operating areas
located near larger urban areas and may face similar competition in its other
operating areas.
In addition to receiving services directly from competitive access
providers, interexchange carriers and other users of toll service may seek other
means to bypass LECs' switching services and local distribution facilities,
particularly if services are not strategically priced. There are several ways
which users of toll service may bypass the Company's switching services. First,
users may construct, modify or lease facilities to transmit their traffic
directly to an interexchange carrier. Cable television companies, in particular,
may be able to modify their networks to partially or completely bypass the
Company's local network. Also, certain interexchange carriers provide services
which allow users to divert their traffic from LECs' usage-sensitive services to
their flat-rate services. In addition, users may choose to use mobile
communications services or, in the future, companies providing competitive local
exchange services, to bypass LECs' switching services. Within the past few
years, each of the three largest interexchange carriers in the United States has
acquired or sought to acquire interests in mobile communications companies,
presumably in part to obtain bypass capabilities. Although certain of the
Company's telephone subsidiaries have experienced a loss of traffic to such
bypass, the Company believes that the impact of such loss on revenues has not
been significant. The Company and the LEC industry are seeking to address bypass
principally by adopting flexible pricing of access services where appropriate
and to the extent permitted by regulatory agencies. No assurance can be given as
to the ultimate outcome of these efforts.
Currently, cellular communications services complement traditional LEC
services. However, as the mobile communications industry continues to mature,
the Company anticipates that existing and emerging mobile communications
technologies will increasingly compete with traditional LEC services.
Technological and regulatory developments in cellular telephone, personal
communications services, digital microwave, coaxial cable, fiber optics and
other wired and wireless technologies are expected to further permit the
development of alternatives to traditional landline services. For further
information on certain of these developments, see "Mobile Communications
Operations - Regulation and Competition."
In connection with the well-publicized convergence of telecommunications,
cable, video, computer and entertainment businesses, several large companies
have announced plans to offer products that would significantly enhance current
communications and data transmission services and, in some instances, introduce
new two-way video, entertainment, data, consumer and other multimedia services.
Other companies with wireline experience (including electric utilities) are
expected to explore opportunities in this market, along with wireless companies
and other emerging technology companies. For information on the effects of these
developments on the Company's cellular operations, see "Mobile Communications
Operations - Regulation and Competition."
To the extent that the telephone industry increasingly experiences
competition, the size and resources of each respective competitor may
increasingly influence its prospects. Many companies currently providing or
planning to provide competitive telecommunication services have substantially
greater assets and resources than the Company, and several are not subject to
the same regulatory constraints as the Company. Moreover, several of these
companies have completed business combinations or formed joint ventures or
alliances to better prepare themselves for competition.
The Company anticipates that the traditional operations of LECs will be
increasingly impacted by continued technological developments as well as
legislative and regulatory initiatives affecting the ability of LECs to provide
new services and the capability of cable television companies, interexchange
carriers, competitive access providers and others to provide competitive LEC
services. The Company intends to actively monitor these developments, to observe
the effect of emerging competitive trends in initial competitive markets (which
are expected to be large urban areas) and to continue to evaluate new business
opportunities that may arise out of future technological, legislative and
regulatory developments. Although competition relating to services traditionally
provided solely by LECs is expected to initially affect large urban areas to a
greater extent than rural, suburban and small urban areas such as those in which
the Company operates, there is no assurance that these developments will not
have an adverse effect on the Company in the future.
MOBILE COMMUNICATIONS OPERATIONS
According to data derived from published sources, at September 30, 1995 the
Company was the fifteenth largest cellular telephone company in the United
States based on the Company's owned pops. The number of pops owned by a cellular
operator does not represent the number of users of cellular service and is not
necessarily indicative of the number of potential subscribers. Rather, this term
is frequently used as a basis for comparing the size of cellular system
operators. At December 31, 1995, the Company owned approximately 7.6 million
pops, of which 72% were applicable to MSAs and 28% were RSA pops.
Cellular Industry
The cellular telephone industry has been in existence for just over ten
years in the United States. Although the industry is relatively new, it has
grown significantly during this period and cellular service is now available in
substantially all areas of the United States. According to the Cellular
Telecommunications Industry Association, in June 1995 there were estimated to be
over 28 million cellular customers across the United States.
Cellular mobile telephone service is capable of high-quality, high-capacity
communications to and from vehicle-mounted and hand-held radio telephones.
Cellular systems, if properly designed and equipped, are capable of handling
thousands of calls at any given time and are capable of providing service to
tens of thousands of subscribers in a market.
In a cellular telephone system, the licensed service area is subdivided into
geographic areas, or cells. Each cell has its own transmitter and receiver that
communicates by radio signal with cellular telephones located within the cell.
Each cell is connected by a telephone circuit or microwave to a Mobile Telephone
Switching Office ("MTSO"), which in turn is connected to the worldwide telephone
network.
Communications within a cellular system are controlled by the MTSO through a
transfer process as a cellular telephone user moves from one cell to another. In
this process, when the signal strength of a call declines to a predetermined
level, the MTSO determines if the signal strength from an adjacent cell is
greater and, if so, transfers the call to the adjacent cell. Software which
facilitates the transfer between adjacent cells of different cellular systems
using equipment of different manufacturers has been implemented by the Company.
Cellular telephone systems have high subscriber capacity because of the
substantial frequency spectrum allocated to these systems by the FCC and because
frequencies can be reused throughout the system. Frequency reuse is possible
because the transmission power of cell site equipment and mobile units is
relatively low. Therefore, signals on the same channel will not interfere with
each other if they are transmitted in cells that are sufficiently far apart.
Reuse multiplies the capacity of channels available to the system operator and
thereby increases the telephone calling capacity.
Until recently, substantially all radio transmissions of cellular systems
were conducted on an analog basis. Technological developments involving the
application of digital radio technology offer certain advantages over analog
technologies, including expanding the capacity of mobile communications systems,
improving voice clarity, permitting the introduction of new services, and making
such systems more private. Providers of certain services competitive with
cellular are currently incorporating digital technology into their operations,
and are expected to continue to do so in the future. In recent years certain
cellular carriers have begun to install digital cellular voice transmission
facilities in certain larger markets. See "-Regulation and
Competition-Developments Affecting Mobile Communications Competition."
Construction and Maintenance
The construction and maintenance of cellular systems is capital intensive.
Although all of the Company's MSA and RSA systems are operational, the Company
has continued to add cell sites to increase coverage, provide additional
capacity and improve the quality of these systems. In 1995 the Company completed
construction of 41 cell sites in markets operated by the Company.
During the last few years the Company upgraded certain portions of its
cellular systems to be capable of providing digital service in the future; the
Company currently plans to implement digital service in certain markets during
1996 using the TDMA digital standard. The Company will continue to monitor the
development and implementation of this technology to determine when it will
become beneficial for the Company to install digital voice transmission
facilities in other markets. See "-Regulation and Competition-Developments
Affecting Mobile Communications Competition." Total capital expenditures related
to majority-owned cellular systems operated by the Company were approximately
$42 million in 1995 and are anticipated to be approximately $61 million in 1996.
Strategy
The Company's business development strategy for its cellular telephone
operations is to secure operating control of service areas that are
geographically clustered. Clustered cellular systems aid the Company's marketing
efforts and provide various operating and service advantages. Approximately 51%
of the Company's pops in markets operated by the Company are in a single,
contiguous cluster of eight MSAs and seven RSAs in Michigan; another 19% are in
a cluster of five MSAs and seven RSAs in northern and central Louisiana,
southern Arkansas and eastern Texas. See "-The Company's Cellular Interests."
Another component of the Company's strategy for cellular operations includes
capturing revenues from roaming service. Roaming service revenues are derived
from calls made in one cellular service area by subscribers from other service
areas. Roaming service is made possible by technical standards requiring that
cellular telephones be functionally compatible with the cellular systems in all
United States market areas. The Company charges premium rates (compared to rates
charged to the Company's customers) for roaming service provided to most
non-Company customers. The Company's Michigan cellular properties include a
significant portion of the interstate highway corridor between Chicago and
Detroit; its Louisiana properties include an east-west interstate highway and a
north-south interstate highway which intersect in its Louisiana cellular service
area; and its Mississippi properties include two east-west interstate highways,
one of which intersects with a north-south interstate highway in Jackson,
Mississippi.
Marketing
The Company markets its cellular services through several distribution
channels, including independent agents, its direct sales force and retail
outlets owned by the Company and others. The Company's cellular sales force
consists of almost 300 independent agents, which generate a significant majority
of the Company's new subscribers, and over 200 sales employees. Each sales
employee and independent agent solicits cellular customers exclusively for the
Company. Company sales employees are compensated by salary and commission and
independent sales agents are paid commissions. The Company advertises its
services through various means, including direct mail, billboard, magazine,
radio, television and newspaper advertisements.
The sales and marketing costs of obtaining new subscribers are substantial.
The Company not only has to pay for advertising, but also incurs a direct
expense for most new subscribers, either in the form of a commission payment to
an agent or a salary/incentive payment to a direct sales person. In addition,
the Company discounts the cost of cellular telephone equipment, and periodically
runs promotions which provide some amount of initial activation, access or
airtime free to new subscribers. Although the Company has continued to lower the
cost of acquisition per subscriber, it remains one of the largest expenses in
conducting the Company's cellular operations.
During 1994 AT&T Corp. completed its acquisition of McCaw Cellular
Communications, Inc., the largest cellular provider in the United States, and
has begun to market McCaw's service under the AT&T brand name. The Company
competes with AT&T in four of the MSAs it operates and several of its operated
RSAs.
Services, Customers and System Usage
There are a number of different types of cellular telephones, all of which
are currently compatible with cellular systems nationwide. The Company sells a
full range of vehicle-mounted, transportable, and hand-held portable cellular
telephones. Features offered in the cellular telephones sold by the Company
include hands-free calling, repeat dialing, horn alert and others.
The Company charges its subscribers for access to its systems, for minutes
of use and for enhanced services, such as voice mail. A subscriber may purchase
certain of these services separately or may purchase rate plans which bundle
these services in different ways and are designed to fit different calling
patterns. While the Company historically has typically charged its customers
separately for custom-calling features, air time in excess of the packaged
amount, and toll calls, recently it has begun to offer plans which include
features such as unlimited toll calls and unlimited weekend calling in certain
calling areas. Custom-calling features provided by the Company include
call-forwarding, call-waiting, three-way calling and no-answer transfer. The
Company offers voice message service in many of its markets. This service, which
functions like a sophisticated answering machine, allows customers to receive
messages from callers when they are not available to take calls.
Cellular customers come from a wide range of occupations. They typically
include a large proportion of individuals who work outside of their office, such
as employees in the construction, real estate, wholesale and retail distribution
businesses, and professionals. More customers are selecting portable and other
transportable cellular telephones as these units become more compact and fully
featured, as well as more attractively priced. It is anticipated that average
revenue per customer may continue to 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. See "-Regulation and
Competition."
Most cellular systems allow a customer to place or receive a call in a
cellular service area away from the customer's home market area. The Company has
entered into "roaming agreements" with operators of other cellular systems
covering virtually all markets in the United States; such agreements offer the
Company's customers the opportunity to roam in these markets. Also, a customer
of a participating non-Company system traveling in a market operated by the
Company where this arrangement is in effect is able to automatically make calls
on the Company's system. The charge to a non-Company customer for this service
is typically at premium rates, and is billed by the Company to the customer's
home system, which then bills the customer. Occasionally, the Company will enter
into reciprocal agreements with other cellular carriers to settle roaming usage
at a rate different from such premium rates. In some instances, based on
competitive factors and financial considerations, the Company charges a lower
amount to its customers than the amount actually charged by the servicing
cellular carrier for roaming. The Company anticipates that competitive factors
and industry consolidation may place further pressure on charging premium
roaming rates. For additional information on roaming revenue, see "-Strategy."
Roamer fraud remains a cellular industry problem. Roamer fraud occurs when
cellular telephone equipment is programmed to conceal the true identity and
location of the user. While the Company and the industry have implemented
extensive fraud control processes, they have not been able to eliminate roamer
fraud.
During recent years, the Company's cellular subsidiaries experienced strong
subscriber growth in the fourth quarter, primarily due to increased holiday
season sales. According to the Cellular Telecommunications Industry Association,
industry-wide cellular sales have been seasonally strong in the fourth calendar
quarter for the past several years.
The following table summarizes, among other things, certain information
about the Company's customers and market penetration:
<TABLE>
<CAPTION>
Year Ended or At December 31,
--------------------------------------------------------------------------------------------------------
1995 1994 1993
--------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Majority-owned and operated MSA and RSA systems (Note 1):
Cellular systems operated 33 31 26
Total population of systems operated (Note 2) 6,877,598 6,359,699 5,015,463
Customers (Note 3):
At beginning of period 211,710 116,484 73,084
Additions 139,836 110,636 62,564
Net acquisitions/dispositions 8,699 30,743 -
Disconnects 70,170 46,153 19,164
At end of period 290,075 211,710 116,484
Market penetration at end of period (Note 4) 4.22% 3.33 2.32
Churn rate (Note 5) 2.39% 2.29 1.75
Average monthly cellular service revenue per customer $ 66 69 71
Construction expenditures (in thousands) $ 41,990 39,937 56,070
All operated MSA and RSA systems (Note 6):
Cellular systems operated 37 36 31
Total population of systems operated (Note 2) 7,721,569 7,445,571 6,084,794
Customers at end of period (Note 7) 313,430 227,140 124,908
Market penetration at end of period (Note 8) 4.06% 3.05 2.05
Notes:
1. Represents the number of systems in which the Company owned at least a
50% interest. The revenues and expenses of these cellular markets, all of which
are operated by the Company, are included in the Company's consolidated
operating revenues and operating expenses.
2. Based on independent third-party population estimates for each
respective year.
3. Represents the approximate number of revenue-generating cellular
telephones served by the cellular systems referred to in note 1.
4. Computed by dividing the number of customers at the end of the period
by the total population of systems referred to in note 1.
5. Represents the average percentage of customers that disconnect on a
monthly basis.
6. Represents the total number of systems that the Company operated,
including systems in which it does not own a majority interest.
7. Represents the approximate number of revenue-generating cellular
telephones served by the cellular systems referred to in note 6.
8. Computed by dividing the number of customers at the end of the period
by the total population of systems referred to in note 6.
</TABLE>
The Company's Cellular Interests
The Company obtained the right to provide cellular service through (i) the
FCC's licensing process described below, under which it received interests in
wireline licenses, and (ii) its acquisition program, under which it has acquired
interests in both wireline and non-wireline licenses. The table below sets forth
certain information with respect to the interests in cellular systems that the
Company owned as of December 31, 1995:
<TABLE>
<CAPTION>
The Other
1995 Company's cellular
population Ownership pops at operator
(Note 1) percentage December 31, 1995 (Note 2)
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Majority-owned and operated MSAs
Grand Rapids, MI 734,501 97.00% 712,466 AirTouch
Lansing, MI 498,597 97.00 483,639 AirTouch
Saginaw, MI 402,929 91.70 369,486 AirTouch
Kalamazoo, MI 305,095 97.00 295,942 Centennial
Battle Creek, MI 193,878 97.00 188,062 Centennial
Muskegon, MI 187,884 97.00 182,247 AirTouch
Benton Harbor, MI 161,966 97.00 157,107 Masters Cellular
Jackson, MI 153,977 97.00 149,358 Centennial
Shreveport, LA 379,525 62.00 235,306 AT&T
Alexandria, LA 144,396 100.00 144,396 Centennial
Monroe, LA 147,395 62.00 91,385 AT&T
Jackson, MS (Note 4) 416,071 87.33 363,354 MCTA
Biloxi-Gulfport, MS (Note 4) 229,730 92.83 213,249 Cellular South
Pascagoula, MS (Note 4) 126,963 85.90 109,065 Cellular South
LaCrosse, WI 101,785 95.00 96,696 U. S. Cellular
Pine Bluff, AR 83,975 100.00 83,975 AT&T
McAllen-Edinburg-Mission, TX (Note 4) 475,980 68.33 325,248 SBC
Brownsville-Harlingen, TX (Note 4) 306,979 77.81 238,872 SBC
Texarkana, AR/TX 136,879 89.00 121,822 AT&T
- --------------------------------------------------------------------------
5,188,505 4,561,675
- --------------------------------------------------------------------------
Minority-owned MSAs
Flint, MI 506,318 3.20% 16,192 Note 3
Detroit, MI 4,602,090 3.20 147,175 Note 3
Appleton/Oshkosh/Neenah, WI 475,651 10.83 51,513 Note 3
Little Rock, AR 543,773 36.00 195,758 Note 3
Lafayette, LA 256,742 49.00 125,804 Note 3
Austin, TX 919,978 35.00 321,992 Note 3
Dallas-Ft. Worth, TX 4,344,179 .50 21,721 Note 3
Sherman-Denison, TX 97,919 .50 490 Note 3
- --------------------------------------------------------------------------
11,746,650 880,645
- --------------------------------------------------------------------------
Total MSAs 16,935,155 5,442,320
- --------------------------------------------------------------------------
Operated RSAs
Arkansas 2 82,860 82.00% 67,945 AT&T
Arkansas 3 102,706 82.00 84,219 AT&T
Arkansas 11 67,360 89.00 59,950 AT&T
Arkansas 12 188,542 80.00 150,834 AT&T
Louisiana 1 114,680 62.00 71,102 Cellular One
Louisiana 2 116,255 62.00 72,078 AT&T/Centennial
Louisiana 3 (B2) 95,585 62.00 59,263 AT&T/Centennial
Louisiana 4 73,168 100.00 73,168 Centennial
Michigan 3 156,490 38.76 60,660 Unitel
Michigan 4 131,069 100.00 131,069 RFB
Michigan 5 156,029 38.76 60,481 Unitel
Michigan 6 135,706 98.00 132,992 Centennial
Michigan 7 238,595 41.78 99,697 Centennial
Michigan 8 98,016 97.00 95,076 Allegan Cellular
Michigan 9 292,857 43.38 127,041 Centennial
Mississippi 2 (Note 4) 242,752 100.00 242,752 Bell South Mobility
Mississippi 6 (Note 4) 182,638 100.00 182,638 Cellular South
Texas 7 (B6) 57,756 89.00 51,403 AT&T
- --------------------------------------------------------------------------
2,533,064 1,822,368
- --------------------------------------------------------------------------
Non-operated RSAs
Arizona 2 243,529 21.30% 51,863 Note 3
Michigan 10 135,023 26.00 35,106 Note 3
Minnesota 11 206,081 13.01 26,807 Note 3
New Mexico 4W 133,708 35.71 47,753 Note 3
Texas 16 319,976 9.60 30,718 Note 3
Wisconsin 1 109,248 8.44 9,222 Note 3
Wisconsin 2 84,925 12.81 10,879 Note 3
Wisconsin 3 139,189 14.29 19,884 Note 3
Wisconsin 6 114,709 28.57 32,774 Note 3
Wisconsin 8 232,864 4.00 9,315 Note 3
Wisconsin 10 128,751 15.00 19,313 Note 3
- --------------------------------------------------------------------------
1,848,003 293,634
- --------------------------------------------------------------------------
Total RSAs 4,381,067 2,116,002
- --------------------------------------------------------------------------
21,316,222 7,558,322
==========================================================================
Notes:
1. Based on 1995 independent third-party population estimates.
2. Information provided to the best of the Company's knowledge.
3. Markets not operated by the Company.
4. Represents a non-wireline interest.
</TABLE>
Operations
A substantial number of the cellular systems in MSAs operated by the Company
are owned by limited partnerships in which the Company is a general partner
("MSA Partnerships"). Most of these partnerships are governed by partnership
agreements with similar terms, including, among other things, customary
provisions concerning capital contributions, sharing of profits and losses, and
dissolution and termination of the partnership. Most of these partnership
agreements vest complete operational control of the partnership with the general
partner. The general partner typically has the power to manage, supervise and
conduct the affairs of the partnership, make all decisions appropriate in
connection with the business purposes of the partnership, and incur obligations
and execute agreements on behalf of the partnership. The general partner also
may make decisions regarding the time and amount of cash contributions and
distributions, and the nature, timing and extent of construction, without the
consent of the other partners. The Company owns more than 50% of all of the MSA
Partnerships.
A substantial number of the cellular systems in RSAs operated by the Company
are also owned by limited or general partnerships in which the Company is either
the general or managing partner (the "RSA Partnerships"). These partnerships are
governed by partnership agreements with varying terms and provisions. In many of
these partnerships, the noncontrolling partners have the right to vote on major
issues such as the annual budget and system design. In a few of these
partnerships, the Company's management position is for a limited term (similar
to a management contract) and the other partners in the partnership have the
right to change managers, with or without cause. The Company owns less than 50%
of some of the RSA Partnerships.
The partnership agreements for both the MSA Partnerships and RSA
Partnerships generally contain provisions granting all partners a right of first
refusal in the event a partner desires to transfer a partnership interest. This
restriction on transfer can make these partnership interests more difficult to
sell to a third party.
Revenue
The following table reflects the major revenue categories for the Company's
mobile communications operations as a percentage of mobile communications
operating revenues in 1995, 1994 and 1993.
1995 1994 1993
----------------------------------
Cellular access fees, toll
revenues and equipment sales 82.3% 82.0 80.5
Cellular roaming 17.7 16.1 14.5
Paging services (Note) - 1.9 5.0
----------------------------------
100.0% 100.0 100.0
==================================
Note: The Company's paging operations were sold in October 1994.
For further information on these revenue categories, see "-Services,
Customers and System Usage."
Regulation And Competition
As discussed below, the FCC and various state public utility commissions
regulate, among other things, the licensing, construction, operation,
interconnection arrangements, sale and acquisition of cellular telephone
systems.
Cellular Licensing Process. During the 1980's and early 1990's, the FCC
awarded two licenses to provide cellular service in each market. Each licensee
is required to provide service to a designated portion of the area or population
in its licensed area as a condition to maintaining that license. Initially, one
license was reserved for companies offering local telephone service in the
market (the wireline carrier) and one license was available for firms
unaffiliated with the local telephone company (the non-wireline carrier). Since
mid-1986, the FCC has permitted telephone companies or their affiliates to
acquire control of non-wireline licenses in markets in which they do not hold
interests in the wireline license.
The completion of acquisitions involving the transfer of control of a
cellular system requires prior FCC approval and, in certain cases, receipt of
other federal and state regulatory approvals. Acquisitions of minority interests
generally do not require FCC approval. Whenever FCC approval is required, any
interested party may file a petition to dismiss or deny the application for
approval of the proposed transfer.
Initial operating licenses were granted for ten-year periods and are
renewable upon application to the FCC for periods of ten years. Licenses may be
revoked and license renewal applications denied for cause. There may be
competition for licenses upon the expiration of the initial ten-year terms and
there is no assurance that any license will be renewed, although the FCC has
issued a decision that grants a renewal expectancy during the license renewal
period to incumbent licensees that substantially comply with the terms and
conditions of their cellular authorizations and the FCC's regulations. The
licenses for the MSA markets operated by the Company were initially granted
between 1984 and 1987, and licenses for operated RSAs were initially granted
between 1989 and 1991. The Company intends to file renewal applications for its
licenses which will otherwise expire in 1996.
Five years after initial operating licenses are granted, unserved areas
within markets previously granted to licensees may be applied for by any
qualified party. The FCC has rules that govern the procedures for filing and
granting such applications and has established requirements for constructing and
operating systems in such areas. The Company has not lost, and does not expect
to lose, any significant market areas as a result of not providing service to
such areas. In addition to regulation by the FCC, cellular systems are subject
to certain Federal Aviation Administration tower height regulations concerning
the siting and construction of cellular transmitter towers and antennas.
Cellular operators are also subject to state and local regulation in some
instances. Although the FCC has pre-empted the states from exercising
jurisdiction in the areas of licensing, technical standards and market
structure, certain states require cellular operators to be certified. In
addition, some state authorities regulate certain aspects of a cellular
operator's business, including certain aspects of pricing, the resale of long
distance service to its customers, the technical arrangements and charges for
interconnection with the landline network, and the transfer of interests in
cellular systems. The siting and construction of the cellular facilities may
also be subject to state or local zoning, land use and other local regulations.
Competition between cellular providers in each market is conducted
principally on the basis of services and enhancements offered, the technical
quality and coverage of the system, quality and responsiveness of customer
service, and price. Competition may be intense. For a listing of the Company's
competitors in cellular markets operated by the Company, see "- The Company's
Cellular Interests." Under applicable law, the Company is required to permit the
reselling of its services. In certain larger markets and in certain market
segments, competition from resellers may be significant. There is also
substantial competition for agents. Certain of the Company's competitors have
substantially greater assets and resources than the Company.
Developments Affecting Mobile Communications Competition. Continued and
rapid technological advances in the communications field, coupled with
legislative and regulatory uncertainty, make it impossible to (i) predict the
extent of future competition to cellular systems, (ii) determine which emerging
technologies pose the most viable alternatives to the Company's cellular
operations, or (iii) list each development that may ultimately impact the
Company's cellular operations. No assurance can be given that current or future
technological advances, or legislative or regulatory changes, will not impact
the Company's cellular operations.
Several recent FCC initiatives have resulted in the allocation of additional
radio spectrum or the issuance of experimental licenses for emerging mobile
communications technologies that will or may be competitive with the Company's
cellular and telephone operations, including personal communication services
("PCS"). Although there is no universally recognized definition of PCS, the term
is generally used to refer to wireless services to be provided by licensees
operating in the 1850 MHz to 1990 MHz radio frequency band using microcells and
high-capacity digital technology. When offered commercially, PCS technology
currently under development may permit PCS operators to offer wireless data,
image and multimedia services. The extent to which PCS will offer services that
are complementary or competitive with cellular services is uncertain, and is
expected to be influenced by continuing developments in PCS and cellular
technologies and by FCC regulation.
The FCC has adopted rules to auction up to six PCS licenses per market.
Under these rules, two 30 MHz frequency blocks have been awarded for each of the
51 Rand McNally Major Trading Areas ("MTAs"), while one 30 MHz and three 10 MHz
frequency blocks will be awarded for each of the 493 Rand McNally Basic Trading
Areas ("BTAs"). Subject to certain exceptions, the Company will be permitted to
freely pursue PCS licenses outside its cellular markets, but will be limited to
acquiring only one 10 MHz block in licensed areas where it controls more than a
20% interest in a cellular licensee and serves more than 10% of the population
within the PCS licensed area. The Company did not participate in the FCC's
auction of the MTA licenses. During 1995 the Company invested $20 million in
exchange for a minority equity interest in an entity formed for the purpose of
participating in the FCC's current auction, which began in December 1995, of the
30 MHz PCS license for each BTA. The FCC anticipates auctioning the final BTA
licenses later in 1996. PCS service is commercially available in Washington D.C.
and Baltimore and is expected to be commercially available in certain other
areas in 1996.
In addition to PCS, users and potential users of cellular systems may find
their communication needs satisfied by other current and developing
technologies, several of which may enjoy potential operational and service
advantages through their use of digital technology. The FCC previously
authorized the licensees of certain specialized mobile radio service ("SMR")
systems (which historically have generally been used by taxicabs and tow truck
operators) to configure their systems so as to operate in a manner similar to
cellular systems. The Company believes that SMR systems are operating in a
majority of its cellular markets. Certain well-established SMR providers have
announced their intention to create a nationwide digital mobile communications
system to compete with cellular systems. Other similar communication services
which have the technical capability to handle mobile telephone calls may provide
competition in certain markets, although these services currently lack the
subscriber capacity of cellular systems. One-way paging or beeper services that
feature voice message and data display as well as tones may be adequate for
potential subscribers who do not need to communicate with the caller. Other
two-way mobile services may also be competitive with the Company's services,
including two-way paging.
Mobile satellite systems, in which transmissions are between mobile units
and satellites, are currently in operation. No assurance can be given that such
systems will not ultimately be successful in obtaining market share from
cellular systems which communicate directly to land-based stations. However, the
Company has entered into an agreement with a satellite system provider whereby
the satellite system will supplement the Company's cellular system in certain
areas.
As described further under "Telephone Operations - Regulation and
Competition," in connection with the well-publicized convergence of
telecommunications, cable, video, computer and entertainment businesses, several
large companies have recently announced plans to offer products that would
significantly enhance current communications and data transmissions services
and, in some instances, introduce new services. Although much of the resulting
competition is expected to center on wireline services, it is anticipated that
these developments may also increase competition in the mobile communications
industry. Several companies are currently developing and marketing small
hand-held devices that provide digital wireless data transmission services that
compete with similar analog services currently being provided by cellular
companies.
Recently, several large cellular providers have merged with other companies
or formed joint ventures. The resulting entities have substantially greater
assets and resources than the Company. Several of these joint ventures pooled
their resources to purchase PCS licenses awarded in the MTA auctions which were
completed in 1995 and to develop the associated markets. For more information,
see "-Marketing."
Although it is uncertain how PCS, SMR, mobile satellites and other emerging
technologies will ultimately affect the Company, they are not anticipated to be
significant sources of competition in the Company's markets in the near term.
Moreover, management believes that equipping its current cellular networks with
digital enhancements and applying new microcellular technologies should permit
its cellular systems to provide services comparable with the emerging
technologies described above, although no assurances can be given that this will
happen or that future technological advances or legislative or regulatory
changes will not create additional sources of competition.
Certain Considerations Regarding Cellular Telephone Operations
The cellular industry has a relatively limited operating history and there
continues to be uncertainty regarding its future. Among other factors, there is
uncertainty regarding (i) the continued growth in the number of customers, (ii)
the usage and pricing of cellular services, particularly as market penetration
increases and lower-usage customers subscribe for service, (iii) the number of
customers who will terminate service each month, and (iv) the impact of changes
in technology, regulation, legislation and competition, any of which could have
a material adverse effect on the Company. See "- Regulation and Competition."
The market value of cellular interests is frequently determined on the basis
of the number of pops owned by a cellular provider. The population of a
particular cellular market, however, does not necessarily bear a direct
relationship to the number of subscribers or the revenues that may be realized
from the operation of the related cellular system. The future market value of
the Company's cellular interests will depend on, among other things, the success
of its cellular operations.
OTHER OPERATIONS
The Company also provides long distance, operator and interactive services
in certain local and regional markets, as well as certain printing and related
services, and has recently entered the competitive access business. The results
of these operations, which accounted for 4.4% and 1.2%, respectively, of the
Company's consolidated revenues and operating income during 1995, are reflected
for financial reporting purposes in the "Other operations" section in operating
income.
Long Distance. At December 31, 1995, the Company provided long distance
services in certain of its local exchange markets to nearly 47,000 customers,
which represented a 69% increase from the number of customers served as of
January 1, 1995. In January 1996 the Company began marketing long distance
service in all of its equal access telephone operating areas and, during January
1996 and February 1996, added 29,000 long distance customers. Although the
Company owns and operates long distance switches in LaCrosse, Wisconsin and San
Marcos, Texas, it anticipates that most of its future long distance service
revenues will be provided by reselling service purchased from other
facilities-based long distance providers. The Company intends to continue to
aggressively expand its long distance business, principally through reselling
arrangements.
Competitive access. The Company's competitive access subsidiary has
constructed an 86-mile fiber optic network which allows the Company to offer
certain competitive access services in Fort Worth and Arlington, Texas, along
with a portion of downtown Dallas. The subsidiary, which has also obtained a
franchise to provide services in Austin, Texas and is currently constructing its
network in the Austin market, provides enhanced data transmission services,
transport to local area network users, and central office interconnection,
primarily for large business customers. The subsidiary also provides transport
for origination and termination services for long distance companies. The
Company plans to continue to pursue the development of its competitive access
business in Texas and expects to incur operating losses in such business during
the next few years.
Other. The Company provides 0+ and 0- operator services for retail and
wholesale markets. The retail market consists primarily of the hospitality and
payphone industries. The wholesale market consists of other independent
telephone companies and interexchange carriers.
The Company has a subsidiary which provides audiotext services,
fax-on-demand services, and interactive marketing surveys and research. The
advertising and consumer information provided through the audiotext services is
supplied by the businesses that advertise. The Company has another subsidiary
that provides printing, database management and direct mail services which, in
conjunction with the subsidiary that provides marketing surveys and research,
can provide a complete market research package to customers. The Company has
signed a preliminary agreement with another company providing complementary
services, pursuant to which the Company would combine most of the operations of
these two subsidiaries with the operations of the other company in exchange for
an 80% equity interest in the newly created company.
Certain service subsidiaries of the company provide installation and
maintenance services, materials and supplies, and managerial, technical and
accounting services to the telephone and mobile communications operating
subsidiaries. In addition, Century provides and bills management services to
subsidiaries and in certain instances makes interest bearing advances to finance
construction of plant and purchases of equipment. These transactions are
recorded by the Company's regulated telephone subsidiaries at their cost to the
extent permitted by regulatory authorities. Intercompany profit on transactions
with regulated affiliates is limited to a reasonable return on investment and
has not been eliminated in connection with consolidating the results of
operations of Century and its subsidiaries. Such intercompany profit is
reflected in the "Other operations" section in operating income.
OTHER MATTERS
The Company has certain obligations based on federal, state and local laws
relating to the protection of the environment. Costs of compliance through 1995
have not been material and the Company currently has no reason to believe that
such costs will become material.
For additional information concerning the business and properties of the
Company, see notes 2, 5, 11, 14 and 16 of Notes to Consolidated Financial
Statements set forth in Item 8 elsewhere herein.
Item 2. Properties.
The Company's properties consist principally of (i) telephone lines,
central office equipment, telephone instruments and related equipment, and land
and building related to telephone operations and (ii) switching and cell site
equipment related to cellular telephone operations. As of December 31, 1995, the
Company's gross property, plant and equipment of approximately $1.5 billion
consisted of the following:
Telephone:
Cable and wire............................................. 44.1%
Central office equipment................................... 23.8
General support............................................ 6.6
Information origination/termination equipment.............. 1.6
Construction in progress................................... 4.0
Other...................................................... .4
-----
80.5
Mobile Communications............................................ 12.8
Other ........................................................... 6.7
-----
100.0%
=====
"Cable and wire" facilities consist primarily of buried cable and aerial
cable, poles, wire, conduit and drops. "Central office equipment" consists
primarily of switching equipment, circuit equipment and related facilities.
"General support" consists primarily of land, buildings, tools, furnishings,
fixtures, motor vehicles and work equipment. "Information
origination/termination equipment" consists primarily of premise equipment
(private branch exchanges and telephones) for official company use.
"Construction in progress" includes property of the foregoing categories that
has not been placed in service because it is still under construction.
Most of the properties of the Company's telephone subsidiaries are subject
to mortgages securing the debt of such companies. The Company owns substantially
all of the central office buildings, local administrative buildings, warehouses,
and storage facilities used in its telephone operations. The Company leases most
of the offices used in its cellular operations; certain of its transmitter sites
are leased while others are owned by the Company. For further information on the
location and type of the Company's properties, see the descriptions of the
Company's telephone and mobile communications operations in Item 1.
Item 3. Legal Proceedings.
From time to time, the Company is involved in litigation incidental to its
business, including administrative hearings of state public utility commissions
relating primarily to rate making, actions relating to employee claims,
occasional grievance hearings before labor regulatory agencies and miscellaneous
third party tort actions. Currently, there are no material legal proceedings.
Item 4. Submission of Matters to a Vote of Security Holders.
Not applicable.
Executive Officers of the Registrant
Information concerning Executive Officers, set forth at Item 10 in Part
III hereof, is incorporated in Part I of this Report by reference.
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder
Matters.
Century's common stock is listed on the New York Stock Exchange and is
traded under the symbol CTL. The following table sets forth the high and low
sale prices, along with the quarterly dividends, for each of the quarters
indicated:
Sale prices
------------------ Dividend per
High Low common share
---- --- ------------
1994:
First quarter $ 27-7/8 21-7/8 .08
Second quarter $ 27-5/8 22-5/8 .08
Third quarter $ 30-1/2 25 .08
Fourth quarter $ 32-1/4 27-1/2 .08
1995:
First quarter $ 33-1/8 29 .0825
Second quarter $ 31-3/4 27-1/2 .0825
Third quarter $ 32-1/8 27 .0825
Fourth quarter $ 32-1/8 27-1/2 .0825
Common stock dividends during 1994 and 1995 were paid each quarter. As of
February 29, 1996, there were approximately 6,900 stockholders of record of
Century's common stock.
Item 6. Selected Financial Data.
The following table presents certain selected consolidated financial data
as of and for each of the years ended in the five-year period ended December 31,
1995:
Selected Income Statement Data
<TABLE>
<CAPTION>
Year ended December 31,
----------------------------------------------------------
1995 1994 1993 1992 1991
----------------------------------------------------------
(Dollars, except per share amounts, and shares expressed in thousands)
<S> <C> <C> <C> <C> <C>
Operating revenues
Telephone $ 419,242 391,265 350,330 298,812 236,408
Mobile Communications 197,494 150,802 84,712 62,092 46,731
Other 28,104 22,534 20,633 9,956 8,658
----------------------------------------------------------
Total operating revenues $ 644,840 564,601 455,675 370,860 291,797
==========================================================
Operating income (loss)
Telephone $ 143,527 137,992 114,902 103,672 80,039
Mobile Communications 57,009 31,443 9,906 5,956 (4,952)
Other 2,383 3,371 3,201 3,324 1,344
----------------------------------------------------------
Net operating income $ 202,919 172,806 128,009 112,952 76,431
==========================================================
Income before cumulative
effect of changes in
accounting principles $ 114,776 100,238 69,004 59,973 37,419
Cumulative effect of changes
in accounting principles - - - (15,668) -
----------------------------------------------------------
Net income $ 114,776 100,238 69,004 44,305 37,419
==========================================================
Fully diluted earnings per share
before cumulative effect of
changes in accounting
principles $ 1.95 1.80 1.32 1.22 .79
Cumulative effect of changes
in accounting principles - - - (.31) -
----------------------------------------------------------
Fully diluted earnings per share $ 1.95 1.80 1.32 .91 .79
==========================================================
Dividends per common share $ .33 .32 .31 .293 .287
==========================================================
Average fully diluted
shares outstanding 59,107 58,135 55,892 48,653 47,432
==========================================================
</TABLE>
Selected Balance Sheet Data
<TABLE>
<CAPTION>
December 31,
---------------------------------------------------------------
1995 1994 1993 1992 1991
---------------------------------------------------------------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
Net property, plant and
equipment $1,047,808 947,131 827,776 675,878 534,998
Excess cost of net assets
acquired, net $ 493,655 441,436 297,158 217,688 114,258
Total assets $1,862,421 1,643,253 1,319,390 1,040,487 764,539
Long-term debt $ 622,904 518,603 364,433 346,944 205,453
Stockholders' equity $ 888,424 650,236 513,768 385,449 319,977
</TABLE>
The following table presents certain selected consolidated operating data
as of the end of each of the years in the five-year period ended December 31,
1995:
Year ended December 31,
-------------------------------------------------
1995 1994 1993 1992 1991
-------------------------------------------------
Telephone access lines 480,757 454,963 434,691 397,300 314,819
Cellular units in service
in majority-owned
markets 290,075 211,710 116,484 73,084 51,083
See Items 1 and 2 in Part I and notes 1, 5 and 14 of Notes to Consolidated
Financial Statements set forth in Item 8 elsewhere herein for additional
information.
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
RESULTS OF OPERATIONS
OVERVIEW
The 1995 net income of Century Telephone Enterprises, Inc. and
subsidiaries (the "Company") increased to $114.8 million from $100.2 million
during 1994 and $69.0 million during 1993. Fully diluted earnings per share for
1995 increased to $1.95 from $1.80 during 1994 and $1.32 during 1993. The
average number of fully diluted shares outstanding increased 1.7% and 4.0% in
1995 and 1994, respectively, as a result of shares issued in connection with
acquisitions and the Company's dividend reinvestment, incentive and benefit
plans.
The Company is a regional diversified telecommunications company that is
primarily engaged in providing traditional telephone services and cellular
mobile telephone services. The Company's 1995 operating income was $202.9
million, an increase of $30.1 million (17.4%) over 1994 operating income of
$172.8 million. During 1995 the operating income of the Company's telephone
segment and its mobile communications segment increased $5.5 million (4.0%) and
$25.6 million (81.3%), respectively, compared to 1994. The Company's operating
income during 1993 was $128.0 million.
<TABLE>
<CAPTION>
Year ended December 31, 1995 1994 1993
- -----------------------------------------------------------------------------------------
(Dollars in thousands,
except per share amounts)
<S> <C> <C> <C>
Operating income
Telephone $ 143,527 137,992 114,902
Mobile Communications 57,009 31,443 9,906
Other 2,383 3,371 3,201
- ------------------------------------------------------------------------------------------
202,919 172,806 128,009
Interest expense (43,615) (42,577) (30,149)
Income from unconsolidated cellular entities 20,084 15,698 6,626
Gain on sales of assets 6,782 15,877 1,661
Minority interest (8,084) (3,377) (516)
Other income and expense 4,982 3,111 625
Income tax expense (68,292) (61,300) (37,252)
- ------------------------------------------------------------------------------------------
Net income $ 114,776 100,238 69,004
==========================================================================================
Fully diluted earnings per share $ 1.95 1.80 1.32
==========================================================================================
</TABLE>
The operating income of the telephone segment includes the results of
operations of Century Telephone of San Marcos, Inc. ("San Marcos") subsequent to
its acquisition in April 1993. See Note 14 of Notes to Consolidated Financial
Statements for additional information.
The Company's mobile communications operations reflect the operations of the
cellular entities in which the Company has a majority interest. For additional
information concerning (i) the minority interest owners' share of the income of
such entities and (ii) the Company's share of earnings from cellular entities in
which it has less than a majority interest (which is not included in the mobile
communications segment), see Mobile Communications Operations. The operating
income of the mobile communications segment includes the results of operations
of Celutel, Inc. ("Celutel") subsequent to its acquisition in February 1994, and
the Company's paging operations prior to their sale in October 1994. See Notes
11 and 14 of Notes to Consolidated Financial Statements for additional
information.
In addition to the San Marcos and Celutel acquisitions, during the three
years ended December 31, 1995 the Company has consummated the acquisitions of
various, smaller, telephone and cellular operations.
Based on its review of publicly available data, the Company believes that it
has the second highest ratio of owned cellular pops (the population of licensed
cellular telephone markets multiplied by the Company's proportionate equity
interests in the licensed operators thereof) to telephone access lines among the
20 largest telephone companies (based on access lines) in the United States.
Accordingly, the Company anticipates that its mobile communications operations
will continue to increasingly influence the Company's overall operations as the
cellular industry continues to grow. Contributions to operating revenues and
operating income by the Company's telephone, mobile communications, and other
operations for each of the years in the three-year period ended December 31,
1995 were as follows:
1995 1994 1993
- ---------------------------------------------------------------------------
Operating revenues
Telephone operations 65.0% 69.3 76.9
Mobile Communications operations 30.6% 26.7 18.6
Other operations 4.4% 4.0 4.5
Operating income
Telephone operations 70.7% 79.9 89.8
Mobile Communications operations 28.1% 18.2 7.7
Other operations 1.2% 1.9 2.5
- ---------------------------------------------------------------------------
TELEPHONE OPERATIONS
Year ended December 31, 1995 1994 1993
- --------------------------------------------------------------------------
(Dollars in thousands)
Operating revenues
Local service $111,629 100,020 88,704
Network access and long distance 258,462 243,759 217,055
Other 49,151 47,486 44,571
- --------------------------------------------------------------------------
419,242 391,265 350,330
- --------------------------------------------------------------------------
Operating expenses
Plant operations 86,789 84,117 80,578
Customer operations 38,768 35,746 32,225
Corporate and other 63,834 60,235 57,450
Depreciation and amortization 86,324 73,175 65,175
- --------------------------------------------------------------------------
275,715 253,273 235,428
- --------------------------------------------------------------------------
Operating income $143,527 137,992 114,902
==========================================================================
The Company's telephone operations are conducted in rural, suburban and
small urban communities in 14 states. Approximately 80% of the Company's
telephone access lines are in Wisconsin, Louisiana, Michigan, Ohio and Arkansas.
Local Service Revenues
Local service revenues are derived from the provision of local exchange
telephone services in the Company's franchised service areas. The $11.6 million
increase in such revenues in 1995 included $4.5 million due to the increase in
the number of customer access lines, $3.0 million from increased rates for basic
services and $2.0 million due to acquisitions. Acquisitions contributed $1.2
million to the 1994 increase of $11.3 million; $4.5 million of the 1994 increase
was due to the increase in access lines; and $3.8 million was due to increased
rates for basic services. The remaining increases in 1995 and 1994 were
primarily due to the provision of custom calling features. Internal access line
growth during 1995, 1994 and 1993 was 4.4%, 4.1% and 3.6%, respectively.
Network Access and Long Distance Revenues
Network access and long distance revenues primarily relate to services
provided to interexchange carriers (long distance carriers) in connection with
the completion of long distance telephone calls. Most of the Company's
interstate network access revenues are received through pooling arrangements
administered by the National Exchange Carrier Association ("NECA") based on cost
separation studies. The NECA receives access charges billed by the Company and
other participating local exchange carriers ("LECs") to interstate long distance
carriers and other LEC customers for their use of the local exchange network to
complete long distance calls. These charges to the long distance carriers and
other LEC customers are based on tariffed access rates filed with the Federal
Communications Commission ("FCC") by the NECA on behalf of the Company and other
participating LECs. Long distance and intrastate network access revenues are
based on access rates, cost separation studies or special settlement
arrangements with intrastate long distance carriers.
Network access and long distance revenues increased $14.7 million (6.0%) in
1995 and $26.7 million (12.3%) in 1994 due to the following factors:
<TABLE>
<CAPTION>
1995 1994
Increase Increase
(decrease) (decrease)
- ----------------------------------------------------------------------------------------
(Dollars in thousands)
<S> <C> <C>
Acquisitions $ 4,821 5,734
Partial recovery of increased operating expenses through
revenue pools in which the Company participates
with other telephone companies and return on rate base 3,039 8,834
Increased recovery from the FCC mandated Universal
Service Fund ("USF") 4,394 8,815
Increased minutes of use 1,440 2,409
Revision of prior year revenue settlement agreements (500) 2,537
Other, net 1,509 (1,625)
- ---------------------------------------------------------------------------------------
$14,703 26,704
=======================================================================================
</TABLE>
The change in other, net in 1995 and 1994 included reductions of $1.7
million and $1.9 million, respectively, in intrastate high-cost assistance
revenues as a result of the phase-out of the Wisconsin state support fund; the
loss of such revenues was offset by an increase in local rates in the same
jurisdictions. Included in other, net in 1995 was approximately $2.5 million of
revenue associated with a change in the method used to calculate factors applied
in the network access revenue billing process. Included in other, net in 1994
was a reduction of $2.3 million in certain settlements received from a large
local exchange operating company by the Company's Louisiana subsidiaries.
Other Revenues
Other revenues include revenues related to (i) leasing, selling,
installing, maintaining and repairing customer premise telecommunications
equipment and wiring ("CPE services"), (ii) providing billing and collection
services for interexchange carriers, (iii) leasing network facilities and (iv)
participating in the publication of local directories. Revenues from CPE
services and acquisitions contributed $1.9 million and $606,000, respectively,
to the increase in other revenues in 1995. Such increases were partially offset
by a decrease in billing and collection revenues of $896,000. Billing and
collection revenues are expected to continue to decrease in 1996. The increase
in other revenues during 1994 was primarily due to a $1.2 million increase in
directory advertising revenues and a $1.1 million increase in billing and
collection revenues.
Operating Expenses
Plant operations expenses during 1995 and 1994 increased $2.7 million (3.2%)
and $3.5 million (4.4%), respectively. Operating expenses attributable to
acquisitions contributed $1.8 million to the 1995 increase and $2.3 million to
the 1994 increase. The remainder of the 1995 increase was due to an increase in
general operating expenses. A $1.2 million increase in salaries, wages and
benefits during 1994 was partially offset by a $531,000 reduction in
postemployment benefit expense.
Expenses attributable to acquisitions contributed $2.7 million and $2.1
million, respectively, to the 1995 increase of $6.6 million (6.9%) and the 1994
increase of $6.3 million (7.0%) in customer operations, corporate, and other
expenses. Ad valorem taxes increased $1.2 million in 1995 and $1.0 million in
1994 due to the increases in plant in service. During 1995 marketing expenses
increased $2.1 million. The remainder of the 1994 increase resulted from
increases in other general operating expenses.
Depreciation and amortization increased $13.1 million (18.0%) and $8.0
million (12.3%) in 1995 and 1994, respectively. Approximately $1.0 million and
$2.4 million of the increases in 1995 and 1994, respectively, were due to
acquisitions. Depreciation expense included nonrecurring additional depreciation
charges approved by regulators in certain jurisdictions which aggregated $6.5
million in 1995 and $3.3 million in 1993. In addition, the Company obtained
higher recurring depreciation rates for certain subsidiaries during 1994 and
1993. The first-year effects of the higher rates were approximately $5.6 million
in 1994 and $1.7 million in 1993. The remaining increases in depreciation and
amortization were due to higher levels of plant in service. The composite
depreciation rate for regulated telephone properties, including the additional
depreciation charges, was 7.5% for 1995 and 7.1% for 1994 and 1993.
Other
For additional information regarding certain matters that have impacted or
may impact the Company's telephone operations, see Regulation and Competition.
MOBILE COMMUNICATIONS OPERATIONS
<TABLE>
<CAPTION>
Year ended December 31, 1995 1994 1993
- ------------------------------------------------------------------------------------------
(Dollars in thousands)
<S> <C> <C> <C>
Operating revenues
Cellular service $ 191,953 141,325 76,583
Equipment and other 5,541 9,477 8,129
- ------------------------------------------------------------------------------------------
197,494 150,802 84,712
- ------------------------------------------------------------------------------------------
Operating expenses
Cost of sales 10,235 8,978 4,273
Other operating expenses 25,902 22,881 15,408
General, administrative and customer service 39,471 33,171 23,872
Sales and marketing 39,450 33,074 19,894
Depreciation and amortization 25,427 21,255 11,359
- ------------------------------------------------------------------------------------------
140,485 119,359 74,806
- ------------------------------------------------------------------------------------------
Operating income $ 57,009 31,443 9,906
==========================================================================================
</TABLE>
The Company's 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
$8.1 million, $3.4 million and $516,000 in 1995, 1994 and 1993, respectively,
and is reflected as an expense in "Minority interest." The Company's cellular
customers are located primarily in Louisiana, Michigan, Mississippi and Texas.
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 increased to $20.1 million in 1995 from $15.7
million in 1994 and $6.6 million in 1993.
Operating Revenues
Cellular service revenues include monthly service fees for providing access
and airtime to customers, service fees for providing airtime to users roaming
through the Company's service areas and toll revenue. Cellular service revenues
during 1995 increased to $192.0 million from $141.3 million in 1994 and $76.6
million in 1993.
The 1995 and 1994 increases in cellular service revenues were primarily
attributable to the significant increases in cellular customers resulting
principally from increased demand, acquisitions and expanded areas of service.
Cellular units in service in the Company's majority-owned markets increased to
290,075 as of December 31, 1995 from 211,710 as of December 31, 1994 and 116,484
as of December 31, 1993. Included in the 1995 and 1994 increases were 8,931 and
31,155, respectively, of units added through acquisitions. Exclusive of
acquisitions, access and usage revenues increased $30.8 million (30.3%) in 1995
and $27.2 million (48.3%) in 1994 and roaming and toll revenues increased $12.9
million (36.0%) and $9.8 million (54.9%) in 1995 and 1994, respectively.
Cellular entities acquired in 1995 contributed $4.0 million to cellular service
revenues. The Celutel operations increased revenues by $26.3 million in 1994.
The average monthly cellular service revenue per customer declined to $66 in
1995 from $69 in 1994 and $71 in 1993. 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 will continue 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 included $2.9 million and $4.2 million in 1994
and 1993, respectively, of revenues attributable to the Company's paging
operations, which were sold in October 1994. The remainder of equipment and
other revenues consisted primarily of cellular equipment sales. Revenues from
the sale of cellular phones decreased $1.0 million in 1995 compared to 1994.
Although the Company sold more phones in 1995 than in 1994, revenues decreased
because the Company has increasingly sold phones below cost, a strategy which is
common in the cellular industry.
Operating Expenses
The increases in cost of sales during 1995 and 1994 resulted from increases
in the number of cellular phones sold.
Other operating expenses increased $3.0 million (13.2%) in 1995 primarily
due to a $1.5 million increase in costs paid to other carriers related to the
Company's customers who roam in 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 a $1.5
million increase in expenses incurred in interconnecting new cell sites. Such
increases were partially offset by a $1.0 million decrease in operating expenses
due to the sale of the Company's paging operations in 1994. The $7.5 million
increase in 1994 in other operating expenses included $5.8 million of expenses
of Celutel subsequent to its acquisition in February 1994. The remaining
increase in other operating expenses in 1994 was primarily due to
interconnecting and operating new cell sites which were built to improve service
in several existing markets and to initiate and develop service in several rural
markets. The Company operated 277 cell sites at December 31, 1995 in entities in
which it had a majority interest, compared to 230 at December 31, 1994 and 158
at December 31, 1993. In 1995 and 1994, 24 cell sites and 29 cell sites,
respectively, were added through acquisitions.
Most of the $6.3 million (19.0%) increase in general, administrative and
customer service expenses in 1995 was related to increased expenses resulting
from a larger customer base, such as billing costs ($1.4 million), general
office expenses ($1.1 million), uncollectible accounts ($1.2 million) and
customer service ($620,000). General, administrative and customer service
expenses increased $9.3 million (39.0%) in 1994, $7.4 million of which was due
to the Celutel operations. The remaining increase in 1994 was primarily related
to the increased number of customers.
During 1995 and 1994, sales and marketing expenses increased $6.4 million
(19.3%) and $13.2 million (66.3%), respectively, of which $3.8 million in 1995
and $8.2 million in 1994 were due to increases in commissions paid to agents for
selling cellular services to new customers. The 1995 increase also included a
$1.3 million increase in the costs of sales promotions and a $509,000 increase
in advertising. Costs of operating the Company's retail stores, the first of
which was opened in late 1994, increased $601,000 in 1995. The remaining
increase in 1994 was due to the Celutel operations.
Depreciation and amortization increased $4.2 million (19.6%) in 1995 and
$9.9 million (87.1%) in 1994 due to increases of $3.7 million and $4.9 million,
respectively, applicable to higher levels of cellular plant in service.
Approximately $3.8 million of the 1994 increase was due to amortization of
goodwill attributable to the acquisition of Celutel.
Other
For additional information regarding certain matters that have impacted or
may impact the Company's mobile communications operations, see Regulation and
Competition.
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. The $988,000
decrease in operating income in 1995 was substantially due to the loss incurred
by the Company's competitive access subsidiary in 1995 ($3.6 million) being $1.8
million more than in 1994. The Company expects such loss to be between $6.0
million and $8.0 million in 1996.
INTEREST EXPENSE
Interest expense increased $1.0 million (2.4%) in 1995 and $12.4 million
(41.2%) in 1994. The effect of higher average interest rates increased interest
expense $4.0 million in 1995. Such increase was substantially offset by a
decrease in interest expense due to a decrease in average debt outstanding. In
February 1995 the Company's $115.0 million of 6% convertible debentures were
converted into common stock. In November 1995 the Company issued $150.0 million
of senior notes under its $400.0 million shelf registration statement filed with
the United States Securities and Exchange Commission (the "SEC") in 1994. For
additional information, see Liquidity and Capital Resources - Financing
Activities and Note 5 of Notes to Consolidated Financial Statements. The
increase during 1994 was primarily the result of a 34% increase in average debt
outstanding, a substantial amount of which was incurred in connection with the
acquisition of Celutel.
INCOME FROM UNCONSOLIDATED CELLULAR ENTITIES
Earnings from unconsolidated cellular entities, net of the amortization of
associated goodwill, increased $4.4 million (27.9%) during 1995 and $9.1 million
(136.9%) during 1994. The 1995 increase was net of an $800,000 reduction in such
earnings which resulted from a retroactive adjustment related to prior years
recorded by the operator of a cellular partnership in which the Company owns
less than a majority interest. An increase of $2.9 million in the Company's
share of income from the partnership interests acquired in the San Marcos
acquisition in April 1993 contributed to the 1994 increase. The remainders of
the 1995 and 1994 increases were due to the improvement in profitability of
cellular entities in which the Company owns less than a majority interest.
GAIN ON SALES OF ASSETS
During 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). Sales of other assets
during 1995 resulted in a pre-tax gain of $873,000 ($567,000 after-tax; $.01 per
fully diluted share).
The Company sold the assets comprising a cellular system in a Rural Service
Area ("RSA") in Minnesota in 1994 and recognized a pre-tax gain of $14.7 million
($8.5 million after-tax; $.15 per fully diluted share). In addition, the Company
sold its paging operations in 1994 which resulted in a pre-tax gain of $1.2
million ($756,000 after-tax; $.01 per fully diluted share).
MINORITY INTEREST
The increased profitability during 1995 and 1994 of the Company's
majority-owned and operated cellular entities resulted in a corresponding
increase of $4.7 million and $2.9 million, respectively, 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 during 1995 was $5.0 million compared to $3.1
million during 1994 and $625,000 in 1993. During 1995 and 1994 interest income
increased $1.0 million and $1.5 million, respectively, due to interest income
earned on a $25.0 million note receivable issued to Century in May 1994. For
additional information, see Liquidity and Capital Resources - Investing
Activities.
INCOME TAX EXPENSE
The effective income tax rate was 37.3%, 37.9% and 35.1% in 1995, 1994 and
1993, respectively. The increase in the effective rate in 1994 was primarily the
result of (i) amortization of investment tax credits and the regulatory
liability relating to income taxes remaining relatively stable while income
before taxes increased and (ii) the effect of an increase in the amortization of
goodwill which is not tax deductible.
ACCOUNTING PRONOUNCEMENTS
The Company adopted Statement of Financial Accounting Standards No. 112
("SFAS 112"), "Employers' Accounting for Postemployment Benefits," in the first
quarter of 1994. No cumulative effect of change in accounting principle was
required to be recorded upon adoption of SFAS 112.
The Company will adopt 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," in 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 adoption of SFAS 121 by the
Company is not expected to materially affect the Company's consolidated
financial position or results of operations.
The Company will also adopt Statement of Financial Accounting Standards No.
123 ("SFAS 123"), "Accounting for Stock-Based Compensation," in 1996. SFAS 123
establishes financial accounting and reporting standards for stock-based
employee compensation plans. The Company currently plans, as allowed by SFAS
123, 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.
INFLATION
The effects of increased costs historically have been mitigated by the
ability to recover certain costs applicable to the Company's regulated telephone
operations through the rate-making process. As operating expenses in the
nonregulated areas increase as a result of inflation, the Company, to the extent
permitted by competition, recovers the costs by increasing prices for its
services and equipment.
While the regulatory process does not consider replacement cost of physical
plant, the Company has historically been able to earn a return on the increased
cost of its net investment when facilities have been replaced. Possible future
regulatory changes may alter the Company's ability to recover increased costs in
its regulated operations. For additional information regarding the current
regulatory environment, see Regulation and Competition.
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 the Company's mobile communications operations
has increased each year since that segment became cash-flow positive.
Operating Activities
Net cash provided by operating activities was $215.7 million, $199.8 million
and $166.8 million in 1995, 1994 and 1993, respectively. 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
those years. For additional information relating to the telephone operations,
mobile communications operations, and other operations of the Company, see
Results of Operations.
Investing Activities
Net cash used in investing activities was $227.8 million, $280.3 million and
$248.7 million during 1995, 1994 and 1993, respectively. Capital expenditures
for 1995 were $136.0 million for telephone operations, $42.0 million for mobile
communications operations and $18.6 million for corporate and other operations.
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 FCC's
auction, which began in December 1995, of Basic Trading Area Personal
Communications Services ("PCS") licenses.
Cash used in connection with the February 1994 acquisition of Celutel was
$56.0 million. In connection with the corporate restructuring of an unaffiliated
local exchange telephone company which has been viewed from time to time as an
acquisition candidate, Century loaned the telephone company's holding company
$25.0 million in May 1994. Payments for property, plant and equipment during
1994 and 1993 were $200.8 million and $204.2 million, respectively.
Financing Activities
Net cash provided by financing activities was $13.5 million in 1995. In
November 1995 the Company issued $150.0 million of senior notes under its $400.0
million shelf registration statement (see next paragraph and Note 5 of Notes to
Consolidated Financial Statements) to take advantage of attractive long-term
interest rates. The net proceeds were used to reduce the Company's borrowings
under its credit facilities.
Net cash provided by financing activities during 1994 and 1993 was $77.8
million and $81.9 million, respectively. During 1994 the Company filed a shelf
registration statement with the SEC registering $400.0 million of senior
unsecured debt securities under which the Company issued $150.0 million of
senior notes in May 1994. See Note 5 of Notes to Consolidated Financial
Statements. The proceeds were used to discharge the Company's indebtedness under
a $90.0 million bridge loan incurred to fund substantially all of the Company's
cash requirements in connection with the acquisition of Celutel in February 1994
and to reduce the Company's short-term bank indebtedness under various
floating-rate credit facilities. In connection with the offering, in the second
quarter of 1994 Moody's upgraded Century's senior unsecured debt rating to Baa1
and Standard & Poor's affirmed its BBB+ rating.
The $158.0 million of notes payable at December 31, 1994 reflected the
Company's continued utilization of borrowings under its credit facilities to
take advantage of favorable short-term interest rates.
Other
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. The Company anticipates that capital
expenditures in its telephone operations will continue to include the
installation of fiber optic cable and the upgrading of its plant and equipment,
including its digital switches, to provide enhanced services. Mobile
communications capital expenditures are expected to continue to focus on
constructing additional cell sites (which will provide expanded areas where
hand-held cellular phones may be used), to enhance the Company's ability to
provide digital service in the future and to begin providing digital service in
certain markets. Budgeted capital expenditures for other operations for 1996
include $19 million of capital construction costs planned to be expended in the
Company's competitive access operations.
The Company will continue its long-term strategy of pursuing the acquisition
of attractive communications properties in exchange for cash, securities or
both, and may require additional financing in connection therewith.
Approximately 615,000 shares of Century common stock and 125,000 shares of
Century preferred stock remain available for future issuance in connection with
acquisitions under an acquisition shelf registration statement.
As of December 31, 1995, 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 $108.6 million of undrawn committed bank
lines of credit. In addition, approximately $140.0 million of uncommitted credit
facilities were available to Century at December 31, 1995. The Company also has
access to debt and equity capital markets, including its shelf registration
statements mentioned above. The Company has experienced no significant problems
in obtaining funds for capital expenditures or other purposes.
Common stockholders' equity as a percentage of total capitalization was
57.6% and 48.4% at December 31, 1995 and 1994, respectively. If the 6%
convertible debentures which were converted into common stock in 1995 had been
converted into common stock at December 31, 1994, common stockholders' equity as
a percentage of total capitalization would have been 57.0%.
REGULATION AND COMPETITION
Most of the Company's telephone operations are regulated extensively by
various state regulatory agencies and by the FCC. Primarily as a result of
legislative, regulatory and technological changes, competition has been
introduced and encouraged in the telephone industry and regulation has
decreased; it is anticipated that these trends will continue. While competition
is not new to the Company's cellular operations, competition from other
providers of mobile communications services is also expected to increase.
Events Affecting the Telecommunications Industry
The telecommunications industry continues to undergo various fundamental
regulatory, competitive and technological changes that make it impossible to
determine the form or degree of future regulation and competition affecting the
Company's telephone and mobile communications operations. The FCC and a number
of state regulatory commissions have begun to reduce the regulatory oversight of
LECs. Coincident with this movement toward reduced regulation has been the
introduction and encouragement of local exchange competition by, among others,
the FCC, various state legislative and regulatory bodies and, most recently, the
United States Congress (see next paragraph). These changes have led to the
organization or continued growth of various companies providing competitive
access and other services that compete with LECs' services. Wireless telephone
services are also expected to increasingly compete with LECs.
In February 1996 the United States Congress enacted the Telecommunications
Act of 1996 (the "1996 Act"), which obligates LECs to permit competitors to
interconnect their facilities to the LEC's network and to take various other
steps that are designed to lower barriers of entry to competitors. These include
obligating incumbent LECs to (i) negotiate interconnection agreements in good
faith, (ii) provide "unbundled" access to all aspects of the LEC's network,
(iii) offer resale of its telecommunications services at wholesale rates and
(iv) permit competitors to collocate its physical plant on the LEC's property,
or provide virtual collocation if physical collocation is not practicable. Under
the 1996 Act's rural telephone company exemption, all of the Company's telephone
subsidiaries will be exempt from the foregoing itemized obligations of incumbent
LECs until such time as the state regulatory commission with jurisdiction over
any such company receives notice of a bona fide request for interconnection,
services or network elements and such commission determines that the request is
technically feasible, not unduly economically burdensome and is consistent with
the universal service provisions contained in the 1996 Act. The 1996 Act
provides that a federal-state joint board will review existing universal service
support mechanisms and recommend changes to the FCC regulations in order that
such regulations will be consistent with the universal service principles in the
1996 Act. In addition, the 1996 Act provides that all telecommunications
carriers providing interstate services shall contribute to universal service
support mechanisms. Management believes that the 1996 Act will ultimately
increase competition in its franchised telephone service areas, although the
form and degree of competition cannot be ascertained until such time as the FCC
(and, in certain instances, state regulatory commissions) adopts implementing
regulations.
The FCC has allocated additional frequency spectrum for mobile
communications technologies that are expected to be competitive with cellular,
including PCS (for which the FCC began to auction operating licenses in late
1994) and mobile satellite services. The FCC has also authorized certain
specialized mobile radio service licensees to configure their systems so as to
operate in a manner similar to cellular systems. In addition, in connection with
the well-publicized convergence of telecommunications, cable, video, computer
and other technologies, several large companies have announced plans to offer
products that would significantly enhance current communications and data
transmission services and, in some instances, introduce new two-way video,
entertainment, data, consumer and other multimedia services.
Competition to provide local exchange and access services is expected to
initially affect large urban areas to a greater extent than rural, suburban and
small urban areas such as those in which the Company's telephone operations are
located. The same expectation applies to emerging competitive wireless
technologies and the development of new multimedia services. The Company does
not believe such competition is likely to materially affect it in the near term.
The Company further believes that it may benefit from having the opportunity to
observe the effects of these developments in large urban markets. The Company
will continue to monitor the ongoing changes in regulation, competition and
technology and consider which developments provide the most favorable
opportunities for the Company to pursue.
Recent Events Affecting the Company
Revenues from the USF increased approximately $5.4 million to $41.7 million
during 1995 after increasing $9.7 million during 1994. The 1996 Act provides
that a federal-state joint board will review existing universal service support
mechanisms and recommend changes to the appropriate FCC regulations; for
additional information, see Events Affecting the Telecommunications Industry.
Earlier in 1995, the FCC sought public comments on proposals and policy changes
relating to certain federal high-cost assistance mechanisms that provide
substantial revenues to the Company, including the USF. Although the Company
anticipates that it may experience a reduction in its federal support revenues
at some point in the future, management believes it is premature to assess or
estimate the ultimate impact thereof. There can be no assurance, however, that
such impact will not be material.
In February 1996 the FCC sought public comments on whether it should
initiate a rate of return represcription proceeding for LECs that are subject to
rate of return regulation for interstate access revenues.
During the last two years, Wisconsin, Louisiana, Ohio, Michigan and certain
other states in which the Company operates took legislative and/or regulatory
steps to further introduce competition into the LEC business. A cable company
has requested authorization to provide local exchange service in a portion of
the Company's franchised service area in Ohio, and it is anticipated that
similar action may be taken by others in the future in the Company's franchised
service areas.
During 1995, the Louisiana Public Service Commission ("LPSC") culminated its
two-year investigation into the earnings of independent telephone companies in
Louisiana by adopting a new regulatory plan for such companies effective July 1,
1995. The plan provides that independent telephone companies in Louisiana will
be regulated on an incentive-type rate of return basis in a manner yet to be
determined.
Under this plan, the Company is required to reduce its intrastate switched
access rates over a two-year period to match the rates in effect for BellSouth.
The Company's access revenues were reduced approximately $500,000 in 1995 as a
result of this regulation and the Company anticipates that this directive will
reduce its access revenues by up to $4.2 million annually upon completion of the
two year phase-in.
The plan also establishes a target rate of return of between 10.75% and
12.75% after giving effect to the access rate reductions described above.
Beginning July 1, 1996, companies earning in excess of 12.75% will be required
to lower their prospective rate of return to 12.25%, either by further reducing
access rates (subject to certain limits) or taking such other actions as may be
directed by the LPSC. Although the impact of this directive on the Company
cannot be readily determined until the LPSC provides additional guidance on the
operation and methodology of the plan, the Company anticipates that the impact
of these changes will adversely affect its results of operations and there is no
assurance that the effect will not be material. During 1995 certain of the
Company's Louisiana telephone subsidiaries, with the LPSC's approval, recorded
an aggregate of $6.5 million of nonrecurring additional depreciation charges.
The Company anticipates that certain of its Louisiana telephone subsidiaries may
continue to take action to reduce earnings levels as a result of this plan.
Certain long distance carriers continue to request that the Company reduce
intrastate access tariffed rates for certain of its telephone subsidiaries.
There is no assurance that these requests will not result in reduced intrastate
access revenues in the future.
Certain revenues determined under the FCC's cost separation rules are
affected by the number of access lines served by a specific telephone company.
During 1995 the customer base of one of the Company's telephone subsidiaries in
Michigan increased above 50,000 access lines, which resulted in a decrease in
revenues of approximately $700,000. An additional decrease in revenues of that
subsidiary of approximately $500,000 is expected in 1996. In addition, in early
1996 another of the Company's telephone subsidiaries reached 50,000 access lines
and it is anticipated that revenues for that subsidiary will decrease
approximately $1.5 million in 1996 as a result thereof.
Other Matters
The Company's regulated telephone operations are subject to the provisions
of Statement of Financial Accounting Standards No. 71 ("SFAS 71"), "Accounting
for the Effects of Certain Types of Regulation," under which the Company is
required to account for the economic effects of the rate-making process,
including the recognition of depreciation of plant and equipment over lives
approved by regulators. The ongoing applicability of SFAS 71 to the Company's
regulated telephone operations is being monitored due to the changing
regulatory, competitive and legislative environments. When the regulated
operations of the Company no longer qualify for the application of SFAS 71, the
required accounting impact, the amount of which has not been determined, will
result in a material, extraordinary, noncash charge against earnings. See Note
12 of Notes to Consolidated Financial Statements for additional information.
The Company has certain obligations based on federal, state and local laws
relating to the protection of the environment. Costs of compliance through 1995
have not been material and the Company currently has no reason to believe that
such costs will become material.
Item 8. Financial Statements and Supplementary Data
Report of Management
--------------------
The Shareholders
Century Telephone Enterprises, Inc.:
Management has prepared and is responsible for the Company's consolidated
financial statements. The consolidated financial statements have been prepared
in accordance with generally accepted accounting principles and necessarily
include amounts determined using our best judgments and estimates with
consideration given to materiality.
The Company maintains internal control systems and related policies and
procedures designed to provide reasonable assurance that the accounting records
accurately reflect business transactions and that the transactions are in
accordance with management's authorization. The design, monitoring and revision
of the systems of internal control involve, among other things, our judgment
with respect to the relative cost and expected benefits of specific control
measures. Additionally, the Company maintains an internal auditing function
which independently evaluates the effectiveness of internal controls, policies
and procedures and formally reports on the adequacy and effectiveness thereof.
The Company's consolidated financial statements have been audited by KPMG
Peat Marwick LLP, independent certified public accountants, who have expressed
their opinion with respect to the fairness of the consolidated financial
statements. Their audit was conducted in accordance with generally accepted
auditing standards, which includes the consideration of the Company's internal
controls to the extent necessary to form an independent opinion on the
consolidated financial statements prepared by management.
The Audit Committee of the Board of Directors is composed of directors who
are not officers or employees of the Company. The Committee meets periodically
with the independent certified public accountants, internal auditors and
management. The Committee considers the audit scope and discusses internal
control, financial and reporting matters. Both the independent and internal
auditors have free access to the Committee.
/s/ R. Stewart Ewing, Jr.
R. Stewart Ewing, Jr.
Senior Vice President and Chief Financial Officer
Independent Auditors' Report
----------------------------
The Board of Directors
Century Telephone Enterprises, Inc.:
We have audited the consolidated financial statements of Century Telephone
Enterprises, Inc. and subsidiaries as listed in Item 14a(i). In connection with
our audits of the consolidated financial statements, we also have audited the
financial statement schedules as listed in Item 14a(ii). These consolidated
financial statements and financial statement schedules are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
consolidated financial statements and financial statement schedules based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Century
Telephone Enterprises, Inc. and subsidiaries as of December 31, 1995 and 1994,
and the results of their operations and their cash flows for each of the years
in the three-year period ended December 31, 1995, in conformity with generally
accepted accounting principles. Also in our opinion, the related financial
statement schedules, when considered in relation to the basic consolidated
financial statements taken as a whole, present fairly, in all material
respects, the information set forth therein.
/s/ KPMG Peat Marwick LLP
KPMG PEAT MARWICK LLP
Shreveport, Louisiana
January 29, 1996
CENTURY TELEPHONE ENTERPRISES, INC.
Consolidated Statements of Income
<TABLE>
<CAPTION>
Year ended December 31,
- -----------------------------------------------------------------------------------------
1995 1994 1993
- -----------------------------------------------------------------------------------------
(Dollars in thousands,
except per share amounts)
<S> <C> <C> <C>
OPERATING REVENUES
Telephone $419,242 391,265 350,330
Mobile Communications 197,494 150,802 84,712
Other 28,104 22,534 20,633
- ------------------------------------------------------------------------------------------
Total operating revenues 644,840 564,601 455,675
- ------------------------------------------------------------------------------------------
OPERATING EXPENSES
Cost of sales and operating expenses 328,151 296,082 250,092
Depreciation and amortization 113,770 95,713 77,574
- ------------------------------------------------------------------------------------------
Total operating expenses 441,921 391,795 327,666
- ------------------------------------------------------------------------------------------
OPERATING INCOME 202,919 172,806 128,009
- ------------------------------------------------------------------------------------------
OTHER INCOME (EXPENSE)
Interest expense (43,615) (42,577) (30,149)
Income from unconsolidated cellular entities 20,084 15,698 6,626
Gain on sales of assets 6,782 15,877 1,661
Minority interest (8,084) (3,377) (516)
Other income and expense 4,982 3,111 625
- ------------------------------------------------------------------------------------------
Total other income (expense) (19,851) (11,268) (21,753)
- ------------------------------------------------------------------------------------------
INCOME BEFORE INCOME TAXES 183,068 161,538 106,256
Income tax expense 68,292 61,300 37,252
- ------------------------------------------------------------------------------------------
NET INCOME $114,776 100,238 69,004
==========================================================================================
PRIMARY EARNINGS PER SHARE $ 1.97 1.88 1.35
==========================================================================================
FULLY DILUTED EARNINGS PER SHARE $ 1.95 1.80 1.32
==========================================================================================
DIVIDENDS PER COMMON SHARE $ .33 .32 .31
==========================================================================================
See accompanying notes to consolidated financial statements.
</TABLE>
CENTURY TELEPHONE ENTERPRISES, INC.
Consolidated Balance Sheets
<TABLE>
<CAPTION>
December 31,
- -----------------------------------------------------------------------------------------
1995 1994
- -----------------------------------------------------------------------------------------
(Dollars in thousands)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 8,540 7,154
Accounts receivable
Customers, less allowance of $2,768 and $2,360 50,943 40,824
Other 24,219 23,180
Materials and supplies, at average cost 6,608 7,090
Other 5,019 2,980
- -----------------------------------------------------------------------------------------
Total current assets 95,329 81,228
- -----------------------------------------------------------------------------------------
NET PROPERTY, PLANT AND EQUIPMENT 1,047,808 947,131
- -----------------------------------------------------------------------------------------
INVESTMENTS AND OTHER ASSETS
Excess cost of net assets acquired, less accumulated
amortization of $52,944 and $40,756 493,655 441,436
Other 225,629 173,458
- -----------------------------------------------------------------------------------------
Total investments and other assets 719,284 614,894
- -----------------------------------------------------------------------------------------
TOTAL ASSETS $ 1,862,421 1,643,253
=========================================================================================
LIABILITIES AND EQUITY
CURRENT LIABILITIES
Current maturities of long-term debt $ 15,325 12,718
Notes payable 14,199 158,000
Accounts payable 55,329 52,331
Accrued expenses and other current liabilities
Salaries and benefits 18,178 17,884
Taxes 12,489 16,530
Interest 6,024 8,243
Other 5,337 9,237
Advance billings and customer deposits 13,043 11,725
- -----------------------------------------------------------------------------------------
Total current liabilities 139,924 286,668
- -----------------------------------------------------------------------------------------
LONG-TERM DEBT 622,904 518,603
- -----------------------------------------------------------------------------------------
DEFERRED CREDITS AND OTHER LIABILITIES 211,169 187,746
- -----------------------------------------------------------------------------------------
STOCKHOLDERS' EQUITY
Common stock, $1.00 par value, authorized 175,000,000
shares, issued and outstanding 59,113,670
and 53,574,361 shares 59,114 53,574
Paid-in capital 453,584 319,235
Retained earnings 387,424 291,999
Unearned ESOP shares (13,960) (16,840)
Preferred stock - non-redeemable 2,262 2,268
- -----------------------------------------------------------------------------------------
Total stockholders' equity 888,424 650,236
- -----------------------------------------------------------------------------------------
TOTAL LIABILITIES AND EQUITY $ 1,862,421 1,643,253
=========================================================================================
See accompanying notes to consolidated financial statements.
</TABLE>
CENTURY TELEPHONE ENTERPRISES, INC.
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
Year ended December 31,
- -----------------------------------------------------------------------------------------
1995 1994 1993
- -----------------------------------------------------------------------------------------
(Dollars in thousands)
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income $114,776 100,238 69,004
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 113,770 95,713 77,574
Income from unconsolidated cellular entities (20,084) (15,698) (6,626)
Minority interest 8,084 3,377 516
Deferred income taxes 9,563 7,423 6,781
Gain on sales of assets (6,782) (15,877) (1,661)
Changes in current assets and current liabilities:
Increase in accounts receivable (8,949) (1,581) (7,026)
Increase (decrease) in accounts payable 2,656 (2,383) 11,024
Increase (decrease) in other accrued taxes (4,134) 8,347 (1,476)
Changes in other current assets and other
current liabilities, net (4,413) 6,543 2,135
Increase in other noncurrent liabilities 5,754 4,092 8,020
Other, net 5,497 9,610 8,489
- -----------------------------------------------------------------------------------------
Net cash provided by operating activities 215,738 199,804 166,754
- -----------------------------------------------------------------------------------------
INVESTING ACTIVITIES
Payments for property, plant and equipment (196,592) (200,776) (204,229)
Acquisitions, net of cash acquired (22,130) (55,979) (37,116)
Investment in unconsolidated personal
communications services entity (20,000) - -
Note receivable 833 (25,000) -
Investments in unconsolidated cellular entities (8,013) (5,516) (3,605)
Distributions from unconsolidated cellular entities 4,957 5,969 1,587
Proceeds from sales of assets 19,953 10,475 -
Purchase of life insurance investment (6,418) (7,664) (7,670)
Other, net (396) (1,764) 2,361
- -----------------------------------------------------------------------------------------
Net cash used in investing activities (227,806) (280,255) (248,672)
- -----------------------------------------------------------------------------------------
FINANCING ACTIVITIES
Proceeds from issuance of long-term debt 203,987 155,427 35,847
Payments of long-term debt (18,377) (59,792) (32,564)
Notes payable to banks, net (158,000) (7,700) 88,285
Proceeds from issuance of common stock 6,522 4,814 3,529
Cash dividends (19,351) (17,184) (15,735)
Other, net (1,327) 2,263 2,562
- -----------------------------------------------------------------------------------------
Net cash provided by financing activities 13,454 77,828 81,924
- -----------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 1,386 (2,623) 6
CASH AND CASH EQUIVALENTS AT
BEGINNING OF YEAR 7,154 9,777 9,771
- -----------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 8,540 7,154 9,777
=========================================================================================
See accompanying notes to consolidated financial statements.
</TABLE>
CENTURY TELEPHONE ENTERPRISES, INC.
Consolidated Statements of Stockholders' Equity
<TABLE>
<CAPTION>
Preferred
Total Stock
Common Stock- Unearned Non-
Shares holders' Common Paid-in Retained ESOP redeem-
Outstanding Equity Stock Capital Earnings Shares able
- ------------------------------------------------------------------------------------------------------------------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
48,896,876 BALANCES, DECEMBER 31, 1992 $ 385,449 48,897 191,522 155,676 (11,100) 454
- Net income 69,004 - - 69,004 - -
Issuance of common stock through
dividend reinvestment, incentive
214,954 and benefit plans 3,529 215 3,314 - - -
2,182,875 Issuance of common stock for acquisitions 68,172 2,183 65,989 - - -
Amortization of unearned compensation
- and other 1,469 - 1,469 - - -
- Release of ESOP shares 1,880 - - - 1,880 -
- Common stock dividends - $.31 per share (15,703) - - (15,703) - -
- Preferred stock dividends (32) - - (32) - -
- ------------------------------------------------------------------------------------------------------------------
51,294,705 BALANCES, DECEMBER 31, 1993 513,768 51,295 262,294 208,945 (9,220) 454
- Net income 100,238 - - 100,238 - -
Issuance of common stock through
dividend reinvestment, incentive
276,657 and benefit plans 4,814 277 4,537 - - -
- Issuance of preferred stock for acquisition 1,875 - - - - 1,875
2,000,578 Issuance of common stock for acquisitions 52,311 2,000 50,311 - - -
Conversion of preferred stock into
2,421 common stock - 2 59 - - (61)
Amortization of unearned compensation
- and other 2,034 - 2,034 - - -
- Release of ESOP shares 2,380 - - - 2,380 -
- Commitment to ESOP (10,000) - - - (10,000) -
- Common stock dividends - $.32 per share (17,084) - - (17,084) - -
- Preferred stock dividends (100) - - (100) - -
- ------------------------------------------------------------------------------------------------------------------
53,574,361 BALANCES, DECEMBER 31, 1994 650,236 53,574 319,235 291,999 (16,840) 2,268
- Net income 114,776 - - 114,776 - -
Issuance of common stock through
dividend reinvestment, incentive
421,545 and benefit plans 6,522 422 6,100 - - -
577,330 Issuance of common stock for acquisition 16,558 577 15,981 - - -
Conversion of preferred stock
382 into common stock - 1 5 - - (6)
Conversion of debentures
4,540,052 into common stock 113,136 4,540 108,596 - - -
Amortization of unearned compensation
- and other 3,667 - 3,667 - - -
- Release of ESOP shares 2,880 - - - 2,880 -
- Common stock dividends - $.33 per share (19,228) - - (19,228) - -
- Preferred stock dividends (123) - - (123) - -
- ------------------------------------------------------------------------------------------------------------------
59,113,670 BALANCES, DECEMBER 31, 1995 $ 888,424 59,114 453,584 387,424 (13,960) 2,262
==================================================================================================================
See accompanying notes to consolidated financial statements.
</TABLE>
CENTURY TELEPHONE ENTERPRISES, INC.
Notes to Consolidated Financial Statements
December 31, 1995
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of consolidation - The consolidated financial statements of Century
Telephone Enterprises, Inc. and subsidiaries (the "Company") include the
accounts of Century Telephone Enterprises, Inc. ("Century") and its
majority-owned subsidiaries and partnerships. The Company's regulated telephone
operations are subject to the provisions of Statement of Financial Accounting
Standards No. 71, "Accounting for the Effects of Certain Types of Regulation."
Investments in cellular entities where the Company does not own a majority
interest are accounted for using the equity method of accounting.
Estimates - The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect (i) the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and (ii) the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Revenue recognition - Revenues are recognized when earned. Certain of the
Company's telephone subsidiaries participate in revenue pools with other
telephone companies for interstate revenue and for certain intrastate revenue.
Such pools are funded by toll revenue and/or access charges within state
jurisdictions and by access charges in the interstate market. Revenues earned
through the various pooling processes are initially recorded based on the
Company's estimates.
Property, plant and equipment - Telephone plant is stated substantially at
original cost of construction. Normal retirements of telephone property are
charged against accumulated depreciation, along with the costs of removal, less
salvage, with no gain or loss recognized. Renewals and betterments of plant and
equipment are capitalized while repairs, as well as renewals of minor items, are
charged to operating expense. Depreciation of telephone properties is provided
on the straight line method, using class or overall group rates acceptable to
the regulatory authorities; such rates range from 2.2% to 25%.
Non-telephone property is stated at cost and, when sold or retired, a gain
or loss is recognized. Depreciation of such property is provided on the straight
line method over estimated service lives ranging from three to 30 years.
Excess cost of net assets acquired - The excess cost of net assets acquired of
substantially all of the Company's acquisitions accounted for as purchases
(goodwill) is being amortized over forty years. The carrying value of goodwill
is reviewed for impairment at least annually, or whenever events or changes in
circumstances indicate that such carrying value may not be recoverable, by
assessing the recoverability of such carrying value through estimated
undiscounted future net cash flows.
Affiliated transactions - Certain service subsidiaries of Century provide
installation and maintenance services, materials and supplies, and managerial,
technical and accounting services to subsidiaries. In addition, Century provides
and bills management services to subsidiaries and in certain instances makes
interest bearing advances to finance construction of plant and purchases of
equipment. These transactions are recorded by the Company's telephone
subsidiaries at their cost to the extent permitted by regulatory authorities.
Intercompany profit on transactions with regulated affiliates is limited to a
reasonable return on investment and has not been eliminated in connection with
consolidating the results of operations of Century and its subsidiaries.
Intercompany profit on transactions with nonregulated affiliates has been
eliminated.
Income taxes - Century files a consolidated federal income tax return with its
eligible subsidiaries. The Company uses the asset and liability method of
accounting for income taxes under which deferred tax assets and liabilities are
established for the future tax consequences attributable to differences between
the financial statement carrying amounts of assets and liabilities and their
respective tax bases. Investment tax credits related to telephone plant have
been deferred and are being amortized as a reduction of federal income tax
expense over the estimated useful lives of the assets giving rise to the
credits.
Earnings per share - Primary earnings per share amounts are determined on the
basis of the weighted average number of common shares and common stock
equivalents outstanding during the year. The weighted average number of shares
used in computing primary earnings per share was 58.1 million in 1995, 53.4
million in 1994, and 51.2 million in 1993.
Fully diluted earnings per share amounts give further effect to convertible
securities, primarily Century's convertible debentures (all of which were
converted into common stock in 1995), which are not common stock equivalents.
The weighted average number of shares used in computing fully diluted earnings
per share was 59.1 million, 58.1 million and 55.9 million in 1995, 1994 and
1993, respectively.
Cash equivalents - The Company considers short-term investments with a maturity
at date of purchase of three months or less to be cash equivalents.
Reclassifications - Certain amounts previously reported for prior years have
been reclassified to conform with the 1995 presentation, including (i) the
results of operations of subsidiaries of the Company which are not included in
telephone or mobile communications operations have been reclassified to
operating income from other income and expense and (ii) the provision for
uncollectible accounts in the Company's telephone operations, previously
reflected as a reduction in other revenues, has been reclassified as an expense.
(2) PROPERTY, PLANT AND EQUIPMENT
Net property, plant and equipment at December 31, 1995 and 1994 was composed
of the following:
December 31, 1995 1994
- -----------------------------------------------------------------------
(Dollars in thousands)
Telephone, at original cost
Cable and wire $ 661,429 580,012
Central office 357,359 310,684
General support 99,145 91,722
Information origination/termination 24,394 21,478
Construction in progress 59,859 67,244
Other 5,161 5,356
- ------------------------------------------------------------------------
1,207,347 1,076,496
Accumulated depreciation (357,633) (295,255)
- ------------------------------------------------------------------------
849,714 781,241
- ------------------------------------------------------------------------
Mobile Communications, at cost
Cell site 140,462 104,553
General support 33,651 34,235
Construction in progress 16,162 12,602
Other 1,319 915
- ------------------------------------------------------------------------
191,594 152,305
Accumulated depreciation (54,927) (38,552)
- ------------------------------------------------------------------------
136,667 113,753
- ------------------------------------------------------------------------
Corporate and other, at cost
General support 86,149 81,932
Other 14,464 3,474
- ------------------------------------------------------------------------
100,613 85,406
Accumulated depreciation (39,186) (33,269)
- ------------------------------------------------------------------------
61,427 52,137
- ------------------------------------------------------------------------
Net property, plant and equipment $1,047,808 947,131
========================================================================
Depreciation expense was $102.1 million, $84.8 million and $70.7 million in
1995, 1994 and 1993, respectively. The composite depreciation rate for telephone
properties was 7.5% for 1995 and 7.1% for 1994 and 1993.
(3) INVESTMENTS AND OTHER ASSETS
Investments and other assets at December 31, 1995 and 1994 were composed of
the following:
December 31, 1995 1994
- -------------------------------------------------------------------------------
(Dollars in thousands)
Excess cost of net assets acquired, less
accumulated amortization $ 493,655 441,436
Investments in unconsolidated cellular entities 83,552 59,360
Cash surrender value of life insurance contracts, net 54,697 47,637
Note receivable, less current portion 22,500 24,167
Investment in unconsolidated personal communications
services entity, at cost 20,000 -
Marketable equity securities 8,478 8,478
Other 36,402 33,816
- ------------------------------------------------------------------------------
$ 719,284 614,894
==============================================================================
Goodwill amortization of $11.4 million, $10.6 million and $6.2 million for
1995, 1994 and 1993, respectively, is included in "Depreciation and
amortization."
In 1995 the Company invested $20.0 million in exchange for a minority equity
interest in an entity formed to participate in the Federal Communication
Commission's auction of Basic Trading Area Personal Communications Services
licenses.
In 1994 Century loaned an unaffiliated telephone holding company $25.0
million. The loan bears interest at prime plus 1.5%; interest is due quarterly.
Quarterly principal payments began in August 1995 and the unpaid balance becomes
due in May 1998. Century received a security interest in the holding company's
capital stock, a guaranty from such company's principal stockholder and first
refusal rights to acquire certain properties under various specified
circumstances.
(4) INVESTMENTS IN UNCONSOLIDATED CELLULAR ENTITIES
The Company's share of earnings from cellular entities in which it does not
own a majority interest was $21.4 million, $16.9 million and $7.6 million in
1995, 1994 and 1993, respectively, and is included, net of $1.3 million, $1.2
million and $966,000 of amortization of goodwill attributable to such
investments, in "Income from unconsolidated cellular entities."
Over 77% of the 1995 income from unconsolidated cellular entities was
attributable to the following investments.
Ownership interest
- ------------------------------------------------------------------------------
GTE Mobilnet of Austin Limited Partnership 35%
Alltel Cellular Associates of Arkansas Limited Partnership 36%
Lafayette MSA Limited Partnership 49%
Detroit SMSA Limited Partnership 3%
New Mexico 4 - Santa Fe RSA West Limited Partnership 36%
- ------------------------------------------------------------------------------
The following summarizes the unaudited combined assets, liabilities and
equity, and the unaudited combined results of operations, of the cellular
entities in which the Company's investments are accounted for by the equity
method.
December 31, 1995 1994
- -------------------------------------------------------------------------------
(Dollars in thousands)
(unaudited)
Assets
Current assets $204,222 76,191
Property and other noncurrent assets 487,073 277,269
- ------------------------------------------------------------------------------
$691,295 353,460
==============================================================================
Liabilities and equity
Current liabilities $ 79,085 48,144
Noncurrent liabilities 6,922 11,080
Equity 605,288 294,236
- ------------------------------------------------------------------------------
$691,295 353,460
==============================================================================
Year ended December 31, 1995 1994 1993
- -----------------------------------------------------------------------------
(Dollars in thousands)
(unaudited)
Results of operations
Revenues $743,779 329,907 236,230
Operating income $266,355 93,512 52,742
Net income $268,967 92,446 53,607
- ------------------------------------------------------------------------------
Consolidated retained earnings at December 31, 1995 which represented
undistributed earnings of unconsolidated cellular entities was $30.4 million.
(5) LONG-TERM DEBT
December 31, 1995 1994
- -----------------------------------------------------------------------------
(Dollars in thousands)
Century
6.0% convertible debentures $ - 115,000
8.25% senior notes, series B, due 2024 100,000 100,000
7.2% senior notes, series D, due 2025 100,000 -
9.4%* senior notes, due through 2004 60,400 65,000
7.75% senior notes, series A, due 2004 50,000 50,000
6.55% senior notes, series C, due 2005 50,000 -
6.07%* notes payable to banks, due 2000 22,500 -
7.2%* Employee Stock Ownership Plan commitment,
due in installments through 2004 13,960 16,840
10.5%* notes, due in installments through 2006 674 975
- -----------------------------------------------------------------------------
Total Century 397,534 347,815
- -----------------------------------------------------------------------------
Subsidiaries
First mortgage debt
5.9%* notes, payable to agencies of the United
States government and cooperative lending
associations, due in installments through 2026 202,037 166,175
6.8%* bonds, due in installments through 2002 4,760 7,094
Other debt
6.5% note, due in installments through 2001 13,714 -
7.4%* notes, due in installments through 2020 19,164 8,632
8.1%* capital lease obligations, due in
installments through 1998 1,020 1,605
- -----------------------------------------------------------------------------
Total subsidiaries 240,695 183,506
- -----------------------------------------------------------------------------
Total long-term debt 638,229 531,321
Less current maturities 15,325 12,718
- -----------------------------------------------------------------------------
Long-term debt, excluding current maturities $622,904 518,603
=============================================================================
* weighted average interest rate at December 31, 1995
The approximate annual debt maturities (including sinking fund requirements)
for the five years subsequent to December 31, 1995 are as follows: 1996 - $15.3
million; 1997 - $18.4 million; 1998 - $16.3 million; 1999 - $15.9 million; and
2000 - $69.8 million.
In January 1995 Century called for redemption its $115.0 million of
outstanding 6% convertible debentures due 2007. All of the debentures were
converted into Century common stock by the debenture holders in February 1995 at
a conversion price of $25.33 per share. If Century had issued common stock
instead of the debentures, primary earnings per share for the years ended
December 31, 1995, 1994 and 1993 would have been $1.95, $1.81 and $1.32,
respectively.
During the fourth quarter of 1995, Century issued $50.0 million of 10-year,
6.55% senior notes and $100.0 million of 30-year, 7.20% senior notes under the
$400.0 million shelf registration statement that Century filed during the first
quarter of 1994. The proceeds were used to reduce Century's short-term
indebtedness under various credit facilities. Interest payments are due
semi-annually and principal payments are due in 2005 and 2025 upon maturity of
the 10-year and 30-year notes, respectively. The 30-year notes may be redeemed
by Century at any time subject to certain "make-whole" provisions contained
therein.
In May 1994 Century issued $50.0 million of 10-year, 7.75% senior notes and
$100.0 million of 30-year, 8.25% senior notes under the $400.0 million shelf
registration statement filed during the first quarter of 1994. The proceeds were
used to reduce certain of the Company's short-term bank indebtedness. Interest
payments are due semi-annually and principal payments are due in 2004 and 2024
upon maturity of the 10-year and 30-year notes, respectively. The 30-year notes
may be redeemed by Century on or after May 1, 2004 subject to a premium schedule
which declines from 103.62% as of May 1, 2004 to 100% as of May 1, 2014.
Certain of the Company's loan agreements contain various restrictions, among
which are limitations regarding issuance of additional debt, payment of cash
dividends, reacquisition of the Company's capital stock and other matters. At
December 31, 1995, all of the consolidated retained earnings reflected on the
balance sheet was available for the declaration of dividends.
The transfer of funds from certain consolidated subsidiaries to Century is
restricted by various loan agreements. Subsidiaries which have loans from
government agencies and cooperative lending associations, or have issued first
mortgage bonds, generally may not loan or advance any funds to Century, but may
pay dividends if certain financial ratios are met. At December 31, 1995,
restricted net assets of subsidiaries were $253.8 million. Subsidiaries'
retained earnings in excess of amounts restricted by debt covenants totaled
$412.0 million.
Most of the Company's telephone property, plant and equipment is pledged to
secure the long-term debt of subsidiaries.
At December 31, 1994, Century had in place certain long-term credit
facilities under which the borrowings as of December 31, 1994 were included in
"Notes payable" on the accompanying balance sheet. The weighted average interest
rate for notes payable was 6.5% as of December 31, 1994.
Short-term borrowings of $22.5 million at December 31, 1995, along with
$30.0 million of debt becoming due in 1996, were classified as long-term debt on
the accompanying balance sheet as the Company had available an aggregate of
$145.0 million in its two long-term revolving credit facilities amended or
entered into in 1995. The Company intends to refinance such debt using the
facilities, both of which are multi-year agreements which expire in August 2000
and contain a variety of pricing options including competitive bid options.
Century's telephone subsidiaries had approximately $142.6 million in
commitments for long-term financing from the Rural Utilities Service available
at December 31, 1995. Approximately $248.6 million of additional borrowings, of
which $140.0 million were under uncommitted facilities, were available to the
Company through lines of credit with various banks. In addition, Century had
$100.0 million of senior unsecured debt securities under the 1994 shelf
registration statement which had not been issued.
(6) STOCK OPTION PROGRAM
Century currently has an incentive compensation program which allows the
Board of Directors, through the Compensation Committee, to grant incentives to
employees in any one or a combination of the following forms: incentive stock
options and non-qualified stock options; stock appreciation rights; restricted
stock; and performance shares.
Stock option transactions during 1993, 1994 and 1995 were as follows:
Number Average
of options price
- ----------------------------------------------------------------------
Outstanding December 31, 1992 2,432,869 $ 20.72
Exercised (51,120) 9.90
- -------------------------------------------------------
Outstanding December 31, 1993 2,381,749 20.96
Exercised (139,282) 11.10
Granted at market price 31,000 26.25
- -------------------------------------------------------
Outstanding December 31, 1994 2,273,467 21.63
Exercised (272,300) 10.12
Granted above market price 634,031 36.15
- -------------------------------------------------------
Outstanding December 31, 1995 2,635,198 25.46
=======================================================
Exercisable December 31, 1994 2,143,873 21.57
- -------------------------------------------------------
Exercisable December 31, 1995 2,604,198 26.32
=======================================================
All of the options expire ten years after the date of grant. As of December
31, 1995, Century has reserved 4.0 million shares of common stock which may be
issued under the incentive compensation program.
The Company will adopt Statement of Financial Accounting Standards No. 123,
"Accounting for Stock-Based Compensation," in 1996. The Company currently 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."
(7) DEFERRED CREDITS AND OTHER LIABILITIES
Deferred credits and other liabilities at December 31, 1995 and 1994 were
composed of the following:
December 31, 1995 1994
- ------------------------------------------------------------------------
(Dollars in thousands)
Deferred federal and state income taxes $ 93,118 73,966
Accrued postretirement benefit costs 44,513 41,126
Regulatory liability - income taxes 27,027 31,278
Minority interest 29,354 22,585
Deferred investment tax credits 6,026 8,175
Other 11,131 10,616
- -------------------------------------------------------------------------
$211,169 187,746
=========================================================================
(8) INCOME TAXES
Income tax expense for the years ended December 31, 1995, 1994 and 1993 was
allocated as follows:
Year ended December 31, 1995 1994 1993
- ------------------------------------------------------------------------------
(Dollars in thousands)
Net tax expense in the consolidated
statements of income $ 68,292 61,300 37,252
Stockholders' equity, primarily for compensation
expense for tax purposes in excess of amounts
recognized for financial reporting purposes (2,354) (1,243) (800)
- -------------------------------------------------------------------------------
$ 65,938 60,057 36,452
===============================================================================
The tax effects of temporary differences that gave rise to significant
portions of the deferred tax assets and deferred tax liabilities at December 31,
1995 and 1994 were as follows:
December 31, 1995 1994
- ----------------------------------------------------------------------------
(Dollars in thousands)
Deferred tax assets:
Postretirement benefit costs $ 15,314 12,908
Net operating loss carryforwards of an
acquired subsidiary 9,234 10,283
Regulatory liability 9,460 10,948
Deferred compensation 2,659 2,676
Deferred investment tax credits 1,918 2,658
Other employee benefits 4,673 4,205
Other 3,227 2,556
- ----------------------------------------------------------------------------
Total gross deferred tax assets 46,485 46,234
Less valuation allowance (9,234) (10,283)
- ----------------------------------------------------------------------------
Net deferred tax assets 37,251 35,951
- ----------------------------------------------------------------------------
Deferred tax liabilities:
Property, plant and equipment, primarily
due to depreciation differences (117,095) (97,073)
Intercompany profits (3,787) (3,497)
Other (9,487) (9,347)
- ----------------------------------------------------------------------------
Total gross deferred tax liabilities (130,369) (109,917)
- ----------------------------------------------------------------------------
Net deferred tax liability $ (93,118) (73,966)
============================================================================
As a result of the acquisition of Celutel, Inc. ("Celutel") (see Note 14)
the Company had $26.4 million and $29.4 million of net operating loss
carryforwards at December 31, 1995 and 1994, respectively, which related to
various entities acquired. The yearly utilization of such loss carryforwards is
limited to separate entity taxable income; the loss carryforwards are further
limited by certain Internal Revenue Code regulations. During 1995 the Company
utilized $3.0 million of such losses; the related tax benefits reduced excess
cost of net assets acquired. Subsequently recognized tax benefits applicable to
the net operating loss carryforwards will reduce excess cost of net assets
acquired. The net operating loss carryforwards expire between 2002 and 2008.
Income tax expense was as follows:
Year ended December 31, 1995 1994 1993
- ----------------------------------------------------------------------
(Dollars in thousands)
Federal
Current $53,554 47,969 26,409
Deferred 9,021 5,703 6,133
State
Current 5,175 5,908 4,062
Deferred 542 1,720 648
- ----------------------------------------------------------------------
$68,292 61,300 37,252
======================================================================
The following is a reconciliation from the statutory federal income tax rate
to the Company's effective income tax rate:
Year ended December 31, 1995 1994 1993
- --------------------------------------------------------------------------
(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 2.0 3.0 2.9
Amortization of nondeductible excess
cost of net assets acquired 1.8 2.1 1.2
Amortization of investment tax credits (1.3) (1.4) (2.0)
Amortization of regulatory liability (1.0) (1.2) (1.8)
Other, net .8 .4 (.2)
- --------------------------------------------------------------------------
Effective income tax rate 37.3% 37.9 35.1
==========================================================================
(9) POSTRETIREMENT AND POSTEMPLOYMENT BENEFITS
The Company sponsors defined benefit health care plans that provide
postretirement medical, life and dental benefits to substantially all retired
full-time employees.
Net periodic postretirement benefit cost for 1995, 1994 and 1993 included
the following components:
Year ended December 31, 1995 1994 1993
- -----------------------------------------------------------------------------
(Dollars in thousands)
Service cost $1,769 2,007 1,640
Interest cost 3,972 3,473 3,008
Amortization of unrecognized
actuarial losses (gains) (50) 447 365
Amortization of unrecognized
prior service cost 121 121 86
- -----------------------------------------------------------------------------
Net periodic postretirement benefit cost $5,812 6,048 5,099
=============================================================================
The following table sets forth the amounts recognized as liabilities for
postretirement benefits in the Company's consolidated balance sheets at December
31, 1995 and 1994.
December 31, 1995 1994
- -----------------------------------------------------------------------------
(Dollars in thousands)
Accumulated postretirement benefit obligation:
Retirees and retirees' dependents $ 26,185 19,079
Fully eligible active plan participants 9,972 8,300
Other active plan participants 23,971 16,430
- -----------------------------------------------------------------------------
Accumulated postretirement benefit obligation 60,128 43,809
Plan assets - -
Unrecognized prior service cost (1,424) (1,546)
Unrecognized net gain (loss) (12,881) 173
- -----------------------------------------------------------------------------
Accrued postretirement benefit costs $ 45,823 42,436
=============================================================================
For calculation purposes, a 7% health care cost rate was assumed for the
first two years; the rate was assumed to decrease to 6% thereafter. If the
assumed health care cost trend rate had been increased by one percentage point
in each year, the accumulated postretirement benefit obligation as of December
31, 1995 would have increased $5.3 million and the net periodic postretirement
benefit cost for the year ended December 31, 1995 would have increased $405,000.
The discount rates used in determining the accumulated postretirement
benefit obligation as of December 31, 1995 and 1994 were 7.25% and 8.5%,
respectively.
In the first quarter of 1994 the Company adopted Statement of Financial
Accounting Standards No. 112 ("SFAS 112"), "Employers' Accounting for
Postemployment Benefits." Liabilities for postemployment benefits in the
consolidated balance sheet as of December 31, 1993 were not materially different
than those required by SFAS 112; therefore, no cumulative effect of change in
accounting principle was recorded upon adoption of SFAS 112.
(10) STOCKHOLDERS' EQUITY
Common stock - At December 31, 1995, unissued shares of Century common stock
were reserved as follows:
December 31, 1995
- ----------------------------------------------------------------
(In thousands)
Stock option plans 4,001
Acquisitions 1,178
Employee stock purchase plan 506
Dividend reinvestment plan 166
Conversion of convertible preferred stock 193
Other employee benefit plans 1,238
- ----------------------------------------------------------------
7,282
================================================================
Under Century's Articles of Incorporation each share of common stock
beneficially owned continuously by the same person since May 30, 1987 generally
entitles the holder thereof to ten votes per share. All other shares entitle the
holder to one vote per share. At December 31, 1995, 8.1 million shares of common
stock were entitled to ten votes per share.
Preferred stock - As of December 31, 1995, Century had 2.0 million shares of
preferred stock, $25 par value per share, authorized. At December 31, 1995 and
1994 there were 90,467 and 90,707 shares, respectively, of outstanding preferred
stock. Holders of currently outstanding Century preferred stock are entitled to
(i) receive cumulative dividends, (ii) receive preferential distributions equal
to $25 per share plus unpaid dividends upon Century's liquidation and (iii) vote
as a single class with the holders of common stock.
Shareholders' Rights Plan - In 1986 the Board of Directors declared a dividend
of one preferred stock purchase right for each common share outstanding or that
shall become outstanding prior to November 26, 1996. With certain exceptions, if
a person or group acquires beneficial ownership of 15% or more of Century common
shares or commences a tender or exchange offer which upon consummation would
result in ownership of 30% or more of the common shares, each right held by
shareholders, other than such person or group, may be exercised to buy (i) eight
twenty-sevenths of one one-hundredth of a share of Series AA Junior
Participating Preferred Stock of Century at a price of $85 per one one-hundredth
of a share or (ii) in lieu thereof, subject to certain restrictions, the number
of shares of Century common stock having a market value equal to two times such
purchase price. The rights, which do not have voting rights, expire on November
27, 1996 and may be redeemed by Century at a price of $.05 per right at any time
before they become exercisable. If, at any time the rights are exercisable,
Century is a party to a merger or other business combination or certain other
transactions occur, each right will entitle its holder to purchase at the
exercise price of the right a number of shares of common stock of the surviving
company having a fair market value of two times the exercise price of the right.
At December 31, 1995, 167,000 shares of Series AA Junior Participating Preferred
Stock were reserved for issuance under the Rights Plan.
(11) SALES OF ASSETS
In the first quarter of 1995 the Company sold, for an aggregate of
approximately $17.9 million cash, its ownership interests in certain
non-strategic cellular Rural Service Areas ("RSAs") located primarily in western
states and three Metropolitan Statistical Areas ("MSAs") in the midwest. These
transactions resulted in a pre-tax gain of $5.9 million ($2.0 million
after-tax). During the fourth quarter of 1995, the Company sold certain assets
of one of its subsidiaries for $2.0 million which resulted in a pre-tax gain of
$873,000 ($567,000 after-tax).
In 1994 the Company sold the assets comprising an RSA cellular system in
Minnesota; the Company received (i) the assets of the Pine Bluff, Arkansas MSA
wireline cellular system and (ii) $10.5 million cash. The transaction resulted
in a pre-tax gain of $14.7 million ($8.5 million after-tax). The Company also
sold the assets of its paging operations during 1994 and recognized a gain of
$1.2 million ($756,000 after-tax).
During 1993 the Company sold a minority investment in a telephone company
which resulted in a pre-tax gain of $1.7 million ($1.1 million after-tax).
(12) ACCOUNTING FOR THE EFFECTS OF REGULATION
The Company's regulated telephone operations are subject to the provisions
of Statement of Financial Accounting Standards No. 71 ("SFAS 71"), "Accounting
for the Effects of Certain Types of Regulation." Actions of a regulator can
provide reasonable assurance of the existence of an asset, reduce or eliminate
the value of an asset and impose a liability on a regulated enterprise. SFAS 71
requires that, if a conflict exists between the application of SFAS 71 and
another authoritative pronouncement, SFAS 71 is to be followed because other
authoritative pronouncements do not consider the economic effects of the
rate-making process. Therefore, regulatory assets and liabilities established by
the actions of a regulator are required to be recorded, and, accordingly,
reflected in the balance sheet of an entity subject to SFAS 71.
The Company's consolidated balance sheet as of December 31, 1995 included
regulatory assets of approximately $8.7 million and regulatory liabilities of
approximately $27.0 million exclusive of (i) property, plant and equipment, (ii)
accumulated depreciation and (iii) deferred income taxes and deferred investment
tax credits associated with regulatory assets and liabilities. The $8.7 million
of regulatory assets included assets established in connection with the adoption
of Statement of Financial Accounting Standards No. 106, "Employers Accounting
for Postretirement Benefits Other Than Pensions" ($2.1 million) and Statement of
Financial Accounting Standards No. 109 ("SFAS 109"), "Accounting For Income
Taxes" ($3.2 million), extraordinary retirements ($305,000), compensated
absences ($401,000) and deferred financing costs ($2.7 million). The $27.0
million of regulatory liabilities was established in connection with the
adoption of SFAS 109. Net deferred income tax assets related to the regulatory
assets and liabilities quantified above were $7.4 million.
Property, plant and equipment of the Company's regulated telephone
operations has been depreciated using generally the straight line method over
lives approved by regulators. Such depreciable lives have generally exceeded the
depreciable lives used by nonregulated entities. In addition, in accordance with
regulatory accounting, retirements of regulated telephone property have been
charged to accumulated depreciation, along with the costs of removal, less
salvage, with no gain or loss recognized. These regulatory accounting policies
have resulted in accumulated depreciation being significantly less than if the
Company's telephone operations had not been regulated.
Statement of Financial Accounting Standards No. 101 ("SFAS 101"), "Regulated
Enterprises Accounting for the Discontinuance of Application of FASB Statement
No. 71," specifies the accounting required when an enterprise ceases to meet the
criteria for application of SFAS 71. SFAS 101 requires the elimination of the
effects of any actions of regulators that have been recognized as assets and
liabilities in accordance with SFAS 71 but would not have been recognized as
assets and liabilities by enterprises in general. SFAS 101 further provides that
the carrying amounts of property, plant and equipment are to be adjusted only to
the extent the assets are impaired and that impairment shall be judged in the
same manner as for enterprises in general. The Company has not determined (i)
the amount of additional accumulated depreciation which will have to be recorded
nor (ii) the amount, if any, by which property, plant and equipment would be
impaired when the Company's regulated operations cease to become subject to SFAS
71. In addition, deferred tax liabilities and deferred investment tax credits
will be impacted based on the change in the temporary differences for property,
plant and equipment and accumulated depreciation.
The ongoing applicability of SFAS 71 to the Company's regulated telephone
operations is being monitored due to the changing regulatory, competitive and
legislative environments. When the regulated operations of the Company no longer
qualify for the application of SFAS 71, the net adjustments required will result
in a material, extraordinary, noncash charge against earnings. Telephone
subsidiaries accounting and reporting for regulatory purposes will not be
affected by the discontinued application of SFAS 71.
(13) RETIREMENT AND SAVINGS PLANS
Century sponsors an Outside Directors' Retirement Plan and a Supplemental
Executive Retirement Plan to provide directors and officers, respectively, with
supplemental retirement, death and disability benefits. In addition, the
bargaining unit employees of a subsidiary are provided benefits under a defined
benefit pension plan. At December 31, 1995 and 1994, the combined accumulated
benefit obligation of the plans, substantially all of which was vested,
aggregated $18.4 million and $15.2 million, respectively. The projected benefit
obligation in excess of plan assets was $823,000 and $2.7 million as of December
31, 1995 and 1994, respectively. During 1995 and 1994 Century funded $2.5
million and $3.0 million, respectively, of the obligations of the plans. Prepaid
pension cost was $2.5 million at December 31, 1995 and $525,000 at December 31,
1994. The net periodic pension cost in 1995, 1994 and 1993 was $928,000, $1.2
million and $1.1 million, respectively. Discount rates used in determining the
year end liabilities were 7.25% for 1995 and 8.5% for 1994.
Century sponsors an Employee Stock Bonus Plan ("ESBP") and an Employee Stock
Ownership Plan ("ESOP"). These plans cover most employees with one year of
service with the Company and are funded by Company contributions determined
annually by the Board of Directors. Century also sponsors a qualified profit
sharing plan pursuant to Section 401(k) of the Internal Revenue Code (the
"401(k) Plan") which is available to substantially all employees of the Company.
The Company's matching contributions to the 401(k) Plan were $2.4 million in
1995 and 1994 and $2.0 million in 1993.
The Company recorded contributions related to the ESBP in the amount of $1.6
million, $2.3 million and $1.8 million during 1995, 1994 and 1993, respectively.
At December 31, 1995, the ESBP owned 4.3 million shares of Century common stock.
The Company's contributions to the ESOP approximate the ESOP's debt service
less dividends received by the ESOP applicable to unallocated shares. The ESOP
shares initially were pledged as collateral for its debt. As the debt is repaid,
shares are released from collateral based on the percentage of principal payment
to outstanding debt before applying the principal payment. As of each year end,
such released shares are allocated to active employees.
The ESOP had outstanding debt of $5.5 million at December 31, 1995 which was
applicable to shares purchased prior to 1993. Interest incurred by the ESOP on
debt applicable to such shares was $580,000, $728,000 and $895,000 in 1995, 1994
and 1993, respectively. The Company contributed and expensed $2.3 million, $1.9
million and $2.6 million during 1995, 1994 and 1993, respectively, with respect
to such shares. Dividends on unallocated ESOP shares used for debt service by
the ESOP were $170,000 in 1995, $288,000 in 1994 and $335,000 in 1993. ESOP
shares as of December 31, 1995 and 1994 which were purchased prior to 1993 were
as follows:
December 31, 1995 1994
- ----------------------------------------------------------
(In thousands)
Allocated shares 1,338 1,164
Unreleased shares 490 707
- ----------------------------------------------------------
1,828 1,871
==========================================================
The Company accounts for shares purchased subsequent to December 31, 1992 in
accordance with Statement of Position 93-6 ("SOP 93-6"). Accordingly, as shares
are released from collateral, the Company reports compensation expense equal to
the current market price of the shares and the shares become outstanding for
earnings per share computations. Dividends on allocated ESOP shares are recorded
as a reduction of retained earnings; dividends on unallocated ESOP shares are
recorded as a reduction of debt. ESOP compensation expense applicable to shares
purchased subsequent to 1992 was $1.3 million for 1995 and $605,000 for 1994.
The fair value of unreleased ESOP shares accounted for under SOP 93-6 was $11.2
million and $11.7 million at December 31, 1995 and December 31, 1994,
respectively. ESOP shares purchased subsequent to 1992 totaled 416,850, of which
62,527 were allocated and 354,323 were unreleased as of December 31, 1995.
(14) MAJOR ACQUISITIONS
In February 1994 the Company acquired Celutel for approximately $106.0
million in a stock and cash transaction accounted for as a purchase.
Approximately $56.0 million of the purchase price was paid in cash, with the
remainder paid through the issuance of approximately 1.9 million shares of
Century common stock. At acquisition, Celutel provided cellular service to
approximately 29,000 customers in five non-wireline provider systems in MSAs in
Mississippi and Texas.
In April 1993 the Company acquired San Marcos Telephone Company, Inc.
("SMTC") in a stock and cash transaction and acquired SM Telecorp, Inc., an
affiliate of SMTC, for cash. The total acquisition price for both companies
approximated $100.0 million, the stock portion of which was represented by
approximately 2.2 million shares of Century common stock. As a result of the
acquisitions, which were accounted for as purchases, the Company acquired
approximately 22,500 telephone access lines in and around San Marcos, Texas,
along with a 35% ownership interest in the Austin, Texas MSA wireline cellular
market and a 9.6% interest in the Texas RSA #16 wireline cellular market.
The following pro forma information represents the consolidated results of
operations of the Company as if (i) the Celutel acquisition had been combined
with the Company as of January 1 of 1994 and 1993 and (ii) the San Marcos
acquisition had been combined with the Company as of January 1, 1993.
Year ended December 31, 1994 1993
- ----------------------------------------------------------------------------
(Dollars in thousands,
except per share amounts)
(unaudited)
Operating revenues $ 543,768 467,862
Net income $ 98,958 62,516
Fully diluted earnings per share $ 1.77 1.15
- ----------------------------------------------------------------------------
The pro forma information is not necessarily indicative of the operating
results that would have occured if each major acquisition had been consummated
as of January 1 of each respective period, nor is it necessarily indicative of
future operating results. The actual results of operations of an acquired
company are included in the Company's consolidated financial statements only
from the date of acquisition.
(15) SUPPLEMENTAL CASH FLOW DISCLOSURES
The Company paid interest of $45.8 million, $40.8 million and $30.1 million
during 1995, 1994 and 1993, respectively. Income taxes paid were $62.4 million
in 1995, $41.3 million in 1994 and $37.1 million in 1993.
Century has consummated the acquisition of various telephone and cellular
operations, along with certain other assets, during the three years ended
December 31, 1995. In connection with these acquisitions, the following assets
were acquired, liabilities assumed and common and preferred stock issued:
Year ended December 31, 1995 1994 1993
- ------------------------------------------------------------------------------
(Dollars in thousands)
Property, plant and equipment $ 16,949 11,301 33,020
Excess cost of net assets acquired 70,124 152,239 85,251
Investments in unconsolidated
cellular entities 2,804 - 7,508
Notes payable (14,199) - -
Long-term debt (38,147) (46,478) (18,609)
Deferred credits and other liabilities (1,880) (5,706) (7,648)
Other assets and liabilities, excluding
cash and cash equivalents 3,037 (1,191) 5,766
Common stock issued (16,558) (52,311) (68,172)
Preferred stock issued - (1,875) -
- ------------------------------------------------------------------------------
Decrease in cash due to acquisitions $ 22,130 55,979 37,116
==============================================================================
Century has consummated the disposition of various telephone and cellular
operations, along with certain other assets, during the three years ended
December 31, 1995. In connection with these dispositions, the following assets
were sold, liabilities eliminated, assets received and gain recognized:
Year ended December 31, 1995 1994 1993
- ----------------------------------------------------------------------------
(Dollars in thousands)
Property, plant and equipment $ (4,399) (2,673) -
Excess cost of net assets acquired (4,494) (3,976) -
Other assets and liabilities, excluding
cash and cash equivalents (4,278) 993 1,661
Assets of cellular system - 11,058 -
Gain on sales of assets (6,782) (15,877) (1,661)
- ----------------------------------------------------------------------------
Increase in cash due to dispositions $ (19,953) (10,475) -
============================================================================
In February 1995 Century's $115.0 million of outstanding 6% convertible
debentures were converted into Century common stock by the debenture holders at
a conversion price of $25.33 per share.
(16) BUSINESS SEGMENTS
The Company operates in two principal segments - traditional telephone
services and mobile communications services. The Company's telephone operations
are conducted in rural, suburban and small urban communities in 14 states.
Approximately 80% of the Company's telephone access lines are in Wisconsin,
Louisiana, Michigan, Ohio and Arkansas. The Company's cellular customers are
located primarily in Louisiana, Michigan, Mississippi and Texas. Other accounts
receivable are primarily amounts due from various long distance carriers,
principally AT&T, and several large local exchange operating companies.
<TABLE>
<CAPTION>
Mobile
Telephone Communications Other Eliminations Total
- -----------------------------------------------------------------------------------------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
Year ended December 31, 1995
- -----------------------------------------------------------------------------------------
Operating revenues $ 419,242 197,494 39,580 (11,476) 644,840
Depreciation and amortization $ 86,324 25,427 2,019 - 113,770
Operating income $ 143,527 57,009 2,383 - 202,919
Year ended December 31, 1994
- -----------------------------------------------------------------------------------------
Operating revenues $ 391,265 150,802 33,272 (10,738) 564,601
Depreciation and amortization $ 73,175 21,255 1,283 - 95,713
Operating income $ 137,992 31,443 3,371 - 172,806
Year ended December 31, 1993
- -----------------------------------------------------------------------------------------
Operating revenues $ 350,330 84,712 30,523 (9,890) 455,675
Depreciation and amortization $ 65,175 11,359 1,040 - 77,574
Operating income $ 114,902 9,906 3,201 - 128,009
- -----------------------------------------------------------------------------------------
</TABLE>
Year ended December 31, 1995 1994 1993
- -------------------------------------------------------------------------------
(Dollars in thousands)
Operating income $ 202,919 172,806 128,009
Interest expense (43,615) (42,577) (30,149)
Income from unconsolidated cellular entities 20,084 15,698 6,626
Gain on sales of assets 6,782 15,877 1,661
Minority interest (8,084) (3,377) (516)
Other income and expense 4,982 3,111 625
- -------------------------------------------------------------------------------
Income before income taxes $ 183,068 161,538 106,256
===============================================================================
Capital expenditures
Telephone $ 136,006 152,336 131,180
Mobile Communications $ 41,990 39,937 56,092
Corporate and other $ 18,596 8,503 16,957
===============================================================================
Identifiable assets
Telephone $1,114,827 1,053,950 969,388
Mobile Communications 547,260 430,777 224,913
General corporate 109,096 88,305 62,827
Other 91,238 70,221 62,262
- -------------------------------------------------------------------------------
Total assets $1,862,421 1,643,253 1,319,390
===============================================================================
(17) FAIR VALUE OF FINANCIAL INSTRUMENTS
The following table presents the carrying amounts and estimated fair values
of certain of the Company's financial instruments at December 31, 1995 and 1994.
Carrying Fair
amount value
- ------------------------------------------------------------------------------
(Dollars in thousands)
December 31, 1995
- ------------------------------------------------------------------------------
Financial assets:
Investments
Note receivable (including current portion) $ 24,167 24,167 (1)
Marketable equity securities $ 8,478 8,672 (2)
Other equity investment $ 20,000 20,000 (1)
Other $ 9,912 9,912 (1)
Financial liabilities:
Long-term debt (including current maturities) $ 638,229 638,383 (3)
Other $ 13,043 13,043 (1)
- ------------------------------------------------------------------------------
December 31, 1994
- ------------------------------------------------------------------------------
Financial assets:
Investments
Note receivable (including current portion) $ 25,000 25,000 (1)
Marketable equity securities $ 8,478 10,127 (2)
Other $ 9,069 9,069 (1)
Financial liabilities:
Long-term debt (including current maturities) $ 531,321 520,151 (3)
Other $ 11,725 11,725 (1)
- ------------------------------------------------------------------------------
(1) Fair value was estimated by the Company.
(2) Fair value was based on quoted market prices.
(3) Fair value was estimated by discounting the scheduled payment streams to
present value based upon rates currently offered to the Company for similar
debt.
Cash and cash equivalents, accounts receivable, notes payable, accounts payable
and accrued expenses - The carrying amount approximates the fair value due to
the short maturity of these instruments.
(18) COMMITMENTS AND CONTINGENCIES
Construction expenditures and investments in vehicles, buildings and other
work equipment during 1996 are estimated to be $102 million for telephone
operations, $61 million for mobile communications operations and $26 million for
corporate and other operations.
The Company is involved in various claims and legal actions arising in the
ordinary course of business. In the opinion of management, the ultimate
disposition of these matters will not have a material adverse effect on the
Company's consolidated financial position or results of operations.
CENTURY TELEPHONE ENTERPRISES, INC.
Consolidated Quarterly Income Information (unaudited)
<TABLE>
<CAPTION>
First Second Third Fourth
Quarter Quarter Quarter Quarter
- --------------------------------------------------------------------------------------
(Dollars in thousands, except per share amounts)
1995
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Operating revenues $148,779 156,815 167,304 171,942
Operating income $ 47,961 49,682 56,392 48,884
Net income $ 27,000 26,167 31,880 29,729
Fully diluted earnings per share $ .47 .45 .54 .50
- --------------------------------------------------------------------------------------
1994
- --------------------------------------------------------------------------------------
Operating revenues $127,350 138,865 147,786 150,600
Operating income $ 36,337 42,123 47,311 47,035
Net income $ 19,201 21,485 24,613 34,939
Fully diluted earnings per share $ .35 .39 .44 .62
- --------------------------------------------------------------------------------------
</TABLE>
The results of operations of subsidiaries of the Company which are not
included in telephone or mobile communications operations have been reclassified
to operating income from other income and expense, and the provision for
uncollectible accounts in the Company's telephone operations, previously
reflected as a reduction in other revenues, has been reclassified as an expense.
Fully diluted earnings per share for the first quarter and the fourth
quarter of 1995 included $.03 and $.01 per share, respectively, of gain on the
sales of assets. Fully diluted earnings per share for the fourth quarter of 1995
was reduced by $.04 per share related to cellular commissions incurred (during
the fourth quarter of 1995 as compared to the average of the first three
quarters of 1995) as a result of the significant increase in the number of
cellular subscribers activated during the quarter.
Fully diluted earnings per share for the fourth quarter of 1994 included
$.16 per share of gain on the sales of assets; such increase in fully diluted
earnings per share was partially offset by a decrease of $.03 per share related
to cellular commissions incurred (during the fourth quarter of 1994 as compared
to the average of the first three quarters of 1994) as a result of the
significant increase in the number of cellular subscribers activated during the
quarter.
Item 9. Changes in and Disagreements With Accountants on
Accounting and Financial Disclosure.
None.
PART III
Item 10. Directors and Executive Officers of the Registrant.
The name, age and office(s) held by each of the Registrant's executive
officers are shown below. Each of the executive officers listed below serves at
the pleasure of the Board of Directors, except Mr. Williams who has entered into
an employment agreement with the Registrant effective through May 1996 and from
year to year thereafter subject to the right of Mr. Williams or the Company to
terminate such agreement.
Name Age Office(s) held with Century
- -----------------------------------------------------------------
Clarke M. Williams 74 Chairman of the Board
of Directors
Glen F. Post, III 43 Vice Chairman of the
Board of Directors, President and Chief
Executive Officer
R. Stewart Ewing, Jr. 44 Senior Vice President and Chief
Financial Officer
W. Bruce Hanks 41 President - Telecommunications
Services
Harvey P. Perry 51 Senior Vice President, General
Counsel and Secretary
Kenneth R. Cole 48 President - Telephone Group
Each of the Registrant's executive officers has served as an officer of
the Registrant and/or one or more of its subsidiaries in varying capacities for
more than the past 5 years. Mr. Cole has served as President-Telephone Group
since January 1995 and as Vice President from 1983 to 1994.
The balance of the information required by Item 10 is incorporated by
reference to the Registrant's definitive proxy statement relating to its 1996
annual meeting of stockholders (the "Proxy Statement"), which Proxy Statement
will be filed pursuant to Regulation 14A within 120 days after the end of the
last fiscal year.
Item 11. Executive Compensation.
The information required by Item 11 is incorporated by reference to the
Proxy Statement.
Item 12. Security Ownership of Certain Beneficial Owners and Management.
The information required by Item 12 is incorporated by reference to the
Proxy Statement.
Item 13. Certain Relationships and Related Transactions.
The information required by Item 13 is incorporated by reference to the
Proxy Statement.
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.
a. Financial Statements
(i) Consolidated Financial Statements:
Independent Auditors' Report on Consolidated Financial
Statements and Financial Statement Schedules
Consolidated Statements of Income for the Years Ended
December 31, 1995, 1994 and 1993
Consolidated Balance Sheets - December 31, 1995 and 1994
Consolidated Statements of Cash Flows for the Years
Ended December 31, 1995, 1994 and 1993
Consolidated Statements of Stockholders' Equity for the
Years Ended December 31, 1995, 1994 and 1993
Notes to Consolidated Financial Statements
Consolidated Quarterly Income Information (unaudited)
(ii) Schedules:*
I Condensed Financial Information of Registrant
II Valuation And Qualifying Accounts
* Those schedules not listed above are omitted as not
applicable or not required.
b. Reports on Form 8-K.
The following item was reported in the Form 8-K dated November 7,
1995:
Item 5. Other Events - News release reporting results
of operations for the quarter ended September
30, 1995.
The following item was reported in the Form 8-K dated November
29, 1995:
Item 5. Other Events - News release reporting
investment in GO Communications Corporation.
c. Exhibits:
3(i) Amended and Restated Articles of Incorporation of
Registrant, dated as of May 23, 1995 (incorporated by
reference to Exhibit 4.1 to Registration No.33-60061).
3(ii) Registrant's Bylaws, as amended through May 23, 1995
(incorporated by reference to Exhibit 4.2 to
Registration No. 33-60061).
4.1 Competitive Advance and Revolving Credit Facility
Agreement, dated October 17, 1995, between Registrant
and Bank One of Texas, N.A. (incorporated by
reference to Exhibit 4.2 to Registrant's Quarterly
Report on Form 10-Q for the quarter ended September
30, 1995).
4.2 Note Purchase Agreement, dated September 1, 1989,
between Registrant, Teachers Insurance and Annuity
Association of America and the Lincoln National Life
Insurance Company (incorporated by reference to
Exhibit 4.23 to Registrant's Quarterly Report on Form
10-Q for the quarter ended September 30, 1989).
4.12 Amended and Restated Rights Agreement dated as of
November 17, 1986 between Century Telephone
Enterprises, Inc. and the Rights Agent named therein
(incorporated by reference to Exhibit 4.1 to
Registrant's Current Report on Form 8-K dated December
20, 1988), the Amendment thereto dated March 26, 1990
(incorporated by reference to Exhibit 4.1 to
Registrant's Quarterly Report on Form 10-Q for the
quarter ended March 31, 1990) and the Second Amendment
thereto dated February 23, 1993 (incorporated by
reference to Exhibit 4.12 to Registrant's Annual
Report on Form 10-K for the year ended December 31,
1992).
4.16 Note Purchase Agreement, dated May 6, 1986, among
Registrant, Teachers Insurance and Annuity Association
of America, Aetna Life Insurance Company, the Aetna
Casualty and Surety Company and Lincoln National
Pension Insurance Company (incorporated by reference
to Exhibit 4.23 to Registration No. 33-5836),
Amendatory Agreement dated November 1, 1986
(incorporated by reference to Exhibit 4.2 to
Registrant's Annual Report on Form 10-K for the year
ended December 31, 1986), amendment thereto dated
November 1, 1987 (incorporated by reference to Exhibit
4.2 to Registrant's Annual Report on Form 10-K for the
year ended December 31, 1987) and Modification Letter
dated September 1, 1989 (incorporated by reference to
Exhibit 19.6 to Registrant's Quarterly Report on Form
10-Q for the quarter ended September 30, 1989).
4.22 Form of common stock certificate of the Registrant
(incorporated by reference to Exhibit 4.1 to
Registrant's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1993).
4.24 Revolving Credit Facility Agreement, dated February 7,
1992 between Registrant and NationsBank of Texas, N.A.
(incorporated by reference to Exhibit 4.24 to
Registrant's Annual Report on Form 10-K for the year
ended December 31, 1991), amendment thereto dated
April 8, 1993 (incorporated by reference to Exhibit
19.2 to Registrant's Quarterly Report on Form 10-Q for
the quarter ended March 31, 1993), amendment thereto
dated July 9, 1993 (incorporated by reference to
Exhibit 4.24 to Registrant's Annual Report on Form
10-K for the year ended December 31, 1993), amendment
thereto dated August 15, 1994 (incorporated by
reference to Exhibit 4.1 to Registrant's Quarterly
Report on Form 10-Q for the quarter ended September
30, 1994) and amendment thereto dated October 5, 1995
(incorporated by reference to Exhibit 4.1 to
Registrant's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1995).
4.25 Indenture dated as of March 31, 1994 between the
Company and Regions Bank of Louisiana (formerly First
American Bank & Trust of Louisiana), as Trustee
(incorporated by reference to Exhibit 4.1 of the
Company's Registration Statement on Form S-3,
Registration No. 33-52915).
4.26 Resolutions adopted by the Executive Committee of the
Board of Directors on April 29, 1994 designating the
terms and conditions of the Company's 7-3/4% Senior
Notes, Series A, due 2004 and 8-1/4% Senior Notes,
Series B, due 2024 ("Senior Notes") (incorporated by
reference to Exhibit 4.1 to Registrant's Quarterly
Report on Form 10-Q for the quarter ended March 31,
1994).
4.27 Resolutions adopted by the Special Pricing Committee
of the Board of Directors on November 27, 1995
designating the terms and conditions of the Company's
6.55% Senior Notes, Series C, due 2005 and 7.2% Senior
Notes, Series D, due 2025 ("Senior Notes"), included
elsewhere herein.
4.28 Form of Senior Notes (incorporated by reference to
Exhibit 4.3 of the Company's Registration Statement on
Form S-3, Registration No. 33-52915).
10.1 Employee Benefit Plans
(a) Registrant's Employee Stock Ownership Plan and
Trust, as amended and restated December 30, 1994
(incorporated by reference to Exhibit 10.1 to
Registrant's Quarterly Report on Form 10-Q for the
quarter ended March 31, 1995) and amendment
thereto dated January 26, 1996, included elsewhere
herein.
(b) Registrant's Stock Bonus Plan, PAYSOP and Trust,
as amended and restated December 30, 1994
(incorporated by reference to Exhibit 10.2 to
Registrant's Quarterly Report on Form 10-Q for the
quarter ended March 31, 1995), amendment thereto
dated July 11, 1995 (incorporated by reference to
Exhibit 10.4 to Registrant's Quarterly Report on
Form 10-Q for the quarter ended June 30, 1995) and
amendment thereto dated January 26, 1996, included
elsewhere herein.
(c) Registrant's Dollars & Sense Plan and Trust, as
amended and restated, generally effective April 1,
1992 (incorporated by reference to Exhibit 10.7 to
Registrant's Annual Report on Form 10-K for the
year ended December 31, 1994).
(d) Registrant's Restated Supplemental Executive
Retirement Plan, generally effective as of
November 16, 1995, included elsewhere herein.
(e) Registrant's 1983 Restricted Stock Plan, dated
February 21, 1984, as amended and restated as of
November 16, 1995, included elsewhere herein.
(f) Registrant's Key Employee Incentive Compensation
Plan, dated January 1, 1984, as amended and
restated as of November 16, 1995, included
elsewhere herein.
(g) Registrant's 1988 Incentive Compensation Program
as amended and restated August 22, 1989
(incorporated by reference to Exhibit 19.8 to
Registrant's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1989).
(h) Form of Stock Option Agreement entered into in
1988 by the Registrant, pursuant to 1988 Incentive
Compensation Program, with certain of its officers
(incorporated by reference to Exhibit 10.10 to
Registrant's Annual Report on Form 10-K for the
year ended December 31, 1988) and amendment
thereto (incorporated by reference to Exhibit 4.6
to Registrant's Registration No. 33-31314).
(i) Registrant's 1990 Incentive Compensation Program,
dated March 15, 1990 (incorporated by reference to
Exhibit 19.1 to Registrant's Quarterly Report on
Form 10-Q for the quarter ended June 30, 1990).
(j) Form of Stock Option Agreement entered into in
1990 by the Registrant, pursuant to 1990 Incentive
Compensation Program, with certain of its officers
(incorporated by reference to Exhibit 19.3 to
Registrant's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1990) and amendment thereto
dated as of May 22, 1995 (incorporated by
reference to Exhibit 10.1 to Registrant's
Quarterly Report on Form 10-Q for the quarter
ended September 30, 1995).
(k) Form of Stock Option Agreement entered into in
1992 by the Registrant, pursuant to 1990 Incentive
Compensation Program, with certain of its officers
and employees (incorporated by reference to
Exhibit 10.17 to Registrant's Annual Report on
Form 10-K for the year ended December 31, 1992)
and amendment thereto dated as of May 22, 1995
(incorporated by reference to Exhibit 10.2 to
Registrant's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1995).
(l) Registrant's 1995 Incentive Compensation Plan
approved by Registrant's shareholders on May 11,
1995 (incorporated by reference to Exhibit 4.4
to Registration No. 33-60061).
(m) Form of Stock Option Agreement, pursuant to 1995
Incentive Compensation Plan and dated as of May
22, 1995, entered into by Registrant and its
officers (incorporated by reference to Exhibit
10.5 to Registrant's Quarterly Report on From 10-Q
for the quarter ended June 30, 1995).
(n) Form of Stock Option Agreement, pursuant to 1995
Incentive Compensation Plan and dated as of June
23, 1995, entered into by Registrant and certain
key employees (incorporated by reference to
Exhibit 10.6 to Registrant's Quarterly Report on
Form 10-Q for the quarter ended June 30, 1995).
(o) Form of Performance Share Agreement Under the 1990
Incentive Compensation Program, entered into in
1993 with certain of its officers and employees
(incorporated by reference to Exhibit 28.1 to
Registrant's Quarterly Report on Form 10-Q for the
quarter ended March 31, 1993) and amendment
thereto dated as of May 22, 1995 (incorporated by
reference to Exhibit 10.3 to Registrant's
Quarterly Report on Form 10-Q for the quarter
ended September 30, 1995).
(p) Form of Restricted Stock Agreement and Performance
Share Agreement Under the 1988 Incentive
Compensation Program, entered into in 1993 with
certain of its officers and employees
(incorporated by reference to Exhibit 28.2 to
Registrant's Quarterly Report on Form 10-Q for the
quarter ended March 31, 1993) and amendment
thereto dated as of May 22, 1995 (incorporated by
reference to Exhibit 10.4 to Registrant's
Quarterly Report on Form 10-Q for the quarter
ended September 30, 1995).
(q) Registrant's Restated Supplemental Defined
Contribution Plan, dated as of November 16, 1995,
included elsewhere herein.
(r) Registrant's Amended and Restated Supplemental
Dollars & Sense Plan, effective as of January 1,
1995 (incorporated by reference to Exhibit 10.22
to Registrant's Annual Report on Form 10-K for the
year ended December 31, 1994).
(s) Registrant's Amended and Restated Salary
Continuation (Disability) Plan for Officers, dated
November 26, 1991 (incorporated by reference to
Exhibit 10.16 of Registrant's Annual Report on
Form 10-K for the year ended December 31, 1991).
(t) Registrant's Restated Outside Directors'
Retirement Plan, dated as of November 16, 1995,
included elsewhere herein.
(u) Registrant's Restated Deferred Compensation Plan
for Outside Directors, dated as of November 16,
1995, included elsewhere herein.
10.2 Employment, Severance and Related Agreements
(a) Employment Agreement, dated May 24, 1993, by and
between Clarke M. Williams and Registrant
(incorporated by reference to Exhibit 19.1 to
Registrant's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1993) and amendment thereto
dated as of February 27, 1996, included elsewhere
herein.
(b) Form of Amended and Restated Severance Agreement,
by and between Registrant and each of its
executive officers other than Clarke M. Williams,
dated as of November 16, 1995, included elsewhere
herein.
(c) Form of Amended and Restated Severance Agreement,
by and between Registrant and six of its officers
who are not executive officers, dated as of
November 16, 1995, included elsewhere herein.
(d) Agreement, dated December 31, 1994, by and between
Jim D. Reppond and Registrant (incorporated by
reference to Exhibit 10.24 to Registrant's Annual
Report on Form 10-K for the year ended December
31, 1994).
10.3 Other Agreements
(a) Agreement and Plan of Merger dated October 8,
1993, as amended by Amendment No. 1 thereto dated
January 5, 1994 by and among Registrant,
Celutel Acquisition Corp., Celutel, Inc. and the
Principal Stockholders of Celutel, Inc.
(incorporated by reference to Appendix I of
Registrant's Prospectus forming a part of its
Registration Statement No.33-50791 filed January
12, 1994 pursuant to Rule 424(b)(5)).
(b) Loan Agreement and Grant of Rights of First
Refusal to Acquire Assets and/or Capital Stock of
MillTenn, Inc. and its Subsidiaries (incorporated
by reference to Exhibit 10.1 to Registrant's
Quarterly Report on Form 10-Q for the quarter
ended March 31, 1994).
11 Computations of Earnings Per Share, included else-
where herein.
21 Subsidiaries of the Registrant, included elsewhere
herein.
23 Independent Auditors' Consent, included elsewhere
herein.
27 Financial Data Schedule, included elsewhere herein.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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: March 18, 1996 By: /s/ Clarke M. Williams
-------------------------
Clarke M. Williams
Chairman of the Board
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the date indicated.
/s/ Clarke M. Williams
- ------------------------- Chairman of the Board
Clarke M. Williams of Directors March 18, 1996
/s/ Glen F. Post, III Vice Chairman of the
- ------------------------- Board of Directors,
Glen F. Post, III President, and Chief
Executive Officer March 18, 1996
/s/ R. Stewart Ewing, Jr. Senior Vice President
- ------------------------- and Chief Financial
R. Stewart Ewing, Jr. Officer March 18, 1996
/s/ Harvey P. Perry Senior Vice President,
- ------------------------- Secretary, General
Harvey P. Perry Counsel and Director March 18, 1996
/s/ W. Bruce Hanks
- ------------------------- President - Telecommunications
W. Bruce Hanks Services and Director March 18, 1996
/s/ Murray H. Greer
- ------------------------- Controller (Principal
Murray H. Greer Accounting Officer) March 18, 1996
/s/ William R. Boles, Jr.
- ------------------------- Director
William R. Boles, Jr. March 18, 1996
/s/ Virginia Boulet
- ------------------------- Director
Virginia Boulet March 18, 1996
/s/ Ernest Butler, Jr.
- ------------------------- Director
Ernest Butler, Jr. March 18, 1996
- ------------------------- Director
Calvin Czeschin March __, 1996
/s/ James B. Gardner
- ------------------------- Director
James B. Gardner March 18, 1996
/s/ R. L. Hargrove, Jr.
- ------------------------- Director
R. L. Hargrove, Jr. March 18, 1996
/s/ Johnny Hebert
- ------------------------- Director
Johnny Hebert March 18, 1996
/s/ F. Earl Hogan
- ------------------------- Director
F. Earl Hogan March 18, 1996
/s/ C. G. Melville, Jr.
- ------------------------- Director
C. G. Melville, Jr. March 18, 1996
/s/ Jim D. Reppond Director
- -------------------------
Jim D. Reppond March 18, 1996
SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT
CENTURY TELEPHONE ENTERPRISES, INC.
(Parent Company)
STATEMENTS OF INCOME
Year ended December 31,
- ------------------------------------------------------------------------------
1995 1994 1993
- ------------------------------------------------------------------------------
(Dollars in thousands)
REVENUES $ 5,608 6,190 5,860
- ------------------------------------------------------------------------------
EXPENSES
Operating expenses 5,165 5,400 6,014
Depreciation and amortization 6,860 6,603 5,877
- ------------------------------------------------------------------------------
Total expenses 12,025 12,003 11,891
- ------------------------------------------------------------------------------
OPERATING LOSS (6,417) (5,813) (6,031)
- ------------------------------------------------------------------------------
OTHER INCOME (EXPENSE)
Interest expense (37,467) (34,463) (20,678)
Interest income 30,930 24,088 10,696
- ------------------------------------------------------------------------------
Total other income (expense) (6,537) (10,375) (9,982)
- ------------------------------------------------------------------------------
LOSS BEFORE INCOME TAXES AND
EQUITY IN SUBSIDIARIES' EARNINGS (12,954) (16,188) (16,013)
Income tax benefit 3,769 3,205 5,037
- ------------------------------------------------------------------------------
LOSS BEFORE EQUITY IN
SUBSIDIARIES' EARNINGS (9,185) (12,983) (10,976)
Equity in subsidiaries' earnings 123,961 113,221 79,980
- ------------------------------------------------------------------------------
NET INCOME $ 114,776 100,238 69,004
==============================================================================
See accompanying notes to condensed financial information of registrant.
SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT
(continued)
CENTURY TELEPHONE ENTERPRISES, INC.
(Parent Company)
BALANCE SHEETS
December 31,
- -----------------------------------------------------------------------------
1995 1994
- -----------------------------------------------------------------------------
(Dollars in thousands)
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 1,616 3,097
Receivables from subsidiaries 94,217 126,821
Other receivables 9,888 941
Prepayments and other 1,854 844
- ----------------------------------------------------------------------------
Total current assets 107,575 131,703
- ----------------------------------------------------------------------------
PROPERTY, PLANT AND EQUIPMENT
Property and equipment 983 932
Accumulated depreciation (583) (524)
- ----------------------------------------------------------------------------
Net property, plant and equipment 400 408
- ----------------------------------------------------------------------------
INVESTMENTS AND OTHER ASSETS
Investments in subsidiaries (at equity) 1,166,186 1,032,991
Receivables from subsidiaries 139,631 155,156
Other investments 50,620 27,919
Note receivable 22,500 24,167
Deferred charges 5,010 5,599
- ----------------------------------------------------------------------------
Total investments and other assets 1,383,947 1,245,832
- ----------------------------------------------------------------------------
TOTAL ASSETS $ 1,491,922 1,377,943
============================================================================
LIABILITIES AND EQUITY
CURRENT LIABILITIES
Current maturities of long-term debt $ 5,516 5,481
Notes payable to banks - 158,000
Payables to subsidiaries 143,793 155,551
Accrued interest 4,424 7,345
Other accrued liabilities 4,377 11,420
- ----------------------------------------------------------------------------
Total current liabilities 158,110 337,797
- ----------------------------------------------------------------------------
LONG-TERM DEBT 392,018 342,334
- ----------------------------------------------------------------------------
PAYABLES TO SUBSIDIARIES 35,684 34,197
- ----------------------------------------------------------------------------
DEFERRED CREDITS AND OTHER LIABILITIES 17,686 13,379
- ----------------------------------------------------------------------------
STOCKHOLDERS' EQUITY
Common stock, $1.00 par value, authorized
175,000,000 shares, issued and
outstanding 59,113,670
and 53,574,361 shares 59,114 53,574
Paid-in capital 453,584 319,235
Retained earnings 387,424 291,999
Unearned ESOP shares (13,960) (16,840)
Preferred stock - non-redeemable 2,262 2,268
- ----------------------------------------------------------------------------
Total stockholders' equity 888,424 650,236
- ----------------------------------------------------------------------------
TOTAL LIABILITIES AND EQUITY $ 1,491,922 1,377,943
============================================================================
See accompanying notes to condensed financial information of registrant.
SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT
(Continued)
CENTURY TELEPHONE ENTERPRISES, INC.
(Parent Company)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year ended December 31,
- ----------------------------------------------------------------------------------------------------
1995 1994 1993
- ----------------------------------------------------------------------------------------------------
(Dollars in thousands)
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income $ 114,776 100,238 69,004
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization 6,860 6,603 5,877
Deferred income taxes 4,241 5,918 (451)
Earnings of subsidiaries (123,961) (113,221) (79,980)
Changes in current assets and current liabilities:
(Increase) decrease in other receivables (8,947) 7,078 (6,692)
Increase (decrease) in other accrued liabilities (3,409) 5,063 1,203
Changes in other current assets and
other current liabilities, net (4,377) 6,014 102
Other, net 1,558 766 1,934
- ----------------------------------------------------------------------------------------------------
Net cash provided by (used in) operating activities (13,259) 18,459 (9,003)
- ----------------------------------------------------------------------------------------------------
INVESTING ACTIVITIES
Acquisitions (22,130) (55,979) (33,209)
Capital contributions to subsidiaries (53,050) (47,516) (16,819)
Dividends received from subsidiaries 52,423 3,841 908
(Increase) decrease in receivables from subsidiaries 71,203 (98,917) (13,024)
Increase (decrease) in payables to subsidiaries (10,271) 70,512 23,848
Investment in unconsolidated personal
communications services entity (20,000) - -
Note receivable 833 (25,000) -
Purchase of Industrial Development Revenue bonds - - (19,000)
Other, net (2,546) (3,292) (2,893)
- -----------------------------------------------------------------------------------------------------
Net cash provided by (used in) investing activities 16,462 (156,351) (60,189)
- -----------------------------------------------------------------------------------------------------
FINANCING ACTIVITIES
Proceeds from issuance of long-term debt 171,046 147,754 -
Payments of long-term debt (4,901) (4,870) (6,697)
Notes payable, net (158,000) 7,500 88,500
Proceeds from issuance of common stock 6,522 4,814 3,529
Cash dividends paid (19,351) (17,184) (15,735)
- ----------------------------------------------------------------------------------------------------
Net cash provided by (used in)financing activities (4,684) 138,014 69,597
- ----------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS (1,481) 122 405
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 3,097 2,975 2,570
- ----------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 1,616 3,097 2,975
====================================================================================================
See accompanying notes to condensed financial information of registrant.
</TABLE>
SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT
(continued)
CENTURY TELEPHONE ENTERPRISES, INC.
(Parent Company)
NOTES TO CONDENSED FINANCIAL INFORMATION OF REGISTRANT
(A) LONG-TERM DEBT
The approximate annual debt maturities (including sinking fund
requirements) for the five years subsequent to December 31, 1995 are as follows:
1996 - $5.5 million
1997 - $5.0 million
1998 - $4.7 million
1999 - $4.3 million
2000 - $57.7 million
(B) GUARANTEES
As of December 31, 1995, Century has guaranteed a promissory note for a
subsidiary of $2.6 million, as well as the applicable interest and premium.
Century has also guaranteed $905,000 in Industrial Development Revenue Bonds
originally issued by a subsidiary; such bonds were assumed by the purchaser of
the subsidiary's assets.
(C) DIVIDENDS FROM SUBSIDIARIES
Dividends paid to Century by consolidated subsidiaries were $52.4 million,
$3.8 million and $908,000 during 1995, 1994 and 1993, respectively.
(D) INCOME TAXES AND INTEREST PAID
Income taxes paid by Century (including amounts reimbursed from
subsidiaries) were $56.9 million, $35.0 million and $31.5 million during 1995,
1994 and 1993, respectively.
Interest paid by Century was $40.4 million, $32.0 million and $20.9
million during 1995, 1994 and 1993, respectively.
(E) AFFILIATED TRANSACTIONS
Century provides and bills management services to subsidiaries and in
certain instances makes interest bearing advances to finance construction of
plant and purchases of equipment. Century recorded intercompany interest income
of $28.2 million, $22.2 million and $10.6 million in 1995, 1994 and 1993,
respectively.
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
CENTURY TELEPHONE ENTERPRISES, INC.
For the years ended December 31, 1995, 1994 and 1993
<TABLE>
<CAPTION>
Additions
Balance at charged to Deductions Balance
beginning costs and from Other at end
Description of period expenses allowance (1) changes (2) of period
- ---------------------------------------------------------------------------------------------------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
Year ended December 31, 1995
Allowance for doubtful accounts $ 2,360 7,200 (6,946) 154 2,768
Year ended December 31, 1994
Allowance for doubtful accounts $ 1,473 4,748 (4,139) 278 2,360
Year ended December 31, 1993
Allowance for doubtful accounts $ 960 2,073 (1,810) 250 1,473
(1) Customers' accounts written-off, net of recoveries.
(2) Allowance for doubtful accounts at the date of acquisition of purchased
subsidiaries, net of allowance for doubtful accounts at the date of
disposition of subsidiaries sold.
</TABLE>
CENTURY TELEPHONE ENTERPRISES, INC.
INDEX TO EXHIBITS
December 31, 1995
Exhibit
Number
- -------
3(i) Amended and Restated Articles of Incorporation of Registrant, dated
as of May 23, 1995 (incorporated by reference to Exhibit 4.1 to
Registration No. 33-60061).
3(ii) Registrant's Bylaws, as amended through May 23, 1995 (incorporated
by reference to Exhibit 4.2 to Registration No. 33-60061).
4.1 Competitive Advance and Revolving Credit Facility Agreement, dated
October 17, 1995, between Registrant and Bank One of Texas, N.A.
(incorporated by reference to Exhibit 4.2 to Registrant's Quarterly
Report on Form 10-Q for the quarter ended September 30, 1995).
4.2 Note Purchase Agreement, dated September 1, 1989, between Registrant,
Teachers Insurance and Annuity Association of America and the Lincoln
National Life Insurance Company (incorporated by reference to Exhibit
4.23 to Registrant's Quarterly Report on Form 10-Q for the quarter
ended September 30, 1989).
4.12 Amended and Restated Rights Agreement dated as of November 17, 1986
between Century Telephone Enterprises, Inc. and the Rights Agent
named therein (incorporated by reference to Exhibit 4.1 to
Registrant's Current Report on Form 8-K dated December 20, 1988), the
Amendment thereto dated March 26, 1990 (incorporated by reference to
Exhibit 4.1 to Registrant's Quarterly Report on Form 10-Q for the
quarter ended March 31, 1990) and the Second Amendment thereto dated
February 23, 1993 (incorporated by reference to Exhibit 4.12 to
Registrant's Annual Report on Form 10-K for the year ended December
31, 1992).
4.16 Note Purchase Agreement, dated May 6, 1986, among Registrant,
Teachers Insurance and Annuity Association of America, Aetna Life
Insurance Company, the Aetna Casualty and Surety Company and Lincoln
National Pension Insurance Company (incorporated by reference to
Exhibit 4.23 to Registration No. 33-5836), Amendatory Agreement dated
November 1, 1986 (incorporated by reference to Exhibit 4.2 to
Registrant's Annual Report on Form 10-K for the year ended December
31, 1986), amendment thereto dated November 1, 1987 (incorporated by
reference to Exhibit 4.2 to Registrant's Annual Report on Form 10-K
for the year ended December 31, 1987) and Modification Letter dated
September 1, 1989 (incorporated by reference to Exhibit 19.6 to
Registrant's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1989).
4.22 Form of common stock certificate of the Registrant (incorporated by
reference to Exhibit 4.1 to Registrant's Quarterly Report on Form
10-Q for the quarter ended June 30, 1993).
4.24 Revolving Credit Facility Agreement, dated February 7, 1992 between
Registrant and NationsBank of Texas, N.A. (incorporated by reference
to Exhibit 4.24 to Registrant's Annual Report on Form 10-K for the
year ended December 31, 1991), amendment thereto dated April 8, 1993
(incorporated by reference to Exhibit 19.2 to Registrant's Quarterly
Report on Form 10-Q for the quarter ended March 31, 1993), amendment
thereto dated July 9, 1993 (incorporated by reference to Exhibit 4.24
to Registrant's Annual Report on Form 10-K for the year ended
December 31, 1993), amendment thereto dated August 15, 1994
(incorporated by reference to Exhibit 4.1 to Registrant's Quarterly
Report on Form 10-Q for the quarter ended September 30, 1994) and
amendment thereto dated October 5, 1995 (incorporated by reference to
Exhibit 4.1 to Registrant's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1995).
4.25 Indenture dated as of March 31, 1994 between the Company and Regions
Bank of Louisiana (formerly First American Bank & Trust of
Louisiana), as Trustee (incorporated by reference to Exhibit 4.1 of
the Company's Registration Statement on Form S-3, Registration No.
33-52915).
4.26 Resolutions adopted by the Executive Committee of the Board of
Directors on April 29, 1994 designating the terms and conditions of
the Company's 7-3/4% Senior Notes, Series A, due 2004 and 8-1/4%
Senior Notes, Series B, due 2024 ("Senior Notes") (incorporated by
reference to Exhibit 4.1 to Registrant's Quarterly Report on Form
10-Q for the quarter ended March 31, 1994).
4.27 Resolutions adopted by the Special Pricing Committee of the Board of
Directors on November 27, 1995 designating the terms and conditions
of the Company's 6.55% Senior Notes, Series C, due 2005 and 7.2%
Senior Notes, Series D, due 2025 ("Senior Notes"), included herein.
4.28 Form of Senior Notes (incorporated by reference to Exhibit 4.3 of the
Company's Registration Statement on Form S-3, Registration No.
33-52915).
10.1 Employee Benefit Plans
(a) Registrant's Employee Stock Ownership Plan and Trust, as
amended and restated December 30, 1994 (incorporated by
reference to Exhibit 10.1 to Registrant's Quarterly Report on
Form 10-Q for the quarter ended March 31, 1995) and amendment
thereto dated January 26, 1996, included herein.
(b) Registrant's Stock Bonus Plan, PAYSOP and Trust, as amended
and restated December 30, 1994 (incorporated by reference to
Exhibit 10.2 to Registrant's Quarterly Report on Form 10-Q for
the quarter ended March 31, 1995), amendment thereto dated
July 11, 1995 (incorporated by reference to Exhibit 10.4 to
Registrant's Quarterly Report on Form 10-Q for the quarter
ended June 30, 1995) and amendment thereto dated January 26,
1996, included herein.
(c) Registrant's Dollars & Sense Plan and Trust, as amended and
restated, generally effective April 1, 1992 (incorporated by
reference to Exhibit 10.7 to Registrant's Annual Report on
Form 10-K for the year ended December 31, 1994).
(d) Registrant's Restated Supplemental Executive Retirement Plan,
generally effective as of November 16, 1995, included herein.
(e) Registrant's 1983 Restricted Stock Plan, dated February 21,
1984, as amended and restated as of November 16, 1995,
included herein.
(f) Registrant's Key Employee Incentive Compensation Plan, dated
January 1, 1984, as amended and restated as of November 16,
1995, included herein.
(g) Registrant's 1988 Incentive Compensation Program as amended
and restated August 22, 1989 (incorporated by reference to
Exhibit 19.8 to Registrant's Quarterly Report on Form 10-Q for
the quarter ended September 30, 1989).
(h) Form of Stock Option Agreement entered into in 1988 by the
Registrant, pursuant to 1988 Incentive Compensation Program,
with certain of its officers (incorporated by reference to
Exhibit 10.10 to Registrant's Annual Report on Form 10-K for
the year ended December 31, 1988) and amendment thereto
(incorporated by reference to Exhibit 4.6 to Registrant's
Registration No. 33-31314).
(i) Registrant's 1990 Incentive Compensation Program, dated March
15, 1990 (incorporated by reference to Exhibit 19.1 to
Registrant's Quarterly Report on Form 10-Q for the quarter
ended June 30, 1990).
(j) Form of Stock Option Agreement entered into in 1990 by the
Registrant, pursuant to 1990 Incentive Compensation Program,
with certain of its officers (incorporated by reference to
Exhibit 19.3 to Registrant's Quarterly Report on Form 10-Q for
the quarter ended June 30, 1990) and amendment thereto dated
as of May 22, 1995 (incorporated by reference to Exhibit 10.1
to Registrant's Quarterly Report on Form 10-Q for the quarter
ended September 30, 1995).
(k) Form of Stock Option Agreement entered into in 1992 by the
Registrant, pursuant to 1990 Incentive Compensation Program,
with certain of its officers and employees (incorporated by
reference to Exhibit 10.17 to Registrant's Annual Report on
Form 10-K for the year ended December 31, 1992) and amendment
thereto dated as of May 22, 1995 (incorporated by reference to
Exhibit 10.2 to Registrant's Quarterly Report on Form 10-Q for
the quarter ended September 30, 1995).
(l) Registrant's 1995 Incentive Compensation Plan approved by
Registrant's shareholders on May 11, 1995 (incorporated by
reference to Exhibit 4.4 to Registration No.
33-60061).
(m) Form of Stock Option Agreement, pursuant to 1995 Incentive
Compensation Plan and dated as of May 22, 1995, entered into
by Registrant and its officers (incorporated by reference to
Exhibit 10.5 to Registrant's Quarterly Report on From 10-Q for
the quarter ended June 30, 1995).
(n) Form of Stock Option Agreement, pursuant to 1995 Incentive
Compensation Plan and dated as of June 23, 1995, entered into
by Registrant and certain key employees (incorporated by
reference to Exhibit 10.6 to Registrant's Quarterly Report on
Form 10-Q for the quarter ended June 30, 1995).
(o) Form of Performance Share Agreement Under the 1990 Incentive
Compensation Program, entered into in 1993 with certain of its
officers and employees (incorporated by reference to Exhibit
28.1 to Registrant's Quarterly Report on Form 10-Q for the
quarter ended March 31, 1993) and amendment thereto dated as
of May 22, 1995 (incorporated by reference to Exhibit 10.3 to
Registrant's Quarterly Report on Form 10-Q for the quarter
ended September 30, 1995).
(p) Form of Restricted Stock Agreement and Performance Share
Agreement Under the 1988 Incentive Compensation Program,
entered into in 1993 with certain of its officers and
employees (incorporated by reference to Exhibit 28.2 to
Registrant's Quarterly Report on Form 10-Q for the quarter
ended March 31, 1993) and amendment thereto dated as of May
22, 1995 (incorporated by reference to Exhibit 10.4 to
Registrant's Quarterly Report on Form 10-Q for the quarter
ended September 30, 1995).
(q) Registrant's Restated Supplemental Defined Contribution Plan,
dated as of November 16, 1995, included herein.
(r) Registrant's Amended and Restated Supplemental Dollars & Sense
Plan, effective as of January 1, 1995 (incorporated by
reference to Exhibit 10.22 to Registrant's Annual Report on
Form 10-K for the year ended December 31, 1994).
(s) Registrant's Amended and Restated Salary Continuation
(Disability) Plan for Officers, dated November 26, 1991
(incorporated by reference to Exhibit 10.16 of Registrant's
Annual Report on Form 10-K for the year ended December 31,
1991).
(t) Registrant's Restated Outside Directors' Retirement Plan,
dated as of November 16, 1995, included herein.
(u) Registrant's Restated Deferred Compensation Plan for Outside
Directors, dated as of November 16, 1995, included herein.
10.2 Employment, Severance and Related Agreements
(a) Employment Agreement, dated May 24, 1993, by and between
Clarke M. Williams and Registrant (incorporated by reference
to Exhibit 19.1 to Registrant's Quarterly Report on Form 10-Q
for the quarter ended June 30, 1993) and amendment thereto
dated as of February 27, 1996, included herein.
(b) Form of Amended and Restated Severance Agreement, by and
between Registrant and each of its executive officers other
than Clarke M. Williams, dated as of November 16, 1995,
included herein.
(c) Form of Amended and Restated Severance Agreement, by and
between Registrant and six of its officers who are not
executive officers, dated as of November 16, 1995, included
herein.
(d) Agreement, dated December 31, 1994, by and between Jim D.
Reppond and Registrant (incorporated by reference to Exhibit
10.24 to Registrant's Annual Report on Form 10-K for the year
ended December 31, 1994).
10.3 Other Agreements
(a) Agreement and Plan of Merger dated October 8, 1993, as amended
by Amendment No. 1 thereto dated January 5, 1994 by and among
Registrant, Celutel Acquisition Corp., Celutel, Inc. and the
Principal Stockholders of Celutel, Inc. (incorporated by
reference to Appendix I of Registrant's Prospectus forming a
part of its Registration Statement No. 33-50791 filed January
12, 1994 pursuant to Rule 424(b)(5)).
(b) Loan Agreement and Grant of Rights of First Refusal to Acquire
Assets and/or Capital Stock of MillTenn, Inc. and its
Subsidiaries (incorporated by reference to Exhibit 10.1 to
Registrant's Quarterly Report on Form 10-Q for the quarter
ended March 31, 1994).
11 Computations of Earnings Per Share, included herein.
21 Subsidiaries of the Registrant, included herein.
23 Independent Auditors' Consent, included herein.
27 Financial Data Schedule, included herein.
Exhibit 4.27
CENTURY TELEPHONE ENTERPRISES, INC.
The following resolutions were adopted by the Special Pricing Committee
of the Board of Directors of Century Telephone Enterprises, Inc. on
November 27, 1995:
WHEREAS, the Board of Directors of Century Telephone Enterprises,
Inc. (the "Company") has previously authorized (i) the appropriate
officers of the Company to take various actions necessary to
permit the Company to register, issue and sell senior debt
securities with an aggregate initial offering price not to exceed
$400,000,000 and (ii) the Special Pricing Committee of the Board
of the Directors to establish the specific terms and conditions of
any one or more series of senior debt securities to be issued and
sold from time to time; and
WHEREAS, the Special Pricing Committee, acting pursuant to such
authorization, deems it desirable and in the best interest of the
Company and its shareholders to authorize the issuance of
$150,000,000 aggregate principal amount of its senior debt
securities;
NOW, THEREFORE, BE IT RESOLVED THAT:
(1) The Company shall create and issue $150,000,000 aggregate
principal amount of its senior debt securities, consisting of (i)
$50,000,000 aggregate principal amount of senior notes designated
as the "Century Telephone Enterprises, Inc. 6.55% Senior Notes,
Series C, Due 2005" (the "Series C Notes") and (ii) $100,000,000
aggregate principal amount of senior notes designated as the
"Century Telephone Enterprises, Inc. 7.20% Senior Notes, Series D,
Due 2025" (the "Series D Notes" and, together with the Series C
Notes, the "Senior Notes"), in each case to be sold at the prices
described below and in accordance with the Indenture dated as of
March 31, 1994 ("Indenture"), between the Company and Regions Bank
of Louisiana (successor to First American Bank & Trust of
Louisiana), as Trustee ("Trustee"), to wit:
a. The Series C Notes will mature on December 1, 2005
and the Series D Notes will mature on December 1, 2025.
b. The Senior Notes shall bear interest from November 30,
1995, until the principal thereof becomes due and payable at the
rate of 6.55% per annum with respect to the Series C Notes and
7.20% per annum with respect to the Series D Notes, payable in
each case semi-annually on June 1 and December 1 of each year
commencing June 1, 1996, and any overdue principal and (to the
extent that the payment of such interest is enforceable under
applicable law) any overdue installment of interest thereon shall
bear interest at the same rate per annum; the principal of and the
interest on the Senior Notes shall be payable in any coin or
currency of the United States of America which at the time of
payment is legal tender for the payment of public and private
debts, at the office or agency of the Company maintained in
accordance with the Indenture, or, at the option of the Company,
by check in U.S. dollars mailed or delivered to the person in
whose name the Senior Notes are registered. The regular record
date with respect to any interest payment date for the Senior
Notes shall be the May 15 or November 15, as the case may be,
immediately preceding such interest payment date, whether or not
such date is a business day.
c. The Series C Notes will not be redeemable prior to
maturity.
d. The Series D Notes will be redeemable as a whole or in
part, at the option of the Company at any time, at a redemption
price equal to the greater of (i) 100% of the principal amount of
such Series D Notes or (ii) the sum of the present values of the
remaining scheduled payments of principal and interest thereon
discounted to the redemption date on a semiannual basis (assuming
a 360-day year consisting of twelve 30-day months) at the Treasury
Rate plus 12.5 basis points, plus in each case accrued interest
thereon to the date of redemption.
"Treasury Rate" means, with respect to any redemption date,
the rate per annum equal to the semiannual equivalent yield to
maturity of the Comparable Treasury Issue, assuming a price for
the Comparable Treasury Issue (expressed as a percentage of its
principal amount) equal to the Comparable Treasury Price for such
redemption date.
"Comparable Treasury Issue" means the United States Treasury
security selected by an Independent Investment Banker as having a
maturity comparable to the remaining term of the Series D Notes to
be redeemed that would be utilized, at the time of selection and
in accordance with customary financial practice, in pricing new
issues of corporate debt securities of comparable maturity to the
remaining term of such Series D Notes. "Independent Investment
Banker" means one of the Reference Treasury Dealers appointed by
the Trustee after consultation with the Company.
"Comparable Treasury Price" means, with respect to any
redemption date, (i) the average of the bid and asked prices for
the Comparable Treasury Issue (expressed in each case as a
percentage of its principal amount) on the third business day
preceding such redemption date, as set forth in the daily
statistical release (or any successor release) published by the
Federal Reserve Bank of New York and designated "Composite 3:30
p.m. Quotations for U.S. Government Securities" or (ii) if such
release (or any successor release) is not published or does not
contain such prices on such business day, (A) the average of the
Reference Treasury Dealer Quotations for such redemption date,
after excluding the highest and lowest such Reference Treasury
Dealer Quotations, or (B) if the Trustee obtains fewer than four
such Reference Treasury Dealer Quotations, the average of all
such Quotations. "Reference Treasury Dealer Quotations" means,
with respect to each Reference Treasury Dealer and any redemption
date, the average, as determined by the Trustee, of the bid and
asked prices for the Comparable Treasury Issue (expressed in each
case as a percentage of its principal amount) quoted in writing
to the Trustee by such Reference Treasury Dealer at 5:00 p.m. on
the third business day preceding such redemption date.
"Reference Treasury Dealer" means each of PaineWebber
Incorporated, Goldman, Sachs & Co., Merrill Lynch, Pierce, Fenner
& Smith Incorporated, Smith Barney Inc. and their respective
successors; provided, however, that if any of the foregoing shall
cease to be a primary U.S. Government securities dealer in New
York City (a "Primary Treasury Dealer"), the Company shall
substitute therefor another Primary Treasury Dealer.
Notice of any redemption will be mailed at least 30 days but
no more than 60 days before the redemption date to each holder of
Series D Notes to be redeemed.
Unless the Company defaults in payment of the redemption
price, on and after the redemption date interest will cease to
accrue on the Series D Notes or portions thereof called for
redemption.
e. There will be no mandatory sinking fund payments for the
Senior Notes.
f. The Senior Notes and the Trustee's Certificate of
Authentication to be endorsed thereon are to be substantially in
the following form:
(FORM OF FACE OF SECURITY)
No _________________ $ ________________________
C U S I P N O.___________
Century Telephone Enterprises, Inc.
____% Senior Notes, Series __, Due ____
Century Telephone Enterprises, Inc., a corporation duly organized
and existing under the laws of the State of Louisiana (herein
referred to as the "Company"), for value received, hereby promises
to pay to _________________________________ or registered assigns,
the principal sum of _________________________Dollars on
____________ and to pay interest on said principal sum from , or
from the most recent interest payment date to which interest has
been paid or duly provided for, semi-annually on ____________ and
______________ in each year, commencing _________________, at the
rate of_____% per annum until the principal hereof shall have
become due and payable, and on any overdue principal and (to the
extent that payment of such interest is enforceable under
applicable law) on any overdue installment of interest at the same
rate per annum. The interest installment so payable, and
punctually paid or duly provided for, on any interest payment date
will, as provided in the Indenture hereinafter referred to, be
paid to the person in whose name this Security (or one or more
Predecessor Securities, as defined in said Indenture) is
registered at the close of business on the regular record date for
such interest installment, which shall be the __________or
____________, as the case may be (whether or not a business day),
immediately preceding such interest payment date. Any such
interest installment not so punctually paid or duly provided for
shall forthwith cease to be payable to the registered holder on
such regular record date, and may be paid to the person in whose
name this Security (or one or more Predecessor Securities) is
registered at the close of business on a special record date to be
fixed by the Trustee for the payment of such defaulted interest,
notice of which shall be given to the registered holders of this
series of Securities not more than 15 days and not less than 10
days prior to such special record date, or may be paid at any time
in any other lawful manner not inconsistent with the requirements
of any securities exchange on which the Securities may be listed,
and upon such notice as may be required by such exchange, all as
more fully provided in the Indenture hereinafter referred to. The
principal of and the interest on this Security shall be payable in
any coin or currency of the United States of America which at the
time of payment is legal tender for payment of public and private
debt, at the office or agency of the Company maintained for that
purpose in the City of Monroe and State of Louisiana, or the
Borough of Manhattan, the City and State of New York, or, at the
option of the Company, by check in U.S. dollars mailed or
delivered to the person in whose name this Security is registered.
This Security shall not be entitled to any benefit under the
Indenture hereinafter referred to, or be valid or become obligatory for
any purpose, until the Certificate of Authentication hereon shall have
been signed by or on behalf of the Trustee.
The provisions of this Security are continued on the reverse side
hereof and such continued provisions shall for all purposes have the same
effect as though fully set forth at this place.
IN WITNESS WHEREOF, the Company has caused this instrument to be
executed.
Dated: ___________________________
CENTURY TELEPHONE ENTERPRISES, INC.
By _______________________________
[President/Vice President]
Attest:
By _______________________________
[Secretary/Assistant Secretary]
(FORM OF CERTIFICATE OF AUTHENTICATION)
CERTIFICATE OF AUTHENTICATION
This is one of the Securities of the above-designated series
therein referred to in the within-mentioned Indenture.
Regions Bank of Louisiana
as Trustee, Authenticating Agent and
Security Registrar
By _________________________________
Authorized Officer
(FORM OF REVERSE OF SECURITY)
This Security is one of a duly authorized series of Securities of
the Company (herein sometimes referred to as the "Securities"),
all issued or to be issued in one or more series under and
pursuant to an Indenture dated as of March 31, 1994 duly executed
and delivered between the Company and Regions Bank of Louisiana
(successor to First American Bank & Trust of Louisiana), a
Louisiana banking corporation organized and existing under the
laws of the State of Louisiana, as Trustee (herein referred to as
the "Trustee") (said Indenture hereinafter referred to as the
"Indenture"), to which Indenture reference is hereby made for a
description of the rights, limitation of rights, obligations,
duties and immunities thereunder of the Trustee, the Company and
the holders of the Securities. By the terms of the Indenture, the
Securities are issuable in series which may vary as to amount,
date of maturity, rate of interest and in other respects as in the
Indenture provided. This Security (herein called the "Security")
is one of the series designated on the face hereof (herein called
the "Series") limited in aggregate principal amount to
$___,000,000.
In case an Event of Default, as defined in the Indenture, with
respect to the Series shall have occurred and be continuing, the
principal of all of the Securities of the Series may be declared,
and upon such declaration shall become, due and payable, in the
manner, with the effect and subject to the conditions provided in
the Indenture.
The Indenture contains provisions permitting the Company and
the Trustee, with the consent of the holders of not less than a
majority in aggregate principal amount of the Securities of each
series affected at the time Outstanding, as defined in the
Indenture, to execute supplemental indentures for the purpose of
adding any provisions to or changing in any manner or eliminating
any of the provisions of the Indenture or of any supplemental
indenture or of modifying in any manner the rights of the holders
of the Securities; provided, however, that no such supplemental
indenture shall (i) extend the fixed maturity of any Securities or
any series, or reduce the principal amount thereof, or reduce the
rate or extend the time of payment of interest thereon, or reduce
any premium payable upon the redemption thereof, without the
consent of the holder of each Security so affected or (ii) reduce
the aforesaid percentage of Securities, the holders of which are
required to consent to any such supplemental indenture, without
the consent of the holders of each Security then Outstanding and
affected thereby. The Indenture also contains provisions
permitting the holders of a majority in aggregate principal amount
of the Securities of any series at the time Outstanding, on behalf
of the holders of Securities of such series, to waive any past
default in the performance of any of the covenants contained in
the Indenture, or establish pursuant to the Indenture with respect
to such series, and its consequences, except a default in the
payment of the principal of, or premium, if any, or interest on
any of the Securities of such series. Any such consent or waiver
by the registered holder of this Security (unless revoked as
provided in the Indenture) shall be conclusive and binding upon
such holder and upon all future holders and owners of this
Security and of any Security issued in exchange hereof or in place
hereof (whether by registration of transfer or otherwise),
irrespective of whether or not any notation of such consent or
waiver is made upon this Security.
No reference herein to the Indenture and no provision of this
Security or of the Indenture shall alter or impair the obligation
of the Company, which is absolute and unconditional, to pay the
principal of and interest on this Security at the times and place
and at the rate and in the currency herein prescribed.
The Securities are issuable as registered Securities without
coupons in denominations of $1,000 or any integral multiple
thereof. Securities may be exchanged, upon presentation thereof
for that purpose, at the office or agency of the Company in the
City of Monroe and State of Louisiana, for other Securities of
authorized denominations, and for a like aggregate principal
amount and series, and upon payment of a sum sufficient to cover
any tax or other governmental charge in relation thereto.
The Securities will not be redeemable prior to maturity.
or
The Securities will be redeemable as a whole or in part, at
the option of the Company at any time, at a redemption price equal
to the greater of (i) 100% of the principal amount of such
Securities or (ii) the sum of the present values of the remaining
scheduled payments of principal and interest thereon discounted to
the redemption date on a semiannual basis (assuming a 360-day year
consisting of twelve 30-day months) at the Treasury Rate plus 12.5
basis points, plus in each case accrued interest thereon to the
date of redemption.
"Treasury Rate" means, with respect to any redemption date,
the rate per annum equal to the semiannual equivalent yield to
maturity of the Comparable Treasury Issue, assuming a price for
the Comparable Treasury Issue (expressed as a percentage of its
principal amount) equal to the Comparable Treasury Price for such
redemption date.
"Comparable Treasury Issue" means the United States Treasury
security selected by an Independent Investment Banker as having a
maturity comparable to the remaining term of the Securities to be
redeemed that would be utilized, at the time of selection and in
accordance with customary financial practice, in pricing new
issues of corporate debt securities of comparable maturity to the
remaining term of such Securities. "Independent Investment Banker"
means one of the Reference Treasury Dealers appointed by the
Trustee after consultation with the Company.
"Comparable Treasury Price" means, with respect to any
redemption date, (i) the average of the bid and asked prices for
the Comparable Treasury Issue (expressed in each case as a
percentage of its principal amount) on the third business day
preceding such redemption date, as set forth in the daily
statistical release (or any successor release) published by the
Federal Reserve Bank of New York and designated "Composite 3:30
p.m. Quotations for U.S. Government Securities" or (ii) if such
release (or any successor release) is not published or does not
contain such prices on such business day, (A) the average of the
Reference Treasury Dealer Quotations for such redemption date,
after excluding the highest and lowest such Reference Treasury
Dealer Quotations, or (B) if the Trustee obtains fewer than four
such Reference Treasury Dealer Quotations, the average of all
such Quotations. "Reference Treasury Dealer Quotations" means,
with respect to each Reference Treasury Dealer and any redemption
date, the average, as determined by the Trustee, of the bid and
asked prices for the Comparable Treasury Issue (expressed in each
case as a percentage of its principal amount) quoted in writing
to the Trustee by such Reference Treasury Dealer at 5:00 p.m. on
the third business day preceding such redemption date.
"Reference Treasury Dealer" means each of PaineWebber
Incorporated, Goldman, Sachs & Co., Merrill Lynch, Pierce, Fenner
& Smith Incorporated, Smith Barney Inc. and their respective
successors; provided, however, that if any of the foregoing shall
cease to be a primary U.S. Government securities dealer in New
York City (a "Primary Treasury Dealer"), the Company shall
substitute therefor another Primary Treasury Dealer.
Notice of any redemption will be mailed at least 30 days but
no more than 60 days before the redemption date to each holder of
Securities to be redeemed.
Unless the Company defaults in payment of the redemption
price, on and after the redemption date interest will cease to
accrue on the Securities or portions thereof called for
redemption.
As provided in the Indenture and subject to certain
limitations therein set forth, this Security is transferable by
the registered holder hereof on the Security Register of the
Company, upon surrender of this Security for registration of
transfer at the office or agency of the Company in the City of
Monroe and State of Louisiana accompanied by a written instrument
or instruments of transfer in form satisfactory to the Company or
the Security Registrar duly executed by the registered holder
hereof or his attorney duly authorized in writing, and thereupon
one or more new Securities of authorized denominations and for
the same aggregate principal amount and series will be issued to
the designated transferee or transferees. No service charge will
be made for any such transfer, but the Company may require
payment of a sum sufficient to cover any tax or other
governmental charge payable in relation thereto.
Prior to due presentment for registration of transfer of this
Security the Company, the Trustee, any Paying Agent and any
Security Registrar may deem and treat the registered holder
hereof as the absolute owner hereof (whether or not this Security
shall be overdue and notwithstanding any notice of ownership or
writing hereon made by anyone other than the Security Registrar)
for the purpose of receiving payment of or on account of the
principal hereof and interest due hereon and for all other
purposes, and neither the Company nor the Trustee nor any paying
agent nor any Security Registrar shall be affected by any notice
to the contrary.
No recourse shall be had for the payment of the principal of
or the interest on this Security, or for any claim based hereon,
or otherwise in respect hereof, or based on or in respect of the
Indenture, against any incorporator, stockholder, affiliate,
officer or director, past, present or future, as such, of the
Company or of any predecessor or successor corporation, whether
by virtue of any constitution, statute or rule of law, or by the
enforcement of any assessment or penalty or otherwise, all such
liability being, by the acceptance hereof and as part of the
consideration for the issuance hereof, expressly waived and
released.
Capitalized terms used herein and not otherwise defined herein
shall have the respective meanings set forth in the Indenture.
The Indenture and this Security shall be governed by and
construed in accordance with the laws of the State of Louisiana.
(2) The principal office of Regions Bank of Louisiana in Monroe,
Louisiana is hereby designated and created as the agency of the
Company in the City of Monroe and State of Louisiana at which (i)
both the principal and the interest on the Senior Notes are
payable on the terms and conditions specified in the Indenture
and notices, presentations and demands to or upon the Company in
respect the Senior Notes may be given or made, (ii) the Senior
Notes may be surrendered for transfer or exchange and transferred
or exchanged in accordance with the terms of the Indenture and
(iii) books for the registration and transfer of the Senior Notes
shall be kept;
(3) The principal office of Regions Bank of Louisiana in Monroe,
Louisiana is hereby designated and created as Security Registrar
of the Company in the City of Monroe and State of Louisiana at
which (i) the Company shall register the Senior Notes, (ii) the
Senior Notes may be surrendered for transfer or exchange and
transferred or exchanged in accordance with the terms of the
Indenture, and (iii) books for the registration and transfer of
the Senior Notes shall be kept; and
(4) The Senior Notes hereby authorized by these resolutions shall
be in substantially the form and shall have the characteristics
provided in the Indenture, and the form of the Senior Notes of
each such series set forth in these resolutions is hereby
approved and adopted.
FURTHER RESOLVED THAT:
(1) The President or any Vice President of the Company is hereby
authorized to execute and deliver on behalf of the Company an
Underwriting Agreement (the "Underwriting Agreement") in
substantially the form of the Underwriting Agreement included as
an exhibit to the registration statement of Form S-3 filed by the
Company on March 30, 1994 and declared effective April 11, 1994
(Registration No. 33-52915) (the "Registration Statement"),
reflecting the terms of the sale of the Senior Notes to the
Underwriters named in such agreement, along with the accompanying
Price Determination Agreement that confirms that the sale price
of the Series C Notes (after deducting an underwriting discount
of .65%) shall be 99.284% of the principal amount thereof and the
sale price of the Series D Notes (after deducting an underwriting
discount of .875%) shall be 98.904% of the principal amount
thereof;
(2) The President or any Vice President and the Secretary or any
Assistant Secretary of the Company are hereby authorized and
directed to deliver to the Trustee a certified record of these
resolutions setting forth the terms of the Senior Notes as
required by Section 2.01 of the Indenture;
(3) The President or any Vice President of the Company is hereby
authorized to execute $50,000,000 aggregate principal amount of
Series C Notes and $100,000,000 aggregate principal amount of
Series D Notes on behalf of the Company under its corporate seal
or a facsimile attested by the Secretary or any Assistant
Secretary, and the signature of the President, or any Vice
President, may be in the form of a facsimile signature of the
present or any future President or Vice President and the
signature of the Secretary or any Assistant Secretary in
attestation of the corporate seal may be in the form of a
facsimile signature of the present or any future Secretary or
Assistant Secretary, and should any officer who signs, or whose
facsimile signature appears upon, any of the Senior Notes cease
to be such an officer prior to their issuance, the Senior Notes
so signed or bearing such facsimile signature shall still be
valid, and without prejudice to the use of the facsimile
signature of any other officer as hereinabove authorized, the
facsimile signature of Glen F. Post III, President, and the
facsimile signature of Harvey P. Perry, Secretary, are hereby
expressly approved and adopted;
(4) The officers of the Company are hereby authorized to cause
the Senior Notes to be delivered to the Trustee for
authentication and delivery by it in accordance with the
provisions of the Indenture, and the Trustee is hereby authorized
and requested to authenticate the Senior Notes upon compliance by
the Company with the provisions of the Indenture and to deliver
the same to or upon the written order of the President or any
Vice President of the Company, and the President or any Vice
President is hereby authorized to apply to the Trustee for the
authentication and delivery of the Senior Notes;
(5) The President or any Vice President and the Treasurer or any
Assistant Treasurer of the Company are hereby authorized and
empowered to endorse, in the name and on behalf or the Company,
any and all checks received in connection with the sales of the
Senior Notes for application as described in the offering
materials prepared and filed, or to be prepared and filed, in
connection with the offering of the Senior Notes, or for deposit
to the account of the Company in any bank, and that any such
endorsement be sufficient to bind the Company;
(6) The officers of the Company are hereby authorized to issue
and sell the aggregate principal amounts of the Senior Notes at
the price and upon the terms and conditions set forth in the
Underwriting Agreement (including the accompanying Price
Determination Agreement) covering the sale of the Senior Notes;
(7) The dissemination and filing with the Securities and Exchange
Commission of a prospectus supplement (to the prospectus dated
April 11, 1994 forming a part of the Registration Statement) in
substantially the form presented to the members of this Committee
is hereby authorized, and the officers of the Company are hereby
authorized to prepare, disseminate and file with the Securities
and Exchange Commission any additional prospectus supplements
that may be necessary or appropriate;
(8) The officers of the Company are authorized to execute and
deliver all such instruments and documents, to incur on behalf of
the Company all such expenses and obligations, to make all such
payments, and to do all such other acts and things as they may
consider necessary or desirable in connection with the
accomplishment of the intent and purposes of the foregoing
resolutions, including without limitation obtaining all necessary
and appropriate CUSIP numbers and debt ratings, retaining all
necessary printing companies, engraving companies and other
agents or advisers, executing and delivering all closing
instruments that are contemplated by the Indenture or
Underwriting Agreement or that are otherwise customary and
appropriate, and issuing any necessary and appropriate press
releases; and
(9) All actions heretofore taken by the officers of the Company
that would have been authorized hereunder if taken after the
adoption of these resolutions are hereby ratified and confirmed
in all respects as the acts of the Company.
Exhibit 10.1(a)
AMENDMENT TO THE
CENTURY TELEPHONE ENTERPRISES, INC.
EMPLOYEE STOCK OWNERSHIP PLAN AND TRUST
STATE OF LOUISIANA
PARISH OF OUACHITA
BE IT KNOWN, that on this 26 day of January, 1996, before me, a Notary
Public, duly commissioned and qualified in and for the Parish of Ouachita, State
of Louisiana, therein residing and in the presence of the undersigned witnesses:
PERSONALLY CAME AND APPEARED:
CENTURY TELEPHONE ENTERPRISES, INC., represented herein by its Senior Vice
President and Chief Financial Officer, R. Stewart Ewing, Jr., as Settlor and
Employer, which hereby executes the following amendment to the Century Telephone
Enterprises, Inc. Employee Stock Ownership Plan and Trust, such amendment to be
effective November 16, 1995:
Insert the following sentence at the end of Section 7.1:
"Finally, notwithstanding the above vesting schedule, an Employee's
right to his or her Account balance shall fully vest and become
nonforfeitable automatically upon the occurrence of any of the
following events: (i) the acquisition by any "person" (as such term is
used in Section 13(d) and 14(d) of the Securities Exchange Act of 1934
(the "Exchange Act")), other than Employer or any employee benefit plan
or related trust or affiliate of Employer or its subsidiaries, of
beneficial ownership (as defined in Rule 13d-3 promulgated under the
Exchange Act), directly or indirectly, of securities of Employer
representing 30% or more of the combined voting power of Employer's
then outstanding securities entitled to vote generally in the election
of directors, but not including any acquisition directly from Employer;
(ii) the consummation of a merger, consolidation, reorganization, share
exchange, or sale or other disposition of all or substantially all of
the assets of Employer unless, immediately thereafter, at least 50% of
the outstanding voting power of the surviving or successor corporation,
or, if applicable, the parent company thereof (the "Surviving
Company"), are owned by Employer's shareholders immediately prior to
such time, at least a majority of the directors of the Surviving
Company were directors of Employer at the time such transaction was
approved, and no person or entity (excluding any employee benefit plan
or related trust of Employer or the Surviving Company and any person or
entity that was a shareholder of Employer immediately prior to such
time) beneficially owns 20% or more of the outstanding voting power of
the Surviving Company; (iii) during any period of two consecutive
years, individuals who at the beginning of such period constitute the
Board of Directors of Employer cease for any reason to constitute at
least a majority thereof, unless the election of each director who was
not a director at the beginning of such period shall have been approved
in advance by directors representing at least two-thirds of the
directors then in office who were directors at the beginning of the
period; or (iv) the approval by Employer's shareholders of a complete
liquidation or dissolution of Employer."
THUS DONE AND SIGNED on the day first above shown, in the presence of the
undersigned competent witnesses, who hereunto sign their names with the said
appearer and me, Notary, after reading of the whole.
WITNESSES: CENTURY TELEPHONE ENTERPRISES, INC.
/s/ Sandra B. Post BY: /s/ R. Stewart Ewing, Jr.,
- --------------------- ------------------------------
R. Stewart Ewing, Jr.,
Senior Vice President and
Chief Financial Officer
/s/ Sherry Bowen
- ---------------------
/s/ Kathy Tettleton
-----------------------
NOTARY PUBLIC
ACCEPTANCE OF AMENDMENT BY TRUSTEE
STATE OF LOUISIANA
PARISH OF OUACHITA
On this 8th day of March, 1996,
BEFORE ME, a Notary Public, and in the presence of the undersigned
competent witnesses, personally came and appeared:
REGIONS BANK OF LOUISIANA
which declared that it is appearing herein for the purpose of accepting and it
does hereby accept the Amendment to the Century Telephone Enterprises, Inc.
Employee Stock Ownership Plan and Trust adopted by the Settlor on January 26,
1996.
THUS DONE AND SIGNED at Monroe, Louisiana, on the date first above
written.
WITNESSES:
REGIONS BANK OF LOUISIANA
/s/ Linda G. Foss By: /s/ William W. Keith
- ---------------------- ---------------------
William W. Keith
Executive Vice President
/s/ Bruce F. Jones
- ----------------------
/s/ Cathy M. Yelverton
-----------------------
NOTARY PUBLIC
Exhibit 10.1(b)
AMENDMENT TO THE
CENTURY TELEPHONE ENTERPRISES, INC.
STOCK BONUS PLAN, PAYSOP AND TRUST
STATE OF LOUISIANA
PARISH OF OUACHITA
BE IT KNOWN, that on this 26 day of January, 1996, before me, a Notary
Public, duly commissioned and qualified in and for the Parish of Ouachita, State
of Louisiana, therein residing and in the presence of the undersigned witnesses:
PERSONALLY CAME AND APPEARED:
CENTURY TELEPHONE ENTERPRISES, INC., represented herein by its Senior
Vice President and Chief Financial Officer, R. Stewart Ewing, Jr., as Settlor
and Employer, which hereby executes the following amendment to the Century
Telephone Enterprises, Inc. Stock Bonus Plan, PAYSOP and Trust, such amendment
to be effective November 16, 1995:
Insert the following sentence at the end of Section 7.1(b):
"Finally, notwithstanding the above vesting schedule, an
Employee's right to his or her Account balance shall fully vest and
become nonforfeitable automatically upon the occurrence of any of the
following events: (i) the acquisition by any "person" (as such term is
used in Section 13(d) and 14(d) of the Securities Exchange Act of 1934
(the "Exchange Act")), other than Employer or any employee benefit plan
or related trust or affiliate of Employer or its subsidiaries, of
beneficial ownership (as defined in Rule 13d-3 promulgated under the
Exchange Act), directly or indirectly, of securities of Employer
representing 30% or more of the combined voting power of Employer's
then outstanding securities entitled to vote generally in the election
of directors, but not including any acquisition directly from Employer;
(ii) the consummation of a merger, consolidation, reorganization, share
exchange, or sale or other disposition of all or substantially all of
the assets of Employer unless, immediately thereafter, at least 50% of
the outstanding voting power of the surviving or successor corporation,
or, if applicable, the parent company thereof (the "Surviving
Company"), are owned by Employer's shareholders immediately prior to
such time, at least a majority of the directors of the Surviving
Company were directors of Employer at the time such transaction was
approved, and no person or entity (excluding any employee benefit plan
or related trust of Employer or the Surviving Company and any person or
entity that was a shareholder of Employer immediately prior to such
time) beneficially owns 20% or more of the outstanding voting power of
the Surviving Company; (iii) during any period of two consecutive
years, individuals who at the beginning of such period constitute the
Board of Directors of Employer cease for any reason to constitute at
least a majority thereof, unless the election of each director who was
not a director at the beginning of such period shall have been approved
in advance by directors representing at least two-thirds of the
directors then in office who were directors at the beginning of the
period; or (iv) the approval by Employer's shareholders of a complete
liquidation or dissolution of Employer."
THUS DONE AND SIGNED on the day first above shown, in the presence of the
undersigned competent witnesses, who hereunto sign their names with the said
appearer and me, Notary, after reading of the whole.
WITNESSES: CENTURY TELEPHONE ENTERPRISES, INC.
/s/ Sandra B. Post By: /s/ R. Stewart Ewing, Jr.
- -------------------- -------------------------
R. Stewart Ewing, Jr.,
Senior Vice President and
Chief Financial Officer
/s/ Sherry Bowen
- --------------------
/s/ Kathy Tettleton
---------------------
NOTARY PUBLIC
ACCEPTANCE OF AMENDMENT BY TRUSTEE
STATE OF LOUISIANA
PARISH OF OUACHITA
On this 8th day of March, 1996,
BEFORE ME, a Notary Public, and in the presence of the undersigned
competent witnesses, personally came and appeared:
REGIONS BANK OF LOUISIANA
which declared that it is appearing herein for the purpose of accepting and it
does hereby accept the Amendment to the Century Telephone Enterprises, Inc.
Stock Bonus Plan, PAYSOP and Trust adopted by the Settlor on January 26, 1996.
THUS DONE AND SIGNED at Monroe, Louisiana, on the date first above
written.
WITNESSES: REGIONS BANK OF LOUISIANA
/s/ Linda G. Foss BY: /s/ William W. Keith
- ------------------- --------------------------
William W. Keith,
Executive Vice President
/s/ Bruce F. Jones
- -------------------
/s/ Cathy M. Yelverton
-------------------------
NOTARY PUBLIC
Exhibit 10.1(d)
CENTURY TELEPHONE ENTERPRISES, INC.
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
1995 RESTATEMENT
I. Purpose of the Plan
This Restated Supplemental Executive Retirement Plan (the "Plan") is
intended to provide Century Telephone Enterprises, Inc. (the "Company") and its
subsidiaries a method for attracting and retaining key employees; to provide a
method for recognizing the contributions of such personnel; and to promote
executive and managerial flexibility, thereby advancing the interests of the
Company and its stockholders. In addition, the Plan is intended to provide a
more adequate level of retirement benefits in combination with the Company's
general retirement program.
II. Definitions
As used in this Plan, the following terms shall have the meanings
indicated, unless the context otherwise specifies or requires:
2.01 "ACCRUED BENEFIT", as of a given date, shall mean an amount equal
to the basic monthly benefit to which a Participant is entitled on his Normal
Retirement Date in accordance with Section 5.01 using his Average Monthly
Compensation, Estimated Primary Insurance Amount and Credited Service determined
as of such given date, in lieu of the corresponding amounts determined as of his
Normal Retirement Date.
2.02 "ACTUARIAL EQUIVALENT" shall mean the amount of pension of a
different type or payable at a different age that has the same value as computed
by the Actuary on the basis of interest and mortality tables. Mortality will be
based on the UP84 Mortality Table. The interest rate will be equal to the
Pension Benefit Guaranty Corporation's published interest rate for immediate
annuities on the date of pension commencement.
2.03 "AVERAGE MONTHLY COMPENSATION" shall mean the average of the 36
consecutive months' Compensation of a Participant which produce the highest
average out of the last 120 months of employment. No compensation will be
considered during a period of Leave of Absence for purposes of determining
Average Monthly Compensation.
2.04 "BOARD OF DIRECTORS" shall mean not less than a quorum of the
whole Board of Directors of Century Telephone Enterprises, Inc.
2.05 "CHANGE IN CONTROL" shall mean the occurrence of any of the
following (i) the acquisition by any "person" (as such term is used in Section
13(d) and 14(d) of the Securities Exchange Act of 1934 (the "Exchange Act")),
other than the Company or any employee benefit plan or related trust or
affiliate of the Company or its subsidiaries, of beneficial ownership (as
defined in Rule 13d-3 promulgated under the Exchange Act), directly or
indirectly, of securities of the Company representing 30% or more of the
combined voting power of the Company's then outstanding securities entitled to
vote generally in the election of directors, but not including any acquisition
directly from the Company; (ii) the consummation of a merger, consolidation,
reorganization, share exchange, or sale or other disposition of all or
substantially all of the assets of the Company unless, immediately thereafter,
at least 50% of the outstanding voting power of the surviving or successor
corporation, or, if applicable, the parent company thereof (the "Surviving
Company"), are owned by the Company's shareholders immediately prior to such
time, at least a majority of the directors of the Surviving Company were
directors of the Company at the time such transaction was approved, and no
person or entity (excluding any employee benefit plan or related trust of the
Company or the Surviving Company and any person or entity that was a shareholder
of the Company immediately prior to such time) beneficially owns 20% or more of
the outstanding voting power of the Surviving Company; (iii) during any period
of two consecutive years, individuals who at the beginning of such period
constitute the Board of Directors of the Company cease for any reason to
constitute at least a majority thereof, unless the election of each director who
was not a director at the beginning of such period shall have been approved in
advance by directors representing at least two-thirds of the directors then in
office who were directors at the beginning of the period; or (iv) the approval
by the Company's shareholders of a complete liquidation or dissolution of the
Company.
2.06 "COMMITTEE" shall mean three or more members of the Board of
Directors as described in Section 14.01 of the Plan, or the Board if no
Committee has been appointed.
2.07 "COMPANY" shall mean Century Telephone Enterprises, Inc., any
Subsidiary thereof, and any affiliate designated by the Company as a
participating employer under this Plan.
2.08 "COMPENSATION" shall mean the sum of a Participant's Salary,
determined under Section 2.19 and Incentive Compensation, determined under
Section 2.14, for a particular month.
2.09 "CREDITED SERVICE" shall mean employment for which a Participant
is entitled to receive service credit for accrual of benefit and for eligibility
for benefits under the Plan in accordance with the provisions of Section 4.01.
2.10 "DISABILITY" shall mean a condition which makes a Participant
unable to perform each of the material duties of his regular occupation where he
is likely to remain thus incapacitated continuously and permanently.
2.11 "EFFECTIVE DATE" of this Restatement shall be November 16, 1995.
Notwithstanding the foregoing, the survivor annuity provided under Article IX
hereof shall only apply to Participants who had not retired as of July 1, 1994
and whose date of death was on or after July 1, 1994, and the amendment to the
definition of Compensation contained in the 1994 Amendment and Restatement of
the Plan shall apply to Compensation paid on or after January 1, 1994. In
addition, the benefits provided hereunder for Jim D. Reppond and C. Kenneth
Conrad shall be computed without regard to the amendment to the definition of
Compensation contained in the 1994 Amendment and Restatement of the Plan and the
provision of the survivor annuity referenced in the preceding sentence.
2.12 "EMPLOYER" shall mean Century Telephone Enterprises, Inc., any
Subsidiary thereof, and any affiliate designated by the Company as a
participating employer under this Plan.
2.13 "ESTIMATED PRIMARY INSURANCE AMOUNT" shall mean the monthly
primary insurance amount calculated to be available at age 65 based on the
Social Security law in effect on the Participant's Normal Retirement Date or
earlier date of termination. The primary insurance amount of a Participant who
terminates prior to Normal Retirement Date shall be based on the assumption that
the Participant earns no compensation between his termination date and his
Normal Retirement Date.
2.14 "INCENTIVE COMPENSATION" shall mean the monthly equivalent of the
amount awarded to a Participant under the Company's Key Employee Incentive
Compensation Program or other incentive compensation arrangement maintained by
the Company, including the amount of any stock award in its cash equivalent at
the time of conversion of the award from cash to stock. A Participant's
Incentive Compensation shall be determined on a monthly basis by dividing the
amount of the Incentive Compensation award by the number of months to which the
award relates. Each award of Incentive Compensation shall, for purposes of this
Plan, be allocated to the month or months to which the award relates, i.e., that
period of time during which the award was earned.
2.15 "LEAVE OF ABSENCE" shall mean any extraordinary absence authorized
by the Employer under the Employer's standard personnel practices.
2.16 "NORMAL RETIREMENT DATE" shall mean the first day of the month
coincident with or next following a Participant's 65th birthday.
2.17 "PARTICIPANT" shall mean any officer of the Employer who is
granted participation in the Plan in accordance with the provisions of Article
III.
2.18 "PLAN" shall mean the Century Telephone Enterprises, Inc.
Supplemental Executive Retirement Plan, as amended and restated herein.
2.19 "SALARY" shall mean the monthly equivalent of a Participant's
annual rate of pay as of the date of determination of benefits hereunder,
exclusive, however, of bonus payments, overtime payments, commissions, imputed
income on life insurance, vehicle allowances, relocation expenses, severance
payments, and any other extra compensation.
2.20 "SUBSIDIARY" shall mean any corporation in which the Company owns,
directly or indirectly through subsidiaries, at least fifty percent (50%) of the
combined voting power of all classes of stock.
III. Participation
3.01 Any officer who is either one of the key employees of the Company
in a position to contribute materially to the continued growth and future
financial success of the Company, or one who has made a significant contribution
to the Company's operations, thereby meriting special recognition, shall be
eligible to participate provided the following requirements are met:
a. The officer is employed on a full-time basis by Century
Telephone Enterprises, Inc., any Subsidiary thereof, or any affiliate designated
by the Company as a participating employer under this Plan.
b. The officer is compensated for full-time employment by a
regular salary;
c. The coverage of the officer is duly approved by the Board
of Directors of Century Telephone Enterprises, Inc.
It is intended that participation in this Plan shall be extended only to those
officers who are members of a select group of management and highly compensated
employees, as determined by the Committee.
3.02 Any officer who is currently a Participant in the Plan shall
continue to be a Participant in the Plan as amended and restated.
3.03 Any officer who met the requirements defined in Section 3.01, who
was age 60 as of November 21, 1983, and who was employed by the Company on
January 1, 1990, will receive benefits equal to the greater of:
a. the benefit determined under this Plan, or
b. a monthly benefit equal to sixty-five percent (65%) of Salary
offset by retirement income payable to the individual executive from:
1. Social Security (Primary Insurance Amount only) determined
as of date of retirement under the Social Security Act.
2. The Company's Stock Bonus Plan and PAYSOP (in which case
the Stock Bonus Plan and PAYSOP accumulation at date of determination will be
converted to a monthly annuity on a straight life basis based upon actuarial
assumptions with respect to mortality and investment return). The mortality
assumptions will be based upon the 1971 Group Annuity Mortality Table. The
investment return assumption will reflect current market conditions as
measured by the 52-week Treasury bill rate as determined monthly.
3. Benefits payable from any qualified or nonqualified
plan attributable to prior employment for those officers who are hired on or
after attainment of age 55 (in which case the benefit(s) will be expressed in
terms of a monthly annuity on a straight life basis payable at date of
retirement).
IV. Credited Service
4.01 A Participant will receive credit for each year of employment,
calculated in completed years and months regardless of the number of hours
worked. Credited service will include all years of service prior to becoming an
officer of the Company, years of service following Normal Retirement Date, and
years of service with any Subsidiary or any affiliate designated by the Company
as a participating employer under this Plan. In addition, periods of Leave of
Absence and periods during which severance pay is provided shall count as
periods of service. A fraction of a year of Credited Service will be given for
completed months during the year of termination.
4.02 At the discretion of the Board of Directors, service with a
predecessor employer may be credited for purposes of this Plan. If such service
is credited to a Participant, the benefit payable under this Plan shall be
reduced by any benefit payable from the prior employer. The Board of Directors
shall make a determination whether service with a predecessor employer will be
credited to a Participant prior to the Participant's commencement of
participation in this Plan, and such determination, once made, shall be
irrevocable. If no determination is made by the Board of Directors prior to a
Participant's commencement of participation in this Plan, service with a
predecessor employer by such Participant shall not be credited for purposes of
this Plan.
V. Normal Retirement
5.01 Except as provided in Section 3.03, the monthly retirement benefit
payable to a Participant on his Normal Retirement Date shall be equal to (a)
less (b), where:
(a) is 1 1/2% of Average Monthly Compensation multiplied by
Credited Service, not greater than 30 years.
(b) is 3 1/3% of Estimated Primary Insurance Amount, multiplied
by Credited Service, not greater than 30 years.
5.02 The normal form of payment of a Participant's normal retirement
benefit shall be an annuity payable for the life of the Participant.
VI. Late Retirement
6.01 If a Participant remains employed beyond his Normal Retirement
Date, his late retirement date will be the first day of the month coincident
with or next following his actual date of retirement.
6.02 A Participant's late retirement benefit will be calculated in
accordance with Section 5.01, based on his Average Monthly Compensation and
Credited Service as of his late retirement date. His Primary Insurance Amount
will be computed as of his Normal Retirement Date.
VII. Early Retirement
7.01 A Participant who has attained age 55, and who has completed 15 or
more years of service, is eligible for early retirement. An eligible
Participant's early retirement date is the first day of the month coincident
with or next following the date he terminates employment.
7.02 A Participant's early retirement benefit is 100% of his Accrued
Benefit computed as of his early retirement date, payable at his Normal
Retirement Date.
7.03 A Participant may elect to receive his early retirement benefit
prior to Normal Retirement Date, in which event the benefit payable will be
reduced according to the following schedule:
Age at Commencement Percentage of Accrued Benefit
55 50 %
56 53 %
57 56 %
58 60 %
59 63 %
60 66 %
61 73 %
62 80 %
63 86 %
64 93 %
65 100 %
7.04 The Board of Directors, at its sole discretion, may grant to a
Participant 100% of his Accrued Benefit, payable at his early retirement date
without such benefit being subject to the reductions set forth in Section 7.03,
provided the Participant has met the requirements of Section 7.01.
VIII. Disability
8.01 A Participant who becomes disabled, as defined in Section 2.10,
prior to retirement or termination of service will be entitled to a disability
benefit computed in accordance with Section 8.02.
8.02 A Participant's disability benefit will be calculated in
accordance with Section 5.01 based on (1) his Average Monthly Compensation
projected to Normal Retirement Date assuming his Compensation as of the date of
his disability remains constant, (2) his projected service to Normal Retirement
Date and (3) his Estimated Primary Insurance Amount based on the Social Security
law in effect on the date of his disability.
8.03 A Participant's disability benefit will commence at his Normal
Retirement Date, and the normal form of benefit payment will be an annuity
payable for the life of the Participant.
IX. Death Benefit
9.01 Upon the death of a Participant who is actively employed or on
Leave of Absence at the time of his death or who has retired or become disabled
prior to the commencement of benefit payments hereunder, a Participant's
beneficiary (as determined under Section 9.02) will be entitled to receive a
death benefit determined in accordance with Section 9.03.
9.02 The beneficiary of a Participant who is married on the date of his
death shall be his spouse. The beneficiary of an unmarried Participant shall be
his living children as of his date of death.
9.03 The monthly death benefit payable to the beneficiary of a
Participant shall be equal to (a) less (b), where:
(a) is 36% of Average Monthly Compensation projected to his
Normal Retirement Date assuming his Compensation as of his date of death remains
constant until his Normal Retirement Date.
(b) the amount of primary Social Security benefits received by
the beneficiary, or to which the beneficiary may be entitled, as determined by
the Committee. The Committee's determination hereunder shall be binding and
conclusive.
9.04 The death benefit shall be paid to the surviving spouse, if any,
of the Participant for his or her life. If the Participant is unmarried at the
date of death, or if the surviving spouse dies subsequent to the Participant's
death, the death benefit shall be paid to the Participant's surviving child or
children (or legal representative of any minor child) in equal shares. The death
benefit payable to a child shall terminate upon the later of the child's
attainment of age 19 or age 23, if a full-time student at an accredited
educational institution, and such share shall thereafter revert to and be
payable equally to the remaining surviving children of the Participant until the
interest of each such surviving child has terminated.
9.05 If a Participant has no surviving spouse or children at the date
of his or her death, no death benefit shall be paid under this Plan.
X. Termination of Service; Change in Control
10.01 If a Participant terminates service prior to death, disability or
retirement, his Accrued Benefit determined under Section 2.01 shall be vested in
accordance with the following schedule:
Years of Service Vested %
---------------- --------
less than 5 0%
5 or more 100%
10.02 A Participant's vested Accrued Benefit is payable at his Normal
Retiremen Date. A Participant may elect to have his benefit commence prior to
age 65 but after age 55 if he meets the service requirements for early
retirement pursuant to Section 7.01. If the benefit commences before age 65, the
amount of monthly benefit will be reduced according to the schedule set forth in
Section 7.03.
10.03 (a) Notwithstanding anything to the contrary in this Plan or in
any applicable law or regulation, upon the earlier of (i) the occurrence of a
Change in Control, (ii) the date that any person or entity submits an offer or
proposal to the Company that results in or leads to a Change in Control (whether
by such person or any other person) or (iii) the date of the public announcement
of a Change in Control or an offer, proposal or proxy solicitation that results
in or leads to a Change in Control (whether by the person or entity making such
announcement or any other person) (the earliest of such dates being hereinafter
referred to as the "Effective Date"), the Accrued Benefit of each Participant
(other than any Participant whose service as an employee was terminated prior to
full vesting of his Accrued Benefit under Section 10.01) and the benefits
conferred under this Section shall automatically vest and thereafter may not be
adversely affected in any matter without the prior written consent of the
Participant. Notwithstanding anything to the contrary in this Plan, upon the
occurrence of a Change in Control any Participant who is then employed by
Century or its subsidiaries ("Active Participants") shall have an irrevocable
right to receive, and the Company shall be irrevocably obligated to pay, a lump
sum cash payment in an amount determined pursuant to this Section if the Company
or its successor, during a period commencing upon the Effective Date and ending
on the third anniversary of the occurrence of the Change in Control, (i)
terminates the Active Participant's employment, (ii) reduces the Active
Participant's salary in effect immediately prior to the Effective Date, (iii)
diminishes the Active Participant's duties, responsibilities or position in the
management of the Company or (iv) requires the Active Participant to relocate
involuntarily to an office outside of the city in which he performed his
services for the Company immediately prior to the Effective Date (each such
action being referred to as an "Effective Termination"). The lump sum cash
payment payable to Active Participants under this Section (the "Lump Sum
Payment") shall be paid on the date of Effective Termination or as soon
thereafter as is administratively feasible.
(b) The amount of each Lump Sum Payment shall be determined as
follows:
(i) With respect to any Active Participant who, after giving
effect to the terms of subsection (b)(iv) below, is eligible as of the date of
Effective Termination to receive benefits under Articles V or VI of this Plan,
the Lump Sum Payment shall equal the Present Value (as defined below) of the
stream of payments to which such participant would have otherwise been entitled
to receive immediately upon Effective Termination in accordance with Articles V
or VI of this Plan (assuming such benefits are paid in the form of a lifetime
annuity), based upon such participant's Average Monthly Compensation, Estimated
Primary Insurance Amount and Credited Service as of the date of Effective
Termination, without giving effect to any salary reductions that gave rise to
such Effective Termination, but after giving effect to the terms of subsection
(b)(iv) below.
(ii) With respect to any Active Participant who, after giving
effect to the terms of subsection (b)(iv) below, is not eligible as of the date
of Effective Termination to receive benefits under Articles V, VI or VII of this
Plan, the Lump Sum Payment shall equal the product of (A) the Present Value,
calculated as of age 65, of the stream of payments to which such participant
would have otherwise been entitled to receive at age 65 in accordance with the
terms of this Plan based on the same assumptions and terms set forth in
subsection (b)(i) above, multiplied times (B) such discount factor as is
necessary to reduce the amount determined under subsection (b)(ii)(A) above to
its Present Value, it being understood that in calculating such discount factor,
no discount shall be applied to reflect the possibility that such participant
may die prior to attaining age 65.
(iii) With respect to any Active Participant who, after
giving effect to the terms of subsection (b)(iv) below, is eligible as of the
date of Effective Termination to receive benefits under Article VII of the Plan,
the Lump Sum Payment shall equal the greater of (A) the Present Value of the
stream of payments to which such participant would have otherwise been entitled
to receive immediately upon Effective Termination in accordance with Article VII
of this Plan, based upon the assumptions and terms set forth in subsection
(b)(i) above, or (B) the Present Value, calculated as of age 65, of the stream
of payments to which such participant would otherwise be entitled to receive at
age 65 in accordance with this Plan, determined in the same manner and subject
to the same assumptions and terms set forth in subsection (b)(ii) above.
(iv) In calculating the Lump Sum Payment due to any Active
Participant under this Section, the number of years of Credited Service of the
Active Participant shall be deemed to equal the number of years determinable
under the other sections of this Plan plus three years and the Active
Participant's age shall be deemed to equal his actual age plus three years;
provided, however, that in no event shall the provisions of this subsection be
applicable if the application thereof will reduce the Active Participant's Lump
Sum Payment from the amount that would otherwise be payable with the addition of
less than three years of service, age or both.
(v) As used in this Section with respect to any amount, the
"Present Value" of such amount shall mean the discounted value of such amount
that is determined by making customary present value calculations in accordance
with generally accepted actuarial principles, provided that (A) the discount
interest rate applied in connection therewith shall equal the interest rate
quoted by the Bloomberg Municipal AAA General Obligation 5-Year Index (as of the
close of business on the first business day of the calendar quarter in which
such present value calculations are made) or, in the event such index is no
longer published, any similar index for comparable municipal securities and (B)
the mortality tables applied in connection therewith shall be "1983 Group
Annuity Mortality Table (50% male/50% female)" as prescribed by the Pension
Benefit Guaranty Corporation or any successor table prescribed by such
organization.
(c) Notwithstanding anything to the contrary in this Plan, upon the
sooner of the occurrence of a Change in Control or the approval by the Board of
Directors of the Company of any Change in Control, the Company shall promptly
consult with each Participant who has already begun to receive periodic payments
under this Plan ("Retired Participants") and, following such consultations, the
Company shall have the option with respect to each Retired Participant to (i)
confirm in writing its obligation to continue to provide to such Retired
Participant all benefits hereunder in the same manner provided prior to the
Change in Control or (ii) make a lump sum cash payment in an amount equal to the
Present Value of the participant's future stream of payments which would
otherwise be payable under this Plan. If the Company elects to furnish any
Retired Participant with a lump sum cash payment, the Company shall offer to
assist such participant in purchasing at such participant's cost an annuity for
the benefit of such participant.
(d) Notwithstanding anything to the contrary in this Plan, upon the
occurrence of Change in Control, any Participant (other than a Retired
Participant) who is then a former employee of Century or its subsidiaries whose
Accrued Benefit is vested under Section 10.01 ("Inactive Participants") shall
have an irrevocable and unconditional right to receive, and the Company shall be
irrevocably and unconditionally obligated to pay, a lump sum payment in an
amount determined in the manner provided in subsection (b)(ii) or (iii), as
applicable; provided, however, that no Inactive Participant will be entitled to
the benefits of subsection (b)(iv).
XI. Form of Benefit Payment
11.01 The normal form of benefit payment is a monthly lifetime annuity,
payable in accordance with the Company's standard payroll practices.
11.02 A Participant may, prior to commencement of participation in the
Plan, elect an optional form of payment which is the Actuarial Equivalent of a
Participant's basic monthly pension, as follows:
Option 1: A reduced monthly pension payable for the lifetime
of the Participant with a minimum of sixty (60) monthly payments guaranteed.
Option 2: A reduced monthly pension payable for the lifetime
of the Participant with a minimum of one hundred twenty (120) monthly payments
guaranteed.
Option 3: A reduced monthly pension payable for the lifetime
of the Participant with a minimum of one hundred eighty (180) monthly payments
guaranteed.
Option 4: A reduced monthly pension, payable to the
Participant for the life of the Participant, with monthly payments of one-half
(1/2) the reduced amount that was payable monthly to the Participant payable
after the Participant's death for the life of the Participant's spouse.
Option 5: A reduced monthly pension payable to the Participant
for the life of the Participant, with reduced monthly payments of two thirds
(2/3) of the reduced amount that was payable monthly to the Participant payable
after the Participant's death for the life of the Participant's spouse.
Option 6: A reduced monthly pension payable to the Participant
for the life of the Participant, with reduced monthly payments of three fourths
(3/4) of the reduced amount that was payable monthly to the Participant payable
after the Participant's death for the life of the Participant's spouse.
Option 7: A reduced monthly pension payable to the Participant
for the life of the Participant, with the same monthly pension payable after the
Participant's death for the life of the Participant's spouse.
11.03 If a Participant does not elect an optional form of benefit
payment under Section 11.02 prior to the commencement of participation in the
Plan, such Participant's benefits shall be paid in the normal form provided in
Section 11.01.
XII. Reemployment of Participants
12.01 If a Participant retires or otherwise terminates employment with
the Employer and such Participant is reemployed by the Employer, his entitlement
to any benefits will be determined on the basis of the provisions of the Plan in
effect on his subsequent termination date. The benefit will be based on the
Average Monthly Compensation, Estimated Primary Insurance Amount and Credited
Service as of the date of subsequent termination, taking into account all
Credited Service prior to the Participant's reemployment date. For purposes of
calculating Average Monthly Compensation, the average of the 36 consecutive
months' Compensation which produce the highest average out of the last 120
months of employment will be considered, without regard to the break in service.
12.02 If a Participant is reemployed after benefit commencement, the
payment of any benefit to such Participant under the Plan on account of his
retirement or severance shall be suspended by reason of such reemployment. The
amount of his benefit at his subsequent termination will be calculated in
accordance with Section 12.01 but reduced by the Actuarial Equivalent of any
benefit payments received prior to subsequent termination.
12.03 The form of monthly benefit payment upon subsequent termination
shall be the form of payment that was in effect prior to reemployment. If the
Participant was married at the time of benefit commencement, and if the
Participant's spouse dies prior to subsequent commencement of benefit payments,
such form of payment shall remain applicable (as though he were married to his
deceased spouse) with no further payments upon his death.
XIII. Additional Restrictions on Benefit Payments
13.01 In no event will there be a duplication of benefits payable under
the Plan because of employment by more than one participating Employer.
XIV. Administration and Interpretation
14.01 The Plan shall be administered by the Board of Directors through
a Committee which shall consist of three or more members of the Board of
Directors of the Company. No individual who is or has ever been a member of the
Committee shall be eligible to be designated as a participant or receive
payments under this Plan. The Committee shall have full power and authority to
interpret and administer the Plan and, subject to the provisions herein set
forth, to prescribe, amend and rescind rules and regulations and make all other
determinations necessary or desirable for the administration of the Plan. The
Board may from time to time appoint additional members of the Committee or
remove members and appoint new members in substitution for those previously
appointed and to fill vacancies however caused.
14.02 The decision of the Committee relating to any question concerning
or involving the interpretation or administration of the Plan shall be final and
conclusive, and nothing in the Plan shall be deemed to give any employee any
right to participate in the Plan, except to such extent, if any, as the
Committee may have determined or approved pursuant to the provisions of the
Plan.
XV. Nature of the Plan
Benefits under the Plan shall generally be payable by the Company from
its own funds, and such benefits shall not (i) impose any obligation upon the
trust(s) of the other employee benefit programs of the Company; (ii) be paid
from such trust(s); nor (iii) have any effect whatsoever upon the amount or
payment of benefits under the other employee benefit programs of the Company.
Participants have only an unsecured right to receive benefits under the Plan
from the Company as general creditors of the Company. The Company may deposit
amounts in the Century Telephone Enterprises, Inc. Supplemental Executive
Retirement Trust (the "Trust") established by the Company for the purpose of
funding the Company's obligations under the Plan. Participants and their
beneficiaries, however, have no secured interest or special claim to the assets
of the Trust, and the assets of the Trust shall be subject to the payment of
claims of general creditors of the Company upon the insolvency or bankruptcy of
the Company, as provided in the Trust.
XVI. Employment Relationship
An employee shall be considered to be in the employment of the Company
and its subsidiaries as long as he remains an employee of either the Company,
any Subsidiary of the Company, or any corporation to which substantially all of
the assets and business of the Company are transferred. Nothing in the adoption
of this Plan nor the designation of any Participant shall confer on any employee
the right to continued employment by the Company or a Subsidiary of the Company,
or affect in any way the right of the Company or such Subsidiary to terminate
his employment at any time. Any question as to whether and when there has been a
termination of an employee's employment, and the cause, notice or other
circumstances of such termination, shall be determined by the Board, and its
determination shall be final.
XVII. Amendment and Termination of Plan
The Board of Directors of the Company in its sole discretion may
terminate the Plan at any time, and shall have the right to alter or amend the
Plan or any part thereof from time to time, except that the Board of Directors
shall not terminate the Plan or make any alteration or amendment thereto which
would impair any rights or benefits of a Participant previously accrued.
XVIII. Binding Effect
This Plan shall be binding on the Company, each Subsidiary, and any
affiliate designated by the Company as a participating employer under this Plan,
the successors and assigns thereof, and any entity to which substantially all of
the assets or business of the Company, a Subsidiary, or a participating
affiliate are transferred.
XIX. Reimbursement to Participants
The Company shall reimburse any Participant, or beneficiary thereof,
for all expenses, including attorney's fees, actually and reasonably incurred by
the Participant or beneficiary in any proceeding to enforce any of their rights
under this Plan.
XX. Construction
The masculine gender, where appearing in the Plan, shall be deemed to
include the feminine gender, and the singular may indicate the plural, unless
the context clearly indicates the contrary. The words "hereof", "herein",
"hereunder" and other similar compounds of the word "here" shall, unless
otherwise specifically stated, mean and refer to the entire Plan, not to any
particular provision or Section. Article and Section headings are included for
convenience of reference and are not intended to add to, or subtract from, the
terms of the Plan.
IN WITNESS WHEREOF, Century Telephone Enterprises, Inc. has executed
this restated Plan in its corporate name and its corporate seal to be hereunto
affixed this 26 day of January, 1996.
ATTEST: CENTURY TELEPHONE ENTERPRISES, INC.
/s/ Sandra B. Post By: /s/ R. Stewart Ewing, Jr.
- ------------------------ --------------------------------
R. Stewart Ewing, Jr.
Senior Vice President and
Chief Financial Officer
Exhibit 10.1(e)
CENTURY TELEPHONE ENTERPRISES, INC.
AMENDED AND RESTATED
1983 RESTRICTED STOCK PLAN
1983 RESTRICTED STOCK PLAN, dated as of February 21, 1984, as amended
and restated as of November 16, 1995.
W I T N E S S E T H:
WHEREAS, on February 21, 1984, Century Telephone Enterprises, Inc., a
Louisiana corporation (the "Company") executed a plan providing for awards of
restricted stock to key employees on terms and conditions substantially similar
to those set forth herein (the "Original Plan"); and
WHEREAS, the Company wishes to modify the Original Plan to amend and
restate the second paragraph of Section 8 of the Original Plan, as approved by
the Compensation Committee of the Company's Board of Directors on November 16,
1995 and ratified by the full Board as of the same date;
NOW THEREFORE, the Original Plan is hereby amended and restated in its
entirety to read as follows:
1. Purpose. The purpose of the 1983 Restricted Stock Plan is to aid
Century Telephone Enterprises, Inc. in securing and retaining key employees of
outstanding ability, and to motivate such individuals to exert their best
efforts on behalf of the Company. In addition, the Company expects that it will
benefit from the added interest which such individuals will have in the welfare
of the Company as a result of their ownership or increased ownership of the
Company's Common Stock. This Plan may be utilized in conjunction with other
short or long term incentive plans at the discretion of the Board of Directors.
2. Definitions. As used in this Plan, the following terms shall have
the meanings indicated:
(a) "Board of Directors" or "Board" shall mean not less
than a quorum of the whole Board of Directors of
Century Telephone Enterprises, Inc.
(b) "Committee" shall mean a subcommittee of the
Compensation Committee of the Board of Directors as
described in Section 4 of the Plan, or the Board if
no Committee has been appointed.
(c) "Common Stock" shall mean the Company's presently
authorized shares of Common Stock as this definition
may be modified as provided in Section 7 of the Plan.
(d) "Company" shall mean Century Telephone Enterprises, Inc.
and its subsidiaries.
(e) "Normal Retirement Date" shall be the first of the
month following or coincident with a Participant's
65th birthday or such other earlier date as approved
by the Board of Directors upon request of a
Participant.
(f) "Participant" shall mean any person who is employed
by the Company on a full-time basis, is compensated
for such employment by a regular salary, and in the
opinion of the Committee is either one of the key
employees of the Company in a position to contribute
materially to the continued growth and development
and future financial success of the Company or one
who has made a significant contribution to the
Company's operations, thereby meriting special
recognition. The Participant shall be designated by
the Committee as belonging to Tier I, Tier II, Tier
III or Tier IV.
(g) "Plan" shall mean the Century Telephone Enterprises, Inc.
1983 Restricted Stock Plan.
(h) "Subsidiary" shall mean any corporation in which the
Company owns, directly or indirectly through
subsidiaries, at least fifty percent (50%) of the
combined voting power of all classes of stock.
3. Stock Subject to the Plan. The maximum number of shares of Common
Stock which may be awarded under the Plan shall not exceed an aggregate of
250,000 shares. All such stock shall be shares of Common Stock which have been
authorized but unissued or treasury shares. Shares of stock awarded under the
Plan and later reacquired by the Company pursuant to the Plan shall again become
available for awards under the Plan.
4. Administration. The Plan shall be administered by the Board of
Directors, through a subcommittee of the Compensation Committee consisting of
three or more members of the Board who are not eligible to receive restricted
stock awards under the Plan. The Board may from time to time appoint additional
members of the Committee or remove members and appoint new members in
substitution for those previously appointed and to fill vacancies however
caused.
Subject to the provisions of the Plan, the Committee shall have
exclusive power to select the employees to whom shares of Common Stock will be
awarded under the Plan, to determine the number of shares to be awarded to each
employee selected, and to determine the time or times when shares will be
awarded. The Committee shall have full power and authority to administer and
interpret the Plan and to adopt such rules, regulations, agreements and
instruments for implementing the Plan and for the conduct of its business as the
Committee deems necessary or advisable. The Committee's interpretations of the
Plan, and all determinations made by the Committee pursuant to the powers vested
in it hereunder, shall be conclusive and binding on all persons having any
interest in the Plan or in any awards granted hereunder. A majority of the
members present at any meeting at which a quorum is present, or acts approved in
writing by all members of the Committee shall be deemed the action of the
Committee.
5. Eligibility. The individuals who shall be eligible to participate
in the Plan shall be any full-time employee of the Company.
6. Grant of Shares. The eligible Employees who shall receive shares of
Common Stock under the Plan, the number of shares to be received by each such
employee, and, subject to the provisions of Section 7, the conditions under
which such shares must be returned to the Company, shall be determined by the
Committee.
7. Terms and Conditions of Awards. All shares of Common Stock awarded
to Participants under this Plan shall be subject to the following terms and
conditions, and to such other terms and conditions not inconsistent with the
Plan as shall be contained in the Agreement referred to in Section 7(e).
(a) At the time of the award there shall be established for
each Participant a "Restriction Period" which shall be a
specific period of time to be determined by the
Committee. Shares of stock awarded to Participants may
not be sold, assigned, transferred, pledged or otherwise
encumbered, except as hereinafter provided, during the
Restriction Period. At the time of an award of restricted
shares to a Participant, the Board may also provided for
the Restriction Period to lapse according to the terms
designated by the Committee. Except for such restrictions
on transfer, the Participant as owner of such shares
shall have all the rights of a shareholder of Common
Stock, including but not limited to the right to receive
all dividends paid on such shares, subject to the
provisions of Section 8, and the right to vote such
shares.
(b) If a Participant ceases to be a full-time employee of the
Company for any reason other than (i) death, (ii)
disability, or (iii) retirement on or after a
Participant's Normal Retirement Date, all shares of stock
theretofore awarded to him which are still subject to the
restrictions imposed by Section 7(a) shall upon such
termination of employment be forfeited and returned to
the Company, provided, however, that in the event
employment is terminated by retirement at the request of
the Company or by action of the Company without cause,
the Committee may, but need not, determine that some or
all of the shares shall be free of restrictions and shall
not be forfeited.
(c) If a Participant ceases to be an employee of the Company
and its subsidiaries by reason of death, disability, or
retirement on or after Normal Retirement Date, the
restrictions imposed by Section 7(a) shall lapse with
respect to the shares theretofore awarded.
(d) Each certificate issued in respect of shares awarded
under the Plan shall be registered in the name of the
Participant and deposited by him, together with a stock
power endorsed in blank, with the Company and shall bear
the following legend:
"The transferability of this certificate and the
shares of stock represented hereby are subject to
the terms and conditions (including forfeiture)
contained in the 1983 Restricted Stock Plan for
Century Telephone Enterprises, Inc., and an
Agreement entered into between the registered
owner and Century Telephone Enterprises, Inc.
Copies of such Plan and Agreement are on file in
the office of the Secretary of Century Telephone
Enterprises, Inc., Monroe, Louisiana."
(e) The Participant shall enter into an Agreement with the
Company in a form specified by the Committee agreeing to
the terms and conditions of the award and such other
matters, including compliance with applicable Federal and
State Securities Laws, and methods of withholding
required taxes, as the Committee shall in its sole
discretion determine.
(f) At the expiration of the Restriction Period imposed
pursuant to Section 7(a), the Company shall redeliver to
the Participant, or his legal representative, the shares
deposited with it pursuant to Section 7(d).
8. Changes in Capitalization. In the event there is a change in
classification of, or subdivision or combination of, or stock dividend on the
outstanding Common Stock of the Company, the maximum aggregate number and class
of shares as to which awards may be granted under the Plan shall be
appropriately adjusted by the Committee whose determination shall be conclusive.
Any shares of Common Stock or other securities or assets (other than ordinary
cash dividends) received by a Participant with respect to shares awarded to him
which are still subject to the restrictions imposed pursuant to Section 7(a)
will be subject to the same restrictions and shall be deposited by the
Participant with the Company.
Upon the occurrence of a Change in Control (as defined below), all
restrictions imposed pursuant to Section 7(a) with respect to any outstanding
award hereunder shall automatically lapse. A Change in Control shall mean the
occurrence of any of the following events: (i) the acquisition by any "person"
(as such term is used in Section 13(d) and 14(d) of the Securities Exchange Act
of 1934 (the "Exchange Act")), other than the Company or any employee benefit
plan or related trust or affiliate of the Company or its subsidiaries, of
beneficial ownership (as defined in Rule 13d-3 promulgated under the Exchange
Act), directly or indirectly, of securities of the Company representing 30% or
more of the combined voting power of the Company's then outstanding securities
entitled to vote generally in the election of directors, but not including any
acquisition directly from the Company; (ii) the consummation of a merger,
consolidation, reorganization, share exchange, or sale or other disposition of
all or substantially all of the assets of the Company unless, immediately
thereafter, at least 50% of the outstanding voting power of the surviving or
successor corporation, or, if applicable, the parent company thereof (the
"Surviving Company"), are owned by the Company's shareholders immediately prior
to such time, at least a majority of the directors of the Surviving Company were
directors of the Company at the time such transaction was approved, and no
person or entity (excluding any employee benefit plan or related trust of the
Company or the Surviving Company and any person or entity that was a shareholder
of the Company immediately prior to such time) beneficially owns 20% or more of
the outstanding voting power of the Surviving Company; (iii) during any period
of two consecutive years, individuals who at the beginning of such period
constitute the Board of Directors of the Company cease for any reason to
constitute at least a majority thereof, unless the election of each director who
was not a director at the beginning of such period shall have been approved in
advance by directors representing at least two-thirds of the directors then in
office who were directors at the beginning of the period; or (iv) the approval
by the Company's shareholders of a complete liquidation or dissolution of the
Company.
9. Amendment or Termination. The Board may from time to time alter,
amend, suspend or discontinue the Plan, except that no alteration or amendment
shall, without the approval of a majority of the stockholders of the Company and
entitled to vote at a duly called stockholders' meeting increase the total
number of shares which may be awarded under the Plan, except as provided in
Section 8, or change the standards of eligibility of employees eligible to
participate in the Plan. No such amendment or modification shall, however,
adversely affect, without his written consent, any employee with respect to
stock already awarded to him.
10. Choice of Law. The place of administration of the Plan shall be
within the State of Louisiana and the validity, interpretation and
administration of the Plan and of any rules, regulations, determinations or
decisions made thereunder shall be determined exclusively in accordance with the
laws of the State of Louisiana. Without limiting the generality of the
foregoing, the period within which any action in connection with the Plan must
be commenced shall be governed by the laws of the State of Louisiana, without
regard to the place where the act or omission complained of took place, the
residence of any party to such action or the place where the action may be
brought.
11. Withholding of Taxes. Participant shall advise the Company within
30 days of written notification of the stock award whether Participant wishes to
be taxed at the time of grant or at the time the Restriction Period expires. At
the time the Participant elects to be taxed, Participant shall advise the
Company whether it shall withhold from regular compensation the amount of
applicable taxes or Participant shall pay the Company the amount of Federal tax
required to be withheld.
IN WITNESS WHEREOF, this instrument has been executed as of the date
and year first above written.
CENTURY TELEPHONE ENTERPRISES, INC.
By: /s/ Glen F. Post, III
----------------------------------
Glen F. Post, III
Vice Chairman, President and
Chief Executive Officer
Exhibit 10.1(f)
CENTURY TELEPHONE ENTERPRISES, INC.
AMENDED AND RESTATED
KEY EMPLOYEE INCENTIVE COMPENSATION PLAN
KEY EMPLOYEE INCENTIVE COMPENSATION PLAN, effective as of January 1,
1984, as amended and restated as of November 16, 1995.
W I T N E S S E T H:
WHEREAS, effective January 1, 1984, Century Telephone Enterprises,
Inc., a Louisiana corporation (the "Company") executed an agreement providing
for incentive bonuses for valued key employees on terms and conditions
substantially similar to those set forth herein (the "Original Plan"); and
WHEREAS, the Company wishes to amend and restate the Original Plan to
add a new Section 15 thereto, as approved by the Compensation Committee of the
Company's Board of Directors on November 16, 1995 and ratified by the full Board
as of the same date;
NOW THEREFORE, the Original Plan is hereby amended and restated in its
entirety to read as follows:
1. Purpose. The purpose of this Key Employee Incentive Compensation
Plan is to advance the interests of the Company by strengthening, through the
use of incentive bonuses, the ability of the Company to attract and retain
valued key employees upon whose judgment, initiative and efforts the successful
conduct and development of the Company depends.
2. Definitions. The following definitions shall be utilized in
administering the Plan:
(a) "Board of Directors" or "Board" shall mean the Board
of Directors of Century Telephone Enterprises, Inc.
(b) "Committee" shall mean a subcommittee of the
Compensation Committee made up of members of the Board
of Directors who are not participants in this Plan.
(c) "Company" shall mean Century Telephone Enterprises,
Inc. and its subsidiaries.
(d) "Incentive Pool" shall mean the amount available with
respect to each Plan Year from which awards are made
for each such Plan Year.
(e) "Maximum Bonus Opportunity" shall mean an amount equal
to the maximum percentage of the Participant's base
salary which may be paid to the Participant as a bonus
award subject to performance criteria as determined by
the Committee from time to time.
(f) "Participant" shall mean any person who is employed by
the Company on a full-time basis, is compensated for
such employment by a regular salary, and in the opinion
of the Committee is either one of the key employees of
the Company in a position to contribute materially to
the continued growth and development and future
financial success of the Company or one who has made a
significant contribution to the Company's operations,
thereby meriting special recognition. The Participant
shall be designated by the Committee as belonging to
Tier I, Tier II, Tier III or Tier IV.
(g) "Plan" shall mean the Century Telephone Enterprises,
Inc. Key Employee Incentive Plan.
(h) "Plan Year" shall mean the fiscal year of the Company
which is currently January 1 to December 31.
(i) "Targeted Bonus Opportunity" shall mean an amount equal
to the targeted percentage of the Participant's base
salary which may be paid to the Participant as a bonus
award, subject to performance criteria as determined by
the Committee from time to time.
(j) "Termination Date" shall mean the date of a
Participant's severance from employment with the
Company by death, disability, resignation, discharge or
other termination of employment.
(k) "Subsidiary" shall mean any corporation in which the
Company owns directly, or indirectly through a
subsidiary or subsidiaries, at least fifty percent
(50%) of the combined voting power of all classes of
stock.
3. Administration. The Committee shall have authority to
establish the following procedures for the administration of the Plan:
(a) Establish, review and amend performance goals;
(b) Determine the maximum amount of the Incentive Pool,
subject to Section 5 herein;
(c) Determine the amounts of Targeted and Maximum
Bonus Opportunity, subject to Section 6 herein; and
(d) Establish regulations for the administration of
the Plan, interpret the Plan, and make all
determinations deemed necessary for the
administration of the Plan.
The Committee's interpretations of the terms and provisions of this
Plan shall be final and conclusive, and it shall have the power and duty to
construe the Plan in a manner necessary to carry out its purposes.
No member of the Committee or of the Board of Directors as a whole
shall be liable to any person for any action taken or omitted in connection with
the interpretation or administration of the Plan.
All expenses of administration of the Plan shall be borne by the
Company, and no part thereof shall be charged against the awards payable to the
Plan Participants.
4. Participation. Participants in the Plan shall be those key
employees designated as Participants by the Committee. In order to receive an
award, the Participant must be an employee of the Company at the time the bonus
payment is made. However, this requirement may be waived by the Committee in
situations such as death, disability, retirement or other cases as determined by
the Committee.
5. Incentive Bonus Opportunity. The amounts of the Targeted and
the Maximum Bonus Opportunity for each Participant in Tier I, Tier II, Tier III
and Tier IV respectively shall be based upon a formula or formulas determined
by the Compensation Committee on an annual basis and shall be defined as a
percentage of base salary for each Participant.
6. Maximum Amount Available for Awards. Promptly after the end
of each Plan Year, the amount of the Incentive Pool shall be determined by the
Compensation Committee, based upon the predetermined formula or formulas
subject, however, to the right of the Board of Directors to reduce the amount of
the Incentive Pool in its sole discretion. The bonus awards shall not be
distributed until the amounts of the Incentive Pool and the Plan Participants
are determined, and the Committee has authorized payment of the bonus awards
provided that if the Board of Directors has reduced the Incentive Pool, awards
will be reduced proportionately.
7. Allocation of Incentive Bonus Fund. The Committee shall in its
sole discretion award bonuses within the predetermined maximum limits to
Participants from the Incentive Pool. The Committee, subject to approval of the
Board of Directors, shall determine each year whether the value of the award
will be paid in cash, common stock, or a combination thereof. If payment of the
award is partially or totally in the form of Common Stock, the Committee, at its
discretion, may utilize shares of stock allocated to the 1983 Restricted Stock
Plan. Any such stock payments shall be subject to the provisions of the
Restricted Stock Plan and an individual award agreement between the Company and
the Participant.
8. Termination of Employment. In the event a Participant's
employment with the Company is severed by normal retirement, early retirement
(with Company's permission), permanent disability, or death, the Participant or
his beneficiary shall receive the award, payable in cash, as earned for the en-
tire Plan Year in which the retirement, permanent disability or death occurred.
In the event of death, the award shall be paid by the Company to the beneficiary
designated by the Participant, or if the Participant has failed to make such
designation, then to the personal representative of the Participant's estate.
Any Participant whose employment is terminated for any reason other than normal
retirement, early retirement (with Company's permission), permanent disability,
or death during the Plan Year shall not receive an award for that Plan Year.
9. Forfeiture of Benefits. In the event a Participant is
discharged by the Company for cause, including, without limitation, fraud,
embezzlement, theft, commission of a felony, proven dishonesty or other
unethical behavior, or disclosure of trade secrets of the Company, then the
amount of any benefit provided under this Plan to which the Participant would
otherwise be entitled shall be forfeited. The decision of the Board as to the
cause of a former Participant's discharge shall be final. No decision of the
Board, however, shall affect finality of the discharge of such Participant by
the Company in any manner.
10. Assignments and Transfers. A Participant shall not
assign, encumber, or transfer his rights and interests under the Plan, and
any attempt to do so shall render those rights and interests null and void.
11. Employee Rights Under the Plan. Nothing in this Plan shall
be construed to:
(a) Give any employee of the Company any claim or right
to be granted an award under this Plan;
(b) Limit in any way the right of the Company to
terminate a Participant's employment with the
Company at any time; or
(c) Be evidence of any agreement or understanding,
express or implied, that the Company will employ a
Participant in any particular position or at any
particular rate of remuneration.
12. Amendment and Termination. The Board of Directors may amend,
suspend or terminate the Plan at any time. Any amendment or termination of the
Plan shall not, however, affect the right of any Participant to receive the
award payments earned in the current Plan Year or any unpaid awards under the
Plan authorized and communicated to Participants prior to the date of such
amendment or termination.
13. Withholding of Taxes. The Company shall deduct from the
amount of all benefits paid under the Plan any taxes required to be withheld
by the Federal or any State or local government.
14. Effective Date and Term of Plan. The effective date of this
Plan is January 1, 1984, and the effective date of this Amendment and Restate-
ment is November 16, 1995. The Plan shall consist of individual calendar year
Plans, one of which will commence January 1, 1984 (the 1984 Plan), and every
consecutive January 1 thereafter during the continuance of the Plan.The Plan
shall continue until terminated by the Board of Directors as provided herein.
15. Change in Control. Notwithstanding any other provision hereof,
upon a Change in Control (as defined below), the Plan Year shall be deemed to
end on the date the Change in Control occurs (the "Change in Control Date") and
the Committee (notwithstanding any removal or attempted removal of some or all
of the members thereof as directors or committee members) shall review the
Company's performance through the Change of Control Date and, after annualizing
such performance to the extent necessary or appropriate, determine the extent to
which the performance goals were met with respect to such Plan Year, in which
event all awards payable under this Plan with respect to such Plan Year (along
with any unpaid awards under this Plan relating to any prior Plan Year) shall be
payable in accordance with past practice in full in cash, without any offset or
reduction, to the same extent as if no Change in Control had occurred. A Change
in Control shall mean the occurrence of any of the following events: (i) the
acquisition by any "person" (as such term is used in Section 13(d) and 14(d) of
the Securities Exchange Act of 1934 (the "Exchange Act")), other than the
Company or any employee benefit plan or related trust or affiliate of the
Company or its subsidiaries, of beneficial ownership (as defined in Rule 13d-3
promulgated under the Exchange Act), directly or indirectly, of securities of
the Company representing 30% or more of the combined voting power of the
Company's then outstanding securities entitled to vote generally in the election
of directors, but not including any acquisition directly from the Company; (ii)
the consummation of a merger, consolidation, reorganization, share exchange, or
sale or other disposition of all or substantially all of the assets of the
Company unless, immediately thereafter, at least 50% of the outstanding voting
power of the surviving or successor corporation, or, if applicable, the parent
company thereof (the "Surviving Company"), are owned by the Company's
shareholders immediately prior to such time, at least a majority of the
directors of the Surviving Company were directors of the Company at the time
such transaction was approved, and no person or entity (excluding any employee
benefit plan or related trust of the Company or the Surviving Company and any
person or entity that was a shareholder of the Company immediately prior to such
time) beneficially owns 20% or more of the outstanding voting power of the
Surviving Company; (iii) during any period of two consecutive years, individuals
who at the beginning of such period constitute the Board of Directors of the
Company cease for any reason to constitute at least a majority thereof, unless
the election of each director who was not a director at the beginning of such
period shall have been approved in advance by directors representing at least
two-thirds of the directors then in office who were directors at the beginning
of the period; or (iv) the approval by the Company's shareholders of a complete
liquidation or dissolution of the Company. Notwithstanding any other provision
to the contrary in this Plan or in any applicable law or regulation, the
benefits conferred under this Section to a Participant shall automatically vest
upon the earlier of (i) the occurrence of a Change in Control, (ii) the date
that any person or entity submits an offer or proposal to the Company that
results in or leads to a Change in Control (whether by such person or any other
person) or (iii) the date of the public announcement of a Change in Control or
an offer, proposal or proxy solicitation that results in or leads to a Change in
Control (whether by the person or entity making such announcement or any other
person), and thereafter such benefits may not be adversely affected in any
manner without the prior written consent of the Participant.
IN WITNESS WHEREOF, this instrument has been executed as of the date
and year first above written.
CENTURY TELEPHONE ENTERPRISES, INC.
By: /s/ Glen F. Post, III
-------------------------------
Glen F. Post, III
Vice Chairman, President and
Chief Executive Officer
Exhibit 10.1(q)
CENTURY TELEPHONE ENTERPRISES, INC.
SUPPLEMENTAL DEFINED CONTRIBUTION PLAN
1995 RESTATEMENT
I. Purpose of the Plan
This Restated Supplemental Defined Contribution Plan (the "Plan") is
intended to provide Century Telephone Enterprises, Inc. (the "Company") and its
subsidiaries a method for attracting and retaining key employees; to provide a
method for recognizing the contributions of such personnel; and to promote
executive and managerial flexibility, thereby advancing the interests of the
Company and its stockholders. In addition, the Plan is intended to provide a
more adequate level of retirement benefits in combination with the Company's
general retirement program.
II. Definitions
As used in this Plan, the following terms shall have the meanings
indicated, unless the context otherwise specifies or requires:
2.01 "ACCOUNT" shall mean the account established under this Plan in
accordance with Section 4.01.
2.02 "ACCOUNT BALANCE", as of a given date, shall mean the fair market
value of a Participant's Account, as determined by the Committee.
2.03 "BOARD OF DIRECTORS" shall mean not less than a quorum of the
whole Board of Directors of Century Telephone Enterprises, Inc.
2.04 "COMMITTEE" shall mean three or more members of the Board of
Directors as described in Section 11.01 of the Plan, or the Board if no
Committee has been appointed.
2.05 "COMMON STOCK" shall mean the common stock, $1.00 par value per
share, of the Company.
2.06 "COMPANY" shall mean Century Telephone Enterprises, Inc., any
Subsidiary thereof, and any affiliate designated by the Company as a
participating employer under this Plan.
2.07 "COMPENSATION" shall mean a sum of Participant's Salary,
determined under Section 2.20 and Incentive Compensation, determined under
Section 2.11, for a particular year. The determination of a Participant's
Compensation for purposes of this Plan shall be made by the Committee, in its
sole discretion.
2.08 "DISABILITY" shall mean a condition which makes a Participant
unable to perform each of the material duties of his regular occupation where he
is likely to remain thus incapacitated continuously and permanently.
2.09 "EFFECTIVE DATE" of this Plan shall mean January 1, 1994. The
effective date of this Restatement shall be November 16, 1995.
2.10 "EMPLOYER" shall mean Century Telephone Enterprises, Inc., any
Subsidiary thereof, and any affiliate designated by the Company as a
participating employer under this Plan.
2.11 "INCENTIVE COMPENSATION" shall mean the amount awarded to a
Participant under the Company's Key Employee Incentive Compensation Program or
other executive incentive compensation arrangement maintained by the Company,
including the amount of any stock award in its cash equivalent at the time of
conversion of the award from cash to stock. A Participant's Incentive
Compensation shall be determined on an annual basis and shall, for purposes of
this Plan, be allocated to the year or years to which the award relates, i.e.,
the period of time during which the award was earned.
2.12 "LEAVE OF ABSENCE" shall mean any extraordinary absence authorized
by the Employer under the Employer's standard personnel practices.
2.13 "NORMAL RETIREMENT AGE" shall mean age sixty-five (65).
2.14 "NORMAL RETIREMENT DATE" shall mean the first day of the month
coincident with or next following a Participant's sixty-fifth (65th) birthday.
Normal Retirement Age shall mean age sixty-five (65).
2.15 "PARTICIPANT" shall mean any officer of the Employer who is
granted participation in the Plan in accordance with the provisions of Article
III.
2.16 "PHANTOM STOCK UNIT" shall mean a unit, the value of which is
equal to the value of a share of Common Stock, but does not represent actual
shares of Common Stock.
2.17 "PLAN" shall mean the Century Telephone Enterprises, Inc.
Supplemental Defined Contribution Plan, as amended and restated herein.
2.18 "PLAN CONTRIBUTIONS" shall mean the total dollar amount of
contributions made, directly or indirectly, on behalf of a Participant under the
Company's Stock Bonus Plan, PAYSOP and Trust and the Company's Employee Stock
Ownership Plan and Trust.
2.19 "PLAN CONTRIBUTION PERCENTAGE" shall mean the estimated total of
the percentage of compensation of employees of the Company contributed by the
Company to its Stock Bonus Plan, PAYSOP and Trust and its Employee Stock
Ownership Plan and Trust, as determined by dividing Plan Contributions for a
particular year by estimated compensation taken into account under such plans
for the year. The Committee, in its sole discretion, shall determine the Plan
Contribution Percentage for each year, and such determination shall be binding
and conclusive.
2.20 "SALARY" shall mean a Participant's actual pay for the calendar
year, exclusive, however, of bonus payments, overtime payments, commissions,
imputed income on life insurance, vehicle allowances, relocation expenses,
severance payments, and any other extra compensation.
2.21 "SUBSIDIARY" shall mean any corporation in which the Company owns,
directly or indirectly through subsidiaries, at least fifty percent (50%) of the
combined voting power of all classes of stock.
III. Participation
3.01 Any officer who is either one of the key employees of the Company
in a position to contribute materially to the continued growth and future
financial success of the Company, or one who has made a significant contribution
to the Company's operations, thereby meriting special recognition, shall be
eligible to participate provided the following requirements are met:
a. The officer is employed on a full-time basis by Century
Telephone Enterprises, Inc., any Subsidiary thereof or any affiliate designated
by the Company as a participating employer under this Plan;
b. The officer is compensated for full-time employment by a
regular salary;
c. The coverage of the officer is duly approved by the
Board of Directors of Century Telephone Enterprises, Inc.
It is intended that participation in this Plan shall be extended only to those
officers who are members of a select group of management and highly compensated
employees, as determined by the Committee.
IV. Accounts and Investments
4.01 An Account shall be established on behalf of each Participant who
receives an allocation of Phantom Stock Units pursuant to Article V hereof. Each
Participant's Account shall be credited with such allocation, and shall be
debited with any expenses properly chargeable thereto. Any cash dividends paid
on the Common Stock will be deemed to be paid on the Phantom Stock Units and
will be deemed to be invested in additional Phantom Stock Units.
4.02 Each Participant shall be furnished with a statement of his
Account, in such form as the Committee shall determine, within a reasonable
period of time after the end of each year.
4.03 Notwithstanding anything to the contrary in this Plan, upon the
occurrence of any of the events described in Section 6.01(d)(a "Change in
Control"), each Phantom Stock Unit shall be automatically converted into cash in
an amount equal to the fair market value of each such unit. For purposes of this
Section, the fair market value of each Phantom Stock Unit shall be determined by
whichever of the following items is applicable: (i) the fair market value of the
cash, securities or other properties into which each share of Common Stock will
be converted pursuant to any merger, consolidation, share exchange, asset sale
or other reorganization that results in a Change in Control, determined as of
the date of the definitive agreement providing for such transaction, (ii) the
price per share of Common Stock offered to shareholders of Century in any tender
offer or exchange offer that results in a Change in Control, determined on the
date the offer is commenced, or (iii) in all other events, the fair market value
per share of Common Stock as determined, as of the close of business on the day
immediately preceding the occurrence of the Change in Control, by the Committee
(which shall remain empowered to make all determinations contemplated by this
Section notwithstanding any removal or attempted removal of some or all of the
members thereof as directors or committee members). In the event that the
consideration offered to shareholders of Century in any transaction described
herein consists of anything other than cash, the Committee shall determine the
fair market value of the portion of the consideration offered which is other
than cash as of the date indicated above (but without giving effect to any
decrease in the value of any securities that comprise some or all of the
consideration payable in connection with such transaction).
V. Allocations to Accounts
5.01 For each calendar year in which this Plan is in effect, each
Participant's Account shall be credited with that number of Phantom Stock Units
equal in value to that number of shares of Common Stock that could be purchased
with an amount determined according to the following formula:
(a) Compensation,
times
(b) Plan Contribution Percentage,
less
(c) Plan Contributions.
For purposes of this Section 5.01 the Common Stock shall be valued at
the closing price of the Common Stock on the New York Stock Exchange on the
trading day immediately preceding the date specified in Section 5.02.
5.02 The amount determined under Section 5.01 shall be credited to a
Participant's account as of the later of the date on which the credit to the
Participant's Account for the year under Section 5.01 is determined, or the date
on which an amount representing such credit is contributed under the Plan, and
shall be considered a part of the Participant's Account Balance as of such date.
VI. Vesting of Account
6.01 A Participant's Account shall be fully vested upon:
(a) attainment of age 55.
(b) death.
(c) disability as defined in Section 2.07.
(d) the occurrence of any of the following: (i) the
acquisition by any "person" (as such term is used in Section 13(d) and 14(d) of
the Securities Exchange Act of 1934 (the "Exchange Act")), other than the
Company or any employee benefit plan or related trust or affiliate of the
Company or its subsidiaries, of beneficial ownership (as defined in Rule 13d-3
promulgated under the Exchange Act), directly or indirectly, of securities of
the Company representing 30% or more of the combined voting power of the
Company's then outstanding securities entitled to vote generally in the election
of directors, but not including any acquisition directly from the Company; (ii)
the consummation of a merger, consolidation, reorganization, share exchange, or
sale or other disposition of all or substantially all of the assets of the
Company unless, immediately thereafter, at least 50% of the outstanding voting
power of the surviving or successor corporation, or, if applicable, the parent
company thereof (the "Surviving Company"), are owned by the Company's
shareholders immediately prior to such time, at least a majority of the
directors of the Surviving Company were directors of the Company at the time
such transaction was approved, and no person or entity (excluding any employee
benefit plan or related trust of the Company or the Surviving Company and any
person or entity that was a shareholder of the Company immediately prior to such
time) beneficially owns 20% or more of the outstanding voting power of the
Surviving Company; (iii) during any period of two consecutive years, individuals
who at the beginning of such period constitute the Board of Directors of the
Company cease for any reason to constitute at least a majority thereof, unless
the election of each director who was not a director at the beginning of such
period shall have been approved in advance by directors representing at least
two-thirds of the directors then in office who were directors at the beginning
of the period; or (iv) the approval by the Company's shareholders of a complete
liquidation or dissolution of the Company.
6.02 If a Participant terminates service for reasons other than as
listed in Section 6.01(a), (b), or (c), his Account Balance shall be vested in
accordance with the following schedule:
Years of Service Vested %
---------------- --------
less than 5 0%
5 or more 100%
VII. Years of Service
7.01 A Participant will receive credit for a year of service for each
calendar year in which he completes at least one thousand (1000) hours of
service. Years of service will include all years of service prior to becoming an
officer of the Company, years of service following Normal Retirement Date, and
years of service with any Subsidiary or any affiliate designated by the Company
as a participating employer under this Plan.. In addition, periods of Leave of
Absence and periods during which severance pay is provided shall be counted for
determining years of service.
VIII. Time of Payment and Beneficiaries
8.01 Except as provided in Section 8.02, a Participant's vested Account
Balance is payable upon termination of employment.
8.02 Payment of the Account Balance of a deceased Participant shall
commence within ninety (90) days of his death, and shall be made to his
beneficiary designated on a form provided for such purpose by the Plan
Administrator. If the Participant fails to designate a beneficiary, his Account
Balance shall be payable to his surviving spouse or, if none, to his surviving
child or children (or legal representative of any minor child or child who has
been declared incompetent or incapable of handling his affairs) in equal shares.
The Account Balance of a Participant who dies leaving no spouse or children
shall be paid to his estate.
IX. Form of Benefit Payment
9.01 The normal form of payment of a Participant's Account Balance
is a lump sum cash payment.
9.02 A Participant may, prior to termination of employment, elect to
receive payment of his Account Balance in monthly, quarterly, or annual cash
installments of approximately equal amounts, over a period not to exceed ten
(10) years.
X. Additional Restrictions on Benefit Payments
10.01 In no event will there be a duplication of benefits payable under
the Plan because of employment by more than one participating Employer.
XI. Administration and Interpretation
11.01 The Plan shall be administered by the Board of Directors through
a Committee which shall consist of three or more members of the Board of
Directors of the Company. No individual who is or has ever been a member of the
Committee shall be eligible to be designated as a participant or receive
payments under this Plan. The Committee shall have full power and authority to
interpret and administer the Plan and, subject to the provisions herein set
forth, to prescribe, amend and rescind rules and regulations and make all other
determinations necessary or desirable for the administration of the Plan. The
Board may from time to time appoint additional members of the Committee or
remove members and appoint new members in substitution for those previously
appointed and to fill vacancies however caused.
11.02 The decision of the Committee relating to any question concerning
or involving the interpretation or administration of the Plan shall be final and
conclusive, and nothing in the Plan shall be deemed to give any employee any
right to participate in the Plan, except to such extent, if any, as the
Committee may have determined or approved pursuant to the provisions of the
Plan.
XII. Nature of the Plan
12.01 Benefits under the Plan shall generally be payable by the Company
from its own funds, and such benefits shall not (i) impose any obligation upon
the trust(s) of the other employee benefit programs of the Company; (ii) be paid
from such trust(s); nor (iii) have any effect whatsoever upon the amount or
payment of benefits under the other employee benefit programs of the Company.
Participants have only an unsecured right to receive benefits under the Plan
from the Company as general creditors of the Company. The Company may deposit
amounts in a trust established by the Company for the purpose of funding the
Company's obligations under the Plan. Participants and their beneficiaries,
however, have no secured interest or special claim to the assets of such trust,
and the assets of the trust shall be subject to the payment of claims of general
creditors of the Company upon the insolvency or bankruptcy of the Company, as
provided in the trust.
XIII. Employment Relationship
13.01 An employee shall be considered to be in the employment of the
Company and its subsidiaries as long as he remains an employee of either the
Company, any Subsidiary of the Company, or any corporation to which
substantially all of the assets and business of the Company are transferred.
Nothing in the adoption of this Plan nor the designation of any Participant
shall confer on any employee the right to continued employment by the Company or
a Subsidiary of the Company, or affect in any way the right of the Company or
such Subsidiary to terminate his employment at any time. Any question as to
whether and when there has been a termination of an employee's employment, and
the cause, notice or other circumstances of such termination, shall be
determined by the Board, and its determination shall be final.
XIV. Amendment and Termination of Plan
14.01 The Board of Directors of the Company in its sole discretion may
terminate the Plan at any time and shall have the right to alter or amend the
Plan or any part thereof from time to time, except that the Board of Directors
shall not terminate the Plan or make any alteration or amendment thereto which
would impair any rights or benefits of a Participant previously accrued.
XV. Binding Effect
15.01 This Plan shall be binding on the Company, each Subsidiary and
any affiliate designated by the Company as a participating employer under this
Plan, the successors and assigns thereof, and any entity to which substantially
all of the assets or business of the Company, a Subsidiary, or a participating
affiliate are transferred.
XVI. Reimbursement of Participants
16.01 The Company shall reimburse any Participant, or beneficiary
thereof, for all expenses, including attorney's fees, actually and reasonably
incurred by the Participant or beneficiary in any proceeding to enforce any of
their rights under this Plan.
XVII. Construction
17.01 The masculine gender, where appearing in the Plan, shall be
deemed to include the feminine gender, and the singular may indicate the plural,
unless the context clearly indicates the contrary. The words "hereof", "herein",
"hereunder" and other similar compounds of the word "here" shall, unless
otherwise specifically stated, mean and refer to the entire Plan, not to any
particular provision or Section. Article and Section headings are included for
convenience of reference and are not intended to add to, or subtract from, the
terms of the Plan.
IN WITNESS WHEREOF, Century Telephone Enterprises, Inc. has executed
this restated Plan in its corporate name and its corporate seal to be hereunto
affixed this 26 day of January, 1996.
ATTEST: CENTURY TELEPHONE ENTERPRISES, INC.
/s/ Sandra B. Post By: /s/ R. Stewart Ewing, Jr.
- ---------------------- --------------------------------
R. Stewart Ewing, Jr.
Senior Vice President and
Chief Financial Officer
Exhibit 10.1 (t)
CENTURY TELEPHONE ENTERPRISES, INC.
OUTSIDE DIRECTORS' RETIREMENT PLAN
1995 RESTATEMENT
I. Purpose of the Plan
This Restated Outside Directors' Retirement Plan (the "Plan") is an
unfunded defined benefit pension plan for those Outside Directors whose coverage
is approved by the Board of Directors (the "Board'). The Plan has been
established by Century Telephone Enterprises, Inc. (the "Company") for the
purpose of attracting and retaining competent individuals to serve as Directors
in order to ensure the continued growth and profitability of the Company by
providing retirement benefits for eligible Board members.
II. Definitions
As used in this Plan, the following terms shall have the meanings
indicated, unless the context otherwise specifies or requires:
2.01. "ACCRUED BENEFIT" shall mean a Participant's accrued monthly
benefit calculated in accordance with the provisions of Section 5.04.
2.02 "ACTUARIAL EQUIVALENT" shall mean equivalence in value between
two or more methods of payment based on the UP 84 Mortality Table and the
Pension Benefit Guaranty Corporation's published interest rate for immediate
annuities on the date of pension commencement.
2.03 "BENEFICIARY" shall mean the person or persons last designated
as such by a Participant or a Former Participant.
2.04 "BENEFIT" shall mean the monthly benefit payable to a Participant
or Former Participant in accordance with the provisions of Sections V and VI.
2.05 "BENEFIT COMMENCEMENT DATE" shall mean the date on which Benefits
under this Plan commence to be paid to a Participant or Former Participant.
2.06 "BOARD OF DIRECTORS" or "BOARD" shall mean the Board of Directors
of Century Telephone Enterprises, Inc.
2.07 "COMMITTEE" shall mean three or more members of the Board of
Directors who are not Outside Directors, as selected by the Board from time to
time to administer this Plan.
2.08 "COMPANY" shall mean Century Telephone Enterprises, Inc.and any
predecessor or business entity designated by the Board.
2.09 "COMPENSATION" shall mean moneys designated as Director's fees
which are paid to the Participant as an annual retainer, whether paid currently,
accrued or deferred for the Plan Year. In addition, fees paid for attending one
special meeting of the Board shall also be included in the Compensation.
2.10 "EARLY RETIREMENT" shall mean a Participant's or Former
Participant's termination of his Outside Director's status with the Board on or
after his Early Retirement Date and prior to his Normal Retirement Date.
2.11 "EARLY RETIREMENT DATE" shall mean the first day of the month
coinciding with or otherwise next following the date on which a Participant
attains the later of the age of 65 or completion of 10 Years of Service.
2.12 "EFFECTIVE DATE" of this Restatement shall mean November 16, 1995.
2.13 "FORMER PARTICIPANT" shall mean a former Participant who has
ceased to participate in the Plan but who has a Vested Benefit.
2.14 "NORMAL FORM OF BENEFIT" shall have the meaning set forth in
Section 5.05.
2.15 "NORMAL RETIREMENT" shall mean a Participant's or Former
Participant's termination of Outside Director's status with the Board on his
Normal Retirement Date.
2.16 "NORMAL RETIREMENT DATE" shall mean the first day of the month
coinciding with or otherwise next following the date on which a Participant
attains the age of 70. Normal Retirement Date of Participants who are past age
70 as of the Effective Date of this Plan shall be the first day of the month
coinciding with or otherwise next following the date on which the Participant
resigns as an Outside Director.
2.17 "OUTSIDE DIRECTOR" shall mean any Director of the Company who is
not an employee of the Company.
2.18 "PARTICIPANT" shall mean any Outside Director who is granted
participation in the Plan in accordance with the provision of Section III.
2.19 "YEARS OF BENEFIT ACCRUAL SERVICE" shall mean the period of
continuous service as an Outside Director with the Company, beginning on the
date the Participant commences or resumes service or any anniversary of such
date.
2.20 "YEARS OF SERVICE" shall mean the period of continuous service as
an Outside or Inside Director with the Company, beginning on the date the
Participant commences or resumes service or any anniversary of such date.
III. Eligibility and Participation
Only Outside Directors on or after the Effective Date of this Plan
shall be eligible to participate in the Plan.
IV. Accrual of Liabilities
4.01 The Board shall accrue liabilities on its books each year equal to
the annual amount required to provide the retirement benefits contingently
payable under the Plan, according to accepted actuarial methods using such
assumptions as the Board from time to time may adopt, provided, however, that
the Board shall accrue such liabilities only in amounts not prohibited by law.
Retirement benefits defined in Section V shall be reduced to the extent the
Board is prohibited by law from accruing such liabilities.
4.02 Neither a Participant nor his Beneficiary shall have any interest
in any sums accrued in recognition of the contingent liability attributable to
this Plan, and such accruals shall at all times remain the assets of the Company
subject to the claims of general creditors of the Company.
V. Retirement Benefit
5.01 A Participant or Former Participant shall be entitled to receive a
Benefit under the Plan, in accordance with the provisions of this Section V.
5.02 Any Participant who retires on his Normal Retirement Date shall be
entitled to receive a monthly benefit in the Normal Form of Benefit, commencing
on his Normal Retirement Date, equal to 100% of his Compensation divided by 12.
5.03 Any Participant may elect to retire on or after his early
Retirement Date and receive a benefit equal to his Accrued Benefit reduced by 2%
for each year by which the Benefit Commencement Date precedes the Participant's
Normal Retirement Date. Payment of such benefit shall commence on the first of
the month coinciding with or next following his termination of Outside
Director's status with the Board.
5.04 A participant's Accrued Benefit under the Plan shall be determined
in accordance with the following schedule based on his Years of Benefit Accrual
Service on the date he terminates his status as an Outside Director:
Years of Benefit
Accrual Service Percent of Compensation
--------------- -----------------------
Less than 1 0%
1 10%
2 20%
3 30%
4 40%
5 50%
6 60%
7 70%
8 80%
9 90%
10 100%
5.05 The normal form of benefit payment for a Participant or Former
Participant shall be a life annuity unless such Participant or Former
Participant elects, prior to commencement of participation in the Plan, one of
the optional benefit forms set forth in Section 5.06.
5.06 Upon the written election of a Participant or Former Participant
made prior to his commencement of participation in the Plan, the Actuarial
Equivalent of the retirement benefit to which such Participant or Former
Participant would otherwise be entitled under the provisions of Section 5.05
above shall, subject to the approval of the Committee, be payable under any
optional methods of payment which are offered by the Board, including a 50%
joint and survivor annuity, or a 100% joint and survivor annuity.
Notwithstanding the foregoing, no optional payment form will be offered which
would accelerate benefits hereunder and no lump sum payment will be made to a
Participant.
5.07 Upon termination of participation by resignation or discharge
other than by death, disability or retirement, the Participant shall be entitled
to a vested percentage of his then Accrued Benefit, payable beginning on or
after his Early Retirement Date, in accordance with the vesting schedule
provided in Section VI. The vested Accrued Benefit amount shall be reduced 2%
for each year the Benefit Commencement Date precedes Normal Retirement Date.
5.08 Upon total and permanent disability determined upon the basis of
competent medical evidence acceptable to a majority of the Board, the
Participant shall be entitled to a monthly disability benefit commencing on the
first of the month coinciding with or next following his disability equal to
100% of his Compensation as of date of disability divided by 12.
5.09 Upon the death of the Participant, the designated Beneficiary
shall be entitled to a death benefit, commencing on the first of the month
coinciding with or next following the Participant's death, equal to the value of
the liabilities that have been accrued by the Board on its books for the
Participant in accordance with Section 401 as of the day immediately prior to
his death. The Death Benefit will be payable in the form of a lump sum.
5.10 The Beneficiary referred to in this Section may be designated or
changed by the Participant (without the consent of any prior Beneficiary) on a
form provided by the Committee and delivered to the Committee prior to his
death. If no such Beneficiary shall have been designated, or if no designated
Beneficiary shall survive the Participant, the benefits shall be payable to the
Participant's estate.
5.11 (a) Notwithstanding anything to the contrary in this Plan or in
any applicable law or regulation, upon the earlier of (i) the occurrence of a
Change in Control (as defined in paragraph (e) below), (ii) the date that any
person or entity submits an offer or proposal to the Company that results in or
leads to a Change in Control (whether by such person or any other person) or
(iii) the date of the public announcement of a Change in Control or an offer,
proposal or proxy solicitation that results in or leads to a Change in Control
(whether by the person or entity making such announcement or any other person)
(the earliest of such dates being hereinafter referred to as the "Effective
Date"), the Accrued Benefit of each Participant (other than any Participant
whose service as an Outside Director was terminated prior to full vesting of his
Accrued Benefit under Article VI) and the benefits conferred under this Section
shall automatically vest and thereafter may not be adversely affected in any
matter without the prior written consent of the Participant. Notwithstanding
anything to the contrary in this Plan, upon the occurrence of a Change in
Control any Participant who is then serving as an Outside Director ("Active
Participants") shall have an irrevocable right to receive, and the Company shall
be irrevocably obligated to pay, a lump sum cash payment in an amount determined
pursuant to this Section if the Company or its successor, in connection with or
following the occurrence of the Change in Control, (i) seeks and obtains the
Participant's resignation as an Outside Director, (ii) removes the Participant
as an Outside Director, (iii) fails to nominate the Participant for re-election
at the end of his term or (iv) reduces either the annual fee paid to the
Participant for service as an Outside Director or the fee payable with respect
to each Board or Committee meeting attended that, in either case, were in effect
immediately prior to the Effective Date (each such action being referred to as
an "Effective Termination"). The lump sum cash payment payable to Active
Participants under this Section (the "Lump Sum Payment") shall be paid on the
date of Effective Termination or as soon thereafter as is administratively
feasible.
(b) The amount of each Lump Sum Payment shall be determined as
follows:
(i) With respect to any Active Participant who is
eligible as of the date of Effective Termination to receive benefits under
Section 5.02 of this Plan, the Lump Sum Payment shall equal the Present Value
(as defined below) of the stream of payments to which such participant would
have otherwise been entitled to receive immediately upon Effective Termination
in accordance with Section 5.02 of this Plan (assuming such benefits are paid in
the form of a lifetime annuity), based upon such participant's Compensation
(without giving effect to any salary reductions that gave rise to such Effective
Termination), Accrued Benefit, and Years of Benefit Accrual Service, in each
case as of the date of Effective Termination.
(ii) With respect to any Active Participant who is
not eligible as of the date of Effective Termination to receive benefits under
Sections 5.02 or 5.03 of this Plan, the Lump Sum Payment shall equal the product
of (A) the Present Value, calculated as of age 70, of the stream of payments to
which such participant would have otherwise been entitled to receive at age 70
in accordance with the terms of this Plan based on the same assumptions and
terms set forth in subsection (b)(i) above, multiplied times (B) such discount
factor as is necessary to reduce the amount determined under subsection
(b)(ii)(A) above to its Present Value, it being understood that in calculating
such discount factor, no discount shall be applied to reflect the possibility
that such participant may die prior to attaining age 70.
(iii) With respect to any Active Participant who is
eligible as of the date of Effective Termination to receive benefits under
Article 5.03 of the Plan, the Lump Sum Payment shall equal the greater of (A)
the Present Value of the stream of payments to which such participant would have
otherwise been entitled to receive immediately upon Effective Termination in
accordance with Section 5.03 of this Plan, based upon the assumptions and terms
set forth in subsection (b)(i) above, or (B) the Present Value, calculated as of
age 70, of the stream of payments to which such participant would otherwise be
entitled to receive at age 70 in accordance with this Plan, determined in the
same manner and subject to the same assumptions and terms set forth in
subsection (b)(ii) above.
(iv) As used in this Section with respect to any
amount, the "Present Value" of such amount shall mean the discounted value of
such amount that is determined by making customary present value calculations in
accordance with generally accepted actuarial principles, provided that (A) the
discount interest rate applied in connection therewith shall equal the interest
rate quoted by the Bloomberg Municipal AAA General Obligation 5-Year Index (as
of the close of business on the first business day of the calendar quarter in
which such present value calculations are made) or, in the event such index is
no longer published, any similar index for comparable municipal securities and
(B) the mortality tables applied in connection therewith shall be "1983 Group
Annuity Mortality Table (50% male/50% female)" as prescribed by the Pension
Benefit Guaranty Corporation or any successor table prescribed by such
organization.
(c) Notwithstanding anything to the contrary in this Plan,
upon the sooner of the occurrence of a Change in Control or the approval by the
Board of Directors of the Company of any Change in Control, the Company shall
promptly consult with each Participant who has already begun to receive periodic
payments under this Plan ("Retired Participants') and, following such
consultations, the Company shall have the option with respect to each Retired
Participant to (i) confirm in writing its obligation to continue to provide to
such Retired Participant all benefits hereunder in the same manner provided
prior to the Change in Control or (ii) make a lump sum cash payment in an amount
equal to the Present Value of the participant's future stream of payments which
would otherwise be payable under this Plan. If the Company elects to furnish any
retired Participant with a lump sum cash payment, the Company shall offer to
assist such participant in purchasing at such participant's cost an annuity for
the benefit of such participant.
(d) Notwithstanding anything to the contrary in this Plan,
upon the occurrence of a Change in Control, any Former Participant (other than a
Retired Participant) shall have an irrevocable and unconditional right to
receive, and the Company shall be irrevocably and unconditionally obligated to
pay, a lump sum payment in an amount determined in the manner provided in
subsection (b)(ii) or (iii), as applicable.
(e) For purposes hereof, Change of Control shall mean the
occurrence of any of the following events: (i) the acquisition by any "person"
(as such term is used in Section 13(d) and 14(d) of the Securities Exchange Act
of 1934 (the "Exchange Act")), other than the Company or any employee benefit
plan or related trust or affiliate of the Company or its subsidiaries, of
beneficial ownership (as defined in Rule 13d-3 promulgated under the Exchange
Act), directly or indirectly, of securities of the Company representing 30% or
more of the combined voting power of the Company's then outstanding securities
entitled to vote generally in the election of directors, but not including any
acquisition directly from the Company; (ii) the consummation of a merger,
consolidation, reorganization, share exchange, or sale or other disposition of
all or substantially all of the assets of the Company unless, immediately
thereafter, at least 50% of the outstanding voting power of the surviving or
successor corporation, or, if applicable, the parent company thereof (the
"Surviving Company"), are owned by the Company's shareholders immediately prior
to such time, at least a majority of the directors of the Surviving Company were
directors of the Company at the time such transaction was approved, and no
person or entity (excluding any employee benefit plan or related trust of the
Company or the Surviving Company and any person or entity that was a shareholder
of the Company immediately prior to such time) beneficially owns 20% or more of
the outstanding voting power of the Surviving Company; (iii) during any period
of two consecutive years, individuals who at the beginning of such period
constitute the Board of Directors of the Company cease for any reason to
constitute at least a majority thereof, unless the election of each director who
was not a director at the beginning of such period shall have been approved in
advance by directors representing at least two-thirds of the directors then in
office who were directors at the beginning of the period; or (iv) the approval
by the Company's shareholders of a complete liquidation or dissolution of the
Company.
VI. Vesting
Participants shall vest in their Accrued Benefit in accordance with the
following schedule:
Years of Service Vesting Percentage
---------------- -----------------
Less than five years 0%
Five years or more 100%
VII. Administration of the Plan
The Committee shall have full power and authority to interpret,
construe, and administer this agreement and the Committee's interpretations and
construction thereof, and action hereunder, including any valuation of the
retirement benefits, or the amount or recipient of the payment to be made
therefrom shall be binding and conclusive on all persons for all purposes. The
Committee shall not be liable to any person for any action taken or omitted in
connection with the interpretation and administration of this Plan unless
attributable to willful misconduct or lack of good faith.
VIII. Amendment or Discontinuance
The Board expects to continue the Plan indefinitely, but the Board may
amend or discontinue the Plan at any time. Any such amendment or discontinuance
shall not operate to deprive a Participant of any Accrued Benefit earned prior
to the execution date of such amendment or discontinuance.
IX. No Assignment
The right of the Participant or any other person to the payment of any
benefit under this Plan shall not be assigned, transferred, pledged, or
encumbered except by will or by the laws of descent and distribution.
X. Nature of the Plan
Benefits under the Plan shall generally be payable by the Company from
its own funds, and such benefits shall not (i) impose any obligation upon the
trust of the other employee benefit programs of the Company; (ii) be paid from
said trust; nor (iii) have any effect whatsoever upon the amount or payment of
benefits under the other employee benefit programs of the Company. Participants
have only an unsecured right to receive benefits under the Plan from the Company
as general creditors of the Company. The Company may deposit amounts in the
Century Telephone Enterprises, Inc. Outside Directors' Retirement Trust (the
"Trust") established by the Company for the purpose of funding the Company's
obligations under the plan. Participants and their beneficiaries, however, have
no secured interest or special claim to the assets of the Trust, and the assets
of the Trust shall be subject to the payment of claims of general creditors of
the Company upon the insolvency or bankruptcy of the Company, as provided in the
Trust.
XI. Validity
If any provision of the Plan is held by a court of competent
jurisdiction to be invalid or unenforceable, the remaining provisions shall
continue in full force and effect. The provisions of the Plan shall be
construed, administered and enforced according to the laws of the State of
Louisiana.
XII. Use
Whenever the masculine gender is used herein, it shall include the
feminine, and whenever the singular form is used, it shall include the plural,
each as may be appropriate in the context used.
XIII. Headings
Article and paragraph headings used herein are for convenience of
reference only and shall not affect the interpretation of the Plan.
IN WITNESS WHEREOF, Century Telephone Enterprises, Inc. has executed
this restated Plan in its corporate name and its corporate seal to be hereunto
affixed this 26 day of January, 1996.
ATTEST: CENTURY TELEPHONE ENTERPRISES, INC.
/s/ Sandra B. Post By: /s/ R. Stewart Ewing, Jr.
- -------------------- --------------------------------
R. Stewart Ewing, Jr.
Senior Vice President and
Chief Financial Officer
Exhibit 10.1 (u)
CENTURY TELEPHONE ENTERPRISES, INC.
DEFERRED COMPENSATION PLAN
FOR OUTSIDE DIRECTORS
1995 RESTATEMENT
I.
PURPOSE OF THE PLAN
1.01 This Restated Deferred Compensation Plan for Outside Directors is intended
to provide a mechanism whereby non-employee directors of Century Telephone
Enterprises, Inc. can elect to defer all or a portion of their fees earned as
directors or as members of committees of the Board of Directors.
II.
DEFINITIONS
2.01 As used in this Plan, the following terms shall have the meanings
indicated, unless the context otherwise specifies or requires:
(a) "ACCOUNT" shall mean the account established under this Plan in
accordance with Article IV hereof.
(b) "ACCOUNT BALANCE", as of a given date, shall mean the fair market
value of a Participant's Account, as determined by the Committee.
(c) "BOARD OF DIRECTORS" shall mean not less than a quorum of the whole
Board of Directors of Century Telephone Enterprises, Inc.
(d) "CHANGE IN CONTROL" shall mean the occurrence of any of the
following: (i) the acquisition by any "person" (as such term is used in Section
13(d) and 14(d) of the Securities Exchange Act of 1934 (the "Exchange Act")),
other than the Company of any employee benefit plan or related trust or
affiliate of the Company or its subsidiaries, of beneficial ownership (as
defined in Rule 13d-3 promulgated under the Exchange Act), directly or
indirectly, of securities of the Company representing 30% or more of the
combined voting power of the Company's then outstanding securities entitled to
vote generally in the election of directors, but not including any acquisition
directly from the Company; (ii) the consummation of a merger, consolidation,
reorganization, share exchange, or sale or other disposition of all or
substantially all of the assets of the Company unless, immediately thereafter,
at least 50% of the outstanding voting power of the surviving or successor
corporation, or, if applicable, the parent company thereof (the "Surviving
Company"), are owned by the Company's shareholders immediately prior to such
time, at least a majority of the directors of the Surviving Company were
directors of the Company at the time such transaction was approved, and no
person or entity (excluding any employee benefit plan or related trust of the
Company or the surviving Company and any person or entity that was a shareholder
of the Company immediately prior to such time) beneficially owns 20% or more of
the outstanding voting power of the Surviving Company; (iii) during any period
of two consecutive years, individuals who at the beginning of such period
constitute the Board of Directors of the Company cease for any reason to
constitute at least a majority thereof, unless the election of each director who
was not a director at the beginning of such period shall have been approved in
advance by directors representing at least two-thirds of the directors then in
office who were directors at the beginning of the period; or (iv) the approval
by the Company's shareholders of a complete liquidation or dissolution of the
Company.
(e) "COMMITTEE" shall mean the persons appointed to administer
this Plan pursuant to Article XI hereof.
(f) "COMPANY" shall mean Century Telephone Enterprises, Inc.
(g) "COMPENSATION" shall mean all monies payable to a Participant
designated as director's fees, whether paid or accrued to the Participant as an
annual retainer or paid or accrued for attendance of the Participant at Board of
Directors or committee meetings. The determination of a Participant's
Compensation for purposes of this Plan shall be made by the Committee, in its
sole discretion.
(h) "DISABILITY" shall mean a condition which makes a Participant
unable to perform each of the material duties of a director where he is likely
to remain thus incapacitated continuously and permanently.
(i) "EFFECTIVE DATE" of this Plan shall mean May 23, 1995. The
effective date of this Restatement is November 16, 1995.
(j) "PARTICIPANT" shall mean any director of the Company who is not
an employee of the Company.
(k) "PLAN" shall mean the Century Telephone Enterprises, Inc.
Deferred Compensation Plan for Outside Directors.
(l) "UNFORESEEABLE EMERGENCY" shall mean an unanticipated emergency
that is caused by an event beyond the control of a Participant and that will
result in severe financial hardship to the Participant unless a payment to the
Participant is made pursuant to Article VI.
III.
DEFERRAL ARRANGEMENT
3.01 Each Participant may elect, in the manner hereinafter described, to have an
amount or percentage of his Compensation to be received by him during each year
from and after the effective date of this Plan deferred in accordance with the
terms and conditions of this Plan. A Participant desiring to exercise such
election shall, prior to the beginning of each calendar year (or prior to the
beginning of the Participant's initial period of service, if such period of
service is to commence other than at the beginning of a year, or simultaneous
with the adoption of this Plan for the initial year), notify the Company, in
writing, on a Director's Deferred Compensation Agreement in the form attached
hereto (hereinafter referred to as a "Director's Deferral Agreement") of the
amount or percentage of such Compensation for the year that the Participant
elects to defer. If a Participant has exercised an election to defer
Compensation hereunder and does not complete a new Director's Deferral Agreement
for a subsequent year, his previous election shall remain in effect until
superseded by a new Director's Deferral Agreement.
IV.
ACCOUNTS AND CREDIT
4.01 The deferred Compensation of a Participant will not be paid by the Company
as it is earned by the Participant. The Company shall create and credit to a
special memorandum account on its books (hereinafter referred to as "Account")
the deferred compensation referred to in this Plan and the Director's Deferral
Agreement. The Company shall provide an annual statement of his Account to each
Participant for whom an Account is created.
V.
VALUATION OF ACCOUNT
5.01 The Company shall adjust each Account to reflect a value which would have
been earned as if the amount of such Account had been invested at a rate of
return equal to the fifty-two (52) week Treasury bill rate as of January 1 of
each year. The Company may, with the consent of all Participants with Account
balances, agree to substitute a different measure for valuation of the Accounts
of Participants, effective as of the date agreed to between the Company and the
Participants.
VI.
PAYMENT OF ACCOUNTS
6.01 (a) A Participant's Account Balance under the Plan shall be distributable
to him in a manner elected by such Participant in his Director's Deferral
Agreement, subject to the following:
(1) In no event shall payments under this Article commence prior to
the earliest of the following:
(a) Death of the Participant;
(b) Permanent disability of the Participant;
(c) Termination of the Participant's director's status with
Company;
(d) Occurrence of an Unforeseeable Emergency; or
(e) A date designated on the Participant's Director's Deferral
Agreement.
(b) In the case of an Unforeseeable Emergency, payment will be made to
a Participant only after the Committee has been notified of the facts of the
emergency in writing and has judged the facts to indeed represent an
Unforeseeable Emergency. A payment to a Participant on account of an
Unforeseeable Emergency shall be limited to the amount necessary to meet the
emergency involved.
(c) In the event of the death of a Participant before complete payment
to him of all amounts credited to his Account, the balance to the credit of the
Participant shall be paid to such beneficiary or beneficiaries as may be
designated by the Participant in writing prior to his death, or if no
beneficiary is so designated then to his surviving spouse, or if he has none
then to his executor or administrator. A Participant's initial designation of
beneficiary shall be made on a Beneficiary Designation Form in the form attached
hereto. After the initial designation, the beneficiary designation may be
amended or revoked by the Participant at any time. Such amendment or revocation
of a beneficiary designation shall be by written notice to the Company on a
revised Beneficiary Designation Form.
(d) Notwithstanding anything to the contrary in this Plan or in any
Director Deferral Agreement entered into hereunder, upon the occurrence of a
Change in Control the Participant shall have an irrevocable right to receive,
and the Company shall be irrevocably obligated to distribute, the Participant's
Account Balance in full if the Company or its successor, in connection with or
following the occurrence of the Change in Control, (i) seeks and obtains the
Participant's resignation as a director of the Company ("Director"), (ii)
removes the Participant as a Director, (iii) fails to nominate the Prticipant
for re-election as a Director at the end of his term or (iv) reduces either the
annual fee paid to the Participant for service as a Director or the fee payable
with respect to each Board or Committee meeting attended. If the Participant
continues to serve after the Change in Control as an outside director of the
Company, its successor or any affiliate thereof without any fee reductions, the
Company or its successor shall promptly consult with each Participant and,
following such consultations, the Company or its successor shall have the option
with respect to each Participant to (i) confirm in writing its obligations under
this Plan or (ii) distribute promptly the Participant's Account Balance in full.
VII.
NONALIENATION OF RIGHTS
7.01 No Participant shall have the right to assign, pledge, or otherwise dispose
of his deferred Compensation, his Account, or any other benefits under this
Plan; nor shall the Participant's interest therein be subject to garnishment,
attachment, transfer by operation of law, or legal process.
VIII.
NATURE OF THE PLAN
8.01 Benefits under the Plan shall generally be payable by the Company from its
own funds, and such benefits shall not (i) impose any obligation upon the
trust(s) of the other employee benefit programs of the Company; (ii) be paid
from such trust(s); nor (iii) have any effect whatsoever upon the amount or
payment of benefits under the other employee benefit programs of the Company.
Participants have only an unsecured right to receive benefits under the Plan
from the Company as general creditors of the Company. The Company may deposit
amounts in a trust established by the Company for the purpose of funding the
Company's obligations under this Plan. Participants and their beneficiaries,
however, have no secured interest or special claim to the assets of such trust,
and the assets of the trust shall be subject to the payment of claims of general
creditors of the Company upon the insolvency or bankruptcy of the Company, as
provided in the trust.
IX.
BINDING EFFECT
9.01 In the event that the Company shall at any time be merged or consolidated
with any other corporation or corporations, or shall sell or otherwise transfer
a substantial portion of its assets to another corporation or entity, the
provisions of this Deferred Compensation Plan shall be binding upon and become
the obligation of the Company or other entity surviving or resulting from such
merger or consolidation, or to which such assets shall be sold or transferred.
X.
LIMITATION OF RIGHTS
10.01 Nothing in this Agreement shall be construed to:
(1) Limit in any way the right of the Board of Directors to terminate
a Participant's director status with the Company; or
(2) Be evidence of any agreement or understanding, expressed or
implied, that the Board of Directors will elect an outside director to any
particular position or compensate an outside director at any particular rate of
remuneration; or
(3) Imply that compensation deferral agreements for subsequent time
periods will be offered to or entered into with the Participant.
XI.
ADMINISTRATION OF THE ACCOUNT
11.01 This Plan shall be administered by a Committee of not less than three
persons appointed from time to time by the Board of Directors of the Company to
serve at the pleasure of the Board of Directors. The Committee shall be deemed
to have all of the powers of the Board of Directors of the Company in the
performance of any of the powers and duties delegated to it under this Plan. The
Committee shall from time to time establish eligibility requirements for
participation in this Plan and rules for the administration of this Plan that
are not inconsistent with the provisions of this Plan. The Board may from time
to time appoint additional members of the Committee or remove members and
appoint new members in substitution for those previously appointed and to fill
vacancies however caused.
11.02 The decision of the Committee relating to any question concerning or
involving the interpretation or administration of the Plan shall be final and
conclusive, and nothing in the Plan shall be deemed to give any director any
right to participate in the Plan, except to such extent, if any, as the
Committee may have determined or approved pursuant to the provisions of the
Plan.
XII.
AMENDMENT OR TERMINATION OF PLAN
12.01 Notwithstanding anything herein contained to the contrary, the Board of
Directors of the Company may, in its absolute discretion and without notice,
modify, amend, or terminate in whole or in part, any or all of the provisions of
this Plan, or suspend or terminate it entirely. In the event of such termination
or suspension, the amount credited to the Account of each Participant shall
become payable in the manner indicated in the Director's Deferral Agreement for
such Participant.
XIII.
EXPENSES OF ADMINISTRATION
13.01 All expenses of administration of this Plan shall be borne by the
Company.
XIV.
MISCELLANEOUS
14.01 The masculine gender, where appearing in the Plan, shall be deemed to
include the feminine gender, and the singular may indicate the plural, unless
the context clearly indicates the contrary.
IN WITNESS WHEREOF, Century Telephone Enterprises, Inc. has executed
this restated Plan in its corporate name and its corporate seal to be hereunto
affixed this 26 day of January, 1996.
ATTEST: CENTURY TELEPHONE ENTERPRISES, INC.
/s/ Sandra B. Post By: /s/ R. Stewart Ewing, Jr.
- ------------------ -------------------------
R. Stewart Ewing, Jr.
Senior Vice President and
Chief Financial Officer
DIRECTOR'S DEFERRED COMPENSATION AGREEMENT
Between CENTURY TELEPHONE ENTERPRISES, INC.
and
_____________________________, Participant
Dated ___________________, 19____
THE COMPANY and the Participant agree as follows:
Section I. With respect to any portion of the Compensation as defined
in Section 2.01(f) of said Plan which may be payable to said Participant for the
next fiscal year commencing on January 1, 19___, and ending December 31, 19___,
it is agreed that ____% (a percentage) or $_______________ (a flat dollar
amount) be withheld and treated as a deferred payment pursuant to Article III of
the Plan. If this Agreement is for the first year this Plan is in effect, it
shall apply to Compensation payable on or after the effective date of the Plan.
If a Participant who has elected to have Compensation deferred does not provide
the Company with a new agreement for a subsequent year(s), the Agreement
previously executed by the Participant shall remain in effect until superseded
by a new agreement.
Section II. Payments under Article VI of the Plan shall be made upon
retirement, disability, death, termination of director status, occurrence of an
Unforeseeable Emergency of the Participant, or, if earlier,
______________________, 19___. Such payment shall be paid to the Participant in
the following manner:
(a) In ____ successive equal annual installments commencing as soon as
administratively feasible following such event.
(b) In a lump sum payable as soon as administratively feasible
following such event.
(c) In the event of an Unforeseeable Emergency, in such amounts and on
such date(s) as determined by the Committee.
AGREED TO at _____________, ___________________ on
______________________, 19___, by the Company and the Participant.
CENTURY TELEPHONE ENTERPRISES, INC.
By:------------------------------
Participant
BENEFICIARY DESIGNATION FORM
_____________________________, Participant
Dated ___________________, 19____
PURSUANT to Article VI of the Plan, the undersigned Participant:
Section I. Hereby directs that his remaining Account Balance at his
death shall be paid as hereinafter provided to such of the following
beneficiary(ies):
Name Relationship Address
- -------------------------- --------------- -------------------------
- -------------------------- --------------- -------------------------
- -------------------------- --------------- -------------------------
as shall survive the undersigned Participant. Unless otherwise stated herein, if
more than one beneficiary is designated above, payments shall be made in equal
shares to and among such of the beneficiaries as are surviving at the time
hereinafter set forth for the making of each such payment.
Section II. If the above designated beneficiary or beneficiaries all
predecease the Participant or all die prior to complete payment of the entire
Account Balance, then the remaining balance shall be paid as hereinafter
provided in equal shares to and among such of the following beneficiary(ies):
Name Relationship Address
- ------------------------ --------------- -------------------------------
- ------------------------ --------------- -------------------------------
- ------------------------ --------------- -------------------------------
as shall be surviving at the time hereinafter set forth for the making of
each such payment.
Section III. Payment to said beneficiary(ies) after the death of the
undersigned Participant shall be made as follows (initial the desired form of
payment):
______ (a) In a lump sum payable as soon as administratively feasible following
the Participant's death.
______ (b) In ____ successive equal annual installments, commencing as soon as
administratively feasible following the death of the undersigned.
Section IV. The undersigned hereby reserves the right to amend or
revoke this Beneficiary Designation Form as provided in Article VI of the Plan.
Dated:________________________, 19____
___________________________, Participant
Exhibit 10.2(a)
AMENDMENT NO. 1
to
EMPLOYMENT AGREEMENT
Amendment No. 1, dated as of February 27, 1996, to the Employment Agreement
dated as of May 24, 1993 (the "Employment Agreement"), between Century Telephone
Enterprises, Inc., a Louisiana corporation (the "Company"), and Clarke M.
Williams ("Executive").
WITNESSETH:
WHEREAS, the Employment Agreement provides Executive with various benefits
if the Company terminates Executive without cause or if Executive resigns under
certain specified circumstances, including the right, under certain
circumstances following a Change in Control of the Company (as defined therein),
to receive such additional cash payments as may be necessary to compensate
Executive for any federal excise taxes imposed under Section 4999 of the
Internal Revenue Code of 1986, as amended ("Gross-Up Payments");
WHEREAS, subsequent to the date of the Employment Agreement other officers
of the Company have been granted contractual rights to receive Gross-Up Payments
pursuant to certain severance agreements (the "Severance Agreements")'
WHEREAS, the Company believes that the contractual rights to receive
Gross-Up Payments afforded to the Company's other officers under the Severance
Agreements are more comprehensive and better advance the objectives of such
provisions than those contractual rights currently provided to Executive under
the Employment Agreement; and
WHEREAS, the Company believes it is necessary and appropriate, and in the
Company's best interests, to provide Executive with the right to receive
Gross-up Payments identical to those held by the Company's other officers;
NOW, THEREFORE, the parties agree as follows:
1. Effective as of the date hereof, Section 5.05 of the Employment
Agreement is hereby amended in its entirety to read as follows:
5.05 Change in Control. If, following a Change in Control of the
Company, the Company terminates Executive's employment, other than for
death, disability or Cause, or Executive terminates his employment (whether
or not for Good Reason), the Company shall, contemporaneously with any
payments due under Section 5.04 and in addition to any other amounts due,
pay in cash to Executive an additional amount (the "Gross-up Payment") such
that the sum of all such payments will enable Executive to receive on a net
basis, after deducting any excise tax imposed on Executive by Section 4999
of the Internal Revenue Code of 1986, as amended (the "Code"), in
connection with his receipt of all such payments and any federal, state and
local income taxes imposed on Executive in connection with his receipt of
all such payments, the same dollar amount as Executive would receive on a
net basis (after deducting any applicable federal, state and local income
taxes) if no such excise tax were payable under Section 4999 of the Code.
In connection with making the Gross-up Payment, the Company shall cause the
Auditors (as defined below) to furnish written calculations of (a)
Executive's "base amount" within the meaning of Section 280G of the Code
and the regulations promulgated thereunder (the "Base Amount"), (b) the
amount of any "parachute payment" deemed to have been received by Executive
with respect to the Change in Control of the Company within the meaning of
Section 280G of the Code and the regulations promulgated thereunder (the
"Parachute Payment") and (c) the aggregate marginal income tax rate
applicable to Executive, after taking into account all applicable federal,
state and local income taxes (the "Applicable Rate"). Upon receipt of these
calculations from the auditors, the parties shall, unless they mutually
agree in writing to the contrary, determine the amount of the Gross-up
Payment in accordance with the following formula:
G = (.2P - .2B) / (.8 - R)
where G is the amount of the Gross-up payment, P is the amount of the
Parachute Payment, B is the Base Amount and R is the Applicable Rate. If
the Auditors fail to timely complete and deliver the calculations referred
to above, the Company may defer making the Gross-up Payment (but not other
payments contemplated hereunder) until such calculations are received,
provided that no deferral shall be permitted if the Auditor's untimeliness
is caused directly or indirectly by the Company's failure to cooperate in
good faith with the Auditors and further provided that in no event
whatsoever shall this payment be deferred by more than 10 business days.
For purposes hereof, "Auditors" shall mean the Company's regular
independent auditors as of the earlier of (i) the day of the public
announcement of a Change in Control of the Company or a proposal that
results in a Change in Control of the Company or (ii) the date that the
Board enters into negotiations with any person or entity, which
negotiations result in a Change in Control of the Company.
2. Notwithstanding any differences between Section 1.6 of the Severance
Agreements and Section 4.04(c) of the Employment Agreement, any event that
constitutes a "Change in Control" under the Severance Agreements shall be deemed
to also constitute a "Change in Control of the Company" under the Employment
Agreement.
3. The Employment Agreement, as amended by Sections 1 and 2 hereof, is, and
shall continue to be, in full force and effect and is hereby ratified and
confirmed in all respects.
IN WITNESS WHEREOF, the parties have duly executed this instrument as
of the date and year first above written.
CENTURY TELEPHONE ENTERPRISES, INC.
By: /s/ Glen F. Post, III
-----------------------
Glen F. Post, III
Vice Chairman, President and
Chief Executive Officer
EXECUTIVE:
/s/ Clarke M. Williams
----------------------
Clarke M. Williams
Exhibit 10.2(b)
FORM OF AMENDED AND RESTATED SEVERANCE AGREEMENT
(for Executive Officers)
SEVERANCE AGREEMENT, dated as of _______________, as amended and restated
as of May 23, 1995, and as further amended and restated as of November 16, 1995,
by and between Century Telephone Enterprises, Inc., a Louisiana corporation (the
"Company"), and _________________ ("Executive").
W I T N E S S E T H:
WHEREAS, as of ______________ the Company and Executive entered into an
agreement providing for severance benefits on terms and conditions substantially
similar to those set forth herein (the "Original Agreement");
WHEREAS, the Company and Executive amended and restated the Original
Agreement as of May 23, 1995 to effect various modifications approved by the
Compensation Committee of the Company's Board of Directors (the "Compensation
Committee") on May 22, 1995 and ratified by the full Board on May 23, 1995; and
WHEREAS, the Company and Executive wish to further modify the Original
Agreement (as amended and restated as of May 23, 1995) to completely amend and
restate Section 3.2 thereof, as approved by the Compensation Committee on
November 16, 1995 and ratified by the full Board as of the same date;
NOW, THEREFORE, in consideration of the premises and the respective
covenants and agreements of the parties contained herein, and intending to be
legally bound hereby, the parties agree that the Original Agreement (as amended
and restated as of May 23, 1995) is hereby amended and restated in its entirety
to read as follows:
SECTION 1
DEFINITIONS
As used herein, the following terms shall have the meanings specified.
1.1 The "Act" - the Securities Exchange Act of 1934, as amended.
1.2 "Announcement Date"- the earlier of (i) the day of the public
announcement of a Change in Control (as hereinafter defined) or a proposal that
results in a Change in Control or (ii) the date that the Board enters into
negotiations with any person or entity, which negotiations result in a Change in
Control.
1.3 "Auditors" - the Company's regular independent auditors as of the
Announcement Date.
1.4 "Board" - the Board of Directors of the Company.
1.5 "Cause" - conviction of a felony, habitual intoxication, abuse of or
addiction to a controlled dangerous substance, excessive absenteeism, the
willful and continued failure by Executive to substantially perform his duties
hereunder (other than any such failure resulting from Executive's incapacity due
to physical or mental illness) after demand for substantial performance is
delivered by the Company that specifically identifies the manner in which the
Company believes Executive has not substantially performed his duties, or the
willful engaging by Executive in misconduct which is materially injurious to the
Company, monetarily or otherwise. For purposes of this paragraph, no act or
failure to act on Executive's part shall be considered "willful" unless done, or
omitted to be done, by him not in good faith and without reasonable belief that
his action or omission was in the best interest of the Company. Notwithstanding
the foregoing, Executive shall not be deemed to have been terminated for Cause
without (i) reasonable notice to Executive setting forth the reasons for the
Company's intention to terminate for Cause, (ii) an opportunity for Executive,
together with his counsel, to be heard before the Board, and (iii) delivery to
Executive of notice from the Board finding that, in the good faith opinion of
the Board, Executive has been guilty of conduct set forth above in the preceding
sentence, and specifying the particulars thereof in detail.
1.6 "Change in Control" - (i) the occurrence of an event with respect to
the Company of a nature that would be required to be reported in response to
Item 6(e) of Schedule 14A of Regulation 14A promulgated under the Act; (ii) any
"person" (as such term in used in Section 13(d) and 14(d) of the Act), other
than the Company or any "person" who on the date hereof is a director, officer,
an employee benefit plan or related trust or affiliate of the Company, becoming
the "beneficial owner" (as defined in Rule 13d-3 under the Act), directly or
indirectly, of securities of the Company representing 30% or more of the
combined voting power of the Company's then outstanding securities entitled to
vote generally in the election of directors; (iii) the Company, its capital
stock, or all or substantially all of its assets are acquired by or combined
with (either through a merger, consolidation, reorganization, share exchange or
otherwise) with another entity and less than a majority of the outstanding
voting power of the parent or surviving corporation are owned, immediately after
consummation of such transaction, by Century's shareholders immediately prior to
such time; or (iv) during any period of two consecutive years, individuals who
at the beginning of such period constitute the Board ceasing for any reason to
constitute at least a majority thereof, unless the election of each director who
was not a director at the beginning of such period shall have been approved in
advance by directors representing at least two-thirds of the directors then in
office who were directors at the beginning of the period.
1.7 "Code" - Internal Revenue Code of 1986, as amended.
1.8 "Company" - Century Telephone Enterprises, Inc. or any successor
thereto.
1.9 "Compensation Amount" - the sum of (i) Executive's annual salary as of
the Announcement Date plus (ii) all cash and stock bonuses (valued on the date
of grant) earned by Executive for the most recent twelve-month period ending
before the effective date of a Change in Control.
1.10 "Effective Termination" - following an Announcement Date, any action
taken by the Company or any controlling entity of the Company in relation to
Executive's salary, duties or position as an executive officer of the Company,
other than an isolated, insubstantial and inadvertent action not taken in bad
faith and which is remedied by the Company (or any controlling entity of the
Company) within three days after receipt of notice thereof given by Executive,
that, in Executive's reasonable judgment, results in any of the following: (a) a
reduction in Executive's salary as of the Announcement Date or a reduction in
the value of the benefits received by Executive under any pension or welfare
employee benefit plan maintained by the Company as of the Announcement Date; (b)
a diminution in Executive's duties, responsibilities and position in the
management of the Company and its subsidiaries including, without limitation,
(i) the permanent assignment to Executive of duties not consistent with
Executive's position as an executive officer of the Company, (ii) the demotion
of Executive or (iii) the failure to provide Executive with secretarial
assistance and all support, staff, office, equipment and other facilities
necessary to carry out his functions as an executive officer of the Company; (c)
the relocation of Executive to an office outside of the city in which he
performed his services for the Company immediately prior to the Announcement
Date; or (d) the refusal to allow Executive to attend to matters or engage in
activities not directly related to the business of the Company which are of the
type which he attended to or engaged in prior to the Announcement Date or was
permitted to attend to or engage in by the Chief Executive Officer or the Board
prior to the Announcement Date.
SECTION 2
TERM
This Agreement shall terminate on the earlier of (i) May 24, 2000 or (ii)
the date that Executive ceases to be an employee of the Company at any time
prior to an Announcement Date.
SECTION 3
COMPENSATION UPON TERMINATION
3.1 Compensation and Severance Benefits. (a) If, during the period
beginning on the Announcement Date and ending three years following the
effective date of a Change in Control, the Company (or any controlling entity of
the Company) shall terminate Executive's employment with the Company, other than
for Cause, or if Executive resigns because an event constituting an Effective
Termination has occurred, Executive shall receive, in addition to all amounts to
which he is entitled pursuant to the Company's termination policies and plans
then in effect, as severance pay, an amount equal to the Compensation Amount
multiplied by the number three. Such severance payment shall be made in a lump
sum within five business days of the date that Executive's employment is
terminated or the date that Executive notifies the Company that an event
constituting an Effective Termination has occurred.
(b) Contemporaneously with any payments due under paragraph (a) and in
addition to any other amounts due, the Company shall pay in cash to Executive an
additional amount (the "Gross-up Payment") such that the sum of all such
payments will enable Executive to receive on a net basis, after deducting any
excise tax imposed on Executive by Section 4999 of the Code in connection with
his receipt of all such payments and any federal, state and local income taxes
imposed on Executive in connection with his receipt of all such payments, the
same dollar amount as Executive would receive on a net basis (after deducting
any applicable federal, state and local income taxes) if no such excise tax were
payable under Section 4999 of the Code. In connection with making the Gross-up
Payment, the Company shall cause the Auditors to furnish written calculations of
(a) Executive's "base amount" within the meaning of Section 280G of the Code and
the regulations promulgated thereunder (the "Base Amount"), (b) the amount of
any "parachute payment" deemed to have been received by Executive with respect
to the Change in Control within the meaning of Section 280G of the Code and the
regulations promulgated thereunder (the "Parachute Payment") and (c) the
aggregate marginal income tax rate applicable to Executive, after taking into
account all applicable federal, state and local income taxes (the "Applicable
Rate"). Upon receipt of these calculations from the Auditors, the parties shall,
unless they mutually agree in writing to the contrary, determine the amount of
the Gross-up Payment in accordance with the following formula:
G = (.2P - .2B) / (.8 - R)
where G is the amount of the Gross-up Payment, P is the amount of the Parachute
Payment, B is the Base Amount and R is the Applicable Rate. If the Auditors fail
to timely complete and deliver the calculations referred to above, the Company
may defer making the Gross-up Payment (but no other payments contemplated
hereunder) until such calculations are received, provided that no deferral shall
be permitted if the Auditor's untimeliness is caused directly or indirectly by
the Company's failure to cooperate in good faith with the Auditors and further
provided that in no event whatsoever shall this payment be deferred by more than
10 business days.
3.2 Election of Benefits. If during the period beginning on the
Announcement Date and ending three years following the effective date of a
Change of Control, the Company (or any controlling entity of the Company) shall
terminate Executive's employment with the Company, other than for Cause, or if
Executive resigns because an event constituting an Effective Termination has
occurred, the Company shall, at its cost, continue for three years following
such termination date health, dental and life insurance benefits to Executive
and his family at least equal to those generally applicable to other peer
executives of the Company and its affiliated companies (to the same extent as if
Executive had continued to serve in such capacity), but in no event shall such
benefits be less favorable than those in effect for Executive immediately prior
to the Announcement Date; provided, however, that if Executive becomes
reemployed with another employer and becomes eligible to receive comparable
benefits under another employer-provided plan, the benefits described herein
shall be secondary to those provided under such other plan during such
applicable period of eligibility. In the event that Executive's participation in
any such insurance plan, program or arrangement is barred, or any such plan,
program or arrangement is discontinued or the benefits thereunder materially
reduced, the Company shall arrange to provide Executive with benefits
substantially similar to those which Executive would otherwise be entitled to
receive hereunder. At the end of the period of coverage hereinabove provided
for, Executive shall have the option to have assigned to him, at no cost and
with no apportionment of prepaid premiums, any assignable insurance owned by the
Company that relates specifically to Executive. All medical and dental
continuation coverage provided under this section shall run concurrently with
COBRA coverage under Section 4980B(f) of the Internal Revenue Code of 1986.
3.3 Additional Obligations of the Company. Nothing herein shall relieve the
Company of its obligations to Executive under any qualified or non-qualified
retirement plan, deferred compensation plan, incentive compensation plan, stock
purchase plan, stock option plan, stock ownership plan, bonus plan, supplemental
plan, insurance program or plan, or any other compensation, benefit or welfare
plan or arrangement, or any agreement entered into thereunder.
SECTION 4
SUCCESSORS; ASSIGNMENT
4.1 Successors to Executive. This Agreement and all rights of Executive
hereunder shall inure to the benefit of and be enforceable by the Executive's
personal or legal representative, executors, administrators, successors, heirs,
distributes, devises and legatees. If Executive should die while any amounts
would still be payable to him hereunder, had he continued to live, all such
amounts, unless otherwise provided herein, shall be paid in accordance with the
terms of this Agreement to Executive's devise, legatee, or other designee or, if
there be no such designee, to Executive's estate.
4.2 Successors to Company. This Agreement and all obligations of the
Company hereunder shall be binding on the Company and on any successor to the
Company. The Company hereby agrees that it will not enter into any agreement to
consolidate, amalgamate or merge with another entity or to convey all or
substantially all of its assets to another entity unless such agreement provides
for the rights set forth in this Agreement.
4.3 Assignment by Executive. Neither this agreement nor any of its
benefits may be assigned by Executive.
SECTION 5
MISCELLANEOUS
5.1 Notice. Any notice provided for in this Agreement shall be actual
notice and shall be deemed to have been duly given when actually received by
Executive.
5.2 Waiver. The failure by any party to enforce any of its rights hereunder
shall not be deemed to be a waiver of such rights, unless such waiver is an
express written waiver. Waiver of any one breach shall not be deemed to be a
waiver of any other breach of the same or any other provision hereof.
5.3 Whole Agreement. This Agreement constitutes the entire understanding
and agreement among the parties hereto with respect to the subject matter
hereof, and there are no agreements or understandings among the parties other
than those set forth herein or provided hereby. Without limiting the generality
of the foregoing, Executive acknowledges that any and all prior employment
agreements between the Company and Executive lapsed on or prior to the date of
the Original Agreement, and Executive has no rights thereunder.
5.4 Choice of Law. The validity of this Agreement, the construction of its
terms and the determination of the rights and duties of the parties hereto shall
be governed by and construed in accordance with the laws of the State of
Louisiana applicable to contracts made and to be performed wholly within such
state.
5.5 Amendment. The parties may amend this Agreement by an instrument in
writing signed by both parties.
5.6 Severability. The invalidity or unenforceability of any provision or
provisions of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement, which shall remain in full force and
effect.
5.7 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
5.8 Expenses. The Company shall reimburse Executive all expenses, including
attorneys' fees, actually and reasonably incurred by Executive in any proceeding
to enforce any of his rights under this Agreement.
5.9 Confidentiality. Upon receipt of the payments or benefits contemplated
by Section 3 hereof, Executive agrees to refrain for a period of three years
from divulging any non-public, confidential or proprietary information
concerning the Company or its subsidiaries to any person or entity other than
the Company, its subsidiaries or their respective officers, directors or
advisors, provided that this obligation shall lapse prior to the end of such
three-year period with respect to any information that (i) is or becomes
generally available to the public other than as a result of a breach of this
Section, (ii) is or becomes available to Executive on a non-confidential basis
from a source other than the Company or its representatives, provided that such
source is not known by Executive to have violated any confidentiality agreement
with the Company in connection with such disclosure, or (iii) is acquired or
developed independently by Executive without violating this Section.
5.10 Demand for Benefits. Unless otherwise provided herein, the payment or
payments due hereunder shall be paid to Executive without the need for demand,
and to a beneficiary upon the receipt of the beneficiary's address and Social
Security number. Nevertheless, Executive or a person claiming to be a
beneficiary who claims entitlement to a benefit can file a claim for benefits
hereunder with the Company. Unless otherwise provided herein, the Company shall
accept or reject the claim within five business days of its receipt. If the
claim is denied, the Company shall give the reason for denial in a written
notice that refers to the provision of this Agreement that forms the basis of
the denial. If any additional information or material is necessary to perfect
the claim, the Company will identify these items in writing and explain why such
additional information is necessary.
IN WITNESS WHEREOF, the parties have executed this instrument as of
the date and year first above written.
[SIGNATURE LINES INTENTIONALLY DELETED]
Exhibit 10.2(c)
FORM OF AMENDED AND RESTATED SEVERANCE AGREEMENT
(for Non-Executive Officers)
SEVERANCE AGREEMENT, dated as of May 23, 1995, as amended and restated as
of November 16, 1995, by and between Century Telephone Enterprises, Inc., a
Louisiana corporation (the "Company"), and ______________ ("Officer").
WITNESSETH:
WHEREAS, as of May 23, 1995, the Company and Officer entered into an
agreement providing for severance benefits on terms and conditions substantially
similar to those set forth herein (the "Original Agreement"); and
WHEREAS, the Company and Officer wish to modify the Original Agreement to
completely amend and restate Section 3.2 thereof, as approved by the
Compensation Committee of the Company's Board of Director's on November 16, 1995
and ratified by the full Board as of the same date;
NOW, THEREFORE, in consideration of the respective covenants and agreements
of the parties contained herein, and intending to be legally bound hereby, the
parties agree that the Original Agreement is hereby amended and restated in its
entirety to read as follows:
SECTION 1
DEFINITIONS
As used herein, the following terms shall have the meanings specified.
1.1 The "Act" - the Securities Exchange Act of 1934, as amended.
1.2 "Announcement Date" - the earlier of (i) the day of the public
announcement of a Change in Control (as hereinafter defined) or a proposal that
results in a Change in Control or (ii) the date that the Board enters into
negotiations with any person or entity, which negotiations result in a Change in
Control.
1.3 "Auditors" - the Company's regular independent auditors as of the
Announcement Date.
1.4 "Board" - the Board of Directors of the Company.
1.5 "Cause" - conviction of a felony, habitual intoxication, abuse of or
addiction to a controlled dangerous substance, excessive absenteeism, the
willful and continued failure by Officer to substantially perform his duties
hereunder (other than any such failure resulting from Officer's incapacity due
to physical or mental illness) after demand for substantial performance is
delivered by the Company that specifically identifies the manner in which the
Company believes Officer has not substantially performed his duties, or the
willful engaging by Officer in misconduct which is materially injurious to the
Company, monetarily or otherwise. For purposes of this paragraph, no act or
failure to act on Officer's part shall be considered "willful" unless done, or
omitted to be done, by him not in good faith and without reasonable belief that
his action or omission was in the best interest of the Company. Notwithstanding
the foregoing, Officer shall not be deemed to have been terminated for Cause
without (i) reasonable notice to Officer setting forth the reasons for the
Company's intention to terminate for Cause, (ii) an opportunity for Officer,
together with his counsel, to be heard before the Board, and (iii) delivery to
Officer of notice from the Board finding that, in the good faith opinion of the
Board, Officer has been guilty of conduct set forth above in the preceding
sentence, and specifying the particulars thereof in detail.
1.6 "Change in Control" - (i) the occurrence of an event with respect to
the Company of a nature that would be required to be reported in response to
Item 6(e) of Schedule 14A of Regulation 14A promulgated under the Act; (ii) any
"person" (as such term in used in Section 13(d) and 14(d) of the Act), other
than the Company or any "person" who on the date hereof is a director, officer,
an employee benefit plan or related trust or affiliate of the Company, becoming
the "beneficial owner" (as defined in Rule 13d-3 under the Act), directly or
indirectly, of securities of the Company representing 30% or more of the
combined voting power of the Company's then outstanding securities entitled to
vote generally in the election of directors; (iii) the Company, its capital
stock, or all or substantially all of its assets are acquired by or combined
with (either through a merger, consolidation, reorganization, share exchange or
otherwise) with another entity and less than a majority of the outstanding
voting power of the parent or surviving corporation are owned, immediately after
consummation of such transaction, by Century's shareholders immediately prior to
such time; or (iv) during any period of two consecutive years, individuals who
at the beginning of such period constitute the Board ceasing for any reason to
constitute at least a majority thereof, unless the election of each director who
was not a director at the beginning of such period shall have been approved in
advance by directors representing at least two-thirds of the directors then in
office who were directors at the beginning of the period.
1.7 "Code" - Internal Revenue Code of 1986, as amended.
1.8 "Company" - Century Telephone Enterprises, Inc. or any successor
thereto.
1.9 "Compensation Amount" - the sum of (i) Officer's annual salary as of
the Announcement Date plus (ii) all cash and stock bonuses (valued on the date
of grant) earned by Officer for the most recent twelve-month period ending
before the effective date of a Change in Control.
1.10 "Effective Termination" - following an Announcement Date, any action
taken by the Company or any controlling entity of the Company in relation to
Officer's salary, duties or position as an officer of the Company, other than an
isolated, insubstantial and inadvertent action not taken in bad faith and which
is remedied by the Company (or any controlling entity of the Company) within
three days after receipt of notice thereof given by Officer, that, in Officer's
reasonable judgment, results in any of the following: (a) a reduction in
Officer's salary as of the Announcement Date or a reduction in the value of the
benefits received by Officer under any pension or welfare employee benefit plan
maintained by the Company as of the Announcement Date; (b) a diminution in
Officer's duties, responsibilities and position in the management of the Company
and its subsidiaries including, without limitation, (i) the permanent assignment
to Officer of duties not consistent with Officer's position as an officer of the
Company, (ii) the demotion of Officer or (iii) the failure to provide Officer
with secretarial assistance and all support, staff, office, equipment and other
facilities necessary to carry out his functions as an officer of the Company;
(c) the relocation of Officer to an office outside of the city in which he
performed his services for the Company immediately prior to the Announcement
Date; or (d) the refusal to allow Officer to attend to matters or engage in
activities not directly related to the business of the Company which are of the
type which he attended to or engaged in prior to the Announcement Date or was
permitted to attend to or engage in by the Chief Executive Officer or the Board
prior to the Announcement Date.
SECTION 2
TERM
This Agreement shall terminate on the earlier of (i) May 24, 2000 or (ii)
the date that Officer ceases to be an employee of the Company at any time prior
to an Announcement Date.
SECTION 3
COMPENSATION UPON TERMINATION
3.1 Compensation and Severance Benefits. (a) If, during the period
beginning on the Announcement Date and ending 18 months following the effective
date of a Change in Control, the Company (or any controlling entity of the
Company) shall terminate Officer's employment with the Company, other than for
Cause, or if Officer resigns because an event constituting an Effective
Termination has occurred, Officer shall receive, in addition to all amounts to
which he is entitled pursuant to the Company's termination policies and plans
then in effect, as severance pay, an amount equal to 150% of the Compensation
Amount. Such severance payment shall be made in a lump sum within five business
days of the date that Officer's employment is terminated or the date that
Officer notifies the Company that an event constituting an Effective Termination
has occurred.
(b) Contemporaneously with any payments due under paragraph (a) and in
addition to any other amounts due, the Company shall pay in cash to Officer an
additional amount (the "Gross-up Payment") such that the sum of all such
payments will enable Officer to receive on a net basis, after deducting any
excise tax imposed on Officer by Section 4999 of the Code in connection with his
receipt of all such payments and any federal, state and local income taxes
imposed on Officer in connection with his receipt of all such payments, the same
dollar amount as Officer would receive on a net basis (after deducting any
applicable federal, state and local income taxes) if no such excise tax were
payable under Section 4999 of the Code. In connection with making the Gross-up
Payment, the Company shall cause the Auditors to furnish written calculations of
(a) Officer's "base amount" within the meaning of Section 280G of the Code and
the regulations promulgated thereunder (the "Base Amount"), (b) the amount of
any "parachute payment" deemed to have been received by Officer with respect to
the Change in Control within the meaning of Section 280G of the Code and the
regulations promulgated thereunder (the "Parachute Payment") and (c) the
aggregate marginal income tax rate applicable to Officer, after taking into
account all applicable federal, state and local income taxes (the "Applicable
Rate"). Upon receipt of these calculations from the Auditors, the parties shall,
unless they mutually agree in writing to the contrary, determine the amount of
the Gross-up Payment in accordance with the following formula:
G = (.2P - .2B) / (.8 - R)
where G is the amount of the Gross-up Payment, P is the amount of the Parachute
Payment, B is the Base Amount and R is the Applicable Rate. If the Auditors fail
to timely complete and deliver the calculations referred to above, the Company
may defer making the Gross-up Payment (but no other payments contemplated
hereunder) until such calculations are received, provided that no deferral shall
be permitted if the Auditor's untimeliness is caused directly or indirectly by
the Company's failure to cooperate in good faith with the Auditors and further
provided that in no event whatsoever shall this payment be deferred by more than
10 business days.
3.2 Election of Benefits. If during the period beginning on the
Announcement Date and ending eighteen months following the effective date of a
Change of Control, the Company (or any controlling entity of the Company) shall
terminate Officer's employment with the Company, other than for Cause, or if
Officer resigns because an event constituting an Effective Termination has
occurred, the Company shall, at its cost, continue for eighteen months following
such termination date health, dental and life insurance benefits to Officer and
his family at least equal to those generally applicable to other peer Officers
of the Company and its affiliated companies (to the same extent as if Officer
had continued to serve in such capacity), but in no event shall such benefits be
less favorable than those in effect for Officer immediately prior to the
Announcement Date; provided, however, that if Officer becomes reemployed with
another employer and becomes eligible to receive comparable benefits under
another employer-provided plan, the benefits described herein shall be secondary
to those provided under such other plan during such applicable period of
eligibility. In the event that Officer's participation in any such insurance
plan, program or arrangement is barred, or any such plan, program or arrangement
is discontinued or the benefits thereunder materially reduced, the Company shall
arrange to provide Officer with benefits substantially similar to those which
Officer would otherwise be entitled to receive hereunder. At the end of the
period of coverage hereinabove provided for, Officer shall have the option to
have assigned to him, at no cost and with no apportionment of prepaid premiums,
any assignable insurance owned by the Company that relates specifically to
Officer. All medical and dental continuation coverage provided under this
section shall run concurrently with COBRA coverage under Section 4980B(f) of the
Internal Revenue Code of 1986.
3.3 Additional Obligations of the Company. Nothing herein shall relieve the
Company of its obligations to Officer under any qualified or non-qualified
retirement plan, deferred compensation plan, incentive compensation plan, stock
purchase plan, stock option plan, stock ownership plan, bonus plan, supplemental
plan, insurance program or plan, or any other compensation, benefit or welfare
plan or arrangement, or any agreement entered into thereunder.
SECTION 4
SUCCESSORS; ASSIGNMENT
4.1 Successors to Officer. This Agreement and all rights of Officer
hereunder shall inure to the benefit of and be enforceable by the Officer's
personal or legal representative, executors, administrators, successors, heirs,
distributes, devises and legatees. If Officer should die while any amounts would
still be payable to him hereunder, had he continued to live, all such amounts,
unless otherwise provided herein, shall be paid in accordance with the terms of
this Agreement to Officer's devise, legatee, or other designee or, if there be
no such designee, to Officer's estate.
4.2 Successors to Company. This Agreement and all obligations of the
Company hereunder shall be binding on the Company and on any successor to the
Company. The Company hereby agrees that it will not enter into any agreement to
consolidate, amalgamate or merge with another entity or to convey all or
substantially all of its assets to another entity unless such agreement provides
for the rights set forth in this Agreement.
4.3 Assignment by Officer. Neither this agreement nor any of its benefits
may be assigned by Officer.
SECTION 5
MISCELLANEOUS
5.1 Notice. Any notice provided for in this Agreement shall be actual
notice and shall be deemed to have been duly given when actually received by
Officer.
5.2 Waiver. The failure by any party to enforce any of its rights hereunder
shall not be deemed to be a waiver of such rights, unless such waiver is an
express written waiver. Waiver of any one breach shall not be deemed to be a
waiver of any other breach of the same or any other provision hereof.
5.3 Whole Agreement. This Agreement constitutes the entire understanding
and agreement among the parties hereto with respect to the subject matter
hereof, and there are no agreements or understandings among the parties other
than those set forth herein or provided hereby.
5.4 Choice of Law. The validity of this Agreement, the construction of its
terms and the determination of the rights and duties of the parties hereto shall
be governed by and construed in accordance with the laws of the State of
Louisiana applicable to contracts made and to be performed wholly within such
state.
5.5 Amendment. The parties may amend this Agreement by an instrument in
writing signed by both parties.
5.6 Severability. The invalidity or unenforceability of any provision or
provisions of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement, which shall remain in full force and
effect.
5.7 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
5.8 Expenses. The Company shall reimburse Officer all expenses, including
attorneys' fees, actually and reasonably incurred by Officer in any proceeding
to enforce any of his rights under this Agreement.
5.9 Confidentiality. Upon receipt of the payments or benefits contemplated
by Section 3 hereof, Officer agrees to refrain for a period of 18 months from
divulging any non-public, confidential or proprietary information concerning the
Company or its subsidiaries to any person or entity other than the Company, its
subsidiaries or their respective officers, directors or advisors, provided that
this obligation shall lapse prior to the end of such 18-month period with
respect to any information that (i) is or becomes generally available to the
public other than as a result of a breach of this Section, (ii) is or becomes
available to Officer on a non-confidential basis from a source other than the
Company or its representatives, provided that such source is not known by
Officer to have violated any confidentiality agreement with the Company in
connection with such disclosure, or (iii) is acquired or developed independently
by Officer without violating this Section.
5.10 Demand for Benefits. Unless otherwise provided herein, the payment or
payments due hereunder shall be paid to Officer without the need for demand, and
to a beneficiary upon the receipt of the beneficiary's address and Social
Security number. Nevertheless, Officer or a person claiming to be a beneficiary
who claims entitlement to a benefit can file a claim for benefits hereunder with
the Company. Unless otherwise provided herein, the Company shall accept or
reject the claim within five business days of its receipt. If the claim is
denied, the Company shall give the reason for denial in a written notice that
refers to the provision of this Agreement that forms the basis of the denial. If
any additional information or material is necessary to perfect the claim, the
Company will identify these items in writing and explain why such additional
information is necessary.
IN WITNESS WHEREOF, the parties have executed this instrument as of
the date and year first above written.
[SIGNATURE LINES INTENTIONALLY DELETED]
EXHIBIT 11
CENTURY TELEPHONE ENTERPRISES, INC.
COMPUTATIONS OF EARNINGS PER SHARE
<TABLE>
<CAPTION>
Year ended December 31,
- ------------------------------------------------------------------------------------------
1995 1994 1993
- ------------------------------------------------------------------------------------------
(Dollars, except per share amounts,
and shares expressed in thousands)
<S> <C> <C> <C>
Net income $ 114,776 100,238 69,004
Dividends applicable to preferred stock (115) (93) (24)
- ------------------------------------------------------------------------------------------
Net income applicable to common stock 114,661 100,145 68,980
Dividends applicable to preferred stock 115 93 24
Interest on convertible securities, net of taxes 714 4,595 4,583
- ------------------------------------------------------------------------------------------
Net income as adjusted for purposes of
computing fully diluted earnings per share $ 115,490 104,833 73,587
==========================================================================================
Weighted average number of shares:
Outstanding during period 58,000 53,139 50,512
Common stock equivalent shares 509 580 694
Employee Stock Ownership Plan shares
not committed to be released (373) (300) -
- ------------------------------------------------------------------------------------------
Number of shares for computing primary
earnings per share 58,136 53,419 51,206
Incremental common shares attributable to additional
dilutive effect of convertible securities 971 4,716 4,686
- ------------------------------------------------------------------------------------------
Number of shares as adjusted for purposes
of computing fully diluted earnings per share 59,107 58,135 55,892
==========================================================================================
Earnings per average common share $ 1.98 1.88 1.37
==========================================================================================
Primary earnings per share $ 1.97 1.88 1.35
==========================================================================================
Fully diluted earnings per share $ 1.95 1.80 1.32
==========================================================================================
</TABLE>
EXHIBIT 21
CENTURY TELEPHONE ENTERPRISES, INC.
SUBSIDIARIES OF THE REGISTRANT
AS OF DECEMBER 31, 1995
State of
Subsidiary incorporation
- --------------------------------------------------------------------------
Brownsville Cellular Telephone Co., Inc. * Delaware
Celutel, Inc. Delaware
Celutel of Biloxi, Inc. * Delaware
Central Indiana Telephone Company, Inc. Indiana
Century Area Long Lines (CALL), Inc. Wisconsin
Century Business Communications, Inc. Louisiana
Century Cellunet, Inc. Louisiana
Century Cellunet of Alexandria, Inc. Louisiana
Century Cellunet of LaCrosse, Inc. Louisiana
Century Cellunet of Michigan RSA #4, Inc. Louisiana
Century Cellunet of Michigan RSAs, Inc. Louisiana
Century Cellunet of Mississippi RSA #2, Inc. Mississippi
Century Cellunet of Mississippi RSA #6, Inc. Mississippi
Century Cellunet of North Arkansas, Inc. Louisiana
Century Cellunet of North Louisiana, Inc. Louisiana
Century Cellunet of Pine Bluff, Inc. Arkansas
Century Cellunet of Saginaw, Inc. Louisiana
Century Cellunet of Shreveport, Inc. Louisiana
Century Cellunet of South Arkansas, Inc. Louisiana
Century Cellunet of Southern Michigan, Inc. Delaware
Century Cellunet of Texarkana, Inc. Louisiana
Century Investments, Inc. Louisiana
Century Paging, Inc. Louisiana
Century Service Group, Inc. Louisiana
Century Supply Group, Inc. Louisiana
Century Telecommunications, Inc. Texas
Century Telelink, Inc. Louisiana
Century Telephone Midwest, Inc. Michigan
Century Telephone of Adamsville, Inc. Tennessee
Century Telephone of Arkansas, Inc. Arkansas
Century Telephone of Central Louisiana, Inc. Louisiana
Century Telephone of Chatham, Inc. Louisiana
Century Telephone of Chester, Inc. Iowa
Century Telephone of Claiborne, Inc. Tennessee
Century Telephone of East Louisiana, Inc. Louisiana
Century Telephone of Evangeline, Inc. Louisiana
Century Telephone of Idaho, Inc. Delaware
Century Telephone of Lake Dallas, Inc. Texas
Century Telephone of Larsen-Readfield, Inc. Wisconsin
Century Telephone of Michigan, Inc. Michigan
Century Telephone of Monroe County, Inc. Wisconsin
Century Telephone of Mountain Home, Inc. Arkansas
Century Telephone of North Louisiana, Inc. Louisiana
Century Telephone of North Mississippi, Inc. Mississippi
Century Telephone of Northern Michigan, Inc. Michigan
Century Telephone of Northern Wisconsin, Inc. Wisconsin
Century Telephone of Northwest Louisiana, Inc. Louisiana
Century Telephone of Northwest Wisconsin, Inc. Wisconsin
Century Telephone of Ohio, Inc. Ohio
Century Telephone of Ooltewah-Collegedale, Inc. Tennessee
Century Telephone of Port Aransas, Inc. Texas
Century Telephone of Redfield, Inc. Arkansas
Century Telephone of San Marcos, Inc. Texas
Century Telephone of South Arkansas, Inc. Arkansas
Century Telephone of Southeast Louisiana, Inc. Louisiana
Century Telephone of Southwest Louisiana, Inc. Louisiana
Century Telephone of Wisconsin, Inc. Wisconsin
Forestville Telephone Company, Inc. Wisconsin
Interactive Communications, Inc. Louisiana
Jackson Cellular Telephone Co., Inc. * Delaware
The McAllen Cellular Telephone Co., Inc. * Nevada
Metro Access Networks, Inc. Delaware
Odon Telephone Co., Inc. Indiana
Pascagoula Cellular Telephone Company, Inc. * Delaware
Remote Access Cellular Telecommunications, Inc. Texas
Tele-Max, Inc. Texas
Universal Telephone, Inc. Wisconsin
Universal Telephone Company of Colorado Colorado
Universal Telephone Company of Southwest New Mexico
* Conduct business in the name of Century Cellunet
Certain of the Company's smaller subsidiaries have been intentionally
omitted from this exhibit pursuant to rules and regulations of the Securities
and Exchange Commission.
EXHIBIT 23
Independent Auditors' Consent
-----------------------------
The Board of Directors
Century Telephone Enterprises, Inc.:
We consent to incorporation by reference in the Registration Statements
(No. 33-17114 and No. 33-52915) on Form S-3, the Registration Statements (No.
33-5836, No. 33-17113, No. 33-46562, No. 33-48554 and No. 33-60061) on Form S-8,
the Registration Statements (No. 33-31314 and No. 33-46473) on combined Form S-8
and Form S-3, and the Registration Statements (No. 33-39196, No. 33-48956, and
No.33-50791) on Form S-4 of Century Telephone Enterprises, Inc. of our report
dated January 29, 1996, relating to the consolidated balance sheets of Century
Telephone Enterprises, Inc. and subsidiaries as of December 31, 1995 and 1994,
and the related consolidated statements of income, stockholders' equity, and
cash flows and related financial statement schedules for each of the years in
the three-year period ended December 31, 1995, which report appears in the
December 31, 1995 annual report on Form 10-K of Century Telephone Enterprises,
Inc.
/s/ KPMG Peat Marwick LLP
KPMG PEAT MARWICK LLP
Shreveport, Louisiana
March 15, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE AUDITED
CONSOLIDATED BALANCE SHEET OF CENTURY TELEPHONE ENTERPRISES, INC. & SUBSIDIARIES
AS OF DECEMBER 31, 1995 & THE RELATED AUDITED CONSOLIDATED STATEMENTS OF INCOME,
STOCKHOLDERS' EQUITY & CASH FLOWS FOR THE TWELVE MONTH PERIOD THEN ENDED & IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000018926
<NAME> CENTURY TELEPHONE ENTERPRISES, INC.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 8,540
<SECURITIES> 0
<RECEIVABLES> 53,711
<ALLOWANCES> 2,768
<INVENTORY> 6,608
<CURRENT-ASSETS> 95,329
<PP&E> 1,499,554
<DEPRECIATION> 451,746
<TOTAL-ASSETS> 1,862,421
<CURRENT-LIABILITIES> 139,924
<BONDS> 622,904
0
2,262
<COMMON> 59,114
<OTHER-SE> 827,048
<TOTAL-LIABILITY-AND-EQUITY> 1,862,421
<SALES> 0
<TOTAL-REVENUES> 644,840
<CGS> 0
<TOTAL-COSTS> 441,921
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 43,615
<INCOME-PRETAX> 183,068
<INCOME-TAX> 68,292
<INCOME-CONTINUING> 114,776
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 114,776
<EPS-PRIMARY> 1.97
<EPS-DILUTED> 1.95
</TABLE>
