UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended March 31, 1994
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
Commission File Number: 1-7784
CENTURY TELEPHONE ENTERPRISES, INC.
(Exact name of registrant as specified in its charter)
Louisiana 72-0651161
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
100 Century Park Drive, Monroe, Louisiana 71203
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (318) 388-9500
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
[X] Yes [ ] No
As of April 30, 1994, there were 53,357,559 shares of common stock
outstanding.
Exhibit Index-Page 17
CENTURY TELEPHONE ENTERPRISES, INC.
TABLE OF CONTENTS
Page No.
Part I. Financial Information:
Consolidated Statements of Income--Three Months
Ended March 31, 1994 and 1993. . . . . . . . . . . . . . . . . . . 3
Consolidated Balance Sheets--March 31, 1994 and
December 31, 1993. . . . . . . . . . . . . . . . . . . . . . . . . 4
Consolidated Statements of Stockholders' Equity--
Three Months Ended March 31, 1994 and 1993 . . . . . . . . . . . . 5
Consolidated Statements of Cash Flows--
Three Months Ended March 31, 1994 and 1993 . . . . . . . . . . . . 6
Notes to Consolidated Financial Statements. . . . . . . . . . . . . 7-8
Management's Discussion and Analysis of Financial
Condition and Results of Operations. . . . . . . . . . . . . . . . 9-14
Part II. Other Information. . . . . . . . . . . . . . . . . . . . . . . . 15
Signature . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Index to Exhibits . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
2
PART I. FINANCIAL INFORMATION
CENTURY TELEPHONE ENTERPRISES, INC.
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
Three months
ended March 31
-----------------------
1994 1993
----------- ----------
(expressed in thousands,
except per share amounts)
REVENUES
Telephone $91,770 78,951
Mobile Communications 29,210 17,874
-------- --------
Total revenues 120,980 96,825
-------- --------
EXPENSES
Cost of sales and operating
expenses 63,661 51,356
Depreciation and amortization 21,433 17,202
-------- --------
Total expenses 85,094 68,558
-------- --------
OPERATING INCOME 35,886 28,267
-------- --------
OTHER INCOME (EXPENSE)
Interest expense (8,502) (6,912)
Gain on sale of asset - 1,661
Earnings from unconsolidated cellular partnerships 2,564 372
Other income, net 191 947
-------- --------
Total other income (expense) (5,747) (3,932)
-------- --------
INCOME BEFORE INCOME TAXES 30,139 24,335
INCOME TAXES 10,938 8,595
-------- --------
NET INCOME $ 19,201 15,740
======== ========
PRIMARY EARNINGS PER SHARE $ .36 .32
======== ========
FULLY DILUTED EARNINGS PER SHARE $ .35 .31
======== ========
DIVIDENDS PER COMMON SHARE $ .0800 .0775
======== ========
See accompanying notes to consolidated financial statements.
3
CENTURY TELEPHONE ENTERPRISES, INC.
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
March 31, December 31,
ASSETS 1994 1993
---------- ----------
(expressed in thousands)
CURRENT ASSETS
Cash and cash equivalents $ 8,397 9,777
Accounts receivable
Customers, less allowance for doubtful
accounts of $1,910,000 and $1,473,000 37,414 34,438
Other 21,840 21,771
Materials and supplies, at cost 4,753 4,418
Other 2,596 2,068
---------- ----------
75,000 72,472
---------- ----------
NET PROPERTY, PLANT AND EQUIPMENT 871,205 827,776
---------- ----------
INVESTMENTS AND OTHER ASSETS
Excess cost of net assets acquired 440,209 297,158
Other investments 107,609 98,142
Deferred charges 24,576 23,842
---------- ----------
572,394 419,142
---------- ----------
$1,518,599 1,319,390
========== ==========
LIABILITIES AND EQUITY
CURRENT LIABILITIES
Current maturities of long-term debt $ 15,263 14,233
Notes payable to banks 19,200 69,200
Accounts payable 37,436 49,506
Accrued expenses and other liabilities
Taxes 18,369 9,327
Interest 4,606 6,476
Other 20,003 21,152
Advance billings and customer deposits 11,000 9,312
---------- ----------
125,877 179,206
---------- ----------
LONG-TERM DEBT 639,971 460,933
---------- ----------
DEFERRED CREDITS AND OTHER LIABILITIES 173,353 165,483
---------- ----------
STOCKHOLDERS' EQUITY
Common stock, $1.00 par value, authorized
100,000,000 shares, issued and outstanding
53,353,033 and 51,294,705 shares 53,353 51,295
Paid-in capital 313,617 262,294
Retained earnings 223,879 208,945
Employee Stock Ownership Plan commitment (13,780) (9,220)
Preferred stock - non-redeemable 2,329 454
---------- ----------
579,398 513,768
---------- ----------
$1,518,599 1,319,390
========== ==========
See accompanying notes to consolidated financial statements.
4
CENTURY TELEPHONE ENTERPRISES, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(UNAUDITED)
Three months
ended March 31
------------------------
1994 1993
---------- ----------
(expressed in thousands)
COMMON STOCK
Balance at beginning of period $ 51,295 48,897
Issuance of common stock for acquisitions 2,000 -
Issuance of common stock through dividend
reinvestment, stock purchase and incentive
plans 58 83
-------- --------
Balance at end of period 53,353 48,980
-------- --------
PAID-IN CAPITAL
Balance at beginning of period 262,294 191,522
Issuance of common stock for acquisitions 50,311 -
Issuance of common stock through dividend
reinvestment, stock purchase and incentive
plans 819 949
Amortization of unearned compensation 193 125
-------- --------
Balance at end of period 313,617 192,596
-------- --------
RETAINED EARNINGS
Balance at beginning of period 208,945 155,676
Net income 19,201 15,740
Cash dividends declared
Common stock-$.0800 and $.0775 per share,
respectively (4,259) (3,794)
Preferred stock (8) (8)
-------- --------
Balance at end of period 223,879 167,614
-------- --------
ESOP COMMITMENT
Balance at beginning of period (9,220) (11,100)
Commitment to ESOP (5,000) -
Reduction of ESOP Commitment 440 440
-------- --------
Balance at end of period (13,780) (10,660)
-------- --------
PREFERRED STOCK - NON-REDEEMABLE
Balance at beginning of period 454 454
Issuance of preferred stock for acquisition 1,875 -
-------- --------
Balance at end of period 2,329 454
-------- --------
TOTAL STOCKHOLDERS' EQUITY $579,398 398,984
======== ========
See accompanying notes to consolidated financial statements.
5
CENTURY TELEPHONE ENTERPRISES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Three months
ended March 31
------------------------
1994 1993
----------- ----------
(expressed in thousands)
OPERATING ACTIVITIES
Net income $ 19,201 15,740
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 24,431 19,662
Deferred income taxes 1,529 (1,159)
Equity in earnings of cellular partnerships (2,860) (466)
Gain on sale of asset - (1,661)
Changes in current assets and current
liabilities:
Decrease in accounts receivable 1,969 7,616
Decrease in accounts payable (17,234) (6,656)
Changes in other current assets and other
current liabilities, net 5,675 7,631
Other, net 111 1,732
-------- --------
NET CASH PROVIDED BY OPERATING ACTIVITIES 32,822 42,439
-------- --------
INVESTING ACTIVITIES
Payments for property, plant and equipment (49,553) (29,791)
Acquisition, net of cash acquired (53,390) -
Purchase of life insurance investment (6,853) (6,799)
Other, net 697 (515)
-------- --------
NET CASH USED IN INVESTING ACTIVITIES (109,099) (37,105)
-------- --------
FINANCING ACTIVITIES
Proceeds from issuance of long-term debt 23,000 7,838
Payments of long-term debt (44,603) (6,375)
Notes payable, net 100,000 12,000
Proceeds from issuance of common stock 877 1,032
Cash dividends paid (4,267) (3,802)
Other, net (110) 266
-------- --------
NET CASH PROVIDED BY FINANCING ACTIVITIES 74,897 10,959
-------- --------
Net increase (decrease) in cash and cash
equivalents (1,380) 16,293
Cash and cash equivalents at beginning
of period 9,777 9,771
-------- --------
Cash and cash equivalents at end of period $ 8,397 26,064
======== ========
Supplemental cash flow information:
Income taxes paid $ 878 2,236
======== ========
Interest paid $ 10,372 8,551
======== ========
See accompanying notes to consolidated financial statements.
6
CENTURY TELEPHONE ENTERPRISES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1994
(UNAUDITED)
(1) Basis of Financial Reporting
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to rules and regulations of
the Securities and Exchange Commission; however, the Company believes the
disclosures which are made are adequate to make the information presented not
misleading. The financial statements and footnotes included in this Form 10-Q
should be read in conjunction with the financial statements and notes thereto
included in the Company's annual report on Form 10-K for the year ended
December 31, 1993. Certain 1993 amounts have been reclassified to be
consistent with the 1994 presentation.
The unaudited financial information for the three months ended March 31,
1994 and 1993 has not been audited by independent public accountants; however,
in the opinion of management, all adjustments (which include only normal
recurring adjustments) necessary to present fairly the results of operations
for the three-month periods have been included therein. The results of
operations for the first three months of the year are not necessarily
indicative of the results of operations which might be expected for the entire
year.
(2) Accounting Pronouncement
In the first quarter of 1994 the Company adopted Statement of Financial
Accounting Standards No. 112 ("SFAS 112"), "Employers' Accounting for
Postemployment Benefits". SFAS 112 requires the adoption of accrual
accounting for workers compensation, disability and other benefits provided
after employment but before retirement by requiring accrual of the expected
cost when it is probable that a benefit obligation has been incurred and the
amount can be reasonably estimated. Liabilities for postemployment benefits
included 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.
(3) Net Property, Plant and Equipment
Net property, plant and equipment is composed of the following:
March 31, December 31,
1994 1993
---------- -----------
(expressed in thousands)
Telephone, at original cost $1,012,706 979,449
Accumulated depreciation (294,017) (288,479)
---------- ----------
718,689 690,970
---------- ----------
Mobile Communications, at cost 138,317 113,252
Accumulated depreciation (36,880) (27,736)
---------- ----------
101,437 85,516
---------- ----------
Other, at cost 79,176 77,737
Accumulated depreciation (28,097) (26,447)
---------- ----------
51,079 51,290
---------- ----------
$ 871,205 827,776
========== ==========
7
CENTURY TELEPHONE ENTERPRISES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1994
(UNAUDITED)
(4) Sale of Asset
The Company sold a minority investment in a telephone company in the
first quarter of 1993 which resulted in a pre-tax gain of $1,661,000
($1,080,000 after-tax; $.02 per share).
(5) Acquisitions
On February 10, 1994, the Company acquired Celutel, Inc. ("Celutel") in
a stock and cash transaction. Approximately $51,400,000 of the purchase price
was paid in cash, with the remainder paid through the issuance of
approximately 1,900,000 shares of Century's common stock. In connection with
the acquisition, Century refinanced approximately $41,700,000 of Celutel's
debt. The acquisition was accounted for as a purchase and approximately
$140,000,000 of cost in excess of net assets acquired was recorded as a result
of the acquisition. Celutel provides cellular service to approximately 28,000
customers in five non-wireline provider systems in MSA's in Mississippi and
Texas.
On March 31, 1994, the Company acquired a local exchange telephone
company in Michigan which serves approximately 2,400 access lines and which
owns a minority interest of approximately 11% in a cellular partnership
operated by the Company. The acquisition, which was accounted for as a
purchase, was consummated through the issuance of approximately 98,000 shares
of Century's common stock and 75,000 shares of Century's preferred stock.
(6) Subsequent Event
On May 6, 1994, the Company completed the issuance of $50,000,000 of 10-
year, 7.75% senior notes and $100,000,000 of 30-year, 8.25% senior notes. The
proceeds were used to reduce certain of the Company's short-term bank
indebtedness, therefore, $150,000,000 of the Company's short-term debt has
been classified as long-term debt on the consolidated balance sheet as of
March 31, 1994.
8
CENTURY TELEPHONE ENTERPRISES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Management's Discussion and Analysis of Financial Condition and Results of
Operations included herein should be read in conjunction with Management's
Discussion and Analysis of Financial Condition and Results of Operations
included in the Company's annual report on Form 10-K for the year ended
December 31, 1993.
RESULTS OF OPERATIONS
Quarter Ended March 31, 1994 Compared
to Quarter Ended March 31, 1993
Net income for the first quarter of 1994 was $19,201,000 as compared to
$15,740,000 during the first quarter of 1993. This increase was primarily due
to a $7,619,000 increase in operating income and a $2,192,000 increase in
earnings from unconsolidated cellular partnerships. These factors were
partially offset by increases in interest expense and income tax expense of
$1,590,000 and $2,343,000, respectively, and a decrease of $756,000 in other
income, net. The first quarter of 1993 also included a $1,661,000 pre-tax
gain on the sale of a minority investment in a telephone company.
Three months
ended March 31
---------------------
1994 1993
--------- ----------
(expressed in thousands,
except per share amounts)
Operating income
Telephone $30,890 25,800
Mobile Communications 4,996 2,467
------- -------
35,886 28,267
Interest expense (8,502) (6,912)
Gain on sale of asset - 1,661
Earnings from unconsolidated cellular
partnerships 2,564 372
Other income, net 191 947
Income taxes (10,938) (8,595)
------- -------
Net income $19,201 15,740
======= =======
Fully diluted earnings per share $ .35 .31
======= =======
Fully diluted earnings per share increased to $.35 for the three months
ended March 31, 1994 from $.31 during the three months ended March 31, 1993, a
12.9% increase. The average number of fully diluted shares outstanding
increased 5.5% as a result of shares issued for acquisitions and through the
Company's dividend reinvestment, stock purchase and incentive plans.
The operating income of the telephone segment during the first quarter
of 1994 included the operations of Century Telephone of San Marcos, Inc. ("San
Marcos") which was acquired April 8, 1993.
The mobile communications operating income reflects the operations of
cellular partnerships in which the Company has a majority interest. The
minority interest partners' share of the income or loss of such partnerships
is reflected in other income, net. The Company's share of income or loss from
the cellular partnerships in which it has less than a majority interest is
reflected in earnings from unconsolidated cellular partnerships. The
operating income of the mobile communications segment during the first quarter
of 1994 included the operations of Celutel, Inc. ("Celutel") since its
acquisition on February 10, 1994.
9
Contributions to consolidated revenues and operating income by the
Company's telephone operations and mobile communications operations for the
three months ended March 31, 1994 and 1993 were as follows:
Three months
ended March 31
---------------
1994 1993
---- ----
Telephone
Revenues 75.9% 81.5
Operating income 86.1% 91.3
Mobile Communications
Revenues 24.1% 18.5
Operating income 13.9% 8.7
Telephone Operations
Three months
ended March 31
------------------
1994 1993
-------- --------
(expressed in thousands)
Revenues
Local $23,505 20,873
Network access and
long distance 57,907 49,268
Other 10,358 8,810
------- -------
91,770 78,951
------- -------
Expenses
Plant operations 21,213 18,711
Customer operations 8,508 6,971
Corporate and other 14,104 12,572
Depreciation and amortization 17,055 14,897
------- -------
60,880 53,151
------- -------
Operating income $30,890 25,800
======= =======
Telephone operating income increased $5,090,000 (19.7%) due to an
increase in revenues of $12,819,000 (16.2%) which more than offset an increase
in operating expenses of $7,729,000 (14.5%).
The increase in revenues was significantly due to the San Marcos
acquisition which contributed approximately $5,453,000 of revenues during the
first quarter of 1994. The remaining increase in revenues was primarily due
to the partial recovery of increased operating expenses through revenue pools
in which the Company participates with other telephone companies, increased
recovery from the Federal Communications Commission mandated Universal Service
Fund, increased minutes of use and growth in access lines.
Certain long distance carriers have requested the Company to reduce
intrastate access tariffed rates for certain of its telephone subsidiaries.
In March 1994 a long distance carrier filed a petition with the Louisiana
Public Service Commission requesting that the commission investigate and lower
the rates for intrastate access charges charged to long distance carriers by
certain local exchange telephone companies, including the subsidiaries of the
Company which operate in Louisiana. There is no assurance that this request
will not result in reduced intrastate access revenues.
10
During the first quarter of 1994, operating expenses, exclusive of
depreciation and amortization, increased $5,571,000 (14.6%) primarily due to
expenses associated with the Company's San Marcos operations. The remainder
of the increase in operating expenses was due to increases in salaries and
wages, employee benefits and other general operating expenses.
Depreciation and amortization increased $2,158,000 due partially to
$1,019,000 of depreciation and amortization related to the San Marcos
operations. The first quarter of 1994 included additional depreciation
recorded in anticipation of the approval of increases, as of January 1, 1994,
in depreciation rates in certain jurisdictions. Higher levels of plant in
service also contributed to the increased depreciation.
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 SFAS 71
the Company is required to account for the economic effects of the rate-making
process, including the recognition of depreciation and amortization of plant
and equipment over lives approved by the regulators. The ongoing
applicability of SFAS 71 to the Company's regulated telephone operations are
being constantly monitored due to the changing regulatory environment and to
increasing competition. Should the regulated operations of the Company no
longer qualify for the application of SFAS 71 at some future date, the
required accounting impact could result in a material, non-cash charge against
earnings.
Mobile Communications Operations
Three months
ended March 31
-----------------------
1994 1993
---------- ----------
(expressed in thousands)
Revenues
Cellular service $27,075 15,793
Equipment and paging 2,135 2,081
------- -------
29,210 17,874
------- -------
Expenses
Sales and marketing 6,278 3,533
General, administrative and customer
service 7,180 5,098
Cost of sales and other operating 6,378 4,471
Depreciation and amortization 4,378 2,305
------- -------
24,214 15,407
------- -------
Operating income $ 4,996 2,467
======= =======
Mobile communications operating income increased $2,529,000 (102.5%) to
$4,996,000 in the first quarter of 1994 from $2,467,000 in the first quarter
of 1993. Mobile communications revenues increased $11,336,000 (63.4%) which
more than offset an increase in operating expenses of $8,807,000 (57.2%).
The increase in cellular service revenues was substantially due to (i)
an increase in the number of cellular units in service and (ii) revenues
generated by Celutel since it was acquired by the Company on February 10, 1994
which aggregated approximately $4,233,000 during the first quarter of 1994.
The average number of cellular units in service in majority-owned markets
during the first quarter of 1994 and 1993 was 138,500 and 78,000,
11
respectively. The average monthly cellular service revenue per subscriber
declined to $65 during the first quarter of 1994 from $67 during the first
quarter of 1993, primarily due to the continued trend that a higher percentage
of new subscribers tend to be lower usage customers. The decline in average
monthly service revenue per subscriber was also affected by the growth rate of
cellular units in service exceeding the growth rate of roaming revenues. The
average monthly service revenue per subscriber may further decline as market
penetration increases and additional lower usage customers are activated. The
Company will attempt to stimulate cellular usage by promoting the availability
of certain enhanced services and by increasing coverage areas through the
construction of additional cell sites.
Sales and marketing expenses increased $2,745,000 due primarily to an
increase in commissions paid to agents for selling cellular services to new
customers and to the Celutel acquisition.
The increase of $2,082,000 in general, administrative and customer
service expenses was primarily due to costs incurred in connection with the
Celutel operations and increased costs associated with serving a larger number
of cellular customers.
Cost of sales and other operating expenses increased $1,907,000 due to
expenses incurred in connection with providing service to a larger number of
subscribers, the development and operation of the Company's Rural Service Area
cellular systems, and the Celutel acquisition.
Depreciation and amortization increased $2,073,000 due primarily to a
higher level of plant in service and to depreciation and amortization
associated with the Celutel acquisition.
Interest Expense
Interest expense increased $1,590,000 during the first quarter of 1994
compared to the first quarter of 1993 due to a 47% increase in average debt
outstanding (significantly due to debt issued in connection with the Celutel
acquisition) which was partially offset by the effect of lower average
interest rates.
Gain on Sale of Asset
During the first quarter of 1993, the Company sold its minority
investment in a telephone company which resulted in a pre-tax gain of
$1,661,000 ($1,080,000 after-tax).
Earnings from Unconsolidated Cellular Partnerships
Earnings from unconsolidated cellular partnerships increased $2,192,000
during the first quarter of 1994 compared to the first quarter of 1993 due to
the Company's share of income from the partnership interests acquired in the
San Marcos acquisition and to the improvement in profitability of other
unconsolidated cellular partnerships.
Other Income, Net
Other income, net for the first quarter of 1994 was $191,000 compared to
$947,000 during the first quarter of 1993. The reduction in other income, net
recorded to reflect the income from the Company's majority-owned and operated
cellular partnerships that is attributable to minority interest partners
12
increased in the first quarter of 1994 as a result of the increased
profitability of such partnerships. Other income, net includes the results of
operations of subsidiaries of the Company which are not included in the
telephone or mobile communications operations, the combined results of which
were less favorable during the first three months of 1994 compared to the
first three months of 1993 primarily due to losses incurred by recently-formed
or recently-acquired subsidiaries of the Company.
Income Taxes
Income tax expense increased $2,343,000 during the first quarter of 1994
compared to the first quarter of 1993 primarily due to an increase in income
before taxes.
LIQUIDITY AND CAPITAL RESOURCES
Excluding cash used for acquisitions, the Company relies on cash
provided by operations to provide a substantial portion of its cash needs.
The Company's telephone operations have historically provided a stable source
of cash flow which has helped the Company continue its long-term program
of capital improvements. Cash provided by mobile communications
operations has increased each year since that segment became cash-flow
positive in 1991.
Net cash provided by operating activities was $32,822,000 during the
first three months of 1994 compared to $42,439,000 during the first three
months of 1993. The Company's accompanying consolidated statement of cash
flows identifies major differences between net income and net cash provided by
operating activities for each of these quarters. For additional information
relating to the telephone and mobile communications operations of the Company,
see Results of Operations.
Net cash used in investing activities was $109,099,000 and $37,105,000
for the three months ended March 31, 1994 and 1993, respectively. Cash used
in connection with the Celutel acquisition during the first three months of
1994 was $53,390,000. Payments for property, plant and equipment were
$19,762,000 more in the first quarter of 1994 than in the comparable period
during 1993. Capital expenditures for the three months ended March 31, 1994
were $39,179,000 for telephone, $8,571,000 for mobile communications and
$1,803,000 for other operations.
Net cash provided by financing activities during the first three months
of 1994 and 1993 was $74,897,000 and $10,959,000, respectively. Net
borrowings, including notes payable and long-term debt, were $64,934,000 more
in the first quarter 1994 than in the comparable period of 1993, primarily due
to the borrowings incurred in connection with the acquisition of Celutel. On
May 6, 1994 the Company completed the issuance of $150,000,000 of senior
notes. The proceeds were used to discharge the Company's indebtedness under a
$90 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
credit facilities bearing interest at rates ranging from 4.0% to 4.6% (see
Note 5 of Notes to Consolidated Financial Statements). The $150,000,000 of
indebtedness has been classified as long-term debt in the consolidated balance
sheet as of March 31, 1994.
In April 1994 Moody's Investors Service upgraded the debt rating of
Century's senior unsecured debentures to Baa1 from Baa3 and assigned a rating
of (P)Baa1 to its $400,000,000 senior unsecured shelf registration. Also in
April 1994 Standard & Poor's Rating Group assigned a preliminary rating of
BBB+ to the $400,000,000 shelf registration and affirmed its BBB+ rating on
the senior unsecured debentures.
13
Budgeted capital expenditures for 1994 total $142,000,000 for telephone
operations and $50,000,000 for mobile communications operations (of which
approximately $10,000,000 will be funded by minority interest owners in
cellular partnerships operated by the Company). Revised budgeted capital
expenditures for other operations total $11,000,000, which includes $7,000,000
currently planned to be expended by the Company's recently-formed competitive
access subsidiary. See Item 5 hereof for additional information.
During the first quarter of 1994, the Company filed a shelf registration
statement registering $400,000,000 of senior unsecured debt securities under
which the Company issued $150,000,000 of senior notes on May 6, 1994. As of
March 31, 1994 Century's telephone subsidiaries had available for use
$84,100,000 of commitments for long-term financing from the Rural
Electrification Administration ("REA") and the Company had $15,600,000 of
undrawn committed bank lines of credit. In addition, approximately $7,000,000
of uncommitted credit facilities were available to the Company at March 31,
1994. Applications for additional long-term financing for the Company's
telephone subsidiaries have been filed with the REA and are in various stages
of processing. Federal budget proposals which could significantly reduce the
availability of new loan commitments to the Company's telephone subsidiaries
under the REA program in future fiscal years were considered in prior years
and are expected to continue to be considered. If the Company's telephone
subsidiaries are unable to borrow additional funds through the REA program and
are forced to borrow from conventional lenders at market rates, the cost of
new loans might increase.
14
PART II. OTHER INFORMATION
CENTURY TELEPHONE ENTERPRISES, INC.
Item 5. Other Information
In May 1994, the Company's newly-organized competitive access
subsidiary obtained a franchise from Fort Worth, Texas to provide
voice, data and certain video services in the Fort Worth market.
The Company anticipates that the capital construction costs for
installing a 60 route mile fiber optic network for this market
will be approximately $7,000,000. The Company will continue to
pursue the acquisition and development of other franchised
competitive access markets.
In connection with the corporate restructuring of a local exchange
telephone company that the Company has viewed from time to time as
an acquisition candidate, in May 1994 the Company loaned the
telephone company's newly-formed parent company $25,000,000. In
exchange, the Company received a security interest in the parent
company's capital stock, a guaranty from such company's principal
stockholder and certain first refusal rights to acquire certain
properties under various specified circumstances.
Item 6. Exhibits and Reports on Form 8-K
A. Exhibits
4.1 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").
4.2 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).
4.3 Indenture dated as of March 31, 1994 between the Company and
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).
10.1 Loan Agreement and Grant of Rights of First Refusal to
Acquire Assets and/or Capital Stock of MillTenn, Inc. and
its Subsidiaries.
11 Computations of Earnings Per Share.
B. Reports on Form 8-K
The following item was reported in the Form 8-K dated January 13,
1994:
Item 5. Other Events - Consolidated Financial Statements of
Celutel, Inc. and Subsidiaries as of October 31, 1993
The following item was reported in the Form 8-K filed February 10,
1994:
Item 2. Acquisition or Disposition of Assets - Consummation
of purchase of Celutel, Inc. by Century Telephone Enterprises,
Inc.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CENTURY TELEPHONE ENTERPRISES, INC.
Date: May 13, 1994 /s/ Murray H. Greer
Murray H. Greer
Controller
(Principal Accounting Officer)
16
CENTURY TELEPHONE ENTERPRISES, INC.
INDEX TO EXHIBITS
Exhibit
Number
4.1 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"), included herein.
4.2 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).
4.3 Indenture dated as of March 31, 1994 between the Company and 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).
10.1 Loan Agreement and Grant of Rights of First Refusal to Acquire Assets
and/or Capital Stock of MillTenn, Inc. and its Subsidiaries, included
herein.
11 Computations of Earnings Per Share, included herein.
17