UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) April 29, 2002
CenturyTel, Inc.
(Exact name of registrant as specified in its charter)
Louisiana 1-7784 72-0651161
(State or other (Commission File (IRS Employer
jurisdiction of Number) Identification No.)
incorporation)
100 CenturyTel Drive, Monroe, Louisiana 71203
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (318) 388-9000
---------------------------
Item 5. Other Events and Regulation FD Disclosure
(a) Set forth below is certain unaudited pro forma consolidated condensed
financial information.
CenturyTel, Inc.
Unaudited Pro Forma Consolidated Condensed Financial Information
Introduction
Background
On October 22, 2001, affiliates of CenturyTel, Inc. (the "Company")
entered into definitive agreements to purchase from affiliates of Verizon
Communications, Inc. ("Verizon") assets comprising all of Verizon's local
telephone operations in Missouri and Alabama. In exchange, the Company has
agreed to pay approximately $2.159 billion in cash, subject to certain
adjustments which are not anticipated to be material. As explained further
below, such transactions are expected to close by the third quarter of 2002.
On March 19, 2002, the Company entered into a definitive agreement to sell
the stock of its wireless operations to an affiliate of ALLTEL Corporation
("Alltel") for $1.65 billion in cash, subject to certain adjustments which are
not anticipated to be material. This transaction is expected to close in the
third quarter of 2002.
The results of operations of the properties to be acquired will be
included in the Company's consolidated financial statements from and after their
respective dates of acquisition. The results of operations of the properties to
be sold will be included in the Company's consolidated financial statements as
discontinued operations up until the date of disposition.
Pending Verizon Acquisitions
On October 22, 2001, the Company entered into definitive agreements to
purchase from Verizon assets comprising all of Verizon's local telephone
operations in Missouri and Alabama. In exchange, the Company has agreed to pay
approximately $2.159 billion in cash, subject to certain adjustments described
below.
The assets to be purchased will include (i) all telephone access lines
(which numbered approximately 372,000 as of December 31, 2001) and related
property and equipment comprising Verizon's local exchange operations in 98
exchanges in predominantly rural and suburban markets throughout Missouri,
several of which are adjacent to properties currently owned and operated by the
Company, (ii) all telephone access lines (which numbered approximately 304,000
as of December 31, 2001) and related property and equipment comprising Verizon's
local exchange operations in 90 exchanges in predominantly rural markets
throughout Alabama, (iii) Verizon's assets used to provide digital subscriber
line ("DSL") and other high speed data services within the purchased exchanges
in both states and (iv) an aggregate of approximately 2,800 route miles of fiber
optic cable within the purchased exchanges in both states. The acquired assets
will not include Verizon's cellular, PCS, long distance, dial-up Internet, or
directory publishing operations, or rights under various Verizon contracts,
including those relating to customer premises equipment. The Company will not
assume any liabilities of Verizon other than those associated with contracts,
employees, facilities and certain other assets transferred in connection with
the purchases. The purchase price will be adjusted to, among other things, (i)
reimburse Verizon for pre-closing construction costs and (ii) compensate the
Company if Verizon fails to attain certain specified pre-closing capital
expenditure targets. The aggregate effect of these adjustments is not expected
to be material.
The Company has received the principal approvals and waivers from the
Federal Communications Commission ("FCC") necessary for it to consummate the
acquisitions on the terms proposed. The Company's purchase of the Alabama
properties has been approved by the Alabama Public Service Commission. The
Company's purchase of the Missouri properties remains subject to the approval of
the Missouri Public Service Commission. Consummation of each transaction is also
subject to, among other things, (i) the receipt of certain additional FCC
approvals, (ii) the receipt of various third party consents, including releases
from Verizon bondholders terminating liens on the transferred assets, and (iii)
various other customary closing conditions. Subject to these conditions, the
Company expects to complete the purchase of the Alabama properties late in the
second quarter of 2002, and the purchase of the Missouri properties during the
third quarter of 2002. Neither purchase is conditioned upon the completion of
the other purchase.
The properties to be acquired are currently subject to price-cap
regulation for interstate purposes, and the Company has no plans to change this.
Under each definitive agreement, the Company has agreed to pay Verizon 10%
of the transaction consideration if the purchase is not consummated under
certain specified conditions, including the Company's inability to finance the
transactions.
In addition to the continued provision of traditional local exchange
telephone services, the Company intends to provide long distance, Internet
access (including DSL access service), and other advanced technology services in
certain of the acquired service areas.
Pending Wireless Disposition
On March 19, 2002, the Company entered into a definitive agreement to sell
the stock of its wireless operations to Alltel for $1.65 billion in cash,
subject to certain adjustments which are not anticipated to be material. The
Company's after-tax proceeds from the sale are anticipated to be approximately
$1.3 billion. In connection with this transaction, the Company will divest its
(i) interests in its majority-owned and operated cellular systems, which at
December 31, 2001 served approximately 797,000 customers and had access to
approximately 7.8 million pops (as defined in the Company's most recent 10-K
Report), (ii) minority cellular equity interests representing approximately 2.0
million pops at December 31, 2001, and (iii) licenses to provide personal
communications services covering 1.3 million pops in Wisconsin and Iowa. The
Company has agreed to maintain capital expenditures and sales and marketing
spending at certain specified levels through the closing, and to retain certain
liabilities associated with the pre-closing operation of its cellular business
for various periods of time. Alltel will not assume any indebtedness in
connection with the sale.
The Company will be committed to (i) seek acknowledgments from some of its
cellular partners confirming that they do not hold "first refusal" rights to
purchase certain of its cellular partnership interests, (ii) seek waivers from
certain other partners of their first refusal rights and (iii) in certain
instances, offer a limited number of our cellular partnership interests to
partners holding such rights. The sale is subject to the satisfactory completion
of these processes for various partnerships.
The sale is also subject to (i) approval by the FCC, (ii) our request to
waive certain FCC rules not being denied by the FCC, (iii) compliance with the
notification and waiting period requirements under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, (iv) receipt of third party consents and (v)
various other customary closing conditions. Subject to these conditions, we
expect to complete the sale in the third quarter of 2002.
The Company intends to use the after-tax proceeds received from the sale of
its wireless operations to partially finance the Verizon acquisitions.
Pro forma Information
The following unaudited pro forma consolidated condensed balance sheet as
of December 31, 2001 and the unaudited pro forma consolidated condensed
statements of income for the years ended December 31, 1999, 2000 and 2001 are
based on the historical consolidated results of operations and financial
condition of CenturyTel, Inc. and its subsidiaries, and includes adjustments to
reflect the Company's wireless operations as discontinued operations. No
interest expense was allocated to discontinued operations and corporate
overhead costs previously absorbed by the wireless operations are reflected as
an expense within continuing operations.
In addition, the unaudited pro forma consolidated condensed balance sheet
as of December 31, 2001 and the unaudited pro forma consolidated condensed
statement of income for the year ended December 31, 2001 also reflect (i) the
effects of acquiring the Verizon properties for an aggregate of $2.159 billion
cash, (ii) the effects of divesting the Company's wireless operations for cash
proceeds that we anticipate will be approximately $1.65 billion pre-tax and
approximately $1.3 billion after-tax and (iii) steps the Company anticipates
taking to finance the Verizon acquisitions.
In accordance with Statement of Financial Accounting Standard No. 142,
"Accounting for Goodwill and Other Intangible Assets", effective January 1,
2002, goodwill is no longer subject to amortization; therefore, the accompanying
2001 pro forma statement of income does not reflect amortization of the
estimated goodwill associated with the acquisition of the Verizon properties.
Pro forma adjustments, and the assumptions on which they are based, are
described in the accompanying notes to the unaudited pro forma consolidated
condensed financial information.
Although the Company's financing plans are not yet complete and will be
dependent upon market conditions and other factors, the pro forma financial
information has been prepared assuming that the aggregate purchase price for the
Verizon assets of $2.159 billion will be financed on a long-term basis
substantially with (i) $1.3 billion of after-tax proceeds from the pending
divestiture of its wireless business, (ii) proceeds from the sale of $500
million of equity units and (iii) $359 million of proceeds from a sale of debt
securities. If the Company requires cash before these sources of long-term
financing are available, the Company intends to borrow cash on a short-term
basis. Conversely, if the Company receives cash from these sources before it
needs such cash, the Company intends to repay short-term debt. For purposes of
the pro forma information, these short-term borrowings and repayments have been
excluded, as have adjustments for estimated transaction costs.
The 2001 pro forma financial information related to the Verizon acquisitions
has been prepared using the purchase method of accounting and is based on the
assumptions that the purchase of all of the Verizon properties took place as of
December 31, 2001 for purposes of the pro forma balance sheet and as of January
1, 2001 for purposes of the pro forma statement of income. In accordance with
the purchase method of accounting, the actual consolidated financial statements
of the Company will reflect the Verizon acquisitions only from and after their
respective dates of acquisition.
The 2001 pro forma information related to the sale of the wireless
operations has been prepared based on the assumptions that the sale of those
operations took place as of December 31, 2001 for purposes of the pro forma
balance sheet and as of January 1, 2001 for purposes of the pro forma statement
of income. The actual consolidated financial statements of the Company will
reflect the operations of the wireless properties (as discontinued operations)
until the date of disposition.
The 2001 unaudited pro forma consolidated condensed financial data included
below does not give effect to any potential revenue enhancements, cost
reductions, or other operating efficiencies that could result from the Verizon
acquisitions or the wireless divestiture, including, but not limited to (i)
offering long distance, Internet access and other advanced technology services
to an increased number of customers in the acquired markets or (ii) cost savings
that may be associated with operating and administering the acquired properties
with the Company's existing personnel and operating assets.
The 2001 pro forma information is presented for illustrative purposes only
and is not necessarily indicative of the operating results or financial position
that would have occurred if such transactions had been consummated on the dates
and in accordance with the assumptions described herein, nor is it necessarily
indicative of future operating results or financial position. The historical
Verizon financial information reflects the operating and management structure of
Verizon and is not necessarily indicative of the results of operations that may
be obtained with respect to the acquired properties under the Company's
operating and management structure.
You are urged to read the financial information below along with the
Company's publicly available historical consolidated financial statements and
accompanying notes.
CENTURYTEL, INC.
Pro Forma Consolidated Condensed Statement of Income
Year ended December 31, 1999
(Unaudited)
Adjustments
for
discontinued CenturyTel
CenturyTel operations Adjusted
----------------------------------------
(Dollars in thousands,
except per share amounts)
OPERATING REVENUES
Telephone $ 1,126,112 - 1,126,112
Wireless 422,269 (422,269) -
Other 128,288 - 128,288
----------------------------------------
Total operating revenues 1,676,669 (422,269) 1,254,400
----------------------------------------
OPERATING EXPENSES
Cost of sales and operating expenses 819,784 (219,746) 600,038
Corporate overheads allocable to
discontinued operations - 19,416 19,416
Depreciation and amortization 348,816 (68,593) 280,223
----------------------------------------
Total operating expenses 1,168,600 (268,923) 899,677
----------------------------------------
OPERATING INCOME 508,069 (153,346) 354,723
----------------------------------------
OTHER INCOME AND EXPENSE
Nonrecurring gains and losses, net 62,808 (51,524) 11,284
Interest expense (150,557) - (150,557)
Income from unconsolidated cellular
partnerships 27,675 (27,675) -
Minority interest (27,913) 27,837 (76)
Other income and expense 9,190 (484) 8,706
----------------------------------------
Total other income (expense) (78,797) (51,846) (130,643)
----------------------------------------
Income from continuing operations
before income tax expense 429,272 (205,192) 224,080
Income tax expense 189,503 (100,943) 88,560
----------------------------------------
Income from continuing operations 239,769 (104,249) 135,520
Discontinued operations, net of tax - 104,249 104,249
----------------------------------------
Net income $ 239,769 - 239,769
========================================
BASIC EARNINGS PER SHARE
From continuing operations $ 1.72 (.75) .97
Discontinued operations $ - .75 .75
Basic earnings per share $ 1.72 - 1.72
DILUTED EARNINGS PER SHARE
From continuing operations $ 1.70 (.74) .96
Discontinued operations $ - .74 .74
Basic earnings per share $ 1.70 - 1.70
AVERAGE BASIC SHARES OUTSTANDING 138,848 138,848 138,848
===========================================
AVERAGE DILUTED SHARES OUTSTANDING 141,432 141,432 141,432
===========================================
See accompanying notes to unaudited pro forma consolidated condensed financial
information.
CENTURYTEL, INC.
Pro Forma Consolidated Condensed Statement of Income
Year ended December 31, 2000
(Unaudited)
Adjustments
for
discontinued CenturyTel
CenturyTel operations Adjusted
----------------------------------------
(Dollars in thousands,
except per share amounts)
OPERATING REVENUES
Telephone $ 1,253,969 - 1,253,969
Wireless 443,569 (443,569) -
Other 148,388 - 148,388
----------------------------------------
Total operating revenues 1,845,926 (443,569) 1,402,357
----------------------------------------
OPERATING EXPENSES
Cost of sales and operating expenses 932,457 (260,465) 671,992
Corporate overheads allocable to
discontinued operations - 21,411 21,411
Depreciation and amortization 388,056 (65,239) 322,817
----------------------------------------
Total operating expenses 1,320,513 (304,293) 1,016,220
----------------------------------------
OPERATING INCOME 525,413 (139,276) 386,137
----------------------------------------
OTHER INCOME AND EXPENSE
Nonrecurring gains and losses, net 20,593 (20,593) -
Interest expense (183,302) - (183,302)
Income from unconsolidated cellular
partnerships 26,986 (26,986) -
Minority interest (10,201) 11,598 1,397
Other income and expense 6,696 (3,157) 3,539
----------------------------------------
Total other income (expense) (139,228) (39,138) (178,366)
----------------------------------------
Income from continuing operations
before income tax expense 386,185 (178,414) 207,771
Income tax expense 154,711 (71,169) 83,542
----------------------------------------
Income from continuing operations 231,474 (107,245) 124,229
Discontinued operations, net of tax - 107,245 107,245
----------------------------------------
Net income $ 231,474 - 231,474
========================================
BASIC EARNINGS PER SHARE
From continuing operations $ 1.65 (.77) .88
Discontinued operations $ - .77 .77
Basic earnings per share $ 1.65 - 1.65
DILUTED EARNINGS PER SHARE
From continuing operations $ 1.63 (.76) .88
Discontinued operations $ - 76 .76
Basic earnings per share $ 1.63 - 1.63
AVERAGE BASIC SHARES OUTSTANDING 140,069 140,069 140,069
========================================
AVERAGE DILUTED SHARES OUTSTANDING 141,864 141,864 141,864
============================================
See accompanying notes to unaudited pro forma consolidated condensed financial
information.
CENTURYTEL, INC.
Pro Forma Consolidated Condensed Statement of Income
Year ended December 31, 2001
(Unaudited)
Adjustments
for
discontinued CenturyTel Pro forma Pro forma
CenturyTel operations Adjusted Verizon adjustments consolidated
-----------------------------------------------------------------------------------------
(Dollars in thousands, except per share amounts)
OPERATING REVENUES
Telephone $ 1,505,733 - 1,505,733 552,127 - 2,057,860
Wireless 437,965 (437,965) - - - -
Other 173,771 - 173,771 - - 173,771
-----------------------------------------------------------------------------------------
Total operating revenues 2,117,469 (437,965) 1,679,504 552,127 - 2,231,631
-----------------------------------------------------------------------------------------
OPERATING EXPENSES
Cost of sales and operating expenses 1,086,166 (259,218) 826,948 233,108 14,900 1,074,956
Corporate overheads allocable to
discontinued operations - 20,213 20,213 - - 20,213
Depreciation and amortization 473,384 (66,346) 407,038 81,498 - 488,536
-----------------------------------------------------------------------------------------
Total operating expenses 1,559,550 (305,351) 1,254,199 314,606 14,900 1,583,705
-----------------------------------------------------------------------------------------
OPERATING INCOME 557,919 (132,614) 425,305 237,521 (14,900) 647,926
-----------------------------------------------------------------------------------------
OTHER INCOME AND EXPENSE
Nonrecurring gains and losses, net 199,971 (166,928) 33,043 - - 33,043
Interest expense (225,523) - (225,523) (21,388) (37,657) (284,568)
Income from unconsolidated cellular
partnerships 27,460 (27,460) - - - -
Minority interest (11,812) 11,510 (302) - - (302)
Other income and expense 5,041 (4,707) 334 (2,482) - (2,148)
-----------------------------------------------------------------------------------------
Total other income (expense) (4,863) (187,585) (192,448) (23,870) (37,657) (253,975)
-----------------------------------------------------------------------------------------
Income from continuing operations
before income tax expense 553,056 (320,199) 232,857 213,651 (52,557) 393,951
Income tax expense 210,025 (121,314) 88,711 87,312 (21,023) 155,000
-----------------------------------------------------------------------------------------
Income from continuing operations 343,031 (198,885) 144,146 126,339 (31,534) 238,951
Discontinued operations, net of tax - 198,885 198,885 - (198,885) -
-----------------------------------------------------------------------------------------
Net income $ 343,031 - 343,031 126,339 (230,419) 238,951
=========================================================================================
BASIC EARNINGS PER SHARE
From continuing operations $ 2.43 (1.41) 1.02 .90 (.22) 1.69
Discontinued operations $ - 1.41 1.41 - (1.41) -
-----------------------------------------------------------------------------------------
Basic earnings per share $ 2.43 (1) - 2.43 (1) .90 (1.64) 1.69
=========================================================================================
DILUTED EARNINGS PER SHARE
From continuing operations $ 2.41 (1.40) 1.01 .89 (.22) 1.68
Discontinued operations $ - 1.40 1.40 - (1.40) -
-----------------------------------------------------------------------------------------
Diluted earnings per share $ 2.41 (1) - 2.41 (1) .89 (1.62) 1.68
=========================================================================================
AVERAGE BASIC SHARES OUTSTANDING 140,743 140,743 140,743 140,743 140,743 140,743
=========================================================================================
AVERAGE DILUTED SHARES OUTSTANDING 142,307 142,307 142,307 142,307 142,307 142,307
=========================================================================================
(1) CenturyTel's basic earnings per share and diluted earnings per share for
the year ended December 31, 2001 were $1.72 and $1.70, after eliminating
the effect of nonrecurring net gains associated with our wireless
operations.
See accompanying notes to unaudited pro forma consolidated condensed financial
information.
CENTURYTEL, INC.
Pro Forma Consolidated Condensed Balance Sheet
December 31, 2001
(Unaudited)
Adjustments
for
discontinued CenturyTel Pro forma Pro forma
CenturyTel operations Adjusted Verizon adjustments consolidated
ASSETS -----------------------------------------------------------------------------------------
------ (Dollars in thousands)
CURRENT ASSETS
Cash and cash equivalents $ 13,362 (9,866) 3,496 - - 3,496
Accounts receivable 254,094 (48,104) 205,990 88,841 - 294,831
Materials and supplies 20,239 (9,323) 10,916 1,453 - 12,369
Other 12,578 (3,067) 9,511 20,102 - 29,613
-----------------------------------------------------------------------------------------
Total current assets 300,273 (70,360) 229,913 110,396 - 340,309
-----------------------------------------------------------------------------------------
NET PROPERTY, PLANT AND EQUIPMENT 2,999,563 (263,421) 2,736,142 633,644 - 3,369,786
-----------------------------------------------------------------------------------------
INVESTMENTS AND OTHER ASSETS
Excess cost of net assets acquired 2,471,484 (384,326) 2,087,158 - 1,485,408 3,572,566
Other 547,364 (127,321) 420,043 129,767 (114,067) 435,743
-----------------------------------------------------------------------------------------
Total investments and other assets 3,018,848 (511,647) 2,507,201 129,767 1,371,341 4,008,309
-----------------------------------------------------------------------------------------
ASSETS HELD FOR SALE - 845,428 845,428 - (845,428) -
-----------------------------------------------------------------------------------------
TOTAL ASSETS $ 6,318,684 - 6,318,684 873,807 525,913 7,718,404
=========================================================================================
LIABILITIES AND EQUITY
----------------------
CURRENT LIABILITIES
Short term debt and current
maturities of long-term debt $ 1,008,834 - 1,008,834 - - 1,008,834
Accounts payable 87,439 (26,383) 61,056 7,428 (7,428) 61,056
Accrued expenses and other liabilities 157,969 (18,285) 139,684 52,767 (52,767) 139,684
Advance billing and customer deposits 39,714 (10,406) 29,308 12,399 - 41,707
-----------------------------------------------------------------------------------------
Total current liabilities 1,293,956 (55,074) 1,238,882 72,594 (60,195) 1,251,281
-----------------------------------------------------------------------------------------
LONG-TERM DEBT 2,087,500 - 2,087,500 - 859,000 2,946,500
-----------------------------------------------------------------------------------------
DEFERRED CREDITS AND OTHER LIABILITIES 599,848 (93,796) 506,052 73,749 6,300 586,101
-----------------------------------------------------------------------------------------
LIABILITIES RELATED TO ASSETS
HELD FOR SALE - 148,870 148,870 - (148,870) -
-----------------------------------------------------------------------------------------
PARENT FUNDING - - - 727,464 (727,464) -
-----------------------------------------------------------------------------------------
STOCKHOLDERS' EQUITY
Common stock 141,233 - 141,233 - - 141,233
Paid in capital 524,668 - 524,668 - (6,300) 518,368
Retained earnings 1,666,004 - 1,666,004 - 603,442 2,269,446
Unearned ESOP shares (2,500) - (2,500) - - (2,500)
Preferred stock - non-redeemable 7,975 - 7,975 - - 7,975
-----------------------------------------------------------------------------------------
Total stockholders' equity 2,337,380 - 2,337,380 - 597,142 2,934,522
-----------------------------------------------------------------------------------------
TOTAL LIABILITIES AND EQUITY $ 6,318,684 - 6,318,684 873,807 525,913 7,718,404
=========================================================================================
See accompanying notes to unaudited pro forma consolidated condensed financial
information.
Notes to Unaudited Pro Forma Consolidated Condensed Financial Information
(A) Purchase of Verizon assets.
Costs of acquisition. The total cash purchase price of the Verizon assets
has been assumed to be $2.159 billion.
Operations. As explained further above, the proforma adjustments do not
consider the effect of possible revenue enhancements, cost reductions or
other operating efficiencies that may occur in connection with combining
the operations of the acquired properties with the Company's operations or
divesting its wireless operations.
(B) Sale of Wireless Operations.
Presentation of wireless operations. The wireless operations have been
adjusted to be reflected as discontinued operations on the Company's
statements of income and the assets and liabilities of the wireless
operations have been reflected as held for sale on the Company's balance
sheet.
Proceeds from disposition. The after-tax proceeds from the sale of the
wireless operations has been assumed to be $1.3 billion.
(C) December 31, 2001 Balance Sheet Pro Forma Adjustments.
The pro forma adjustments applicable to the acquisition of the Verizon
properties with respect to the unaudited pro forma consolidated condensed
balance sheet as of December 31, 2001, as set forth below, reflect
preliminary allocations of the aggregate purchase price to the acquired
properties. The preliminary estimates of the fair value of the noncurrent
assets and liabilities are subject to change upon completion of our
valuation analysis. As explained further above under "Pro Forma
Information," the pro forma financial information has been prepared
assuming that the aggregate purchase price of $2.159 billion will be
financed on a long-term basis with (i) $1.3 billion of after-tax
proceeds from the pending divestiture of its wireless business,
(ii) proceeds from the sale of $500 million of equity units (comprised
of senior notes and purchase contracts entitling the holders to, among
other things, contract adjustment payments) and (iii) proceeds of $359
million from a sale of debt securities. The pro forma financial
information has been prepared assuming that the weighted average interest
rate of the $859 million of net indebtedness to be incurred (including
indebtedness associated with senior notes issued in connection with the
equity units) will be 6.8%. There is no adjustment to reduce long-term
debt as a result of the discontinued operations because the Company has
no outstanding indebtedness directly related to its wireless operations.
December 31, 2001 Balance Sheet Pro Forma Adjustments
Excess (Assets) Accrued Deferred
Cash cost of Investments liabilities expenses Long- credits Paid
and cash net assets and other held Accounts and other term and other Parent in Retained
equivalents acquired assets for sale payable liabilities debt liabilities funding capital earnings
------------------------------------------------------------------------------------------------------------------------------------
(Dollars in thousands)
(1)(a) $ 2,159,000 2,159,000
(b) (2,159,000) 2,159,000
(2) (727,464) (727,464)
(3) 114,067 (114,067)
(4) (60,195) (7,428) (52,767)
(5)(a) 1,650,000 (845,428) 953,442
148,870
(b) (350,000) (350,000)
(c) (1,300,000) (1,300,000)
(6) 6,300 (6,300)
--------------------------------------------------------------------------------------------------------------------------------
$ 0 1,485,408 (114,067) (696,558) (7,428) (52,767) 859,000 6,300 (727,464) (6,300) 603,442
================================================================================================================================
(1) Reflects (a) $2.159 billion raised in the manner discussed herein and
(b) delivery of $2.159 billion to purchase the assets of Verizon.
(2) Reflects the elimination of Verizon's parent debt and equity funding.
(3) Reflects the elimination of Verizon's excess pension assets. Verizon will
retain these assets, together with all income generated by such assets.
Verizon's historical financial statements reflect such assets and income.
(4) Reflects the elimination of Verizon's accounts payable and accrued expenses
and other liabilities. These liabilities will be retained by Verizon.
(5) Reflects (a) gross proceeds received from the sale of the Company's wireless
operations to Alltel of $1.65 billion, elimination of assets and liabilities
held for sale and pre-tax gain from the sale of wireless interests,
(b) taxes paid related to the gain on sale of wireless operations of $350
million and (c) a $1.3 billion reduction in the amount of debt that would
otherwise be incurred absent the divestiture.
(6) Reflects, as a reduction of equity, the present value of contract adjustment
payments related to $500 million equity unit issuance.
(D) December 31, 2001 Income Statement Pro Forma Adjustments.
Set forth below are the pro forma adjustments applicable to the acquisition
of the Verizon assets and to the divestiture of the wireless operations with
respect to the unaudited pro forma consolidated condensed statement of income
for the year ended December 31, 2001.
December 31, 2001 Income Statement Pro Forma Adjustments
Cost of Sales Discontinued
and Operating Interest Income operations,
Expenses expense tax expense net of tax
--------------------------------------------------------------------------------------------------------------
(Dollars in thousands)
Interest on net borrowings of $859 million at
an assumed rate of 6.8% (1) $ 58,412
Eliminate Verizon interest expense on parent
funding (2) (21,388)
Eliminate pension credit related to
excess pension assets which will remain
with Verizon (3) 14,900
Record amortization of discounted contract
adjustment payment liability related to
$500 million equity unit issuance 633
Tax benefit relating to pro forma
adjustments (assuming a 40%
tax rate) (21,023)
Eliminate discontinued operations
of wireless business (198,885)
--------------------------------------------------------------
$ 14,900 37,657 (21,023) (198,885)
==============================================================
(1) See footnote (C). Use of an assumed rate .125% higher or lower than 6.8%
on net borrowings would have changed net income by approximately $644,000.
(2) See footnote (C), adjustment number (2).
(3) See footnote (C), adjustment number (3).
(E) Reclassifications.
Certain reclassifications have been made to the historical financial
information to conform to the presentation of the condensed pro forma
information.
(F) Verizon Historical Results.
All amounts reflected above under the headings "As Reported - Verizon" are
based on audited special purpose financial statements of the Verizon
acquired operations. In connection with the preparation of these special
purpose financial statements, Verizon made numerous assumptions and
allocations where specific data was not available pertaining to the
acquired assets. Because of the significant amount of allocations and
estimates used to prepare these special purpose financial statements and
because this Company will operate these assets under a different operating
and management structure, they may not reflect the financial position and
results of operations of the acquired properties after such properties are
acquired by the Company.
(b) Legal Proceeding
On December 26, 2001, AT&T Corp. and one of its subsidiaries filed a
complaint in the U.S. District Court for the Western District of Washington
(Case No. CV0121512) seeking money damages against CenturyTel of the Northwest,
Inc. The plaintiffs claim, among other things, that CenturyTel of the Northwest,
Inc. has breached its obligations under an October 1994 stock purchase agreement
to indemnify the plaintiffs for various environmental costs and damages relating
to properties sold to the plaintiffs under such 1994 agreement. The Company has
investigated this claim and believes it has numerous defenses available. If the
plaintiffs are successful in recovering any sums under this litigation, the
Company believes it is entitled to indemnification under agreements with third
parties.
FORWARD-LOOKING STATEMENTS
In addition to historical information, this Form 8-K includes certain
forward-looking statements and estimates that are based on current expectations
only, and are subject to a number of risks, uncertainties and assumptions, many
of which are beyond the control of the Company. Actual events and results may
differ materially from those anticipated, estimated or projected if one or more
of these risks or uncertainties materialize, or if underlying assumptions prove
incorrect. Factors that could affect actual results include but are not limited
to: the Company's ability to successfully finance and timely consummate its
pending Verizon acquisitions and its wireless divestiture; the receipt of all
governmental and other approvals, consents or waivers necessary to complete the
Company's pending acquisitions and wireless divestiture; the availability of
capital on terms attractive to the Company; the prevailing level of interest
rates; the Company's ability to effectively integrate new businesses into its
operations; possible changes in the demand for, or pricing of, the Company's
products and services; the Company's ability to successfully introduce new
offerings on a timely and cost-effective basis; and the effects of more general
factors such as changes in overall market or economic conditions or in
legislation, regulation or public policy. These and other uncertainties related
to the business are described in greater detail in Item 1 to the Company's
Annual Report on Form 10-K for the year ended December 31, 2001. You are
cautioned not to place undue reliance on these forward-looking statements, which
speak only as of the date hereof. The Company undertakes no obligation to update
any of its forward-looking statements for any reason.
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.
CenturyTel, Inc.
By: /s/ Neil A. Sweasy
----------------------------
Neil A. Sweasy
Vice President and Controller