Annual Report (Form 10-K), fiscal year 1993

Item 1. Business.
Century Telephone Enterprises, Inc. ("Century") is a regional
diversified telecommuni-cations company that is primarily engaged
in providing traditional telephone services and mobile
communications services. For the year ended December 31, 1993,
telephone operations and mobile communications operations provided
80% and 20%, 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, 1993 the Company's telephone subsidiaries
operated over 434,000 telephone access lines, primarily in rural,
suburban and small urban areas in 14 states, with the largest
customer bases located in Wisconsin, Louisiana, Michigan, Ohio and
Arkansas. Based on the number of access lines served, the Company
is the fifteenth largest local exchange telephone company in the
United States.
Whenever used herein with respect to the Company, (i) the term
"pops" means the population of licensed cellular telephone markets
(based on 1993 population estimates of Donnelly Marketing
Information Services) multiplied by the Company's proportionate
equity interests in the licensed operators thereof, (ii) the term
"MSA" means any Metropolitan Statistical Area for which the
Federal Communications Commission (the "FCC") has granted a
cellular operating license and (iii) the term "RSA" means any
Rural Service Area for which the FCC has granted a cellular
operating license.
Through its cellular operations, including those operations
acquired in February 1994, the Company controls approximately 7.1
million pops in 27 MSAs, primarily concentrated in Michigan,
Louisiana, Mississippi and Texas, and 32 RSAs, most of which are
in Michigan, Louisiana, Arkansas and Wisconsin. The Company is
the majority owner and operator in 18 of the MSAs and 13 of the
RSAs, which collectively represent 5.5 million pops, and has
minority interests in nine other MSAs and 19 other RSAs, which
collectively represent 1.6 million pops. Of the Company's 7.1
million pops, approximately 73% are attributable to the Company's
MSA interests, with the balance attributable to its RSA interests.
Based on the population of the Company's majority-owned and
operated MSAs and RSAs, the Company is the fifteenth largest
operator of cellular telephone systems in the United States. At
December 31, 1993, the Company's majority-owned cellular systems
had more than 116,000 cellular subscribers, not
including approximately 28,000 subscribers acquired by the Company
in connection with its February 1994 acquisition of Celutel, Inc.
described further below. The Company also provides paging
services to customers residing in Louisiana and Michigan in
conjunction with the operation of its cellular systems.
The FCC has awarded only two licenses to provide cellular
service in each market. During its licensing process, the FCC
reserved one license for companies offering local telephone
service in the market (the wireline carrier) and one license for
entities unaffiliated with the local telephone company (the non-
wireline carrier). Each of the MSAs that the Company operated as
of December 31, 1993 and all but one of the RSAs operated by the
Company are wireline markets.
In April 1993 the Company acquired San Marcos Telephone
Company, Inc. ("SMTC") and SM Telecorp, Inc., an affiliate of
SMTC. As a result of these acquisitions, 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, together representing
approximately 327,000 pops.
In September 1993 the Company signed a definitive merger
agreement to acquire a local exchange telephone company in
Michigan which serves approximately 2,400 access lines and owns
approximately 11% (representing approximately 33,000 pops) of a
Michigan cellular partnership which holds the wireline licenses
for two RSA cellular markets operated by the Company. This
transaction is expected to be completed in March 1994.
In February 1994 the Company acquired Celutel, Inc.
("Celutel"), which provides cellular mobile telephone services to
approximately 28,000 customers in three MSA non-wireline cellular
markets in Mississippi and two MSA non-wireline cellular markets
in Texas which have a combined population of 1.4 million.
Celutel's share of the pops is approximately 1.1 million.
The Company is continually evaluating the possibility of
acquiring additional telephone access lines and cellular interests
in exchange for either 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.
Partially as a result of 1993 acquisitions, the Company also
provides long distance, operator and interactive services in
certain local and regional markets, as well as certain printing
and related services. The results of these operations, which are
not material individually or in the aggregate, are recorded for
financial reporting purposes as other income, net.
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. As of December
31, 1993, the Company employed approximately 2,800 persons, of
which approximately 200 were covered by a collective bargaining
agreement.
TELEPHONE OPERATIONS
The Company is the fifteenth largest local exchange telephone
company in the United States, based on the more than 434,000
access lines it served at December 31, 1993. An access line is a
single or multi-party circuit between a customer's business or
residence and a central switching office. Through its operating
telephone subsidiaries, Century provides services to predominately
rural, suburban and small urban markets in 14 states, with
Wisconsin, Louisiana, Michigan, Ohio and Arkansas accounting for
the greatest share of access lines served.
Future growth in telephone operations is expected to be
derived from (i) acquiring additional telephone companies, (ii)
providing service to new customers, (iii) upgrading existing
customers to higher grades of service, (iv) increasing network
usage and (v) providing additional services made possible by
advances in technology. For information on developing competitive
trends, see "-Regulation and Competition."
The replacement of mechanical switches with digital switches
is an important component of the Company's growth strategy because
it allows the Company to offer new 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 1993 the Company expanded its list
of premium services offered in certain service areas and plans to
aggressively market these services in 1994. In addition, with
digital switching the Company has been able to construct central
electronic monitoring facilities that allow employees to detect
operating malfunctions in digital switches and, in many cases, to
correct the malfunctions without a site visit by the Company's
personnel, thereby reducing maintenance costs. Progress toward
increased digital switching of
the Company's telephone systems is demonstrated by the change in
the number of digitally switched lines as a percentage of total
lines, which increased from 19% in 1982 to 93% in 1993.
In addition, the Company is installing fiber optic cable in
certain areas in which it operates and has provided alternative
routing of telephone service over fiber optic cable networks in
two of its larger operating areas.
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 total telephone
revenues derived from these respective services:
1993 1992 1991 _________________________
Local service 25.4% 26.3 24.9 Network access and long distance 62.3 61.4 61.6 Other 12.3 12.3 13.5 _________________________ 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 to interexchange carriers (long distance
carriers) in connection with the origination and termination of
long distance telephone calls. Substantially all of the Company's
interstate network access revenues are derived through pooling
arrangements administered by the National Exchange Carrier
Association ("NECA"). NECA receives access charges billed by the
Company and other participating local exchange carriers ("LECs")
to interstate long distance carriers for their use of the
participating LECs' local exchange networks to complete long
distance calls and subsequently distributes these revenues to such
LECs based on cost separations studies or average schedule
settlement agreements. The charges billed to the long distance
carriers are based on tariffed access rates filed with the FCC by
NECA on behalf of the Company and other participating LECs.
Interstate revenues as a percentage of total telephone revenues
amounted to 32.1%, 31.4% and 31.0% in 1993, 1992 and 1991,
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. Such intrastate network
access charges are based on access tariffs which are subject to
state regulatory commission approval. Additionally, certain of
the Company's telephone subsidiaries' 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 various intrastate access charges and state
pooling arrangements are intended to compensate LECs for the use
of their facilities furnished in originating and terminating
intrastate long distance telephone calls.
Other revenues include revenues related to non-regulated
telecommunications equipment and services, billing and collection
services for interexchange carriers, network facilities leases and
directory 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 Electrification Administration
("REA"), the Rural Telephone Bank ("RTB") and the Federal
Financing Bank ("FFB"). The REA has made long-term loans to
telephone companies since 1949 for the purpose of improving
telephone service in rural areas. The REA 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 an interest rate based on its average cost of funds as
determined by statutory formula (6.35% for the fiscal year ended
September 30, 1993), and in some cases makes loans concurrently
with REA loans. In addition, the REA guarantees certain loans
made to telephone companies by the FFB or other qualified lenders.
A significant portion of the Company's telephone plant is pledged
or is subject to mortgages to secure obligations of the Company's
telephone subsidiaries to the REA, RTB and FFB. The amount of
common stock dividends that may be paid by the Company's
telephone subsidiaries is limited by certain financial
requirements set forth in the mortgages.
Certain of the Company's telephone subsidiaries have made
applications for additional loans from the REA and RTB and intend
to make further applications as needs arise. There is no
assurance that these applications will be accepted or that the
terms or interest rates of any future
loan commitments will remain favorable. Federal budget proposals
which could significantly reduce the availability of new loan
commitments to the Company's telephone subsidiaries under the REA
and RTB programs in future fiscal years were considered in recent
years and are expected to continue to be considered. If the
Company's telephone subsidiaries are unable to borrow additional
funds through the REA and RTB programs and are forced to borrow from
conventional lenders at market rates, the Company's cost of new loans
might increase.
For additional information regarding the Company's financings,
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 by various state regulatory agencies (generally
called public service commissions or public utility commissions)
and by the FCC. Although it is anticipated that regulation will
continue for some time, the form or degree of such regulation is
unknown. As discussed in greater detail below under "-
Developments Affecting Competition," in recent years various
aspects of federal and state regulation have been subject to
reexamination and ongoing modification. As further indicated
below, it is expected that regulation will decrease and
competition will increase in the traditionally monopolistic
portions of the industry.
Regulation of Rates and Related Matters. The FCC regulates
the interstate services provided by the Company's telephone
subsidiaries. This regulation primarily consists of the
regulation of interstate access charges that are billed to
interexchange carriers by the Company for use of its local network
in connection with the origination and termination of interstate
telephone calls. Additionally, the FCC prescribes rules and
regulations for telephone companies, including 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 and GTE. 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. This
alternative form of regulation took effect for AT&T's interstate
rates on July 1, 1989. 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
reevaluate its options on a periodic basis. Consequently, the
Company's telephone subsidiaries' authorized interstate access
rate of return is 11.25%, which is the rate established by the FCC
for LECs not governed by price-cap regulation or the optional
incentive regulatory plan.
The local service rates and intrastate access charges of
substantially all of the Company's telephone subsidiaries are
regulated by state public service commissions. Most of these
commissions also (i) regulate the sale and acquisition 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 and a limited
number of other state legislatures and regulatory commissions have
begun to relax the regulation of LECs, including rates and
earnings. Other states have announced their intention to study
these issues and it is expected that several such states,
including states in which the Company operates, may also relax
their regulation of LECs. This relaxed regulatory oversight of
certain of the Company's telephone operations may permit 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 more detailed discussion of these
developments, see "-Developments Affecting Competition".
Substantially all of the state commissions that have
regulatory jurisdiction over the Company's telephone operations
have statutory authority to initiate and conduct earnings reviews
of the LECs that they regulate. The specific limits of their
authority vary depending upon the state and their particular
statutory authority with respect to rate of return regulation and
authorized returns. As indicated above, several states are moving
away from traditional rate of return regulation, which reduces
both the incentive and authority that the respective regulatory
commissions have with respect to earnings reviews. Century does
not currently have any operating telephone company subject to a
formal earnings investigation. However, all independent LECs in
Louisiana have been the subject of an informal earnings review by
the Louisiana Public Service Commission during 1993. There is no
assurance that this informal review (or any other future review in
Louisiana or any other state) will not lead to future revenue
reductions. Moreover, in light of the movement away from
traditional rate of return regulation,
no assurance can be given that the Company's telephone
subsidiaries will continue to earn the same rate of return
that they achieved in 1993.
Most of the Company's telephone subsidiaries concur with the
common line and traffic sensitive tariffs filed by NECA and
participate in the access revenue pools administered by NECA for
interstate services. All of the Company's telephone subsidiaries'
long distance and intrastate network access revenues are based on
access charges, cost separation studies or special settlement
arrangements. See "-Services."
Recently, the FCC and certain state public utility commissions
have explored or implemented initiatives to reduce the funding of
certain support mechanisms that have traditionally benefited LECs
serving small communities and rural areas. In 1993 the eight-year
phase-in of the FCC's mandated Universal Service Fund ("USF") was
completed. In December 1993 the FCC adopted a provision which
places certain limitations, including a cap, on the USF growth
rate during 1994 and 1995. The Company anticipates that,
subsequent to 1993, revenues from the USF will continue to
increase in the near term, but at a lesser percentage rate than
that associated with recent prior periods. The FCC has announced
that it intends to comprehensively study the USF during 1994 and
1995 to determine if permanent rule changes should be effected.
In addition, the Public Service Commission of Wisconsin ("PSCW")
has ordered the existing Wisconsin state support fund to be
phased-out over one and one-half years beginning July 1, 1993.
Certain of the Company's subsidiaries affected by the order have
filed requests with the PSCW to receive increased rates and/or
compensation which could potentially offset some or all of the
amounts that those subsidiaries have been receiving from such
support fund. All such additional revenue must be justified based
on each subsidiary's financial need as demonstrated by an
expedited rate case.
Certain long distance carriers have requested the Company to
reduce intrastate access tariffed rates for certain of its
telephone subsidiaries. Although intrastate access tariffed rates
are subject to state regulatory commission approval, there is no
assurance that final resolution of these requests will not result
in reduced intrastate access revenues.
Developments Affecting Competition. Primarily as a result of
regulatory and technological changes, competition has been
introduced and encouraged in certain sectors of the telephone
industry, including interstate and intrastate toll, special access
services and customer premise equipment. In 1992 the FCC took a
step toward introducing competition in the local exchange access
business by ordering that competitive access providers,
interexchange carriers and others
have the right to directly interconnect facilities to the central
offices of certain larger (Tier One) telephone companies for the
provision of interstate special transport access services. The
intent of this order and other related FCC decisions
is to allow interstate special access competition with
telephone companies and provide telephone companies with
limited pricing flexibility. In a related proceeding the
FCC also issued proposals to expand competitive interconnection
to LECs' switched access services in the future.
Principally as a result of these and other regulatory actions,
competition from competitive access providers and others has
increased and is expected to continue to increase. Certain states
are considering steps that would further introduce competition
into the LEC business. Moreover, certain well-established
interexchange carriers have publicly announced their desire to
enter the LEC business. Although local exchange competition and
competitive access are 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, there is no assurance that these developments will
not have an adverse effect on the Company in the future.
Certain providers and users of toll service may seek to bypass
LECs' switching services and local distribution facilities,
particularly if services are not strategically priced. There are
three primary ways which users of toll service may bypass the
Company's switching services. First, users may construct and
operate or lease facilities to transmit their traffic to an
interexchange carrier. Second, certain interexchange carriers
provide services which allow users to divert their traffic from
LECs' usage-sensitive services to their flat-rate services.
Third, users may choose to use mobile communications services to
bypass LECs' switching services. Within the past two years, each
of the three largest interexchange carriers in the United States
has acquired, or has entered into preliminary or definitive
agreements 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 impact of such
loss on revenues has not been significant. The Company and the
exchange carrier industry are seeking to address bypass by
adopting flexible pricing of access and toll services where
appropriate, although no assurance can be given as to the ultimate
outcome of these efforts.
As the mobile communications industry matures, 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 these
developments, see "Mobile Communications Operations - Regulation
and Competition."
In connection with the well-publicized convergence of
telecommunications, cable, video, computer and other technologies,
several large companies have recently 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. In particular, several large cable
television companies have announced plans that, if successfully
implemented, could provide significant competition with LECs'
traditional 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. Although the development of
new multimedia services is expected to initially have a greater
effect on larger urban areas, no assurance can be given as to how
the offering of these products or services by others will affect
the Company. For information on the effects of these developments
on the Company's cellular operations, see "Mobile Communications
Operations - Regulation and Competition."
Several bills have been filed in the U. S. Congress that have
the potential to significantly alter the telecommunications
industry and its regulatory framework. Several of these bills are
designed to promote local telephone competition and obligate LECs
to provide competitors with universal access to their networks and
facilities. Several others are designed to remove barriers of
entry to several lines of telecommunications businesses, including
current barriers that prohibit the regional Bell operating
companies and others from providing interstate and intrastate
services and that prohibit LECs from providing cable television
services. In addition, the Clinton administration and Congress
have proposed legislative and regulatory initiatives to promote
wireless technologies as part of the development of a national
information infrastructure. Although it is currently impossible
to assess the ultimate effect of these initiatives, there can be
no assurances that those bills, or others that may follow, will
not materially affect the Company's telephone or cellular
operations.
The Company anticipates that the traditional operations of
LECs will increasingly be affected by continued technological
developments and continued legislative and regulatory initiatives
affecting the ability of LECs to provide new services and the
ability of cable 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 test
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.
MOBILE COMMUNICATIONS OPERATIONS
The Company is the fifteenth largest operator of cellular
telephone systems in the United States, based on the population of
the Company's majority-owned and operated MSAs and RSAs. 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, 1993, the Company's
pops exceeded 5.9 million. Over 1.1 million additional pops were
acquired in the February 1994 acquisition of Celutel. Of the
approximately 7.1 million pops controlled by the Company,
approximately 5.2 million (73%) are applicable to MSAs and
approximately 1.9 million (27%) are 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.
According to the Cellular Telecommunications Industry Association,
at December 31, 1993 there were estimated to be approximately 16
million cellular customers across the United States. Cellular
service is now available to substantially all areas of the United
States.
Cellular mobile telephone technology was developed in response
to certain limitations of conventional mobile telephone systems.
Compared to such conventional systems, cellular mobile telephone
service is capable of high-quality, high-capacity communications
to and from vehicle-mounted and hand-held radio telephones. While
conventional mobile systems limit the number of people who can
utilize the service simultaneously, 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
Switching Center ("MSC"), which in turn is connected to the
worldwide telephone network.
Communications within a cellular system are controlled by the
MSC 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 MSC
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 in certain markets.
Cellular telephone systems have higher subscriber capacity
than conventional mobile telephone systems 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 of the radio transmissions
of cellular systems were conducted on an analog basis.
Technological developments involving the application of digital
radio technology may offer certain advantages over analog
technologies, including expanding the capacity of mobile
communications systems, improving voice transmission quality,
permitting the introduction of new services, and otherwise making
such systems more efficient, more accessible, more private and
eventually less expensive. Providers of certain competitive
services are currently incorporating digital technology into their
operations, and may be expected to continue to do so in the
future. See "-Regulation and Competition-Developments Affecting
Competition."
In recent years certain cellular carriers have begun to
install digital cellular voice transmission facilities in certain
larger markets. During 1993 the Company upgraded certain portions
of its cellular systems in Louisiana and Michigan to be capable of
providing digital service in the future. 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 cellular voice transmission facilities.
See "-Regulation and Competition-Developments Affecting
Competition."
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. After giving effect to those
operations acquired in February 1994, 51% of the Company's pops in
markets operated by the Company were in a single, contiguous
cluster of eight MSAs and six RSAs in Michigan; another 19% were
in a cluster of four MSAs and seven RSAs in northern and central
Louisiana, southern Arkansas and eastern Texas.
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, and its Louisiana properties include an east-
west interstate highway and a north-south interstate highway which
intersect in its Louisiana cellular service area.
In connection with its February 1994 acquisition of Celutel,
the Company acquired over 84 percent of the Biloxi/Gulfport,
Mississippi MSA and over 82% the Pascagoula, Mississippi MSA.
The interstate highway between New Orleans, Louisiana and Mobile,
Alabama spans these markets. In connection with this acquisition,
the Company also acquired over 86% interest in the Jackson,
Mississippi MSA; over 77% in the Brownsville, Texas MSA; and over
67% in the McAllen, Texas MSA. Jackson is the state capital and
is located in central Mississippi where two interstate highways
intersect. The MSAs in Texas are adjacent to Mexico and consist of
urban, resort, farm and ranch areas and include two Foreign Trade
Zones.
Marketing
The Company coordinates the marketing strategy for each
cellular system in which it has a majority interest. The
Company's cellular sales force consists of approximately 60 sales
employees and approximately 200 independent agents. 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 Company is a founding partner and participant in a
national alliance of 15 leading mobile communications companies
which is marketing a national brand of cellular service under the
name MobiLink. This cellular alliance offers a customer
satisfaction guarantee and certain quality standards.
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's customers are able to choose from a variety of
packaged pricing plans which are designed to fit different calling
patterns. The Company typically charges its customers separately
for custom-calling features, air time in excess of the packaged
amount, and toll calls. Custom-calling features provided by the
Company include call-forwarding, call-waiting, three-way calling
and no-answer transfer. The Company offers a 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 will continue
to decline as additional non-commercial customers who generate
fewer local minutes of use are added as subscribers and as roaming
revenues grow more slowly.
An added service offered by the Company allows 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 systems in
the United States. These agreements offer the Company's customers
the opportunity to roam in these systems. These reciprocal
agreements automatically pre-register the customers of the Company's
system in the other carriers' systems. 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 and receive 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, the Company may
charge a lower amount to its customers than the amount actually
charged by another cellular carrier for roaming. The Company
anticipates that competitive factors may place downward pressures
on charging premium roaming rates. For additional information on
roaming revenue, see"-Strategy."
During 1993, 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 quarter for the
past several years.
The following table summarizes, among other things, certain
information about the Company's customers and market penetration
(without giving effect to the operations acquired in February
1994):
Notes: 1. Represents the number of systems in which the Company owned at least a 50% interest and which it operated. The revenues and expenses of these cellular markets are included in the Company's consolidated revenues and expenses.
2. Represents the approximate number of revenue-generating cellular telephones served by the cellular systems referred to in footnote 1.
3. Computed by dividing the number of customers at the end of the period by the total population of markets in service as estimated by Donnelly Marketing Information Services for the respective years.
4. Represents the total number of systems that the Company operated, including systems in which it does not own a controlling interest.
5. Represents the approximate number of revenue-generating cellular telephones served in all systems that the Company operated, including systems in which it does not own a controlling interest.
The Company's Cellular Interests
The table below sets forth certain information with respect to the interests in cellular systems that the Company owned or had the right to acquire pursuant to definitive agreements as of December 31, 1993:
(1) To the best of the Company's knowledge.
(2) Markets not operated by the Company.
(3) Represents a non-wireline interest.
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 and competition, any of which could have a material
adverse effect on the Company. See " - Regulation and
Competition."
Management believes that a significant portion of the
aggregate market value of Century's common stock is represented by
the current market value of its cellular interests. There can be
no assurance that the market value of its cellular interests will
remain at its current level. Management believes that decreases
in the market value of such interests could materially decrease
the trading price of Century common stock.
The market value of cellular interests is frequently
determined on the basis of the number of pops controlled 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.
Paging
As part of the Company's strategy of focusing its resources in
the cellular and telephone businesses, the Company's Florida
paging operations were sold during 1991. The Company continues to
provide paging services to customers in Michigan and Louisiana in
conjunction with the operation of its majority-owned cellular
systems. As of December 31, 1993, the Company had approximately
9,500 pagers in service.
Revenue
The following table reflects the major revenue categories for
the Company's mobile communications operations as a percentage of
total mobile communications revenues in 1993, 1992 and 1991.
1993 1992 1991 _________________________ Cellular access fees, toll revenues and equipment sales 80.5% 78.6 72.4 Cellular roaming 14.5 14.3 16.4 Paging services 5.0 7.1 11.2 _________________________ 100.0% 100.0 100.0 =========================
For further information on these revenue categories, see"-
Services, Customers and System Usage" and "- Paging."
Regulation And Competition
The FCC and various state public utility commissions regulate
the licensing, construction, operation, interconnection
arrangements, sale and acquisition of cellular telephone systems
and certain state public utility commissions also regulate certain
aspects of pricing by cellular operators.
Cellular Licensing Process. The FCC awarded only 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 are 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.
Five years after initial operating licenses are granted,
unserved areas within markets previously granted to licensees may
be applied for by both wireline and non-wireline entities and by
third parties. 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 respecting the siting and construction of
cellular transmitter towers and antennas.
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 competition for
agents. Some of the Company's competitors have 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) systematically 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").
Due to PCS' next generation, high-capacity digital technology
(which has been tested under experimental licenses since late
1989), PCS may be able to offer wireless data, image and other
advanced wireless services. In late 1993, the FCC proposed rules
for auctioning up to seven PCS licenses per market, two of which
would entitle the licensees to use 30 megahertz ("MHz") of
frequency band each, one of which would entitle the licensee to
use 20 MHz, and four of which would entitle the licensees to use
10 MHz each. These rules would divide the United States into 540
licensed markets, none of which would be co-terminus with current
cellular markets. Under these rules, 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. Auctioning of certain PCS licenses
is anticipated to commence in 1994. Due to several pending
petitions to reconsider these rules, it is possible that the final
rules will be modified.
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 has recently authorized the licensees
of certain specialized mobile radio service ("SMR") systems (which
currently are generally 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, and in connection therewith have sought and
obtained financial and other assistance from various other well-
established telecommunication companies. 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 transmit
back to the caller. Other two-way mobile services may also be
competitive with the Company's services. For example, the second
generation of cordless telephone technology ("CT-2") will permit
the application of this technology to a public environment.
The FCC has taken various actions to authorize mobile
satellite systems in which transmissions from mobile units to
satellites would augment or replace transmissions to land-based
stations. It is anticipated that the first operational satellite-
based mobile communications system will serve primarily rural
customers in North America. However, other satellite-based
systems are being studied and designed, including a worldwide-
system backed by an international consortium, and no assurance can
be given that such systems will not ultimately be successful in
augmenting or replacing land-based cellular systems.
As described further under "Telephone Operations - Regulation
and Competition," in connection with the well-publicized
convergence of telecommunications, cable, video, computer and
other technologies, 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
wireless data and computer companies are currently developing and,
in some instances, marketing small hand-held products that may
ultimately provide an additional source of competition for
cellular systems, and it is anticipated that this trend will
continue.
As also described further under "Telephone Operations -
Regulation and Competition," several bills have been filed in the
U.S. Congress that have the potential to significantly alter the
telecommunications industry, including various bills that focus on
the mobile communications industry.
It is uncertain how PCS, SMR, CT-2, mobile satellites and
other emerging technologies will ultimately affect the Company.
However, PCS, SMR, CT-2 and mobile satellites 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 may 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.
Paging. There is vigorous competition for paging customers in
most of the areas served by the Company. Some of the Company's
competitors have greater assets and resources than the Company.
The paging companies compete on the basis of price, the
reliability and strength of their signals, the size of the area
served and the customer service they provide. In recent months,
certain other companies have reduced prices on nationwide paging
services, a development which is not expected to have a
substantial impact on the Company's consolidated operations.
The FCC has authorized the use of cellular frequencies to
provide paging service, creating the potential for new
competitors. It is anticipated that all or substantially all of
the developments described in the immediately preceding section
will affect the Company's paging operations. It is too early to
predict the extent to which these developments may affect the
Company.
OTHER
The Company has certain obligations based on federal, state
and local laws relating to the protection of the environment.
Costs of compliance through 1993 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, 6, 7 and 12 of Notes to
Consolidated Financial Statements set forth in Item 8 elsewhere
herein.
Item 2.



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, 1993, the Company's
gross property, plant and equipment of approximately $1.2 billion
consisted of the following:
Telephone: General support 7.3% Central office equipment 24.0 Information origination/termination equipment 3.1 Cable and wire 43.8 Construction in progress 4.6 Other .9 _____ 83.7 Mobile Communications 9.7 Other 6.6 _____ 100.0% =====
"General support" consists primarily of land, buildings,
tools, furnishings, fixtures, motor vehicles and work equipment.
"Central office equipment" consists primarily of switching
equipment, circuit equipment, and related facilities.
"Information origination/termination equipment" consists primarily
of premise equipment (private branch exchanges and telephones) for
official company use. "Cable and wire" facilities consist
primarily of buried cable and aerial cable, poles, wire, conduit
and drops. "Construction in progress" includes property of the
foregoing categories that has not been placed in service because
it is still under construction. The properties of the Company's
telephone subsidiaries are subject to mortgages securing the
funded 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.

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, tort actions relating to employee claims and occasional
grievance hearings before labor regulatory agencies. Currently,
there are no material legal proceedings.
Item 4.

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.

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 ____ ___ ____________ 1992: First quarter $ 24-7/8 18-5/8 .0733 Second quarter $ 25-3/8 18-3/8 .0733 Third quarter $ 25 18-5/8 .0733 Fourth quarter $ 28-7/8 22-7/8 .0733
1993: First quarter $ 33-3/8 26 .0775 Second quarter $ 33-1/8 28 .0775 Third quarter $ 31-5/8 27-1/8 .0775 Fourth quarter $ 30-3/8 23-1/4 .0775
Common stock dividends during 1992 and 1993 were paid each
quarter. As of February 28, 1994, there were approximately 5,900
stockholders of record of Century's common stock.
Item 6.

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, 1993.
Selected Income Statement Data
Selected Balance Sheet Data
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, 1993.
See Items 1 and 2 in Part I and notes 4, 8 and 12 of Notes to Consolidated Financial Statements set forth in Item 8 elsewhere herein for additional information.
Item 7.

Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
RESULTS OF OPERATIONS
The 1993 net income of Century Telephone Enterprises, Inc.
and subsidiaries (the "Company") increased to $69,004,000 from
$44,305,000 during 1992 and $37,419,000 during 1991. Income
before the cumulative effect of changes in accounting principles
during 1992 was $59,973,000.
Fully diluted earnings per share for 1993 increased to $1.32
from $.91 during 1992 and $.79 during 1991. Fully diluted
earnings per share in 1992 before the cumulative effect of
changes in accounting principles was $1.22.
As of January 1, 1992, the Company adopted Statement of
Financial Accounting Standards No. 106 ("SFAS 106"), "Employers'
Accounting for Postretirement Benefits Other than Pensions," and
Statement of Financial Accounting Standards No. 109 ("SFAS 109"),
"Accounting for Income Taxes." The cumulative effect of the
changes in accounting principles related to SFAS 106 and SFAS 109
reduced 1992 net income by $14,755,000 ($.30 per share) and
$913,000 ($.01 per share), respectively.
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 1993 operating income was $124,808,000, an increase of
$15,180,000 (13.8%) over 1992 operating income of $109,628,000.
During 1993 the operating income of the telephone operations and
the mobile communications operations increased $11,230,000
(10.8%) and $3,950,000 (66.3%), respectively, compared to the
1992 results of operations. The Company's net operating income
during 1991 was $75,087,000.
Year ended December 31, 1993 1992 1991 ================================================================== (expressed in thousands, except per share amounts) Operating income (loss) Telephone $ 114,902 103,672 80,039 Mobile Communications 9,906 5,956 (4,952) __________________________________________________________________ 124,808 109,628 75,087 Interest expense (30,149) (27,166) (22,504) Earnings from unconsolidated cellular partnerships 6,626 1,692 697 Gain on sales of assets 1,661 3,985 - Other income, net 3,310 4,433 4,209 Income tax expense (37,252) (32,599) (20,070) __________________________________________________________________ Income before cumulative effect of changes in accounting principles 69,004 59,973 37,419 Cumulative effect of changes in accounting principles - (15,668) - __________________________________________________________________ Net income $ 69,004 44,305 37,419 ================================================================== Fully diluted earnings per share: Income before cumulative effect of changes in accounting principles $ 1.32 1.22 .79 Cumulative effect of changes in accounting principles - (.31) - __________________________________________________________________ Fully diluted earnings per share $ 1.32 .91 .79 ==================================================================
The operating income of the telephone segment includes the
operations, subsequent to each respective acquisition, of Century
Telephone of San Marcos, Inc. ("San Marcos"), acquired
in April 1993; Century Telephone of Ohio, Inc. ("Ohio"), acquired in
April 1992; and two other local exchange telephone companies
collectively with Ohio the "1992 Acquisitions") acquired during
the first quarter of 1992. See note 12 for additional
information applicable to these acquisitions.
The mobile communications operating income (loss) reflects
the operations of the 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 1993 includes the operations of the Alexandria,
Louisiana Metropolitan Statistical Area ("MSA") cellular system
("Alexandria"), which was acquired in December 1992.
According to published sources, the Company has the second
highest ratio of cellular subscribers to telephone access lines
among the 20 largest telephone companies 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
matures. The following chart illustrates this trend:
Year ended December 31, 1993 1992 1991 ==================================================================
Telephone Operations: Revenues (% of total revenues) 80.4% 82.7 83.5 Operating income (% of total operating income) 92.1% 94.6 106.6
Mobile Communications Operations: Revenues (% of total revenues) 19.6% 17.3 16.5 Operating income (% of total operating income) 7.9% 5.4 (6.6) ==================================================================
TELEPHONE OPERATIONS
1993 1992 1991 ================================================================== (expressed in thousands) Revenues Local service $ 88,704 78,108 58,653 Network access and long distance 217,055 182,711 145,279 Other 42,726 36,691 31,864 __________________________________________________________________ 348,485 297,510 235,796 __________________________________________________________________ Expenses Plant operations 80,578 66,878 52,546 Customer operations 32,225 26,242 19,502 Corporate and other 55,605 46,791 39,227 Depreciation and amortization 65,175 53,927 44,482 __________________________________________________________________ 233,583 193,838 155,757 __________________________________________________________________ Operating income $ 114,902 103,672 80,039 ==================================================================
Telephone revenues increased $50,975,000 (17.1%) in 1993 and
$61,714,000 (26.2%) in 1992. Revenues applicable to San Marcos
and Ohio accounted for $15,681,000 and $14,833,000, respectively,
of the 1993 increase and revenues applicable to the 1992
Acquisitions accounted for $34,891,000 of the 1992 increase.
Amounts recorded as a result of revisions of prior years' revenue
settlements were $8,380,000 (exclusive of Ohio), $8,181,000 and
$8,206,000 in 1993, 1992 and 1991, respectively.
Local Revenues
Local service revenues are derived from the provision of
local exchange telephone services in the Company's franchised
service areas. During 1993 local service revenues increased
$2,219,000 and $5,252,000 due to San Marcos and Ohio,
respectively. During 1992 such revenues increased $15,670,000
due to the 1992 Acquisitions. Internal access line growth during
1993, 1992 and 1991 was 3.6%, 3.8% and 3.2%, respectively.
Network Access and Long Distance Revenues
Network access and long distance revenues increased
$34,344,000 (18.8%) in 1993 and $37,432,000 (25.8%) in 1992 due
to the following factors:
1993 1992 ================================================================== (expressed in thousands)
San Marcos acquisition $ 11,279 -
1992 Acquisitions 8,458 13,687
Partial recovery of increased operating expenses through revenue pools in which the Company participates with other telephone companies and return on rate base 7,326 9,931
Increased recovery as a result of additional investment and phase-in of the Federal Communications Commission ("FCC") mandated Universal Service Fund 6,161 7,040
Increased minutes of use 3,444 3,607
Other (2,324) 3,167 __________________________________________________________________ $ 34,344 37,432 ==================================================================
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. Substantially all of the Company's interstate
network access revenues are received through pooling arrangements
administered by the National Exchange Carrier Association
("NECA") based on cost separations studies and average schedule
settlement agreements. The NECA receives access charges billed
by the Company and other participating local exchange carriers to
interstate long distance carriers for their use of the local
exchange network to complete long distance calls. These charges
to the long distance carriers are based on tariffed access rates
filed with the FCC by the NECA on behalf of the Company and other
participating local exchange telephone companies. Long distance
and intrastate network access revenues are based on access rates,
cost separations studies or special settlement arrangements with
intrastate long distance carriers.
In December 1993 the eight-year phase-in of the FCC
Universal Service Fund ("USF") was completed. Revenues from the
USF increased approximately $6,161,000 during 1993, of which
approximately $3,200,000 was the effect of the phase-in.
Revenues were unfavorably impacted in the amount of $1,000,000
during 1993 by reductions (which will aggregate
approximately $3,500,000 annually upon final phase-in 1994) in
the level of certain settlements received from South Central
Bell by the Company's Louisiana subsidiaries.
Other Revenues
Other revenues include revenues related to nonregulated
telecommunications equipment and services, billing and collection
services for interexchange long distance carriers, network
facilities leases and directories. The increases in other
revenues during 1993 and 1992 were primarily due to the 1992
Acquisitions and, during 1993, to San Marcos.
Expenses
Plant operations expenses during 1993 and 1992 increased
$13,700,000 (20.5%) and $14,332,000 (27.3%), respectively.
Approximately $3,650,000 and $3,455,000 of the 1993 increase were
due to San Marcos and Ohio, respectively. Increases in salaries,
wages and benefits during 1993 accounted for approximately
$2,192,000. The remainder of the 1993 increase was due to
increases in other general operating expenses. Approximately
$10,269,000 and $1,105,000 of the 1992 increase were due to the
1992 Acquisitions and the SFAS 106 postretirement benefit costs,
respectively. The remainder of the 1992 increase was due to
increases in salaries and wages and other general operating
expenses.
Customer operations, corporate expenses and other expenses
increased $14,797,000 (20.3%) in 1993 and $14,304,000 (24.4%) in
1992. The operations of San Marcos and Ohio contributed
$6,467,000 and $4,532,000, respectively, to the 1993 increase.
The 1992 Acquisitions and the SFAS 106 postretirement benefit
costs accounted for approximately $11,186,000 and $806,000,
respectively, of the 1992 increase. The remainder of the 1993
and 1992 increases included increased operating costs, such as
salaries and wages, employee benefits, insurance and operating
taxes.
Depreciation and amortization increased $11,248,000 (20.9%)
and $9,445,000 (21.2%) in 1993 and 1992, respectively.
Approximately $5,447,000 of the 1993 increase was due to San
Marcos and Ohio. The 1992 Acquisitions accounted for $6,939,000
of the 1992 increase. Depreciation expense included one-time
depreciation charges in certain jurisdictions which aggregated
$3,336,000 in 1993 (exclusive of San Marcos), $2,938,000 in 1992
(exclusive of the 1992 Acquisitions) and $1,784,000 in 1991. In
addition, the Company obtained higher depreciation rates for
certain subsidiaries during the last three years. The first-year
effects of the
higher rates were approximately $1,650,000 in 1993 (exclusive
of San Marcos), $700,000 in 1992 (exclusive of the 1992
Acquisitions) and $3,100,000 in 1991. The remaining
increases in depreciation and amortization are due to higher
levels of plant in service. The composite depreciation rate for
telephone properties, including the one-time additional
depreciation, was 7.1%, 6.6% and 6.7% for 1993, 1992 and 1991,
respectively.
See Other Matters for additional information.
MOBILE COMMUNICATIONS OPERATIONS
1993 1992 1991
================================================================== (expressed in thousands) Revenues Cellular Service $ 76,583 54,489 38,923 Equipment 3,930 3,194 2,592 Paging 4,199 4,409 5,216 __________________________________________________________________ 84,712 62,092 46,731 __________________________________________________________________
Expenses General, administrative and customer service 23,872 19,685 18,144 Sales and marketing 19,894 13,167 13,403 Cost of sales and other operating expenses 19,681 14,313 12,378 Depreciation and amortization 11,359 8,971 7,758 __________________________________________________________________ 74,806 56,136 51,683 __________________________________________________________________ Operating income (loss) $ 9,906 5,956 (4,952) ==================================================================
Revenues
Revenues from cellular operations during 1993 increased to
$80,513,000 from $57,683,000 in 1992 and $41,515,000 in 1991.
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.
Service revenues increased $22,094,000 (40.5%) in 1993 and
$15,566,000 (40.0%) in 1992. Increases in access and usage
revenues, exclusive of Alexandria, accounted for $14,585,000 of
the 1993 increase in service revenues, compared to $12,871,000
during 1992. The increases in access and usage revenues in both
years were primarily attributable to increases in the number of
cellular customers. Roaming and toll revenues increased
$4,120,000 in 1993, exclusive of Alexandria, after increasing
$2,281,000 during 1992. The remainder of the 1993 increase in
cellular revenues was due substantially to the Alexandria
acquisition.
Cellular units in service increased to 116,484 as of
December 31, 1993 from 73,084 as of December 31, 1992 (which
included the December 1992 acquisition of Alexandria) and 51,083
at December 31, 1991.
The average monthly service revenue per subscriber declined
to $71 in 1993 from $75 in 1992 and 1991, primarily due to the
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 continue
to 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.
Expenses
General, administrative and customer service expenses
increased $4,187,000 (21.3%) and $1,541,000 (8.5%) during 1993
and 1992, respectively. The increases were primarily due to
higher billing and other costs due to the increased number of
customers and, in 1993, to Alexandria.
During 1993 mobile communications sales and marketing
expenses increased $6,727,000 (51.1%) primarily due to an
increase in commissions paid to agents for selling cellular
services to the large volume of new customers. The remaining
increase during 1993 was primarily due to an increase in
advertising costs and to Alexandria. The Company implemented a
new cellular sales commission structure during 1992 which,
notwithstanding an increase in agent sales, contributed to the
1.8% decrease in mobile communications sales and marketing
expenses in 1992.
The increases in cost of sales and other operating expenses
in 1993 and 1992 were primarily due to growth in the business, to
the development and operation of the Company's Rural Service Area
("RSA") cellular systems and, in 1993, to Alexandria. Sixty-two
cell sites were placed in service during 1993 (compared to 21
during 1992 and 24 during 1991) in partnerships in which the
Company has a majority interest. In addition, as a result of the
December 1992 acquisition of Alexandria, the Company acquired
five additional cell sites. The Company operated 158 cell sites
at December 31, 1993 in partnerships in which it has a majority
interest.
Depreciation and amortization increased $2,388,000 (26.6%)
in 1993 and $1,213,000 (15.6%) in 1992 primarily due to higher
levels of cellular plant in service.
See Other Matters for additional information.
INTEREST EXPENSE
Interest expense increased $2,983,000 (11.0%) during 1993
and $4,662,000 (20.7%) during 1992. Interest expense incurred
during 1993 due to an increase in average debt outstanding was
substantially offset by the effect of lower average interest
rates. Interest expense during 1992 increased primarily due to
the issuance of $115,000,000 of 6% convertible debentures during
the first quarter of 1992. The debenture interest of
approximately $6,200,000 during 1992 was partially offset by
reduced interest expense due to lower average interest rates.
EARNINGS FROM UNCONSOLIDATED CELLULAR PARTNERSHIPS
Earnings from unconsolidated cellular partnerships increased
$4,934,000 in 1993 and $995,000 in 1992. The Company's share of
income from the partnership interests acquired in the San Marcos
acquisition contributed substantially to the 1993 increase.
SALES OF ASSETS
During 1993 the Company sold a minority investment in a
telephone company which resulted in a pre-tax gain of $1,661,000
($1,080,000 after-tax).
During 1992 the Company consummated the sales of two
telephone subsidiaries which served approximately 2,000 access
lines; its minority interests in an MSA cellular partnership and
an RSA cellular partnership; and its 100% interest in an RSA
cellular market. The sales prices totaled $12,212,000 and the
aggregate pre-tax gain was $3,985,000 ($2,630,000 after-tax).
OTHER INCOME, NET
Other income, net decreased $1,123,000 (25.3%) primarily
because interest income earned during 1993 was less than interest
income during 1992.
INCOME TAX EXPENSE
The effective income tax rate was 35.1%, 35.2% and 34.9% in
1993, 1992 and 1991, respectively. The additional federal income
taxes incurred during 1993 as a result of the 1% increase in the
statutory federal income tax rate in accordance with the
provisions of the Omnibus Budget Reconciliation Act of 1993 (the
"Act") was more than offset by the tax benefit applicable to the
deductibility of certain intangible assets also provided by the
Act.
CUMULATIVE EFFECT OF CHANGES IN ACCOUNTING PRINCIPLES
The Company adopted SFAS 106 as of January 1, 1992. SFAS
106 requires that the expected cost of providing postretirement
health care and life insurance benefits be accrued during the
years an employee renders service to the Company. During 1991
the Company had recognized $1,475,000 of postretirement benefits
on the pay-as-you-go basis. The unrecognized obligation existing
at the date of initial application of SFAS 106 (the "Transition
Obligation") was $27,390,000. In accordance with the provisions
of Statement of Financial Accounting Standards No. 71 ("SFAS
71"), "Accounting for the Effects of Certain Types of
Regulation," the Company deferred approximately $3,450,000 of the
Transition Obligation; such costs are being expensed in
connection with recovery through the rate-making process. The
remaining $23,940,000, net of tax benefits which aggregated
$9,185,000, was reported as the cumulative effect of a change in
accounting principle and reduced 1992 fully diluted earnings per
share by $.30. The accrual of postretirement benefits during
1992, net of the related toll revenue and 1992 pay-as-you-go
costs, decreased income before income taxes and cumulative effect
of changes in accounting principles for 1992 by $2,023,000.
The Company also adopted SFAS 109 as of January 1, 1992,
under which the accounting for income taxes is based on an asset
and liability approach rather than the deferred method. The
cumulative effect of the change in accounting principle related
to SFAS 109 decreased net income for 1992 by $913,000 ($.01 per
fully diluted share). In accordance with the provisions of SFAS
71, the Company established a regulatory liability of
approximately $47,000,000 relative to the excess deferred income
taxes and the regulatory impact thereof.
INFLATION
The effects of increased costs are mitigated by the ability
to recover costs applicable to the Company's regulated telephone
operations through the rate-making process. As operating
expenses increase in the nonregulated areas, 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 any increased cost of its net investment when
facilities are replaced. Possible future regulatory changes may
alter the Company's ability to recover increased costs in its
regulated operations.
LIQUIDITY AND CAPITAL RESOURCES
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 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 $166,754,000,
$146,324,000 and $92,884,000 in 1993, 1992 and 1991,
respectively. For additional information relative to the
telephone operations and mobile communications operations of the
Company, see Results of Operations.
Although payments for property, plant and equipment during
1993 increased by $64,172,000, net cash used in investing
activities during 1993 was approximately the same as 1992
primarily because the amount of cash used in acquisitions during
1993 was approximately $80,083,000 less than in the previous
year. Net cash used in investing activities increased
$147,910,000 in 1992, primarily due to the 1992 Acquisitions and
to an increase of $44,335,000 in payments for property, plant and
equipment.
Cash provided by financing activities in 1993 was
$23,247,000 less than in 1992 primarily because net borrowings,
including long-term debt and notes payable, were $20,582,000 less
than in 1992. The $36,785,000 increase in notes payable
outstanding at December 31, 1993 compared to December 31, 1992
reflects the Company's utilization of borrowings under its short-
term credit facilities to take advantage of declining short-term
interest rates during 1993. The Company intends to eventually
refinance such short-term borrowings with long-term debt.
Proceeds from the issuance of debt during 1992 ($100,655,000 more
than during 1991) included
$115,000,000 from the issuance of 6% convertible debentures in
February 1992 to provide the major portion of the purchase price
of Ohio.
In October 1993 the Company executed a merger agreement with
Celutel, Inc., under which Century acquired Celutel for
approximately $102,000,000 during the first quarter of 1994.
Approximately $51,400,000 of the purchase price was paid in cash,
with the remainder being paid through the issuance of 1,900,000
shares of Century common stock. In connection with the
acquisition, Century refinanced approximately $41,700,000 of
Celutel's debt. Century funded the cash portion of the merger
consideration and the debt prepayment from proceeds received from
a committed bridge term loan. It is currently anticipated that
the bridge term loan will be repaid prior to September 30, 1994
with proceeds from the issuance of long-term debt, the terms and
conditions of which have not yet been determined. Based on a
review of its financing alternatives, Century does not anticipate
any problems in obtaining such financing.
Budgeted capital expenditures for 1994 total $142,000,000
for telephone operations, $50,000,000 for mobile communications
operations (of which $10,000,000 will be funded by minority
interest owners in cellular partnerships operated by the Company)
and $4,000,000 for other operations.
As of December 31, 1993, Century's telephone subsidiaries
had available for use $84,000,000 of commitments for long-term
financing from the Rural Electrification Administration ("REA")
and the Company had $23,600,000 of undrawn committed bank lines
of credit. In addition, approximately $7,000,000 of uncommitted
credit facilities were available to the Company at December 31,
1993. Applications for additional long-term financing for
Century's telephone subsidiaries have been filed with the REA and
are in various stages of processing. The Company has experienced
no significant problems in obtaining funds for capital
expenditures or other purposes.
Stockholders' equity as a percentage of total capitalization
was 48.5% and 47.0% at December 31, 1993 and 1992, respectively.
ACCOUNTING PRONOUNCEMENT
The Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 112 ("SFAS 112"),
"Employers' Accounting for Postemployment Benefits," in November
1992. 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.
The Company will be required to adopt SFAS 112 in the first
quarter of 1994. Liabilities for postemployment benefits
included in the consolidated balance sheet as of December 31,
1993 are not materially different than those required by SFAS
112.
OTHER MATTERS
In December 1993 the eight-year phase-in of the USF was
completed. Revenues from the USF increased approximately
$6,161,000 during 1993, of which approximately $3,200,000
reflected the effect of the phase-in. The Company anticipates
that, subsequent to 1993, revenues from the USF will continue to
increase in the near term, but at a lesser percentage rate than
that associated with recent prior periods. In addition, the
Public Service Commission of Wisconsin ("PSCW") has ordered that
the existing Wisconsin state support fund, from which certain of
the Company's subsidiaries received approximately $3,575,000
during 1993 and $3,755,000 during 1992, will be phased-out over
one and one-half years beginning July 1, 1993. Certain of the
Company's subsidiaries affected by the order have filed requests
with the PSCW to receive increased rates and/or compensation
which could potentially offset some or all of the amounts that
those subsidiaries have been receiving from the existing support
fund. All such additional revenue must be justified based on
each subsidiary's financial need as demonstrated by an expedited
rate case. The Wisconsin State Telephone Association has, among
other things, appealed the PSCW's planned phase-out of the
support fund. Also, the Louisiana Public Service Commission
("LPSC") is conducting an informal review of the earnings of all
independent local exchange telephone companies in Louisiana. It
is possible that reviews by state regulatory authorities, such as
the informal review being conducted by the LPSC, may result in
refunds and/or future reductions in revenues.
Revenues are being impacted by reductions (which will
aggregate approximately $3,500,000 annually upon completion in
the second quarter of 1994 of a one-year phase-in period) in the
level of certain settlements received from South Central Bell by
the Company's Louisiana subsidiaries. For information on the
effect of these reductions on the Company's 1993 operations, see
Results of Operations.
The telecommunications industry is currently undergoing
various regulatory, competitive and technological changes,
including the following. First, the FCC and a limited number of
state
public utility commissions have begun to reduce the
regulatory oversight of the earnings and return rates of local
exchange carriers ("LEC's"). Coincident with this movement
toward reduced regulation is the introduction and encouragement
of local exchange competition by the FCC and various state public
utility commissions, along with the emergence of certain
companies providing competitive access and other services that
compete with LEC's services and the announcement by certain well-
established interexchange carriers of their desire to enter the
LEC business. Second, several recent FCC initiatives have
resulted in the allocation of additional frequency spectrum or
the issuance of experimental licenses for mobile communications
technologies that will or may be competitive with cellular,
including personal communications services (for which the FCC
intends to begin auctioning operating licenses in 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,
and certain of these licensees recently announced their intention
to create a nationwide mobile communications system to compete
with cellular systems. Third, in connection with the well-
publicized convergence of telecommunications, cable, video,
computer and other technologies, several large companies have
recently 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. Local exchange competition and competitive access are
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 holds true for emerging competitive wireless
technologies and the development of new multimedia services.
Therefore, the Company does not believe these developments are
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 in the near term, thereby better preparing it for
competition. 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.
The Company has certain obligations based on federal, state
and local laws relating to the protection of the environment.
Costs of compliance through 1993 have not been material and the
Company currently has no reason to believe that such costs will
become material.
Item 8.


Item 8. Financial Statements and Supplementary Data.
Report of Management ____________________
To the Shareholders of 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, 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. This 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.
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, 1993 and 1992, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 1993, 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.
As discussed in notes 4 and 8 to the consolidated financial statements, the Company adopted the Financial Accounting Standards Board's Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes," and Statement of Financial Accounting Standards No. 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions," in 1992.
KPMG PEAT MARWICK
Shreveport, Louisiana February 4, 1994
CENTURY TELEPHONE ENTERPRISES, INC. Consolidated Statements of Income
Year ended December 31, ================================================================== 1993 1992 1991 __________________________________________________________________ (expressed in thousands, except per share amounts) REVENUES Telephone $348,485 297,510 235,796 Mobile Communications Cellular 80,513 57,683 41,515 Paging 4,199 4,409 5,216 __________________________________________________________________ Total revenues 433,197 359,602 282,527 __________________________________________________________________ EXPENSES Cost of sales and operating expenses 231,855 187,076 155,200 Depreciation and amortization 76,534 62,898 52,240 __________________________________________________________________ Total expenses 308,389 249,974 207,440 __________________________________________________________________ OPERATING INCOME 124,808 109,628 75,087 __________________________________________________________________ OTHER INCOME (EXPENSE) Interest expense (30,149) (27,166) (22,504) Earnings from unconsolidated cellular partnerships 6,626 1,692 697 Gain on sales of assets 1,661 3,985 - Other income, net 3,310 4,433 4,209 __________________________________________________________________ Total other income (expense) (18,552) (17,056) (17,598) __________________________________________________________________ INCOME BEFORE INCOME TAXES AND CUMULATIVE EFFECT OF CHANGES IN ACCOUNTING PRINCIPLES 106,256 92,572 57,489 INCOME TAXES 37,252 32,599 20,070 __________________________________________________________________ INCOME BEFORE CUMULATIVE EFFECT OF CHANGES IN ACCOUNTING PRINCIPLES 69,004 59,973 37,419 CUMULATIVE EFFECT OF CHANGES IN ACCOUNTING PRINCIPLES - (15,668) - __________________________________________________________________ NET INCOME $69,004 44,305 37,419 ================================================================== PRIMARY EARNINGS PER SHARE : Income before cumulative effect of changes in accounting principles $ 1.35 1.23 .79 Cumulative effect of changes in accounting principles - (.32) - __________________________________________________________________ PRIMARY EARNINGS PER SHARE $ 1.35 .91 .79 ================================================================== FULLY DILUTED EARNINGS PER SHARE : Income before cumulative effect of changes in accounting principles $ 1.32 1.22 .79 Cumulative effect of changes in accounting principles - (.31) - __________________________________________________________________ FULLY DILUTED EARNINGS PER SHARE $ 1.32 .91 .79 ================================================================== DIVIDENDS PER COMMON SHARE $ .310 .293 .287 ==================================================================
See accompanying notes to consolidated financial statements.
CENTURY TELEPHONE ENTERPRISES, INC. Consolidated Balance Sheets
December 31, =================================================================== 1993 1992 ___________________________________________________________________ (expressed in thousands) ASSETS
CURRENT ASSETS Cash and cash equivalents $ 9,777 9,771 Accounts receivable Customers, less allowance for doubtful accounts of $1,473,000 and $960,000 34,438 28,436 Other 21,771 14,111 Materials and supplies, at cost 4,418 4,512 Other 2,068 3,226 ___________________________________________________________________ Total current assets 72,472 60,056 ___________________________________________________________________ PROPERTY, PLANT AND EQUIPMENT Telephone, at original cost 979,449 871,383 Accumulated depreciation (288,479) (280,242) ___________________________________________________________________ 690,970 591,141 ___________________________________________________________________ Mobile Communications, at cost 113,252 71,926 Accumulated depreciation (27,736) (27,613) ___________________________________________________________________ 85,516 44,313 ___________________________________________________________________ Other, at cost 77,737 61,110 Accumulated depreciation (26,447) (20,686) ___________________________________________________________________ 51,290 40,424 ___________________________________________________________________ Net property, plant and equipment 827,776 675,878 ___________________________________________________________________ INVESTMENTS AND OTHER ASSETS Excess cost of net assets acquired, less accumulated amortization of $29,253,000 and $21,975,000 297,158 217,688 Other investments 98,142 67,478 Deferred charges 23,842 19,387 ___________________________________________________________________ Total investments and other assets 419,142 304,553 ___________________________________________________________________ TOTAL ASSETS $1,319,390 1,040,487 ===================================================================
See accompanying notes to consolidated financial statements.
CENTURY TELEPHONE ENTERPRISES, INC. Consolidated Balance Sheets (continued)
December 31, =================================================================== 1993 1992 ___________________________________________________________________
(expressed in thousands)
LIABILITIES AND EQUITY
CURRENT LIABILITIES Current maturities of long-term debt $ 14,233 9,709 Notes payable to banks 69,200 32,415 Accounts payable 49,506 34,605 Accrued expenses and other current liabilities Taxes 9,327 10,343 Interest 6,476 6,412 Other 21,152 17,012 Advance billings and customer deposits 9,312 10,169 ___________________________________________________________________ Total current liabilities 179,206 120,665 ___________________________________________________________________ LONG-TERM DEBT 460,933 391,944 ___________________________________________________________________ DEFERRED CREDITS AND OTHER LIABILITIES Deferred income taxes 60,122 39,064 Deferred investment tax credits 10,431 11,833 Other 94,930 91,532 ___________________________________________________________________ Total deferred credits and other liabilities 165,483 142,429 ___________________________________________________________________ STOCKHOLDERS' EQUITY Common stock, $1.00 par value, authorized 100,000,000 shares, issued and outstanding 51,294,705 and 48,896,876 shares 51,295 48,897 Paid-in capital 262,294 191,522 Retained earnings 208,945 155,676 Employee Stock Ownership Plan commitment (9,220) (11,100) Preferred stock - non-redeemable 454 454 ___________________________________________________________________ Total stockholders' equity 513,768 385,449 ___________________________________________________________________ TOTAL LIABILITIES AND EQUITY $1,319,390 1,040,487 ===================================================================
See accompanying notes to consolidated financial statements.
CENTURY TELEPHONE ENTERPRISES, INC. Consolidated Statements of Cash Flows
Year ended December 31, ==================================================================== 1993 1992 1991 ____________________________________________________________________ (expressed in thousands)
OPERATING ACTIVITIES Net income $69,004 44,305 37,419 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 86,175 70,762 57,306 Cumulative effect of changes in accounting principles - 15,668 - Equity in income of cellular partnerships (7,592) (2,087) (984) Deferred income taxes 6,781 (1,427) (335) Gain on sales of assets (1,661) (3,985) - Changes in current assets and current liabilities: Increase in accounts receivable (7,026) (2,307) (6,440) Increase in accounts payable 11,024 11,694 4,581 Decrease in other current assets and other current liabilities, net 659 10,549 32 Other, net 9,390 3,152 1,305 ____________________________________________________________________ Net cash provided by operating activities 166,754 146,324 92,884 ____________________________________________________________________ INVESTING ACTIVITIES Acquisitions, net of cash acquired (54,916) (134,999) (4,600) Payments for property, plant and equipment (204,229) (140,057) (95,722) Investments in unconsolidated cellular partnerships (3,605) (2,161) (9,098) Proceeds from sales of assets - 5,049 - Purchase of life insurance investment (7,670) (6,160) (6,080) Other, net 3,948 7,166 (7,752) ____________________________________________________________________ Net cash used in investing activities (266,472) (271,162)(123,252) ____________________________________________________________________ FINANCING ACTIVITIES Proceeds from issuance of long-term debt 82,347 157,087 56,432 Payments of long-term debt (9,764) (44,552) (48,685) Notes payable, net 36,785 17,415 6,000 Proceeds from issuance of common stock 3,529 8,776 6,388 Cash dividends paid (15,735) (14,119) (13,388) Other, net 2,562 (1,636) 2,668 ____________________________________________________________________ Net cash provided by financing activities 99,724 122,971 9,415 ____________________________________________________________________ NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 6 (1,867) (20,953) ____________________________________________________________________ CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 9,771 11,638 32,591 ____________________________________________________________________ CASH AND CASH EQUIVALENTS AT END OF YEAR $9,777 9,771 11,638 ====================================================================
See accompanying notes to consolidated financial statements.
CENTURY TELEPHONE ENTERPRISES, INC. Consolidated Statements of Stockholders' Equity
CENTURY TELEPHONE ENTERPRISES, INC.
Notes to Consolidated Financial Statements
December 31, 1993
(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 cellular partnerships. The Company's regulated
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." Unaffiliated
parties' interests in cellular partnerships which have been
consolidated are included in other liabilities at December 31,
1993 and 1992 in the amounts of $10,494,000 and $6,530,000,
respectively.
Investments in cellular partnerships where the Company does
not have a majority partnership interest are accounted for using
the equity method of accounting. The Company's share of income
from these partnerships was $7,592,000, $2,087,000 and $984,000
in 1993, 1992 and 1991, respectively, and is included in earnings
from unconsolidated cellular partnerships.
Revenue Recognition - Revenues are recognized when earned.
Certain of Century'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.
Revenue earned through the various pooling processes is initially
recorded based on estimates. The Company recorded adjustments,
based upon settlements of prior years' revenues for certain
subsidiaries, which increased revenues by $9,152,000, $8,181,000
and $8,206,000 in 1993, 1992 and 1991, respectively.
Excess Cost of Net Assets Acquired - The excess cost over net
assets acquired of substantially all acquisitions accounted for
as purchases (goodwill) is being amortized over 40 years.
Amortization of $6,215,000, $4,955,000 and $2,886,000 for 1993,
1992 and 1991, respectively, is included in depreciation and
amortization. Amortization of goodwill attributable to
unconsolidated investments in cellular partnerships was $966,000,
$395,000 and $287,000 for 1993, 1992 and 1991, respectively, and
is included as a reduction in earnings from unconsolidated
cellular partnerships. The carrying value of goodwill is
reviewed for impairment whenever events or changes in
circumstances indicate that such carrying value may not be
recoverable by assessing the recoverability of such carrying
value through projected undiscounted future results.
Other Investments - The Company's other investments consist of
the following:
December 31, 1993 1992 ================================================================== (expressed in thousands) Cash surrender value of life insurance, partially pledged $ 38,642 30,446 Investments in unconsolidated cellular partnerships 41,983 23,895 Investments in marketable equity securities, at cost 8,478 7,008 Other 9,039 6,129 __________________________________________________________________ $ 98,142 67,478 ==================================================================
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 all subsidiaries and in certain instances makes
interest-bearing advances to finance construction of plant and
purchases of equipment. These purchases are recorded in the
telephone subsidiaries' accounts at their cost to the extent
permitted by regulatory authorities. Intercompany profits on
service subsidiaries' sales to regulated affiliates are limited
to a reasonable return on investment and have not been
eliminated. Intercompany profits on service subsidiaries' sales
to nonregulated affiliates have been eliminated.
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 composite rates
acceptable to the regulatory authorities. Included in 1993, 1992
and 1991 depreciation expense were additional one-time
depreciation charges of $3,621,000, $3,854,000 and $1,784,000,
respectively. The composite depreciation rate for telephone
properties was 7.1%, 6.6% and 6.7% for 1993, 1992 and 1991,
respectively.
When non-telephone property is sold or retired, a gain or
loss is recognized. Depreciation is provided on the straight-
line method over estimated service lives ranging from three to
thirty years.
Depreciation expense was $77,999,000, $64,340,000 and
$53,197,000 in 1993, 1992 and 1991, respectively.
Income Taxes - Century files a consolidated federal income tax
return with its subsidiaries.
In February 1992 the Financial Accounting Standards Board
("FASB") issued Statement of Financial Accounting Standards No.
109 ("SFAS 109"), "Accounting For Income Taxes." SFAS 109
requires the use of a method 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.
Effective January 1, 1992, the Company adopted SFAS 109 and
reported an unfavorable $913,000 cumulative effect of the change
in the method of accounting for income taxes in the 1992
consolidated statement of income. Due to the reduction in
corporate federal income tax rates as a result of the Tax Reform
Act of 1986, there existed excess deferred income taxes.
Pursuant to SFAS 71, a regulatory liability in the amount of
approximately $47,000,000 and a corresponding reduction in net
deferred income taxes payable were recorded in 1992 relative to
the excess deferred income taxes and the regulatory impact
thereof. The regulatory liability, net of the related tax impact
(approximately $20,300,000 at adoption), is being amortized as a
reduction of federal income tax expense over the estimated
remaining lives of the assets which generated the deferred taxes.
Investment tax credits related to telephone plant have been
deferred and amortized as a reduction of federal income tax
expense over the estimated useful lives of the assets giving rise
to the credits. In accordance with SFAS 109, unamortized
deferred investment tax credits are treated as temporary
differences.
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 number of shares used in computing primary earnings per share
was 51,206,000 in 1993, 48,500,000 in 1992 and 47,305,000 in
1991.
Fully diluted earnings per share amounts give further effect
to convertible securities, primarily the debentures, which are
not common stock equivalents. The number of shares used in
computing fully diluted earnings per share before the cumulative
effect of changes in accounting principles was 55,892,000 in
1993, 52,814,000 in 1992 and 47,432,000 in 1991. For the
computation of fully diluted earnings per share for 1992, the
debentures have been excluded as their inclusion would be anti-
dilutive. The number of shares used in computing fully diluted
earnings per share was 55,892,000, 48,653,000 and 47,432,000 in
1993, 1992 and 1991, 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 1993
presentation.
(2) LONG-TERM DEBT
December 31, 1993 1992 ================================================================== (expressed in thousands) Century 6.0% convertible debentures, due 2007 $115,000 115,000 9.8% senior notes - 4,813 9.4% senior notes, due in installments through 2004 69,600 71,200 10.8% notes, due in installments through 2006 1,245 1,529 Notes payable to banks (at money market rates - 3.9%) 81,500 30,000 8.4% Employee Stock Ownership Plan commitment, due in installments through 2000 9,220 11,100 __________________________________________________________________ Total Century 276,565 233,642 __________________________________________________________________ Subsidiaries First mortgage debt 5.9% notes, payable to agencies of the United States government and cooperative lending associations, due in installments through 2026 158,998 126,670 7.2% bonds, due in installments through 2002 11,699 14,505 Other debt 9.0% notes, due in installments through 2020 8,633 8,334 7.6% capital lease obligations, due in installments through 1997 4,271 3,502 Notes payable to bank (at money market rates - 4.1%), due 1995 15,000 15,000 __________________________________________________________________ Total subsidiaries 198,601 168,011 __________________________________________________________________ Total long-term debt 475,166 401,653 __________________________________________________________________ Less current maturities 14,233 9,709 __________________________________________________________________ Long-term debt, excluding current maturities $460,933 391,944 ==================================================================
Except for the 6% convertible debentures, each interest rate
shown in the preceding table is a weighted average interest rate
as of December 31, 1993.
The approximate annual debt maturities (including sinking
fund requirements) for the five years subsequent to December 31,
1993 are as follows: 1994 - $14,233,000; 1995 - $77,757,000;
1996 - $45,611,000; 1997 - $17,182,000; and 1998 - $16,077,000.
In February 1992 Century issued $115,000,000 of 6%
convertible debentures. Interest is payable semiannually in
August and February. The debentures are convertible into common
stock at a conversion price of $25.33 per share and will mature
on February 1, 2007 unless previously converted or redeemed. The
debentures may be redeemed by Century on or after February 1,
1995. Certain redemptions through a sinking fund are required
from 2002 through 2006. Under certain circumstances the
debentures are redeemable at the option of the holder. See note
12 for information applicable to the use of the proceeds.
The Company's loan agreements contain various restrictions,
among which are limitations regarding issuance of additional
debt, payment of cash dividends on common and preferred stock,
reacquisition of the Company's capital stock and other matters.
All of the Company's year-end consolidated retained earnings was
available for the payment of cash dividends to stockholders.
The transfer of funds from consolidated subsidiaries to
Century is also 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. Loan
agreements of subsidiaries with other major lenders provide
restrictions as to the payment of dividends, but do not formally
limit loans and advances to Century. At December 31, 1993,
restricted net assets of subsidiaries were $126,528,000 and
subsidiaries' retained earnings in excess of amounts restricted
by debt covenants were $286,340,000.
Substantially all of the telephone property, plant and
equipment is pledged to secure the long-term debt of
subsidiaries.
At December 31, 1993, Century had outstanding $30,500,000
under a $50,000,000 line of credit (two-year revolver,
convertible to a five-year term loan) with interest at the rate
chosen by the Company based on a number of interest rate options.
In addition, Century had $51,000,000 outstanding under a
$55,000,000 line of credit (three-year revolving credit facility)
with similar interest rate options.
Century's telephone subsidiaries had approximately
$84,000,000 in commitments for long-term financing from the Rural
Electrification Administration available at December 31, 1993.
In addition to the $23,500,000 available under the two lines of
credit mentioned above, approximately $7,100,000 of additional
borrowings, some of which would be classified as current
liabilities, were available at December 31, 1993 to the Company
through lines of credit with various banks.
Interest paid by the Company was $30,085,000, $24,035,000
and $23,407,000 during 1993, 1992 and 1991, respectively.
Interest capitalized by the Company during 1993, 1992 and 1991
was $76,000, $547,000 and $91,000, respectively.
ESOP Commitment - The Employee Stock Ownership Plan ("ESOP") is
partially funded by loans guaranteed by Century. Each loan is to
be repaid over a 10-year period with level principal payments
throughout its term. The weighted average interest rate of the
loans is 8.4% per annum. The unpaid balances of the loans are
included in long-term debt. An equivalent amount, representing
unearned employee compensation, is reflected as a deduction in
stockholders' equity. Both the debt and the amount in
stockholders' equity are reduced in equal amounts as the ESOP
repays the loans.
(3) STOCKHOLDERS' EQUITY
Common Stock - At December 31, 1993, unissued shares of Century's
common stock were reserved as follows:
================================================================= Conversion of convertible debentures 4,540,000 Stock option plans 2,958,000 Employee stock purchase plan 506,000 Dividend reinvestment plan 409,000 Conversion of convertible preferred stock 122,000 Other employee benefit plans 1,243,000 _________________________________________________________________ 9,778,000 =================================================================
As amended in 1991, Article III of Century's Articles of
Incorporation eliminates prospectively the ability of holders to
qualify for ten votes per share by providing that only voting
shares beneficially owned continuously by the same person since
May 30, 1987 will entitle the holder thereof to ten votes per
share. All other shares are entitled to one vote per share.
Preferred Stock - As of December 31, 1993, Century had authorized
2,000,000 shares of preferred stock, redeemable or non-
redeemable. All outstanding non-redeemable preferred stock has a
liquidation price equivalent to its par value of $25 per share
and is cumulative as to dividends; each series has voting rights.
At December 31, 1993 and 1992, there were 18,162 total shares of
non-redeemable preferred stock outstanding that were convertible
to a total of approximately 122,000 common shares.
Stock Split - In November 1992 Century's Board of Directors
declared a three-for-two common stock split effected as a 50%
stock dividend in December 1992. Per share data for periods
prior to December 1992 which are included in this report have
been restated to reflect this stock split. An amount equal to
the par value of the additional common shares issued pursuant to
the stock split was reflected as a transfer from paid-in-capital
to common stock on the consolidated financial statements in 1992.
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 ownership of 15% or more of Century's 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 at the then-current
exercise price of the right (currently $85) the number of shares
of Series AA Junior Participating Preferred Stock of Century
having a market value equal to two times the exercise 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, reverse
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 market value of
two times the exercise price of the right. At December 31, 1993,
519,000 shares of Series AA Junior Participating Preferred Stock
were reserved for issuance under the Rights Plan.
(4) INCOME TAXES
As discussed in note 1, the Company adopted SFAS 109 as of
January 1, 1992. The cumulative effect of this change in
accounting for income taxes resulted in a $913,000 decrease in
net income and was included in cumulative effect of changes in
accounting principles in the consolidated statement of income for
the year ended December 31, 1992.
Total income tax expense (benefit) for the years ended
December 31, 1993 and 1992 was allocated as follows:
1993 1992 ================================================================= (expressed in thousands)
Income before cumulative effect of changes in accounting principles $ 37,252 32,599 Cumulative effect of changes in accounting principles - (8,272) ________________________________________________________________ Net tax expense in the consolidated statement of income 37,252 24,327 Stockholders' equity, primarily for compensation expense for tax purposes in excess of amounts recognized for financial reporting purposes (800) (2,885) _________________________________________________________________ $ 36,452 21,442 =================================================================
Income tax expense attributable to income before cumulative
effect of changes in accounting principles is composed of the
following:
Year ended December 31, 1993 1992 1991 ================================================================= (expressed in thousands) Federal Current $ 26,409 29,100 16,227 Deferred 6,133 (1,742) (335) State Current 4,062 4,926 4,178 Deferred 648 315 - _________________________________________________________________ $ 37,252 32,599 20,070 =================================================================
The tax effects of temporary differences that gave rise to
significant portions of the deferred tax assets and deferred tax
liabilities at December 31, 1993 and 1992 were as follows:
December 31, 1993 1992 ================================================================= (expressed in thousands) Deferred tax assets: Postretirement benefit cost $ 10,809 10,194 Deferred compensation 2,522 2,246 Regulatory liability 12,011 14,705 Deferred investment tax credits 3,465 3,685 Other employee benefits 3,842 2,228 Other 630 4,817 _________________________________________________________________ Total gross deferred tax assets 33,279 37,875 Less valuation allowance - - _________________________________________________________________ Net deferred tax assets 33,279 37,875 _________________________________________________________________ Deferred tax liabilities: Property, plant and equipment, primarily due to depreciation differences (84,159) (73,598) Deferred intercompany profits (3,236) (2,929) Other (6,006) (412) _________________________________________________________________ Total gross deferred tax liabilities (93,401) (76,939) _________________________________________________________________ Net deferred tax liability $ (60,122) (39,064) =================================================================
A $20,910,000 deferred tax asset and a valuation allowance
of a like amount reported at December 31, 1992 have been netted
during 1993 based on a refined purchase price allocation.
For the year ended December 31, 1991, deferred tax expense
resulted from timing differences in the recognition of revenue
and expense for tax and financial accounting purposes. The
sources of these timing differences and the tax effects of each
were as follows:
Year ended December 31, 1991 ================================================================= (expressed in thousands)
Excess tax depreciation over book depreciation $ 1,636 Employee benefits (949) Removal costs 552 Amortization of investment tax credits (2,225) Amortization of excess deferred federal income taxes (1,147) Other 1,798 _________________________________________________________________ $ (335) =================================================================
The following is a reconciliation from the statutory federal
income tax rate to the Company's effective income tax rate:
Year ended December 31, 1993 1992 1991 ================================================================= (expressed as a percentage of pre-tax income)
Statutory federal income tax rate 35.0% 34.0 34.0 State income taxes, net of federal income tax benefit 2.9 3.7 4.8 Amortization of nondeductible excess cost of net assets acquired 1.2 2.0 1.7 Amortization of investment tax credits (2.0) (2.3) (3.9) Amortization of excess deferred federal income taxes (1.8) (2.6) (2.0) Other, net (.2) .4 .3 _________________________________________________________________ Effective income tax rate 35.1% 35.2 34.9 =================================================================
Income taxes paid by the Company were $37,092,000,
$30,518,000 and $19,962,000 during 1993, 1992 and 1991,
respectively.
(5) STOCK OPTION AND INCENTIVE PROGRAMS
Century's 1990 Incentive Compensation Program (the "1990
Program") 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 awards; restricted stock;
performance shares; and cash awards. During 1990, 836,904 stock
options were granted under the terms of the 1990 Program with an
average option price of $21.58 per share. During 1992, 960,639
stock options were granted with an option price of $27.67 per
share. Century has reserved 1,873,000 shares of common stock
which may be issued under the 1990 Program.
One-seventh of the options granted in 1990 were exercisable
on the date of grant. An additional one-seventh become
exercisable on each of the first six anniversary dates of the
date of grant. The dates on which some or all of the last two-
sevenths become exercisable are accelerated if specified average
market prices of Century's common stock are attained on one or
more of the first four anniversary dates of the date of grant.
The options granted in 1992 became exercisable in June 1993. The
options expire ten years after the date of grant.
The Company's 1988 Incentive Compensation Program (the "1988
Program") allows the Board, 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; stock awards;
restricted stock; performance shares; and cash awards.
Century has reserved 1,085,000 shares of common stock which may
be issued under the 1988 Program. The options under the 1988
Program expire ten years after the date of grant.
Stock option transactions during 1991, 1992 and 1993 were as
follows:
Number of Options _________________ 1990 1988 Program Program ================================================================= Balance as of December 31, 1990 836,904 1,391,007 Exercised (average option price per share: $8.85) - (239,283) _________________________________________________________________ Balance as of December 31, 1991 836,904 1,151,724 Exercised (average option price per share: $8.97) - (516,398) Granted (option price per share: $27.67) 960,639 - _________________________________________________________________ Balance as of December 31, 1992 1,797,543 635,326 Exercised (average option price per share: $20.42 and $9.32, respectively) (2,658) (48,462) _________________________________________________________________ Balance as of December 31, 1993 1,794,885 586,864 =================================================================
At December 31, 1993, 1,499,104 and 586,864 shares were
issuable under exercisable options granted under the 1990 Program
and the 1988 Program, respectively. Option prices range from
$8.85 to $27.67.
(6) SALES OF ASSETS
During 1993 the Company sold a minority investment in a
telephone company which resulted in a pre-tax gain of $1,661,000
($1,080,000 after-tax).
During 1992 the Company sold two telephone subsidiaries
which served approximately 2,000 access lines; its minority
interest in a Metropolitan Statistical Area ("MSA") cellular
partnership and its minority interest in a Rural Service Area
("RSA") cellular partnership; and its 100% interest in an RSA
cellular market. The sales prices totaled $12,212,000, and the
transactions resulted in an aggregate pre-tax gain of $3,985,000
($2,630,000 after-tax).
(7) BUSINESS SEGMENTS
The Company currently operates in two principal segments -
traditional telephone services and mobile communications
services.
The Company's telephone customers are located in rural,
suburban and small urban communities in 14 states. Approximately
82% of the Company's telephone access lines are in
Wisconsin, Ohio, Louisiana, Michigan and Arkansas. The Company's
mobile communications customers are located primarily in
Louisiana and Michigan.
Other accounts receivable are primarily amounts due from
various long distance carriers, principally AT&T.
Year ended December 31, 1993 1992 1991 ================================================================= (expressed in thousands) Telephone Operations
Revenues Local service $ 88,704 78,108 58,653 Network access, long distance and other 259,781 219,402 177,143 _________________________________________________________________ 348,485 297,510 235,796 _________________________________________________________________
Expenses Cost of sales and operating expenses 168,408 139,911 111,275 Depreciation and amortization 65,175 53,927 44,482 _________________________________________________________________
233,583 193,838 155,757 _________________________________________________________________
Operating income $ 114,902 103,672 80,039 ================================================================= Capital expenditures $ 131,180 108,974 73,913 Identifiable assets $1,027,390 843,356 616,992 =================================================================
Mobile Communications Operations
Revenues Cellular $ 80,513 57,683 41,515 Paging 4,199 4,409 5,216 _________________________________________________________________ 84,712 62,092 46,731 _________________________________________________________________ Expenses Cost of sales and operating expenses 63,447 47,165 43,925 Depreciation and amortization 11,359 8,971 7,758 _________________________________________________________________ 74,806 56,136 51,683 _________________________________________________________________ Operating income (loss) $ 9,906 5,956 (4,952) _________________________________________________________________ Capital expenditures $ 56,092 10,904 12,702 Identifiable assets $240,634 148,485 116,293 =================================================================
The effect of the change in accounting principle related to
accounting for postretirement benefits reduced 1992 operating
income of the telephone operations and mobile communications
operations by $1,773,000 and $250,000, respectively.
(8) POSTRETIREMENT BENEFITS
The Company sponsors a defined benefit health care plan (the
"Retiree Plan") that provides postretirement medical, life and
dental benefits to substantially all retired full-time employees,
exclusive of the bargaining unit employees of Century Telephone
of Ohio, Inc. ("Ohio").
The acquisition of Ohio was consummated on April 1, 1992.
The employees of Ohio who are covered under a collective
bargaining agreement and who meet certain eligibility
requirements are provided postretirement medical and life
insurance benefits upon retirement under the provisions of a
separate plan (the "Ohio Plan" and, together with the Retiree
Plan, the "Benefit Plans").
The Company adopted Statement of Financial Accounting
Standards No. 106 ("SFAS 106"), "Employers' Accounting for
Postretirement Benefits Other Than Pensions," as of January 1,
1992 and elected immediate recognition of the transition
obligation. In accordance with the provisions of SFAS 71 the
Company deferred $3,450,000 of the $27,390,000 transition
obligation as a regulatory asset; such costs are being expensed
in connection with recovery through the rate-making process. The
remaining $23,940,000, net of tax benefits which aggregated
$9,185,000, was reported as the cumulative effect of a change in
accounting principles. The effects of adopting SFAS 106 on net
income and on income before cumulative effect of changes in
accounting principles for the year ended December 31, 1992 were
decreases of $16,009,000 and $1,254,000, respectively.
Postretirement benefit costs of approximately $1,475,000 for the
year ended December 31, 1991, which were recorded on a pay-as-
you-go basis, were not restated.
Net periodic postretirement benefit cost under the Benefit
Plans for 1993 and 1992 included the following components:
Year ended December 31, 1993 1992 ================================================================= (expressed in thousands)
Service cost $ 1,640 1,040 Interest cost 3,008 2,521 Amortization of unrecognized actuarial losses 365 - Amortization of unrecognized prior service cost 86 - _________________________________________________________________ Net periodic postretirement benefit cost $ 5,099 3,561 =================================================================
The following table sets forth the amounts recognized as
liabilities for postretirement benefits in the Company's
consolidated balance sheets at December 31, 1993 and 1992.
December 31, 1993 1992 ================================================================= (expressed in thousands) Accumulated postretirement benefit obligation: Retirees and retirees' dependents $ 20,451 15,796 Fully eligible active plan participants - 537 Other active plan participants 24,980 16,991 _________________________________________________________________ Accumulated postretirement benefit obligation 45,431 33,324 Plan assets - - Unrecognized prior service cost (1,177) - Unrecognized net loss (6,302) - _________________________________________________________________ Accrued postretirement benefit costs included in other liabilities $ 37,952 33,324 =================================================================
For measurement purposes, an 8% health care cost rate was
assumed for 1993 through 1996; the rate was assumed to decrease
to 7% 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,
1993 would have increased $5,219,000 and the net periodic
postretirement benefit cost for the year ended December 31, 1993
would have increased $756,000.
The discount rate used in determining the accumulated
postretirement benefit obligation as of December 31, 1993 was 7%.
The average discount rate used in 1992 was 8.85%.
(9) PENSION PLANS
Century sponsors an Outside Directors' Retirement Plan and a
Supplemental Executive Retirement Plan to provide directors and
officers, respectively, with supplemental retirement and
disability benefits. In addition, the bargaining unit employees
of Ohio, a wholly-owned subsidiary which was acquired April 1,
1992, are provided benefits under a defined benefit pension plan.
At December 31, 1993 and 1992, the combined accumulated benefit
obligation of the plans, substantially all of which was vested,
aggregated $16,321,000 and $15,167,000, respectively. The
projected benefit obligation in excess of plan assets was
$7,390,000 and $7,229,000, of which $3,371,000 and $3,704,000 was
accrued as of December 31, 1993 and 1992, respectively. The net
periodic pension cost for 1993, 1992 and 1991 was $1,057,000,
$930,000 and $965,000, respectively. Discount rates ranged from
7.0% - 7.25% for 1993 and from 7.0% - 8.3.% for 1992.
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.
The Company recorded contributions related to the ESBP in
the amount of $1,800,000, $1,120,000 and $540,000 during 1993,
1992 and 1991, respectively. At December 31, 1993, the ESBP
owned 4,454,403 shares of Century common stock.
The ESOP held 1,882,935 common shares of Century and had
outstanding debt of $9,220,000 at December 31, 1993. Interest
incurred by the ESOP on its debt was $895,000, $1,052,000 and
$1,205,000 in 1993, 1992 and 1991, respectively. As the Company
makes annual contributions to the ESOP, these contributions,
along with dividends earned on shares held by the ESOP, are used
to repay the debt. The Company contributed $2,596,000,
$2,427,000 and $2,728,000 during 1993, 1992 and 1991,
respectively, to the ESOP. Dividends on ESOP shares used for
debt service by the ESOP were $580,000, $560,000 and $554,000 in
1993, 1992 and 1991, respectively.
(10) FAIR VALUE OF FINANCIAL INSTRUMENTS
Cash and Cash Equivalents, Accounts Receivable, Accounts Payable
and Notes Payable to Banks - The carrying amount approximates the
fair value due to the short maturity of these instruments.
Other Investments - The fair value of the Company's investments
in marketable equity securities, based on quoted market prices,
was $11,444,000 and $7,230,000 at December 31, 1993 and 1992,
respectively. The carrying amount of the cash surrender value of
life insurance approximates the fair value.
Long-Term Debt - The fair value ($502,826,000 and $399,783,000 at
December 31, 1993 and 1992, respectively) of the Company's long-
term debt is estimated by discounting the scheduled payment
streams to present value based upon rates currently offered to
the Company for debt of similar remaining maturities.
(11) COMMITMENTS AND CONTINGENCIES
Construction expenditures and investments in vehicles,
buildings and other work equipment during 1994 are estimated to
be $142,000,000 for telephone operations, $50,000,000 for mobile
communications operations (of which $10,000,000 will be funded by
minority interest owners in cellular partnerships operated by the
Company) and $4,000,000 for 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.
(12) ACQUISITIONS
On April 8, 1993, the Company acquired San Marcos Telephone
Company, Inc. ("SMTC") in a stock and cash transaction and SM
Telecorp, Inc., an affiliate of SMTC, for cash. Subsequent to
the acquisitions, the Company changed the names of San Marcos
Telephone Company, Inc. and the principal operating subsidiary of
SM Telecorp, Inc. to Century Telephone of San Marcos, Inc. and
Century Telecommunications, Inc., respectively. The total
acquisition price for both companies approximated $100,000,000,
the stock portion (approximately $67,000,000) of which was
represented by approximately 2,151,000 shares of Century's 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. Approximately $87,000,000 of cost in excess of net
assets acquired was recorded as a result of the acquisitions.
On April 1, 1992 the Company acquired Central Telephone
Company of Ohio ("Central") for $120,000,000 and changed
Central's name to Century Telephone of Ohio, Inc. ("Ohio"). Ohio
is a local exchange telephone company with approximately 68,100
access lines located in suburbs of Cleveland, Ohio. The net
proceeds from the issuance of debentures were used to fund the
major portion of the acquisition of Ohio. The acquisition was
accounted for as a purchase and approximately $80,000,000 of cost
in excess of net assets acquired was recorded.
During the first quarter of 1992, the Company purchased
Ooltewah-Collegedale Telephone Company ("Ooltewah") and Chatham
Telephone Co., Inc. ("Chatham"). Ooltewah provides service to
6,200 customers in suburbs of Chattanooga, Tennessee. Chatham
owns a minority interest in a cellular partnership operated by
the Company and serves 1,500 telephone customers in north
Louisiana. In December 1992 the Company acquired 100% of the
Alexandria, Louisiana MSA wireline cellular market
("Alexandria").
The purchase prices of Ooltewah, Chatham and Alexandria
aggregated approximately $37,000,000, of which approximately
$21,475,000 was paid through the issuance of 978,115 shares of
Century's common stock.
The following pro forma information represents the
consolidated results of operations of the Company as if each 1993
and 1992 acquisition had been combined with the Company as of
January 1 of each respective period.
Year ended December 31, 1993 1992 =============================================================== (expressed in thousands, except per share amounts) (unaudited) Revenues $438,418 395,033 Income before cumulative effect of changes in accounting principles $69,122 58,324 Net income $69,122 42,656 Fully diluted earnings per share before cumulative effect of changes in accounting principles $ 1.31 1.12 Fully diluted earnings per share $ 1.31 .85 ===============================================================
The pro forma information is not necessarily indicative of
the operating results that would have occured if each 1993 and
1992 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.
(13) SUBSEQUENT EVENTS (UNAUDITED)
In September 1993 the Company signed a merger agreement
whereby it will acquire 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. This transaction is
expected to be completed in the first quarter of 1994.
In October 1993 the Company executed a merger agreement with
Celutel, Inc. under which Century acquired Celutel for
approximately $102,000,000 during the first quarter of 1994.
Approximately $51,400,000 of the purchase price was paid in cash,
with the remainder being paid through the issuance of 1,900,000
shares of Century 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 $138,000,000 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 MSAs in Mississippi and
Texas.
CENTURY TELEPHONE ENTERPRISES, INC. Consolidated Quarterly Income Information (unaudited)
Fully diluted earnings per share for the fourth quarter of 1993 reflect a decrease of $.04 per share (compared to the fourth quarter of 1992) related to cellular commissions incurred as a result of the significant increase in the number of cellular subscribers activated during December 1993; such decrease was offset by non-recurring favorable income tax adjustments of $.04 per share.
Fully diluted earnings per share before cumulative effect of changes in accounting principles for the fourth quarter of 1992 reflect a $.06 per share impact of favorable adjustments to telephone revenues and a $.04 per share impact from gains on the sales of assets.
Fully diluted earnings per share before cumulative effect of changes in accounting principles for 1992 have been adjusted to reflect the December 1992 stock split. See note 3 of Notes to Consolidated Financial Statements.
Certain amounts previously reported for 1992 have been reclassified to conform with 1993 presentation.
Item 9.

Item 9. Changes in and Disagreements With Accountants on
Accounting and Financial Disclosure.
None.
PART III
Item 10.



Item 10. Directors and Executive Officers of the Registrant.
Executive Officers
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 the employment agreement in accordance
with the terms of such agreement.
Name Age Office(s) held with Century ____ ___ ___________________________
Clarke M. Williams 72 Chairman of the Board of Directors
Glen F. Post, III 41 Vice Chairman of the Board of Directors, President and Chief Executive Officer
R. Stewart Ewing, Jr. 42 Senior Vice President and Chief Financial Officer
W. Bruce Hanks 39 President - Telecommunications Services
Harvey P. Perry 49 Senior Vice President, General Counsel and Secretary
Jim D. Reppond 52 President - Telephone Group
Each of the Registrant's executive officers has served as an
officer of the Registrant or one or more of its subsidiaries in
varying capacities for more than the past 5 years.
The balance of the information required by Item 10 is
incorporated by reference to the Registrant's definitive proxy
statement relating to its 1994 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.

Item 11. Executive Compensation.
The information required by Item 11 is incorporated by
reference to the Proxy Statement.
Item 12.

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.

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.

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, 1993, 1992 and 1991
Consolidated Balance Sheets - December 31, 1993 and
Consolidated Statements of Cash Flows for the Years
Ended December 31, 1993, 1992 and 1991
Consolidated Statements of Stockholders' Equity for
the Years Ended December 31, 1993, 1992 and 1991
Notes to Consolidated Financial Statements
Consolidated Quarterly Income Information
(unaudited)
(ii) Schedules:*
III Condensed Financial Information of Registrant
V Property, Plant and Equipment
VI Accumulated Depreciation and Amortization of
Property, Plant and Equipment
IX Short-Term Borrowings
X Supplementary Income Statement Information
* Those Schedules not listed above are omitted as
not applicable or not required.
b. Report on Form 8-K.
The following Current Report on Form 8-K was filed
during the fourth quarter of 1993:
October 8, 1993 _______________
Item 5. Other Events - Execution of definitive
agreement and plan of merger pursuant to which
Century Telephone Enterprises, Inc. proposes to
acquire Celutel, Inc.
c. Exhibits:
3(i) Amended and Restated Articles of Incorporation of
Registrant, dated December 15, 1988
(incorporated by reference to Exhibit 3.1 to
Registrant's Annual Report on Form 10-K for the
year ended December 31, 1988), as amended by the
Articles of Amendment dated May 2, 1989
(incorporated by reference to Exhibit 4.1 to
Registrant's Current Report on Form 8-K dated
May 5, 1989), by the Articles of Amendment dated
May 17, 1990 (incorporated by reference to
Exhibit 4.1 of the Registrant's Post-Effective
Amendment No. 2 on Form S-3 dated December 21,
1990, Registration No. 33-17114) and by the
Articles of Amendment dated May 30, 1991
(incorporated by reference to Exhibit 3.1 of
Registrant's Current Report on Form 8-K dated
June 12, 1991).
3(ii) Registrant's Bylaws, as amended through February
22, 1994, included elsewhere herein.
4.1 Loan Agreement, dated January 3, 1990, between
Registrant and National Bank of Detroit, First
National Bank of Commerce and Bank One, Texas,
National Association (incorporated by reference
to Exhibit 4.1 to Registrant's Annual Report on
Form 10-K for the year ended December 31, 1989)
and amendment thereto dated May 15, 1992
incorporated by reference to Exhibit 4.1 to
Registrant's Annual Report on Form 10-K for the
year ended December 31, 1992) and the second
amendment thereto dated March 31,1993
(incorporated by reference to Exhibit 19.1 to
Registrant's Quarterly Report on Form 10-Q for
the quarter ended March 31, 1993).
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).
4.3 Agreement, dated November 27, 1977, among
Registrant, The Travelers Insurance Company and
The Travelers Indemnity Company, and form of
Warrant (incorporated by reference to Exhibits 4
and 5 to
Registrant's Annual Report on Form 10-K
for the year ended December 31, 1977).
4.10 Form of Indenture dated May 1, 1940 among Century
Telephone of Wisconsin, Inc. (formerly La Crosse
Telephone Corporation) and the First National
Bank of Chicago and William K. Stevens
(incorporated by reference to Exhibit 4.12 to
Registration No. 2-48478).
4.11 Supplemental Indenture No. 12 (incorporated by
reference to Exhibit 5.12 to Registration No. 2-
62172) and Supplemental Indentures 13 and 14
(incorporated by reference to Exhibit 5.11 to
Registration No. 2-68731), each of which are
supplemental indentures to the Form of Indenture
dated May 1, 1940 listed above as Exhibit 4.10.
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).
4.21 * The Century Telephone Enterprises, Inc. Stock Bonus
Plan, PAYSOP and Trust, as amended and restated
September 10, 1987 and amendment thereto dated
February 29, 1988 (incorporated by reference to
Exhibit 4.21 to Registrant's Annual Report on
Form 10-K for the year ended December 31, 1987),
amendments thereto dated March 21, 1991 and
April 15, 1991, (incorporated by reference to
Exhibit 4.21 to Registrant's Annual Report on
Form 10-K for the year ended December 31, 1991),
amendment thereto dated March 31, 1992
(incorporated by reference to Exhibit 4.21 to
Registrant's Annual Report on Form 10-K for the
year ended December 31, 1992) and amendments
thereto dated June 1, 1993 and June 10, 1993,
included elsewhere herein.
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).
4.23 Indenture, dated February 1, 1992, between
Registrant and First American Bank and Trust of
Louisiana (incorporated by reference to Exhibit
4.23 to Registrant's Annual Report on Form 10-K
for the year ended December 31, 1991).
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) and amendment
thereto dated July 9, 1993, included elsewhere
herein.
4.25 Credit Agreement, dated February 9, 1994 between
Registrant, NationsBank of Texas, N.A., Bank
One, Texas, N.A., The Bank of Nova Scotia, First
National Bank of Commerce and Texas Commerce
Bank National Association, included elsewhere
herein.
10.1 * 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).
10.2 * Form of employment agreement that the registrant
has entered into with each Executive Officer
other than Mr. Williams (incorporated by
reference to Exhibit 10.2 to Registrant's Annual
Report on Form 10-K for the year ended December
31, 1990).
10.3 * Registrant's Outside Directors' Retirement Plan,
dated November 19, 1984 (incorporated by
reference to Registrant's Annual Report on Form
10-K for the year ended December 31, 1985),
amendment thereto dated February 21, 1989
(incorporated by reference to Registrant's
Annual Report on Form 10-K for the year ended
December 31, 1988) and amendment thereto dated
May 17, 1991 (incorporated by reference to
Exhibit 10.3 to Registrant's Annual Report on
Form 10-K for the year ended December 31, 1991).
10.4 * Registrant's Amended and Restated Supplemental
Executive Retirement Plan, as amended and
restated May 17, 1991 (incorporated by reference
to Exhibit 10.4 to Registrant's Annual Report on
Form 10-K for the year ended December 31, 1991)
and amendment thereto dated February 24, 1993
(incorporated by reference to Exhibit 10.4 to
Registrant's Annual Report on Form 10-K for the
year ended December 31, 1992).
10.5 * Registrant's 1983 Restricted Stock Plan, dated
February 21, 1984 (incorporated by reference to
Registrant's Annual Report on Form 10-K for the
year ended December 31, 1985).
10.6 * Registrant's Key Employee Incentive Compensation
Plan, dated January 1, 1984 (incorporated by
reference to Registrant's Annual Report on Form
10-K for the year ended December 31, 1985).
10.7 * The Century Telephone Enterprises, Inc. Dollars &
Sense Plan and Trust, as amended and restated
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, 1992)
and amendments thereto dated as of January 1,
1993, April 1, 1993, April 9, 1993 and July 1,
1993, included elsewhere herein.
10.8 * Century Telephone Enterprises, Inc. Employee Stock
Ownership Plan and Trust, dated March 20, 1987
(incorporated by reference to Registrant's
Annual Report on Form 10-K for the year ended
December 31, 1986), amendment thereto dated
February 29, 1988 (incorporated by reference to
Exhibit 10.9 to Registrant's Annual Report on
Form 10-K for the year ended December 31, 1987),
amendments thereto dated March 21, 1991 and
April 15, 1991 (incorporated by reference to
Exhibit 10.8 to Registrant's Annual Report on
Form 10-K for the year ended December 31, 1991),
amendments thereto dated March 31, 1992
(incorporated by reference to Exhibit 10.8 to
Registrant's Annual Report on Form 10-K for the
year ended December 31, 1992) and amendments
thereto dated June 1, 1993 and June 10, 1993,
included elsewhere herein.
10.9 * 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).
10.10 * 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).
10.11 * 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).
10.12 * 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).
10.13 * Disability Retirement Agreement, dated July
17, 1990, between Clarke M. Williams, Jr. and
Century Telephone Enterprises, Inc.
(incorporated by reference to Exhibit 19.2 to
Registrant's Quarterly Report on Form 10-Q for
the quarter ended June 30, 1990).
10.15 Agreement and Plan of Merger dated as of September
24, 1992, as amended by Amendment No. 1 thereto,
by and among Registrant, San Marcos Telephone
Company, Incorporated, SM Telecorp, Inc., SMTC
Acquisition Corp. and SMT Acquisition Corp.
(incorporated by reference to Exhibit 2 of
Registrant's Registration on Form S-4 dated
February 3, 1993, Registration No. 33-57838).
10.16 * 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).
10.17 * 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).
10.18 * 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).
10.19 * 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).
10.20 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)).
11 Computations of Earnings Per Share, included
elsewhere herein.
21 Subsidiaries of the Registrant, included elsewhere
herein.
23 Independent Auditors' Consent, included elsewhere
herein.
* Management contract or compensatory plan or arrangement.
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 16, 1994 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 16, 1994
Vice Chairman of the Board of Directors, /s/ Glen F. Post, III President, and Chief Glen F. Post, III Executive Officer March 16, 1994
Senior Vice President /s/ R. Stewart Ewing, Jr. and Chief Financial R. Stewart Ewing, Jr. Officer March 16, 1994
Senior Vice President, /s/ Harvey P. Perry Secretary, General Harvey P. Perry Counsel and Director March 16, 1994
/s/ Jim D. Reppond President - Telephone Jim D. Reppond Group and Director March 16, 1994
Signatures (Continued)
/s/ W. Bruce Hanks President - Telecommunications W. Bruce Hanks Services and Director March 16, 1994
/s/ Murray H. Greer Controller (Principal Murray H. Greer Accounting Officer) March 16, 1994
/s/ William R. Boles, Jr. Director William R. Boles, Jr. March 16, 1994
/s/ Ernest Butler, Jr. Director Ernest Butler, Jr. March 16, 1994
/s/ Calvin Czeschin Director Calvin Czeschin March 16, 1994
/s/ James B. Gardner Director James B. Gardner March 16, 1994
/s/ R. L. Hargrove, Jr. Director R. L. Hargrove, Jr. March 16, 1994
/s/ Johnny Hebert Director Johnny Hebert March 16, 1994
/s/ F. Earl Hogan Director F. Earl Hogan March 16, 1994
Signatures (Continued)
/s/ Tom S. Lovett Director Tom S. Lovett March 16, 1994
/s/ C. G. Melville Director C. G. Melville March 16, 1994
SCHEDULE III - CONDENSED FINANCIAL INFORMATION OF REGISTRANT
CENTURY TELEPHONE ENTERPRISES, INC. (Parent Company)
STATEMENTS OF INCOME
SCHEDULE III - CONDENSED FINANCIAL INFORMATION OF REGISTRANT (continued)
CENTURY TELEPHONE ENTERPRISES, INC. (Parent Company)
BALANCE SHEETS
December 31, _____________________________________________________________________ 1993 1992 _____________________________________________________________________ (expressed in thousands)
ASSETS
CURRENT ASSETS Cash and cash equivalents $ 5,547 2,570 Receivables from subsidiaries 53,638 46,967 Other receivables 7,330 1,168 Prepayments and other 857 343 _____________________________________________________________________ Total current assets 67,372 51,048 _____________________________________________________________________
PROPERTY, PLANT AND EQUIPMENT Property and equipment 1,192 1,119 Accumulated depreciation (772) (681) _____________________________________________________________________ Net property, plant and equipment 420 438 _____________________________________________________________________
INVESTMENTS AND OTHER ASSETS Investments in subsidiaries (at equity) 771,062 579,579 Receivables from subsidiaries 130,568 124,215 Other investments, at cost 22,368 3,117 Deferred charges 3,788 3,920 _____________________________________________________________________ Total investments and other assets 927,786 710,831 _____________________________________________________________________
TOTAL ASSETS $995,578 762,317 =====================================================================
SCHEDULE III - CONDENSED FINANCIAL INFORMATION OF REGISTRANT (continued)
CENTURY TELEPHONE ENTERPRISES, INC. (Parent Company)
BALANCE SHEETS (continued)
December 31, ____________________________________________________________________ 1993 1992 ____________________________________________________________________ (expressed in thousands)
LIABILITIES AND EQUITY
CURRENT LIABILITIES Current maturities of long-term debt $ 4,450 4,027 Notes payable to banks 69,000 32,000 Payables to subsidiaries 93,540 91,469 Accrued interest 5,431 5,098 Other accrued liabilities 3,656 3,500 ____________________________________________________________________ Total current liabilities 176,077 136,094 ____________________________________________________________________
LONG-TERM DEBT 272,115 229,615 ____________________________________________________________________
PAYABLES TO SUBSIDIARIES 25,696 3,919 ____________________________________________________________________
DEFERRED CREDITS AND OTHER LIABILITIES 7,922 7,240 ____________________________________________________________________
STOCKHOLDERS' EQUITY Common stock, $1.00 par value, authorized 100,000,000 shares, issued and outstanding 51,294,705 and 48,896,876 shares 51,295 48,897 Paid-in capital 262,294 191,522 Retained earnings 208,945 155,676 Employee Stock Ownership Plan commitment (9,220) (11,100) Preferred stock - non-redeemable 454 454 ____________________________________________________________________ Total stockholders' equity 513,768 385,449 ____________________________________________________________________
TOTAL LIABILITIES AND EQUITY $995,578 762,317 ====================================================================
SCHEDULE III - CONDENSED FINANCIAL INFORMATION OF REGISTRANT (continued)
CENTURY TELEPHONE ENTERPRISES, INC. (Parent Company)
STATEMENTS OF CASH FLOWS
SCHEDULE III - 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, 1993 are as follows:
1994 - $ 4,450,000 1995 - $ 55,481,000 1996 - $ 37,566,000 1997 - $ 7,014,000 1998 - $ 9,817,000
(B) GUARANTEES
As of December 31, 1993, Century has guaranteed a promissory note for a subsidiary of $2,889,000, as well as the applicable interest and premium. Century has also guaranteed $1,085,000 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 $908,000, $12,030,000 and $28,612,000 during 1993, 1992 and 1991, respectively.
(D) INCOME TAXES AND INTEREST PAID
Income taxes paid by Century (including amounts reimbursed from subsidiaries) were $31,500,000, $26,500,000 and $16,000,000 during 1993, 1992 and 1991, respectively.
Interest paid by Century was $20,870,000, $15,676,000 and $15,379,000 during 1993, 1992 and 1991, respectively.
(E) CUMULATIVE EFFECT OF CHANGES IN ACCOUNTING PRINCIPLES
Century adopted Statement of Financial Accounting Standards No. 106 ("SFAS 106"), "Employer's Accounting for Postretirement Benefits Other than Pensions" and Statement of Financial Accounting Standards No. 109 ("SFAS 109"), "Accounting for Income Taxes", as of January 1, 1992.
(F) SUPPLEMENTAL CASH FLOW INFORMATION
Century issued common stock in connection with certain acquisitions during 1993, 1992 and 1991. The value at time of issuance of such common stock was approximately $67,000,000, $21,475,000 and $5,355,000, respectively. These amounts represent the non-cash portion of the purchase prices for the acquisitions and are not included on the Statement of Cash Flows.
CENTURY TELEPHONE ENTERPRISES, INC. AND SUBSIDIARIES
SCHEDULE V - PROPERTY, PLANT AND EQUIPMENT
For the year ended December 31, 1993
CENTURY TELEPHONE ENTERPRISES, INC. AND SUBSIDIARIES
SCHEDULE V - PROPERTY, PLANT AND EQUIPMENT (continued)
For the year ended December 31, 1992
(1) Includes $110,667,000 of assets at the date of acquisition of purchased subsidiaries, net of $5,064,000 of assets at the date of disposition of subsidiaries sold.
For additional information see Note 1 of Notes to Consolidated Financial Statements included in Item 8 elsewhere herein.
CENTURY TELEPHONE ENTERPRISES, INC. AND SUBSIDIARIES
SCHEDULE V - PROPERTY, PLANT AND EQUIPMENT (continued)
For the year ended December 31, 1991
(1) Includes $2,032,000 of assets related to the Florida paging operations which were sold in 1991.
For additional information see note 1 of Notes to Consolidated Financial Statements included in Item 8 elsewhere herein.
CENTURY TELEPHONE ENTERPRISES, INC. AND SUBSIDIARIES
SCHEDULE VI - ACCUMULATED DEPRECIATION AND AMORTIZATION OF PROPERTY, PLANT AND EQUIPMENT
For the year ended December 31, 1993
Depreciation and amortization charged to income - Depreciation, as above $77,999 Amortization of cost of investment in subsidiaries in excess of net assets acquired 7,512 Amortization of extraordinary retirements 664 ______ $86,175 ======
(1) Includes $16,771,000 of accumulated depreciation and amortization at the date of acquisition of purchased subsidiaries.
(2) Includes $6,277,000 of accumulated depreciation related to equipment removed from service to be refurbished and/or held for future use.
(3) Includes $1,447,000 of accumulated depreciation and amortization at the date of acquisition of purchased subsidiaries.
CENTURY TELEPHONE ENTERPRISES, INC. AND SUBSIDIARIES
SCHEDULE VI - ACCUMULATED DEPRECIATION AND AMORTIZATION OF PROPERTY, PLANT AND EQUIPMENT (continued)
For the year ended December 31, 1992
Depreciation and amortization charged to income - Depreciation, as above $64,340 Amortization of cost of investment in subsidiaries in excess of net assets acquired 5,396 Amortization of extraordinary retirements 1,026 _______ $70,762 =======
(1) Includes $43,154,000 of accumulated depreciation and amortization at the date of acquisition of purchased subsidiaries, net of $1,855,000 of accumulated depreciation and amortization at the date of disposition of subsidiaries sold.
CENTURY TELEPHONE ENTERPRISES, INC. AND SUBSIDIARIES
SCHEDULE VI - ACCUMULATED DEPRECIATION AND AMORTIZATION OF PROPERTY, PLANT AND EQUIPMENT
(continued)
For the year ended December 31, 1991
Depreciation and amortization charged to income - Depreciation, as above $53,197 Amortization of cost of investment in subsidiaries in excess of net assets acquired 3,173 Amortization of extraordinary retirements 936 _______ $57,306 =======
(1) Includes $1,300,000 of accumulated depreciation and amortization related to the Florida paging operations which were sold in 1991.
CENTURY TELEPHONE ENTERPRISES, INC. AND SUBSIDIARIES
SCHEDULE IX - SHORT-TERM BORROWINGS
For the years ended December 31, 1993, 1992 and 1991
Note 1 ______ Notes payable to banks represent various promissory notes and revolving credit notes.
Note 2 ______ Notes payable to banks represent borrowings under promissory notes and a money market revolving credit note.
(a) Maximum amount outstanding at any month-end during the period.
(b) Average amount outstanding during the period is computed by dividing the total weighted daily balance outstanding by 360.
(c) Average interest rate for the year is computed by dividing short-term interest expense by the average short-term debt outstanding.
CENTURY TELEPHONE ENTERPRISES, INC. AND SUBSIDIARIES
SCHEDULE X - SUPPLEMENTARY INCOME STATEMENT INFORMATION
Year ended December 31, _________________________________________________________________ 1993 1992 1991 _________________________________________________________________
(expressed in thousands)
Maintenance and repairs $ 64,401 52,820 43,561 =================================================================
Taxes, other than payroll and income taxes: Property taxes $ 11,629 9,805 6,906 Gross receipts taxes 4,570 4,473 3,326 All other operating taxes 2,525 1,455 1,263 _________________________________________________________________ Taxes charged to costs and expenses $ 18,724 15,733 11,495 ================================================================= Advertising costs $ 4,148 3,459 2,771 =================================================================
All other requirements of this schedule are either immaterial or disclosed in the consolidated financial statements or related notes.
CENTURY TELEPHONE ENTERPRISES, INC.
INDEX TO EXHIBITS
December 31, 1993
Exhibit Number _______
3(i) Amended and Restated Articles of Incorporation of Registrant, dated December 15, 1988 (incorporated by reference to Exhibit 3.1 to Registrant's Annual Report on Form 10-K for the year ended December 31, 1988), as amended by the Articles of Amendment dated May 2, 1989 (incorporated by reference to Exhibit 4.1 to Registrant's Current Report on Form 8-K dated May 5, 1989), by the Articles of Amendment dated May 17, 1990 (incorporated by reference to Exhibit 4.1 of the Registrant's Post-Effective Amendment No. 2 on Form S-3 dated December 21, 1990, Registration No. 33-17114) and by the Articles of Amendment dated May 30, 1991 (incorporated by reference to Exhibit 3.1 of Registrant's Current Report on Form 8-K dated June 12, 1991).
3(ii) Registrant's Bylaws, as amended through February 22, 1994, included herein.
4.1 Loan Agreement, dated January 3, 1990, between Registrant and National Bank of Detroit, First National Bank of Commerce and Bank One, Texas, National Association (incorporated by reference to Exhibit 4.1 to Registrant's Annual Report on Form 10-K for the year ended December 31, 1989) and amendment thereto dated May 15, 1992 incorporated by reference to Exhibit 4.1 to Registrant's Annual Report on Form 10-K for the year ended December 31, 1992) and the second amendment thereto dated March 31,1993 (incorporated by reference to Exhibit 19.1 to Registrant's Quarterly Report on Form 10-Q for the quarter ended March 31, 1993).
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).
4.3 Agreement, dated November 27, 1977, among Registrant, The Travelers Insurance Company and The Travelers Indemnity Company, and form of Warrant (incorporated by reference to Exhibits 4 and 5 to Registrant's Annual Report on Form 10-K for the year ended December 31, 1977).
4.10 Form of Indenture dated May 1, 1940 among Century Telephone of Wisconsin, Inc. (formerly La Crosse Telephone Corporation) and the First National Bank of Chicago and William K. Stevens (incorporated by reference to Exhibit 4.12 to Registration No. 2-48478).
4.11 Supplemental Indenture No. 12 (incorporated by reference to Exhibit 5.12 to Registration No. 2-62172) and Supplemental Indentures 13 and 14 (incorporated by reference to Exhibit 5.11 to Registration No. 2-68731), each of which are supplemental indentures to the Form of Indenture dated May 1, 1940 listed above as Exhibit 4.10.
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).
4.21 The Century Telephone Enterprises, Inc. Stock Bonus Plan, PAYSOP and Trust, as amended and restated September 10, 1987 and amendment thereto dated February 29, 1988 (incorporated by reference to Exhibit 4.21 to Registrant's Annual Report on Form 10-K for the year ended December 31, 1987), amendments thereto dated March 21, 1991 and April 15, 1991, (incorporated by reference to Exhibit 4.21 to Registrant's Annual Report on Form 10-K for the year ended December 31, 1991), amendment thereto dated March 31, 1992 (incorporated by reference to Exhibit 4.21 to Registrant's Annual Report on Form 10-K for the year ended December 31, 1992) and amendments thereto dated June 1, 1993 and June 10, 1993, included herein.
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).
4.23 Indenture, dated February 1, 1992, between Registrant and First American Bank and Trust of Louisiana (incorporated by reference to Exhibit 4.23 to Registrant's Annual Report on Form 10-K for the year ended December 31, 1991).
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) and amendment thereto dated July 9, 1993, included herein.
4.25 Credit Agreement, dated February 9, 1994 between Registrant, NationsBank of Texas, N.A., Bank One, Texas, N.A., The Bank of Nova Scotia, First National Bank of Commerce and Texas Commerce Bank National Association, included herein.
10.1 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).
10.2 Form of employment agreement that the registrant has entered into with each Executive Officer other than Mr. Williams (incorporated by reference to Exhibit 10.2 to Registrant's Annual Report on Form 10-K for the year ended December 31, 1990).
10.3 Registrant's Outside Directors' Retirement Plan, dated November 19, 1984 (incorporated by reference to Registrant's Annual Report on Form 10-K for the year ended December 31, 1985), amendment thereto dated February 21, 1989 (incorporated by reference to Registrant's Annual Report on Form 10-K for the year ended December 31, 1988) and amendment thereto dated May 17, 1991 (incorporated by reference to Exhibit 10.3 to Registrant's Annual Report on Form 10-K for the year ended December 31, 1991).
10.4 Registrant's Amended and Restated Supplemental Executive Retirement Plan, as amended and restated May 17, 1991 (incorporated by reference to Exhibit 10.4 to Registrant's Annual Report on Form 10-K for the year ended December 31, 1991) and amendment thereto dated February 24, 1993 (incorporated by reference to Exhibit 10.4 to Registrant's Annual Report on Form 10-K for the year ended December 31, 1992).
10.5 Registrant's 1983 Restricted Stock Plan, dated February 21, 1984 (incorporated by reference to Registrant's Annual Report on Form 10-K for the year ended December 31, 1985).
10.6 Registrant's Key Employee Incentive Compensation Plan, dated January 1, 1984 (incorporated by reference to Registrant's Annual Report on Form 10-K for the year ended December 31, 1985).
10.7 The Century Telephone Enterprises, Inc. Dollars & Sense Plan and Trust, as amended and restated 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, 1992) and amendments thereto dated as of January 1, 1993, April 1, 1993, April 9, 1993 and July 1, 1993, included herein.
10.8 Century Telephone Enterprises, Inc. Employee Stock Ownership Plan and Trust, dated March 20, 1987 (incorporated by reference to Registrant's Annual Report on Form 10-K for the year ended December 31, 1986), amendment thereto dated February 29, 1988 (incorporated by reference to Exhibit 10.9 to Registrant's Annual Report on Form 10-K for the year ended December 31, 1987), amendments thereto dated March 21, 1991 and April 15, 1991 (incorporated by reference to Exhibit 10.8 to Registrant's Annual Report on Form 10-K for the year ended December 31, 1991), amendments thereto dated March 31, 1992 (incorporated by reference to Exhibit 10.8 to Registrant's Annual Report on Form 10-K for the year ended December 31, 1992) and amendments thereto dated June 1, 1993 and June 10, 1993, included herein.
10.9 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).
10.10 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).
10.11 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).
10.12 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).
10.13 Disability Retirement Agreement, dated July 17, 1990, between Clarke M. Williams, Jr. and Century Telephone Enterprises, Inc. (incorporated by reference to Exhibit 19.2 to Registrant's Quarterly Report on Form 10-Q for the quarter ended June 30, 1990).
10.15 Agreement and Plan of Merger dated as of September 24, 1992, as amended by Amendment No. 1 thereto, by and among Registrant, San Marcos Telephone Company, Incorporated, SM Telecorp, Inc., SMTC Acquisition Corp. and SMT Acquisition Corp. (incorporated by reference to Exhibit 2 of Registrant's Registration on Form S-4 dated February 3, 1993, Registration No. 33-57838).
10.16 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).
10.17 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).
10.18 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).
10.19 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).
10.20 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)).
11 Computations of Earnings Per Share, included herein.
21 Subsidiaries of the Registrant, included herein.
23 Independent Auditors' Consent, included herein.