United States
Securities and Exchange Commission
Washington, D.C. 20549
Form 11-K
[X] ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2003
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission file number 1-7784
A. Full title of the plan and the address of the plan, if different
from that of the issuer named below:
CENTURYTEL, INC.
UNION GROUP INCENTIVE PLAN
B. Name of issuer of the securities held pursuant to the plan and the
address of its principal executive office:
CENTURYTEL, INC.
100 CENTURYTEL DRIVE
MONROE, LA 71203
Report of Independent Registered Public Accounting Firm
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The Board of Directors
CenturyTel, Inc.:
We have audited the accompanying statements of net assets available for benefits
of CenturyTel, Inc. Union Group Incentive Plan as of December 31, 2003 and 2002,
and the related statement of changes in net assets available for benefits for
the year ended December 31, 2003. These financial statements are the
responsibility of the Plan's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). 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 financial statements referred to above present fairly, in
all material respects, the net assets available for benefits of CenturyTel, Inc.
Union Group Incentive Plan as of December 31, 2003 and 2002, and the changes in
net assets available for benefits for the year ended December 31, 2003 in
conformity with U.S. generally accepted accounting principles.
Our audits were performed for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental schedule of assets (held
at end of year) is presented for the purpose of additional analysis and is not a
required part of the basic financial statements but is supplementary information
required by the Department of Labor's Rules and Regulations for Reporting and
Disclosure under the Employee Retirement Income Security Act of 1974. This
supplemental schedule is the responsibility of the Plan's management. The
supplemental schedule has been subjected to the auditing procedures applied in
the audit of the basic financial statements and, in our opinion, is fairly
stated in all material respects in relation to the basic financial statements
taken as a whole.
KPMG LLP
/s/ KPMG LLP
Shreveport, Louisiana
June 9, 2004
CENTURYTEL, INC.
UNION GROUP INCENTIVE PLAN
Statements of Net Assets Available for Benefits
December 31, 2003 and 2002
2003 2002
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PLAN ASSETS
Investments, at fair value $ 37,355,922 26,108,872
Contributions receivable - employer 44,285 191
Contributions receivable - participants 729 473
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NET ASSETS AVAILABLE FOR BENEFITS $ 37,400,936 26,109,536
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See accompanying notes to financial statements.
CENTURYTEL, INC.
UNION GROUP INCENTIVE PLAN
Statement of Changes in Net Assets Available for Benefits
For the year ended December 31, 2003
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Additions to net assets:
Investment income:
Net appreciation in fair value of investments:
Mutual funds $ 4,265,145
Common stocks 22,291
Dividend and other income 608,936
Interest income 123,756
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Net investment income 5,020,128
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Contributions:
Participants 5,357,947
Company 2,068,478
Transfer from Spectra Communications Group,
LLC Union 401(k) Plan and Trust 1,571,667
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Total contributions 8,998,092
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Total investment income and contributions 14,018,220
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Deductions from net assets:
Participant withdrawals 2,726,820
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Net increase 11,291,400
Net assets available for benefits:
Beginning of year 26,109,536
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End of year $ 37,400,936
===============================================================================
See accompanying notes to financial statements.
CENTURYTEL, INC.
UNION GROUP INCENTIVE PLAN
Notes to Financial Statements
December 31, 2003 and 2002
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND PROVISIONS OF THE PLAN
Basis of Presentation
The CenturyTel, Inc. Union Group Incentive Plan (the Plan) was established
on June 1, 1983. The accompanying financial statements of the Plan have
been prepared on the accrual basis of accounting and present the net
assets available for benefits as of December 31, 2003 and 2002 and changes
in net assets available for benefits for the year ended December 31, 2003.
The Plan has made estimates in preparing the accompanying financial
statements in accordance with U.S. generally accepted accounting
principles. Actual results could differ from those estimates.
The assets of the Plan are invested by the Trustee in various investment
programs (funds) which are described in Note 2.
Effective September 30, 2003, the Company merged the assets of the Spectra
Communications Group, LLC Union 401(k) Plan and Trust (the "Spectra Union
Plan") into the Plan. The total amount transferred was $1,571,667.
Effective with this merger, participants of the Spectra Union Plan became
participants in the Plan.
The following description of the Plan provides only general information.
Participants should refer to the Plan Document for a more complete
description of the Plan's provisions.
Participation
Participation in the Plan is available to each eligible employee of
CenturyTel, Inc. (the Company) whose compensation and conditions of
employment are covered by certain collective bargaining agreements.
In order to participate in the Plan, an employee must execute a Salary
Deferral Agreement with the Company. In the Salary Deferral Agreement,
which is executed either on-line or by telephone, an employee agrees to a
deferral of between one percent and twenty-five percent of his eligible
pay; however, the total amount contributed to the Plan cannot exceed
$12,000 for 2003 (as adjusted from year to year in accordance with Federal
Law). The percentage of compensation a participant elects to defer applies
to the participant's W-2 earnings not in excess of $200,000 for 2003 (as
adjusted in accordance with Federal Law) excluding severance pay,
disability pay, reimbursements or other expense allowances, fringe
benefits, moving expenses, deferred compensation, and welfare benefits.
The amount of compensation deferred by each participant is credited to an
account (Elective Deferral Account) maintained for each participant by the
Trustee.
Participants age 50 years or older are allowed to make an additional
contribution to the Plan each year in excess of the otherwise prescribed
limits. The amount of the allowable additional contribution for a
participant in 2003 was $2,000; the amount will increase by $1,000 each
year to a maximum of $5,000 in 2006 (which will thereafter be adjusted
annually).
An employee is permitted to transfer to the Plan as a contribution his
interest in another plan qualified under Section 401(k) of the Internal
Revenue Code, as amended (the Code). Such contribution must qualify as a
"rollover" contribution described in Section 402(c) or 408(d)(3) of the
Code. Such a rollover will be credited to a rollover account on behalf of
the participant (the Rollover/Transfer Account).
As of the end of each payroll period, the Company contributes to an
account (Employer Match Account) for each participant a contribution equal
to a percentage, as determined by the participant's applicable collective
bargaining agreement, of each such participant's contribution during such
payroll period; however, this matching contribution applies only to the
first 6% of such participant's eligible compensation contributed to the
Plan by the employee. The Board of Directors of the Company may, at its
discretion, elect at the end of each year to contribute an additional
amount to participants' accounts (Additional Match Account). During 2003,
the Company contributed $2,068,478 to the Plan, of which $2,024,500
related to contributions made to the Employer Match Account and $43,978
related to contributions made to the Additional Match Account.
The interest of a participant in his Elective Deferral Account and his
Rollover/Transfer Account is fully vested and non-forfeitable at all
times.
The interest of a participant in his Employer Match Account and Additional
Match Account vests as follows:
Years of Service Percentage Vested
---------------- -----------------
Less than 1 0%
1 20
2 40
3 60
4 80
5 100
In the event of death, disability, or upon reaching age 65, the Employer
Match Account and Additional Match Account become fully vested.
Reports to Participants
Participants are furnished with quarterly statements which set forth the
status of their accounts in the Plan.
Forfeitures
A participant's non-vested account balances shall be forfeited as of the
date upon which the participant's employment has terminated with the
Company. Forfeiture amounts may be utilized first to satisfy any
restorations for the year. Any remaining forfeitures shall be applied to
offset future employer contributions.
Distributions
If the employment of a participant with the employer ceases because of
death, retirement, disability, termination of employment or for any other
reason, the participant's vested interest in the Plan may be distributed
to him or to his beneficiary in a lump sum or in periodic installments. If
the participant dies without designating a beneficiary, his beneficiary
shall be, in the order listed, (i) his spouse, (ii) his children, or (iii)
his estate.
Withdrawals
A participant who is an employee and over age 59 1/2 may make withdrawals
from his vested investment accounts prior to normal distribution
requirements being met. A participant may make withdrawals from his
Rollover/Transfer Account at any time. In addition, a hardship withdrawal
may be made from an Elective Deferral Account or a Rollover/Transfer
Account only as a result of financial hardship related to unreimbursable
educational expenses, medical expenses which are not reimbursable by
insurance, the need to pay for the funeral expenses of a family member,
the prevention of eviction or foreclosure from the Participant's principal
residence, or for the purchase of the participant's principal residence.
The determination of the existence of a financial hardship and the amount
required to be distributed to meet the need created by the hardship shall
be made uniformly and without discrimination at the sole discretion of the
Plan Administrator.
Loans to Participants
The Plan has a provision whereby a participant can borrow from his
Elective Deferral Account or Rollover/Transfer Account. The maximum loan
is $50,000 reduced by the excess, if any, of the highest outstanding loan
balance during the previous year over the outstanding balance on the date
of the new loan or 50% of the vested account balance. The loans are repaid
through payroll deductions and the interest rate is the prime rate
published in the Wall Street Journal on the last day of the previous
quarter plus 1%. The loan repayment period may not exceed five years
except for loans for the purchase of the Participant's principal residence
which may be for any period not to exceed fifteen years.
Trustee
The Trustee of the Plan, as of December 31, 2003, was T. Rowe Price Trust
Company (T. Rowe Price). The Board of Directors of the Company may remove
the Trustee and appoint a successor trustee. The Company and the Trustee
have entered into a Trust Agreement which provides for the establishment
of a Trust for the purpose of holding and investing the contributions to
the Trust pursuant to the provisions of the Plan.
Administration
The Company has appointed a committee to administer the Plan. The
individuals who administer the Plan serve at the discretion of the Board
of Directors of the Company and may be removed by the Board of Directors
at any time. The administrative costs of the Plan are paid by the Company.
Investment Valuation and Income Recognition
Investments in CenturyTel, Inc. Common Stock (CenturyTel Common Stock) are
valued at the closing market price on December 31, 2003 and 2002,
respectively. Other investments in the funds, which consist primarily of
shares of mutual funds, are valued by the Trustee based on the market
value at year-end of the underlying assets of each fund. Purchases and
sales of securities are recorded on a trade date basis. Loans to
participants are valued at principal amount outstanding which approximates
market value. Interest income is recorded on the accrual basis.
Plan Termination
Although it has not expressed any intention to do so, the Company has the
right under the Plan to change, suspend or terminate the Plan at any time,
subject to the provisions set forth in the Employee Retirement Income
Security Act of 1974. However, the Company is required to comply with all
relevant provisions of the applicable labor agreements.
(2) DESCRIPTION OF THE FUNDS
The following is a description of each of the funds which had outstanding
balances and were available to Plan participants as of December 31, 2003:
(a) T. Rowe Price Equity Index 500 Fund - consists of investments in the
same stocks and in substantially the same percentages as the S & P
500 Index ($5,072,812 and $3,343,721 at December 31, 2003 and 2002,
respectively).
(b) CenturyTel Common Stock Fund - consists of shares of CenturyTel
Common Stock ($1,436,200 and $789,472 at December 31, 2003 and 2002,
respectively).
(c) Loan Fund - represents loans to participants from the participants'
investment accounts ($2,162,354 and $1,679,094 at December 31, 2003
and 2002, respectively).
(d) T. Rowe Price Summit Cash Reserves Fund - consists primarily of
investments in various money market instruments ($6,940,871 and
$5,775,966 at December 31, 2003 and 2002, respectively).
(e) T. Rowe Price Equity Income Fund - consists primarily of investments
in U. S. and foreign common stocks ($9,889,274 and $7,519,545 at
December 31, 2003 and 2002, respectively).
(f) Janus Overseas Fund - consists primarily of investments in foreign
equity securities ($689,838 and $294,252 at December 31, 2003 and
2002, respectively).
(g) Janus Fund - consists primarily of investments in U. S. and foreign
equity securities ($1,571,810 and $792,731 at December 31, 2003 and
2002, respectively).
(h) T. Rowe Price Mid-Cap Growth Fund - consists primarily of investments
in common stocks of companies whose market capitalization falls
within the range of companies in the S&P MidCap 400 Index ($2,522,929
and $1,003,947 at December 31, 2003 and 2002, respectively).
(i) Morgan Stanley Institutional Fund Small Company Growth
Portfolio B - consists primarily of investments in common stocks of
small companies ($1,374,393 and $500,714 at December 31, 2003 and
2002, respectively).
(j) PIMCO Total Return Fund - consists primarily of investments in debt
securities ($4,477,022 and $4,017,905 at December 31, 2003 and 2002,
respectively).
(k) BGI Asset Allocation Fund - consists primarily of investments in
common stocks, U. S. Treasury bonds and money market instruments
($280,484 and $113,042 at December 31, 2003 and 2002, respectively).
(l) BGI LifePath Retirement Fund - consists primarily of investments
in U.S. and foreign equity and debt securities and money market
instruments and is managed for investors planning to retire (or begin
to withdraw substantial portions of their investment) in the near
future ($149,576 and $53,484 at December 31, 2003 and 2002,
respectively).
(m) BGI LifePath 2010 Fund - consists primarily of investments in U. S.
and foreign equity and debt securities and money market instruments
and is managed for investors planning to retire (or begin to withdraw
substantial portions of their investment) around the year 2010
($396,601 and $77,375 at December 31, 2003 and 2002, respectively).
(n) BGI LifePath 2020 Fund - consists primarily of investments in U.S.
and foreign equity and debt securities and money market instruments
and is managed for investors planning to retire (or begin to withdraw
substantial portions of their investment) around the year 2020
($121,473 and $53,425 at December 31, 2003 and 2002, respectively).
(o) BGI LifePath 2030 Fund - consists primarily of investments in U.S.
and foreign equity and debt securities and money market instruments
and is managed for investors planning to retire (or begin to withdraw
substantial portions of their investment) around the year 2030
($185,550 and $71,576 at December 31, 2003 and 2002, respectively).
(p) BGI LifePath 2040 Fund - consists primarily of investments in U. S.
and foreign equity and debt securities and money market instruments
and is managed for investors planning to retire (or begin to withdraw
substantial portions of their investment) around the year 2040
($84,735 and $22,623 at December 31, 2003 and 2002, respectively).
Investments in T. Rowe Price Equity Index 500 Fund, Loan Fund, T. Rowe
Price Summit Cash Reserves Fund, T. Rowe Price Equity Income Fund, T. Rowe
Price Mid-Cap Growth Fund and PIMCO Total Return Fund were each greater
than 5% of assets available for benefits at December 31, 2003.
A participant may instruct that all contributions to his accounts be
allocated among the various funds. A participant may change his investment
allocation instructions and contribution percentage at any time.
(3) INCOME TAXES
The Plan and related trust are designed to meet the necessary requirements
of Internal Revenue Code Section 401(a) and, accordingly, the trust
underlying the Plan is exempt from income taxation pursuant to Internal
Revenue Code Section 501(a). A favorable determination letter was received
in September 2003 related to the Plan.
(4) RELATED PARTY TRANSACTIONS
Certain Plan investments are shares of mutual funds managed by T. Rowe
Price, Barclays Global Investors Funds, Inc. (Barclays), Morgan Stanley
Investment Management Inc. (Morgan Stanley), Janus Capital
Corporation (Janus), or Pacific Investment Management Company (PIMCO).
T. Rowe Price is the Trustee as defined by the Plan. Therefore, T. Rowe
Price, Barclays, Morgan Stanley, Janus and PIMCO qualify as
parties-in-interest. Fees paid by the Company to T. Rowe Price for
trustee, record keeping and other services amounted to $83,345 for the
year ended December 31, 2003.
(5) CONCENTRATION OF INVESTMENTS
Substantially all of the assets available for benefits were invested in
mutual funds managed by T. Rowe Price, Janus, Barclays, Morgan Stanley or
PIMCO. The remaining assets available for benefits are invested in
CenturyTel Common Stock and loans to participants.
CENTURYTEL, INC.
UNION GROUP INCENTIVE PLAN
Schedule H, Line 4i - Schedule of Assets (Held at End of Year)
December 31, 2003
Identity of issuer, borrower, Current
lessor or similar party Description of Investment Value
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Investment in CenturyTel Common Stock 44,028 shares at $32.62 per share $ 1,436,200
Loan Fund (interest rates ranged
from 4.74% to 12.5%) - 2,162,354 (Note 1)
Investment in Mutual Funds for
Qualified Employee Benefit Plans:
Managed by Barclays:
Asset Allocation Fund 30,063 shares at $9.33 per share 280,484
LifePath Retirement Fund 13,561 shares at $11.03 per share 149,576
LifePath 2010 Fund 32,244 shares at $12.30 per share 396,601
LifePath 2020 Fund 8,597 shares at $14.13 per share 121,473
LifePath 2030 Fund 13,132 shares at $14.13 per share 185,550
LifePath 2040 Fund 5,477 shares at $15.47 per share 84,735
Managed by Janus:
Janus Overseas Fund 33,390 shares at $20.66 per share 689,838
Janus Fund 66,971 shares at $23.47 per share 1,571,810
Managed by Morgan Stanley:
Institutional Fund Small Company
Growth Portfolio B 131,647 shares at $10.44 per share 1,374,393
Managed by PIMCO:
PIMCO Total Return Fund 418,023 shares at $10.71 per share 4,477,022 (Note 1)
Managed by T. Rowe Price:
Equity Income Fund 409,324 shares at $24.16 per share 9,889,274 (Note 1)
Equity Index 500 Fund 169,376 shares at $29.95 per share 5,072,812 (Note 1)
Mid-Cap Growth Fund 58,810 shares at $42.90 per share 2,522,929 (Note 1)
Summit Cash Reserves Fund 6,940,871 shares at $1.00 per share 6,940,871 (Note 1)
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$ 37,355,922
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Barclays, Janus, Morgan Stanley, PIMCO and T. Rowe Price are considered
parties-in-interest. Additionally, CenturyTel, Inc., as sponsor of the Plan, is
considered a party-in-interest.
Notes: (1) These investments are greater than 5% of assets available
for benefits.
(2) Information on cost of investments is excluded as all investments
are participant directed.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Retirement Committee has duly caused this annual report to be signed on its
behalf by the undersigned thereunto duly authorized.
CenturyTel, Inc.
Union Group Incentive Plan
June 25, 2004 /s/ R. Stewart Ewing, Jr.
-------------------------
R. Stewart Ewing, Jr.
Retirement Committee Member and
Executive Officer of Issuer of
Plan Securities
CENTURYTEL, INC.
UNION GROUP INCENTIVE PLAN
Index to Exhibits
Exhibit
Number
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23.1 Consent of Independent Registered Public Accounting Firm