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, 2002
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
Independent Auditors' Report
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, 2002 and 2001,
and the related statement of changes in net assets available for benefits for
the year ended December 31, 2002. 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 auditing standards generally accepted
in the United States of America. 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, 2002 and 2001, and the changes in
net assets available for benefits for the year ended December 31, 2002 in
conformity with accounting principles generally accepted in the United States of
America.
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 6, 2003
CENTURYTEL, INC.
UNION GROUP INCENTIVE PLAN
Statements of Net Assets Available for Benefits
December 31, 2002 and 2001
2002 2001
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PLAN ASSETS
Investments, at fair value $ 26,108,872 23,835,597
Contributions receivable - employer 191 38,891
Contributions receivable - participants 473 101,165
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NET ASSETS AVAILABLE FOR BENEFITS $ 26,109,536 23,975,653
===============================================================================
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, 2002
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Additions to net assets:
Investment income (loss):
Net appreciation (depreciation) in fair value of investments:
Mutual funds $ (2,808,198)
Common stocks 5,430
Dividend and other income 695,000
Interest income 129,958
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Net investment income (loss) (1,977,810)
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Contributions:
Participants 4,731,530
Company 1,387,473
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Total contributions 6,119,003
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Total investment income (loss) and contributions 4,141,193
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Deductions from net assets:
Participant withdrawals 2,007,310
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Net increase 2,133,883
Net assets available for benefits:
Beginning of year 23,975,653
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End of year $ 26,109,536
===============================================================================
See accompanying notes to financial statements.
CENTURYTEL, INC.
UNION GROUP INCENTIVE PLAN
Notes to Financial Statements
December 31, 2002 and 2001
(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, 2002 and 2001 and changes
in net assets available for benefits for the year ended December 31, 2002.
The Plan has made estimates in preparing the accompanying financial
statements in accordance with accounting principles generally accepted in
the United States of America. 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.
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 base pay;
however, the total amount contributed to the Plan cannot exceed $11,000
for 2002 (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 2002 (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.
Effective June 3, 2002, 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 2002 was $1,000; 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 base compensation contributed to the Plan
by the employee. During 2002 the Company contributed $1,387,473 to the
Employer 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 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 becomes 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 shall be utilized first to satisfy any
restorations for the year and any remaining forfeitures shall be applied
to offset future employer contributions or pay plan expenses.
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, 2002, 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, 2002 and 2001,
respectively. Other investments in the funds, which consist 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, 2002:
(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 ($3,343,721 and $3,692,293 at December 31, 2002 and 2001,
respectively).
(b) CenturyTel Common Stock Fund - consists of shares of CenturyTel
Common Stock ($789,472 and $221,291 at December 31, 2002 and 2001,
respectively).
(c) Loan Fund - represents loans to participants from the participants'
investment accounts ($1,679,094 and $1,366,015 at December 31, 2002
and 2001, respectively).
(d) T. Rowe Price Summit Cash Reserves Fund - consists primarily of
investments in various money market instruments ($5,775,966 and
$5,207,044 at December 31, 2002 and 2001, respectively).
(e) T. Rowe Price Equity Income Fund - consists primarily of investments
in U. S. and foreign common stocks ($7,519,545 and $7,946,349 at
December 31, 2002 and 2001, respectively).
(f) Janus Overseas Fund - consists primarily of investments in foreign
equity securities ($294,252 and $232,473 at December 31, 2002 and
2001, respectively).
(g) Janus Fund - consists primarily of investments in U. S. and foreign
equity securities ($792,731 and $779,351 at December 31, 2002 and
2001, 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 ($1,003,947
and $590,265 at December 31, 2002 and 2001, respectively).
(i) Morgan Stanley Dean Witter Small Company Growth Portfolio Fund -
consists primarily of investments in common stocks of small companies
($500,714 and $416,529 at December 31, 2002 and 2001, respectively).
(j) PIMCO Total Return Fund - consists primarily of investments in debt
securities ($4,017,905 and $3,225,940 at December 31, 2002 and 2001,
respectively).
(k) BGI Asset Allocation Fund - consists primarily of investments in
common stocks, U. S. Treasury bonds and money market instruments
($113,042 and $39,026 at December 31, 2002 and 2001, respectively).
(l) BGI LifePath Income 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 ($53,484
and $19,607 at December 31, 2002 and 2001, 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
($77,375 and $43,177 at December 31, 2002 and 2001, 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
($53,425 and $30,960 at December 31, 2002 and 2001, 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
($71,576 and $11,780 at December 31, 2002 and 2001, 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
($22,623 and $13,497 at December 31, 2002 and 2001, 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 and
PIMCO Total Return Fund were each greater than 5% of assets available for
benefits at December 31, 2002.
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 March 1996 related to the Plan. The Plan has been amended and restated
since receiving the determination letter. However, the Plan administrator
believes that the Plan is designed and is currently being operated in
compliance with the applicable provisions of the Internal Revenue Code.
(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
Dean Witter 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 $67,505 for the year ended
December 31, 2002.
(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, 2002
Identity of issuer, borrower, Current
lessor or similar party Description of Investment Value
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Investment in CenturyTel Common Stock 26,871 shares at $29.38 per share $ 789,472
Loan Fund (interest rates ranged
from 4.74% to 12.5%) - 1,679,094 (Note 1)
Investment in Mutual Funds for
Qualified Employee Benefit Plans:
Managed by Barclays:
Asset Allocation Fund 13,786 shares at $8.20 per share 113,042
LifePath Income Fund 5,332 shares at $10.03 per share 53,484
LifePath 2010 Fund 7,151 shares at $10.82 per share 77,375
LifePath 2020 Fund 4,493 shares at $11.89 per share 53,425
LifePath 2030 Fund 6,192 shares at $11.56 per share 71,576
LifePath 2040 Fund 1,844 shares at $12.27 per share 22,623
Managed by Janus:
Janus Overseas Fund 19,245 shares at $15.29 per share 294,252
Janus Fund 44,485 shares at $17.82 per share 792,731
Managed by Morgan Stanley:
Small Co. Growth Portfolio Fund 68,969 shares at $7.26 per share 500,714
Managed by PIMCO:
PIMCO Total Return Fund 376,561 shares at $10.67 per share 4,017,905 (Note 1)
Managed by T. Rowe Price:
Equity Income Fund 379,967 shares at $19.79 per share 7,519,545 (Note 1)
Equity Index 500 Fund 141,264 shares at $23.67 per share 3,343,721 (Note 1)
Mid-Cap Growth Fund 32,344 shares at $31.04 per share 1,003,947
Summit Cash Reserves Fund 5,775,966 shares at $1.00 per share 5,775,966 (Note 1)
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$ 26,108,872
=======================================================================================================
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 27, 2003 /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 Independent Auditors' Consent
99 Certification pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.