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 SECURITY SYSTEMS, INC.
401 (k) PLAN AND TRUST
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 Security Systems, Inc. 401 (k) Plan and Trust 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
Security Systems, Inc. 401(k) Plan and Trust 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 SECURITY SYSTEMS, INC.
401 (k) PLAN AND TRUST
Statements of Net Assets Available for Benefits
December 31, 2002 and 2001
2002 2001
------------------------------------------------------------------------------
PLAN ASSETS
Investments, at fair value $ 103,976 97,582
Contribution receivable - participants 69 860
------------------------------------------------------------------------------
NET ASSETS AVAILABLE FOR BENEFITS $ 104,045 98,442
==============================================================================
See accompanying notes to financial statements.
CENTURYTEL SECURITY SYSTEMS, INC.
401 (k) PLAN AND TRUST
Statement of Changes in Net Assets Available for Benefits
For the year ended December 31, 2002
------------------------------------------------------------------------------
Additions to net assets:
Investment income (loss):
Net depreciation in fair value of investments $ (19,689)
Dividends and interest 2,287
------------------------------------------------------------------------------
Net investment income (loss) (17,402)
------------------------------------------------------------------------------
Contributions:
Participants 25,581
------------------------------------------------------------------------------
Total additions 8,179
------------------------------------------------------------------------------
Deductions from net assets:
Participant withdrawals 2,576
------------------------------------------------------------------------------
Net increase 5,603
Net assets available for benefits:
Beginning of period 98,442
------------------------------------------------------------------------------
End of period $ 104,045
===============================================================================
See accompanying notes to financial statements.
CENTURYTEL SECURITY SYSTEMS, INC.
401 (k) PLAN AND TRUST
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 Security Systems Inc., 401(k) Plan and Trust (the Plan) was
established on June 1, 1997. The accompanying financial statements of the
Plan have been prepared on the accrual basis of accounting and present the
net assets available for benefits and changes in net assets available for
benefits. 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 employee of CenturyTel
Security Systems, Inc. (the Company), other than those who are classified
as temporary employees or employees covered under a collective bargaining
agreement.
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 on-line or by telephone, an employee agrees to a
deferral of between one percent and twenty-five percent of compensation;
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. The Elective Deferral Account is self-directed.
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; this 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 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).
The interest of a participant in his Elective Deferral Account and his
Rollover/Transfer Account is fully vested and non-forfeitable at all
times.
Reports to Participants
All participants are furnished with quarterly statements which set forth
the status of their accounts in the Plan.
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 entire 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 accounts prior to meeting normal distribution
requirements. 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 purchase of a principal residence of the Participant, or the
prevention of eviction or foreclosure from 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.
Plan Termination
Although it has not expressed any intent to do so, the Company has the
right under the Plan to discontinue its contributions at any time and to
change, suspend or terminate the Plan subject to the provisions of the
Employee Retirement Income Security Act of 1974.
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 loan balance on the
date of the new loan or 50% of the account balance. The loans are repaid
through payroll deductions and the interest rate is the prime rate
published in the Wall Street Journal for the last business 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 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.
(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) Janus Overseas Fund - consists primarily of investments in foreign
equity securities ($14,083 and $15,306 at December 31, 2002 and 2001,
respectively).
(b) Janus Fund - consists primarily of investments in U. S. and foreign
equity securities ($15,426 and $15,688 at December 31, 2002 and 2001,
respectively).
(c) T. Rowe Price Equity Index 500 Fund - consists primarily of
investments in the same stocks and in substantially the same
percentages as the S & P 500 Index ($30,111 and $26,970 at December
31, 2002 and 2001, respectively).
(d) T. Rowe Price Equity Income Fund - consists primarily of investments
in U. S. and foreign common stocks ($9,394 and $9,424 at December 31,
2002 and 2001, respectively).
(e) T. Rowe Price Summit Cash Reserves Fund - consists primarily of
investments in various money market instruments ($1,770 and $4,529 at
December 31, 2002 and 2001, respectively).
(f) PIMCO Total Return Fund - consists primarily of investments in debt
securities ($591 and $530 at December 31, 2002 and 2001,
respectively).
(g) CenturyTel Common Stock Fund - consists of shares of CenturyTel
Common Stock ($10,339 and $4,981 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 ($5,659 and
$4,129 at December 31, 2002 and 2001, respectively).
(i) BGI LifePath Income Fund - consists primarily 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 ($16 and
$17 at December 31, 2002 and 2001, respectively).
(j) 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 ($13
and $10 at December 31, 2002 and 2001, respectively).
(k) 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
($1,216 and $719 at December 31, 2002 and 2001, respectively).
(l) 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 ($636
and $8 at December 31, 2002 and 2001, respectively).
(m) BGI Asset Allocation Fund - consists primarily of investments in
common stocks, U.S. Treasury bonds and money market instruments ($4
at December 31, 2002).
(n) Morgan Stanley Dean Witter Small Company Growth Portfolio Fund -
consists primarily of investments in equity securities of small
companies ($1,251 and $778 at December 31, 2002 and 2001,
respectively).
(o) Loan Fund - represents loans to participants from the participants'
investment accounts ($13,467 and $14,493 at December 31, 2002 and
2001, respectively).
Investments in Janus Overseas Fund, Janus Fund, T. Rowe Price Equity Index
500 Fund, T. Rowe Price Equity Income Fund, T. Rowe Price Mid-Cap Growth
Fund, CenturyTel Common Stock Fund and Loan Fund were each greater than 5%
of assets available for benefits at December 31, 2002.
A participant may instruct that his contribution be allocated among the
various funds. A participant may change his investment allocation
instructions and his contribution percentage at any time.
(3) INCOME TAXES
The Plan and related trust were 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
from the Internal Revenue Service has not been obtained for the Plan as
currently amended and restated. A request for such was filed on February
28, 2002. 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, Janus Capital Corporation (Janus), Barclays Global Investors Funds,
Inc. (Barclays), Morgan Stanley Dean Witter Investment Management Inc.
(Morgan Stanley) or Pacific Investment Management Company (PIMCO). T. Rowe
Price is the Trustee as defined by the Plan. Therefore, T. Rowe Price,
Janus, Barclays, Morgan Stanley 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 $6,635 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 were invested in
CenturyTel Common Stock and loans to participants.
CENTURYTEL SECURITY SYSTEMS, INC.
401 (k) PLAN AND TRUST
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
----------------------------------------------------------------------------------------------------------
Investment in CenturyTel Common Stock 352 shares at $29.38 per share $ 10,339 (Note 1)
Loan Fund (interest rates ranged from
5.75% to 9.0%) - 13,467 (Note 1)
Investment in Mutual Funds for
Qualified Employee Benefit Plans
Managed by Janus:
Janus Overseas Fund 921 shares at $15.29 per share 14,083 (Note 1)
Janus Fund 866 shares at $17.82 per share 15,426 (Note 1)
Investment in Mutual Funds for
Qualified Employee Benefit Plans
Managed by T. Rowe Price:
Equity Income Fund 475 shares at $19.79 per share 9,394 (Note 1)
Equity Index 500 Fund 1,272 shares at $23.67 per share 30,111 (Note 1)
Mid-Cap Growth Fund 182 shares at $31.04 per share 5,659 (Note 1)
Summit Cash Reserves Fund 1,770 shares at $1.00 per share 1,770
Investments in Mutual Funds for
Qualified Employee Benefit Plans
Managed by PIMCO:
PIMCO Total Return Fund 55 shares at $10.67 per share 591
Investments in Mutual Funds for
Qualified Employee Benefit Plans
Managed by Barclays:
Asset Allocation Fund 1 share at $8.20 per share 4
LifePath Income Fund 2 shares at $10.03 per share 16
LifePath 2010 Fund 1 share at $10.82 per share 13
LifePath 2020 Fund 102 shares at $11.89 per share 1,216
LifePath 2030 Fund 55 shares at $11.56 per share 636
Investments in Mutual Funds for
Qualified Employee Benefit Plans
Managed by Morgan Stanley:
Small Company Growth Portfolio Fund 172 shares at $7.26 per share 1,251
----------------------------------------------------------------------------------------------------------
$ 103,976
==========================================================================================================
T. Rowe Price, Janus, PIMCO, Barclays and Morgan Stanley 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 it
behalf by the undersigned thereunto duly authorized.
CenturyTel Security Systems, Inc.
401 (k) Plan and Trust
June 27, 2003 /s/ R. Stewart Ewing, Jr.
-------------------------
R. Stewart Ewing, Jr.
Retirement Committee Member and
Executive Officer of Issuer of Plan Securities
CENTURYTEL SECURITY SYSTEMS, INC.
401(K) PLAN AND TRUST
Index to Exhibits
Exhibit
Number
----------------------------------------------------------------------------
23.1 Independent Auditors' Consent
99 Certification pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.