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, 2004
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
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 Security Systems, Inc. 401 (k) Plan and Trust as of December 31,
2004 and 2003, and the related statement of changes in net assets available for
benefits for the year ended December 31, 2004. 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
Security Systems, Inc. 401(k) Plan and Trust as of December 31, 2004 and 2003,
and the changes in net assets available for benefits for the year ended December
31, 2004, 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 15, 2005
CENTURYTEL SECURITY SYSTEMS, INC.
401 (k) PLAN AND TRUST
Statements of Net Assets Available for Benefits
December 31, 2004 and 2003
2004 2003
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PLAN ASSETS
Investments, at fair value $ 164,389 141,825
Cash 9 -
Contribution receivable - participants - 66
Contribution receivable - employer - 432
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NET ASSETS AVAILABLE FOR BENEFITS $ 164,398 142,323
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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, 2004
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Additions to net assets:
Investment income:
Net appreciation in fair value of investments $ 11,404
Dividends and interest 3,011
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Net investment income 14,415
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Contributions:
Participants 16,176
Employer 1,333
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Total contributions 17,509
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Total investment income and contributions 31,924
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Deductions from net assets:
Participant withdrawals 9,849
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Net increase 22,075
Net assets available for benefits:
Beginning of period 142,323
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End of period $ 164,398
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See accompanying notes to financial statements.
CENTURYTEL SECURITY SYSTEMS, INC.
401 (k) PLAN AND TRUST
Notes to Financial Statements
December 31, 2004 and 2003
(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 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.
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 $13,000 for 2004 (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 $205,000 for 2004 (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.
As of the end of each payroll period, the Company contributes to an account
(Employer Match Account) for each participant a contribution equal to 10%
of each such participant's contribution during such payroll period;
however, this matching contribution applies only to the first 6% of such
participant's compensation contributed to the Plan. The Board of Directors
of the Company may, at its discretion, elect to contribute an additional
amount to participants' accounts (Additional Match Account). During 2004,
the Company contributed $1,333 to the Plan, all of which related to
contributions made to the Employer Match Account.
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 2004 was $3,000; 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 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).
The interest of a participant in his Elective Deferral Account, his
Rollover/Transfer Account, his Employer Match Account and his Additional
Match 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 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, 2004, 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, 2004 and 2003, 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.
(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, 2004:
(a) CenturyTel Common Stock Fund - consists of shares of CenturyTel
Common Stock ($17,078 and $14,760 at December 31, 2004 and
2003, respectively).
(b) Loan Fund - represents loans to participants from the participants'
investment accounts ($22,651 and $11,659 at December 31, 2004 and
2003, respectively).
(c) American Funds Amcap, R4 - consists primarily of investments in
U.S. common stocks ($21,705 at December 31, 2004).
(d) Fidelity Diversified International Fund - consists primarily of
investments in foreign common stocks ($19,994 at December 31, 2004).
(e) Oakmark Equity and Income Fund, Class I - consists primarily of
investments in U.S. equity and debt securities ($5 at December 31,
2004).
(f) Morgan Stanley Institutional Fund Small Company Growth Portfolio B -
consists primarily of investments in equity securities of small
companies ($2,807 and $2,363 at December 31, 2004 and 2003,
respectively).
(g) PIMCO Total Return Fund - consists primarily of investments in
debt securities ($1,624 and $798 at December 31, 2004 and
2003, respectively).
(h) T. Rowe Price Retirement 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 ($457 at December 31, 2004).
(i) T. Rowe Price Retirement 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 ($60 at December 31, 2004).
(j) T. Rowe Price Retirement 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 ($1,434 at December 31, 2004).
(k) T. Rowe Price Equity Income Fund - consists primarily of investments
in U. S. and foreign common stocks ($11,301 and $12,373 at December
31, 2004 and 2003, respectively).
(l) 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 ($56,690 and $48,746 at December
31, 2004 and 2003, respectively).
(m) 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 ($6,950 and
$6,650 at December 31, 2004 and 2003, respectively).
(n) T. Rowe Price Summit Cash Reserves Fund - consists primarily of
investments in various money market instruments ($1,633 and $1,924 at
December 31, 2004 and 2003, respectively).
Investments in American Funds Amcap R4, Fidelity Diversified International
Fund, T. Rowe Price Equity Index 500 Fund, T. Rowe Price Equity Income
Fund, CenturyTel Common Stock Fund and Loan Fund were each greater than 5%
of assets available for benefits at December 31, 2004.
A participant may instruct that all 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 was received in October 2003 related to the Plan.
(4) RELATED PARTY TRANSACTIONS
Certain Plan investments are shares of mutual funds managed by T. Rowe
Price, Capital Research and Management Company (Capital), Fidelity
Investments (Fidelity), Harris Associates (Harris), Morgan Stanley
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, Capital, Fidelity, Harris, 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
$6,815 for the year ended December 31, 2004.
(5) CONCENTRATION OF INVESTMENTS
Substantially all of the assets available for benefits were invested in
mutual funds managed by T. Rowe Price, Capital, Fidelity, Harris, 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, 2004
Identity of issuer, borrower, Current
lessor or similar party Description of Investment Value
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Investment in CenturyTel Common Stock 481 shares at $35.47 per share $ 17,078 (Note 1)
Loan Fund (interest rates ranged
from 5.0% to 9.0%) 22,651 (Note 1)
Investment in Mutual Funds for
Qualified Employee Benefit Plans:
Managed by Capital Research and
Management Company:
American Funds Amcap, R4 1,186 shares at $18.30 per share 21,705 (Note 1)
Managed by Fidelity Investments:
Fidelity Diversified International Fund 698 shares at $28.64 per share 19,994 (Note 1)
Managed by Harris Associates:
Oakmark Equity & Income Fund, Class I 0.21 shares at $23.50 per share 5
Managed by Morgan Stanley:
Institutional Fund Small Company
Growth Portfolio B 234 shares at $12.02 per share 2,807
Managed by PIMCO:
PIMCO Total Return Fund 152 shares at $10.67 per share 1,624
Managed by T. Rowe Price:
Retirement 2010 Fund 33 shares at $14.04 per share 457
Retirement 2020 Fund 4 shares at $14.89 per share 60
Retirement 2030 Fund 93 shares at $15.50 per share 1,434
Equity Income Fund 425 shares at $26.59 per share 11,301 (Note 1)
Equity Index 500 Fund 1,741 shares at $32.56 per share 56,690 (Note 1)
Mid-Cap Growth Fund 139 shares at $49.88 per share 6,950
Summit Cash Reserves Fund 1,633 shares at $1.00 per share 1,633
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$ 164,389
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T. Rowe Price, Capital, Fidelity, Harris, PIMCO, 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.
See accompanying report of independent registered public accounting firm.
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 Security Systems, Inc.
401 (k) Plan and Trust
June 27, 2005 /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
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23.1 Consent of Independent Registered Public Accounting Firm