FILED PURSUANT TO RULE 424(b)(3)
REGISTRATION NO. 333-100480
PROSPECTUS
[CENTURYTEL LOGO]
OFFER TO EXCHANGE
$500,000,000 REGISTERED 7.875% SENIOR NOTES, SERIES L, DUE 2012
FOR
ALL OUTSTANDING UNREGISTERED 7.875% SENIOR NOTES, SERIES L, DUE 2012
We are offering to exchange 7.875% senior notes, Series L, due 2012 that we
have registered under the Securities Act of 1933 for all of our outstanding
7.875% senior notes, Series L, due 2012. In this prospectus, we refer to our
registered notes as the exchange notes and our outstanding senior notes as the
outstanding notes. We refer to the exchange notes and the outstanding notes
collectively as the notes, all of which are described further herein.
- We hereby offer to exchange all outstanding notes that are validly
tendered and not withdrawn for an equal principal amount of exchange
notes which are registered under the Securities Act of 1933.
- The exchange offer will expire at 5:00 p.m., New York City time, on March
13, 2003, unless extended.
- You may withdraw tenders of your outstanding notes at any time before the
exchange offer expires.
- We will issue the exchange notes promptly after the exchange offer
expires.
- We believe that the exchange of outstanding notes for exchange notes will
not be a taxable event for federal income tax purposes, but you should
read "Certain U.S. Federal Income Tax Consequences" beginning on page 35
for more information.
- We will not receive any proceeds from the exchange offer.
- No public market currently exists for the exchange notes. We do not
intend to apply for listing of the exchange notes on any securities
exchange or to arrange for them to be quoted on any quotation system.
OWNING THE EXCHANGE NOTES INVOLVES RISKS THAT WE DESCRIBE IN THE "RISK
FACTORS" SECTION BEGINNING ON PAGE 13.
----------------------
Each broker-dealer that receives exchange notes for its own account
pursuant to the exchange offer must acknowledge that it will deliver a
prospectus in connection with any resale of such exchange notes. The letter of
transmittal described below states that by so acknowledging and by delivering a
prospectus, a broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act of 1933. This prospectus,
as it may be amended or supplemented from time to time, may be used by a
broker-dealer in connection with resales of exchange notes received in exchange
for outstanding notes where such outstanding notes were acquired by such
broker-dealer as a result of market-making activities or other trading
activities. We have agreed that, for a period of 180 days after the expiration
date (as defined herein), we will make this prospectus available to any
broker-dealer for use in connection with any such resale. See "Plan of
Distribution."
----------------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THE EXCHANGE NOTES OR DETERMINED IF
THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
----------------------
The date of this prospectus is February 10, 2003
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED OR
INCORPORATED BY REFERENCE IN THIS PROSPECTUS IN CONNECTION WITH THE OFFER
CONTAINED IN THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY CENTURYTEL.
NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL UNDER
ANY CIRCUMSTANCES CREATE AN IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF CENTURYTEL SINCE THE DATE HEREOF. THIS PROSPECTUS DOES NOT CONSTITUTE
AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN
THOSE SPECIFICALLY OFFERED HEREBY OR ANY SECURITIES IN ANY JURISDICTION WHERE,
OR TO ANY PERSON TO WHOM, IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. YOU
SHOULD ASSUME THAT THE INFORMATION CONTAINED OR INCORPORATED BY REFERENCE IN
THIS PROSPECTUS IS ACCURATE ONLY AS OF THE DATE ON THE FRONT COVER OF THOSE
DOCUMENTS.
----------------------
TABLE OF CONTENTS
Forward-Looking Statements.................................. ii
Where You Can Find More Information......................... ii
Prospectus Summary.......................................... 1
Risk Factors................................................ 13
Use of Proceeds............................................. 17
Earnings Ratios............................................. 17
Capitalization.............................................. 18
The Exchange Offer.......................................... 20
Description of the Notes.................................... 28
Certain United States Federal Income Tax Consequences....... 35
Plan of Distribution........................................ 38
Legal Matters............................................... 39
Experts..................................................... 39
i
FORWARD-LOOKING STATEMENTS
Certain statements contained or incorporated by reference in this
prospectus that are not historical facts are intended to be forward-looking
statements within the meaning of the Private Securities Litigation Reform Act of
1995. These forward-looking statements are based on current expectations only,
and are subject to a number of risks, uncertainties and assumptions, many of
which are beyond our control. Our actual results may differ materially from
those anticipated, estimated or projected if one or more of these risks or
uncertainties materialize, or if underlying assumptions prove incorrect. Factors
that could affect actual results include but are not limited to:
- our ability to effectively manage our growth, including integrating newly
acquired properties into our operations, hiring adequate numbers of
qualified staff and successfully upgrading our billing and other
information systems
- the risks inherent in rapid technological change
- the effects of ongoing changes in the regulation of the communications
industry, including the final outcome of pending regulatory and judicial
proceedings affecting communication companies generally
- the effects of greater than anticipated competition in our markets
- possible changes in the demand for, or pricing of, our products and
services, including lower than anticipated demand for our newly offered
products and services
- our ability to successfully introduce new product or service offerings on
a timely and cost-effective basis
- the direct and indirect effects on our business resulting from the
financial difficulties of other communications companies, including the
effect on our ability to collect receivables from financially troubled
carriers and our ability to access the capital markets on favorable
terms, and
- the effects of more general factors, such as changes in interest rates,
in the capital markets, in general market or economic conditions or in
legislation, regulation or public policy.
These factors, and others, are described in greater detail in Item 1 of our
Annual Report on Form 10-K for the year ended December 31, 2001, which is
incorporated by reference in this prospectus. You are cautioned not to place
undue reliance on our forward-looking statements, which speak only as of the
date of the document in which they appear. Except for our obligations to
disclose material information under the federal securities laws, we undertake no
obligation to update any of our forward-looking statements for any reason.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and current reports, proxy statements and other
information with the SEC. You can read and copy that information at the public
reference room of the SEC at 450 Fifth Street, NW, Washington, D.C. 20549. You
may call the SEC at 1-800-SEC-0330 for more information about the public
reference room. The SEC also maintains an Internet site that contains reports,
proxy and information statements and other information regarding registrants,
like us, that file reports with the SEC electronically. The SEC's Internet
address is http://www.sec.gov. You may also obtain certain information about us
at the offices of the New York Stock Exchange at 20 Broad Street, New York, New
York 10005.
We have filed a registration statement on Form S-4 and related exhibits
with the SEC under the Securities Act. The registration statement may contain
additional information that may be important to you. You may obtain a copy of
the registration statement and exhibits from the SEC as indicated above.
In this document, we "incorporate by reference" certain information that we
file with the SEC, which means that we can disclose important information to you
by referring to that information. You will be deemed to have notice of all
information incorporated by reference in this prospectus as if that information
was included in this prospectus. You should therefore read the information
incorporated by reference in this prospectus with the same care you use when
reading this prospectus. Certain information that we file later
ii
with the SEC will automatically update and supersede information incorporated by
reference in this prospectus and information contained in this prospectus.
We incorporate by reference the following documents that we have filed with
the SEC pursuant to the Securities Exchange Act of 1934, as amended (the
"Exchange Act"):
- Annual Report on Form 10-K for the year ended December 31, 2001.
- Quarterly Reports on Form 10-Q for the quarters ended March 31, 2002,
June 30, 2002 and September 30, 2002.
- Current Reports on Form 8-K filed on January 31, 2002, February 1, 2002,
March 22, 2002, April 25, 2002, April 29, 2002, May 3, 2002, June 28,
2002, July 15, 2002, July 19, 2002, July 26, 2002, August 13, 2002 (two
reports), August 14, 2002, August 22, 2002, October 8, 2002, October 25,
2002, January 13, 2003 and January 31, 2003.
- All documents filed by us with the SEC pursuant to Sections 13(a), 13(c),
14 or 15(d) of the Exchange Act after the date of this prospectus and
prior to the termination of this offering.
At your request, we will provide you with a free copy of any of these
filings (except for exhibits, unless the exhibits are specifically incorporated
by reference into the filing). You may request copies by writing us at 100
CenturyTel Drive, Monroe, Louisiana 71203, Attention: Harvey P. Perry, or by
telephoning us at (318) 388-9000. In addition, so long as any notes remain
outstanding as "restricted securities" within the meaning of Rule 144 under the
Securities Act, we will make available to any holder of notes, upon request, at
the same address and phone number, information as is necessary to permit sales
pursuant to Rule 144 and Rule 144A under the Securities Act during any period in
which we are not subject to Section 13 or 15(d) of the Exchange Act.
iii
PROSPECTUS SUMMARY
This summary highlights selected information from this prospectus and is
not intended to contain all of the information that may be important to you. You
should read the entire prospectus and the documents to which we have referred
you As used in this prospectus, the terms "CenturyTel," "we," "our' and "us"
refer to CenturyTel, Inc., and not any of its subsidiaries (unless the context
requires and except under the heading "CenturyTel" immediately below, where such
terms refer to the consolidated operations of CenturyTel, Inc. and its
subsidiaries).
CENTURYTEL
We are a regional integrated communications company. We are primarily
engaged in providing local telephone communications services in 22 states. We
also provide long distance, Internet, competitive local exchange, broadband
data, security monitoring, and other communications and business information
services. As described further below, we recently sold our wireless
communications business. For the nine months ended September 30, 2002, local
telephone services provided approximately 88% of our consolidated operating
revenues from continuing operations.
Our principal offices are located at 100 CenturyTel Drive, Monroe,
Louisiana 71203, telephone number: (318) 388-9000.
OPERATIONS
Telephone operations. Based on published sources, we believe that we are
currently the eighth largest local exchange telephone company in the United
States, measured by the number of telephone access lines served. At September
30, 2002, our telephone subsidiaries served over 2.4 million access lines in 22
states, primarily in rural, suburban and small urban communities. All of our
access lines are served by digital switching technology, which in conjunction
with other technologies allows us to offer additional premium services to our
customers, including call forwarding, conference calling, caller identification,
selective call ringing and call waiting.
The following table sets forth information with respect to our access lines
as of September 30, 2002:
NUMBER OF PERCENT OF
STATE ACCESS LINES ACCESS LINES
----- ------------ ------------
Wisconsin.................................... 494,707(1) 20.3%
Missouri..................................... 485,063(2) 19.9%
Alabama...................................... 292,969 12.0%
Arkansas..................................... 269,708 11.1%
Washington................................... 189,415 7.8%
Michigan..................................... 115,531 4.7%
Louisiana.................................... 104,689 4.3%
Colorado..................................... 97,090 4.0%
Ohio......................................... 84,481 3.5%
Oregon....................................... 77,303 3.2%
Montana...................................... 66,044 2.7%
Texas........................................ 49,602 2.0%
Minnesota.................................... 31,111 1.3%
Tennessee.................................... 27,606 1.1%
Mississippi.................................. 24,212 1.0%
New Mexico................................... 6,547 --(3)
Idaho........................................ 6,064 --(3)
1
NUMBER OF PERCENT OF
STATE ACCESS LINES ACCESS LINES
----- ------------ ------------
Wyoming...................................... 5,550 --(3)
Indiana...................................... 5,470 --(3)
Iowa......................................... 2,079 --(3)
Arizona...................................... 1,990 --(3)
Nevada....................................... 513 --(3)
--------- ----
2,437,744 100%
--------- ----
---------------
(1) Approximately 61,930 of these lines are owned and operated by CenturyTel's
89%-owned affiliate.
(2) Approximately 130,870 of these lines are owned and operated by CenturyTel's
75.7%-owned affiliate.
(3) Represents less than 1%.
----------------------
Our telephone subsidiaries are installing fiber optic cable in certain of
our high traffic markets and have provided alternative routing of telephone
service over fiber optic cable networks in several strategic operating areas. At
September 30, 2002, our telephone subsidiaries had approximately 13,800 miles of
fiber optic cable in use.
Other operations. We also provide long distance, Internet, competitive
local exchange, broadband data, and security monitoring in certain local and
regional markets, as well as certain printing and related business information
services. At September 30, 2002, our long distance business served approximately
584,890 customers in certain of our markets, and we provided Internet access
services to a total of approximately 171,900 customers, 129,800 of which
received traditional dial-up Internet service and 42,100 of which received
retail DSL services.
In late 2000, we began offering competitive local exchange telephone
services, coupled with long distance, Internet access and other services, to
small to medium-sized businesses in Monroe and Shreveport, Louisiana, and in
late 2001, we began offering similar services in Grand Rapids and Lansing,
Michigan.
ACQUISITIONS AND DISPOSITIONS
Wireline acquisitions. On July 1, 2002, we completed the purchase of
assets comprising all of the local exchange telephone operations of Verizon
Communications, Inc. ("Verizon") in the state of Alabama for approximately
$1.022 billion in cash. The assets purchased include (i) all telephone access
lines (which numbered nearly 300,000 at the time of purchase) and related
property and equipment comprising Verizon's local exchange operations in 90
exchanges in predominantly rural markets throughout Alabama, (ii) Verizon's
assets used to provide DSL and other high speed data services within the
purchased exchanges and (iii) approximately 1,400 route miles of fiber optic
cable within the purchased exchanges. The acquired assets do not include
Verizon's wireless, long distance, dial-up Internet, or directory publishing
operations, or rights under various Verizon contracts, including those relating
to customer premise equipment. We did not assume any liabilities of Verizon
other than (i) those associated with contracts, facilities and certain other
assets transferred in connection with the purchase and (ii) certain
employee-related liabilities, including liabilities for postretirement health
benefits.
On August 31, 2002, we completed the purchase of assets comprising all of
Verizon's local exchange telephone operations in the state of Missouri for
approximately $1.179 billion in cash. The assets purchased include (i) all
telephone access lines (which numbered approximately 354,000 at the time of
purchase) and related property and equipment comprising Verizon's local exchange
operations in 98 exchanges in predominantly rural and suburban markets
throughout Missouri, several of which are adjacent to properties that we have
owned and operated since 2000, (ii) Verizon's assets used to provide DSL and
other high speed data services within the purchased exchanges in Missouri and
(iii) an aggregate of approximately 1,400 route miles of fiber optic cable
within the purchased exchanges in Missouri. Our agreement with Verizon relating
to assets
2
retained by Verizon and liabilities assumed by us in the transaction are the
same as those described above for the Alabama purchase.
Wireless operations divestiture. On August 1, 2002, we completed the sale
of substantially all of our wireless operations to an affiliate of ALLTEL
Corporation ("Alltel"). We received approximately $1.591 billion in connection
with the transaction ($1.285 billion after tax). We retained a minority interest
in one market, which Alltel has agreed to purchase from us for approximately $68
million, subject to several closing conditions. The parties are currently in
discussions regarding whether these closing conditions have been met. No
assurance can be given that this sale will occur.
In connection with this transaction, we divested our (i) interests in our
majority-owned and operated cellular systems, which at June 30, 2002 served
approximately 783,000 customers and had access to approximately 7.8 million
pops, (ii) minority cellular equity interests representing approximately 1.8
million pops at June 30, 2002, and (iii) licenses to provide Personal
Communications Services covering approximately 1.3 million pops in Wisconsin and
Iowa.
Future acquisitions. We continually evaluate the possibility of acquiring
additional communications assets in exchange for cash, securities or both, and
at any given time may be engaged in discussions or negotiations regarding
additional acquisitions. We generally do not announce our acquisitions until we
have entered into a preliminary or definitive agreement. Over the past few
years, the number and size of communications properties on the market has
increased substantially. Although our primary focus will continue to be on
acquiring interests near our properties or that serve a customer base large
enough for us to operate efficiently, we may also acquire other communications
interests and these acquisitions could have a material impact upon CenturyTel.
----------------------
When used in this prospectus, (1) the term "FCC" means the Federal
Communications Commission, (2) the term "DSL" means digital subscriber lines,
through which we provide high-speed Internet service, and (3) the term "pops,"
whenever used with respect to wireless operations, means the population of
licensed markets (based on independent third-party population estimates)
multiplied by our proportionate equity interests in the licensed operators of
those markets.
3
THE EXCHANGE OFFER
Securities Offered............ We are offering to exchange the outstanding
notes for the exchange notes in the aggregate
principal amount of up to $500,000,000. The
exchange notes will evidence the same debt as
the outstanding notes and will be entitled to
the benefits of the same indenture as the
outstanding notes. The terms of the exchange
notes and outstanding notes are identical in
all material respects, except principally for
certain provisions relating to additional
interest and transfer restrictions.
The Exchange Offer............ The exchange notes are being offered in
exchange for a like principal amount of
outstanding notes. The outstanding notes may be
exchanged only in integral multiples of $1,000.
The issuance of the exchange notes is intended
to satisfy our obligations contained in a
registration rights agreement between us and
the initial purchasers of the outstanding
notes.
Resale of Exchange Notes...... Based on interpretive letters of the SEC staff
to third parties, we believe that you may
resell and transfer the exchange notes issued
pursuant to the exchange offer in exchange for
outstanding notes without compliance with the
registration and prospectus delivery provisions
of the Securities Act if, among other things:
- you are acquiring the exchange notes in
the ordinary course of your business;
- you have no arrangement or understanding
with any person to participate in the
distribution of the exchange notes;
- you are not our affiliate (as defined in
Rule 405 promulgated under the
Securities Act); and
- you are not engaged in, and do not
intend to engage in, the distribution of
the exchange notes.
However, the SEC has not confirmed this
treatment and we cannot assure you that the
staff of the SEC would make a similar
determination with respect to the exchange
offer.
If you fail to satisfy any of these conditions,
you will be subject to the registration and
prospectus delivery requirements of the
Securities Act in connection with a resale of
the exchange notes.
Each broker-dealer that receives exchange notes
for its own account pursuant to the exchange
offer in exchange for outstanding notes that it
acquired as a result of market-making or other
trading activities must deliver a prospectus in
connection with any resale of the exchange
notes and provide us with a signed
acknowledgment of these obligations.
Expiration Date............... The exchange offer expires at 5:00 p.m., New
York City time, on March 13, 2003, or such
later date and time to which it is extended by
us in our sole discretion (the "expiration
date").
Conditions to the Exchange
Offer......................... Our obligation to consummate the exchange offer
is subject to certain customary conditions. See
"The Exchange Offer." We reserve the right to
terminate or amend the exchange offer at any
4
time prior to the expiration date upon the
occurrence of any such condition.
Withdrawal Right.............. Tenders may be withdrawn at any time prior to
the expiration date. Any outstanding notes not
accepted for any reason will be returned
without expense to the tendering holder as
promptly as practicable after the expiration or
termination of the exchange offer.
Procedure for Tendering
Outstanding Notes............. We issued the outstanding notes as global
securities in fully registered form without
coupons. Beneficial interests in the
outstanding notes which are held by direct or
indirect participants in The Depository Trust
Company ("DTC") through uncertificated
depositary interests are shown on, and
transfers of the outstanding notes can be made
only through, records maintained in book-entry
form by DTC with respect to its participants.
If you are a holder of an outstanding note held
in the form of a book-entry interest and you
wish to tender your outstanding notes for
exchange pursuant to the exchange offer, you
must transmit to the exchange agent, on or
prior to the expiration date:
- a written or facsimile copy of a
properly completed and executed letter
of transmittal and all other required
documents to the address set forth on
the cover page of the letter of
transmittal; or
- a computer-generated message transmitted
by means of DTC's Automated Tender Offer
Program system and forming a part of a
confirmation of book-entry transfer in
which you acknowledge and agree to be
bound by the terms of the letter of
transmittal.
The exchange agent must also receive on or
prior to the expiration date:
- a timely confirmation of book-entry
transfer of your outstanding notes into
the exchange agent's account at DTC, in
accordance with the procedure for
book-entry transfers described in this
prospectus under "The Exchange Offer --
Exchange Offer Procedures -- Book-Entry
Transfer" or
- the documents necessary for compliance
with the guaranteed delivery procedures
described in this prospectus under "The
Exchange Offer -- Exchange Offer
Procedures."
Use of Proceeds............... We will not receive any cash proceeds from the
issuance of the exchange notes pursuant to the
exchange offer.
Exchange Agent................ Regions Bank is serving as the exchange agent
in connection with the exchange offer.
United States Federal Income
Tax Consequences.............. The exchange of outstanding notes pursuant to
the exchange offer should not be a taxable
event for United States federal income tax
purposes. See "Certain U.S. Federal Income Tax
Considerations -- The Exchange Offer."
5
Effect on Holders of
Outstanding Notes............. Upon acceptance for exchange of all validly
tendered outstanding notes pursuant to the
terms of this exchange offer, we will have
fulfilled a covenant contained in the
registration rights agreement between us and
the initial purchasers of the outstanding notes
and, accordingly, the holders of the
outstanding notes will have no further
registration or other rights under the
registration rights agreement, except under
certain limited circumstances. See "The
Exchange Offer -- Terms of the Exchange."
Holders of the outstanding notes who do not
tender their outstanding notes in the exchange
offer will continue to hold such outstanding
notes and will be entitled to all rights and
limitations thereto under the indenture. All
untendered, and tendered but unaccepted,
outstanding notes will continue to be subject
to the restrictions on transfer provided for in
such outstanding notes and the indenture. To
the extent outstanding notes are tendered and
accepted in the exchange offer, the trading
market, if any, for the outstanding notes could
be adversely affected. See "Risk
Factors -- Risk Factors Relating to the
Exchange Offer -- Outstanding notes not
exchanged for exchange notes will continue to
be subject to restrictions on transfer and may
become less liquid."
THE EXCHANGE NOTES
Issuer........................ CenturyTel, Inc., a Louisiana corporation.
Notes Offered................. $500 million aggregate principal amount of
7.875% Senior Notes, Series L, due 2012.
Maturity...................... August 15, 2012.
Ranking....................... The exchange notes will be our senior unsecured
obligations. The exchange notes will rank
senior to any of our future subordinated debt
and equally in right of payment with all of our
existing and future unsecured and
unsubordinated debt. As of September 30, 2002,
we had approximately $3.2 billion of unsecured
and unsubordinated debt that would have ranked
equally with the notes. We are a holding
company and, therefore, the notes will be
effectively subordinated to all existing and
future obligations of our subsidiaries. As of
September 30, 2002, the long-term debt of our
subsidiaries was $517.3 million.
Certain Covenants............. The indenture governing the notes contains
covenants that, among other things, will limit
our ability to:
- incur, issue or create liens upon our
property; and
- consolidate with or merge into, or
transfer or lease all or substantially
all of our assets to, any other party.
These covenants are subject to important
exceptions and qualifications that are
described under "Description of the
Notes -- Merger and Consolidation" and
"-- Limitations on Liens."
Interest...................... 7.875% per year on the principal amount payable
semi-annually in arrears on February 15 and
August 15 of each year, beginning on February
15, 2003.
6
Optional Redemption........... We may redeem some or all of the notes at any
time and from time to time at a redemption
price equal to the greater of (i) 100% of the
principal amount thereof and (ii) the sum of
the present values of the remaining scheduled
payments of principal and interest on the notes
being redeemed discounted to the redemption
date at the then current Treasury Rate plus 35
basis points, together with, in either case,
any accrued and unpaid interest to the date of
redemption as described under "Description of
the Notes -- Optional Redemption."
Form and Denomination......... The exchange notes will be issued in
denominations of $1,000 and any integral
multiple of $1,000. The exchange notes will be
represented by a single, permanent global note
in fully-registered form without interest
coupons. The global note will be deposited with
the trustee as custodian for DTC and registered
in the name of a nominee of DTC in New York,
New York for the accounts of participants in
DTC. Beneficial interests in any of the
exchange notes will be shown on, and transfers
will be effected only through, records
maintained by DTC or its nominee and any such
interest may not be exchanged for certificated
securities, except in limited circumstances
described in this prospectus.
Trading....................... The exchange notes will not be listed on any
securities exchange or included in any
automated quotation system. The initial
purchasers of the outstanding notes have
advised us that they currently intend to make a
market in the exchange notes. However, the
initial purchasers are not obligated to do so
and may discontinue any market-making activity
with respect to the exchange notes at any time
without notice.
RISK FACTORS
You should carefully consider all of the information contained or
incorporated by reference in this prospectus as well as the specific factors
under "Risk Factors" beginning on page 13.
7
SUMMARY CONSOLIDATED FINANCIAL INFORMATION AND OPERATING DATA
(DOLLARS, EXCEPT PER SHARE AMOUNTS, IN THOUSANDS)
The summary consolidated financial information of CenturyTel set forth
below has been derived from, and should be read in conjunction with, (i) our
audited consolidated financial statements as of December 31, 2000 and 2001 and
for each of the years in the three-year period ended December 31, 2001
incorporated by reference in this prospectus from our current report on Form 8-K
dated March 19, 2002 and filed with the SEC on August 13, 2002, and (ii) our
unaudited financial information as of and for the nine months ended September
30, 2001 and 2002 incorporated by reference in this prospectus from our
quarterly report on Form 10-Q for the quarter ended September 30, 2002. Our
operating results for the nine months ended September 30, 2001 and 2002 are not
necessarily indicative of the results to be expected for any future periods. For
additional information, see "-- Recent Developments."
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
------------------------------------ -----------------------
1999 2000 2001 2001 2002
---------- ---------- ---------- ---------- ----------
(UNAUDITED)
INCOME STATEMENT DATA:
Operating revenues:
Telephone...................... $1,126,112 $1,253,969 $1,505,733 $1,116,880 $1,214,165
Other.......................... 128,288 148,388 173,771 127,945 171,952
---------- ---------- ---------- ---------- ----------
Total operating revenues......... 1,254,400 1,402,357 1,679,504 1,244,825 1,386,117
---------- ---------- ---------- ---------- ----------
Operating expenses:
Cost of sales and operating
expenses (exclusive of
depreciation and
amortization)............... 600,038 671,992 826,948 617,577 694,801
Corporate overhead costs
allocable to discontinued
operations.................. 19,416 21,411 20,213 14,876 11,275
Depreciation and
amortization................ 280,223 322,817 407,038 302,863 293,745
---------- ---------- ---------- ---------- ----------
Total operating expenses.... 899,677 1,016,220 1,254,199 935,316 999,821
---------- ---------- ---------- ---------- ----------
Operating income................. 354,723 386,137 425,305 309,509 386,296
---------- ---------- ---------- ---------- ----------
Interest expense................. (150,557) (183,302) (225,523) (173,499) (164,826)
Income from continuing
operations, net of tax......... 135,520 124,229 144,146 107,489 146,684
Discontinued operations, net of
tax............................ 104,249 107,245 198,885 185,779 610,595
Net income....................... 239,769 231,474 343,031 293,268 757,279
Add: After-tax effect of goodwill
amortization(1)................ 41,814 46,555 56,266 42,208 --
Net income, as adjusted.......... 281,583 278,029 399,297 335,476 757,279
Basic earnings per share:
From continuing operations..... $ 0.97 $ 0.88 $ 1.02 $ 0.76 $ 1.04
From continuing operations, as
adjusted(1)................. 1.20 1.15 1.35 1.01 1.04
From discontinued operations... 0.75 0.77 1.41 1.32 4.32
From discontinued operations,
as adjusted(1).............. 0.83 0.84 1.48 1.37 4.32
Basic earnings per share....... 1.72 1.65 2.43 2.08 5.36
Basic earnings per share, as
adjusted(1)................. 2.03 1.98 2.83 2.38 5.36
8
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
------------------------------------ -----------------------
1999 2000 2001 2001 2002
---------- ---------- ---------- ---------- ----------
(UNAUDITED)
Diluted earnings per share:
From continuing operations..... $ 0.96 $ 0.88 $ 1.01 $ 0.76 $ 1.03
From continuing operations, as
adjusted(1)................. 1.18 1.13 1.34 1.00 1.03
From discontinued operations... 0.74 0.76 1.40 1.31 4.28
From discontinued operations,
as adjusted(1).............. 0.81 0.83 1.47 1.36 4.28
Diluted earnings per share..... 1.70 1.63 2.41 2.06 5.31
Diluted earnings per share, as
adjusted(1)................. 1.99 1.96 2.81 2.36 5.31
OTHER FINANCIAL DATA:(2)
Ratio of earnings from
continuing operations to fixed
charges and preferred stock
dividends...................... 2.45 2.07 2.00 1.95 2.34
Ratio of earnings from continuing
operations, excluding
nonrecurring items, to fixed
charges and preferred stock
dividends...................... 2.39 2.12 1.89 1.79 2.47
AS OF DECEMBER 31, AS OF
----------------------- SEPTEMBER 30,
2000 2001 2002
---------- ---------- -------------
(UNAUDITED)
BALANCE SHEET DATA:
Cash and cash equivalents............................... $ 11,407 $ 3,496 $ 294,239
Net property, plant and equipment....................... 2,698,010 2,736,142 3,335,224
Assets held for sale.................................... 902,133 845,428 11,796
Total assets............................................ 6,393,290 6,318,684 8,065,375
Total debt (including short-term debt and current
maturities of long-term debt)......................... 3,472,954 3,096,334 3,678,477
Liabilities related to assets held for sale............. 152,332 148,870 --
Stockholders' equity.................................... 2,032,079 2,337,380 3,063,923
AS OF DECEMBER 31, AS OF
---------------------------------- SEPTEMBER 30,
1999 2000 2001 2002
--------- --------- --------- -------------
OPERATING DATA (UNAUDITED):
Local exchange access lines in service........ 1,272,867 1,800,565(3) 1,797,643 2,437,744(4)
Long distance customers....................... 303,722 363,307 465,872 584,890
---------------
(1) This adjustment reflects the after-tax effect of eliminating goodwill
amortization in accordance with Statement of Financial Accounting Standard
No. 142 ("SFAS 142"), which provides that, effective January 1, 2002,
goodwill is no longer subject to amortization.
(2) Calculated in the manner described in this prospectus under "Earnings
Ratios."
(3) Reflects our purchase of over 490,000 telephone access lines during 2000.
(4) Reflects our purchase of over 650,000 telephone access lines during the
third quarter of 2002.
9
SUMMARY PRO FORMA FINANCIAL DATA
(DOLLARS, EXCEPT PER SHARE AMOUNTS, IN THOUSANDS)
The following tables set forth summary unaudited consolidated condensed pro
forma financial information for the year ended December 31, 2001 and as of and
for the nine months ended September 30, 2002 that gives effect to our Verizon
acquisitions and wireless operations divestiture completed in the third quarter
of 2002. See "Prospectus Summary -- CenturyTel -- Acquisitions and
Dispositions." This summary pro forma information has been derived from, and
should be read in conjunction with, the unaudited pro forma consolidated
condensed financial information, and the notes thereto, incorporated by
reference in this prospectus from our current report on Form 8-K dated November
14, 2002 and filed with the SEC on January 13, 2003. Our wireless operations
have been presented below as discontinued operations.
We have prepared the pro forma financial information related to the Verizon
acquisitions and the wireless divestiture based on various assumptions described
in our current report on Form 8-K, including the assumption that each purchase
and the divestiture occurred on January 1, 2001. As explained further in our
current report on Form 8-K, the pro forma information does not give effect to
any potential revenue enhancements, cost reductions or other operating
efficiencies that could result from the Verizon acquisitions.
We have presented this summary pro forma information for illustrative
purposes only. This information may not be indicative of the operating results
or financial position that would have occurred if such pending transactions
actually occurred on the dates indicated above and in accordance with the other
assumptions described in our current report on Form 8-K, nor is it necessarily
indicative of our future operating results or financial position. See "Risk
Factors."
YEAR ENDED DECEMBER 31, 2001
----------------------------------------------------------------
AS REPORTED PRO FORMA (UNAUDITED)
---------------------------- -------------------------------
VERIZON PRO FORMA PRO FORMA
CENTURYTEL ACQUISITIONS(1) ADJUSTMENTS(2) CONSOLIDATED
---------- --------------- -------------- ------------
INCOME STATEMENT DATA:
Operating revenues:
Telephone.......................... $1,505,733 $552,127 $ -- $2,057,860
Other.............................. 173,771 -- -- 173,771
---------- -------- --------- ----------
Total operating revenues............. 1,679,504 552,127 -- 2,231,631
---------- -------- --------- ----------
Operating expenses:
Cost of sales and operating
expenses (exclusive of
depreciation and
amortization)................... 826,948 233,108 14,900 1,074,956
Corporate overhead costs allocable
to discontinued operations...... 20,213 -- -- 20,213
Depreciation and amortization...... 407,038 81,498 -- 488,536
---------- -------- --------- ----------
Total operating expenses........ 1,254,199 314,606 14,900 1,583,705
---------- -------- --------- ----------
Operating income..................... 425,305 237,521 (14,900) 647,926
---------- -------- --------- ----------
Interest expense..................... (225,523) (21,388) (42,732) (289,643)
Income from continuing operations,
net of tax......................... 144,146 126,339 (34,579) 235,906
Discontinued operations, net of
tax................................ 198,885 -- (198,885) --
Net income........................... 343,031 126,339 (233,464) 235,906
Basic earnings per share:
From continuing operations......... 1.02 1.67
From continued operations, as
adjusted(3)..................... 1.35 2.00
From discontinued operations....... 1.41 --
From discontinued operations, as
adjusted(3)..................... 1.48 --
Basic earnings per share........... 2.43(4) 1.67
Basic earnings per share, as
adjusted(3)..................... 2.83 2.00
10
YEAR ENDED DECEMBER 31, 2001
----------------------------------------------------------------
AS REPORTED PRO FORMA (UNAUDITED)
---------------------------- -------------------------------
VERIZON PRO FORMA PRO FORMA
CENTURYTEL ACQUISITIONS(1) ADJUSTMENTS(2) CONSOLIDATED
---------- --------------- -------------- ------------
Diluted earnings per share:
From continuing operations......... 1.01 1.66
From continuing operations, as
adjusted(3)..................... 1.34 1.98
From discontinued
operations............... 1.40 --
From discontinued operations, as
adjusted(3)..................... 1.47 --
Diluted earnings per
share.................... 2.41(4) 1.66
Diluted earnings per share, as
adjusted(3)..................... 2.81 1.98
OTHER FINANCIAL DATA (UNAUDITED):
Ratio of earnings from continuing
operations to fixed charges and
preferred stock dividends(5)....... 2.00 2.31
Ratio of earnings from continuing
operations, excluding nonrecurring
items, to fixed charges and
preferred stock dividends(5)....... 1.89 2.22
NINE MONTHS ENDED SEPTEMBER 30, 2002 (UNAUDITED)
----------------------------------------------------------------
AS REPORTED(6) PRO FORMA
---------------------------- -------------------------------
VERIZON PRO FORMA PRO FORMA
CENTURYTEL ACQUISITIONS(1) ADJUSTMENTS(2) CONSOLIDATED
---------- --------------- -------------- ------------
INCOME STATEMENT DATA:
Operating revenues Telephone......... $1,214,165 $313,870 $ -- $1,528,035
Other.............................. 171,952 -- -- 171,952
---------- -------- --------- ----------
Total operating revenues........ 1,386,117 313,870 -- 1,699,987
---------- -------- --------- ----------
Operating expenses:
Cost of sales and operating
expenses (exclusive of
depreciation and
amortization)................... 694,801 127,217 8,428 830,446
Corporate overhead costs allocable
to discontinued operations...... 11,275 -- -- 11,275
Depreciation and amortization...... 293,745 50,336 -- 344,081
---------- -------- --------- ----------
Total operating expenses........ 999,821 177,553 8,428 1,185,802
---------- -------- --------- ----------
Operating income..................... 386,296 136,317 (8,428) 514,185
Interest expense..................... (164,826) (9,615) (27,321) (201,762)
Income from continuing operations,
net of tax......................... 146,684 77,651 (21,450) 202,885
Discontinued operations, net of
tax................................ 610,595 -- (610,595) --
Net income........................... 757,279 77,651 (632,045) 202,885
Basic earnings per share:
From continuing operations......... 1.04 1.43
From discontinued operations....... 4.32 --
---------- ----------
5.36(7) 1.43
---------- ----------
Diluted earnings per share:
From continuing operations......... 1.03 1.42
From discontinued operations....... 4.28 --
---------- -------- --------- ----------
5.31(7) 1.42
---------- -------- --------- ----------
11
NINE MONTHS ENDED SEPTEMBER 30, 2002 (UNAUDITED)
----------------------------------------------------------------
AS REPORTED(6) PRO FORMA
---------------------------- -------------------------------
VERIZON PRO FORMA PRO FORMA
CENTURYTEL ACQUISITIONS(1) ADJUSTMENTS(2) CONSOLIDATED
---------- --------------- -------------- ------------
OTHER FINANCIAL DATA (UNAUDITED):
Ratio of earnings from continuing
operations to fixed charges and
preferred stock dividends(5)....... 2.34 2.54
Ratio of earnings from continuing
operations, excluding nonrecurring
items, to fixed charges and
preferred stock dividends(5)....... 2.47 2.65
---------------
(1) These amounts are based on special purpose financial statements of the
Verizon operations acquired in the third quarter of 2002. In connection with
these special purpose financial statements, Verizon made numerous
assumptions and allocations where specific data was not available pertaining
to the acquired assets. Because of the significant amount of allocations and
estimates used to prepare these special purpose financial statements and
because we will operate these assets under a different operating and
management structure, they may not reflect the financial position and
results of operations of the properties after we acquire them.
(2) These amounts are based on our preliminary allocations of the aggregate
Verizon purchase price in both acquisitions to the Verizon assets acquired.
Our preliminary estimates of the fair value and useful lives of Verizon's
non-current assets and liabilities are subject to change upon completion of
our valuation analysis. To the extent that final allocations of the purchase
price cause our annual depreciation and amortization expense to differ from
that presented in the pro forma information, annual earnings per share will
be affected by $.01 per share for every $2.4 million difference in annual
depreciation and amortization expense. For more information, see "Risk
Factors."
(3) As adjusted to reflect the after-tax effect of eliminating goodwill
amortization in accordance with SFAS 142.
(4) Our basic earnings per share and diluted earnings per share for the year
ended December 31, 2001 were $1.72 and $1.70, after eliminating the effect
of nonrecurring net gains associated with our wireless operations.
(5) Calculated in the manner described in this prospectus under "Earnings
Ratios."
(6) The amounts reflected under "CenturyTel" reflect the results of operations
of the acquired Verizon Alabama properties since July 1, 2002 and the
acquired Verizon Missouri properties since August 31, 2002. The amounts
reflected under "Verizon Acquisitions" reflect the results of operations of
the acquired Verizon Alabama properties for the six months ended June 30,
2002 and the results of operations of the acquired Verizon Missouri
properties for the eight months ended August 31, 2002.
(7) Our basic earnings per share and diluted earnings per share for the nine
months ended September 30, 2002 were $1.60 and $1.58, after eliminating the
effect of nonrecurring net gains associated with our wireless operations.
See footnote 6 for additional information.
RECENT DEVELOPMENTS
On January 30, 2003, we announced the results of our operations for the
quarter and year ended December 31, 2002. For more information, we refer you to
our Current Report on Form 8-K dated January 30, 2003 and filed with the SEC on
January 31, 2003, which is incorporated by reference herein.
12
RISK FACTORS
In connection with the exchange offer, you should carefully consider the
following risk factors, as well as the other information contained or
incorporated by reference in this prospectus.
RISK FACTORS RELATING TO CENTURYTEL
WE HAVE A SUBSTANTIAL AMOUNT OF INDEBTEDNESS.
Principally, as a result of our recent acquisitions, we have a substantial
amount of indebtedness. See "Capitalization." This could hinder our ability to
adjust to changing market and economic conditions, as well as our ability to
access the capital markets to refinance maturing debt in the ordinary course. In
connection with executing our business strategies, we are continuously
evaluating the possibility of acquiring additional communications assets, and we
may elect to finance acquisitions by incurring additional indebtedness. If we
incur significant additional indebtedness, our credit ratings could be adversely
affected. As a result, our borrowing costs could increase, our access to capital
may be adversely affected and our ability to satisfy our obligations under the
notes or our other indebtedness could be adversely affected.
OUR OPERATIONS HAVE UNDERGONE MATERIAL CHANGES, AND OUR ACTUAL OPERATING
RESULTS WILL DIFFER FROM THE RESULTS INDICATED IN OUR HISTORICAL AND PRO FORMA
FINANCIAL STATEMENTS.
As a result of our recently completed Verizon acquisitions and wireless
divestiture, our mix of operating assets differs materially from those
operations upon which our historical financial statements are based.
Consequently, our historical financial statements may not be reliable as an
indicator of future results. Moreover, the pro forma financial information
summarized and incorporated by reference in this prospectus, while helpful in
illustrating certain effects of our recently completed transactions and related
financings, does not attempt to predict or suggest future operating results. The
pro forma information is presented for illustrative purposes only and is not
necessarily indicative of the operating results or financial position that would
have occurred if such transactions had been consummated on the dates and in
accordance with the assumptions described in such information, nor is it
necessarily indicative of our future operating results or financial position.
In particular, you should be aware that the pro forma information
summarized and incorporated by reference in this prospectus reflects our
preliminary allocations of the aggregate purchase price paid in the Verizon
acquisitions to the Verizon assets acquired. Such preliminary allocations
include the assumption that the fair value of property, plant and equipment will
approximate the carrying value thereof on the applicable dates of acquisition
and that the estimated useful lives of property, plant and equipment used by the
Company are comparable to those used by Verizon. The preliminary estimates of
the fair value of the noncurrent assets and liabilities are subject to change
upon completion of our valuation analysis. To the extent that final allocations
of the purchase price cause our annual depreciation and amortization expense to
differ from that presented in the pro forma information, annual earnings per
share will be affected by $.01 per share for every $2.4 million difference in
annual depreciation and amortization expense. Thus, for example, if we
ultimately allocate an additional $95.7 million of the aggregate purchase price
to property, plant and equipment (representing a 15% increase in the amount that
we have preliminarily allocated to such assets), our annual depreciation and
amortization expense would increase by approximately $9.6 million (assuming a
composite depreciation rate of 10%) and our annual earnings per share would
decrease by approximately $.04 per share from the amounts presented in the pro
forma information. For more information, see the notes to the pro forma
information incorporated by reference herein.
13
OUR FUTURE RESULTS WILL SUFFER IF WE DO NOT EFFECTIVELY MANAGE OUR GROWTH.
We expect our future growth to come from acquiring additional telephone
properties, expanding into new markets, providing service to new customers,
increasing network usage and providing additional products and services. Our
future growth depends, in part, upon our ability to:
- upgrade our billing and other information systems
- retain and attract technological, managerial and other key personnel to
work at our Monroe, Louisiana headquarters and regional offices
- effectively manage our day to day operations while attempting to execute
our business strategy of expanding our wireline operations and our
emerging businesses
- realize the projected growth and revenue targets developed by management
for our newly acquired and emerging businesses, and
- continue to identify new acquisition opportunities that we can finance,
complete and operate on attractive terms.
Our rapid growth poses substantial challenges for us to integrate new
operations into our existing business, to successfully monitor our operations,
costs, regulatory compliance and service quality, and to maintain other
necessary internal controls. If we are not able to meet these challenges
effectively, our results of operations may be harmed.
OUR INDUSTRY IS HIGHLY REGULATED, AND CONTINUES TO UNDERGO VARIOUS FUNDAMENTAL
REGULATORY CHANGES.
As a diversified full service incumbent local exchange carrier, or ILEC, we
have traditionally been subject to significant regulation from federal, state
and local authorities. This regulation restricts our ability to raise our rates
and to compete, and imposes substantial compliance costs on us. In recent years,
the communications industry has undergone various fundamental regulatory changes
that have generally reduced the regulation of telephone companies and permitted
competition in each segment of the telephone industry. These and subsequent
changes could adversely affect us by reducing the fees that we are permitted to
charge, altering our tariff structures, or otherwise changing the nature of our
operations and competition in our industry. We are unable to predict the future
actions of the various regulatory bodies that govern us, but such actions could
materially affect our business.
WE FACE COMPETITION, WHICH COULD ADVERSELY AFFECT US.
As a result of various technological, regulatory and other changes, the
telecommunications industry has become increasingly competitive, and we expect
these trends to continue. The number of companies that have requested
authorization to provide local exchange service in our markets has increased in
recent years, and we anticipate that others will take similar action in the
future. As an ILEC, our competitors include competitive local exchange carriers,
or CLECs, and other providers (or potential providers) of communications
services, such as Internet service providers, wireless telephone companies,
satellite companies, alternate access providers, neighboring ILECs, long
distance companies and cable companies that may provide services competitive
with ours or services that we intend to introduce. We cannot assure you that we
will be able to compete effectively with all of these industry participants.
We expect competition to intensify as a result of new competitors and the
development of new technologies, products and services. We cannot predict which
future technologies, products or services will be important to maintain our
competitive position or what funding will be required to develop and provide
these technologies, products or services. Our ability to compete successfully
will depend on how well we market our products and services, and on our ability
to anticipate and respond to various competitive factors affecting the industry,
including a changing regulatory environment that may affect us differently from
our competitors, new services that may be introduced, changes in consumer
preferences, demographic trends, economic conditions and discount pricing
strategies by competitors.
14
Many of our current and potential competitors have market presence,
engineering, technical and marketing capabilities and financial, personnel and
other resources substantially greater than ours. In addition, some of our
competitors can raise capital at a lower cost than we can, and have
substantially stronger brand names. Consequently, some competitors may be able
to charge lower prices for their products and services, to develop and expand
their communications and network infrastructures more quickly, to adapt more
swiftly to new or emerging technologies and changes in customer requirements,
and to devote greater resources to the marketing and sale of their products and
services than we can.
While we expect our telephone revenues to grow as the economy improves, our
internal telephone revenue growth rate has slowed in recent years and may
continue to slow during upcoming periods.
WE COULD BE HARMED BY THE RECENT ADVERSE DEVELOPMENTS AFFECTING OTHER
COMMUNICATIONS COMPANIES.
Recently, WorldCom, Inc. and several other large communications companies
have declared bankruptcy or suffered financial difficulties. Consequently, we
recorded a provision for uncollectible receivables, primarily related to the
bankruptcy of WorldCom, Inc., in the amount of $15.0 million in the second
quarter of 2002. Continued weakness in the communications industry could have
additional future adverse effects on us, including reducing our ability to
collect receivables and to access the capital markets on favorable terms.
RISK FACTORS RELATING TO THE EXCHANGE OFFER
OUTSTANDING NOTES NOT EXCHANGED FOR EXCHANGE NOTES WILL CONTINUE TO BE SUBJECT
TO RESTRICTIONS ON TRANSFER AND MAY BECOME LESS LIQUID.
Holders of outstanding notes who do not participate in the exchange offer
will continue to be subject to the restrictions on transfer of their outstanding
notes as set forth in the legend thereon. In general, the outstanding notes may
not be offered or sold, unless registered under the Securities Act, except
pursuant to an exemption from, or in a transaction not subject to, the
Securities Act and applicable state securities laws. We do not currently
anticipate that we will register the outstanding notes under the Securities Act.
Because we anticipate that most holders of outstanding notes will elect to
exchange their outstanding notes, we expect that the liquidity of the market for
any outstanding notes remaining after the completion of the exchange offer may
be substantially reduced and thereby adversely affected.
RESTRICTIONS AND CONDITIONS MAY APPLY TO THE TRANSFER OF EXCHANGE NOTES UNDER
CERTAIN CIRCUMSTANCES.
Based on interpretations by the staff of the SEC, as set forth in no-action
letters issued to third parties, we believe that exchange notes issued pursuant
to the exchange offer may be offered for resale, resold or otherwise transferred
by holders thereof (other than any such holder which is an "affiliate" of the
Company within the meaning of Rule 405 under the Securities Act) without
compliance with the registration and prospectus delivery provisions of the
Securities Act, provided that such exchange notes are acquired in the ordinary
course of such holder's business and such holder has no arrangement with any
person to participate in the distribution of such exchange notes. However, we do
not intend to confirm this treatment with the SEC, and there can be no assurance
that the staff of the SEC would make a similar determination with respect to the
exchange offer being made hereunder.
Each holder, other than a broker-dealer, must acknowledge that it is not
engaged in, and does not intend to engage in, a distribution of exchange notes
and has no arrangement or understanding to participate in a distribution of
exchange notes. If any holder is an affiliate of the Company, is engaged in or
intends to engage in or has any arrangement or understanding with respect to the
distribution of the exchange notes to be acquired pursuant to the exchange
offer, such holder (i) cannot rely on the applicable interpretations of the
staff of the SEC and (ii) will be subject to the registration and prospectus
delivery requirements of the Securities Act in connection with any resale
transaction. Each broker-dealer that receives exchange notes for its own account
pursuant to the exchange offer must acknowledge that it will deliver a
prospectus in connection with any resale of such exchange notes.
15
YOUR OUTSTANDING NOTES MAY NOT BE ACCEPTED FOR EXCHANGE IF YOU FAIL TO TIMELY
TRANSMIT A LETTER OF TRANSMITTAL IN ACCORDANCE WITH THE TERMS OF THE EXCHANGE
OFFER.
To participate in the exchange offer, holders of outstanding notes must
transmit a properly completed letter of transmittal, including all other
documents required thereby, to the exchange agent at one of the addresses set
forth below on or prior to the expiration date. In addition, a holder must (i)
timely furnish to the exchange agent either confirmation of a book-entry
transfer of such outstanding notes into the exchange agent's account at the DTC
pursuant to the procedure for book-entry transfer described herein or (ii)
comply with the guaranteed delivery procedures described herein. See "The
Exchange Offer."
RISK FACTORS RELATING TO THE EXCHANGE NOTES
THE EXCHANGE NOTES WILL BE EFFECTIVELY SUBORDINATED TO THE DEBT OF OUR
SUBSIDIARIES.
As a holding company, substantially all of our income and operating cash
flow is dependent upon the earnings of our subsidiaries and the distribution of
those earnings to, or upon loans or other payments of funds by those
subsidiaries to, us. As a result, we rely upon our subsidiaries to generate the
funds necessary to meet our obligations, including the payment of amounts owed
under the exchange notes. Our subsidiaries are separate and distinct legal
entities and have no obligation to pay any amounts due pursuant to the exchange
notes or, subject to limited exceptions for tax-sharing purposes, to make any
funds available to us to repay our obligations, whether by dividends, loans or
other payments. Certain of our subsidiaries' loan agreements contain various
restrictions on the transfer of funds to us, including certain provisions that
restrict the amount of dividends that may be paid to us. As of December 31,
2001, the amount of retained earnings of our subsidiaries not subject to
dividend restrictions was approximately $1.8 billion. Moreover, our rights to
receive assets of any subsidiary upon its liquidation or reorganization (and the
ability of holders of exchange notes to benefit indirectly therefrom) will be
effectively subordinated to the claims of creditors of that subsidiary,
including trade creditors. As of September 30, 2002, the long-term debt of our
subsidiaries was $517.3 million.
AN ACTIVE TRADING MARKET FOR THE EXCHANGE NOTES MAY NOT DEVELOP, AND THERE MAY
BE RESTRICTIONS ON RESALE OF THE NOTES.
Prior to this offering, there has been no trading market for the notes. We
cannot assure you that an active trading market for the exchange notes will
develop or as to the liquidity or sustainability of any such market, the ability
of the holders to sell their exchange notes or the price at which holders will
be able to sell their exchange notes. Future trading prices of the notes will
also depend on many other factors, including, among other things, prevailing
interest rates, the market for similar securities, our performance and other
factors. We do not intend to apply for listing of the exchange notes on any
securities exchange or any automated quotation system.
CHANGES IN OUR CREDIT RATING OR CHANGES IN THE CREDIT MARKETS COULD ADVERSELY
AFFECT THE MARKET PRICE OF THE EXCHANGE NOTES.
The market price for the exchange notes will be based on a number of
factors, including:
- our ratings with major credit rating agencies;
- the prevailing interest rates being paid by other companies similar to
us; and
- the overall condition of the financial markets.
The condition of the credit markets and prevailing interest rates have
fluctuated in the past and are likely to fluctuate in the future. Fluctuations
in these factors could have an adverse effect on the price and liquidity of the
exchange notes.
In addition, credit rating agencies continually revise their ratings for
the companies that they follow, including us. The credit rating agencies also
evaluate the communications industry as a whole and may change their credit
rating for us based on their overall view of our industry. See "-- Risk Factors
Relating to CenturyTel -- We could be harmed by the recent adverse developments
affecting other communications
16
companies." We cannot be sure that credit rating agencies will maintain their
current ratings on the exchange notes. A negative change in our ratings could
have an adverse effect on the price of the exchange notes.
USE OF PROCEEDS
We will not receive any proceeds in connection with the exchange offer.
EARNINGS RATIOS
Our unaudited ratio of earnings to fixed charges and preferred stock
dividends was as indicated below for the periods indicated.
YEAR ENDED DECEMBER 31, NINE MONTHS ENDED
-------------------------------- SEPTEMBER 30,
1997 1998 1999 2000 2001 2002
---- ---- ---- ---- ---- -----------------
Ratio of earnings to fixed charges and
preferred stock dividends(1)............. 7.80 3.25 3.75 3.07 3.40 7.66
Ratio of earnings, excluding non-recurring
items(2), to fixed charges and preferred
stock dividends.......................... 4.87 2.95 3.45 3.01 2.57 3.15
Ratio of earnings from continuing
operations to fixed charges and preferred
stock dividends(1)....................... 5.91 2.18 2.45 2.07 2.00 2.34
Ratio of earnings from continuing
operations, excluding non-recurring
items(3), to fixed charges and preferred
stock dividends.......................... 2.98 2.01 2.39 2.12 1.89 2.47
---------------
(1) For purposes of the chart above, "earnings" consist of income (or income
from continuing operations, as applicable) before income taxes and fixed
charges, and "fixed charges" include interest expense, including amortized
debt issuance costs and preferred stock dividend costs of CenturyTel and its
subsidiaries. No interest expense was allocated to discontinued operations
for the computation of the ratios for continuing operations. We have assumed
that our consolidated preferred stock dividend requirements were equal to
the pre-tax earnings that would be required to cover those dividend
requirements. We computed those pre-tax earnings using actual tax rates for
each period. The ratio of earnings to fixed charges and preferred stock
dividends does not differ materially from the ratio of earnings to fixed
charges for the periods indicated in the table above.
(2) Non-recurring items during the periods presented above primarily relate to
gains on the sales of assets (which aggregated on a pre-tax basis $179.0
million in 1997, $49.9 million in 1998, $47.9 million in 1999, $20.6 million
in 2000, $227.6 million in 2001 and $807.6 million for the nine months ended
September 30, 2002) and other non-recurring charges and credits, including,
but not limited to, (i) the write off of all costs expended to develop the
wireless portion of the Company's new billing system currently in
development (which aggregated $30.5 million pre-tax for the nine months
ended September 30, 2002), (ii) a reserve for uncollectible receivables,
primarily due to the bankruptcy of WorldCom, Inc. (which aggregated $15.0
million pre-tax for the nine months ended September 30, 2002), (iii) the
write-down in the value of certain nonoperating assets or investments (which
aggregated $25.5 million pre-tax in 2001), (iv) costs to defend an
unsolicited takeover proposal (which aggregated $6.0 million pre-tax in 2001
and $3.0 million pre-tax for the nine months ended September 30, 2002), and
(v) costs to settle interest rate hedge contracts (which aggregated $7.9
million pre-tax in 2000). We have included additional information on the
calculation of the ratios appearing above in Exhibit 12.1 to the
registration statement of which this prospectus forms a part.
(3) Non-recurring items from continuing operations during the periods presented
above primarily relate to gains on the sales of assets (which aggregated on
a pre-tax basis $179.0 million in 1997, $28.1 million in 1998, $11.3 million
in 1999, $58.5 million in 2001 and $3.7 million for the nine months ended
September 30, 2002) and other non-recurring charges and credits, including,
but not limited to, (i) a
17
reserve for uncollectible receivables, primarily due to the bankruptcy of
WorldCom, Inc. (which aggregated $15.0 million pre-tax for the nine months
ended September 30, 2002), (ii) the write-down in the value of certain
nonoperating assets or investments (which aggregated $25.5 million pre-tax
in 2001), (iii) costs to defend an unsolicited takeover proposal (which
aggregated $6.0 million pre-tax in 2001 and $3.0 million pre-tax for the
nine months ended September 30, 2002), and (iv) costs to settle interest
rate hedge contracts (which aggregated $7.9 million pre-tax in 2000). We
have included additional information on the calculation of the ratios
appearing above in Exhibit 12.1 to the registration statement of which this
prospectus forms a part.
CAPITALIZATION
(DOLLARS IN THOUSANDS)
The following table sets forth our consolidated capitalization as of
September 30, 2002. The table reflects the effects of our acquisitions,
divestiture and debt issuances during the third quarter of 2002. You should read
the following table in conjunction with our consolidated financial statements
and unaudited pro forma consolidated condensed financial information, and the
notes thereto, incorporated by reference into this prospectus.
AS OF
SEPTEMBER 30,
2002(1)
-------------
Cash and cash equivalents................................... $ 294,239
==========
Short-term debt............................................. $ --
----------
Long-term debt
CenturyTel, Inc.
Senior notes and debentures 7.75% Series A, due
2004.................................................. 50,000
8.25% Series B, due 2024............................. 100,000
6.55% Series C, due 2005............................. 50,000
7.20% Series D, due 2025............................. 100,000
6.15% Series E, due 2005............................. 100,000
6.30% Series F, due 2008............................. 240,000
6.875% Series G, due 2028............................ 425,000
8.375% Series H, due 2010............................ 500,000
7.75% Series I, remarketable 2002.................... 400,000(2)
6.02% Series J, due 2007............................. 500,000
4.75% Series K, due 2032............................. 165,000
7.875% Series L, due 2012............................ 500,000
9.38% notes, due through 2003........................ 2,800
6.83%(3) Employee Stock Ownership Plan commitment,
due in installments through 2004.................... 1,750
Fair value of derivative instruments related to
Series H senior notes............................... 19,237
Net unamortized premium and discounts................ 7,251
Other................................................ 153
----------
Total CenturyTel, Inc............................. 3,161,191
Subsidiaries................................................ 517,286
----------
Total long-term debt........................................ 3,678,477
Less: Current maturities.................................... 28,431
----------
Total long-term debt excluding current maturities........... 3,650,046
----------
18
AS OF
SEPTEMBER 30,
2002(1)
-------------
Stockholders' equity
Common stock, $1.00 par value, 350,000,000 shares
authorized, 142,042,786 shares issued and
outstanding............................................ 142,043
Paid-in capital........................................ 515,593
Accumulated other comprehensive income (loss), net of
tax................................................... (658)
Retained earnings...................................... 2,400,720
Unearned ESOP shares................................... (1,750)
Preferred stock-non-redeemable......................... 7,975
----------
Total stockholders' equity............................. 3,063,923
----------
Total capitalization................................... $6,742,400
----------
---------------
(1) This table does not reflect transactions that occurred after September 30,
2002, including without limitation (i) our payment in December 2002 of $290
million of fourth quarter 2002 estimated tax payments, which included
estimated taxes resulting from our wireless divestiture described further
above in "Prospectus Summary", and (ii) the redemption of our Series I notes
described in note 2 below. We funded our tax payment with borrowings under
our credit facilities and our commercial paper program, and funded $195
million of our redemption payments with borrowings under our credit
facilities and the remainder using cash on hand.
(2) These Series I notes were redeemed on October 15, 2002 at par value, plus
payment of (i) accrued interest and (ii) a redemption premium of
approximately $71.1 million. See note 1 above.
(3) Weighted average interest rate at September 30, 2002.
19
THE EXCHANGE OFFER
OVERVIEW
Background. The outstanding notes were issued to the initial purchasers on
August 26, 2002 (the "issue date") as part of a private offering. The
outstanding notes were sold by the initial purchasers to qualified institutional
buyers in reliance on Rule 144A under the Securities Act.
Registration Rights. We entered into a registration rights agreement with
the initial purchasers, which we have filed with the SEC as an exhibit to the
registration statement of which this prospectus forms a part. The following
summary of the registration rights agreement does not purport to be complete,
and is subject to, and is qualified in its entirety by reference to, the
registration rights agreement.
In accordance with the registration rights agreement, we filed a
registration statement relating to an offer to exchange the outstanding notes
for exchange notes. We agreed to use our reasonable best efforts to keep the
exchange offer registration statement effective for not less than 20 business
days (or a longer period if required by applicable law or extended by us, at our
option) after the date notice of the registered exchange offer is mailed to the
holders of the outstanding notes. The exchange notes will have terms
substantially identical to the outstanding notes, except as otherwise indicated
below.
In addition, under the circumstances set forth below, we are required to
use our reasonable best efforts to cause the SEC to declare effective a shelf
registration statement with respect to the resale of the outstanding notes and
keep the registration statement continuously effective, supplemented and amended
as required to permit this prospectus to be usable by holders of outstanding
notes for a period of two years after the issue date or, if earlier, when all of
the outstanding notes covered by such shelf registration statement (i) have been
sold pursuant to the shelf registration statement in accordance with the
intended method of distribution thereunder, (ii) become eligible for resale
pursuant to Rule 144(k) under the Securities Act, or (iii) cease to have
registration rights under the registration rights agreement. These circumstances
include:
- Changes in law or applicable interpretations of the staff of the SEC
preclude us from effecting a registered exchange offer;
- For any other reason we do not consummate the registered exchange offer
within 30 days after the effectiveness of the exchange offer registration
statement;
- Upon the request of an initial purchaser who holds outstanding notes
within 60 days after the consummation of the exchange offer; or
- Any other holder of outstanding notes notifies us within 20 business days
following the consummation of the exchange offer that, based upon the
advice of its counsel, it was not eligible to participate in the exchange
offer or that it participated in the exchange offer but did not receive
exchange notes which are freely tradeable without any limitations or
restrictions under the Securities Act.
If we fail to comply with certain obligations under the registration rights
agreement, we will be required to pay additional interest to holders of the
outstanding notes.
Other General Matters. Each holder of outstanding notes who wishes to
exchange outstanding notes for exchange notes hereunder will be required to make
the following representations:
- Any exchange notes will be acquired in the ordinary course of its
business;
- The holder will have no arrangements or understandings with any person to
participate in the distribution of the exchange notes within the meaning
of the Securities Act;
- The holder is not an affiliate (as defined in Rule 405 promulgated under
the Securities Act) of ours or an initial purchaser holding outstanding
notes acquired by it and having the status of an unsold allotment in the
initial offering and sale of the outstanding notes pursuant to the
purchase agreement by and between us and the initial purchasers;
20
- If the holder is not a broker-dealer, that it is not engaged in, and does
not intend to engage in, the distribution of the exchange notes;
- Each broker-dealer who receives exchange notes for its own account in
exchange for outstanding notes, where such outstanding notes were
acquired by such broker-dealer as a result of market-making activities,
must acknowledge that it will deliver a prospectus in connection with any
resale of such exchange notes; and
- The holder is not acting on behalf of any person who could not truthfully
and completely make the foregoing representations.
TERMS OF THE EXCHANGE
We hereby offer to exchange, upon the terms and subject to the conditions
set forth herein and in the letter of transmittal, up to $500,000,000 principal
amount of exchange notes for up to $500,000,000 principal amount of outstanding
notes. The form and terms of the exchange notes are identical in all respects to
the terms of the outstanding notes for which they may be exchanged pursuant to
the exchange offer, except that (i) the interest on the exchange notes will
accrue from the last date on which interest was paid or duly provided for on the
outstanding notes or, if no such interest has been paid or duly provided for,
from the issue date, (ii) provisions relating to an increase in the stated rate
of interest thereon upon the occurrence of a registration default will be
eliminated, and (iii) the transfer restrictions on the outstanding notes will be
eliminated. The exchange notes will evidence the same debt as the outstanding
notes and will be entitled to the benefits of the indenture pursuant to which
such outstanding notes were issued. See "Description of the Notes."
Based on interpretations by the staff of the SEC, as set forth in no-action
letters issued to third parties, we believe that exchange notes issued pursuant
to the exchange offer in exchange for outstanding notes may be offered for
resale, resold or otherwise transferred by holders thereof (other than any such
holder which is an "affiliate" of ours within the meaning of Rule 405 under the
Securities Act) without compliance with the registration and prospectus delivery
provisions of the Securities Act, provided that such exchange notes are acquired
in the ordinary course of such holder's business and such holder does not intend
to participate in the distribution of such exchange notes. However, we do not
intend to confirm this treatment with the SEC, and there can be no assurance
that the staff of the SEC would make a similar determination with respect to the
exchange offer being made hereunder.
Each holder, other than a broker-dealer, must acknowledge that it is not
engaged in, and does not intend to engage in, a distribution of exchange notes
and has no arrangement or understanding to participate in a distribution of
exchange notes. If any holder is an affiliate of the Company, is engaged in or
intends to engage in or has any arrangement or understanding with respect to the
distribution of the exchange notes to be acquired pursuant to the exchange
offer, such holder (i) cannot rely on the applicable interpretations of the
staff of the SEC and (ii) will be subject to the registration and prospectus
delivery requirements of the Securities Act in connection with any resale
transaction.
Each broker-dealer that owns outstanding notes that are acquired for its
own account as a result of market-making activities or other trading activities
and that receives exchange notes for its own account pursuant to the exchange
offer may be an "underwriter" within the meaning of the Securities Act, and must
acknowledge that it will deliver a prospectus, in connection with any resale of
such exchange notes. The letter of transmittal states that by so acknowledging
and by delivering a prospectus a broker-dealer will not be deemed to admit that
it is an "underwriter" within the meaning of the Securities Act. This
prospectus, as it may be amended or supplemented from time to time, may be used
by a broker-dealer in connection with resales of exchange notes received in
exchange for outstanding notes where such outstanding notes were acquired by
such broker-dealer as a result of market-making activities or other trading
activities (other than outstanding notes acquired directly from us). We have
agreed that, for a period of 180 days following the consummation of the exchange
offer, we will use our best efforts to make this prospectus available to any
broker-dealer for use in connection with any such resale. See "Plan of
Distribution."
21
Tendering holders of outstanding notes will not be required to pay
brokerage commissions or fees or, subject to the instructions in the letter of
transmittal, transfer taxes with respect to the exchange of the outstanding
notes pursuant to the exchange offer.
Interest on the exchange notes will accrue from the last date on which
interest was paid or duly provided for on the outstanding notes or, if no such
interest has been paid or duly provided for, from the issue date. Holders whose
outstanding notes are accepted for exchange will receive accrued interest
thereon to, but not including, the date of issuance of the exchange notes, such
interest to be payable with the first interest payment on the exchange notes,
but will not receive any payment in respect of interest on the outstanding notes
accrued after the issuance of the exchange notes.
EXPIRATION DATE; EXTENSIONS; TERMINATION; AMENDMENTS
The exchange offer expires on the expiration date. The term "expiration
date" means 5:00 p.m., New York City time, on March 13, 2003, unless in our sole
discretion we extend the period during which the exchange offer is open, in
which event the term "expiration date" means the latest time and date on which
such exchange offer, as so extended, expires. We will be entitled to close the
exchange offer 20 business days after the commencement thereof, provided,
however, that we have accepted all outstanding notes theretofore validly
surrendered in accordance with the terms of the exchange offer. We reserve the
right to extend the exchange offer at any time and from time to time prior to
the expiration date. We will notify Regions Bank (the "Exchange Agent") and each
registered holder of the outstanding notes of any extension by press release or
other public announcement prior to 9:00 a.m., New York City time, on the next
business day after the previously scheduled expiration date, unless otherwise
required by applicable law or regulation. During any extension of the exchange
offer, all outstanding notes previously tendered pursuant to the exchange offer
will remain subject to the exchange offer.
We expressly reserve the right to (i) terminate the exchange offer and not
accept for exchange any outstanding notes for any reason, including if any of
the events set forth below under "-- Conditions to the Exchange Offer" have
occurred and have not been waived by us and (ii) amend the terms of the exchange
offer in any manner, whether before or after any tender of the outstanding
notes. If any such termination or amendment occurs, we will notify the Exchange
Agent in writing and will either issue a press release or give written notice to
the holders of the outstanding notes as promptly as practicable. Unless we
terminate the exchange offer prior to 5:00 p.m. New York City time, on the
expiration date, we will exchange the exchange notes for the related outstanding
notes promptly following the expiration date.
If we waive any material condition to the exchange offer, or amend the
exchange offer in any other material respect, and if at the time that notice of
such waiver or amendment is first published, sent or given to holders of
outstanding notes in the manner specified above the exchange offer is scheduled
to expire at any time earlier than the expiration of a period ending on the
fifth business day from, and including, the date that such notice is first so
published, sent or given, then the exchange offer will be extended until the
expiration of such period of five business days, unless otherwise required by
applicable law.
This prospectus and the related letter of transmittal and other relevant
materials will be mailed by us to record holders of outstanding notes and will
be furnished to brokers, banks and similar persons whose names, or the names of
whose nominees, appear on the lists of holders for subsequent transmittal to
beneficial owners of outstanding notes.
EXCHANGE OFFER PROCEDURES
The tender of outstanding notes to us by a holder thereof pursuant to one
of the procedures set forth below will constitute an agreement between such
holder and us in accordance with the terms and subject to the conditions set
forth herein and in the letter of transmittal. Because the outstanding notes
were issued as global notes, this prospectus generally assumes that holders will
tender their outstanding notes through book-entry transfer, although
supplemental information regarding the delivery of certificated notes is also
included in the unlikely event that the global notes are exchanged for
certificated notes.
22
General Procedures. A holder of an outstanding note may tender the note by
(i) properly completing and signing the letter of transmittal or a facsimile
thereof (it being understood that all references herein to the letter of
transmittal will be deemed to include a facsimile thereof) and delivering it,
together with a timely confirmation of a book-entry transfer pursuant to the
procedure described below, to the Exchange Agent at its address set forth below
under "-- Exchange Agent" or on prior to the expiration date or (ii) complying
with the guaranteed delivery procedures described below.
If tendered notes are registered in the name of the signer of the letter of
transmittal and the exchange notes to be issued in exchange therefor are to be
issued (and any untendered outstanding notes are to be reissued) in the name of
the registered holder, the signature of such signer need not be guaranteed. In
any other case, the tendered notes must be endorsed or accompanied by written
instruments of transfer in form satisfactory to us and duly executed by the
registered holder and the signature on the endorsement or instrument of transfer
must be guaranteed by a firm (an "Eligible Institution") that is a member of a
recognized signature guarantee medallion program (an "Eligible Program") within
the meaning of Rule 17Ad-15 under the Exchange Act. If any notes are to be
delivered to an address other than that of the registered holder appearing on
the note register for the outstanding notes, the signature on the letter of
transmittal must be guaranteed by an Eligible Institution.
Any beneficial owner whose outstanding notes are registered in the name of
a broker, dealer, commercial bank, trust company or other nominee and who wishes
to tender outstanding notes should contact such holder promptly and instruct
such holder to tender outstanding notes on such beneficial owner's behalf. If
such beneficial owner wishes to tender such outstanding notes himself, such
beneficial owner must, prior to completing and executing the letter of
transmittal and delivering such outstanding notes, either make appropriate
arrangements to register ownership of the outstanding notes in such beneficial
owner's name or follow the procedures described in the immediately preceding
paragraph. The transfer of record ownership may take considerable time.
THE METHOD OF DELIVERY OF OUTSTANDING NOTES AND ALL OTHER DOCUMENTS IS AT
THE ELECTION AND RISK OF THE HOLDER. IF SENT BY MAIL, IT IS RECOMMENDED THAT
REGISTERED MAIL, RETURN RECEIPT REQUESTED, BE USED, PROPER INSURANCE BE
OBTAINED, AND THE MAILING BE MADE SUFFICIENTLY IN ADVANCE OF THE EXPIRATION DATE
TO PERMIT DELIVERY TO THE EXCHANGE AGENT ON OR BEFORE THE EXPIRATION DATE.
Unless an exemption applies under the applicable law and regulations
concerning "backup withholding" of federal income tax, the Exchange Agent will
withhold 30% of the gross proceeds otherwise payable to a holder pursuant to the
exchange offer if the holder does not provide its taxpayer identification number
(social security number of employer identification number) and certify that such
number is correct. Each tendering holder should complete and sign the main
signature form and the Substitute Form W-9 included as part of the letter of
transmittal, so as to provide the information and certification necessary to
avoid backup withholding, unless an applicable exemption exists and is proved in
a manner satisfactory to us and the Exchange Agent.
Book-Entry Transfer. The outstanding notes were issued as global
securities in fully registered form without interest coupons. Beneficial
interests in the global securities, held by direct or indirect participants in
DTC, are shown on, and transfers of these interests are effected only through,
records maintained in book-entry form by DTC with respect to its participants.
The Exchange Agent will establish an account with respect to the book-entry
interests at DTC for purposes of the exchange offer promptly after the date of
this prospectus. You must deliver your book-entry interest by book-entry
transfer to the account maintained by the Exchange Agent at DTC. Any financial
institution that is a participant in DTC's systems may make book-entry delivery
of book-entry interests by causing DTC to transfer the book-entry interests into
the Exchange Agent's account at DTC in accordance with DTC's procedures for
transfer.
If you hold your outstanding notes in the form of book-entry interests and
you wish to tender your outstanding notes for exchange pursuant to the exchange
offer, you must transmit to the Exchange Agent on
23
or prior to the expiration date either: (i) a written or facsimile copy of a
properly completed and duly executed letter of transmittal, including all other
documents required by the letter of transmittal, to the Exchange Agent at the
address set forth below under "-- Exchange Agent" or (ii) a computer-generated
message transmitted by means of DTC's Automated Tender Offer Program system and
received by the Exchange Agent and forming a part of a confirmation of
book-entry transfer, in which you acknowledge and agree to be bound by the terms
of the letter of transmittal.
In addition, in order to deliver outstanding notes held in the form of
book-entry interests a holder must (i) timely furnish to the exchange agent a
confirmation of book-entry transfer of such outstanding notes into the exchange
agent's account at DTC prior to the expiration date or (ii) comply with the
guaranteed delivery procedures described below.
Guaranteed Delivery Procedures. If a holder desires to accept the exchange
offer but is unable to deliver all required documentation or to obtain
confirmation of a book-entry transfer before the expiration date, a tender may
be effected if the Exchange Agent has received at the address specified below
under "-- Exchange Agent" on or prior to the expiration date a letter or
facsimile transmission from an Eligible Institution setting forth the name and
address of the tendering holder, the names in which the outstanding notes are
registered and, if possible, the certificate number of the outstanding notes to
be tendered, and stating that the tender is being made thereby and guaranteeing
that within three New York Stock Exchange trading days after the date of
execution of such letter or facsimile transmission by the Eligible Institution,
the outstanding notes, in proper form for transfer, will be delivered by such
Eligible Institution together with a properly completed and duly executed letter
of transmittal (and any other required documents). Unless outstanding notes
being tendered by the above-described method (or a timely Book-Entry
Confirmation) are deposited with the Exchange Agent within the time period set
forth above (accompanied or preceded by a properly completed letter of
transmittal and any other required documents), we may, at our option, reject the
tender. Copies of a Notice of Guaranteed Delivery, which may be used by Eligible
Institutions for the purposes described in this paragraph, are being delivered
with this prospectus and the related letter of transmittal.
Other Matters. A tender will be deemed to have been received as of the
date when the tendering holder's properly completed and duly signed letter of
transmittal accompanied by the outstanding notes or a timely book-entry
confirmation is received by the Exchange Agent. Issuances of exchange notes in
exchange for outstanding notes tendered pursuant to a Notice of Guaranteed
Delivery or letter or facsimile transmission to similar effect (as provided
above) by an Eligible Institution will be made only against deposit of the
letter of transmittal (and any other required documents) and the tendered notes
or a timely book-entry confirmation.
All questions as to the validity, form, eligibility (including time of
receipt) and acceptance for exchange of any tender of outstanding notes will be
determined by us, whose determination will be final and binding on all parties.
We reserve the absolute right to reject any or all tenders not in proper form or
the acceptance of which, or exchange for which, may, in the opinion of our
counsel, be unlawful. We also reserve the absolute right, subject to applicable
law, to waive any of the conditions of the exchange offer or any defects or
irregularities in tenders of any particular holder whether or not similar
defects or irregularities are waived in the case of other holders. Our
interpretation of the terms and conditions of the exchange offer (including the
letter of transmittal and the instructions thereto) will be final and binding.
No tender of outstanding notes will be deemed to have been validly made until
all defects and irregularities with respect to such tender have been cured or
waived. None of us, the Exchange Agent or any other person will be under any
duty to give notification of any defects or irregularities in tenders or will
incur any liability for failure to give any such notification.
Each broker-dealer that receives exchange notes for its own account in
exchange for outstanding notes, where such exchange notes were acquired by such
broker-dealer as a result of market-making activities or other trading
activities, must acknowledge that it will deliver a prospectus in connection
with any resale of such exchange notes. See "Plan of Distribution."
24
TERMS AND CONDITIONS OF THE LETTER OF TRANSMITTAL
The letter of transmittal contains, among other things, the following terms
and conditions, which are part of the exchange offer.
- The party tendering outstanding notes for exchange (the "transferor")
exchanges, assigns and transfers the outstanding notes to us and
irrevocably constitutes and appoints the Exchange Agent as the
transferor's agent and attorney-in-fact to cause the outstanding notes to
be assigned, transferred and exchanged.
- The transferor represents and warrants that it has full power and
authority to tender, exchange, sell, assign and transfer the outstanding
notes, and that, when they are accepted for exchange, we will acquire
good, marketable and unencumbered title to the tendered outstanding
notes, free and clear of all liens, restrictions, changes and
encumbrances and not subject to any adverse claim. The transferor also
warrants that it will, upon request, execute and deliver any additional
documents deemed by us or the Exchange Agent to be necessary or desirable
to complete the exchange, assignment and transfer of tendered outstanding
notes. The transferor agrees that all authority conferred by the
transferor will survive the death or incapacity of the transferor and
every obligation of the transferor will be binding upon the heirs, legal
representatives, successors, assigns, executors and administrators of
such transferor.
- If the transferor is not a broker-dealer, it represents that it is not
engaged in, and does not intend to engage in, a distribution of exchange
notes. If the transferor is a broker-dealer that will receive exchange
notes for its own account in exchange for outstanding notes, it
represents that the outstanding notes to be tendered were acquired by it
as a result of market-making activities or other trading activities and
acknowledges that it will deliver a prospectus meeting the requirements
of the Securities Act in connection with any resale of such exchange
notes; however, by so acknowledging and by delivering a prospectus, the
transferor will not be deemed to admit that it is an "underwriter" within
the meaning of the Securities Act.
WITHDRAWAL RIGHTS
Outstanding notes tendered pursuant to the exchange offer may be withdrawn
at any time prior to the expiration date.
For a withdrawal to be effective, a written or facsimile transmission of
such notice of withdrawal must be timely received by the Exchange Agent at its
address set forth below under "-- Exchange Agent" on or prior to the expiration
date. Any such notice of withdrawal must specify the person named in the letter
of transmittal as having tendered outstanding notes to be withdrawn, the
certificate numbers of outstanding notes to be withdrawn, the aggregate
principal amount of outstanding notes to be withdrawn (which must be an
authorized denomination), that such holder is withdrawing his election to have
such outstanding notes exchanged, and the name of the registered holder of such
outstanding notes, if different from that of the person who tendered such
outstanding notes. Additionally, the signature on the notice of withdrawal must
be guaranteed by an Eligible Institution (except in the case of outstanding
notes tendered for the account of an Eligible Institution). The Exchange Agent
will return any properly withdrawn certificated notes promptly following receipt
of notice of withdrawal. All questions as to the validity of notices of
withdrawals, including time of receipt, will be final and binding on all
parties.
If outstanding notes have been tendered pursuant to the procedures for book
entry transfer, the notice of withdrawal must specify the name and number of the
account at DTC to be credited with the withdrawal of outstanding notes, in which
case a notice of withdrawal will be effective if delivered to the Exchange Agent
by written or facsimile transmission.
Withdrawals of tenders of outstanding notes may not be rescinded.
Outstanding notes properly withdrawn will not be deemed validly tendered for
purposes of the exchange offer, but may be retendered at any subsequent time on
or prior to the expiration date by following any of the procedures described
herein.
25
ACCEPTANCE OF OUTSTANDING NOTES FOR EXCHANGE; DELIVERY OF EXCHANGE NOTES
Upon the terms and subject to the conditions of the exchange offer, the
acceptance for exchange of outstanding notes validly tendered and not withdrawn
and the issuance of the exchange notes will be made promptly following the
expiration date. For the purposes of the exchange offer, we will be deemed to
have accepted for exchange validly tendered outstanding notes when, as and if we
have given notice thereof to the Exchange Agent.
The Exchange Agent will act as agent for the tendering holders of
outstanding notes for the purposes of receiving exchange notes from us and
causing the outstanding notes to be assigned, transferred and exchanged. Upon
the terms and subject to the conditions of the exchange offer, delivery of
exchange notes to be issued in exchange for accepted outstanding notes will be
made by the Exchange Agent promptly after acceptance of the tendered outstanding
notes. Certificated notes not accepted for exchange by us will be returned
without expense to the tendering holders or in the case of outstanding notes
tendered by book-entry transfer into the Exchange Agent's account at DTC
promptly following the expiration date or, if we terminate the exchange offer
prior to the expiration date, promptly after the exchange offer is so
terminated.
CONDITIONS TO THE EXCHANGE OFFER
Notwithstanding any other provision of the exchange offer, or any extension
of the exchange offer, we will not be required to issue exchange notes in
respect of any properly tendered outstanding notes not previously accepted and
may terminate the exchange offer (by oral or written notice to the Exchange
Agent and by timely public announcement communicated, unless otherwise required
by applicable law or regulation, by making a press release) or, at our option,
modify or otherwise amend the exchange offer, if (i) the exchange offer, or the
making of any exchange by a holder of an outstanding note, would violate
applicable law or any applicable interpretation of the staff of the SEC, (ii) an
action or proceeding shall have been instituted or threatened in any court or by
or before any governmental agency or body with respect to the exchange offer
which, in our judgment, would reasonably be expected to impair our ability to
proceed with the exchange offer, or (iii) the holders of outstanding notes fail
to tender the outstanding notes to us in accordance with the exchange offer.
The foregoing conditions are for our sole benefit and may be asserted by us
with respect to all or any portion of the exchange offer regardless of the
circumstances (including any action or inaction by us) giving rise to such
condition or may be waived by us in whole or in part at any time or from time to
time in our sole discretion. The failure by us at any time to exercise any of
the foregoing rights will not be deemed a waiver of any such right, and each
right will be deemed an ongoing right which may be asserted at any time or from
time to time. In addition, we have reserved the right, notwithstanding the
satisfaction of each of the foregoing conditions, to terminate or amend the
exchange offer.
Any determination by us concerning the fulfillment or non-fulfillment of
any conditions will be final and binding upon all parties.
In addition, we will not accept for exchange any outstanding notes
tendered, and no exchange notes will be issued in exchange for any such
outstanding notes, if at such time any stop order shall be threatened or in
effect with respect to (i) the registration statement of which this prospectus
constitutes a part or (ii) the qualification under the Trust Indenture Act of
1939 (the "Trust Indenture Act") of the indenture pursuant to which such
outstanding notes were issued.
EXCHANGE AGENT
Regions Bank has been appointed as the Exchange Agent of the exchange
offer. All executed letters of transmittal should be directed to the Exchange
Agent at one of the addresses set forth below. Questions and
26
requests for assistance, requests for additional copies of this prospectus or of
the letter of transmittal and requests for Notices of Guaranteed Delivery should
be directed to the Exchange Agent addressed as follows:
By Mail/Registered or Certified Mail/
Hand Delivery/Overnight Delivery:
Regions Bank, Corporate Trust Department
2nd Floor, Regions Tower
60 Commerce Street
Montgomery, AL 36104
Attn: Robert B. Rinehart
Jo Ann Mayfield
Via Facsimile (for eligible institutions only):
(334) 230-6150
Confirm by telephone:
(334) 230-6119
For Information Call:
(334) 230-6119
DELIVERY TO AN ADDRESS OTHER THAN AS SET FORTH HEREIN, OR TRANSMISSIONS OF
INSTRUCTIONS VIA FACSIMILE NUMBER OTHER THAN THE ONES SET FORTH HEREIN, WILL NOT
CONSTITUTE A VALID DELIVERY.
SOLICITATIONS OF TENDERS; EXPENSES
We have not retained any dealer-manager or similar agent in connection with
the exchange offer and will not make any payments to brokers, dealers or others
for soliciting acceptances of the exchange offer. We will, however, pay the
Exchange Agent reasonable and customary fees for its services and will reimburse
it for reasonable out-of-pocket expenses in connection therewith. We will also
pay brokerage houses and other custodians, nominees and fiduciaries the
reasonable out-of-pocket expenses incurred by them in forwarding tenders for
their customers. We will pay the expenses to be incurred in connection with the
exchange offer, including the fees and expenses of the Exchange Agent and
printing, accounting and legal fees.
ACCOUNTING TREATMENT
The exchange notes will be recorded at the same carrying value as the
outstanding notes, which is the principal amount as reflected in our accounting
records on the date of the exchange. Accordingly, no gain or loss for accounting
purposes will be recognized.
APPRAISAL RIGHTS
Holders of outstanding notes will not have dissenters' rights or appraisal
rights in connection with the exchange offer.
OTHER
Participation in the exchange offer is voluntary and holders should
carefully consider whether to accept. Holders of the outstanding notes are urged
to consult their financial and tax advisors in making their own decisions on
what action to take.
Upon acceptance for exchange of all validly tendered outstanding notes
pursuant to the terms of this exchange offer, we will have fulfilled a covenant
contained in the registration rights agreement. Holders of the outstanding notes
who do not tender their certificates in the exchange offer will continue to hold
such certificates and will be entitled to all the rights, and limitations
applicable thereto, under the indenture pursuant to which the outstanding notes
were issued, except for any rights under the registration rights agreement which
terminate as a result of the making of this exchange offer. All untendered
outstanding notes
27
will continue to be subject to the restrictions on transfer set forth in the
outstanding notes and the indenture. To the extent that outstanding notes are
tendered and accepted in the exchange offer, the trading market, if any, for the
outstanding notes could be adversely affected. See "Risk Factors -- Risk Factors
Relating to the Exchange Offer -- Outstanding notes not exchanged for exchange
notes will continue to be subject to restrictions on transfer and may become
less liquid."
We may in the future seek to acquire untendered outstanding notes in open
market or privately negotiated transactions, through subsequent exchange offers
or otherwise. We have no present plan to acquire any outstanding notes that are
not tendered in the exchange offer.
DESCRIPTION OF THE NOTES
The outstanding notes were issued as a separate series of senior debt
securities under an indenture, dated as of March 31, 1994, between us and
Regions Bank (successor-in-interest to First American Bank and Trust of
Louisiana and Regions Bank of Louisiana), as trustee (the "indenture"). As
described under "The Exchange Offer -- Overview -- Registration Rights," we
agreed to file the registration statement of which this prospectus forms a part
to permit holders to exchange the outstanding notes for publicly registered
exchange notes having substantially identical terms, except principally for
certain provisions relating to additional interest and transfer restrictions.
The outstanding notes and the exchange notes will constitute a single series of
securities under the indenture and therefore will vote together as a single
class for purposes of determining whether holders of the requisite percentage in
aggregate principal amount thereof have taken actions or exercised rights they
are entitled to take or exercise under the indenture.
The following summary does not purport to be complete, and is subject to,
and qualified in its entirety by reference to, all the provisions of the notes
and the indenture. We urge you to read the notes and the indenture, which we
have filed with the SEC as exhibits to the registration statement of which this
prospectus forms a part, because they, and not this description, define your
rights as holders of the notes.
GENERAL
The notes will be limited initially to $500 million aggregate principal
amount, but we may "reopen" the series of notes at any time without the consent
of the noteholders and issue additional debt securities with the same terms
(except the issue price and issue date) that will constitute a single series
with the notes. The notes will be issued only in fully registered form without
coupons in denominations of $1,000 and any integral multiples of $1,000.
The notes will mature on August 15, 2012, unless redeemed prior to that
date, as described under "-- Optional Redemption." Interest on the notes
generally accrues at the rate of 7.875% per year. As a result of delays in
having our registration statement declared effective by the SEC, we incurred
"penalty" interest that increased the annual interest rate payable on the notes
from 7.875% to 8.125% between January 24, 2003 and February 9, 2003. Interest on
the notes will be computed on the basis of a 360-day year comprised of twelve
30-day months. We will pay interest on the notes semi-annually in arrears on
February 15 and August 15 of each year, beginning on February 15, 2003, to the
registered holders of the notes on the preceding February 1 and August 1,
respectively.
If any interest payment date, maturity date or redemption date falls on a
day that is not a business day, the required payment of principal, premium, if
any, and interest will be made on the next succeeding business day as if made on
the date that the payment was due, and no interest will accrue on the amount so
payable for the period from and after the interest payment date, maturity date
or redemption date, as the case may be, to the date of that payment on the next
succeeding business day.
We do not intend to apply for the listing or quotation of the notes on any
securities exchange or market.
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RANKING
The notes are our senior unsecured obligations. The notes rank senior to
any of our future subordinated debt and rank equally in right of payment with
all of our existing and future unsecured and unsubordinated debt. The indenture
does not limit the aggregate principal amount of senior debt securities that we
may issue thereunder. As of September 30, 2002, we had approximately $3.2
billion of unsecured and unsubordinated debt that would have ranked equally with
the notes, including almost $3.1 billion aggregate principal amount of senior
debt securities issued under the indenture.
As a holding company, substantially all of our income and operating cash
flow is dependent upon the earnings of our subsidiaries and the distribution of
those earnings to, or upon loans or other payments of funds by those
subsidiaries to, us. As a result, we rely upon our subsidiaries to generate the
funds necessary to meet our obligations, including the payment of amounts owed
under the notes. Our subsidiaries are separate and distinct legal entities and
have no obligation to pay any amounts due pursuant to the notes or, subject to
limited exceptions for tax sharing purposes, to make any funds available to us
to repay our obligations, whether by dividends, loans or other payments. Certain
of our subsidiaries' loan agreements contain various restrictions on the
transfer of funds to us, including certain provisions that restrict the amount
of dividends that may be paid to us. At December 31, 2001, the amount of
retained earnings of our subsidiaries not subject to dividend restrictions was
approximately $1.8 billion. Moreover, our rights to receive assets of any
subsidiary upon its liquidation or reorganization (and the ability of holders of
notes to benefit indirectly therefrom) will be effectively subordinated to the
claims of creditors of that subsidiary, including trade creditors. As of
September 30, 2002, the long-term debt of our subsidiaries was $517.3 million.
OPTIONAL REDEMPTION
The notes are redeemable in whole or in part at any time and from time to
time, at our option, at a redemption price equal to the greater of:
- 100% of the principal amount of the notes to be redeemed; and
- the sum of the present values of the remaining scheduled payments of
principal and interest on the notes to be redeemed (exclusive of interest
accrued to the date of redemption) discounted to the date of redemption
on a semi-annual basis (assuming a 360-day year consisting of twelve
30-day months) at the then current Treasury Rate plus 35 basis points.
In each case we will pay any accrued and unpaid interest on the principal amount
being redeemed to the date of redemption.
"Comparable Treasury Issue" means the U.S. Treasury security selected by an
Independent Investment Banker as having a maturity comparable to the remaining
term ("Remaining Life") of the notes to be redeemed that would be utilized, at
the time of selection and in accordance with customary financial practice, in
pricing new issues of corporate debt securities of comparable maturity to the
remaining term of such notes.
"Comparable Treasury Price" means, with respect to any redemption date, (1)
the average of the Reference Treasury Dealer Quotations for such redemption
date, after excluding the highest and lowest Reference Treasury Dealer
Quotations, or (2) if the trustee obtains fewer than four such Reference
Treasury Dealer Quotations, the average of all such quotations.
"Independent Investment Banker" means one of the Reference Treasury Dealers
that we appoint to act as the Independent Investment Banker from time to time.
"Reference Treasury Dealer" means each of Banc of America Securities LLC,
J.P. Morgan Securities Inc. and Wachovia Securities, Inc. and their respective
successors, and one other firm that is a primary U.S. Government securities
dealers (each, a "Primary Treasury Dealer") which we specify from time to time;
provided, however, that if any of them ceases to be a Primary Treasury Dealer,
we will substitute another Primary Treasury Dealer.
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"Reference Treasury Dealer Quotations" means, with respect to each
Reference Treasury Dealer and any redemption date, the average, as determined by
the trustee, of the bid and asked prices for the Comparable Treasury Issue
(expressed in each case as a percentage of its principal amount) quoted in
writing to the trustee by such Reference Treasury Dealer at 5:00 p.m., New York
City time, on the third business day preceding such redemption date.
"Treasury Rate" means, with respect to any redemption date, the rate per
year equal to: (1) the yield, under the heading which represents the average for
the immediately preceding week, appearing in the most recently published
statistical release designated "H.15(519)" or any successor publication which is
published weekly by the Board of Governors of the Federal Reserve System and
which establishes yields on actively traded U.S. Treasury securities adjusted to
constant maturity under the caption "Treasury Constant Maturities," for the
maturity corresponding to the Comparable Treasury Issue; provided that, if no
maturity is within three months before or after the Remaining Life of the notes
to be redeemed, yields for the two published maturities most closely
corresponding to the Comparable Treasury Issue will be determined and the
Treasury Rate will be interpolated or extrapolated from those yields on a
straight line basis, rounding to the nearest month; or (2) if such release (or
any successor release) is not published during the week preceding the
calculation date or does not contain such yields, the rate per year equal to the
semi-annual equivalent yield to maturity of the Comparable Treasury Issue,
calculated using a price for the Comparable Treasury Issue (expressed as a
percentage of its principal amount) equal to the Comparable Treasury Price for
such redemption date. The Treasury Rate will be calculated on the third business
day preceding the redemption date.
Notice of redemption will be mailed at least 30 but not more than 60 days
before the redemption date to each holder of record of the notes to be redeemed
at its registered address. The notice of redemption for the notes will state,
among other things, the amount of notes to be redeemed, the redemption date, the
redemption price and the place or places that payment will be made upon
presentation and surrender of notes to be redeemed. Unless we default in the
payment of the redemption price, interest will cease to accrue on any notes that
have been called for redemption at the redemption date.
If we choose to redeem less than all of the notes, we will notify the
trustee at least 45 days before giving notice of redemption, or such shorter
period as is satisfactory to the trustee, of the aggregate principal amount of
notes to be redeemed and the redemption date. The trustee will select by lot, or
in such other manner it deems fair and appropriate, the notes to be redeemed in
part.
If we have given notice as provided in the indenture and funds for the
redemption of any notes (or any portion thereof) called for redemption will have
been made available on the redemption date referred to in such notice, those
notes (or any portion thereof) will cease to bear interest on that redemption
date and the only right of the holders of those notes will be to receive payment
of the redemption price.
The notes are not be subject to, and do not have the benefit of, a sinking
fund.
MERGER AND CONSOLIDATION
We may not consolidate or merge with or into, or sell or otherwise dispose
of all or substantially all of our assets to, another corporation, unless (1) we
agree to obtain a supplemental indenture pursuant to which the surviving entity
or transferee agrees to assume our obligations under all outstanding senior debt
securities, including the notes, issued under the indenture and (2) the
surviving entity or transferee is organized under the laws of the United States,
any state thereof or the District of Columbia.
LIMITATIONS ON LIENS
The indenture provides that we will not, while any of the senior debt
securities under the indenture remain outstanding (including the notes), create
or suffer to exist any mortgage, lien, pledge, security interest or other
encumbrance (which we collectively refer to below as liens) upon our property,
whether now owned or hereafter acquired, unless we shall secure the senior debt
securities then outstanding, including the notes, by such lien equally and
ratably with all obligations and indebtedness thereby secured so long as such
obligations
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and indebtedness remain so secured. Notwithstanding the foregoing, the indenture
will not restrict us from creating or suffering to exist various types of liens
permitted in the indenture, including the following:
- liens upon property hereafter acquired by us or liens on such property at
the time of the acquisition thereof, or conditional sales agreements or
title retention agreements with respect to any such property;
- liens on the stock of a corporation that, when such liens arise,
concurrently becomes our subsidiary, or liens on all or substantially all
of the assets of a corporation arising in connection with our purchase
thereof;
- liens for taxes and similar levies, deposits to secure performance or
obligations under certain specified circumstances and laws, mechanics'
liens and similar liens arising in the ordinary course of business, liens
created by or resulting from legal proceedings being contested in good
faith, certain specified zoning restrictions and other restrictions on
the use of real property, interests of lessors in property subject to any
capitalized lease, and certain other similar liens generally arising in
the ordinary course of business;
- liens existing on the date of the indenture; and
- liens that replace, extend or renew any lien otherwise permitted under
the indenture.
The restrictions in the indenture described above would not protect the
note holders in the event of a highly leveraged transaction in which unsecured
indebtedness was incurred or in which the liens arising in connection therewith
were freely permitted under the indenture, nor would it afford protection in the
event of one or more highly leveraged transactions in which secured indebtedness
was incurred by our subsidiaries. In the event of one or more highly leveraged
transactions in which we incurred secured indebtedness, however, these
provisions would require the notes to be secured equally and ratably with such
indebtedness, subject to the exceptions described above.
EVENTS OF DEFAULT
The indenture provides that an Event of Default means that one or more of
the following events has occurred and is continuing with respect to senior debt
securities of a particular series outstanding under the indenture, including the
notes:
- failure for 30 business days to pay interest on the senior debt
securities of that series when due;
- failure to pay principal of (or premium, if any, on) the senior debt
securities of that series when due (whether at maturity, upon redemption,
by declaration or otherwise) or to make any sinking or analogous fund
payment with respect to that series unless caused solely by a wire
transfer malfunction or similar problem outside our control;
- failure to observe or perform any other covenant of that series for 60
days after written notice is given to us by the trustee with respect
thereto; or
- certain events relating to bankruptcy, insolvency or reorganization.
No Event of Default with respect to the senior debt securities of a
particular series necessarily constitutes an Event of Default with respect to
the senior debt securities of any other series issued under the indenture.
If an Event of Default shall occur and be continuing with respect to any
series and if it is known to the trustee, the trustee is required to mail to
each holder of that series a notice of the Event of Default within 90 days of
such default.
Upon the occurrence of an Event of Default with respect to any series, the
trustee or the holders of not less than 25% in aggregate outstanding principal
amount of that series, by notice in writing to us (and to the trustee if given
by such holders), may declare the principal of all senior debt securities of
that series due and payable immediately, but the holders of a majority in
aggregate outstanding principal amount of such series may rescind such
declaration and waive the default if the default has been cured and a sum
sufficient to pay all
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matured installments of interest and principal (and premium, if any) has been
deposited with the trustee before any judgment or decree for such payment has
been obtained or entered.
Holders of senior debt securities may not enforce the indenture except as
provided therein. Subject to the provisions of the indenture relating to the
duties of the trustee, if an Event of Default occurs and is continuing the
trustee will be under no obligation to exercise any of the rights or powers
under the indenture at the request or direction of any holders of the affected
series, unless, among other things, the holders shall have offered the trustee
indemnity reasonably satisfactory to it. Subject to the indemnification
provisions and certain limitations contained in the indenture, the holders of a
majority in aggregate principal amount of the senior debt securities of such
series then outstanding will have the right to direct the time, method and place
of conducting any proceeding for any remedy available to the trustee or
exercising any trust or power conferred on the trustee with respect to such
series. The holders of a majority in aggregate principal amount of the then
outstanding senior debt securities of any series affected by a default may, in
certain cases, waive such default except a default in payment of principal of,
or any premium, if any, or interest on, the debt securities of that series or a
call for redemption of the debt securities of that series.
We will be required to furnish to the trustee annually a statement
regarding our performance of certain of our obligations under the indenture.
DISCHARGE AND DEFEASANCE
We may discharge our obligations with respect to any series of our senior
debt securities outstanding under the indenture, including the notes, subject to
certain exceptions, if at any time:
(1) we deliver to the trustee for cancellation all outstanding senior
debt securities of that series and for which payment in moneys or U.S.
government obligations has been deposited in trust by us, or
(2) all outstanding senior debt securities of that series not
previously delivered to the trustee for cancellation by us shall have
become due and payable or are to become due and payable or called for
redemption within one year and we have deposited with the trustee the
entire amount in moneys or U.S. government obligations sufficient, without
reinvestment, to pay at maturity or upon redemption the outstanding senior
debt securities, including principal (and premium, if any) and interest due
or to become due to the date of maturity or redemption, and if we shall
also pay or cause to be paid all other sums payable thereunder with respect
to that series.
MODIFICATION OF THE INDENTURE
The indenture contains provisions permitting us, when authorized by a board
resolution, and the trustee, with the consent of the holders of not less than a
majority in aggregate principal amount of the senior debt securities of any
series at the time outstanding and affected by such modification, including the
notes, to modify the indenture or any supplemental indenture affecting that
series. However, no such modification may:
(1) extend the fixed maturity of any senior debt securities of any
series, reduce the principal amount thereof, reduce the rate or extend the
time of payment of interest thereon or reduce any premium payable upon the
redemption thereof, without the consent of the holder of each debt security
so affected, or
(2) reduce the aforesaid percentage of senior debt securities, the
holders of which are required to consent to any such supplemental
indenture, without the consent of the holder of each senior debt security
then outstanding and affected thereby.
CenturyTel and the trustee may execute, without the consent of any holder
of senior debt securities, including the notes, a supplemental indenture for
certain other usual purposes, including the following:
- creating a new series of senior debt securities;
- evidencing the assumption by any successor to CenturyTel of our
obligations under the indenture;
- adding covenants to the indenture for the protection of the holders of
senior debt securities;
32
- curing any ambiguity or inconsistency in the indenture, or making other
provisions as shall not adversely affect the interests of the holders of
the senior debt securities of any series; or
- changing or eliminating any provisions of the indenture provided that
there is no outstanding senior debt security of any series created prior
to such change that benefits therefrom.
FORM, REGISTRATION AND TRANSFER
The outstanding notes have been and the exchange notes will be issued in
fully registered form. The trustee will act as the registrar of the notes. No
service charge will be made for any registration of transfer or exchange of
notes, or issue of new notes in the event of a partial redemption, but we may
generally require payment of a sum sufficient to cover any tax or other
governmental charge payable in connection therewith.
PAYMENT AND PAYING AGENTS
Payment of principal of, or premium, if any, and interest on the notes will
be made in U.S. dollars at the principal office of our paying agent or, at our
option, by check in U.S. dollars mailed or delivered to the person in whose name
such exchange note is registered. Subject to certain exceptions provided for in
the indenture, payment of any installment of interest on the notes will be made
to the person in whose name such exchange note is registered at the close of
business on the record date established under the indenture for the payment of
interest.
The trustee acts as our sole paying agent and 1500 North 18th Street,
Monroe, Louisiana, is designated as the agent's office for purposes of payments
with respect to the notes. We may at any time designate additional paying agents
or rescind the designation of any paying agents or approve a change in the
office through which any paying agent acts, except that we will be required to
maintain a paying agent in the Borough of Manhattan, City and State of New York,
or Monroe, Louisiana.
Any money set aside by us for the payment of principal of, or premium, if
any, or interest on any exchange note that remains unclaimed two years after
such payment has become due and payable will be repaid to us on May 31 following
the expiration of the two-year period and the holder of the exchange note may
thereafter look only to us for payment thereof.
REPLACEMENT OF NOTES
We will replace any note that becomes mutilated, destroyed, lost or stolen
at the expense of the holder. The holder should deliver the note or satisfactory
evidence of the destruction, loss or theft thereof to us and the trustee. An
indemnity satisfactory to us and the trustee may be required before a
replacement security will be issued.
CONCERNING THE TRUSTEE
The trustee, prior to the occurrence of an Event of Default, undertakes to
perform only such duties as are specifically set forth in the indenture and,
after the occurrence of an Event of Default, will exercise the same degree of
care as a prudent person would exercise in the conduct of such person's own
affairs. Subject to such provision, the trustee is not required to exercise any
of the rights or powers vested in it by the indenture at the request, order or
direction of any note holders, unless offered reasonable security or indemnity
by such holders against the costs, expenses and liabilities which might be
incurred thereby. The trustee is not required to expend or risk its own funds or
incur personal financial liability in the performance of its duties if the
trustee reasonably believes that repayment of such funds or liability or
adequate indemnity is not reasonably assured to it. We will pay the trustee
reasonable compensation and reimburse it for reasonable expenses incurred in
accordance with the indenture.
The trustee may resign with respect to the notes and a successor trustee
may be appointed to act with respect to the notes.
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Regions Bank is trustee under the indenture relating to our outstanding
Series A, B, C, D, E, F, G, H, J, K and L senior debt securities. Regions Bank
also serves as trustee for one of our employee benefit plans and provides
revolving credit and other traditional banking services to CenturyTel.
GOVERNING LAW
The notes and the indenture are governed by, and construed in accordance
with, the laws of the State of Louisiana.
GLOBAL NOTES AND BOOK-ENTRY SYSTEM
The exchange notes will be in book-entry form, will be represented by a
single, permanent global certificate in fully registered form without interest
coupons and will be deposited with the trustee as custodian for DTC and
registered in the name of Cede & Co. or another nominee designated by DTC.
We will issue exchange notes in certificated form (the "certificated
notes") to DTC for owners of beneficial interests in a global note if:
- DTC notifies us that it is unwilling or unable to continue as depositary
and we are unable to locate a qualified successor within 90 days or if at
any time DTC, or any successor depositary, ceases to be a "clearing
agency" under the Exchange Act;
- an Event of Default relating to the exchange notes occurs; or
- we decide in our sole discretion to terminate the use of the book-entry
system for the exchange notes through DTC.
DTC has advised us as follows: DTC is a limited-purpose trust company
organized under the New York Banking Law, a "banking organization" within the
meaning of the New York Banking Law, a member of the Federal Reserve System, a
"clearing corporation" within the meaning of The New York Uniform Commercial
Code and a "clearing agency" registered pursuant to the provisions of Section
17A of the Exchange Act. DTC holds securities that its participants ("Direct
Participants") deposit with DTC. DTC also facilitates the settlement among
Direct Participants of securities transactions, such as transfers and pledges,
in deposited securities through electronic computerized book-entry changes in
Direct Participants' accounts, thereby eliminating the need for physical
movement of securities certificates. Direct Participants include securities
brokers and dealers, banks, trust companies, clearing corporations, and certain
other organizations. DTC is owned by a number of its Direct Participants and by
The New York Stock Exchange, Inc., the American Stock Exchange LLC, and the
National Association of Securities Dealers, Inc. Access to the DTC system is
also available to others like securities brokers and dealers, banks, and trust
companies that clear through or maintain a custodial relationship with a Direct
Participant, either directly or indirectly ("Indirect Participants"). The rules
applicable to DTC and its Direct and Indirect Participants are on file with the
SEC.
Purchases of global notes under the DTC system must be made by or through
Direct Participants, which will receive a credit for the global notes on DTC's
records. The beneficial interest of each actual purchaser of each global note (a
"Beneficial Owner") is in turn to be recorded on the records of the respective
Direct Participant and Indirect Participant. Beneficial Owners will not receive
written confirmation from DTC of their purchase, but Beneficial Owners are
expected to receive written confirmations providing details of the transaction,
as well as periodic statements of their holdings, from the Direct Participant or
Indirect Participant through which the Beneficial Owner entered into the
transaction. Transfers of ownership interests in the global notes are to be
effected by entries made on the books of Direct Participants and Indirect
Participants acting on behalf of Beneficial Owners. Beneficial Owners will not
receive certificates representing their ownership interests in global notes,
except in the event that use of the book-entry system for the global notes is
discontinued.
To facilitate subsequent transfers, all global notes deposited by Direct
Participants with DTC are registered in the name of DTC's partnership nominee,
Cede & Co. or any other name as may be requested by an authorized representative
of DTC. The deposit of global notes with DTC and their registration in the name
34
of Cede & Co. or any other nominee do not effect any change in beneficial
ownership. DTC has no knowledge of the actual Beneficial Owners of the global
notes; DTC's records reflect only the identity of the Direct Participants to
whose accounts those global notes are credited, which may or may not be the
Beneficial Owners. The Direct Participants and Indirect Participants will remain
responsible for keeping account of their holdings on behalf of their customers.
Payments of the principal of, premium, if any, and interest and additional
interest, if any, on the exchange notes represented by the global notes
registered in the name of and held by DTC or its nominee will be made to DTC or
its nominee, as the case may be, as the registered owners and holder of the
global notes.
Conveyance of notices and other communications by DTC to Direct
Participants, by Direct Participants to Indirect Participants, and by Direct
Participants and Indirect Participants to Beneficial Owners will be governed by
arrangements among them, subject to any statutory or regulatory requirements as
may be in effect from time to time.
Neither DTC nor Cede & Co. (or any other nominee of DTC) will consent or
vote with respect to the global notes. Under its usual procedures, DTC mails an
Omnibus Proxy to us as soon as possible after the record date. The Omnibus Proxy
assigns Cede & Co.'s consenting or voting rights to those Direct Participants to
whose accounts the global notes are credited on the record date (identified in a
listing attached to the Omnibus Proxy). Principal, premium, if any, and interest
payments in respect of the global notes will be made to Cede & Co. or any other
nominee as may be requested by an authorized representative of DTC. DTC's
practice is to credit Direct Participants' accounts, upon DTC's receipt of funds
and corresponding detail information from us or the trustee on the payment date
in accordance with their respective holdings shown on DTC's records. Payments by
Direct Participants and Indirect Participants to Beneficial Owners will be
governed by standing instructions and customary practices, as is the case with
securities held for the accounts of customers in bearer form or registered in
"street name," and will be the responsibility of each such Direct or Indirect
Participant and not that of DTC, the trustee or us, subject to any statutory or
regulatory requirements as may be in effect from time to time. Principal,
premium, if any, and interest payments in respect of the global notes to Cede &
Co. (or other nominee requested by an authorized representative of DTC) is our
responsibility, disbursement of such payments to Direct Participants will be the
responsibility of DTC and disbursement of such payments to the Beneficial Owners
will be the responsibility of Direct Participants and Indirect Participants.
The laws of some states require that certain persons take physical delivery
of securities in definitive form. Consequently, the ability to transfer
beneficial interests in a global note to those persons may be limited. In
addition, because DTC can act only on behalf of Direct Participants, which, in
turn, act on behalf of Indirect Participants and certain banks, the ability of a
person having a beneficial interest in a global note to pledge that interest to
persons or entities that do not participate in the DTC system, or otherwise take
actions in respect of that interest, may be affected by the lack of a physical
certificate evidencing that interest.
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
The following general discussion of certain U.S. federal income tax
considerations relating to the exchange notes applies to you if you acquired the
outstanding notes at the original issue price within the meaning of Section 1273
of the Internal Revenue Code of 1986 and hold or will hold the notes as a
"capital asset" within the meaning of Section 1221 of the Code. This discussion
is based on the Internal Revenue Code of 1986, Treasury Regulations promulgated
thereunder, administrative positions of the Internal Revenue Service and
judicial decisions now in effect, all of which are subject to change (possibly
with retroactive effect) or to different interpretations.
We have not sought a ruling from the IRS with respect to the U.S. federal
income tax consequences of the exchange offer or the acquiring, holding or
disposing of an exchange note. There can be no assurance that the IRS will not
challenge one or more of the conclusions described herein.
This discussion does not purport to deal with all aspects of U.S. federal
income taxation that may be relevant to a particular holder in light of the
holder's circumstances (such as a person subject to the alternative
35
minimum tax provisions of the Code). In addition, it is not intended to be
wholly applicable to all categories of investors, some of which (like dealers in
securities, banks, insurance companies, tax-exempt organizations, persons
holding a note as part of a "straddle," hedge," conversion transaction" or other
risk reduction transaction and persons who have a "functional currency" other
than the U.S. dollar) may be subject to special rules.
This discussion does not address any aspect of state, local or foreign law,
or U.S. federal estate and gift tax law nor does it address exchange notes held
through a partnership or other pass-through entity.
WE ADVISE YOU TO CONSULT WITH YOUR TAX ADVISERS REGARDING THE FEDERAL,
STATE, LOCAL AND FOREIGN TAX CONSEQUENCES OF ACQUIRING, HOLDING AND DISPOSING OF
THE EXCHANGE NOTES IN LIGHT OF YOUR OWN PARTICULAR CIRCUMSTANCES.
The following general discussion is limited to certain United States
federal income tax consequences to a holder of an exchange note that is a "U.S.
Holder." For purposes of this discussion, a "U.S. Holder" is a beneficial owner
of an exchange note that for U.S. federal income tax purposes is:
- a citizen or resident of the Code of the United States;
- a corporation (or an entity treated as a corporation) created or
organized in or under the laws of the United States, any state or the
District of Columbia;
- an estate the income of which is subject to U.S. federal income taxation
regardless of its source; or
- a trust if a U.S. court is able to exercise primary supervision over the
administration of the trust and one or more U.S. persons have the
authority to control all substantial decisions of the trust.
TAXATION OF STATED INTEREST ON THE EXCHANGE NOTES
Generally, payments of stated interest on an exchange note will be
includible in a holder's gross income and taxable as ordinary income for U.S.
federal income tax purposes at the time such interest is paid or accrued in
accordance with the holder's regular method of tax accounting.
SALE, EXCHANGE OR RETIREMENT OF AN EXCHANGE NOTE
Each holder generally will recognize capital gain or loss upon a sale,
exchange or retirement of an exchange note measured by the difference, if any,
between (i) the amount of cash and the fair market value of any property
received (except to the extent that the cash or other property received in
respect of an exchange note is attributable to the payment of accrued interest
on the exchange note not previously included in income, which amount will be
taxable as ordinary income) and (ii) the holder's adjusted tax basis in the
exchange note. The gain or loss will be long-term capital gain or loss if the
exchange note has been held for more than one year at the time of the sale,
exchange or retirement. A holder's initial basis in an exchange note generally
will be the amount paid for the exchange note.
Prospective investors will be aware that the resale of an exchange note may
be affected by the "market discount" rules of the Code, under which a portion of
any gain realized on the retirement or other disposition of an exchange note by
a subsequent holder that acquires the exchange note at a market discount
generally would be treated as ordinary income to the extent of the market
discount that accrues while that holder holds the exchange note.
EXCHANGE OFFER
Because the exchange notes should not differ materially in kind or extent
from the outstanding notes, your exchange of outstanding notes for exchange
notes should not constitute a taxable disposition of the outstanding notes for
U.S. federal income tax purposes. As a result, you should not recognize taxable
income, gain or loss on such exchange, your holding period for the exchange
notes should generally include the holding period for the notes so exchanged,
and your adjusted tax basis in the exchange notes should generally be the same
as your adjusted tax basis in the notes so exchanged.
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INFORMATION REPORTING AND BACKUP WITHHOLDING
A holder of an exchange note may be subject, under certain circumstances,
to information reporting and "backup withholding" at a rate of 30% with respect
to certain "reportable payments," including interest on or principal (and
premium, if any) of a note and the gross proceeds from a disposition of an
exchange note. The backup withholding rules apply if the holder, among other
things, (i) fails to furnish a social security number or other taxpayer
identification number ("TIN") certified under penalties of perjury within a
reasonable time after the request therefor, (ii) furnishes an incorrect TIN,
(iii) fails to properly report the receipt of interest or dividends or (iv)
under certain circumstances, fails to provide a certified statement, signed
under penalties of perjury, that the TIN furnished is the correct number and
that the holder is not subject to backup withholding. A holder who does not
provide us with its correct TIN also may be subject to penalties imposed by the
IRS. Backup withholding will not apply with respect to payments made to certain
holders, including corporations and tax-exempt organizations, provided their
exemptions from backup withholding are properly established. We will report
annually to the IRS and to each holder of an exchange note the amount of any
"reportable payments" and the amount of tax withheld, if any, with respect to
those payments.
Any amounts withheld under the backup withholding rules from a payment to a
holder will be allowed as a refund or as a credit against that holder's U.S.
federal income tax liability, provided the requisite procedures are followed.
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PLAN OF DISTRIBUTION
Each broker-dealer that receives exchange notes for its own account under
the exchange offer must acknowledge that it will deliver a prospectus in
connection with any resale of those exchange notes. This prospectus, as it may
be amended or supplemented from time to time, may be used by a broker-dealer for
resales of exchange notes received in exchange for outstanding notes that had
been acquired as a result of market-making or other trading activities. We have
agreed that, for a period of 180 days after the expiration date of the exchange
offer, we will make this prospectus, as it may be amended or supplemented,
available to any broker-dealer for use in connection with any such resale. Any
broker-dealers required to use this prospectus and any amendments or supplements
to this prospectus for resales of the exchange notes must notify us of this fact
by checking the box on the letter of transmittal requesting additional copies of
these documents.
Notwithstanding the foregoing, we are entitled under the registration
rights agreement to suspend the use of this prospectus by broker-dealers under
specified circumstances. For example, we may suspend the use of this prospectus
if:
- the SEC or any state securities authority requests an amendment or
supplement to this prospectus or the related registration statement or
additional information;
- the SEC or any state securities authority issues any stop order
suspending the effectiveness of the registration statement or initiates
proceedings for that purpose;
- we receive notification of the suspension of the qualification of the
exchange notes for sale in any jurisdiction or the initiation or
threatening of any proceeding for that purpose;
- the suspension is required by law;
- we determine that an amendment to the registration statement is
appropriate; or
- an event occurs or we discover any fact or condition that makes any
statement in this prospectus untrue in any material respect or which
constitutes an omission to state a material fact in this prospectus.
If we suspend the use of this prospectus, the 180-day period referred to
above will be extended by the number of days equal to the period of the
suspension.
We will not receive any proceeds from any sale of exchange notes by
broker-dealers. Exchange notes received by broker-dealers for their own account
under the exchange offer may be sold from time to time in one or more
transactions in the over-the-counter market, in negotiated transactions, through
the writing of options on those exchange notes or a combination of those
methods, at market prices prevailing at the time of resale, at prices related to
prevailing market prices or at negotiated prices. Any resales may be made
directly to purchasers or to or through brokers or dealers who may receive
compensation in the form of commissions or concessions from the selling
broker-dealer or the purchasers of the exchange notes. Any broker-dealer that
resells exchange notes received by it for its own account under the exchange
offer and any broker or dealer that participates in a distribution of the
exchange notes may be deemed to be an "underwriter" within the meaning of the
Securities Act and any profit on any resale of exchange notes and any
commissions or concessions received by these persons may be deemed to be
underwriting compensation under the Securities Act. The letter of transmittal
states that, by acknowledging that it will deliver and by delivering a
prospectus, a broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.
We have agreed to pay all expenses incidental to the exchange offer other
than commissions and concessions of any broker or dealer and will indemnify
holders of the exchange notes, including any broker-dealers, against certain
liabilities, including liabilities under the Securities Act or contribute to
payments that they may be required to make in request thereof.
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LEGAL MATTERS
The validity of the exchange notes have been passed upon for CenturyTel by
Jones, Walker, Waechter, Poitevent, Carrere & Denegre, L.L.P., New Orleans,
Louisiana.
EXPERTS
The consolidated financial statements and related financial statement
schedules of CenturyTel, Inc. and subsidiaries as of December 31, 2001 and 2000,
and for each of the years in the three-year period ended December 31, 2001,
included in CenturyTel, Inc.'s current report on Form 8-K dated March 19, 2002
and filed with the SEC on August 13, 2002, have been incorporated by reference
herein and in the Registration Statement, in reliance upon the reports of KPMG
LLP, independent accountants, also incorporated by reference herein and in the
Registration Statement, and upon the authority of said firm as experts in
accounting and auditing.
The special purpose financial statements of Verizon's Alabama Operations
and Verizon's Missouri Operations as of December 31, 2001, and for year then
ended, included in CenturyTel, Inc.'s current report on Form 8-K dated August 1,
2002 filed on August 13, 2002, and August 31, 2002 and filed with the SEC on
October 8, 2002, have been audited by Ernst & Young LLP, independent auditors,
as set forth in their reports thereon included therein and incorporated by
reference herein. Such special-purpose financial statements have been
incorporated by reference herein in reliance upon such reports given the
authority of such firm as experts in accounting and auditing.
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[CENTURYTEL LOGO]
OFFER TO EXCHANGE
$500,000,000 REGISTERED 7.875% SENIOR NOTES, SERIES L, DUE 2012
FOR
ALL OUTSTANDING UNREGISTERED 7.875% SENIOR NOTES, SERIES L, DUE 2012
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PROSPECTUS
----------------------
February 10, 2003
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