As filed with the Securities and Exchange Commission on November 8, 1994
Registration No. 33-54433
==============================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------------
Amendment No. 4
to
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
-----------------
C-TEC CORPORATION
(Exact name of Registrant as specified in its charter)
Pennsylvania 23-2093008
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
105 Carnegie Center
Princeton, NJ 08540
(609) 734-3700
(Address, including zip code, and telephone number,
including area code of Registrant's principal executive offices)
-----------------
Raymond B. Ostroski
Vice President and General Counsel
C-TEC Corporation
105 Carnegie Center
Princeton, NJ 08540
(609) 734-3700
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
-----------------
Copy to:
Peter R. Douglas
Davis Polk & Wardwell
450 Lexington Avenue
New York, New York 10017
(212) 450-4000
-----------------
Approximate date of commencement of proposed sale to the public: As
soon as practicable after the effective date of this Registration Statement.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the
following box. ( )
If any of the securities being registered on this Form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933, other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box. ( )
-----------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(A), MAY DETERMINE.
PROSPECTUS (Subject to Completion) [LOGO]
Issued November 8, 1994
[ ] Shares
C-TEC Corporation
Common Stock
C-TEC Corporation, a Pennsylvania corporation (the "Company"), is
distributing to holders of record of shares of its Common Stock, par value
$1.00 per share (the "Common Stock"), and to holders of record of shares of
its Class B Common Stock, par value $1.00 per share (the "Class B Stock",
and collectively with the Common Stock, the "Company Stock"), transferable
subscription rights (the "Rights") to subscribe for and purchase additional
shares of the Common Stock for a price of $[ ] per share (the "Subscription
Price"). Such shareholders will receive [ ] Rights for every [ ] shares of
Company Stock held by them as of the close of business on November 10, 1994
(the "Record Date"). No fractional Rights or cash in lieu thereof will be
distributed or paid by the Company. The number of Rights distributed by
the Company to each record holder (a "Holder") of Company Stock will be
round ed up to the nearest whole number. Rights holders may purchase one
share of Common Stock for each whole Right held. Each Right also carries
the right to subscribe (the "Oversubscription Privilege") at the
Subscription Price for shares of Common Stock that are not otherwise
purchased pursuant to the exercise of Rights. See "The Rights
Offering--Subscription Privileges--Oversubscription Privilege." The Rights
will be evidenced by transferable certificates. Once a holder has
exercised any Rights, such exercise may not be revoked. There can be no
assurance that the Company will receive any proceeds from the exercise of
the Rights.
The Rights will expire at 5:00 p.m., New York City time, on December
1, 1994 (the "Expiration Date"). Shareholders who do not exercise or sell
their Rights will relinquish the value inherent in the Rights.
Accordingly, shareholders are strongly urged to exercise or sell their
Rights. See "Investment Considerations--Dilution."
As of November 10, 1994, RCN Corporation, a Delaware corporation
("RCN"), owns directly or indirectly, 600,768 shares of Common Stock,
representing 7.5% of the outstanding Common Stock, and 5,094,223 shares of
Class B Stock, representing 59.6% of the outstanding Class B Stock. RCN
will receive [ ] Rights in respect of the shares of Company Stock it owns,
and such Rights represent 34.5% of the total Rights to be distributed. RCN
has informed the Company that it intends to exercise the Rights it receives
for an aggregate subscription price of $[ ] and that it intends to exercise
the Oversubscription Privilege for an aggregate subscription price of
approximately $______________ to subscribe for [ ] additional shares of
Common Stock. The opportunity to exercise the Oversubscription Privilege
is available to all holders of rights on the same terms. The Common Stock
has less voting power per share than the Class B Stock. See "Description
of Capital Stock--Voting Rights and Powers." As a result of its ownership
of 59.6% of the Class B Stock and 7.5% of the Common Stock, RCN has, and
after the Rights Offering will have, effective control of the Company.
The principal market for the Common Stock is The NASDAQ Stock Market's
National Market ("NASDAQ"). It is anticipated that the Rights will trade
on NASDAQ under the symbol "CTEXR." Certain registered broker-dealers have
indicated to the Company that they intend to make a market in the Rights.
There can be no assurance, however, that a market for the Rights will
develop. Rights may also be sold in over-the-counter and private sales
transactions. Orders to sell Rights must be received by the Subscription
Agent (as hereinafter defined) not later than 11:00 a.m. on November 23,
1994, if a holder wishes to sell Rights through the Subscription Agent. On
June 30, 1994, the last day on which trade prices were reported prior to
the public announcement of the Rights Offering, the closing sale price of
the Common Stock on NASDAQ was $25.25 per share. On November 10, 1994, the
closing sale price of the Common Stock on NASDAQ was $[ ] per share.
-----------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
-----------------
SHAREHOLDERS WHO DO NOT EXERCISE THEIR RIGHTS IN FULL WILL EXPERIENCE
DILUTION IN THEIR RELATIVE PERCENTAGE OWNERSHIP IN THE COMPANY UPON
ISSUANCE OF THE COMMON STOCK TO SHAREHOLDERS EXERCISING THEIR RIGHTS.
-----------------
BEFORE MAKING AN INVESTMENT DECISION, POTENTIAL INVESTORS SHOULD CARE-
FULLY CONSIDER THE FACTORS SET FORTH IN "INVESTMENT CONSIDERATIONS"
IN ADDITION TO THE OTHER INFORMATION CONTAINED IN THIS PROSPECTUS
Underwriting Discounts Proceeds to the
Price to Public and Commissions (1) Company(2)
--------------- ---------------------- ---------------
Per Share..... $ N/A $
Total......... $ N/A $
(1) See "Plan of Distribution" for information with respect to contingent
fees payable by the Company.
(2) Before deduction of estimated expenses of $[ ] payable by the
Company, including registration fees, listing fees, NASD review fees,
financial advisory, legal and accounting fees, subscription agent
fees, information agent fees, soliciting dealer fees, printing
expenses and other miscellaneous fees and expenses.
-----------------
The date of this Prospectus is November ____, 1994.
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF
ANY SUCH STATE.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files reports, proxy statements and other information
with the Securities and Exchange Commission (the "Commission"). Reports,
proxy statements and other information filed by the Company can be inspected
and copied at the public reference facilities maintained by the Commission at
Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549 and at the Regional
Offices of the Commission located at 7 World Trade Center, 13th Floor, New
York, New York 10048 and Northwest Atrium Center, 500 West Madison Street,
Chicago, Illinois 60661. Copies of such material can be obtained upon written
request addressed to the Public Reference Section of the Commission at 450
Fifth Street, N.W., Washington D.C. 20549, at prescribed rates. The Company's
Common Stock is quoted on NASDAQ and such reports, proxy statements and other
information can also be inspected at the offices of NASDAQ Operations, 1735 K
Street, N.W., Washington, D.C. 20006.
The Company has filed with the Commission a Registration Statement on
Form S-3 (together with any amendments thereto, the "Registration Statement")
under the Securities Act of 1933, as amended (the "Securities Act"), with
respect to the shares of Common Stock issuable upon exercise of the Rights.
This Prospectus does not contain all the information set forth in the
Registration Statement. Such additional information may be obtained from the
Commission's principal office in Washington, D.C. Statements contained in
this Prospectus or in any document incorporated in this Prospectus by
reference as to the contents of any contract or other document referred to
herein or therein are not necessarily complete, and, in each instance,
reference is made to the copy of such contract or other document filed as an
exhibit to the Registration Statement or such other document, each such
statement being qualified in all respects by such reference.
DOCUMENTS INCORPORATED BY REFERENCE
The following documents filed by the Company (File No. 0-11053) with the
Commission pursuant to Section 13 of the Exchange Act are incorporated herein
by reference: (i) the Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 1993, as amended on October 28, 1994 (as so further
amended, the "Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1993") (ii) the Company's Proxy Statement dated
March 15, 1994 (iii) the Company's Quarterly Report on Form 10-Q for the
quarter ended March 31, 1994, as amended on October 28, 1994, (iv) the
Company's Quarterly Report on Form 10-Q for the six months ended June 30,
1994, as amended on October 28, 1994 (as so further amended, the
"Company's Quarterly Report on Form 10-Q for the six months ended June 30,
1994") (v) the Company's Current Report on Form 8-K dated September 26, 1994
and (vi) the Company's Current Report on Form 8-K dated October 27, 1994.
All documents filed by the Company pursuant to Section 13(a), 13(c), 14
or 15(d) of the Exchange Act subsequent to the date of this Prospectus and
prior to the termination of the offering of the Common Stock shall be deemed
to be incorporated by reference into this Prospectus and to be a part hereof
from the date of filing of such documents. Any statement contained in a
document incorporated or deemed to be incorporated by reference herein shall
be deemed to be modified or superseded for purposes of this Prospectus to the
extent that a statement contained herein or in any other subsequently filed
document which is also deemed to be incorporated by reference herein modifies
or supersedes such statement. Any such statement so modified or superseded
shall not be deemed, except as so modified or superseded, to constitute a part
of this Prospectus.
This Prospectus incorporates documents by reference which are not
presented herein or delivered herewith. The Company will provide without
charge to each person, including each beneficial owner, to whom a copy of this
Prospectus has been delivered, on the written or oral request of such person,
a copy of any or all documents referred to above which have been incorporated
by reference into this Prospectus except the exhibits to such documents unless
such exhibits are specifically incorporated by reference into the information
that the Prospectus incorporates. Telephone requests for such copies should
be directed to the Information Agent at (212) 929-5500 or (800) 322-2885, or,
if made in writing, to MacKenzie Partners, Inc., 156 Fifth Avenue, 9th Floor,
New York, NY 10010. Such requests may also be directed to Raymond B.
Ostroski, Vice President and General Counsel at (609) 734-3803 or, if made
in writing, to C-TEC Corporation, 105 Carnegie Center, Princeton, NJ 08540
attention: Raymond B. Ostroski, Vice
President and General Counsel.
PROSPECTUS SUMMARY
The following material is qualified in its entirety by the
information appearing elsewhere in this Prospectus and in the documents
incorporated in this Prospectus by reference.
THE COMPANY
The Company was organized in 1979 and is incorporated under the laws of
the Commonwealth of Pennsylvania. The Company is a holding company with
wholly owned subsidiaries which are engaged in various aspects of the
telecommunications industry and which are organized into five principal groups
- - Telephone, Cable, Communications Services, Mobile Services, and Long
Distance. Through its wholly owned subsidiaries, the Company also has
ownership interests in a number of other entities providing telecommunications
services.
The Telephone Group consists of a Pennsylvania public utility providing
local telephone service to a 19 county, 5,067 square mile service territory in
Pennsylvania. As of June 30, 1994, the Telephone Group serviced approximately
215,000 main access lines. Of these 168,000 were residential and 47,000 were
primarily related to business. This Group's operating territory is rural,
containing only 42.4 access lines per square mile as compared to a
Pennsylvania average of approximately 151 lines per square mile. The Group's
79 central offices serve an average of approximately 2,700 lines and 65 square
miles.
The Cable Group is a cable television operator with cable television
systems located in the States of New York, New Jersey, Michigan and Delaware.
The Group owns and operates cable television systems serving approximately
236,000 customers and manages cable television systems with an additional
36,000 customers, ranking it among the top 35 multiple system operators in the
United States. On October 12, 1994 the Company announced the pending
acquisition of a Pennsylvania cable television provider, Twin County Trans
Video, Inc. ("Twin County"). For information on the pending acquisition
and pro forma effect of such acquisition, see "Recent Developments" and
"Pro Forma Condensed Consolidated Financial Statements," respectively.
The Communications Services Group presently carries out business
principally in the Northeastern United States providing telecommunications
related engineering and technical services. These services are provided out
of the Group headquarters in Wilkes-Barre, Pennsylvania, and regional offices
in Pennsylvania, New York and Virginia.
The Mobile Services Group previously operated cellular telephone systems
in metropolitan statistical areas ("MSAs") and rural statistical areas
("RSAs") throughout eight counties in Northeastern and Central Pennsylvania
and 24 counties in Southeast Iowa, serving a total population of 1.5 million.
On September 9, 1994, the Company completed the sale of its cellular
properties to Independent Cellular Network, Inc. ("ICN") for approximately
$182.5 million, subject to certain adjustments to be made within 90 days
after closing estimated to result in approximately $7 million of additional
proceeds. For information on the pro forma effect of such sale, see "Pro
Forma Condensed Consolidated Financial Statements." The Group also operates
paging and message management services in Northeastern Pennsylvania. These
business units were not sold to ICN as part of the cellular sale.
The Long Distance Group principally operates in Pennsylvania. The Group
began operations in 1990 by servicing the local service area of the Telephone
Group. In late 1992, the Long Distance Group entered the
Wilkes-Barre/Scranton territory served by Bell Atlantic. In late 1993, the
Group established sales offices in additional markets in Philadelphia,
Pittsburgh, Harrisburg and Allentown. The primary focus in these markets is
providing service to residential and business customers.
The Company believes that the long term competitiveness of
telecommunications systems will be based upon the capacity to provide voice,
video and data services over a single network (a "Full Service Network").
Although still in the formative stages, Full Service Networks will combine key
attributes of the cable television and telephone networks including the high
capacity of cable television networks and the access to switching of telephone
networks. The Company believes that because of its experience in the design,
construction and operation of both telephone and cable television systems, it
is well positioned to implement competitive Full Service Networks designed
around such systems or other platforms. The Company intends to develop Full
Service Networks utilizing certain of the Company's cable television and
telephone systems or other platforms (such as leased or overbuilt
facilities), to expand the footprint available for upgrade through
acquisitions, joint ventures and similar strategic investments, to implement
these expanded services at an early stage relative to its competitors and to
explore opportunities to expand its business into international markets.
On or about October 29, 1993, RCN acquired 600,768 shares of Common
Stock and 5,094,223 shares of Class B Stock of the Company from a group
consisting of Andrew J. Sordoni III, William B. Sordoni, Stephen Sordoni and
Charles E. Parente (including entities wholly owned or controlled by any one
or more of them) (the "Sellers") pursuant to the terms of the Stock Purchase
Agreement dated June 17, 1993 among the Sellers, RCN and Kiewit Diversified
Group, Inc. The purchase price paid by RCN was $202,327,191 and the source of
such funds was RCN's and its affiliates' working capital. This transaction
represented approximately 34% of the equity and approximately 57% of the
voting control of the Company. RCN nominees currently constitute a majority
of the Board of Directors of the Company.
The Company's principal executive offices are located at 105 Carnegie
Center Princeton, NJ 08540 (telephone:(609) 734-3000).
THE RIGHTS OFFERING
Rights................. Each Holder of Company Stock will receive [ ]
transferable Rights for every [ ] shares of
Company Stock held of record on November 10,
1994 (the "Record Date"). The number of Rights
distributed by the Company to each Holder of
Company Stock will be rounded up to the nearest
whole number. An aggregate of approximately [ ]
Rights will be distributed pursuant to the
Rights Offering. Each Right will be exercisable
for one share of Common Stock. An aggregate of
approximately [ ] shares of Common Stock (the
"Underlying Shares") will be sold upon exercise
of the Rights assuming exercise of all Rights.
The distribution of the Rights and sale of
Underlying Shares is referred to herein as the
"Rights Offering." See "The Rights Offering--The
Rights."
Basic Subscription
Privilege............ Rights holders are entitled to purchase for the
Subscription Price one share of Common Stock for
each whole Right held (the "Basic Subscription
Privilege"). See "The Rights
Offering--Subscription Privileges--Basic
Subscription Privilege."
Oversubscription
Privilege............ Each holder of Rights who elects to exercise in full
his or her Basic Subscription Privilege may also
subscribe at the Subscription Price for additional
Underlying Shares available as a result of
unexercised Rights, if any (the "Oversubscription
Privilege"). If an insufficient number of
Underlying Shares is available to satisfy fully all
elections to exercise the Oversubscription
Privilege, the available Underlying Shares will be
prorated among holders who exercise their
Oversubscription Privilege based on the respective
numbers of Rights exercised by such holders
pursuant to the Basic Subscription Privilege. See
"The Rights Offering--Subscription
Privileges--Oversubscription Privilege."
Subscription Price..... $[ ] in cash per share of Common Stock subscribed
for pursuant to the Basic Subscription Privilege or
the Oversubscription Privilege.
Shares of Common Stock
Outstanding after
Rights Offering...... Approximately [ ] shares, based on the
number of shares outstanding on November 10, 1994
and assuming exercise of all Rights.
Intent of RCN.......... RCN has informed the Company that it intends to
exercise the [ ] Rights it will receive in
respect of the shares of Company Stock currently
owned by RCN for an aggregate subscription price
of $_______ and that it intends to exercise the
Oversubscription Privilege for an aggregate
subscription price of approximately $___________
to subscribe for [ ] additional shares of
Common Stock. The opportunity to exercise the
Oversubscription Privilege is available to all
holders of Rights on the same terms. See "The
Rights Offering--Subscription Privileges--
Oversubscription Privilege."
Transferability
of Rights............ The Rights are transferable, and it is anticipated
that they will trade on NASDAQ under the symbol
"CTEXR." Certain registered broker-dealers have
indicated that they intend to make a market in the
Rights during the period the Rights are
outstanding. No assurance can be given, however,
that a market for the Rights will develop or, if
such a market develops, how long it will continue.
The Subscription Agent will endeavor to sell Rights
for holders who deliver a Subscription Certificate
with the instruction for sale properly executed to
the Subscription Agent by 11:00 a.m., New York City
time, on November 23, 1994. See "The Rights
Offering--Method of Transferring Rights."
Record Date............ November 10, 1994.
Expiration Date........ December 1, 1994, at 5:00 p.m., New York City time.
Procedure for Exer-
cising Rights........ Basic Subscription Privileges and Oversubscription
Privileges may be exercised by properly
completing and signing the Subscription Certificate
evidencing the Rights (a "Subscription
Certificate") and forwarding such Subscription
Certificate (or following the Guaranteed Delivery
Procedures), with payment of the Subscription Price
for each Underlying Share subscribed for pursuant
to the Basic Subscription Privilege and the
Oversubscription Privilege, to the Subscription
Agent on or prior to the Expiration Date. Any
Rights holder subscribing for an aggregate of more
than 5000 Underlying Shares pursuant to the
Oversubscription Privilege prior to the Expiration
Date shall not be required to deliver payment for
such number of Underlying Shares in excess of 5000
until the Expiration Date. The Company, in its sole
discretion, may determine to waive payment for such
number of Underlying Shares in excess of 5000
subscribed for pursuant to the Oversubscription
Privilege until after the Expiration Date and after
all prorations and adjustments contemplated by the
terms of the Rights Offering have been effected.
If the mail is used to forward Subscription
Certificates, it is recommended that insured,
registered mail be used. No interest will be paid
on funds delivered in payment of the Subscription
Price.
Once a holder of Rights has exercised the Basic
Subscription Privilege or the Oversubscription
Privilege, such exercise may not be revoked.
See "The Rights Offering--Exercise of Rights."
Procedure for Exer-
cising Rights by
Foreign and Certain
Other Shareholders.... Subscription Certificates will not be mailed to
Holders of Company Stock whose addresses are
outside the United States or who have an APO or
FPO address, but will be held by the
Subscription Agent for their account. To
exercise such rights, such a Holder must notify
the Subscription Agent on or prior to 11:00
a.m., New York City time, on November 23, 1994,
and must establish to the satisfaction of the
Subscription Agent that such exercise is
permitted under applicable law. If such a Holder
does not notify the Subscription Agent and
provide acceptable instructions to the Subscription
Agent by such time, such Rights will be sold,
if feasible, and the net proceeds, if any, remitted
to such Holder. See "The Rights Offering--Foreign
and Certain other Shareholders."
Persons Holding Shares,
or Wishing to Exer-
cise Rights, Through
Others............... Persons holding shares of Company Stock and receiving
the Rights distributable with respect thereto,
through a broker, dealer, commercial bank, trust
company or other nominee, as well as persons
holding certificates of Company Stock personally
who would prefer to have such institutions
effect transactions relating to the Rights on
their behalf, should contact the appropriate
institution or nominee and request it to effect
the transactions for them. See "The Rights
Offering--Exercise of Rights."
Issuance of Common
Stock................ Certificates representing shares of Common Stock
purchased pursuant to the Basic Subscription
Privilege will be delivered to subscribers as soon
as practicable after the corresponding Rights have
been validly exercised and full payment for shares
has been received and cleared. For shares
purchased pursuant to the Oversubscription
Privilege, delivery of certificates will occur as
soon as practicable after the Expiration Date and
after all prorations and adjustments contemplated
by the terms of the Rights Offering have been
effected. See "The Rights Offering--Subscription
Privileges."
Use of Proceeds........ The net cash proceeds received by the Company from
the sale of the shares of Common Stock offered
hereby, after payment of fees and expenses, would
be approximately [$300] million, assuming full
exercise of the Rights. The Rights Offering is,
however, not conditioned upon any minimum level of
exercise of the Rights, and there can be no
assurance that the Company will raise any proceeds
from the Rights Offering. RCN has, however,
informed the Company that it intends to exercise
the Rights it receives for an aggregate
subscription price of $[ ] and that it intends
to exercise the Oversubscription Privilege for
an aggregate subscription price of approximately
$____________ to subscribe for [ ] additional
shares of Common Stock. The opportunity to
exercise the Oversubscription Privilege is
available to all holders of Rights on the same
terms. See "The Rights Offering--Subscription
Privileges--Oversubscription Privilege." The net
proceeds, if any, from the Rights Offering will
be used for general corporate purposes.
Specifically, the Company expects that such
proceeds, together with the proceeds from the
recently completed sale of the Company's cellular
properties, will be used primarily (i) to finance
the acquisition of Twin County, (ii) to prepay
$100,000,000 in aggregate principal amount of the
Company's 9.52% Senior Secured Notes due
December 1, 2001 (the "Senior Secured Notes"),
(iii) to develop Full Service Networks utilizing
certain of the Company's cable television and
telephone systems or other platforms (such as
leased or overbuilt facilities) and (iv) for
potential acquisitions, joint ventures and
similar strategic investments in the
telecommunications industry. Prior to the
consummation of the Rights Offering, the Company
may prepay the Senior Secured Notes by entering
into a short term revolving credit facility
on terms the Company believes are favorable and
then repay such short term credit facility with
the proceeds of the Rights Offering. See
"Recent Developments," "Use of Proceeds"
and "Corporate Strategy."
Subscription Agent..... The First National Bank of Boston. See "Subscription
Agent."
Information Agent...... MacKenzie Partners, Inc. See "Information Agent."
Investment Consider-
ations............... There are substantial risks in connection with this
offering that should be considered by prospective
purchasers. See "Investment Considerations."
SELECTED FINANCIAL AND OPERATING INFORMATION
The following selected historical financial information as of and for the
periods ended June 30, 1994 and June 30, 1993 is unaudited but, in the opinion
of the Company's management, includes all recurring adjustments necessary for
a fair presentation of the results of operations for such periods.
Information as of and for the six months ended June 30, 1994 and June 30, 1993
has been derived from, and should be read in conjunction with, the Company's
unaudited consolidated condensed financial statements for such periods, which
are included in the Company's Quarterly Report on Form 10-Q for the six
months ended June 30, 1994, which report is incorporated by reference in this
Prospectus. The results for such interim periods are not necessarily
indicative of the results for the full fiscal year. The information as of and
for the three fiscal years ended December 31, 1993 has been derived from, and
should be read in conjunction with, the Company's Consolidated Financial
Statements for the three fiscal years ended December 31, 1993, which have been
audited by independent public accountants and are included in the Company's
Annual Report on Form 10-K for the fiscal year ended December 31, 1993,
which report is incorporated by reference in this Prospectus and the Company's
consolidated financial statements for the three fiscal years ended December
31, 1992 which have been audited by independent public accountants and are
included in the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1992 as previously filed with the Commission. The information
with respect to the fiscal years ended December 31, 1990 and December 31, 1989
has been derived from, and should be read in conjunction with, the Company's
Consolidated Financial Statements for the three fiscal years ended December
31, 1992, 1991 and 1990, which have been audited by independent public
accountants and are included in the Company's Annual Reports on Form 10-K for
the fiscal years ended December 31, 1992, 1991 and 1990, respectively, as
previously filed with the Commission.
Summary Financial and Operating Data
(dollars in thousands except per share and operating data)
<TABLE>
<CAPTION>
Six Months Ended
Year Ended December 31, June 30,(1)
----------------------------------------------------------- ------------------
1989(2) 1990 1991 1992 1993 1993 1994
--------- --------- --------- --------- -------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Consolidated Statement of Operations Data:
Sales.................................... $161,005 $200,383 $232,818 $256,564 $283,987 $138,230 $145,114
Operating income before depreciation
and amortization........................ 65,386 80,638 89,738 105,370 107,644 55,805 58,253
Depreciation and amortization............ 43,673 62,712 78,145 75,289 73,103 36,927 36,690
Operating income......................... 21,713 17,926 11,593 30,081 34,541 18,879 21,563
Interest income.......................... 1,721 1,321 1,801 2,178 1,609 839 1,250
Interest expense......................... (14,632) (31,889) (37,472) (37,321) (34,204) (17,147) (16,333)
Other income (expense)................... (11) (1,242) 685 291 1,408 152 613
Income (loss) before income taxes........ 8,791 (13,884) (23,393) 1,303 5,342 4,711 7,986
Provision (benefit) for income taxes..... 3,903 (3,782) (5,486) 3,284 10,714 4,465 3,973
Income (loss) before minority interest
and equity in unconsolidated
entities................................ 4,888 (10,102) (17,907) (1,981) (5,372) 246 4,013
Income (loss) from continuing operations
before cumulative effect of
accounting principle changes............ 5,787 (9,594) (19,415) (2,061) (5,486) 279 3,818(3)
Cumulative effect of changes in
accounting principles................... -- -- -- -- (1,163) (1,163) (393)
Net income (loss)........................ 4,460 (9,943) (12,392) (2,061) (6,649) (884) 564
Net income (loss) per share.............. .27 (.60) (.75) (.13) (.40) (.05) .03
Capital expenditures..................... 52,146 69,657 55,050 51,207 59,142 34,212 27,162
Cable(4):
Sales.................................... 35,868 63,925 76,128 85,299 93,550 46,262 47,402
Operating expenses(5).................... 37,358 72,747 80,589 85,070 90,931 44,294 44,925
Operating income before depreciation
and amortization(5)..................... 14,807 28,056 35,401 40,937 44,328 22,784 23,394
Depreciation and amortization............ 16,297 36,878 39,862 40,708 41,709 20,816 20,917
Telephone:
Sales.................................... 110,834 113,104 119,310 123,039 125,293 62,617 61,129
Operating expenses(5).................... 70,485 71,424 75,599 71,360 75,580 39,214 36,212
Operating income before depreciation
and amortization(5)..................... 63,481 63,621 67,057 72,285 72,465 35,256 36,413
Depreciation and amortization............ 23,132 21,941 23,346 20,606 22,752 11,853 11,496
Mobile Services:(6)
Sales.................................... 6,466 10,753 13,993 18,687 24,810 10,912 15,165
Operating expenses(5).................... 10,670 13,551 25,956 27,723 26,354 11,559 13,804
Operating income (loss) before
depreciation and amortization(5)........ (933) (550) 1,442 3,552 5,590 2,931 4,851
Depreciation and amortization............ 3,271 2,248 13,405 12,588 7,134 3,578 3,490
Communication Services:
Sales.................................... 7,837 10,941 14,325 14,015 18,895 8,363 8,931
Operating expenses(5).................... 8,860 14,425 17,815 15,118 19,923 8,828 9,369
Operating income (loss) before
depreciation and amortization(5)........ (924) (3,351) (3,287) (891) (649) (299) (276)
Depreciation and amortization............ 99 133 203 212 379 166 162
Long Distance:
Sales.................................... - 1,660 9,062 15,445 21,383 10,044 12,470
Operating expenses(5).................... - 2,449 10,378 16,957 25,041 10,945 16,000
Operating income (loss) before
depreciation and amortization(5)........ - (742) (888) (1,163) (3,232) (737) (3,290)
Depreciation and amortization............ - 47 428 349 426 164 240
________________________________
<FN>
(1) Unaudited.
(2) Restated to reflect a disposition accounted for as a
discontinued operation.
(3) Excludes extraordinary charge of $2,861 for
debt prepayment penalty.
(4) Excludes the effects of the Company's pending acquisition of Twin
County. For information on the pro forma effect of such pending
acquisition, see "Pro Forma Condensed Consolidated Financial
Statements."
(5) Fiscal 1989 amounts have been restated to conform to the presentation in
fiscal years 1990 through 1993 which excludes the effects of
allocated general corporate expenses on operating income (loss)
before depreciation and amortization and on operating expenses.
(6) On September 9, 1994, the Company completed the sale of its cellular
properties to ICN for approximately $182,500, subject to certain
adjustments to be made within 90 days after closing estimated to
result in approximately $7 million additional proceeds. For
information on the pro forma effect of such sale, see "Pro Forma
Condensed Consolidated Financial Statements."
</TABLE>
<TABLE>
<CAPTION>
December 31, June 30,(1)
------------------------------------------------------------ ------------------
1989 1990 1991 1992 1993 1993 1994
---------- --------- --------- --------- -------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance Sheet Data:
Cash and temporary cash investments....... 6,306 24,057 49,636 58,837 60,182 57,063 47,328
Total assets.............................. 486,850 580,429 596,000 586,366 579,564 620,825 570,865
Long term debt............................ 268,290 364,970 432,482 421,780 409,293 415,310 386,187
Common shareholders' equity............... 92,591 77,932 69,009 66,824 60,363 65,789 60,927
Operating Data:(1)
Cable Systems(2):
Homes passed.............................. 286,289 322,755 334,461 343,871 354,035 349,209 355,595
Basic Subscribers (approximate)(3)........ 175,000 197,000 207,000 218,000 224,000 228,000 236,000
Premium revenue per average
subscriber per month..................... $7.75 $7.37 $6.61 $6.31 $6.01 $5.97 $5.52
Telephone:
Access lines - business (approximate)..... 32,000 37,000 38,000 41,000 44,000 42,000 47,000
Access lines - residential
(approximate)............................ 152,000 157,000 160,000 163,000 167,000 165,000 168,000
Access lines total (approximate).......... 184,000 194,000 198,000 204,000 211,000 207,000 215,000
Average daily carrier access
minutes of use(4)....................... 1,705,313 1,789,721 1,884,622 1,940,051 2,146,046 2,088,263 2,324,579
Telephone employees....................... 763 665 635 610 608 616 609
Telephone employees per 10,000
access lines............................ 41.47 34.28 32.07 29.90 28.82 29.76 28.33
________________________________
<FN>
(1) Unaudited.
(2) Excludes the effects of the Company's pending acquisition of Twin
County.
(3) A home with one or more television sets connected
to a cable television system is counted as one basic subscriber.
(4) Access minute data was derived from the Telephone Group's revenue
system for all toll jurisdictions and divided by 365 to determine
average daily usage.
</TABLE>
INVESTMENT CONSIDERATIONS
Each prospective purchaser should carefully examine all of the
information contained in this Prospectus and should give particular
consideration to the following risk factors:
Operating Losses
The Company has experienced losses from continuing operations since 1990
and may incur losses from continuing operations in the future. The Company
incurred losses of $6,649,000, $2,061,000, $19,415,000 and $9,594,000 for the
years ended December 31, 1993, 1992, 1991 and 1990, respectively. There can
be no assurance as to when, if ever, the Company will recognize a profit from
continuing operations.
Dividend Policy and Restrictions
Since 1989, the Company has maintained a policy of not paying cash
dividends. The Company does not intend to alter this policy in the
foreseeable future. Certain debt instruments to which the Company is a party
contain restrictions on the payment of cash dividends on Company Stock.
Indefinite Amount and Use of Proceeds
The net cash proceeds from the Rights Offering after payment of fees and
expenses would be approximately [$300] million, assuming full exercise of all
Rights. The Rights Offering is, however, not conditioned upon any minimum
level of exercise of the Rights. Consequently, there can be no assurance that
the Company will raise any proceeds from the Rights Offering. RCN has,
however, informed the Company that it intends to exercise the Rights it
receives for an aggregate subscription price of $[ ] and that it intends to
exercise the Oversubscription Privilege for an aggregate subscription price
of approximately $__________ to subscribe for [ ] additional shares of
Common Stock.
The Company expects to use the net proceeds, if any, from the Rights
Offering to further its corporate strategy. More specifically, the Company
expects to use such proceeds, together with the proceeds from the recently
completed sale of the Company's cellular properties, (i) to finance the
acquisition of Twin County, (ii) to prepay $100,000,000 in aggregate
principal amount of the Company's 9.52% Senior Secured Notes due December
1, 2001, (iii) to develop Full Service Networks utilizing certain of the
Company's cable television and telephone systems or other platforms (such
as leased or overbuilt facilities) and (iv) for potential acquisitions,
joint ventures and other similar strategic investments in the
telecommunications industry. Prior to the consummation of the Rights
Offering, the Company may prepay the Senior Secured Notes by entering into
a short term revolving credit facility on terms the Company believes are
favorable and then repay such short term credit facility with the proceeds
of the Rights Offering. See "Recent Developments," "Use of Proceeds," and
"Corporate Strategy". The Company's plans for the establishment of such
Full Service Networks are still being developed and are subject to a number
of variables, not all of which are within the control of the Company.
The Company's ability to grow through acquisitions, joint ventures and
similar strategic investments in the telecommunications industry will depend
on the availability of reasonably priced properties, joint venture
opportunities and investments and on the Company's ability to compete
successfully for such properties, opportunities and investments against other
companies, including companies with greater financial resources than the
Company. Although the Company is exploring a number of possible
transactions, the Company has no commitment for any material
acquisition, joint venture or investment, other than the pending acquisition
of Twin County described in "Recent Developments," and there can be no
assurance that appropriate acquisition, joint venture and investment
opportunities will arise in the future. The Company desires to position
itself to take advantage of strategic opportunities as they arise. The
Company cannot predict with any degree of precision how much capital will
be needed for this purpose because of the uncertainty as to what
opportunities, if any, will arise. If the Company does not raise adequate
capital through the Rights Offering to pursue opportunities that may arise
and that further its corporate strategy, the Company may attempt to raise
capital through other means.
Although substantially all of the proceeds from the Rights Offering and
the cellular sale are intended to be applied toward effecting the Company's
corporate strategy, such proceeds are not otherwise being designated for any
more specific purpose. Pending their utilization for other corporate
purposes, the Company expects to invest the proceeds from the Rights Offering
and the cellular sale primarily in Treasury obligations, money market
instruments and other similar securities.
Highly Competitive Industry
The Company engages in various aspects of the telecommunications
industry, and certain of the businesses in which it engages are in highly
competitive sectors of the industry. In addition, as a result of
technological, regulatory and other legal developments, the Company faces the
risk of new or increased competition in virtually all businesses in which it
engages. Although these developments are expected to provide new
opportunities for the Company, it is not possible to predict their future
effect on the telecommunications industry in general or on the Company in
particular.
Effect of Regulation
Most of the businesses operated by the Company are subject to extensive
regulation. In recent years, the Company's Cable Group, like other operators
of cable television systems, has become subject to extensive regulation at the
federal, state and local levels. Many aspects of such regulation are
currently the subject of judicial proceedings and administrative or
legislative proceedings or proposals. On October 5, 1992, Congress passed the
Cable Television Consumer Protection and Competition Act of 1992 (the "Cable
Act") which significantly expanded the scope of regulation of certain
subscriber rates and a number of other matters in the cable industry, such as
mandatory carriage of local broadcast stations and retransmission consent, and
which will increase the administrative costs of complying with such
regulations. On April 1, 1993, the Federal Communications Commission (the
"FCC") adopted its initial regulations on cable television rates, and on
February 22, 1994, the FCC adopted revised rate regulations that became
effective on May 15, 1994.
The Company anticipates that certain provisions of the Cable Act that do
not relate to rate regulation -- such as the provisions relating to
retransmission consent and customer service and technical standards -- will
reduce the operating margins of the Company's Cable Group. Otherwise, the
Company is currently unable to predict the effect that implementation of the
rate regulations and other provisions of the Cable Act will have on its
business and results of operations in future periods. No assurance can be
given at this time that such matters will not have a material adverse effect
on the Company's business and results of operations in the future. Also, no
assurance can be given as to what other future actions Congress, the FCC or
other regulatory authorities may take or the effects thereof on the cable
industry in general or on the Company in particular.
The Cable Group's performance is dependent to a large extent on its
ability to obtain and renew its franchise agreements from local government
authorities on acceptable terms. To date, all of the Group's franchises have
been renewed or extended, generally at or prior to their stated expirations
and on acceptable terms. No assurance can be given in this regard as to
future franchise renewals. No one franchise accounts for more than 10% of the
Group's total revenue.
The Company's local exchange telephone subsidiary, Commonwealth
Telephone Company ("CTCo"), is subject to a rate-making process regulated by
the Pennsylvania Public Utility Commission ("PPUC"). Consequently, the
ability of the Company's Telephone Group to generate increased income and cash
flow is largely dependent on its ability to increase its subscriber base,
obtain higher message volumes and control its expenses. During 1993, the PPUC
conducted an investigation of the appropriateness of CTCo transactions with
affiliates and analyzed the earnings of CTCo. Following this investigation
CTCo and the PPUC entered into an agreement imposing certain requirements and
restrictions on CTCo. Among other things, CTCo agreed to provide its
residential customers the enhancement of touch-tone service free of charge
beginning February 1, 1994. The agreement also states that, barring
unforeseen regulatory changes, CTCo will not increase basic service rates
prior to January 1, 1997. The PPUC has also required CTCo to permit only
income taxes actually paid to be recognized as a cost of service.
Accordingly, subsequent to December 31, 1993, the Company will not record
deferred income taxes on certain temporary differences. These requirements
and restrictions are not expected to have a material adverse effect on the
Company.
Control by Principal Shareholder
On most matters, including the election of directors, the holders of
Common Stock and the holders of Class B Stock vote as a class with each share
of Common Stock entitled to one vote and each share of Class B stock entitled
to 15 votes. RCN controls over 50% of the total votes of all outstanding
shares of Company Stock. Consequently RCN is able to elect a majority of the
members of the Board of Directors of the Company and thereby control the
Company's policies and operations. In addition, RCN's share ownership gives
it the ability to control certain corporate actions requiring shareholder
approval. RCN will continue to control over 50% of the total votes of all
outstanding shares of Company Stock after the Rights Offering and if no
holders of Rights other than RCN exercise their Rights, RCN will own [ ]% of
the Common Stock, 59.6% of the Class B Stock and [ ]% of the combined votes
of all Company Stock. The control of the Company by RCN may tend to deter
nonnegotiated tender offers or other efforts to obtain control of the Company
and thereby deprive shareholders of opportunities to sell shares at prices
higher than those prevailing in the market.
Relationship with RCN; Conflicts of Interest; Noncompetition Agreement
RCN is a subsidiary of Kiewit Diversified Group, Inc. ("KDG"), which is
a wholly owned subsidiary of Peter Kiewit Sons', Inc. ("PKS"). KDG owns 90%
of RCN, and David C. McCourt, Chairman and Chief Executive Officer of the
Company, owns the remaining 10% of RCN. KDG owns approximately 70% of and
controls MFS Communications Company, Inc. ("MFS"). MFS provides a variety of
telecommunications services, primarily over its digital fiber optic
telecommunications networks. Certain of the officers and directors of the
Company are also officers or directors of PKS, KDG, RCN and MFS. As a result
of the common control of the Company and MFS, possible conflicts of interest
could arise, for example, if either the Company or MFS were presented with the
opportunity to engage in a business competing with the other or if the Company
and MFS were to enter into a business relationship together. Potential
conflicts of interest will be dealt with on a case-by-case basis taking into
consideration relevant factors including the requirements of NASDAQ and
prevailing corporate practices.
The Company and PKS have entered into a Noncompetition Agreement dated
as of May 26, 1993. The Noncompetition Agreement provides, among other
things, that until the earlier to occur of (i) the tenth anniversary of the
date of the Noncompetition Agreement and (ii) the date on which PKS ceases to
own at least 30% of the issued and outstanding shares of common stock of MFS,
PKS will not, and will cause its subsidiaries and affiliates (which would
include the Company), not to compete directly or indirectly with MFS for the
provision of certain telecommunications services to business or government
users. In addition, PKS will not, and will cause its subsidiaries not to
compete against MFS in the network systems integration and facilities
management businesses with certain limited exceptions.
Uncertain Market for Rights
Certain registered broker-dealers have indicated to the Company that
they intend to make a market in the Rights. No assurance can be given,
however, regarding whether a market for the rights will develop and, if one
does develop, how long it will continue or the prices at which the Rights
will trade from time to time in relation to the Common Stock. Moreover,
because the Rights are new securities, the trading markets, if any, for the
Rights may be volatile. There also can be no assurance that the shares of
Common Stock issuable upon exercise of the Rights will trade at or above
the Subscription Price.
Dilution
Holders who do not exercise their Rights will experience a decrease in
their proportionate interest in the equity ownership and voting power of the
Company. The sale of the Rights may not compensate a holder for all or any
part of any reduction in the market value of such shareholder's Company Stock
resulting from the Rights Offering. Shareholders who do not exercise or sell
their Rights will relinquish any value inherent in the Rights. Accordingly,
holders are strongly urged to exercise or sell their Rights.
The Subscription Price per share of Common Stock exceeds the net
tangible book value per share of Company Stock. Accordingly, the purchasers
of the Common Stock in the Rights Offering will experience immediate and
substantial dilution. See "Dilution."
Based on the 7,962,266 shares of Common Stock and 8,547,327 shares of
Class B Stock outstanding as of June 30, 1994, the consummation of the Rights
Offering would result (on a pro forma basis as of such date and assuming no
additional Rights are issued as a result of rounding the number of Rights
distributed to holders up to the nearest whole number) in an increase of [ ]
shares of Common Stock outstanding.
Market Considerations
There can be no assurance that the market price of the Common Stock
will not decline during the period the Rights are outstanding or that,
following the issuance of the Rights and the sale of the Underlying Shares
upon exercise of Rights, a subscribing Rights holder will be able to sell
shares purchased in the Rights Offering at a price equal to or greater than
the Subscription Price. Once a holder of Rights has exercised the Basic
Subscription Privilege or the Oversubscription Privilege, such exercise may
not be revoked. Moreover, until certificates are delivered, subscribing
Rights holders may not be able to sell the shares of Common Stock that they
have purchased in the Rights Offering. Certificates representing shares of
Common Stock purchased pursuant to the Basic Subscription Privilege will be
delivered as soon as practicable after the corresponding Rights have been
validly exercised and full payment for the shares has been received and
cleared. For shares purchased pursuant to the Oversubscription Privilege,
delivery of certificates will occur as soon as practicable after the
Expiration Date and after all prorations and adjustments contemplated by
the terms of the Rights Offering have been effected.
No interest will be paid to Rights holders on funds delivered to the
Subscription Agent pursuant to the exercise of Rights pending delivery of
Underlying Shares.
USE OF PROCEEDS
The net cash proceeds from the Rights Offering after payment of fees and
expenses would be approximately [$300] million, assuming full exercise of all
Rights. The Rights Offering is, however, not conditioned upon any minimum
level of exercise of the Rights, and there can be no assurance that the
Company will raise any proceeds from the Rights Offering. RCN has,
however, informed the Company that it intends to exercise the Rights it
receives for an aggregate subscription price of $[ ] and that it intends to
exercise the Oversubscription Privilege for an aggregate subscription price
of approximately $__________ to subscribe for [ ] additional shares of
Common Stock. The opportunity to exercise the Oversubscription Privilege is
available to all holders of Rights on the same terms. See "The Rights
Offering--Subscription Privileges--Oversubscription Privilege."
The net proceeds, if any, from the Rights Offering will be used for
general corporate purposes. In the event that all Rights are not exercised
the Company expects that, consistent with its corporate strategy as
described below, the proceeds, together with the proceeds from the recently
completed sale of the Company's cellular properties, will be used, first,
to finance the pending acquisition of Twin County, second, to prepay
$100,000,000 in aggregate principal amount of the Company's 9.52% Senior
Secured Notes due December 1, 2001 (the "Senior Secured Notes"), third, to
develop Full Service Networks utilizing certain of the Company's cable
television and telephone systems or other platforms (such as leased or
overbuilt facilities) and, fourth, for potential acquisitions, joint
ventures and similar strategic investments in the telecommunications
industry. See "Recent Developments" and "Corporate Strategy". The Company
desires to position itself to take advantage of strategic opportunities as
they arise. The Company cannot predict with any degree of precision how
much capital will be needed for this purpose because of the uncertainty as
to what opportunities will arise. If the Company does not raise adequate
capital through the Rights Offering to pursue opportunities that may arise
and that further its corporate strategy, the Company may attempt to raise
capital through other means.
Prior to the consummation of the Rights Offering, the Company may
prepay the Senior Secured Notes by entering into a short term revolving
credit facility on terms the Company believes are favorable and then repay
such short term credit facility with the proceeds from the Rights Offering.
The Company intends to prepay the Senior Secured Notes in order to
eliminate certain restrictive covenants in those securities that could
inhibit the Company's ability to pursue its corporate strategy. In order to
prepay the Senior Secured Notes, the Company is required to pay the holders
of those notes a "make whole amount." The Company estimates that the make
whole amount will be approximately $5,000,000 in aggregate.
CORPORATE STRATEGY
The Company believes that the long term competitiveness of
telecommunications systems will be based upon the capacity to provide Full
Service Networks. Present basic telecommunications services such as cable
television and telephone are provided over separate networks and the
businesses of delivering these services have distinct and different
attributes. Cable television (video) services are typically delivered over a
broad band, one-way network with revenues generated principally on a
subscription basis. Telephone (voice and data) service is provided over a
two-way, narrow band network with revenues generated both on a subscription
and a transaction basis. Full Service Networks will combine key attributes of
both types of networks and businesses including the high capacity of cable
television networks and the access to switching of telephone networks.
Additionally, the Company believes these services (as well as various new
services) will generate revenues on both a subscription and a transaction
basis.
The Company believes that because of its experience in the design,
construction and operation of both telephone and cable television systems it
is well positioned to implement competitive Full Service Networks designed
around such systems as well as other platforms. The Company has been in the
cable television business for nearly 15 years and has grown to be among the
top 35 multiple system operators in the country. The Company has been in the
telephone business for nearly 100 years. The Company believes that compared
to telephone systems of similar or greater size its telephone operations have
been among the most efficient in the United States as measured by employees
per 10,000 access lines and as measured by trouble reports.
The Company intends to develop Full Service Networks utilizing certain
of the Company's cable television and telephone systems or other platforms and
to expand the footprint available for upgrade through acquisitions, joint
ventures and similar strategic investments in the telecommunications industry.
The Company intends to implement these expanded services at an early stage
relative to its competitors. The Company also intends to explore
opportunities to expand its business into international markets.
The Company believes that there will be acquisition and joint venture
opportunities involving system operators which do not otherwise have the
resources or expertise to effectively develop competitive networks. With
adequate capital resources the Company believes it will be well positioned
to take advantage of such opportunities as they arise. Although the
Company is exploring a number of possible transactions, the
Company has no commitment for any material acquisition, joint venture or
investment, other than the pending acquisition of Twin County described in
"Recent Developments," and there can be no assurance that appropriate
acquisition, joint venture and investment opportunities will arise in the
future.
RECENT DEVELOPMENTS
The Mobile Services Group previously operated cellular telephone
systems in MSAs and RSAs throughout eight counties in Northeastern and
Central Pennsylvania and 24 counties in Southwest Iowa, serving a total
population of 1.5 million. On September 9, 1994, the Company completed the
sale of its cellular properties to ICN for approximately $182.5 million
subject to certain adjustments to be made within 90 days after closing
estimated to result in approximately $7 million of additional proceeds.
For information on the pro forma effect of such sale, see "Pro Forma
Condensed Consolidated Financial Statements."
C-TEC Cable Systems, Inc., a wholly owned subsidiary of the Company,
has entered into a Merger Agreement (the "Merger Agreement") with Twin
County Trans Video, Inc. ("Twin County") and Bark Lee Yee, Stella C. Yee,
Susan C. Yee, Raymond C. Yee and Kenneth C. Yee, shareholders of Twin
County, and Robert G. Tallman, as trustee of a trust holding certain
shares of Twin County common stock. Founded in 1962, Twin County is one of
the nation's oldest cable companies and is currently one of the top 100
cable companies in the United States. Twin County serves over 50
contiguous franchises, providing cable television service to approximately
74,000 subscribers in the Greater Lehigh Valley area of Pennsylvania,
situated within 75 miles of the New York, Philadelphia, and Wilkes-Barre
metropolitan areas.
Under the terms of the Merger Agreement Twin County will merge with
and into C-TEC Cable Systems of Pennsylvania, Inc., a wholly owned
subsidiary of C-TEC Cable Systems, Inc. The transaction is subject to
regulatory approval and certain other conditions. For information on the
pro forma effect of such pending acquisition, see "Pro Forma Condensed
Consolidated Financial Statements."
The aggregate consideration for the acquisition of all the capital
stock of Twin County and for certain related noncompetition agreements will
be cash of approximately $47.5 million, a promissory note of $4 million,
and exchangeable preferred stock of C-TEC Cable Systems, Inc. with an
aggregate liquidation preference of $52 million (the "Cable Preferred
Stock"). The Cable Preferred Stock consists of Cable Preferred Stock
Series A shares with a total liquidation preference of $41 million (the
"Cable Preferred Stock Series A") and Cable Preferred Stock Series B shares
with a total liquidation preference of $11 million (the "Cable Preferred
Stock Series B"). The cash portion of the purchase price is subject to
certain adjustments, which are not estimated to be material, based on the
excess of Twin County's liabilities over its cash balance at the closing date.
The dividend rate on each series of Cable Preferred Stock is 5% per annum
of the liquidation preference, and unpaid dividends are cumulative.
Beginning three years from the closing date of the acquisition and expiring
ten years from such closing date, the holders of Cable Preferred Stock
Series A acting unanimously may exchange their Cable Preferred Stock with
the Company for 1,171,428 shares of common stock of the Company (the
"Series A Exchange Shares") and the holders of Cable Preferred Stock Series
B acting unanimously may exchange their Preferred Stock with the Company
for 285,714 shares of common stock of the Company (the "Series B Exchange
Shares"). During the same time period, the Company may elect to acquire
all, but not less than all of either or both series of Cable Preferred
Stock as follows: (i) if the market value of the Exchange Shares for such
series at the time of election is greater than or equal to the aggregate
liquidation preference for such series, the consideration shall be the
Exchange Shares for such series and (ii) if the market value of the
Exchange Shares for such series at the time of election is less than the
aggregate liquidation preference for such series, the consideration shall
be, at the holders' option, either (x) an amount of cash equal to the
aggregate liquidation preference for such series or (y) the Exchange Shares
for such series. If at the end of such period, neither the holders of the
Cable Preferred Stock nor the Company has made any of the elections
described above, then the holders of the Cable Preferred Stock acting
unanimously may elect to sell such stock to the Company for $52 million.
PRICE RANGE OF COMMON STOCK AND DIVIDEND POLICY
The principal market for the Common Stock is NASDAQ. The following
table indicates the high and low per-share sales prices for the Common Stock
as reported by NASDAQ for the periods indicated
High Low
------ -----
1992
First Quarter............................... $16.25 $14.50
Second Quarter.............................. 15.00 10.75
Third Quarter............................... 14.00 9.75
Fourth Quarter.............................. 15.25 10.00
1993
First Quarter............................... 17.75 13.50
Second Quarter.............................. 25.00 15.75
Third Quarter............................... 28.00 23.50
Fourth Quarter.............................. 33.50 23.75
1994
First Quarter............................... 31.00 27.25
Second Quarter.............................. 28.50 24.50
Third Quarter............................... 29.50 21.25
Fourth Quarter(1)........................... [ ] [ ]
_______________
(1) Through the close of business on November 10, 1994.
Since 1989, the Company has maintained a policy of not paying cash
dividends. The Company does not intend to alter this policy in the
foreseeable future. Certain debt instruments to which the Company is a
party contain restrictions on the payment of cash dividends on the
Company's Common Stock.
DILUTION
The pro forma net tangible book value of the shares of Company Stock
as of June 30, 1994, reflecting the sale of the cellular properties and the
pending acquisition of Twin County, was approximately $23 million, or $1.28
per share assuming the exchange of the Cable Preferred Stock to be issued
in the pending Twin County acquisition. See "Pro Forma Condensed
Consolidated Financial Statements." "Net tangible book value" per share
represents the amount of total tangible assets (total assets less
intangible assets) less total liabilities, divided by the number of shares
of Company Stock outstanding, assuming the Cable Preferred Stock to be
issued in connection with the pending Twin County acquisition had been
exchanged with the Company for 1,457,142 newly issued shares of Common
Stock. After giving effect to the sale by the Company of the [ ] shares of
Common Stock offered hereby (assuming full exercise of the Rights) and
after deducting the estimated offering expenses, the adjusted pro forma net
tangible book value of the Company as of June 30, 1994 would have been
approximately $[ ], or $[ ] per share, representing an immediate and
substantial dilution of $[ ] per share in respect of shares of Common Stock
purchased pursuant to this Rights Offering. The following table
illustrates this per share dilution:
Subscription Price......................................... $[ ]
Pro forma net tangible book value per share
before offering........................................ $1.28
Increase per share attributable to shareholders
exercising Rights...................................... [ ]
Adjusted pro forma net tangible book value per share
after offering......................................... [ ]
Dilution to shareholders exercising Rights(1).............. $[ ]
========
- -------------
(1) Dilution is determined by subtracting the pro forma net tangible book
value per share from the Subscription Price paid by an investor for a
share of Common Stock in the Rights Offering.
The foregoing assumes no exercise of the options issued to officers
of the Company under its stock option plan. As of November 10, 1994, options
to purchase 715,500 shares of Common Stock were outstanding with a weighted
average exercise price of $23.72 per share. In addition, the Company has
granted options to purchase 250,000 shares of Common Stock to an executive
officer. The exercise price of such options will be the market price of
the Common Stock on a date specified in early 1995.
THE RIGHTS OFFERING
The Rights
The Company is distributing transferable Rights at no cost to the
record holders ("Holders") of outstanding shares of Company Stock as of
November 10, 1994 (the "Record Date"). The Company will distribute [ ]
Rights for every [_____] shares of Company Stock held on the Record Date.
The Rights will be evidenced by transferable subscription certificates (the
"Subscription Certificates") and each such Right entitles the holder
thereof to subscribe for one share of Common Stock.
The Subscription Price of $________ per share of Common Stock
represents a discount of __% from the closing price of $______ for the
Common Stock as quoted on NASDAQ on November 10, 1994, the day of the
commencement of the Rights Offering. There can be no assurance that the
Common Stock will trade at prices above the Subscription Price. See
"Investment Considerations--Uncertain Market for Rights."
No fractional Rights or cash in lieu thereof will be issued or paid.
The number of Rights distributed to each Holder will be rounded up to the
nearest whole number. No Subscription Certificate may be divided in such a
way as to permit the holder of such certificate to receive a greater number of
Rights than the number to which such Subscription Certificate entitles its
holder, except that a depository, bank, trust company, or securities broker
or dealer holding shares of Company Stock on the Record Date for more than one
beneficial owner may, upon proper showing to the Subscription Agent, exchange
its Subscription Certificate to obtain a Subscription Certificate for the
number of Rights to which all such beneficial owners in the aggregate would
have been entitled had each been a Holder on the Record Date. The Company
reserves the right to refuse to issue any such Subscription Certificate if
such issuance would be inconsistent with the principle that each beneficial
owner's holdings will be rounded up to the nearest whole Right.
Because the number of Rights distributed to each record holder will be
rounded up to the nearest whole number, beneficial owners of Company Stock who
are also the record holders of such shares will receive more Rights under
certain circumstances than beneficial owners of Company Stock who are not the
record holders of their shares and who do not obtain (or cause the record
holder of their shares of Company Stock to obtain) a separate Subscription
Certificate with respect to the shares beneficially owned by them, including
shares held in an investment advisory or similar account. To the extent that
record holders of Company Stock or beneficial owners of Company Stock who
obtain a separate Subscription Certificate receive more Rights, they will be
able to subscribe for more shares pursuant to the Basic Subscription Privilege
and, in the event shares subscribed for pursuant to the Oversubscription
Privilege are prorated, such record holders or beneficial owners will be able
to subscribe for more shares pursuant to the Oversubscription Privilege.
The issuance by the Company of shares of Common Stock pursuant to the
Rights Offering is not conditioned upon the subscription of any minimum number
of shares of Common Stock by holders of the Rights, and no assurance can be
given that the Company will raise any proceeds from the Rights Offering. RCN
has, however, informed the Company that it intends to exercise the Rights it
receives for an aggregate subscription price of $[ ] and that it intends to
exercise the Oversubscription Privilege for an aggregate subscription price
of approximately $__________ to subscribe for [ ] additional shares of Common
Stock. The opportunity to exercise the Oversubscription Privilege is
available to all holders of Rights on the same terms. See "The Rights
Offering--Subscription Privileges--Oversubscription Privilege."
BEFORE EXERCISING OR SELLING ANY RIGHTS, POTENTIAL INVESTORS ARE URGED
TO READ CAREFULLY THE INFORMATION SET FORTH UNDER "INVESTMENT CONSIDERATIONS."
Expiration Date
The Rights will expire at 5:00 p.m., New York City time, on December
1, 1994 (the "Expiration Date"). After such time, unexercised Rights will
be null and void. The Company will not be obligated to honor any purported
exercise of Rights received by the Subscription Agent after 5:00 p.m., New
York City time, on the Expiration Date, regardless of when the documents
relating to such exercise were sent, except pursuant to the Guaranteed
Delivery Procedures described below.
Subscription Privileges
Basic Subscription Privilege. Each Right will entitle the holder
thereof to receive, upon payment of the Subscription Price, one share of
Common Stock (the "Basic Subscription Privilege"). Certificates representing
shares of Common Stock purchased pursuant to the Basic Subscription Privilege
will be delivered to subscribers as soon as practicable after the
corresponding Rights have been validly exercised and full payment for shares
has been received and cleared.
Oversubscription Privilege. Subject to the allocation described below,
each Right also carries the right to subscribe at the Subscription Price for
additional shares of Common Stock (the "Oversubscription Privilege") up to the
amount offered hereby. All beneficial holders who exercise the Basic
Subscription Privilege in full will be entitled to exercise the
Oversubscription Privilege.
Underlying Shares will be available for purchase pursuant to the
Oversubscription Privilege only to the extent that any Underlying Shares are
not subscribed for through the Basic Subscription Privilege. If the
Underlying Shares not subscribed for through the Basic Subscription Privilege
(the "Excess Shares") are not sufficient to satisfy all subscriptions pursuant
to the Oversubscription Privilege, the Excess Shares will be allocated pro
rata (subject to the elimination of fractional shares) among those holders of
Rights exercising the Oversubscription Privilege, in proportion, not to the
number of shares requested pursuant to the Oversubscription Privilege, but to
the number of shares each beneficial holder exercising the Oversubscription
Privilege has purchased pursuant to the Basic Subscription Privilege;
provided, however, that if such pro rata allocation results in any Rights
holder being allocated a greater number of Excess Shares than such holder
subscribed for pursuant to the exercise of such holder's Oversubscription
Privilege, then such holder will be allocated only such number of Excess
Shares as such holder subscribed for and the remaining Excess Shares will be
allocated among all other holders exercising the Oversubscription Privilege.
Certificates representing shares of Common Stock purchased pursuant to the
Oversubscription Privilege will be delivered to subscribers as soon as
practicable after the Expiration Date and after all prorations and adjustments
contemplated by the terms of the Rights Offering have been effected.
Banks, brokers and other nominee holders of Rights who exercise the
Basic Subscription Privilege and the Oversubscription Privilege on behalf of
beneficial owners of Rights will be required to certify to the Subscription
Agent and the Company, in connection with the exercise of the Oversubscription
Privilege, as to the aggregate number of Rights that have been exercised and
the number of Underlying Shares that are being subscribed for pursuant to the
Oversubscription Privilege by each beneficial owner of Rights on whose behalf
such nominee holder is acting.
Exercise of Rights
Rights may be exercised by delivering to The First National Bank of
Boston (the "Subscription Agent"), at or prior to 5:00 p.m., New York City
time, on the Expiration Date, the properly completed and executed
Subscription Certificate evidencing such Rights with any signatures
required to be guaranteed so guaranteed, together with payment in full of
the Subscription Price for each Underlying Share subscribed for pursuant to
the Basic Subscription Privilege and the Oversubscription Privilege. Any
Rights holder subscribing for an aggregate of more than 5000 Underlying
Shares pursuant to the Oversubscription Privilege prior to the Expiration
Date shall not be required to deliver payment for such number of Underlying
Shares in excess of 5000 until the Expiration Date. The Company, in its
sole discretion, may determine to waive payment for such excess number of
Underlying Shares until after the Expiration Date and after all prorations
and adjustments contemplated by the terms of the Rights Offering have been
effected. All payments must be by (a) check or bank draft drawn upon a
U.S. bank or postal or express money order payable to The
First National Bank of Boston, as Subscription Agent, or (b) by wire
transfer of same-day funds, in which case please contact the Subscription
Agent at (617) 575-2700 for such information. Payments will be deemed to
have been received by the Subscription Agent only upon (i) clearance of any
uncertified check, (ii) receipt by the Subscription Agent of any certified
check or bank draft upon a U.S. bank or of any postal or
express money order or (iii) receipt of good funds in the Subscription
Agent's account designated above. If paying by uncertified personal check,
please note that the funds paid thereby may take at least five business
days to clear. Accordingly, holders of Rights who wish to pay the
Subscription Price by means of uncertified personal check are urged to make
payment sufficiently in advance of the Expiration Date to ensure that such
payment is received and clears by such date and are urged to consider
payment by means of certified or cashier's check, money order or wire
transfer of funds.
The address to which the Subscription Certificates and payment of the
Subscription Price should be delivered is:
By Mail:
The First National Bank of Boston
P.O. Box 1872
Mail Stop 45-01-19
Boston, Massachusetts
02105-1872
By Hand:
BancBoston Trust Company of
New York
55 Broadway
3rd Floor
New York, New York
10006
By Overnight Courier:
The First National Bank of Boston
Shareholder Services Division
150 Royall Street
Mail Stop 45-01-19
Canton, Massachusetts
02021
If a Rights holder wishes to exercise Rights, but time will not permit such
holder to cause the Subscription Certificate or Subscription Certificates
evidencing such Rights to reach the Subscription Agent on or prior to the
Expiration Date, such Rights may nevertheless be exercised if all of the
following conditions (the "Guaranteed Delivery Procedures") are met:
(i) such holder has caused payment in full of the Subscription Price
for each Underlying Share being subscribed for pursuant to the Basic
Subscription Privilege and the Oversubscription Privilege (subject to
the right of the Company to waive advance payment in respect of the
Oversubscription Privilege as described above) to be received (in the
manner set forth above) by the Subscription Agent on or prior to the
Expiration Date;
(ii) the Subscription Agent receives, on or prior to the Expiration
Date, a guarantee notice ("Notice of Guaranteed Delivery"),
substantially in the form provided with the instructions as to use of
C-TEC Corporation Subscription Certificates (the "instructions")
distributed with the Subscription Certificates, from a member firm of a
registered national securities exchange or a member of the National
Association of Securities Dealers, Inc. ("NASD"), or from a commercial
bank or trust company having an office or correspondent in the United
States or from a bank, stockbroker, savings and loan association or
credit union with membership in an approved signature guarantee
medallion program, pursuant to Rule 17Ad-15 of the Exchange Act
(each, an "Eligible Institution"), stating the name of the exercising
Rights holder, the number of Rights represented by the Subscription
Certificate or Subscription Certificates held by such exercising
Rights holder, the number of Underlying Shares being subscribed for
pursuant to the Basic Subscription Privilege and the number of
Underlying Shares, if any, being subscribed for pursuant to the
Oversubscription Privilege, and guaranteeing the delivery to the
Subscription Agent of any Subscription Certificate evidencing such
Rights within five NASDAQ trading days following the Expiration Date;
and
(iii) the properly completed Subscription Certificate evidencing the
Rights being exercised, with any required signatures guaranteed, is
received by the Subscription Agent within five NASDAQ trading days
following the Expiration Date. The Notice of Guaranteed Delivery may be
delivered to the Subscription Agent in the same manner as Subscription
Certificates at the address set forth above, or may be transmitted to
the Subscription Agent by facsimile transmission (telecopy no. (617)
575-2232 or -2233). Additional copies of the form of Notice of
Guaranteed Delivery are available upon request from the Information
Agent, whose address and telephone number are set forth under
"Information Agent."
Funds received in payment of the Subscription Price for Excess Shares
subscribed for pursuant to the Oversubscription Privilege will be held in a
segregated account pending issuance of such Excess Shares. If a Rights holder
exercising the Oversubscription Privilege is allocated less than all of the
shares of Common Stock which such holder subscribed for pursuant to the
Oversubscription Privilege, the excess funds paid by such holder in respect of
the Subscription Price for shares not issued shall be returned by mail without
interest or deduction as soon as practicable after the Expiration Date and
after all prorations and adjustments contemplated by the terms of the Rights
Offering have been effected.
Unless a Subscription Certificate (i) provides that the shares of Common
Stock to be issued pursuant to the exercise of Rights represented thereby are
to be delivered to the record holder of such Rights or (ii) is submitted for
the account of an Eligible Institution, signatures on such Subscription
Certificate must be guaranteed by an Eligible Institution or other eligible
guarantor institution which is a member of or a participant in a medallion
guarantee program acceptable to the Subscription Agent.
Holders who hold shares of Company Stock for the account of others, such
as brokers, trustees or depositories for securities, should notify the
respective beneficial owners of such shares as soon as possible to ascertain
such beneficial owners' intentions and to obtain instructions with respect to
the Rights. If the beneficial owner so instructs, the record holder of such
Rights should complete Subscription Certificates and submit them to the
Subscription Agent with the proper payment. In addition, beneficial owners of
Common Stock or Rights held through a record holder should contact the holder
and request the holder to effect transactions in accordance with such
beneficial owner's instructions.
The instructions accompanying the Subscription Certificates should be
read carefully and followed in detail. DO NOT SEND SUBSCRIPTION CERTIFICATES
TO THE COMPANY.
THE METHOD OF DELIVERY OF SUBSCRIPTION CERTIFICATES AND PAYMENT OF THE
SUBSCRIPTION PRICE TO THE SUBSCRIPTION AGENT WILL BE AT THE ELECTION AND RISK
OF THE RIGHTS HOLDERS, BUT IF SENT BY MAIL IT IS RECOMMENDED THAT SUCH
CERTIFICATES AND PAYMENTS BE SENT BY REGISTERED MAIL, PROPERLY INSURED, WITH
RETURN RECEIPT REQUESTED, AND THAT A SUFFICIENT NUMBER OF DAYS BE ALLOWED TO
ENSURE DELIVERY TO THE SUBSCRIPTION AGENT AND CLEARANCE OF PAYMENT PRIOR TO
5:00 P.M., NEW YORK CITY TIME, ON THE EXPIRATION DATE. BECAUSE UNCERTIFIED
PERSONAL CHECKS MAY TAKE AT LEAST FIVE BUSINESS DAYS TO CLEAR, YOU ARE
STRONGLY URGED TO PAY, OR ARRANGE FOR PAYMENT, BY MEANS OF CERTIFIED OR
CASHIER'S CHECK, MONEY ORDER OR WIRE TRANSFER OF FUNDS.
All questions concerning the timeliness, validity, form and eligibility
of any exercise of Rights will be determined by the Company, whose
determinations will be final and binding. The Company in its sole discretion
may waive any defect or irregularity, or permit a defect or irregularity to be
corrected within such time as it may determine, or reject the purported
exercise of any Right. Subscriptions will not be deemed to have been received
or accepted until all irregularities have been waived or cured within such
time as the Company determines in its sole discretion. Neither the Company,
the Subscription Agent, nor the Information Agent will be under any duty to
give notification of any defect or irregularity in connection with the
submission of Subscription Certificates or incur any liability for failure to
give such notification.
Any questions or requests for assistance concerning the method of
exercising Rights or requests for additional copies of this Prospectus, the
Instructions or the Notice of Guaranteed Delivery should be directed to the
Information Agent, MacKenzie Partners, Inc., at its address set forth under
"Information Agent" (telephone: (212) 929-5500 or (800) 322-2885).
No Revocation
ONCE A HOLDER OF RIGHTS HAS EXERCISED THE BASIC SUBSCRIPTION PRIVILEGE
AND/OR THE OVERSUBSCRIPTION PRIVILEGE, SUCH EXERCISE MAY NOT BE REVOKED.
Method of Transferring Rights
Rights may be purchased or sold through usual investment channels,
including banks and brokers. It is anticipated that the Rights will be
traded on NASDAQ under the symbol "CTEXR." Rights also may be sold in
over-the-counter and private sales transactions. Certain registered
broker-dealers have indicated that they intend to make a market in the Rights
during the period the Rights are outstanding. No assurance can be given,
however, that a market for the Rights will develop or, if such a market
develops, as to how long it will continue.
The Rights evidenced by a single Subscription Certificate may be
transferred in whole by endorsing the Subscription Certificate for transfer in
accordance with the instructions accompanying the Subscription Certificate. A
portion of the Rights evidenced by a single Subscription Certificate (but not
fractional Rights) may be transferred by delivering to the Subscription Agent
a Subscription Certificate properly endorsed for transfer, with instructions
to register such portion of the Rights evidenced thereby in the name of the
transferee (and to issue a new Subscription Certificate to the transferee
evidencing such transferred Rights). In such event, a new Subscription
Certificate evidencing the balance of the Rights will be issued to the Rights
holder or, if the Rights holder so instructs, to an additional transferee.
The Rights evidenced by a Subscription Certificate also may be sold, in
whole or in part, through the Subscription Agent by delivering to the
Subscription Agent such Subscription Certificate properly executed for sale by
the Subscription Agent. If only a portion of the Rights evidenced by a single
Subscription Certificate are to be sold by the Subscription Agent, such
Subscription Certificate must be accompanied by instructions setting forth the
action to be taken with respect to the Rights that are not to be sold. If the
Rights can be sold, sales of such Rights will be deemed to have been effected
at the weighted average price received by the Subscription Agent on the day
such Rights are sold, less any applicable brokerage commissions, taxes and
other direct expenses of sale. Promptly following the settlement of such
sale, the Subscription Agent will send the Rights holder a check for the net
proceeds (after deduction of any applicable brokerage commissions, taxes and
other direct expenses of the sale) from the sale of any Rights sold. The
Company will pay the fees charged by the Subscription Agent for effecting such
sales. Orders to sell Rights must be received by the Subscription Agent prior
to 11:00 a.m., New York City time, on November 23, 1994, and the Subscription
Agent's obligation to execute orders is subject to its ability to find buyers.
Holders wishing to transfer all or a portion of their Rights (but not
fractional Rights) should allow a sufficient amount of time prior to the
Expiration Date for (i) the transfer instructions to be received and processed
by the Subscription Agent, (ii) a new Subscription Certificate to be issued
and transmitted to the transferee or transferees with respect to transferred
Rights, and to the transferor with respect to retained Rights, if any, and
(iii) the Rights evidenced by such new Subscription Certificates to be
exercised or sold by the recipients thereof. Neither the Company nor the
Subscription Agent shall have any liability to a transferee or transferor of
Rights if Subscription Certificates are not received in time for exercise or
sale prior to the Expiration Date.
Except for the fees charged by the Subscription Agent (which will be
paid by the Company as described above), all commissions, fees and other
expenses (including brokerage commissions and transfer taxes) incurred in
connection with the purchase, sale or exercise of Rights will be for the
account of the transferor of the Rights, and none of such commissions, fees or
expenses will be paid by the Company or the Subscription Agent.
Procedures for Book Entry Transfer Facility Participants
The Company anticipates that the Rights will be eligible for transfer
through, and that the exercise of the Basic Subscription Privilege (but not
the Oversubscription Privilege) may be effected through, the facilities of the
Depository Trust Company, Midwest Securities Trust Company and Philadelphia
Depository Trust Company (collectively, the "Book Entry Facilities"; Rights
exercised through any such facility are referred to as "Book Entry Exercised
Rights"). The holder of a Book Entry Exercised Right may exercise the
Oversubscription Privilege in respect of such Book Entry Exercised Right by
properly executing and delivering to the Subscription Agent, at or prior to
5:00 p.m., New York City time, on the Expiration Date, a Nominee Holder
Oversubscription Form, together with payment of the Subscription Price for the
number of Underlying Shares for which the Oversubscription Privilege is to be
exercised. Any Rights holder subscribing for an aggregate of more than 5000
Underlying Shares pursuant to the Oversubscription Privilege prior to the
Expiration Date shall not be required to deliver payment for such number of
Underlying Shares in excess of 5000 until the Expiration Date. The Company,
in its sole discretion, may determine to waive payment for such excess number
of Underlying Shares until after the Expiration Date and after all prorations
and adjustments contemplated by the terms of the Rights Offering have been
effected. Copies of the Nominee Holder Oversubscription Form may be obtained
from the Subscription Agent.
Effect of Rights Offering on Other Securities
and Stock Options of the Company and Company Plans
The number of shares covered by certain stock options and the option
prices thereunder are subject to adjustment in accordance with the provisions
thereof. The Company's stock option plan or, in certain cases, the stock
option agreements evidencing awards made thereunder, require the Compensation
Committee of the Board of Directors (the "Committee") to make appropriate
adjustments to the outstanding options or other awards in the event of any
split-ups, stock dividends, recapitalizations, mergers, consolidations,
combinations, exchanges of shares and the like (each an "adjustment event").
The Committee, whose determination shall be conclusive, has discretion to
determine the nature and extent of the adjustments to be made in order to make
the outstanding options or awards, immediately after such adjustment event,
equivalent to such options or awards immediately prior to such adjustment
event.
The Committee will meet to determine whether the Rights Offering is an
adjustment event and if so, what adjustment to make.
Determination of Subscription Price
The Subscription Price was determined by the Company and its Board of
Directors. In making this determination, the Company considered, among other
factors, the market price of the Common Stock, the pro rata nature of the
offering and pricing discounts customarily applied in transactions of this
type. The Subscription Price should not be considered an indication of the
actual value of the Company or the Common Stock. See "Price Range of Common
Stock and Dividend Policy."
Intent of RCN
RCN will receive [ ] Rights in respect of the shares of Company
Stock it owns, and such Rights represent 34.5% of the total Rights to be
distributed. RCN has informed the Company that it intends to exercise the
Rights it receives for an aggregate subscription price of $[ ] and that it
intends to exercise the Oversubscription Privilege for an aggregate
subscription price of approximately $___________ to subscribe for [ ]
additional shares of Common Stock. The opportunity to exercise the
Oversubscription Privilege is available to all holders of Rights on the
same terms. See "The Rights Offering--Subscription
Privileges--Oversubscription Privilege." If RCN is the only holder to
exercise its Rights, it will own approximately 59.6% of the Class B Stock
and [ ]% of the Common Stock.
Foreign and Certain Other Shareholders
Subscription Certificates will not be mailed to Holders whose
addresses are outside the United States or who have an APO or FPO address,
but will be held by the Subscription Agent for their account. To exercise
such Rights, such a Holder must notify the Subscription Agent on or prior
to 11:00 a.m., New York City time, on November 23, 1994, and must establish
to the satisfaction of the Subscription Agent that such exercise is
permitted under appliable law. If such a Holder does not notify the
Subscription Agent and provide acceptable instructions to the Subscription
Agent by such time, such Rights represented thereby will be sold, if
feasible, and the net proceeds, if any, remitted to such Holder. If the
Rights can be sold, sales of such Rights will be deemed to have been
effected at the weighted average price received by the Subscription Agent
on the day such Rights are sold, less any applicable brokerage commissions,
taxes and other expenses.
Other Matters
The Rights Offering is not being made in any state or other jurisdiction
in which it is unlawful to do so, nor is the Company selling or accepting any
offers to purchase any shares of Company Stock from Rights holders who are
residents of any such state or other jurisdiction. The Company may delay the
commencement of the Rights Offering in certain states or other jurisdictions
in order to comply with the securities law requirements of such states or
other jurisdictions. It is not anticipated that there will be any changes in
the terms of the Rights Offering. The Company, if it so determines in its
sole discretion, may decline to make modifications to the terms of the Rights
Offering requested by certain states or other jurisdictions, in which event
Rights holders resident in those states or jurisdictions will not be eligible
to participate in the Rights Offering.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following summary describes certain United States federal income tax
considerations applicable to U.S. Holders who hold Company Stock as a capital
asset and who receive Rights in respect of such Company Stock in the issuance
(the "Issuance"). This summary is based upon laws, regulations, rulings and
decisions currently in effect. This summary does not discuss all aspects of
federal income taxation that may be relevant to a particular investor or to
certain types of investors subject to special treatment under the federal
income tax laws (for example, banks, dealers in securities, life insurance
companies, tax exempt organizations and foreign taxpayers), nor does it
discuss any aspect of state, local or foreign tax laws.
Issuance of the Rights
Holders of Company Stock will not recognize taxable income in connection
with the receipt or exercise of the Rights.
Basis and Holding Period of the Rights
Except as provided in the following sentence, the basis of the Rights
received by a shareholder as a distribution with respect to such shareholder's
Company Stock will be zero. If either (i) the fair market value of the Rights
on the date of Issuance is 15% or more of the fair market value (on the date
of Issuance) of the Company Stock with respect to which they are received or
(ii) the shareholder elects, in his or her federal income tax return for the
taxable year in which the Rights are received, to allocate part of the basis
of such Company Stock to the Rights, then upon exercise or transfer of the
Rights, the shareholder's basis in such Company Stock will be allocated
between the Company Stock and the Rights in proportion to the fair market
values of each on the date of Issuance. The holding period of a shareholder
with respect to the Rights received as a distribution on such shareholder's
Company Stock will include the shareholder's holding period for the Company
Stock with respect to which the Rights were issued.
Transfer of the Rights
A shareholder who sells Rights received in the Issuance prior to
exercise will recognize gain or loss equal to the difference between the sale
proceeds and such shareholder's basis (if any) in the Rights sold. Such gain
or loss will be long-term capital gain or loss if such shareholder's holding
period in the Rights (as discussed above) exceeds one year. The excess of net
long-term capital gains over net short-term capital losses is taxed at a lower
rate than ordinary income for certain non-corporate taxpayers. The
distinction between capital gain or loss and ordinary income is also
relevant for purposes of, among other things, limitations on the
deductibility of capital losses.
Lapse of the Rights
Shareholders who allow the Rights received by them at the Issuance to
lapse will not recognize any gain or loss, and no adjustment will be made to
the basis of the Company Stock, if any, owned by such holders of the Rights.
Exercise of the Rights; Basis
and Holding Period of Common Stock
Holders of Rights will not recognize any gain or loss upon the exercise
of such Rights. The basis of the Common Stock acquired through exercise of
the Rights will be equal to the sum of the Subscription Price therefor and the
Rights holder's basis in such Rights (if any) as described above. The holding
period for the Common Stock acquired through exercise of the Rights will begin
on the date the Rights are exercised.
THE FOREGOING SUMMARY IS INCLUDED FOR GENERAL INFORMATION ONLY.
ACCORDINGLY, EACH SHAREHOLDER IS URGED TO CONSULT WITH HIS OR HER OWN TAX
ADVISOR WITH RESPECT TO THE TAX CONSEQUENCES OF THE RIGHTS OFFERING ON HIS OR
HER OWN PARTICULAR TAX SITUATION, INCLUDING THE APPLICATION AND EFFECT OF
STATE AND LOCAL INCOME AND OTHER TAX LAWS.
PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The following unaudited Pro Forma Condensed Consolidated Balance
Sheet as of June 30, 1994 gives effect to the disposition of cellular
properties and the pending acquisition of Twin County (the "transactions")
as though they had occurred on June 30, 1994. The following unaudited Pro
Forma Condensed Consolidated Statements of Operations for the six months
ended June 30, 1994 and the year ended December 31, 1993 give effect to the
transactions as though they had occurred on January 1, 1993. These pro
forma financial statements should be read in conjunction with (i) Twin
County's historical financial statements and notes thereto contained in the
Company's Current Report on Form 8-K dated October 27, 1994 and (ii) the
Company's historical consolidated financial statements and notes thereto
contained in the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1993, and in the Company's Quarterly Report on Form 10-Q
for the six months ended June 30, 1994. The Pro Forma Condensed
Consolidated Statements of Operations and Balance Sheet are not necessarily
indicative of the actual results of operations or financial position which
would have been reported if the transactions had occurred on the respective
dates referred to above nor do they purport to indicate the results of
future operations or financial position of the Company. In the opinion of
management, all adjustments necessary to present fairly such pro forma
financial statements have been made. Information with respect to Twin
County and the historical financial information of Twin County was provided
by Twin County.
<TABLE>
<CAPTION>
C-TEC Corporation
Pro Forma Condensed Consolidated Balance Sheet
(Dollars in Thousands)
(Unaudited)
Twin County Twin County
C-TEC Trans Video, Inc. July Trans Video, Inc.
Corporation June Cellular Disposition 31, 1994 Acquisition
30, 1994 (Actual) Adjustments(a) (Actual)(e) Adjustments(b) Pro Forma
------------------ --------------------- ---------------------- ------------------ ----------
<S> <C> <C> <C> <C> <C>
Current Assets
Cash and temporary cash
investments $47,328 $124,779 $947 $(47,500) $125,554
Other current assets 48,811 12,783 2,173 - 63,767
Deferred income taxes 3,134 (27) 1,390 - 4,497
-------- -------- -------- -------- --------
Total current assets 99,273 137,535 4,510 (47,500) 193,818
-------- -------- -------- -------- --------
Property, Plant and Equipment
Telephone plant 388,430 - - - 388,430
Cable plant 180,902 - 40,119 - 221,021
Mobile and Cellular Plant 30,468 (27,797) - - 2,671
Other property, plant and equipment 12,143 - - - 12,143
-------- -------- -------- -------- --------
Total property, plant and equipment 611,943 (27,797) 40,119 - 624,265
Accumulated depreciation 264,040 (9,121) 23,948 (23,948) 254,919
-------- -------- -------- -------- --------
Net property, plant and equipment 347,903 (18,676) 16,171 23,948 369,346
-------- -------- -------- -------- --------
Investments 14,771 (1,283) - - 13,488
-------- -------- -------- -------- --------
Intangible Assets, Net 91,669 (33,236) 45 109,177 167,655
-------- -------- -------- -------- --------
Deferred Charges 17,249 - 4,959 (2,200) 20,008
-------- -------- -------- -------- --------
Total Assets $570,865 84,340 $25,685 $83,425 $764,315
======== ======== ======== ======== ========
LIABILITIES AND SHAREHOLDERS'
EQUITY
Current Liabilities
Current maturities of long-term
debt and preferred stock $9,449 ($421) - - $9,028
Advance billings and customer
deposits 8,526 (326) $3,655 - 11,855
Accrued taxes 11,684 - - - 11,684
Accrued interest 6,567 (37) - - 6,530
Other current liabilities 34,513 (3,215) 2,762 - 34,060
-------- -------- -------- -------- --------
Total current liabilities 70,739 (3,999) 6,417 - 73,157
-------- -------- -------- -------- --------
Long-Term Debt 386,187 (1,306) 11,941 $4,000 400,822
-------- -------- -------- -------- --------
Deferred Income Taxes and Investment
Tax Credits 30,572 14,698 1,372 32,726 79,368
-------- -------- -------- -------- --------
Other Deferred Credits 19,718 - 654 - 20,372
-------- -------- -------- -------- --------
Minority Interest 2,448 (2,448) - - -
-------- -------- -------- -------- --------
Exchangeable Preferred Stock
of a Subsidiary - - - 52,000 52,000
-------- -------- -------- -------- --------
Redeemable Preferred Stock 274 - - - 274
-------- -------- -------- -------- --------
Common Shareholders' Equity
Common Stock 16,887 - 300 (300) 16,887
Additional paid-in capital 20,635 - - - 20,635
Retained earnings 28,693 77,395 5,001 (5,001) 106,088
Treasury stock at cost, 377,842
shares at June 30, 1994 (5,288) - - - (5,288)
-------- -------- -------- -------- --------
Total Shareholders' Equity 60,927 77,395 5,301 (5,301) 138,322
-------- -------- -------- -------- --------
Total Liabilities and Shareholders'
Equity $570,865 $84,340 $25,685 $83,425 $764,315
======== ======== ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
Pro Forma Condensed Consolidated Statement of Operations
For the Six Months Ended June 30, 1994
(Dollars in Thousands Except Per Share Amounts)
(Unaudited)
C-TEC Twin County
Corporation Six Trans Video, Inc. Twin County
Months Ended Cellular Six Months Ended Trans Video, Inc.
June 30, 1994 Disposition April 30, 1994 Acquisition Pro
(actual) Adjustments (c) (actual) (e) Adjustments (f) Forma (d)
---------------- --------------- ---------------- ----------------- ----------
<S> <C> <C> <C> <C> <C>
Sales $145,114 $(13,785) $11,945 - $143,274
Costs & Expenses 123,551 (12,264) 9,892 $6,315 127,494
-------- -------- -------- -------- --------
Operating Income 21,563 (1,521) 2,053 (6,315) $15,780
Interest Income 1,250 (40) 10 - 1,220
Interest Expense (16,333) 79 (418) (100) (16,772)
Gain on Sale of certain
Pennsylvania Cable 893 - - - 893
Properties
Other Income, Net 613 3 - - 616
-------- -------- -------- -------- --------
Income (Loss) Before Income Taxes 7,986 (1,479) 1,645 (6,415) 1,737
Provision for Income Taxes 3,973 (1,008) 775 (2,245) 1,495
-------- -------- -------- -------- --------
Income (Loss) Before Minority Interest
and Equity in Unconsolidated Entities 4,013 (471) 870 (4,170) 242
Preferred Dividends and Minority Interest
in Income of Consolidated Entities (476) 429 - (1,300) (1,347)
Equity in Income of Unconsolidated Entities 281 (91) - - 190
-------- -------- -------- -------- --------
Income (Loss) Available for Common Stock Before
Extraordinary Charge and Cumulative Effect of
Accounting Principle Change (g) $3,818 $(133) $870 $(5,470) $(915)
======== ======== ======== ======== ========
Earnings (Loss) Per Average Common Share:
Income before extraordinary charge and
cumulative effect of accounting principle change $.23 $(.06)
======== ======== ======== ======== ========
Average Common Shares Outstanding 16,509,593 16,509,593
</TABLE>
<TABLE>
Pro Forma Condensed Consolidated Statement of Operations
For the Year Ended December 31, 1993
(Dollars in Thousands Except Per Share Amounts)
(Unaudited)
Twin County
C-TEC Corporation Trans Video, Inc. Twin County
Year Ended Cellular Year Ended Trans Video, Inc.
December 31, 1993 Disposition October 31, 1993 Acquisition
(actual) Adjustments (c) (actual) (e) Adjustments (f) Pro Forma (d)
----------------- --------------- ----------------- ----------------- -------------
<S> <C> <C> <C> <C> <C>
Sales $283,987 $(22,570) $19,999 $281,416
Costs & Expenses 244,421 (22,924) 18,433 $(12,766) 252,696
Nonrecurring Charges 5,025 - - - 5,025
-------- -------- -------- -------- --------
Operating Income 34,541 354 1,566 (12,766) 23,695
Interest Income 1,609 - 15 - 1,624
Interest Expense (34,204) 184 (827) (200) (35,047)
Gain on Sale of Marketable
Equity Securities 1,988 - - - 1,988
Other Income, Net 1,408 (62) - - 1,346
-------- -------- -------- -------- --------
Income (Loss) Before Income Taxes 5,342 476 754 (12,966) (6,394)
Provision for Income Taxes 10,714 (830) 286 (4,408) 5,762
-------- -------- -------- -------- --------
Income (Loss) Before Minority Interest
and Equity in Unconsolidated
Entities (5,372) 1,306 468 (8,558) (12,156)
Preferred Dividends and Minority
Interest in income of
Consolidated Entities (341) 256 - (2,600) (2,685)
Equity in Income of Unconsolidated
Entities 227 (155) - - 72
-------- -------- -------- -------- --------
Income (Loss) Available for Common Stock
Before Extraordinary Charge and
Cumulative Effect of Accounting
Principle Change (g) (5,486) $1,407 $468 $(11,158) $(14,769)
======== ======== ======== ======== ========
Earnings (Loss) Per Average
Common Share:
Income before extraordinary
charge and cumulative effect
of accounting principal change $(.33) $(.89)
======== ======== ======== ======== ========
Average Common Shares Outstanding 16,506,494 16,506,494
</TABLE>
Notes to Pro Forma Condensed Consolidated Financial Statements
(a) Adjustments to record the disposition of certain cellular
properties. The adjustments assume that the sales proceeds, net of certain
escrow reserves and holdbacks discussed below and net of income taxes
estimated to be payable after the utilization of certain net operating loss
carryforwards, are retained as temporary cash investments. The escrow
reserves and holdbacks of approximately $16 million are included in other
current assets. The adjustments assume the realization of deferred tax
assets of approximately $21 million, representing the tax benefits
associated with the utilization of approximately $54.7 million federal net
operating loss carryforwards and approximately $18.9 million state net
operating loss carryforwards. The final resolution of the Company's
current IRS examination may impact the utilization of net operating loss
carryforwards. Adjustments also assume a reduction in a related valuation
allowance for deferred tax assets of approximately $6 million. An after-
tax gain of approximately $71 million was assumed to be recognized on the
sale. Certain working capital adjustments to the sales price to be made
ninety days after closing were estimated to be approximately $7 million
based on the historical asset and liability balances at June 30, 1994.
(b) Adjustments to reflect the pending acquisition of Twin County.
The adjustments assume that the consideration for the acquisition will be
cash of approximately $47.5 million, a promissory note of $4 million, and
exchangeable preferred stock of C-TEC Cable Systems, Inc. with a
liquidation preference of $52 million (the "Cable Preferred Stock"). The
purchase price will reflect the fair value of the consideration for the
pending acquisition; such fair value may differ from assumptions used in
the preparation of the pro forma statements. The purchase price has been
allocated based on assumptions of the fair values of the tangible and
identifiable intangible assets acquired and liabilities assumed.
(c) Adjustments to eliminate the historical results of operations of
certain cellular properties. Corporate overhead allocated to cellular
operations has not been eliminated because that overhead would have been
reallocated to other business segments.
(d) The Pro Forma Consolidated Statements of Operations exclude a
non-recurring after-tax gain of approximately $71 million expected to be
realized on the sale, and the reversal of a valuation allowance for deferred
tax assets of approximately $6 million.
(e) Twin County has a fiscal year ending October 31. Twin
County's most recent interim historical balance sheet as of July 31, 1994
is included in the pro forma condensed consolidated balance sheet. Twin
County's statement of operations for the year ended October 31, 1993 is
included in the pro forma condensed consolidated statement of operations
for the year ended December 31, 1993. Twin County's results of operations
for the six months ended April 30, 1994 which are included in the pro forma
condensed consolidated statement of operations for the six months ended
June 30, 1994 were derived from its most recent interim historical
statement of operations for the nine months ended July 31, 1994, as
follows:
<TABLE>
Nine Months Six Months
Ended Ended
July 31, 1994 Adjustments April 30, 1994
---------------- -------------- -----------------
<S> <C> <C> <C>
Sales $18,208 $(6,263) $11,945
Costs & Expenses 15,677 (5,785) 9,892
---------------- -------------- -----------------
Operating Income 2,531 (478) 2,053
Interest Income 20 (10) 10
Interest Expense (661) 243 (418)
Gain on sale of certain Pennsylvania Cable Properties - - -
Other Income, net - - -
---------------- -------------- -----------------
Income Before Income Taxes 1,890 (245) 1,645
Provision for Income Taxes 797 (22) 775
---------------- -------------- -----------------
Income Before Minority Interest and Equity in
Unconsolidated Entities 1,093 (223) 870
Equity in Income of Unconsolidated Entities - - -
Minority Interest in Income of Consolidated Entities - - -
---------------- -------------- -----------------
Income Before Extraordinary Charge and Cumulative
Effect of Accounting Principle Changes $1,093 $(223) $870
================ ============== =================
</TABLE>
(f) Adjustments to record additional depreciation and amortization
resulting from Twin County purchase price allocation and to increase
interest expense associated with a $4 million promissory note and to record
dividends of 5% on the $52 million of Cable Preferred Stock issued in
connection with the acquisition.
(g) For information purposes only, since 1989 C-TEC has maintained a
policy of not paying cash dividends. C-TEC does not intend to alter this
policy in the foreseeable future.
THE COMPANY
The Company was organized in 1979. It is incorporated under the laws
of the Commonwealth of Pennsylvania and has its principal office in
Princeton, NJ. The Company is a holding company with wholly-owned
subsidiaries, which are engaged in various aspects of the
telecommunications industry and which are organized into five principal
groups - Telephone, Cable, Communications Services, Mobile Services, and
Long Distance. Through its wholly owned subsidiaries, the Company also has
ownership interests in a number of other entities providing
telecommunications services.
On or about October 29, 1993, RCN acquired 600,768 shares of Common
Stock and 5,094,223 shares of Class B Stock of the Company from a group
consisting of Andrew J. Sordoni III, William B. Sordoni, Stephen Sordoni and
Charles E. Parente (including entities wholly owned or controlled by any one
or more of them) (the "Sellers") pursuant to the terms of the Stock Purchase
Agreement dated June 17, 1993 among the Sellers, RCN and KDG. The purchase
price paid by RCN was $202,327,191 and the source of such funds was RCN's and
its affiliates' working capital. This transaction represented approximately
34% of the equity and approximately 57% of the voting control of the
Company. RCN nominees currently constitute a majority of the Board of
Directors of the Company.
Financial information regarding the Company's industry segments is
set forth in footnote 14 to the Consolidated Financial Statements included
in the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1993, which is incorporated herein by reference.
As of December 31, 1993, the Company had 1,282 full-time employees
including general office and administrative personnel.
Operations
Telephone
The Telephone Group consists of a Pennsylvania public utility providing
local telephone service to a 19 county, 5,067 square mile service territory in
Pennsylvania. As of June 30, 1994, the Telephone Group provided service to
approximately 215,000 main access lines. Of these 168,000 were residential
and 47,000 primarily related to business. This Group's operating territory is
rural, containing only 42.4 access lines per square mile as compared to a
Pennsylvania average of approximately 151 lines per square mile. The Group's
79 central offices serve an average of approximately 2,700 lines and 65 square
miles.
In addition to providing local telephone service, this Group provides
network access and billing and collection services to interexchange carriers.
This Group also has other revenues which are considered non-regulated and
primarily relate to telecommunications equipment sales and services and
billing/collection services for interexchange long distance carriers.
Intralata toll bypass and alternative local access telephone service
providers are potential competitive threats, although no significant
competition has occurred to date. Intralata toll and access revenue comprise
a significant portion of the Group's business.
Cable
The Cable Group is a cable television operator with cable television
systems located in the States of New York, New Jersey, Michigan and Delaware.
The Group owns and operates cable television systems serving approximately
236,000 customers and manages cable television systems with an additional
36,000 customers, ranking it among the top 35 multiple system operators in the
United States. On October 12, 1994 the Company announced the pending
acquisition of Pennsylvania Cable Television provider, Twin County. For
information on the pending acquisition and pro forma effect of such pending
acquisition, see "Recent Developments" and "Pro Forma Condensed
Consolidated Financial Statements," respectively.
During 1993, the Cable Group restructured rates and channel offerings to
comply with the basic rate regulations and to minimize the impact on revenue
of the Cable Act. The future impact of the Cable Act on the Cable Group and
the cable television industry is still unclear. The Cable Group's 1993
operating results were not significantly impacted by the Cable Act. See
"Investment Considerations--Regulation."
The Group's performance is dependent to a large extent on its ability to
obtain and renew its franchise agreements from local government authorities on
acceptable terms. To date, all of the Group's franchises have been renewed or
extended, generally at or prior to their stated expirations and on acceptable
terms. During 1993, the Cable Group completed negotiations with 64
communities resulting in franchise renewals on terms which are acceptable to
the Group. The Cable Group has 369 franchises, 63 of which are due for
renewal within the next three years. No one franchise accounts for more than
10% of the Group's total revenue.
Competition for the Group's services traditionally has come from a
variety of providers including broadcast television, video cassette recorders
and home satellite dishes. Direct broadcast satellite (DBS) which will allow
consumers to receive cable programming for a fee once they purchase a
receiving dish and a set-top terminal may increase competition in the future.
Two DBS companies have launched their services in 1994. In addition,
recent changes in federal regulation allow telephone companies to lease
their networks to video programmers under the video dial-tone platform.
Also, the recently announced mergers of various telephone and cable
companies has heightened the concerns about competition in the future. The
current regulatory environment appears to be fostering competition in cable
television by telephone companies, and in telephone by cable companies.
These regulations are still evolving. The Cable and Telephone Groups
continue to monitor the progress of regulations affecting the
telecommunications industry and are developing a business plan to meet
future competition. It is impossible to predict at this time the impact of
these technological and regulatory developments on the cable television
industry in general or on the Cable Group in particular.
Mobile Services
The Mobile Services Group previously operated cellular telephone
systems in MSAs and RSAs throughout eight counties in Northeastern and
Central Pennsylvania and 24 counties in Southeast Iowa, serving a total
population of 1.5 million. On September 9, 1994, the Company completed the
sale of its cellular properties to ICN for approximately $182.5 million,
subject to certain adjustments to be made within 90 days after closing
estimated to result in approximately $7 million of additional proceeds.
For information on the pro forma effect of such sale, see "Pro Forma
Condensed Consolidated Financial Statements."
The Group also operates paging and message management services in
Northeastern Pennsylvania. These business units were not sold to ICN as a
part of the cellular sale.
Communication Services
The Communications Services Group presently carries on business
principally in the Northeastern United States providing telecommunications-
related engineering and technical services. The Group headquarters is
located in Princeton, New Jersey and the services are provided out of
regional offices in Pennsylvania, New York, New Jersey and Virginia.
The services provided by the Group include telephony engineering; system
integration; operation and management of telecommunications facilities for
large corporate clients, hospitals and universities; and installation of
premises distribution systems in large campus environments. In addition, the
Communications Services Group sells, installs and maintains private branch
exchanges (PBXs) in Pennsylvania and New Jersey. The Group has also expanded
its engineering services to include video and data engineering, and
successfully implemented several major projects during 1993. These major
projects were contracts for the construction of integrated voice, video and
data distribution systems for a major university and for a governmental agency.
The Group encounters major competition from interexchange carriers,
regional bell operating companies, independent telephone companies, system
integrators, interconnect companies and small independent consultants. The
competition from various sources results in significant downward pressure on
the prices and margins for the services the Group provides. The Group's cost
effective operations, competitive pricing, flexibility to meet customer
requirements, and reputation in the telecommunications industry for quality
service have been its primary strengths against the competition.
Long Distance
The Long Distance Group principally operates in Pennsylvania. The Group
began operations in 1990 by servicing the local area of the Telephone Group.
In late 1992, the Long Distance Group entered the Wilkes-Barre/Scranton
territory served by Bell Atlantic. In late 1993, the Group established sales
offices in additional markets in Philadelphia, Pittsburgh, Harrisburg and
Allentown. The primary focus in these markets is to provide services to
residential and business customers.
The Long Distance Group provides facility based services, is a
"reseller" of several types of services and employs the networks of several
long distance providers on a wholesale basis. As a result of market share
growth, in 1993 the Group procured its own long distance switch which allows
customers to choose the Long Distance Group as their long distance provider
and dial the common "1+" to use the service. This switched service enables
the Company to provide quality services such as private line services, 800
services, operating services and calling card services at reduced rates. The
Group also provides telemarketing services, primarily to cable companies.
Additionally, the Long Distance Group recognized the need for access to
AT&T services to sell nationwide to large business customers with multiple
locations. In 1992, the Group procured access to AT&T Tariff 12 services
through a series of agreements. The AT&T Tariff 12 arrangement is a regulated
tariff on file with the FCC pursuant to which AT&T services are provided at
specified rates.
The interexchange (long-distance) carrier market is crowded and
competitive. Recent industry surveys indicate an estimated 350-400
interexchange carriers in operation. A key development was the rapid revenue
growth by regional and niche oriented companies. Although the top three
carriers (AT&T, MCI and Sprint) account for almost 90% of all interexchange
carrier revenue, that share may decline as other interexchange carrier revenue
grows.
Intense competition in the mid-sized business market reflects the rapid
growth of business customer revenue. The residential market is still
dominated by the top three carriers. However, this domination may decline
given increased price pressure combined with more aggressive marketing by the
regional carriers.
In Pennsylvania, the Long Distance Group has mirrored the overall growth
statistics of the regional carriers. Competition for the mid-sized business
market has come from other similarly situated carriers rather than the top
three. The primary deviation from industry growth trends is seen in the
residential market segment in the Telephone Group's operating territories.
Here the Long Distance Group has continued to hold the predominant market
share. A combination of value priced products, exceptional customer service
and aggressive marketing activities has been the Group's primary strength
against competition.
DESCRIPTION OF CAPITAL STOCK
The following general summary of the Common Stock is qualified in its
entirety by reference to the Company's Amended and Restated Articles of
Incorporation, as further amended (the "Articles of Incorporation"), a copy of
which is on file with the Commission. See "Available Information."
The authorized capital stock of the Company is 43,753,203 shares,
consisting of 35,000,000 shares of Common Stock, par value $1.00 per share,
and 8,753,203 shares of Class B Stock, par value $1.00 per share. As of
November 10, 1994, the Company had outstanding 7,962,266 shares of Common
Stock and 8,547,327 shares of Class B Stock.
Voting Rights and Powers
With respect to all matters upon which shareholders are entitled to vote
(including the election of directors) or to which shareholders are entitled to
give consent, except as provided in the next sentence, the holders of the
outstanding shares of the Common Stock and the holders of any outstanding
shares of the Class B Stock shall vote together without regard to class, and
every holder of the outstanding shares of the Common Stock shall be entitled
to cast one vote for each share of the Common Stock held, and every holder of
any outstanding shares of the Class B Stock shall be entitled to cast fifteen
votes for each share of the Class B Stock held. However, with respect to any
proposed amendment to the Articles of Incorporation which would (i) increase
or decrease the par value of any class, (ii) alter or change the preferences,
qualifications, limitations, restrictions or special or relative rights of the
shares of any class so as to affect the holders of such class adversely, (iii)
increase the authorized number of shares of any class, (iv) authorize a new
class of shares senior or superior in any respect to the shares of any class,
or (v) increase the number of authorized shares of any class senior or
superior in any respect to the shares of any class then authorized, the
approval of a majority of the votes entitled to be cast by the holders of the
class affected by the proposed amendment, voting separately as a class, shall
be obtained in addition to the approval of a majority of the votes entitled to
be cast by the holders of the Common Stock and the Class B Stock voting
together without regard to class as described above.
Dividends and Distributions
Cash Dividends
At any time shares of the Class B Stock are outstanding, as and when
cash dividends may be declared by the Board of Directors, the cash dividends
payable on shares of the Common Stock shall be in all cases at least 105% of
the cash dividend payable on shares of the Class B Stock.
Other Dividends and Distributions
In the case of dividends in the form of stock or other property of the
Company, each share of the Common Stock and each share of the Class B Stock is
equal in respect of rights and dividends except that in the case of dividends
or other distributions payable in stock or stock split-ups or divisions,
shares of the Class B Stock shall be distributed only with respect to the
Class B Stock and shares of the Common Stock may be distributed with respect
to both the Common Stock and the Class B Stock.
Other Rights
Except as otherwise required by the Pennsylvania Business Corporation
Law or as otherwise provided in the Articles of Incorporation, each share of
the Common Stock and each share of the Class B Stock has identical powers,
preferences and rights, including rights in liquidation.
Conversion of Class B Stock
Shares of Class B Stock shall be convertible at the option of the
respective holders thereof, at any time, into fully paid and nonassessable
shares of Common Stock on the basis of one share of Common Stock for each
share of Class B Stock. Any holder of shares of the Class B Stock may elect
to convert any or all of such shares at one time or at various times, in such
holder's discretion.
No payment or adjustment with respect to dividends on shares of the
Common Stock or on the Class B Stock shall be made in connection with any
conversion of shares of Class B Stock into shares of Common Stock except for
those shares of the Class B Stock converted subsequent to the record date for
the payment of a stock or cash dividend or other distribution on the shares of
the Class B Stock but prior to such payment. In such an instance, the stock
or cash dividend or other distribution will be paid on the Class B Stock to the
registered holder of such shares as of the close of business on the record
date as if no conversion had been made.
In the event of any capital reorganization or any reclassification of
the Common Stock (except for reorganizations or reclassifications involving a
subdivision or combination of outstanding shares of the Common Stock), the
shares of the Class B Stock shall thereafter have the right to be converted
into the number of shares of stock or other securities or property of the
Company to which outstanding shares of the Common Stock would have been
entitled upon the effective date of the reorganization or reclassification.
If the shares of the Common Stock or the Class B Stock at any time
outstanding shall, by reclassification or otherwise, be subdivided into a
greater number of shares or combined into a lesser number of shares, the
shares of Class B Stock or Common Stock, respectively, then outstanding shall,
at the same time, be subdivided or combined, as the case may be, on the same
basis.
Liquidation Preferences
In the event of dissolution, liquidation or winding up of the Company
whether voluntary or involuntary, holders of the Company Stock shall be
entitled to payment out of the assets of the Company ratably in accordance
with the number of shares held by them, respectively.
Duration of Class Rights and Powers
At any time when less than 25,000 shares of Class B Stock are
outstanding any shares of the Class B Stock which are then outstanding shall
without any action by the Board of Directors or the holder or holders thereof,
automatically convert into and become for all purposes shares of Common Stock,
and the provisions of the Articles of Incorporation which provide for
different voting or cash dividend rights for the Common Stock and the Class B
Stock shall not be of any effect. All shares of either or both the Common
Stock or the Class B Stock which are then outstanding shall have equal and
general voting power in all matters upon which shareholders of the Company are
entitled to vote or give consent, even if at such time there shall have been
fixed by the Board of Directors a record date for voting of any meeting of
shareholders.
General
The transfer agent and registrar for the Company's shares of Common
Stock and Class B Stock is The First National Bank of Boston.
Common Stock Outstanding after Rights Offering
Approximately [ ] shares of Common Stock will be issued in
connection with the Rights Offering assuming exercise of all Rights. Based on
the 7,962,266 shares of Common Stock outstanding as of November 10, 1994, the
issuance of such shares pursuant to the Rights Offering would result (on a pro
forma basis as of such date) in a [ ]% increase in the amount of
outstanding Common Shares.
The outstanding shares of the Common Stock are listed on NASDAQ under
the symbol "CTEX."
PLAN OF DISTRIBUTION
The Company has agreed to pay broker-dealers that have entered into a
Soliciting Dealer Agreement with the Company fees for their soliciting
efforts (the "Soliciting Fees") equal to $0.25 per share of Common Stock
for each share of Common Stock issued pursuant to the exercise of Rights
subject to a maximum Soliciting Fee of $250 in the case of each person
beneficially purchasing more than 1,000 shares of Common Stock pursuant to
the exercise of Rights. The Soliciting Fees will be paid directly to a
broker-dealer designated on the applicable portion of the Subscription
Certificate. Soliciting Fees will not be paid on any undesignated exercise
of Rights.
SUBSCRIPTION AGENT
The Company has appointed The First National Bank of Boston as
Subscription Agent for the Rights Offering. The Subscription Agent's address,
which is the address to which the Subscription Certificates and payment of the
Subscription Price (other than wire transfers) should be delivered, as well as
the address to which any Notice of Guaranteed Delivery must be delivered, is:
By Mail:
The First National Bank of Boston
P.O. Box 1872
Mail Stop 45-01-19
Boston, Massachusetts
02105-1872
By Hand:
BancBoston Trust Company of
New York
55 Broadway
3rd Floor
New York, New York
10006
By Overnight Courier:
The First National Bank of Boston
Shareholder Services Division
150 Royall Street
Mail Stop 45-01-19
Canton, Massachusetts
02021
The Company will pay the fees and expenses of the Subscription Agent,
and has also agreed to indemnify the Subscription Agent from certain
liabilities in connection with the Rights Offering.
INFORMATION AGENT
The Company has appointed MacKenzie Partners, Inc. as Information
Agent for the Rights Offering. Any questions or requests for additional
copies of this Prospectus, the Instructions or the Notice of Guaranteed
Delivery may be directed to the Information Agent at the telephone number and
address below.
MacKenzie Partners, Inc.
156 Fifth Avenue
9th Floor
New York, New York 10010
or
Call Toll Free
(800) 322-2885
The Company will pay the fees and expenses of the Information Agent and has
also agreed to indemnify the Information Agent from certain liabilities in
connection with the Rights Offering.
LEGAL MATTERS
The validity of the authorization and issuance of the securities offered
hereby is being passed upon by Raymond B. Ostroski, Vice President and General
Counsel of the Company. Davis Polk & Wardwell, New York, New York, will
advise the Company with respect to certain other matters relating to the Rights
Offering.
EXPERTS
The Company consolidated balance sheets as of December 31, 1993 and
1992 and the consolidated statements of operations, common shareholders'
equity, and cash flows for each of the three years in the period ended
December 31, 1993, incorporated by reference in this Prospectus, have been
incorporated herein in reliance on the report, which includes an
explanatory paragraph referring to the Company's change in methods of
accounting for income taxes and postretirement benefits other than
pensions, of Coopers & Lybrand, independent accountants, given on the
authority of that firm as experts in accounting and auditing.
The financial statements of Twin County Trans Video, Inc. as of and
for the years ended October 31, 1993 and 1992 incorporated by reference
herein to the Company's Current Report on Form 8-K filed with the
Commission on October 27, 1994 have been incorporated by reference in
reliance upon the report of Adams & Associates, independent certified public
accountants, and upon the authority of that firm as experts in accounting
and auditing.
No dealer, salesperson or any other person has
been authorized to give any information or to
make any representations other than those [LOGO]
contained or incorporated by reference in this
Prospectus in connection with the offer made by
this Prospectus, and, if given or made, such
information or representation must not be relied C-TEC
upon as having been sanctioned or authorized by Corporation
the Company. Neither the delivery of this
Prospectus nor any sale made hereunder shall
under any circumstances create any implication
that there has been no change in the affairs of the
Company since the date hereof. This Prospectus
does not constitute an offer or solicitation by Common Stock
anyone in any jurisdiction in which the person
making such offer or solicitation is not qualified to
do so or to any person to whom it is unlawful to
make such offer or solicitation.
TABLE OF CONTENTS
PROSPECTUS
Page
----
Available Information............ [ ]
Documents Incorporated by
Reference.................... [ ]
Prospectus Summary............... [ ]
Investment Considerations........ [ ]
Use of Proceeds.................. [ ]
Corporate Strategy............... [ ]
Price Range of Common Stock and
Dividend Policy.............. [ ]
Dilution......................... [ ]
The Rights Offering.............. [ ]
Certain Federal Income Tax
Consequences................. [ ]
Pro Forma Condensed Consolidated
Financial Statements......... [ ]
The Company...................... [ ]
Description of Capital Stock..... [ ]
Plan of Distribution............. [ ]
Subscription Agent............... [ ]
Information Agent................ [ ] Dated [ ], 1994
Legal Matters.................... [ ]
Experts.......................... [ ]
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution
The following table sets forth expenses in connection with the
issuance and distribution of the securities being registered. All amounts
shown are estimated, except the SEC registration fee and the NASDAQ
National Market listing fees.
SEC registration fee.......................... $114,998
NASDAQ listing fee............................ 17,500
NASD review fee............................... 30,500
Financial Advisor's fees and expenses......... *
Subscription Agent's fees and expenses........ *
Information Agent's fees and expenses......... *
Accounting fees............................... *
Legal fees and expenses (including Blue Sky
fees and expenses).......................... *
Printing and engraving fees................... *
Miscellaneous................................. *
---------
Total................................... $ *
=========
- ---------------
* To be supplied by amendment.
Item 15. Indemnification of Directors and Officers
Reference is made to Sections 1741 and 1742 of the 1988 Business
Corporation Law of the Commonwealth of Pennsylvania, which provide for
indemnification of directors and officers in certain circumstances. In
addition, Article IV of the By-laws of C-TEC provides that, except as
prohibited by law, any director or officer of C-TEC is entitled to be
indemnified in any action or proceeding in which he or she may be involved
by virtue of holding such position.
In addition, C-TEC maintains a directors' and officers' liability
insurance policy.
For the undertaking with respect to indemnification, see Item 17
herein.
Item 16. Exhibits
5 - Opinion of Raymond B. Ostroski*
23(a) - Consent of Coopers & Lybrand
23(b) - Consent of Adams & Associates
23(c) - Consent of Raymond B. Ostroski (included in Exhibit 5)*
24(a) - Power of attorney (included in the signature page to the
Registration Statement except in the case of the power of
attorney for Eugene Roth).**
24(b) - Power of attorney for Eugene Roth.**
99(a) - Form of Subscription Certificate.**
99(b) - Form of Instructions for Subscription Certificates.**
99(c) - Form of Notice of Guaranteed Delivery.**
99(d) - Form of Subscription Agency Agreement.*
99(e) - Form of Soliciting Dealer Agreement.*
- ---------------
*To be supplied by amendment.
**Previously filed.
Item 17. Undertakings
The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, as amended,
each filing of the registrant's annual report pursuant to Section 13(a) or
15(d) of the Securities Exchange Act of 1934, as amended, that is
incorporated by reference in the registration statement shall be deemed to
be a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities
Act of 1933, the information omitted from the form of prospectus filed
as part of this registration statement in reliance upon Rule 430A and
contained in a form of prospectus filed by the registrant pursuant to
Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be
deemed to be part of this registration statement as of the time it was
declared effective.
(2) For the purpose of determining any liability under the
Securities Act of 1933, each post-effective amendment that contains a
form of prospectus shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide
offering thereof.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933, as amended, may be permitted to directors, officers
and controlling persons of the registrant pursuant to the provisions
referred to in Item 15 of this registration statement, or otherwise, the
registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as
expressed in such Act and is, therefore, unenforceable. In the event that
a claim for indemnification against such liabilities (other than the
payment by the registrant of expenses incurred or paid by a director,
officer or controlling person of the registrant in the successful defense
of any action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered
hereby, the registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in such Act and will be governed by the
final adjudication of such issue.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant hereby certifies that it has reasonable grounds to believe that
it meets all of the requirements for filing on Form S-3 and has duly caused
this Amendment to Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the city of Wilkes-Barre,
Commonwealth of Pennsylvania, on the 8th day of November, 1994.
C-TEC CORPORATION
By *
______________________
David C. McCourt
Chairman and Chief
Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
Amendment to Registration Statement has been signed by the following
persons in the capacity and on the dates indicated.
Signature Title Date
--------- ----- ----
*
------------------- Director, Chairman and
David C. McCourt Chief Executive Officer November 8, 1994
*
------------------- President and
Michael J. Mahoney Chief Operating Officer November 8, 1994
*
------------------- Executive Vice President
Bruce Godfrey and Chief Financial Officer November 8, 1994
*
------------------- Director November 8, 1994
James Q. Crowe
*
------------------- Director November 8, 1994
Walter E. Scott, Jr.
*
------------------- Director November 8, 1994
Richard R. Jaros
*
------------------- Director November 8, 1994
Robert E. Julian
*
------------------- Director November 8, 1994
Thomas C. Stortz
*
------------------- Director November 8, 1994
David C. Mitchell
*
------------------- Director November 8, 1994
Frank M. Henry
*
------------------- Director November 8, 1994
Donald G. Reinhard
*
------------------- Director November 8, 1994
Eugene Roth, Esquire
*
------------------- Director November 8, 1994
Stuart E. Graham
*By /s/ Raymond B. Ostroski
------------------------
Raymond B. Ostroski
Attorney-In-Fact
EXHIBIT INDEX
Exhibit
Number Description of Document
- ------- -----------------------
5 Opinion of Raymond B. Ostroski*
23(a) Consent of Coopers & Lybrand
23(b) Consent of Adams & Associates
23(c) Consent of Raymond B. Ostroski (included in Exhibit 5)*
24(a) Power of attorney (included in the signature page to the
Registration Statement except in the case of the power of
attorney for Eugene Roth).**
24(b) Power of attorney for Eugene Roth.**
99(a) Form of Subscription Certificate.**
99(b) Form of Instructions for Subscription Certificates.**
99(c) Form of Notice of Guaranteed Delivery.**
99(d) Form of Subscription Agency Agreement.*
99(e) Form of Soliciting Dealer Agreement.*
- --------------
*To be supplied by amendment.
**Previously filed.
Exhibit 23(a)
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in this Amendment No. 4 to the
registration statement of C-TEC Corporation on Form S-3 (File No. 33-54433)
of our report, which includes an explanatory paragraph referring to the
Company's change in methods of accounting for income taxes and
postretirement benefits other than pensions, dated March 4, 1994, on our
audits of the consolidated financial statements and financial statement
schedules of C-TEC Corporation as of December 31, 1993 and 1992, and for
the years ended December 31, 1993, 1992 and 1991, which report is included
in C-TEC Corporation's Annual Report on Form 10-K for the fiscal year ended
December 31, 1993. We also consent to the reference to our firm under the
caption "Experts".
/s/ COOPERS & LYBRAND L.L.P.
Philadelphia, PA
November 8, 1994
Exhibit 23(b)
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in this Amendment No. 4 to the
registration statement of C-TEC Corporation on Form S-3 (File No. 33-54433)
of our report dated September 30, 1994, on our audits or the financial
statements of Twin County Trans Video, Inc. as of October 31, 1993 and
1992, and for the years ended October 31, 1993 and 1992, which report is
included in C-TEC Corporation's Current Report on Form 8-K dated October
27, 1994. We also consent to the reference to our firm under the caption
"Experts".
Adams & Associates, P.C.
/s/ Edward W. Adams, CPA
- -------------------------
Edward W. Adams, CPA
Managing Director
November 8, 1994
