UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
[X]
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended November 30, 1994
OR
[ ]
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
for the transition period from to
Commission file number 1-9676
Century Communications Corp.
(Exact name of registrant as specified in its charter)
New Jersey 06-1158179
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
50 Locust Avenue
New Canaan, CT 06840
(Address of principal executive offices, including zip code)
(203) 972-2000
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
YES [X] NO [ ]
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practical date.
Class A Common - 25,196,668 outstanding shares as of January 9, 1995
Class B Common - 65,406,115 outstanding shares as of January 9, 1995
<TABLE>
PART 1 - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CENTURY COMMUNICATIONS CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Amounts in thousands)
<CAPTION>
November 30, May 31,
1994 1994
<S> <C> <C>
ASSETS
Current assets:
Cash and short-term investments $ 140,140 $ 67,779
Accounts receivable, less allowance for doubtful
accounts of $2,104 and $1,952, respectively 29,498 18,219
Prepaid expenses and other current assets 8,923 4,058
Total current assets 178,561 90,056
Property, plant and equipment - net 456,877 419,612
Investment in marketable equity securities 48,463 26,905
Equity investments in cable television and cellular
telephone systems - net 204,283 176,908
Debt issuance costs, less accumulated amortization
of $5,940 and $4,370, respectively 23,027 20,270
Cable television franchises, less accumulated
amortization of $219,363 and $204,391 respectively 187,775 168,133
Cellular telephone licenses, less accumulated
amortization of $123,553 and $104,000, respectively 320,551 220,366
Excess of purchase price over value of net
assets acquired, less accumulated amortization
of $42,041 and $38,854, respectively 244,264 210,383
Other assets 24,822 17,793
$ 1,688,623 $ 1,350,426
See notes to consolidated financial statements
</TABLE>
<TABLE>
CENTURY COMMUNICATIONS CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(CONTINUED)
(Amounts in thousands, except share data)
<CAPTION>
November 30, May 31,
1994 1994
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
Current liabilities:
Current maturities of long-term debt $ 1,643 $ 2,866
Accounts payable 21,740 19,262
Accrued interest payable 18,964 18,431
Other accrued expenses 36,203 31,989
Customers' deposits and prepayments 12,559 10,706
Total current liabilities 91,109 83,254
Long-term debt 1,410,877 1,270,989
Deferred income taxes 95,250 65,410
Minority interest in subsidiaries 140,929 16,829
Preferred stock, par value $.01 per share
authorized 100,000,000 shares, none issued - -
Subsidiary convertible redeemable preferred stock (at
aggregate liquidation value), par value $.01 per share,
authorized, issued and outstanding 102,187 shares 163,499 157,572
(redemption value of $1,823.00 per share)
Common stockholders' deficiency:
Common stock, par value $.01 per share:
Class A, authorized 400,000,000 shares,
issued and outstanding 35,499,471 and
34,687,013 shares, respectively 355 347
Class B, authorized 300,000,000 shares, issued
and outstanding 65,406,115 and 66,177,130
shares, respectively 654 662
Additional paid-in capital 145,904 105,301
Unrealized appreciation of marketable securities 21,558 -
Accumulated deficit (354,000) (322,426)
(185,529) (216,116)
Less: Cost of 11,324,266 Class A common shares
in treasury (27,512) (27,512)
Total common stockholders' deficiency (213,041) (243,628)
$ 1,688,623 $ 1,350,426
See notes to consolidated financial statements
</TABLE>
<TABLE>
CENTURY COMMUNICATIONS CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts in thousands, except share data)
<CAPTION>
Three Months Ended Six Months Ended
November 30, November 30, November 30, November 30
1994 1993 1994 1993
<S> <C> <C> <C> <C>
Revenues:
Cable service income $ 82,816 $ 81,001 $ 162,695 $ 159,406
Cellular service income 21,455 13,457 38,997 26,143
104,271 94,458 201,692 185,549
Costs and expenses:
Cost of services - Cable 20,355 18,289 40,030 35,601
Cost of services - Cellular 5,844 3,493 10,494 6,498
Selling, general and administrative 27,179 20,417 50,873 39,106
Depreciation and amortization 41,454 37,235 80,550 72,815
94,832 79,434 181,947 154,020
Operating income 9,439 15,024 19,745 31,529
Interest 33,346 30,386 65,667 59,925
Loss before income tax (benefit) and
minority interest (23,907) (15,362) (45,922) (28,396)
Income tax (benefit) (1,043) (1,592) (2,728) (1,578)
Loss before minority interest (22,864) (13,770) (43,194) (26,818)
Minority interest in loss of
subsidiaries 6,247 4,249 11,620 8,745
Net loss $ (16,617) $ (9,521) $ (31,574) $ (18,073)
Dividend requirement on subsidiary convertible
redeemable preferred stock $ 1,047 $ 1,529 $ 2,324 $ 2,947
Loss applicable to common shares $ (17,664) $ (11,050) $ (33,898) $ (21,020)
Loss per common share $ (.20) $ (.12) $ (.38) $ (.24)
Weighted average number of common shares
outstanding during the period 89,564,000 89,341,000 89,555,000 89,232,000
See notes to consolidated financial statements
</TABLE>
<TABLE>
CENTURY COMMUNICATIONS CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMMON STOCKHOLDERS' DEFICIENCY
(Amounts in thousands, except share data)
<CAPTION>
Common Stock Additional
Class A Class B Paid-In Unrealized (AccumulateTreasury
Shares Dollars Shares Dollars Capital AppreciationDeficit) Stock Total
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at June 1, 1993 31,533,586 $ 315 61,313,680 $ 613 $ 91,833 $ - $ (280,499)$ (27,500) $ (215,238)
Shares issued in connection
with employee
incentive plans 438,922 5 2,684 (12) 2,677
Effect of 3% and 5% 2,582,230 26 4,995,725 50 (82) (6)
stock distributions
Class B shares converted
to Class A shares 132,275 1 (132,275) (1) -
Net Paid in Capital
contributed by minority
interests 16,291 16,291
Accretion in liquidation
value of subsidiary (5,838) (5,838)
preferred stock
Vesting of subsidary
stock options 413 413
Net loss (41,927) (41,927)
Balance at May 31, 1994 34,687,013 347 66,177,130 662 105,301 - (322,426) (27,512) (243,628)
Shares issued in
connection with employee
incentive plans 41,443 154 154
Class B shares converted to
Class A shares 771,015 8 (771,015) (8) -
Accretion in liquidation
value of subsidiary
preferred stock (2,324) (2,324)
Net paid in capital
contributed by minority
interests 42,773 42,773
Unrealized appreciation of
marketable securities 21,558 21,558
Net loss (31,574) (31,574)
Balance at November 30, 199 35,499,471 $ 355 65,406,115 $ 654 $ 145,904 $ 21,558 $ (354,000)$ (27,512) $ (213,041)
See notes to consolidated financial statements
</TABLE>
<TABLE>
CENTURY COMMUNICATIONS CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands)
<CAPTION>
Six Months Ended
November 30, November 30,
1994 1993
<S> <C> <C>
OPERATING ACTVITIES:
Cash received from subscribers and others $ 229,940 $ 210,215
Cash paid to suppliers, employees
and governmental agencies (140,833) (106,868)
Interest paid (55,642) (53,734)
NET CASH PROVIDED BY OPERATING ACTIVITIES 33,465 49,613
INVESTING ACTIVITIES:
Capital expenditures (46,312) (27,059)
Cable television franchise expenditures (358) (188)
Acquisition of other assets (9,215) (732)
Acquisition of cable television and cellular
telephone and radio paging systems (82,298) 6,202
Capital contributed to equity investments (357) (125)
Capital returned from equity investments 2,641 1,300
NET CASH USED IN INVESTING ACTIVITIES (135,899) (20,602)
FINANCING ACTIVITIES:
Proceeds from long-term borrowings 184,672 281,850
Principal payments on long-term debt (55,195) (244,501)
Debt issuance costs (4,326) (4,479)
Issuance of common stock 154 1,332
Subsidiary common stock rights offering 49,490 -
NET CASH PROVIDED BY
FINANCING ACTIVITIES 174,795 34,202
NET INCREASE IN CASH AND SHORT-TERM
INVESTMENTS 72,361 63,213
CASH AND SHORT-TERM INVESTMENTS - BEGINNING
OF PERIOD 67,779 66,343
CASH AND SHORT-TERM INVESTMENTS - END $ 140,140 $ 129,556
OF PERIOD
See notes to consolidated financial statements
</TABLE>
<TABLE>
CENTURY COMMUNICATIONS CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(CONTINUED)
(Amounts in thousands)
<CAPTION>
Six Months Ended
November 30, November 30,
1994 1993
<S> <C> <C>
RECONCILIATION OF NET LOSS TO NET CASH
PROVIDED BY OPERATING ACTIVITIES:
Net loss $ (31,574) $ (18,073)
Adjustments to reconcile net loss to net
cash provided by operating activities:
Depreciation and amortization 80,550 72,815
Minority interest in loss of subsidiaries (11,620) (8,745)
Deferred income taxes - decrease (4,543) (1,950)
Interest charged on zero coupon bonds 9,188 8,412
Other 800 396
Change in assets and liabilities, net
of effects of acquired cable television and
cellular telephone systems
Accounts receivable - (increase) (9,141) (5,099)
Prepaid expenses and other current assets -
(increase) (4,318) (2,338)
Accounts payable and accrued expenses -
increase 2,377 4,005
Customer deposits and prepayments -
increase 1,746 190
Total adjustments 65,039 67,686
Net cash provided by operating activities $ 33,465 $ 49,613
See notes to consolidated financial statements
</TABLE>
CENTURY COMMUNICATIONS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. INTERIM FINANCIAL STATEMENTS
In the opinion of management, the accompanying interim unaudited
consolidated financial statements contain all adjustments (consisting of
normal recurring accruals) necessary to present fairly the consolidated
financial position of Century Communications Corp. and subsidiaries (the
"Company") as of November 30, 1994 and the results of its consolidated
operations and cash flows for the six months ended November 30, 1994 and
November 30, 1993. It is suggested that the statements be read in
conjunction with the consolidated financial statements and notes thereto
included in the Company's May 31, 1994 Annual Report on Form 10-K.
NOTE 2. INVESTMENT IN MARKETABLE EQUITY SECURITIES
The Company adopted the provisions of SFAS No. 115, "Accounting for
Certain Investments in Debt and Equity Securities" effective June 1,
1994. Under SFAS 115, the Company must classify its debt and marketable
equity securities in one of three categories: trading, available-for-
sale, or held-to-maturity. The Company has classified equity securities
as "Available-for-Sale".
Unrealized holding gains and losses, net of the related income tax effect
on the available-for-sale securities are excluded from earnings and are
reported as a separate component of stockholders' deficiency until
realized. The Company recorded an unrealized gain of $21,558,000 during
the six months ended November 30, 1994.
A decline in the market of any available-for-sale or held-to-maturity
security below cost that is deemed other than temporary is charged to
earnings resulting in the establishment of a new cost basis for the
security. The Company recorded such a writedown during the fiscal year
ended May 31, 1991. Equity Securities at May 31, 1994 are stated at
cost, net of the writedown of approximately $21,702,000.
NOTE 3. REVENUE RECOGNITION
Cable service income includes earned subscriber service revenues and
charges for installation and connections, net of programmers' share of
pay television revenues. Such programmers' shares netted against service
income amounted to $31,142,000 and $27,524,000 for the six months ended
November 30, 1994 and 1993, respectively.
Cellular telephone service income includes service revenues and charges
for installation and connections, net of land line charges of $7,079,000
and $4,284,000 for the six months ended November 30, 1994 and November
30, 1993, respectively.
NOTE 4. REGISTRATION STATEMENTS
On October 26, 1993, the Company filed a registration statement with the
Securities and Exchange Commission ("SEC") relating to the shelf
registration of $500,000,000 of the Company's debt securities, augmenting
the remaining $2,000,000 under a prior shelf registration. The debt
securities may be issued from time to time in series on terms to be
specified in one or more prospectus supplements at the time of the
offering. If so specified with respect to any particular series, the
debt securities may be convertible into shares of the Company's Class A
Common Stock. The registration statement became effective July 14, 1994.
The Company's 33.9% owned subsidiary, Centennial Cellular Corp.
("Centennial"), has filed a shelf registration statement with the
Securities and Exchange Commission for the issuance of up to 8,000,000
shares of Centennial's Class A Common Stock (such shares to be used
principally for acquisitions of cellular telephone and related
telecommunications business). At December 31, 1994, there were 5,363,896
shares available for issuance under this registration statement.
NOTE 5. SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING
ACTIVITIES
During the six months ended November 30, 1993, the Company changed its
estimate of deferred tax liability and associated goodwill related to two
acquisitions. Accordingly, the Company has decreased goodwill and
deferred income taxes by approximately $8,594,000 to reflect this change
in estimate.
During the six months ended November 30, 1994, the Company recorded
approximately $34,384,000 of goodwill and deferred taxes, resulting from
the difference between the book and tax basis of assets acquired.
NOTE 6. ACQUISITIONS
In February 1994, the Company through a wholly owned subsidiary
("Australian Holding Company") invested approximately $58,000,000 in a
Company (the "Licensee") which presently owns a 91.5% interest in one of
two licenses issued by the Australian Broadcasting Authority authorizing
the satellite delivery of television programming on a paid subscription
basis ("Satellite Pay TV"). For its investment, the Company is to be
issued approximately 15% of the voting stock, the remainder represented
by all of the non-voting debentures and debt securities of the Licensee.
In addition, subsequent to year-end, the Company acquired for
approximately $15,000,000, through the Australian Holding Company, the
additional 8 1/2% interest in the license. With respect to the operation
of the Satellite Pay TV business, the Australian Holding Company has an
agreement in principle to cooperate with the other Satellite Pay TV
license holder ("Second License Holder") in the areas of marketing,
distribution facilities (including joint use of facilities for
transmitting programming), subscriber management, and other areas of
operation as contemplated by the Australian Broadcast Service Act. In
addition, the Licensee has agreed to jointly use facilities for the
distribution of programming in Australia through the use of MMDS licenses
owned by the Second License Holder ("MMDS Venture"). The Licensee's
initial interest in the MMDS Venture accrued by reason of said joint use
facilities is approximately 25%, which may be increased by virtue of
additional capital contributions. The Company has also acquired,
subsequent to May 31, 1994, an approximate 2% economic interest in the
Second License Holder for approximately $10,000,000.
In July of 1994, the Company entered into an agreement to acquire a 50%
economic interest in an Australian company which is a franchisee (the
"Franchisee") of the Second License Holder. The franchise provides for
the exclusive distribution rights of certain programming as well as the
use of subscriber billing systems and distribution facilities. Pursuant
to such agreement, the Company agreed to invest up to $55,000,000 for the
acquisition by the Franchisee of MMDS licenses covering the franchised
areas. The licenses were acquired for approximately $12,000,000 through
an auction process conducted by the Australian Government. The Company
has also agreed to fund up to $7,200,000 of working capital needs of the
Franchisee on terms which reflect the market for commercial banking
facilities.
The Company has further agreed, subject to certain conditions precedent,
to merge its Australian Holding Company with the Franchisee. After
completion of such merger, the Company would have an approximate 75% to
77% economic interest in the combined entity. The Company's investments
at November 30, 1994 are currently non-operating and in the development
stage.
On June 29, 1994, Centennial acquired the non-wireline cellular telephone
system serving Jonesboro, Arkansas, representing approximately 201,000
Net Pops. The purchase price for this acquisition was $18,500,000,
subject to adjustment, consisting of approximately $4,500,000 in cash and
700,670 registered shares of Centennial's Class A Common Stock valued at
approximately $14,000,000.
On June 30, 1994, Centennial acquired the non-wireline cellular telephone
system serving Iberville, Louisiana, representing approximately 131,000
Net Pops. The purchase price for this acquisition was $12,100,000,
consisting of approximately $700,000 in cash and 639,055 registered
shares of Centennial's Class A Common Stock valued at approximately
$11,400,000.
On August 23, 1994, Centennial acquired the non-wireline cellular
telephone system serving DeSoto and Caldwell, Louisiana and Claiborne,
Mississippi, representing an aggregate of approximately 381,600 Net Pops.
The purchase price for this acquisition was $45,300,000, subject to
adjustment, consisting of approximately $8,100,000 in cash and 2,345,953
registered shares of Centennial's Class A Common Stock valued at
approximately $37,200,000.
On September 21, 1994, Centennial acquired the non-wireline cellular
telephone system serving Clinton, Iowa, representing approximately
107,800 Net Pops. The purchase price for this acquisition was
$15,500,000 consisting of approximately $5,000,000 in cash and 611,354
registered shares of Class A Common Stock valued at approximately
$10,500,000.
On September 30, 1994, Centennial acquired the non-wireline cellular
telephone system serving Huntington-Marion, Indiana, representing
approximately 145,000 Net Pops. The purchase price for this acquisition
was $18,400,000 consisting of 844,863 registered shares of Class A Common
Stock valued at approximately $14,400,000 and approximately $4,000,000 in
cash.
On October 24, 1994, Centennial acquired the non-wireline cellular
telephone system serving Louisiana RSA #7, representing approximately
170,900 Net Pops. The purchase price for the acquisition was
$17,000,000, consisting of approximately 998,167 registered shares of
Class A Common Stock valued at $17,000,000.
NOTE 7. SUBSIDIARY COMMON STOCK RIGHTS OFFERING
On July 22, 1994, Centennial successfully completed a rights offering
involving the distribution to holders of record of its Class A Common
Stock outstanding on July 7, 1994 ("the Record Date") transferable
subscription rights (the "Rights") to subscribe for and purchase an
aggregate of 3,098,379 additional shares of Class A Common Stock based on
6,887,287 shares of Class A Common Stock outstanding on the Record Date
for a subscription price of $14.00 per share. Record date stockholders
received 0.45 of a Right for each share of Class A Common Stock owned by
them and were entitled to purchase one share of Class A Common Stock for
each full right held. Holders of Rights purchased an aggregate of
2,988,478 of the 3,098,379 shares of Class A Common Stock available for
purchase pursuant to the basic subscription privilege. The balance of
109,901 shares of Class A Common Stock were sold pursuant to the
oversubscription privilege and were distributed pro rata among the
holders of Rights who requested an aggregate of 235,746 additional shares
pursuant to the oversubscription privilege. Lehman Brothers Inc. acted
as dealer manager for the rights offering.
Centennial also distributed to Century Communications and Citizens, the
holder of record of all of the shares of Centennial's Class B Common
Stock outstanding as of the Record Date, nontransferable subscription
rights (the "Class B Rights") to subscribe for and purchase an aggregate
of approximately 3,272,311 additional shares of Class B Common Stock for
a subscription price of $14.00 per share. Century Communications and
Citizens each exercised all of the Class B Rights distributed to them.
Each share of Class B Common Stock is convertible into one share of
Centennial's Class A Common Stock at any time at the option of the
holder. The total net proceeds to Centennial from the rights offering
(after deducting soliciting fees and expenses of approximately
$2,700,000) were approximately $86,500,000. $37,200,000 was contributed
by Century through its purchase of Centennial's Class B shares.
NOTE 8. COMMITMENTS AND CONTINGENCIES
On March 2, 1993, the Company and Citizens Utilities Company entered into
an agreement to acquire the assets of two cable television systems which
serve in the aggregate approximately 45,000 primary basic subscribers.
The aggregate purchase price for the cable television systems is
$89,500,000 subject to adjustment. Citizens Utilities Company and the
Company have agreed that they shall own and operate the cable television
systems in a joint venture structure yet to be determined. It is
anticipated that each Company will have a 50% ownership interest in the
joint venture. On September 30, 1994, the Century/Citizens Joint Venture
completed the acquisition of one of these cable television systems
serving approximately 24,000 primary basic subscribers. The purchase
price of approximately $51,900,000 was funded by the Company and Citizens
equally.
On December 14, 1994, Centennial entered into an agreement to acquire the
non-wireline cellular telephone systems serving Michigan RSA #6 and
Michigan RSA #7 representing an aggregate of approximately 352,600 Net
Pops. The aggregate purchase price for these markets is $42,960,000,
subject to adjustment, payable $25,000,000 in cash and the balance in
898,000 registered shares of Centennial's Class A Common Stock (valued at
$20 per share, subject to post-closing adjustment based on the price
performance of the Class A Common Stock). The obligations of Centennial
and the seller under the agreement are subject to the satisfaction of
various closing conditions, including FCC and other regulatory approvals.
There can be no assurance that the closing conditions will be satisfied.
Centennial anticipates completing this acquisition by June 30, 1995.
On November 28, 1994, the Company entered into an agreement to acquire
the cable television systems serving Anaheim, Hermosa Beach/Manhattan
Beach, Fairfield and Rohnert Park/Yountville, California for an aggregate
purchase price of $286,000,000, subject to adjustment, payable in cash.
At September 30, 1994, such cable television systems served an aggregate
of approximately 135,000 primary basic subscribers. The obligation of
the Company to consummate this transaction is subject to certain closing
conditions, including the approval of the relevant franchise authorities
and other regulatory approvals. The Company anticipates completing this
acquisition by June 30, 1995.
In December of 1993, the Company entered into a letter of intent to
acquire cable television systems located in California, Colorado, Idaho,
Montana and Washington for an aggregate purchase price of $92,875,000,
subject to adjustment, payable by $50,000,000 in cash and the balance in
3,500,000 registered shares of Class A Common Stock of the Company
(valued at $12.25 per share, subject to post-closing adjustment based on
the price performance of the Class A Common Stock). At August 1, 1994,
such cable television systems served an aggregate of approximately 44,000
primary basic subscribers. The obligations of the parties pursuant to
the letter of intent are subject to the execution and delivery of a
definitive purchase agreement which, when executed, will be subject to
certain closing conditions, including the approval of the relevant
franchise authorities and other regulatory approvals. There is no
assurance that such agreement will be executed or when executed, that
such conditions will be satisfied. The Company anticipates executing the
definitive purchase agreement and completing this acquisition by February
28, 1995.
On December 21, 1994, Centennial announced that its Board of Directors
authorized the repurchase, from time to time, of up to `1,000,000 shares
of Centennial's Class A Common Stock, depending on prevailing marketing
conditions.
Centennial is currently participating in the bidding with respect to the
FCC auction of personal communication system (PCS) licenses. Centennial
is bidding for the license to serve the Commonwealth of Puerto Rico and
the U.S. Virgin Islands. The latest bid submitted by Centennial was
approximately $30,845,000. There is no assurance that Centennial will be
successful in obtaining such license through such bidding and Centennial
has no obligations to submit additional bids.
During December 1994, the FCC responded to certain of the letters of
inquiry related to A La Carte Service Offerings. The FCC has through
such responses, effectively determined that A La Carte Service Offerings
limited to six channels or less will be considered New Product Tiers
under the FCC rules (see Regulation). A La Carte Service Offerings in
systems serving approximately 84% of the Company's subscribers qualify as
New Product Tiers. A La Carte Offerings in excess of six channels have
not been given New Product Tier status and it is the intent of the FCC to
treat such offerings as regulated tiers of cable programming service
retroactively to the date of initial regulation. Such treatment,
effecting approximately 16% of the Company's subscribers, would result in
further reductions in the Company's rates for such services as well as
refunds for previously provided services. The Company intends to appeal
this determination to the FCC. The outcome of such an appeal cannot be
determined at this time. An adverse determination would not have a
material adverse effect on the consolidated financial statements of the
Company.
NOTE 9. PRO FORMA INFORMATION
The summary pro forma information includes the accounts and operations of
the Company and all acquisitions and pending acquisitions described in
Notes 6 and 8, in each case as if such acquisitions had been consummated
as of the beginning of each of the respective periods for the combined
statements of operations (amounts in thousands, except per share data and
unaudited).
Six Months Ended
November 30, November 30,
1994 1993
Revenues $248,107 $233,623
Net Loss (46,043) (36,381)
Loss per common share (.49) (.39)
Pro forma loss per common share for the six months ended November 30,
1994 and 1993 is calculated on a fully diluted basis using the pro forma
average number of common shares outstanding during the period, including
common stock equivalents.
NOTE 10. LONG TERM DEBT
On June 30, 1994, CCC-II, Inc. ("CCC-II"), a subsidiary of the Company
that owns the Company's interest in certain cable television systems that
accounted for approximately 45% of the Company's consolidated operating
cash flows in the year ended May 31, 1994, entered into a three year
$350,000,000 unsecured revolving credit facility which converts to a five
year term loan with a syndicate of banks led by Citibank, N.A. as agent
for the syndicate. The proceeds of the facility may be used for
acquisitions, working capital and general corporate purposes. The
interest rates payable on borrowings under the new credit facility are
based on, at the election of CCC-II, (a) the base rate of interest
announced by Citibank, N.A. plus 1/8 to 3/4 per annum based upon certain
conditions, (b) the London Interbank Offering Rate plus 1 1/8 to 1 3/4
per annum based upon certain conditions, or (c) the average consensus bid
rates of certificate of deposit dealers for the purchase at face value of
certificates of deposit of Citibank, N.A. plus 1 1/4 to 1 7/8 per annum
based upon certain conditions. This credit facility restricts the
incurrence of certain additional debt by CCC-II, limits the ability of
CCC-II to pay dividends to the Company and requires that certain
operating tests be met.
<TABLE>
NOTE 11. SEGMENT INFORMATION
Information about the Company's operations in its two business segments
for the six months ended November 30, 1994 and November 30, 1993
is as follows (amounts in thousands):
<CAPTION>
Six Months Ended November 30 1994 1993
<S> <C> <C>
Gross revenues:
Cable television $ 162,785 $ 159,520
Cellular telephone 38,997 26,143
Eliminations (90) (114)
$ 201,692 $ 185,549
Operating income (loss):
Cable television $ 32,916 $ 41,988
Cellular telephone (13,081) (10,345)
Eliminations (90) (114)
$ 19,745 $ 31,529
Net loss:
Cable television $ (25,492) $ (10,998)
Cellular telephone (15,408) (13,035)
Eliminations 9,326 5,960
$ (31,574) $ (18,073)
Assets, at end of period:
Cable television $ 1,109,092 $ 914,144
Cellular telephone 711,340 509,973
Eliminations (131,809) (101,408)
$ 1,688,623 $ 1,322,709
Depreciation and amortization:
Cable television $ 50,525 $ 51,146
Cellular telephone 30,025 21,669
$ 80,550 $ 72,815
Capital expenditures:
Cable television $ 38,546 $ 22,347
Cellular telephone 7,766 4,712
$ 46,312 $ 27,059
The Company's consolidated financial statements include two distinct
business segments. Century Communications owns, operates and
develops cable television systems. Centennial Cellular Corp., a 33.9%
owned subsidiary, owns, operates and invests in cellular telephone
systems and an SMR and paging business. The information provided
below is that of Century Communications before the consolidation of
Centennial Cellular Corp; and Centennial Cellular Corp., which comprises
the Company's cellular telephone business segment, as well as
consolidated information.
</TABLE>
<TABLE>
NOTE 11. SEGMENT INFORMATION (continued)
CENTURY COMMUNICATIONS CORP. AND SUBSIDIARIES
CONSOLIDATING BALANCE SHEET FINANCIAL DATA
November 30, 1994
(Amounts in thousands)
<CAPTION>
Century
Communications
Corp. before
consolidation of Centennial Reclassifications
Centennial Cellular and
Cellular Corp. Corp. Eliminations Consolidated
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and short-term investments $ 76,367 $ 63,773 $ - $ 140,140
Accounts receivable - net 15,688 13,810 - 29,498
Prepaid expenses and other current assets 4,816 4,107 - 8,923
Total current assets 96,871 81,690 - 178,561
Property, plant and equipment - net 401,435 55,442 - 456,877
Investment in marketable equity securities 48,463 - - 48,463
Investment in Centennial Cellular Corp., at cost 138,769 - (138,769) -
Equity investment in cable television and cellular
telephone systems - net 90,722 107,385 6,176 204,283
Debt issuance costs - net 18,790 4,237 - 23,027
Cable television franchises - net 187,775 - - 187,775
Cellular telephone licenses - net - 320,551 - 320,551
Excess of purchase price over value of net
assets acquired - net 107,078 137,186 - 244,264
Other assets 19,189 4,849 784 24,822
$ 1,109,092 $ 711,340 $ (131,809) $ 1,688,623
</TABLE>
<TABLE>
NOTE 11. SEGMENT INFORMATION (continued)
CENTURY COMMUNICATIONS CORP. AND SUBSIDIARIES
CONSOLIDATING BALANCE SHEET FINANCIAL DATA
(CONTINUED)
November 30, 1994
(Amounts in thousands)
<CAPTION>
Century
Communications
Corp. before
consolidation of Centennial Reclassifications
Centennial Cellular and
Cellular Corp. Corp. Eliminations Consolidated
<S> <C> <C> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
(DEFICIENCY)
Current liabilities:
Current maturities of long-term debt $ 1,643 $ - $ - $ 1,643
Accounts payable and accrued expenses 59,107 17,800 - 76,907
Customers' deposits and prepayments 9,225 3,334 - 12,559
Total current liabilities 69,975 21,134 - 91,109
Long-term debt 1,160,877 250,000 - 1,410,877
Deferred liability 5,000 4,080 (9,080) -
Deferred income taxes 22,282 72,968 - 95,250
Minority interest in subsidiaries 29,217 - 111,712 140,929
Convertible redeemable preferred stock - 163,499 - 163,499
Second series convertible redeemable
preferred stock - 6,365 (6,365) -
Common stockholders' equity (deficiency):
Common stock, par value $.01 per share:
Class A 355 148 (148) 355
Class B 654 105 (105) 654
Additional paid-in capital 37,116 382,885 (274,097) 145,904
Unrealized gain on investment in
equity securities 21,558 - - 21,558
Accumulated deficit (210,430) (185,043) 41,473 (354,000)
(150,747) 198,095 (232,877) (185,529)
Less: Cost of Class A common shares
in treasury (27,512) (1,801) 1,801 (27,512)
Note receivable - (3,000) 3,000 -
Total common stockholders' equity
(deficiency) (178,259) 193,294 (228,076) (213,041)
$ 1,109,092 $ 711,340 $ (131,809) $ 1,688,623
</TABLE>
<TABLE>
NOTE 11. SEGMENT INFORMATION (continued)
CENTURY COMMUNICATIONS CORP. AND SUBSIDIARIES
CONSOLIDATING STATEMENT OF OPERATIONS FINANCIAL DATA
SIX MONTH PERIOD ENDED NOVEMBER 30, 1994
(Amounts in thousands)
<CAPTION> Century
Communications
Corp. before
consolidation of Centennial Reclassification
Centennial Cellular and
Cellular Corp. Corp. Eliminations Consolidated
<S> <C> <C> <C> <C>
Revenues: $ 162,785 $ 38,997 $ (90) $ 201,692
Costs and expenses
Costs of services 40,030 10,494 - 50,524
Selling, general and administrative 39,314 11,559 - 50,873
Depreciation and amortization 50,525 30,025 - 80,550
129,869 52,078 - 181,947
Operating income (loss) 32,916 (13,081) (90) 19,745
Income from equity investments - (2,851) (2,851) -
Interest 54,318 11,349 - 65,667
Loss before income tax provision
(benefit) and minority interest (21,402) (21,579) (2,941) (45,922)
Income tax provision (benefit) 3,332 (6,060) - (2,728)
Loss before minority interest (24,734) (15,519) (2,941) (43,194)
Minority interest in (income)
loss of subsidiaries (758) 111 12,267 11,620
Net Loss $ (25,492) $ (15,408) $ 9,326 $ (31,574)
</TABLE>
ITEM 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Results of Operations (Dollar Amounts in Thousands except subscriber and
share data)
Historically, the Company has earned its revenues primarily from
subscriber fees for services provided by its cable television systems and
from the operations of two radio stations. In addition, the Company's
subsidiary, Centennial Cellular Corp. ("Centennial"), provides cellular
telephone service to subscribers of twenty-nine cellular telephone
systems. Centennial also has minority investments in six cellular
telephone systems accounted for by Centennial under the equity method of
accounting. In accordance with Financial Accounting Standards Board
Statement No. 94, the accounts of Centennial are consolidated with those
of the Company for financial reporting purposes for all periods
presented. See Note 10 to the consolidated financial statements.
Due to recent actions by the Federal Communications Commission (the
"FCC"), relating to the reinstitution of rate regulation, as hereinafter
described, the rate structure of the cable television industry, including
the Company's business, will be negatively affected. In view of the
continuing changes and recent published revisions to the FCC rate
regulations, the Company is currently unable to assess the full impact of
the 1992 Cable Act upon its future financial results. The Company
implemented new rate and service offerings whereby subscribers are given
the choice of buying certain programming services individually on a per
channel basis or as part of a package of premium services at a discounted
price ("A La Carte Service Offerings"). Several of the Company's
systems, along with numerous other cable operators, received specific
inquiries from the FCC regarding their implementation of this method of
offering cable services. In its decisions on the inquiry letters, the FCC
admitted that previous guidelines which cable operators, including the
Company relied upon, may have been confusing. During December 1994, the
FCC responded to certain of the letters of inquiry related to A La Carte
Service Offerings. The FCC has, through such responses, effectively
determined that A La Carte Service Offerings limited to six channels or
less will be considered New Product Tiers under the FCC rules (see
Regulation). A La Carte Service Offerings in systems serving
approximately 84% of the Company's subscribers qualify as New Product
Tiers. A La Carte Service Offerings in excess of six channels have not
been given New Product Tier status and it is the intent of the FCC to
treat such offerings as regulated tiers of cable programming service,
retroactively to the date of initial regulation. Such treatment,
effecting approximately 16% of the Company's primary basic subscribers,
would result in further reductions in the Company's rates for such
services as well as refunds for previously provided services. The Company
intends to appeal this determination to the FCC. The outcome of such an
appeal cannot be determined at this time.
During July and August 1994, further adjustments to the Company's rates
were made in certain of the Company's cable television systems pursuant
to the FCC's recent revision to its rate formula. It is expected that
such adjustment, based upon the Basic Subscriber level during fiscal
1994, in the cable systems in which such adjustments were required to be
made, would result in a prospective decrease in revenue from regulated
services by approximately $8,000 for the fiscal year ended May 31, 1995.
Under the regulatory price cap mechanism established by the FCC, a
portion of this decline may be offset in part, by allowable rate
increases during fiscal 1995. Such increases relate to adjustments for
the annual change in the Consumer Price Index as well as certain
increases in programming fees, the addition of new channel service and so
called "external costs" as delineated in the rules.
Six Months Ended November 30, 1994 and November 30, 1993
Revenue for the six months ended November 30, 1994 increased by $16,143
or 8.7%, over the six months ended November 30, 1993. Revenue from cable
television operations increased by $3,289 or 2.1%, over the corresponding
six months ended November 30, 1993 as a result of increases in the number
of cable television subscriptions and an increase in subscriber revenues
for cable television services. The increase was partially offset by a
decline in revenues related to the implementation of rate regulations
established by the FCC pursuant to the 1992 Cable Act. Average primary
basic cable television subscribers ("Basic Subscribers") for the twelve
months ended November 30, 1994, were approximately 955,000 as compared to
approximately 932,000 during the twelve-month period ended November 30,
1993, an increase of 2.1%. Average monthly revenue per Basic Subscriber,
including programmer's share of such revenue, was approximately $33.28
during the twelve months ended November 30, 1994, as compared to
approximately $32.68 during the comparable prior twelve month period, an
increase of 3.0%.
Revenue from cellular telephone operations for the six months ended
November 30, 1994 increased by $12,854 or 49.2%, over the six months
ended November 30, 1993, primarily as a result of growth in subscriptions
to cellular telephone service. In addition, acquisitions of ten cellular
telephone markets accounted for approximately $4,706 or 36.6% of the
increase in cellular telephone revenue.
Costs and expenses excluding depreciation and amortization for the six
months ended November 30, 1994 increased by $20,192 or 24.9% over the six
months ended November 30, 1993. Cost of services for the six months
ended November 30, 1994 increased by $8,425 or 20.0% over the
corresponding period in the prior year, while selling, general and
administrative expenses increased by $11,767 or 30.1%. Cost of services
of the Company's cable television operations increased by $4,429 an
increase of 12.4%, while selling, general and administrative expenses of
the Company's cable television operations for the six months ended
November 30, 1994 increased to $39,314 an increase of $8,529 or 27.7%
over the $30,785 in the six months ended November 30, 1993. The
principal reason for these increases was expenditures associated with the
implementation of the 1992 Cable Act. In addition, the Company expanded
its managerial, customer service and marketing efforts to accommodate the
increased customer service and technical standards imposed by the 1992
Cable Act. The Company expects that during fiscal 1995 it will continue
to incur incremental costs associated with implementation of, and
compliance with, the 1992 Cable Act. Further, the Company expects to
further expand its customer service and marketing functions.
Cost of services related to the cellular telephone operations during the
six months ended November 30, 1994 was $10,494, an increase of $3,996 or
61.5% as compared to the six months ended November 30, 1993. The reason
for the increase was the variable costs associated with a larger revenue
and subscription base as well as increased cellular coverage areas
resulting from the continued expansion of Centennial's network as well as
acquisitions completed during the fiscal year ended May 31, 1994 and the
six months ended November 30, 1994.
Selling, general and administrative expenses related to the cellular
telephone operations rose to $11,559, an increase of $3,238 or 38.9%
above the $8,321 recorded during the six months ended November 30, 1993.
The increase was primarily the result of the Company increasing its
managerial, customer service and sales staff to accommodate the current
and anticipated growth of its cellular telephone business. Secondarily,
the variable costs associated with a larger revenue base and acquisitions
made during fiscal 1994 and the six months ended November 30, 1994
contributed to the increase.
The Company anticipates continued increases in the cost of services and
selling, general and administrative expenses as the growth of its
cellular telephone business continues. In addition, the Company expects
that the start-up and development of its recently acquired cellular
telephone markets will contribute to an increase in these costs and
expenses. However, due to the fixed nature of the cost structure in the
cellular telephone industry, it is anticipated that these costs will
increase at a slower rate than the growth in incremental revenues.
Depreciation and amortization for the six months ended November 30, 1994
increased by $7,735 or 10.6% over the six months ended November 30, 1993.
The cellular telephone operations and acquisitions accounted for $8,356
of this increase, offset by a decline in cable television operations of
$621.
Operating income for the six months ended November 30, 1994 decreased by
$11,784 or 37.4% below the six months ended November 30, 1993. The
cellular operating loss for the six months ended November 30, 1994 of
$13,081 increased by $2,736 or 26.5% over the six months ended November
30, 1993.
Interest expense for the six months ended November 30, 1994 increased by
$5,742 or 9.6% as compared with the six months ended November 30, 1993
reflecting higher average debt levels offset to some extent by lower
interest rates in effect during the six months ended November 30, 1994.
For the six months ended November 30, 1994, the average debt outstanding
was approximately $1,371,000 or $186,000 above the average outstanding
debt balance of $1,185,000 during the six months ended November 30, 1993.
The cellular operations accounted for $56,600 or 30.4% of the increase.
The Company's weighted average interest rate excluding borrowings of
Centennial and the Company's 50% owned joint ventures was approximately
9.8% in the six months ended November 30, 1994 as compared to
approximately 10.6% in the six months ended November 30, 1993. The
decrease in such rates is the result of fixing the interest rate of
substantially all of the related debt through either long-term fixed rate
financings or interest rate hedge transactions, the effects of which are
reflected in the foregoing rates. At November 30, 1994, the Company's
effective weighted average variable interest rate on its bank credit
agreement was approximately 6.2%. During the six months ended November
30, 1994, the Company incurred interest expense of $1,846 in respect of
the interest rate hedge transactions compared to interest expense of
$5,817 in respect of the interest rate hedge transactions in the six
months ended November 30, 1993. See "Liquidity and Capital Resources".
Centennial's weighted average interest rate declined to 9.1% for the six
months ended November 30, 1994 from 10.3% for the six months ended
November 30, 1993.
After losses attributable to minority interests in subsidiaries for the
six months ended November 30, 1994, a pretax loss of $34,302 was
incurred, as compared to a pretax loss of $19,651 for the six months
ended November 30, 1993. The income tax benefit of $2,728 for the six
months ended November 30, 1994 represents an adjustment to the deferred
tax liability of the Company offset by current state and local taxes for
the period. These tax benefits are non-cash in nature and are
attributable to the Company's acquisitions and results of operations,
calculated in accordance with the Financial Accounting Standards Board
Statement No. 109 for the six months ended November 30, 1994 and 1993.
The net loss for the six months ended November 30, 1994 of $31,574
represents an increase of $13,501 or 74.7% over the loss for the six
months ended November 30, 1993. The Company expects net losses to
continue until such time as the operations of the cellular telephone
systems, cable television systems and investments in plant associated
with rebuilds and extensions of its cable television systems and
expansion of the cellular telephone system infrastructure generate
sufficient earnings to offset the associated costs of acquisitions and
operations described above.
Three Months Ended November 30, 1994 and November 30, 1993
Revenue for the three months ended November 30, 1994 increased by $9,813
or 10.4% over the three months ended November 30, 1993. Revenue from
cable television operations increased by $1,815 or 2.2% over the
corresponding prior three month period as a result of increases in the
number of cable television subscriptions and the acquisition of one cable
system.
Revenue from cellular telephone operations for the three month period
ended November 30, 1994 increased by $7,998 or 59.4% over the three
months ended November 30, 1993, primarily as a result of growth in
subscriptions to cellular telephone services and acquisitions.
Costs and expenses excluding depreciation and amortization for the three
month period ended November 30, 1994 increased by $11,179 or 26.5% over
the three months ended November 30, 1993. The cellular telephone
operations accounted for $4,538 or 40.6% of this increase. Costs of
services for the three months ended November 30, 1994 increased by $4,417
or 20.3% over the corresponding period in the prior year, while selling,
general and administrative expenses increased by $6,762 or 33.1% over the
three months ended November 30, 1993. The cellular telephone operations
accounted for $2,351 or 53.2% and $2,187 or 32.3% of these increases,
respectively. The principal reason for these increases in cable
television operations was costs related to the implementation of new
regulations imposed on the Company as a result of the 1992 Cable Act.
Depreciation and amortization expense for the three months ended November
30, 1994 increased by $4,219 or 11.3% over the comparable period in the
prior year. The cellular telephone operations accounted for $5,143 of
this increase.
Operating income for the three months ended November 30, 1994 decreased
by $5,585 or 37.2% over the corresponding three months ended November 30,
1993. The cellular operating loss for the three months ended November
30, 1994 of $6,836 increased by $1,683 or 32.7% above the corresponding
1993 three month period.
Interest expense for the three months ended November 30, 1994 increased
by $2,960 or 9.7% as compared with the three months ended November 30,
1993 reflecting higher debt levels. The Company's weighted average
interest rate excluding borrowings of Centennial and the Company's 50%
owned joint ventures, decreased to 9.6% for the three months ended
November 30, 1994 from 10.5% for the three months ended November 30,
1993. Centennial's weighted average interest rate decreased to 9.1% for
the three months ended November 30, 1994 from 11.6% for the three months
ended November 30, 1993.
After losses attributable to minority interests in subsidiaries for the
three months ended November 30, 1994, a pretax loss of $17,660 was
incurred, as compared to a pretax loss of $11,113 in the three months
ended November 30, 1993. The income tax benefit of $1,043 for the three
months ended November 30, 1994 represents an adjustment to the deferred
tax liability of the Company offset by current state and local taxes for
the period. These tax benefits are non-cash in nature and are
attributable to the Company's acquisitions and results of operations,
calculated in accordance with the Financial Accounting Standards Board
Statement No. 109 for the three months ended November 30, 1994. The tax
benefit of $1,592 for the three months ended November 30, 1993 was
calculated in accordance with Financial Accounting Standards Board
Statement No. 109.
The net loss of $16,617 for the three months ended November 30, 1994
represents an increase of $7,096 or 74.5% over the loss for the
corresponding three month period in the prior fiscal year. The Company
expects net losses to continue until such time as operations of cellular
telephone systems, cable telephone systems and investments in plant
associated with rebuilds and extensions of its cable television systems
and expansion of the cellular telephone system infrastructure generate
sufficient earnings to offset the associated costs of the acquisitions
and operations described above.
Liquidity and Capital Resources (Dollar Amounts in Thousands except Share
Data)
In recent years, the Company has grown through acquisitions as well as
upgrading, extending and rebuilding its existing cable television
systems. In addition, Centennial, since August of 1988, has acquired
twenty-nine cellular telephone markets which it owns and manages, all of
which are considered to be in the start-up or early development phase of
operations, and equity investment interests in certain other cellular
telephone systems. Since both the cable television and cellular
telephone activities are capital intensive, the Company continues to seek
various sources of financing to meet its needs, including growth in
internally generated cash, bank financing, joint ventures and
partnerships and public and private placements of debt and equity
securities of the Company and its subsidiaries. Subsidiaries of the
Company have entered into credit agreements with various bank groups and
private lending institutions providing for an aggregate of approximately
$730,000 of potential borrowing capacity as of November 30, 1994.
On November 15, 1993, Centennial issued $250,000 eight year unsecured
senior notes at an interest rate of
8 7/8% ("Cellular Senior Notes"). Centennial used $182,700 of the net
proceeds to retire in full all principal amounts outstanding under the
bank credit facility then in effect. The remaining amount of
approximately $62,600 (after debt issuance costs) was used for general
corporate purposes, including those described above. The notes contain
limitations on certain "restricted payments" including, but not limited
to dividends and investments in unrestricted subsidiaries and other
persons. Further, the notes contain restrictions on the incurrence of
certain additional debt and limitations on Centennial's ability to secure
additional indebtedness.
The Company's internally-generated cash along with third party financing,
primarily bank borrowings and the issuance of public debentures, has
enabled it to fund its working capital requirements, capital expenditures
for property, plant and equipment, acquisitions, investments and debt
service. In addition, Centennial has funded certain of its obligations
through the sale of equity securities to third parties. The Company has
funded the principal obligations on its long-term borrowings by
refinancing the principal with expanded bank lines of credit, through the
issuance of debt securities in the public market and to private
institutions as well as internally generated cash flow. Although to date
the Company has been able to obtain financing on satisfactory terms,
there can be no assurance that this will continue to be the case in the
future. Certain of the debt instruments to which the Company and its
subsidiaries are a party impose restrictions on the incurrence of
indebtedness.
For the six months ended November 30, 1994, earnings were less than fixed
charges by $36,626. However, such amount reflects non-cash charges
totaling $82,874, consisting of depreciation and amortization of $80,550
and non-cash subsidiary preferred stock dividends of $2,324.
Historically, cash generated from operating activities has exceeded fixed
charges. The Company believes that its cable television operations will
continue to generate sufficient cash to meet the debt service obligations
under the debt instruments applicable to its cable television businesses.
There is no assurance that cash generated from cellular telephone
operations will cover required capital expenditures and the debt service
required under the Cellular Senior Notes. It is currently anticipated
that any shortfall will be made up either through equity issuances or
additional borrowing. In that regard, Centennial, during July of 1994
completed a rights offering to holders of its Class A and Class B common
shares with net proceeds of $86,500.
The Company's future commitments for property, plant and equipment
consist of usual upgrades, extensions, betterments and replacements of
cable plant and equipment and start-up expenditures for the cellular
telephone systems. During the six months ended November 30, 1994 the
Company made capital expenditures of $46,312 as compared to $27,059 for
the corresponding six months ended November 30, 1993. During the six
months ended November 30, 1994, Centennial made capital expenditures of
$7,766 or 16.8% of the Company's total capital expenditures. As the
Company completes capital projects started in prior fiscal years, it is
anticipated that the level of capital expenditures exclusive of those
related to acquisitions described herein will continue at a similar
annualized level as compared to the first six months of the fiscal year.
Various construction projects have been undertaken to expand the
operations of certain cable television systems into adjacent and
previously unbuilt areas and to rebuild and upgrade its existing cable
system plant. The Company is currently considering the further upgrade
of its cable television distribution systems in certain of its cable
television markets to expand its capability for the delivery of video,
voice and data transmission. Should the Company undertake such an
upgrade plan, it would result in an acceleration of capital expenditures
which would otherwise be incurred in future years. The Company has not
yet determined the feasibility, timing or cost of such projects.
Cellular telephone capital projects include the addition of cell sites
for greater coverage areas as well as enhancements to the existing
infrastructure of the cellular system. In addition, Centennial plans to
construct a new cellular telephone network covering certain geographic
areas associated with its recent acquisitions of cellular markets. With
respect to its current and newly acquired markets, Centennial expects
capital expenditures of $15,000 during the current fiscal year ending May
31, 1995. Funds for cable television capital projects and related
equipment are available from internally generated cash and other
financing resources. Funds for Centennial's capital expenditure
requirements may be provided by bank borrowings, debt or equity
issuances, other financing resources or internally generated cash.
The following table sets forth, for the periods indicated, the Company's
net cash provided by operating activities before interest payments ("net
cash provided") and the Company's principal uses of such cash.
Six Months Ended November 30,
1994 1993
Amount % Amount %
Net cash provided by
operating activities $33,465 37.6% $ 49,613 48.0%
Interest paid 55,642 62.4 53,734 52.0
Net cash provided $89,107 100.0% $103,347 100.0%
Principal uses of
net cash provided:
Interest paid $55,642 62.4% $ 53,734 52.0%
Property, plant and equipment
(excluding acquisitions) 46,312 52.0 27,059 26.2
Total $101,954 114.4% $ 80,793 78.2%
Cash (required) provided $(12,847) (14.4)% $ 22,554 21.8%
Net cash provided by operating activities of $89,107 for the six months
ended November 30, 1994 and cash on hand were sufficient to fund the
Company's expenditures for property, plant and equipment and debt
service. In addition, funds provided by financing and investing
activities of $85,208 were available for general corporate purposes. The
Company will continue to rely on internally generated cash as well as
various financing activities to fund these requirements.
The following table sets forth the primary sources and uses of funds from
financing and investing activities for the periods indicated:
Six Months Ended November
30,
1994 1993
Proceeds from long-term borrowings $ 184,672 $ 281,850
Principal payments on long-term debt (55,195) (244,501)
Subsidiary common stock rights offering 49,490 --
Issuance of common stock 154 1,332
Debt issuance and related fees (4,326) (4,479)
Cash provided by financing activities 174,795 34,202
Net capital returned from equity investments 2,284
1,175
Acquisition of and investments in cable
television, cellular telephone systems
and other assets (91,871) 5,282
Cash available for operating activities $ 85,208 $ 40,659
On June 30, 1994, CCC-II, Inc. ("CCC-II"), a subsidiary of the Company
that owns the Company's interest in certain cable television systems that
accounted for approximately 45% of the Company's consolidated operating
cash flows in the year ended May 31, 1994, entered into a three year
$350,000 unsecured revolving credit facility which converts to a five
year term loan with a syndicate of banks led by Citibank, N.A. as agent
for the syndicate. The proceeds of the facility may be used for
acquisitions, working capital and general corporate purposes. The
interest rates payable on borrowings under the new credit facility are
based on, at the election of CCC-II, (a) the base rate of interest
announced by Citibank, N.A. plus 1/8% to 3/4% per annum based upon
certain conditions, (b) the London Interbank Offering Rate plus 1 1/8% to
1 3/4% per annum based upon certain conditions, or (c) the average
consensus bid rates of certificate of deposit dealers for the purchase at
face value of certificates of deposit of Citibank, N.A. plus 1 1/4% to 1
7/8% per annum based upon certain conditions. This credit facility
restricts the incurrence of certain additional debt by CCC-II, limits the
ability of CCC-II to pay dividends to the Company and requires that
certain operating tests be met.
On January 25, 1993, CCC-I, Inc. ("CCC-I"), a subsidiary of the Company
that owns the Company's interest in certain cable television systems that
accounted for approximately 30% of the Company's consolidated operating
cash flows in the year ended May 31,1994, entered into a three year,
$300,000 unsecured revolving credit facility which converts to a five
year term loan with a syndicate of banks led by Citibank, N.A. as agent
for the syndicate. The proceeds of the facility were used by the Company
to repay existing indebtedness and will be used for working capital and
general corporate purposes. The repayment by the Company of its existing
indebtedness discharged all of the Company's obligations under its
then-existing credit agreement and, as a result, such agreement was
terminated. The interest rates payable on borrowings under the new
credit facility are based on, at the election of CCC-I, (a) the base rate
of interest announced by Citibank, N.A. plus 0 to 1/2% per annum based
upon certain conditions, (b) the London Interbank Offering Rate plus 1%
to 1 1/2% per annum based upon certain conditions, or (c) the average of
consensus bid rates of certificate of deposit dealers for the purchase at
face value of certificates of deposit of Citibank, N.A. plus 1 1/8% to 1
5/8% per annum based upon certain conditions. This credit facility
restricts the incurrence of certain additional debt of CCC-I, limits the
ability of CCC-I to pay dividends to the Company and requires that
certain operating tests be met.
In connection with the terms and covenants of certain of the Company's
bank credit facilities, certain of the Company's subsidiaries were
required to enter into various interest rate hedge agreements (the "Hedge
Agreements"). The credit facilities required that at least 50% of
outstanding debt under such facilities be hedged with agreements with an
average life of three years. The Hedge Agreements are designed to limit
the Company's exposure to the variable interest rate structure of the
bank credit facilities. The Hedge Agreements are structured such that
the Company pays a fixed rate of interest based upon a notional amount
and in return receives a variable rate of interest based on either three
(3) month or six (6) month LIBOR. At November 30, 1994, the aggregate
notional amount of the Hedge Agreements was $115,000 with a weighted
average interest rate of 8.12%. Based upon current market conditions and
the current mix of fixed and floating rate debt securities of the Company
and the elimination of any future hedge requirements in its current bank
credit facilities, the Company currently has no plans to renew, extend or
replace the Hedge Agreements upon expiration.
On August 30, 1991, Citizens Cellular Company merged with and into
Centennial, and in connection with the merger, Centennial issued to
Citizens Utilities Company ("Citizens"), Convertible Redeemable Preferred
Stock valued at $128,450 and Class B Common Stock representing 18.8% of
the then common equity of Centennial. In connection with an amendment to
the Services Agreement with the Company, Centennial issued its Second
Series Convertible Redeemable Preferred Stock valued at $5,000 to the
Company. Although the Convertible Redeemable Preferred Stock and the
Second Series Convertible Redeemable Preferred Stock carry no cash
dividend requirement during the first five years, the shares accrete
liquidation preference and redemption value at the rate of 7.5% per
annum, compounded quarterly, in each of years one through five. Assuming
no change in the number of shares of such classes outstanding, the fully
accreted liquidation preference and redemption value of the Convertible
Redeemable Preferred Stock and the Second Series Convertible Redeemable
Preferred Stock, in years six through fifteen, will be $186,287 and
$7,252, respectively. Beginning in year six through year fifteen, the
holders of the Convertible Redeemable Preferred Stock and the Second
Series Convertible Redeemable Preferred Stock will be entitled to receive
cash dividends at the rate of 8.5% per annum. Assuming no change in the
number of shares of such classes outstanding, the annual dividend
payments, commencing in 1997, to be made in respect of the Convertible
Redeemable Preferred Stock and the Second Series Convertible Redeemable
Preferred Stock will be $15,834 and $616, respectively. The Convertible
Redeemable Preferred Stock and the Second Series Convertible Redeemable
Preferred Stock have mandatory redemption provisions at the end of
fifteen years.
Even if Centennial's operating cash flow does increase, it is anticipated
that cash generated from Centennial's cellular telephone operations will
not be sufficient in the next several years to cover interest, the
preferred stock dividend requirements that commence in fiscal 1997 and
required capital expenditures and that any shortfall will be made up
either through debt and equity issuances or additional financing
arrangements that may be entered into by Centennial. Centennial
continues to seek various sources of external financing to meet its
current and future needs, including bank financing, joint ventures and
partnerships, and public and private placements of debt and equity
securities of Centennial. In that regard, Centennial on July 22, 1994,
successfully completed its rights offering involving the distribution to
holders of record of Centennial's Class A Common Stock ("Centennial
Stock") outstanding on July 7, 1994 (the "Record Date") transferable
subscription rights (the "Rights") to subscribe for and purchase an
aggregate of 3,098,379 additional shares of Centennial Stock based on
6,887,287 shares of Centennial Stock outstanding on the Record Date for a
subscription price of $14.00 per share. Record date stockholders
received 0.45 Right for each share of Centennial Stock owned by them and
were entitled to purchase one share of Centennial Stock for each full
Right held. Holders of Rights purchased an aggregate of 2,988,478 of the
3,098,379 shares of Class A Common Stock. The remaining shares were sold
pursuant to the oversubscription privilege and were distributed pro rata
among the holders of Rights who requested an aggregate of 235,746
additional shares pursuant to the oversubscription privilege.
Centennial also distributed to the Company and Citizens, the holders of
record of all of the shares of Centennial Class B Common Stock
outstanding as of the Record Date, nontransferable subscription rights
(the "Class B Rights") to subscribe for and purchase an aggregate of
approximately 3,272,311 additional shares of Centennial Class B Common
Stock. The Company and Citizens each exercised all of the Class B Rights
distributed to them. The Company's obligation with respect to the
exercise was $37,200. Such amount was paid by the Company on July 22,
1994. The net proceeds of approximately $86,500 from the rights offering
(after deducting soliciting fees and expenses of approximately $2.7
million) are available to be used by Centennial for general corporate
purposes including the financing of working capital, capital expenditures
and acquisitions.
On October 26, 1993, the Company filed a registration statement with the
Securities and Exchange Commission relating to the shelf registration of
$500,000 of the Company's debt securities, augmenting the remaining
$2,000 under a prior shelf registration. The registration statement
became effective July 14, 1994. The debt securities may be issued from
time to time in series on terms to be specified in one or more prospectus
supplements at the time of the offering. If so specified with respect to
any particular series, the debt securities may be convertible into shares
of the Company's Class A Common Stock.
During fiscal 1994, Centennial filed a shelf registration statement with
the Securities and Exchange Commission for up to 8,000,000 shares of its
Class A Common Stock that may be offered from time to time in connection
with acquisitions. At December 31, 1994, there were 5,363,896 shares
available for issuance under this registration statement.
Acquisitions
On September 30, 1993, Centennial acquired a 92.79% ownership interest in
the non-wireline cellular telephone system serving the Alexandria,
Louisiana market, representing approximately 138,300 Net Pops, and a
12.37% ownership interest in the non-wireline cellular telephone system
serving the Lake Charles, Louisiana market, representing approximately
20,800 Net Pops, together with $6,556 in exchange for its 85.22% interest
in the non-wireline cellular telephone system serving the Lincoln,
Nebraska market, representing approximately 182,100 Net Pops.
On January 25, 1994, Centennial acquired the non-wireline cellular
telephone system serving Richmond, Indiana, representing approximately
218,000 Net Pops. The purchase price for this acquisition was $25,021
consisting of (a) the purchase price of $20,221, (consisting of the
assumption of $8,350 of liabilities of the seller and the issuance of
553,428 shares of Class A Common Stock with an aggregate value of $11,871
and (b) the issuance of 223,800 shares of Class A Common Stock with an
aggregate value of $4,801 relating to a loan payable to the seller from
one of its shareholders.
On April 15, 1994, Centennial acquired the non-wireline cellular
telephone system serving Beauregard, Louisiana, representing
approximately 372,500 Net Pops. The purchase price for the acquisition
was $35,094 as adjusted, of which $35,051 was paid in cash and $43 was
paid in shares of Centennial's Class A Common Stock ("Centennial Stock")
(valued based on the average closing price of the shares of Centennial
Stock on the NASDAQ National Market System for the five consecutive
trading days immediately preceding the third business day prior to the
closing date).
On April 26, 1994, Centennial purchased the interest of its partner in
the joint venture which owns and operates the cellular system serving the
Lynchburg, Virginia market representing approximately 77,300 Net Pops for
a cash purchase price of approximately $9,256.
On May 6, 1994, Centennial acquired the non-wireline cellular telephone
system serving Bastrop, Louisiana, representing approximately 116,300 Net
Pops. The purchase price for this acquisition was $11,546, consisting of
$6,046 in cash and 266,021 registered shares of Centennial Stock valued
at $5,500.
On May 10, 1994, Centennial acquired the non-wireline cellular telephone
systems serving Wilkesboro, North Carolina, representing approximately
152,900 Net Pops. The purchase price for this acquisition was $15,745,
subject to adjustment, consisting of $5,025 in cash and 534,663
registered shares of Centennial Stock valued at $10,720.
On June 29, 1994, Centennial acquired the non-wireline cellular telephone
system serving Jonesboro, Arkansas, representing approximately 201,000
Net Pops. The purchase price for this acquisition was $18,500 subject to
adjustment, consisting of approximately $4,500 in cash and 700,670
registered shares of Centennial Common Stock valued at approximately
$14,000.
On June 30, 1994, Centennial acquired the non-wireline cellular telephone
system serving Iberville, Louisiana, representing approximately 131,000
Net Pops. The purchase price for this acquisition was $12,100 consisting
of approximately $700 in cash and 639,055 registered shares of Centennial
Common Stock valued at approximately $11,400.
On August 23, 1994, Centennial acquired the cellular telephone systems
serving Louisiana RSA #3, Louisiana RSA #4 and Mississippi RSA #8,
representing an aggregate of approximately 381,600 Net Pops. The
purchase price for the acquisition was $45,300, subject to adjustment,
consisting of approximately $8,100 in cash and 2,345,953 registered
shares of Centennial's Class A Common Stock valued at $37,200.
On March 2, 1993, the Company and Citizens ("the Century/Citizens Joint
Venture") entered into an agreement to acquire the assets of two cable
television systems which serve in the aggregate approximately 45,000
primary basic subscribers. The aggregate purchase price for the cable
television systems is $89,500 subject to adjustment. Citizens and the
Company have agreed that they shall own and operate the cable television
systems in a joint venture structure yet to be determined. It is
anticipated that each Company will have a 50% ownership interest in the
joint venture. The obligations of the Venture and the seller under the
agreement are subject to the satisfaction of various closing conditions.
On September 30, 1994, the Century/Citizens Joint Venture completed the
acquisition of one of these cable television systems serving
approximately 24,000 primary basic subscribers. The purchase price of
approximately $51,900 was funded by the Company and Citizens equally.
On September 21, 1994, Centennial acquired the non-wireline cellular
telephone system serving Jackson, Iowa, representing approximately
107,800 Net Pops. The purchase price for this acquisition was $15,500
consisting of approximately $5,000 in cash and 611,354 shares of Class A
Common Stock valued at approximately $10,500.
On September 30, 1994, Centennial acquired the non-wireline cellular
telephone license serving the Huntington-Marion, Indiana market
representing approximately 145,000 Net Pops. The purchase price for this
acquisition was approximately $18,400 consisting of approximately $4,000
in cash and 844,863 registered shares of Class A Common Stock valued at
approximately $14,400.
On October 24, 1994, Centennial acquired the non-wireline cellular
telephone system serving Louisiana RSA #7, representing approximately
170,900 Net Pops. The purchase price for the acquisition was $17,000,
consisting of approximately 998,167 registered shares of Class A Common
Stock valued at $17,000.
Centennial also plans to exercise its right to acquire the minority
interest held by the Company in the Cass and Jackson, Michigan systems
from the Company for the prices paid by the Company for such minority
interests in the acquisitions of such systems ($2,000 and $1,000,
respectively). Upon completion of these transactions, Centennial will
own 100% of these systems.
On December 14, 1994, Centennial entered into an agreement to acquire the
non-wireline cellular telephone systems serving Michigan RSA #6 and RSA
#7 representing an aggregate of approximately 352,600 Net Pops. The
aggregate purchase price for these markets is $42,960, subject to
adjustment, payable $25,000, in cash and the balance in 898,000
registered shares of Centennial's Class A Common Stock (valued at $20 per
share, subject to post-closing adjustment based on the price performance
of the Class A Common Stock). The obligations of Centennial and the
seller under the agreement are subject to the satisfaction of various
closing conditions, including FCC and other regulatory approvals. There
can be no assurance that the closing conditions will be satisfied.
Centennial anticipates completing this acquisition by June 30, 1995.
On December 21, 1994, Centennial announced that its Board of Directors
authorized the repurchase, from time to time, of up to 1,000,000 shares
of Centennial's Class A Common Stock, depending on prevailing market
conditions.
Centennial is currently participating in the bidding with respect to the
FCC auction of personal communication system (PCS) licenses. Centennial
is bidding for the license to serve the Commonwealth of Puerto Rico and
the latest bid submitted by Centennial was approximately $30,845. There
is no assurance that Centennial will be successful in obtaining such
license through such bidding and Centennial has no obligations to submit
additional bids.
On November 28, 1994, the Company entered into an agreement to acquire
the cable television systems serving Anaheim, Hermosa Beach/Manhattan
Beach, Fairfield and Rohnert Park/Yountville, California for an aggregate
purchase price of $286,000, subject to adjustment, payable in cash. At
September 30, 1994, such cable television systems served an aggregate of
approximately 135,000 primary basic subscribers. The obligation of the
Company to consummate this transaction is subject to certain closing
conditions, including the approval of the relevant franchise authorities
and other regulatory approvals. The Company anticipates completing this
acquisition by June 30, 1995.
In December of 1993, the Company entered into a letter of intent to
acquire cable television systems located in California, Colorado, Idaho,
Montana and Washington for an aggregate purchase price of $92,875,
subject to adjustment, payable by $50,000 in cash and the balance in
3,500,000 registered shares of Class A Common Stock of the Company
(valued at $12.25 per share, subject to post-closing adjustment based on
the price performance of the Class A Common Stock). At August 1, 1994,
such cable television systems served an aggregate of approximately 44,000
primary basic subscribers. The obligations of the parties pursuant to
the letter of intent are subject to the execution and delivery of a
definitive purchase agreement which, when executed, will be subject to
certain closing conditions, including the approval of the relevant
franchise authorities and other regulatory approvals. There is no
assurance that such agreement will be executed or when executed, that
such conditions will be satisfied The Company anticipates executing the
definitive purchase agreement and completing this acquisition by February
28, 1995.
Investments
In February 1994, the Company through a wholly owned subsidiary
("Australian Holding Company") invested approximately $58,000 in a
Company (the "Licensee") which presently owns a 91.5% interest in one of
two licenses issued by the Australian Broadcasting Authority authorizing
the satellite delivery of television programming on a paid subscription
basis ("Satellite Pay TV"). For its investment, the Company is to be
issued approximately 15% of the voting stock, the remainder represented
by all of the non-voting debentures and debt securities of the Licensee.
In addition, subsequent to year-end, the Company acquired for
approximately $15,000, through the Australian Holding Company, the
additional 8 1/2% interest in the license. With respect to the operation
of the Satellite Pay TV business, the Australian Holding Company has an
agreement in principle to cooperate with the other Satellite Pay TV
license holder ("Second License Holder") in the areas of marketing,
distribution facilities (including joint use of facilities for
transmitting programming), subscriber management, and other areas of
operation as contemplated by the Australian Broadcast Service Act. In
addition, the Licensee has agreed to jointly use facilities for the
distribution of programming in Australia through the use of MMDS licenses
owned by the Second License Holder ("MMDS Venture"). The Licensee's
initial interest in the MMDS Venture accrued by reason of said joint use
facilities is approximately 25%, which may be maintained or increased by
virtue of additional capital contributions. The Company has also
acquired, an approximate 2% economic interest in the Second License
Holder for approximately $10,000.
In July of 1994, the Company entered into an agreement to acquire a 50%
economic interest in an Australian company which is a franchisee (the
"Franchisee") of the Second License Holder. The franchise provides for
the exclusive distribution rights of certain programming as well as the
use of subscriber billing systems and distribution facilities. Pursuant
to such agreement, the Company agreed to invest up to $55,000 for the
acquisition by the Franchisee of MMDS licenses covering the franchised
areas. The licenses were acquired for approximately $12,000 through an
auction process conducted by the Australian Government. The Company has
also agreed to fund up to $7,200 of working capital needs of the
Franchisee on terms which reflect the market for commercial banking
facilities.
The Company has further agreed, subject to certain conditions precedent,
to merge its Australian Holding Company with the Franchisee. After
completion of such merger, the Company would have an approximate 75% to
77% economic interest in the combined entity. As of November 30, 1994,
the Company has an aggregate investment in the Australian pay television
business of approximately $91,000.
Regulation
On October 5, 1992, Congress enacted the Cable Television Consumer
Protection and Competition Act of 1992 ("Act"). The Act substantially
reregulates the cable television industry and imposes numerous
requirements, including provisions regarding rates which may be regulated
by the applicable local franchising authority and those to be regulated
by the FCC, exclusive programming arrangements, the carriage of broadcast
signals, customer service standards, leased access channels, VCR
compatibility and various other matters. Although this regulation under
the Act will be detrimental to the Company, it is premature to predict
the full impact of the Act on the Company. This will be dependent, among
other factors, on the interpretation to be afforded by the Federal
Communications Commission ("FCC") and the courts to both the Act and
regulations as well as the actions of the Company in response thereto.
Virtually all of the Company's cable systems are subject to rate
regulation. The Act (i) mandates that the FCC establish rate standards
for basic cable service rates and customer equipment which may be
regulated by the applicable local franchising authority, (ii) requires
the FCC, upon complaint from a franchising authority or a subscriber, to
review rates for additional tiers of cable service, (iii) regulates rates
for mandatorily offered commercial leased access channels and (iv)
eliminates the prior automatic 5% annual increase for basic rates. Rates
for channels offered as individual purchase options and pay-per-view
events are excluded from rate regulation.
On April 1, 1993, the FCC announced the adoption of rate regulations
which became effective September 1, 1993. Under those regulations, rates
must be evaluated initially against "competitive benchmarks" and are
generally subject to rollbacks if they exceed the benchmark levels. On
February 22, 1994, the FCC adopted further rate reductions effective May
15, 1994 based on complex formulas and revised benchmarks. Future rate
increases will be subject to price caps, with rate increases limited to
the general rate of inflation and certain increases in system costs.
Notwithstanding the foregoing, the cable operator is afforded the
opportunity to defend rates in excess of these benchmarks based on
utility-type and cost-of-service rate regulation. Utilization of the
remedy by the cable operator assumes the risk of an adjudication of rates
below the "benchmarks", particularly because of uncertainty regarding
various aspects of the cost-of-service standards to be applied. Cable
systems are also required to unbundle all equipment charges and base
those charges on "actual cost" plus permitted mark-up. On November 10,
1994, the FCC adopted two refinements to its rate regulation rules in an
effort to create incentives for the addition of new programming services.
One, starting January 1, 1995, permits cable operators to charge 20 cents
per subscriber, plus the cost of programming, for each new channel added
to a regulated non-basic service tier. The maximum total rate increase
for such channel additions is $1.50 over the next two years, and the
maximum number of channels which can use this pricing method is six (a
seventh channel can be added in year three, bringing the total price
increase to $1.70). Two, under certain conditions, cable operators can
create "New Product Tiers" made up of services not previously carried on
the system, and such tiers will not be rate regulated. Court challenges
to the FCC regulation are pending.
In view of the continuing changes and recently published revisions to the
FCC rate regulations, the Company is currently unable to assess the full
impact of the 1992 Cable Act upon its future financial results. It is
expected that the Company's cable operations will sustain higher
operating costs in administering additional regulatory burdens. Although
the financial impact of the 1992 Cable Act cannot yet be ascertained
precisely, once fully implemented, certain aspects of the new law will
have a negative impact on the Company. Further, in complying with the
benchmark regulatory scheme (without considering the effect of any cost-
of-service showing) for the period September 1, 1993 to May 15, 1994, the
Company, on a franchise basis, was required to reduce regulated service
rates such that the "average monthly subscriber bill" for all cable
service subject to rate regulation (including, but not limited to basic
service, cable programming service not offered on a per channel basis,
secondary outlets, converters and remote control units, installation and
service charges) was reduced by an amount of up to 10% of such charges as
of September 1992. Under the new FCC benchmarks, additional reductions
were required no later than July 14, 1994. The Company is considering
whether to utilize the alternative procedure of justifying rates for at
least some of its systems based on a cost-of-service, rather than
benchmark approach. Where rates are found to exceed the permitted
levels, the Company will be subject to refunds and other penalties. The
extent of the anticipated decline in revenues and any potential refunds
or penalties cannot be determined at this time, but could have a negative
impact on the Company.
The Act establishes a choice for broadcasters between compelling the
carriage of their signals ("must carry" rights) and negotiating a fee for
such carriage ("retransmission consent" rights). As of October 1993,
cable operators were required to secure retransmission consent from
broadcasters who either have not selected "must carry" or who are not
entitled under the Act to make such selection, before transmitting such
broadcasters' signals. This requirement has the potential to increase
the cost of carriage of broadcast stations in the event particular
broadcasters do not elect "must carry" and the Company chooses to
continue carriage of such broadcasters' signals. No retransmission fees
will be payable by the Company to broadcasters who elect "must carry"
although the Company will then be obligated to carry signals of these
"local" broadcast stations. Established "super stations" are exempted
from the "must carry"/"retransmission consent" provision.
The Act directs the FCC to promulgate regulations intended to promote
distribution of cable programming by competing technologies such as DBS,
MMDS, SMATV and other potential programming distributors. The Act
imposes limitations on some volume discounts received by large cable
operators and strictly limits discriminatory programming contract terms
favoring cable operators over other programming distributors. On April
1, 1993, the FCC adopted regulations to implement these program access
provisions of the Act. The full extent of the impact of these provisions
and the implementing regulations on the Company cannot be determined at
this time.
FCC regulations adopted pursuant to the Act contain a number of other
regulatory provisions such as those relating to program carriage
requirements, ownership regulations and customer service/technical
standards, all of which will impose additional burdens and cost on a
cable operator. The full extent of the impact of these provisions and
the implementing regulations on the Company cannot be determined at this
time.
PART II - OTHER INFORMATION
ITEM 1. Legal Proceedings
On January 13, 1988, five residents of Colorado Springs, Colorado brought
a class action lawsuit against Colorado Springs Cablevision, Inc.
("CSCI"), an indirect 50% subsidiary of the Company, and other parties in
the Colorado District Court of El Paso County, Colorado. The complaint
alleged that the defendants violated provisions of the Colorado Springs
Municipal Code prohibiting service discrimination and unreasonable rate
differences, and of the Colorado Unfair Practices Act prohibiting
predatory pricing and the imposition of different rates for the purpose
of destroying competition, by charging lower rates for its services in
one portion of Colorado Springs than it charged in the remainder of the
City. The named plaintiffs requested certification to represent a class
of CSCI subscribers charged the higher rates and sought recovery of three
times the difference between those rates and the lower rates charged
other subscribers with interest and costs from approximately April 1,
1986 to the date of judgment. On August 12, 1988, the District Court for
El Paso County, Colorado granted CSCI's motion and dismissed the
plaintiffs' complaint in its entirety with prejudice. The Court held
that there is no private right of action under the Colorado Springs
Municipal Code and that the plaintiffs lacked standing to pursue their
claims under the Colorado Unfair Practices Act. On May 3, 1990, the
Colorado Court of Appeals affirmed the lower court's ruling dismissing
the complaint in its entirety. The Colorado Supreme Court agreed to
review the decision of the Court of Appeals and subsequently on April 13,
1992 reversed the dismissal of the complaint and remanded the case back
to the Court of Appeals for further proceedings to determine whether the
complaint is subject to dismissal on other grounds.
On November 5, 1992, the Court of Appeals issued a decision denying
dismissal of the complaint and denied rehearing on January 7, 1993. CSCI
sought review of this and related issues in the Colorado Supreme Court by
petition for writ of certiorari, which was denied by order dated July 12,
1993. The Court of Appeals entered its Amended Mandate on July 16, 1993,
by which this case was returned to the El Paso County District Court for
further proceedings. Plaintiffs filed an Amended Complaint seeking to
alter their theories of recovery in certain respects and CSCI responded
to that complaint. In March 1994, plaintiffs filed an amended motion for
class certification. In June 1994, venue of the case was transferred
from the El Paso County District Court to the District Court for the City
and County of Denver. By order dated December 2, 1994, the District
Court denied plaintiffs' amended motion for class certification in its
entirety. The case is thus presently limited to the claims of the four
remaining individual plaintiffs (one of the five original plaintiffs
having been dismissed from the case). Plaintiffs have not yet stated
their intentions with respect to seeking appellate review of the District
Court's denial of class certification.
ITEM 4. Submission of Matters to a Vote of Security Holders
a) Registrant's annual meeting of shareholders was held on October 26,
1994.
b) The following persons were elected as directors at said meeting
pursuant to the following votes:
Number of Votes
Director For Withheld
Larry C. Ballard 678,894,987 200,757
Steven R. Boehlke 678,856,105 200,953
Bernard P. Gallagher 678,894,187 201,557
David Z. Rosensweig 678,894,987 200,757
Andrew Tow 678,891,106 201,557
Claire L. Tow 678,891,119 204,625
Leonard Tow 678,829,707 203,037
Scott N. Schneider 678,894,187 200,557
Robert D. Siff 17,160,198 164,603
Peter J. Solomon 17,161,194 163,068
William M. Kraus 17,160,198 164,064
c) The following matters were also voted upon at said meeting:
1. The shareholders approved a proposal to adopt the Registrant's 1994
Employee Stock Option Plan.
The following sets forth the number of votes on this proposal.
For Against Abstain
673,090,255 2,200,691 59,926
2. The shareholders approved a proposal to adopt the Registrant's 1993
Non-Employee Directors'
Stock Option Plan. The following sets forth the number of votes on
this proposal.
For Against Abstain
674,435,961 797,473 117,438
3. The shareholders approved a proposal to adopt an amendment to the
Registrant's 1985 Employee
Stock Purchase Plan. The following sets forth the number of votes
on this proposal.
For Against Abstain
674,576,594 683,510 90,768
4. The shareholders approved a proposal to ratify the selection by the
Board of Directors of Deloitte
& Touche LLP as independent accountants for the Registrant for the
fiscal year ending May 31, 1995.
The following sets forth the number of votes on this proposal:
For Against Abstain
679,015,461 52,451 27,832
d) Not applicable.
ITEM 5. Other Information
On November 28, 1994, the Registrant entered into an agreement to acquire
the cable television systems serving Anaheim, Hermosa Beach/Manhattan
Beach, Fairfield and Rohnert Park/Yountville, California, for an
aggregate purchase price of $286,000,000, subject to adjustment, payable
in cash. At September 30, 1994, such cable television systems served an
aggregate of approximately 135,000 primary basic subscribers. The
obligation of the Registrant to consummate this transaction is subject to
certain closing conditions, including the approval of the relevant
franchise authorities and other regulatory approvals. The Registrant
anticipates completing this acquisition by June 30, 1995.
In December of 1993, the Registrant entered into a letter of intent to
acquire cable television systems located in California, Colorado, Idaho,
Montana and Washington for an aggregate purchase price of $92,875,000,
subject to adjustment, payable by $50,000,000 in cash and the balance in
3,500,000 registered shares of Class A Common Stock of the Registrant
(valued at $12.25 per share, subject to post-closing adjustment based on
the price performance of the Class A Common Stock). At August 1, 1994,
such cable television systems served an aggregate of approximately 44,000
primary basic subscribers. The obligations of the parties pursuant to
the letter of intent are subject to the execution and delivery of a
definitive purchase agreement which, when executed, will be subject to
certain closing conditions, including the approval of the relevant
franchise authorities and other regulatory approvals. There is no
assurance that such agreement will be executed or, when executed, that
such conditions will be satisfied. The Registrant anticipates executing
the definitive purchase agreement and completing this acquisition by
March 31, 1995.
ITEM 6. Exhibits and Reports on Form 8-K
a) Exhibits
i) Exhibit 11 - Statement re computation of per
share earnings
b) Reports on Form 8-K
One report on Form 8-K was filed by the Registrant with
the Securities and Exchange
Commission on December 1, 1994 relating to the execution
of an asset purchase
agreement on November 28, 1994 by the Registrant and ML
Media Partners, L.P. For
a description of the asset purchase agreement, see "Part
II, Item 5, Other Information".
<TABLE>
CENTURY COMMUNICATIONS CORP. AND SUBSIDIARIES
EXHIBIT TO FORM 10-Q
For the Six Months Ended
November 30, 1994 and November 30, 1993
COMPUTATION OF LOSS PER COMMON SHARE
(Amounts in thousands, except per share data)
<CAPTION>
Six Months Ended
November 30, November 30,
1994 1993
<S> <C> <C>
Primary fully diluted:
Net Loss $ (31,574) $ (18,073)
Accretion in liquidation value of subsidiary
preferred stock (2,324) (2,947)
Loss applicable to common shares $ (33,898) $ (21,020)
Average number of common shares and common
share equivalents outstanding
Average number of common shares
outstanding during the period 89,555,000 89,232,000
Add common share equivalents - Options
to purchase common shares - net 637,000 1,066,000
Average number of common shares and common
share equivalents outstanding 90,192,000 (A) 90,298,000 (A)
Loss per common share $ (.38) (A) $ (.23) (A)
(A) In accordance with Accounting Principles Board Opinion No. 15, the inclusion of
common share equivalents in the computation of earnings per share need not
be considered if the reduction of earnings per share is less than 3% or the effect is
anti-dilutive. Therefore, loss per common share and common share equivalents as
shown on the Consolidated Statements of Operations for the periods presented do
not include the common share equivalents as their effect is anti-dilutive.
</TABLE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CENTURY COMMUNICATIONS CORP.
Date: January 13, 1995
_______________________________
Scott N. Schneider
Senior Vice President and Treasurer
(On behalf of Registrant and as
Principal Accounting Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAY-31-1994
<PERIOD-END> NOV-30-1994
<CASH> 140,140
<SECURITIES> 0
<RECEIVABLES> 31,602
<ALLOWANCES> 2,104
<INVENTORY> 0
<CURRENT-ASSETS> 178,561
<PP&E> 456,877
<DEPRECIATION> 349,603
<TOTAL-ASSETS> 1,688,623
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<BONDS> 0
<COMMON> 1,009
0
163,499
<OTHER-SE> 145,904
<TOTAL-LIABILITY-AND-EQUITY> 1,688,623
<SALES> 201,692
<TOTAL-REVENUES> 201,692
<CGS> 50,524
<TOTAL-COSTS> 181,947
<OTHER-EXPENSES> 0
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<INTEREST-EXPENSE> 65,667
<INCOME-PRETAX> (45,922)
<INCOME-TAX> (2,728)
<INCOME-CONTINUING> (43,194)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
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<NET-INCOME> (33,898)
<EPS-PRIMARY> (.38)
<EPS-DILUTED> 0
</TABLE>
