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 August 31, 1996
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 - 29,014,849 outstanding shares as of September 30, 1996
Class B Common - 45,126,115 outstanding shares as of October 10 , 1996
<TABLE>
PART 1 - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CENTURY COMMUNICATIONS CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Amounts in thousands)
<CAPTION>
August 31, May 31,
1996 1996
<S> <C> <C>
ASSETS
Current assets:
Cash and short-term investments $ 127,926 $ 164,592
Accounts receivable, less allowance for doubtful
accounts of $4,080 and $3,008, respectively 56,274 41,002
Prepaid expenses and other current assets 7,667 6,632
Total current assets 191,867 212,226
Property, plant and equipment - net 660,395 651,607
Investment in marketable equity securities 53,918 53,069
Equity investments in cable television and cellular
telephone systems - net 110,953 108,256
Debt issuance costs, less accumulated amortization
of $13,039 and $11,652, respectively 28,767 28,352
Cable television franchises, less accumulated
amortization of $343,406 and $285,991, respectively 452,906 525,194
Wireless telephone licenses, less accumulated
amortization of $176,410 and $164,786, respectively 349,883 360,213
Excess of purchase price over value of net
assets acquired, less accumulated amortization
of $53,620 and $51,529, respectively 292,377 279,202
Other assets 31,640 16,790
$ 2,172,706 $ 2,234,909
See notes to consolidated financial statements
</TABLE>
<TABLE>
CENTURY COMMUNICATIONS CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(CONTINUED)
(Amounts in thousands, except share data)
<CAPTION>
August 31, May 31,
1996 1996
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
Current liabilities:
Current maturities of long-term debt $ 15,171 $ 15,084
Accounts payable 30,918 26,102
Accrued interest payable 37,576 22,921
Other accrued expenses 69,499 72,757
Customers' deposits and prepayments 20,827 19,370
Total current liabilities 173,991 156,234
Long-term debt 2,066,012 2,081,611
Deferred income taxes 90,894 99,474
Minority interest in subsidiaries 156,902 162,790
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
(redemption value of $1,823.00 per share) 186,287 182,813
Common stockholders' deficiency:
Common stock, par value $.01 per share:
Class A, authorized 400,000,000 shares,
issued and outstanding 60,550,940 and
59,946,280 shares, respectively
(includes treasury shares) 606 599
Class B, authorized 300,000,000 shares, issued
and outstanding 45,126,115 and 45,406,115
shares, respectively 451 454
Additional paid-in capital 177,418 175,804
Other, including 31,536,341 and 31,357,530
treasury shares, respectively (111,475) (117,702)
Accumulated deficit (568,380) (507,168)
Total common stockholders' deficiency (501,380) (448,013)
$ 2,172,706 $ 2,234,909
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
1996 1995
<S> <C> <C>
Revenues:
Cable service income $ 112,685 $ 89,705
Cellular service income 32,365 26,922
Australian operations 7,954 -
153,004 116,627
Costs and expenses:
Cost of services - Cable 24,345 19,971
Cost of services - Cellular 7,469 5,713
Selling, general and administrative 35,894 29,429
Australian expenses 6,960 -
Depreciation and amortization - domestic 56,136 47,725
Depreciation and amortization - Australia 6,514 -
Write-down of Australian assets 40,000 -
177,318 102,838
Operating (loss) income (24,314) 13,789
Gain on sale of assets 48 4,176
Interest expense (48,424) (45,782)
Other income 1,368 215
Loss before income tax (benefit) and
minority interest (71,322) (27,602)
Income tax (benefit) (6,598) (4,806)
Loss before minority interest (64,724) (22,796)
Minority interest in loss of
subsidiaries 3,512 879
Net loss $ (61,212) $ (21,917)
Dividend requirement on subsidiary convertible
redeemable preferred stock $ 1,098 $ 1,035
Loss applicable to common shares $ (62,310) $ (22,952)
Loss per common share $ (.84) $ (.31)
Weighted average number of common shares
outstanding during the period 74,069,000 73,583,000
See notes to consolidated financial statements
</TABLE>
<TABLE>
CENTURY COMMUNICATIONS CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands)
<CAPTION>
Three Months Ended August 31,
1996 1995
<S> <C> <C>
OPERATING ACTIVITIES:
Cash received from subscribers and others $ 171,122 $ 126,871
Cash paid to suppliers, employees
and governmental agencies (101,961) (82,775)
Debt issuance costs (1,802) (5,126)
Interest paid (28,325) (29,666)
NET CASH PROVIDED BY OPERATING ACTIVITIES 39,034 9,304
INVESTING ACTIVITIES:
Capital expenditures (36,611) (22,065)
Cable television franchise expenditures - (117)
Acquisition of other assets (15,381) (1,023)
Acquisition of cable television and
wireless telephone systems (5,095) (46,756)
Capital contributed to equity investments (213) (91)
Capital returned from equity investments 1,385 2,114
NET CASH USED IN INVESTING ACTIVITIES (55,915) (67,938)
FINANCING ACTIVITIES:
Proceeds from long-term borrowings 523,087 235,500
Principal payments on long-term debt (544,000) (237,906)
Issuance of common stock 2,716 300
Purchase of treasury stock (1,588) -
NET CASH USED IN FINANCING ACTIVITIES (19,785) (2,106)
NET DECREASE IN CASH AND SHORT-TERM INVESTMENTS (36,666) (60,740)
CASH AND SHORT-TERM INVESTMENTS - BEGINNING
OF PERIOD 164,592 228,764
CASH AND SHORT-TERM INVESTMENTS - END $ 127,926 $ 168,024
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>
Three Months Ended August 31,
1996 1995
<S> <C> <C>
RECONCILIATION OF NET LOSS TO NET CASH
PROVIDED BY OPERATING ACTIVITIES:
NET LOSS $ (61,212) $ (21,917)
Adjustments to reconcile net loss to net
cash provided by operating activities:
Depreciation and amortization 62,650 47,725
Write-down of Australian assets 40,000 -
Gain on sale of assets - (4,176)
Deferred income taxes - decrease (8,576) (5,250)
Minority interest in loss of subsidiaries (3,512) (879)
Non cash interest charges 5,400 8,596
Debt issuance costs paid (1,802) (5,126)
Other (2,243) (298)
Change in assets and liabilities, net
of effects of acquired, exchanged and disposed
cable television and cellular telephone systems
Accounts receivable - (increase) (15,272) (14,784)
Prepaid expenses and other current assets -
(increase) (1,035) (1,043)
Accounts payable and accrued expenses -
increase 23,179 6,280
Customer deposits and prepayments -
increase 1,457 176
Total adjustments 100,246 31,221
Net cash provided by operating activities $ 39,034 $ 9,304
See notes to consolidated financial statements
</TABLE>
CENTURY COMMUNICATIONS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except subscriber, pop and share data)
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 August 31, 1996 and the results of its consolidated
operations and cash flows for the three months ended August 31, 1996 and
1995. 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, 1996 Annual Report on Form 10-K. Certain
reclassifications have been made to prior period balances to conform with
the current period's presentation.
During the three month period ended August 31, 1995, certain subsidiaries
which were previously accounted for by the equity method were
consolidated. There was no significant impact on the consolidated
statement of operations as a result of this change.
NOTE 2. WRITE-DOWN OF AUSTRALIAN ASSETS
During 1995, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 121, "Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to be
Disposed of" effective for financial statements for fiscal years
beginning after December 15, 1995. The statement requires that long-
lived assets and certain identifiable intangibles be reviewed for
impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable and specifies the
criteria for the determination and measurement of an impairment loss.
Since commencement of its operations in the Australian Pay TV Business,
East Coast Pay Television Pty. Limited, an Australian Company ("ECT") has
been funded by capital contributions and short-term debt facilities from
its principal security holders (including the Company), and third party
bank financings. These debt facilities are currently payable upon
demand. There is no assurance that such funding will continue to be
available, or that the lenders (including the Company) will continue to
extend the maturity of the demand loans. On September 30, 1996, ECT was
notified that two of its debt facilities currently held by a third party
bank which aggregate approximately $9,600 which, had by their terms
matured, were in default. ECT is currently in negotiations to refinance
all or a portion of the facilities. There is no assurance that such
negotiations will be successful. In that regard, the Company's
Australian Holding Company has reserved against its short-term advances
to ECT in the aggregate amount of $40,000. As a result, the Company has
recorded this reserve in the three months ended August 31, 1996, as a
write-down of its Australian assets in accordance with Statement of
Financial Accounting Standards No. 121. In addition to the occurrence of
the default under ECT's third party debt facilities, the write-down was
based upon changes in market conditions, development plans and other
considerations. For further discussion see Management's Discussion and
Analysis.
NOTE 3. REVENUE RECOGNITION
Cable service income includes earned subscriber service revenues and
charges for installation and connections, net of programmers' share of
service revenues. Such programmers' shares netted against service income
amounted to $27,434 and $22,302 for the three months ended August 31,
1996 and August 31, 1995, respectively.
Cellular telephone service income includes service revenues and charges
for installation and connections, net of land line charges of $7,212 and
$4,681 for the three months ended August 31, 1996 and August 31, 1995,
respectively.
NOTE 4. REGISTRATION STATEMENTS
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. As of October 10, 1996, there was
$252,000 available for issuance under this registration.
During fiscal 1994, Centennial filed a shelf registration statement with
the SEC for up to 8,000,000 shares of Centennial's Class A Common Stock
that may be offered from time to time in connection with acquisitions.
As of October 10, 1996, there were 4,239,231 shares available for
issuance under this registration statement.
Centennial on April 5, 1995, filed a shelf registration statement with
the SEC for the issuance of $500,000 of Centennial's debt securities.
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 Centennial's Class A
Common Stock. As of October 10, 1996, $400,000 remained available for
issuance.
NOTE 5. SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING
ACTIVITIES
The table below summarizes non-cash reclassifications that occurred
during the three months ended August 31, 1996 and August 31, 1995. The
reclassifications result from the Company's acquisitions and exchanges
and consolidation of entities previously accounted for by the equity
method of accounting:
Three Months Ended August 31,
1996 1995
Current assets $ -- $(14,049)
Property, plant and equipment -- (8,072)
Equity investments -- (91,356)
Cable television franchises (14,828) 126,314
Wireless telephone licenses -- 8,063
Goodwill 14,828 (4,324)
Other assets -- (983)
$ -- $ 15,593
Current liabilities $ 6,634 $ (853)
Deferred taxes -- (1,454)
Minority interest -- 17,900
Additional paid in capital -- --
Translation adjustments (6,634) --
$ -- $ 15,593
NOTE 6. ACQUISITIONS
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 was $92,900 subject to adjustment. Citizens and the
Company own and operate the cable television systems in a joint venture
structure in which each company will have a 50% ownership interest. 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. On December 1, 1995, the
second acquisition serving approximately 21,000 primary basic subscribers
was completed. The purchase price of approximately $51,900 at September
30, 1994 and $41,000 at December 1, 1995 was funded by the Company and
Citizens equally.
On May 31, 1996, the Company acquired the cable television systems
serving Anaheim, Hermosa Beach/Manhattan Beach, Fairfield and Rohnert
Park/Yountville, California for an aggregate purchase price of
approximately $287,600, subject to adjustment. Funds for this
acquisition were provided by an existing bank credit facility. At May
31, 1996, such cable television systems served an aggregate of
approximately 135,000 primary basic subscribers.
On August 16, 1996, the Company and Citizens entered into agreements to
acquire three cable television systems which serve an aggregate of
approximately 76,000 primary basic subscribers. These systems are
primarily located in Yorba Linda, Orange County, Diamond Bar, Oxnard and
Ventura County, California. The aggregate purchase price for these
systems is approximately $140,000. The Century/Citizens Joint Venture
currently expects to fund the acquisitions using commercial bank
facilities, the terms of which are currently being negotiated.
Acquisitions, Exchanges, Dispositions - Centennial
On June 30, 1995, Centennial acquired the non-wireline cellular telephone
systems serving (a) Newtown, LaPorte, Starke, Pulaski, Jasper and White,
Indiana, (b) Kosciusko, Noble, Steuben and Lagrange, Indiana, (c)
Williams, Defiance, Henry and Paulding, Ohio and (d) Copiah, Simpson,
Lawrence, Jefferson Davis, Walthall and Marion, Mississippi, representing
an aggregate of approximately 608,100 Net Pops. The above-described
systems were acquired by Centennial in exchange for Centennial's non-
wireline cellular telephone systems serving the Roanoke, Virginia MSA,
the Lynchburg, Virginia MSA, North Carolina RSA #3 and Iowa RSA #5,
representing an aggregate of approximately 644,000 Net Pops.
Simultaneously with the consummation of the transaction described above,
Centennial sold its 72.2% interest in the non-wireline cellular telephone
system serving the Charlottesville, Virginia MSA, representing an
aggregate of approximately 94,700 Net Pops, for a cash purchase price of
approximately $9,914 subject to adjustment. The Company recognized a
gain of approximately $4,176 as a result of the sale.
On October 31, 1995, Centennial acquired (i) a 94.3% interest in the non-
wireline cellular telephone system serving the Lafayette, Louisiana MSA,
representing approximately 205,700 Net Pops, in exchange for Centennial's
non-wireline cellular telephone system serving the Jonesboro, Arkansas
RSA (comprising approximately 205,000 Net Pops), the license rights and
assets located in and covering Desoto and Red River Parishes of Louisiana
3 RSA (comprising approximately 34,700 Net Pops), the license rights and
assets located in and covering a section of Morehouse Parish of Louisiana
2 RSA (comprising approximately 24,100 Net Pops) and a cash payment by
Centennial of approximately $5,580, subject to adjustment, and (ii) an
additional 14.3% minority interest in the Elkhart, Indiana RSA, a market
in which the Company now has a 91.4% interest, and an additional 12.7%
equity investment interest in the Lake Charles, Louisiana MSA, a market
in which the Company now has a 25.1% interest, for a cash payment of
approximately $2,951.
In summary, during fiscal 1996, Centennial acquired 813,800 net pops,
additional minority interests in existing Centennial markets and $1,383,
in cash, in exchange for 1,002,500 net pops previously owned by
Centennial.
On September 12, 1996, Centennial acquired for approximately $34,000 in
cash, 100% of the ownership interests in the partnership owning the non-
wireline cellular telephone system serving the Benton Harbor, Michigan
MSA. The Benton Harbor market represents approximately 161,400 Net Pops.
Centennial Personal Communications Services ("PCS")
Centennial was the successful bidder for one of two MTA licenses (granted
June 23, 1995) to provide broadband personal communications services in
the Commonwealth of Puerto Rico and the U.S. Virgin Islands. The
licensed area represents approximately 3,623,000 Net Pops. The amount of
the final bid submitted by Centennial was $54,672.
The summary pro forma information includes the accounts and operations of
the Company and all acquisitions and pending acquisitions described
above, 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.
Three Months Ended August 31,
1996 1995
Revenues $154,274 $132,932
Net loss (21,052) (30,074)
Net loss per common share (.30) (.42)
Pro forma net loss per common share for the three months ended August 31,
1996 and August 31, 1995 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 7. LONG-TERM DEBT
(a) CCC-II, Inc. ("CCC-II"), a subsidiary of the Company, entered into a
credit agreement as amended August 12, 1996, that provides CCC-II 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 interest rates payable on borrowings under
the credit facility are based on, at the election of CCC-II, (a) the base
rate of interest announced by Citibank, N.A. plus 0% to 0.5% per annum
based upon certain conditions, or (b) the London Interbank Offering Rate
plus 0.75 to 1.375% per annum based upon certain conditions. The 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. The Company is in compliance with
the terms of the credit facility.
(b) CCC-I, Inc. ("CCC-I"), a subsidiary of the Company, entered into a
credit agreement as amended August 12, 1996, that provides CCC-I a three
year $525,000 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 on
August 7, 1995, of its existing indebtedness discharged all of the
Company's obligations under its then-existing $300,000 credit agreement
and, as a result, such agreement was terminated. The interest rates
payable on borrowings under the 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 0.625% per annum based upon certain conditions, or (b)
the London Interbank Offering Rate plus 0.75% to 1.625% per annum based
upon certain conditions. The 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. The Company is in compliance with the terms of the credit facility.
(c) On July 31, 1995, a subsidiary of the Company, Century Venture Corp.
("CVC") entered into a three year, $80,000,000 revolving credit facility
which converts to a five year term loan. The proceeds of the facility
were used by CVC to repay existing indebtedness of CVC and will be used
for working capital and general corporate purposes. The repayment by
CVC of its existing indebtedness discharged all of CVC'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 CVC, (a) "C/D Base Rate"
plus an applicable margin, as defined or (b)"Eurodollar Base Rate" plus
an applicable margin as defined or (c) "ABR" rate as defined. The
agreement expires on February 28, 2004. The credit facility restricts
the incurrence of certain additional debt of CVC, limits the ability of
CVC to pay dividends to the Company and requires that certain operating
tests be met.
(d) On September 12, 1996, Centennial entered into a $50,000 credit
facility with Citibank, N.A. The facility terminates on March 20, 1998.
Approximately $34,000 of the facility was used to fund the Benton Harbor,
Michigan cellular telephone system acquisition (see acquisitions -
Centennial). The remainder will be used for working capital and general
corporate purposes. The interest rate payable on borrowings under the
new credit facility are based on, at the election of Centennial, (a)
"Base Rate" plus a margin of 2% or (b) "Eurodollar Rate" plus a margin of
3%. The facility is secured by the stock of certain of Centennial's
subsidiaries not otherwise subject to restrictions under its Senior Note
Indentures. The credit facility restricts the incurrence of certain
additional debt of Centennial, limits Centennial's ability to pay
dividends and requires that certain operating tests be met.
NOTE 8. REGULATORY MATTERS
On February 1, 1996, Congress passed S.652, "The Telecommunications Act
of 1996" ("Act"), which was signed into law by the President. The new
law will alter federal, state and local laws and regulations regarding
telecommunications providers and services, including the cable television
industry. The Act substantially deregulates (except for basic service)
cable service rates over a three year period. Implementing regulations
of the Act are currently being written. The effect that the Act will
have on the Company cannot be determined at this time.
<TABLE>
NOTE 9. SEGMENT INFORMATION
Information about the Company's operations in its three business segments
for the three months ended August 31, 1996 and 1995 is as follows
(amounts in thousands):
<CAPTION>
Three Months Ended August 31, 1996 1995
<S> <C> <C>
Gross revenues:
Cable television $ 112,728 $ 89,745
Cellular telephone 32,365 26,922
Australian operations 7,954 -
Eliminations (43) (40)
$ 153,004 $ 116,627
Operating (loss) income:
Cable television $ 24,648 $ 18,533
Cellular telephone (3,399) (4,704)
Australian operations (45,520) -
Eliminations (43) (40)
$ (24,314) $ 13,789
Net loss:
Cable television $ (10,004) $ (20,626)
Cellular telephone (6,107) (3,418)
Australian operations (49,235) -
Eliminations 4,134 2,127
$ (61,212) $ (21,917)
Assets, at end of period:
Cable television $ 1,573,102 $ 1,287,300
Cellular telephone 783,038 801,173
Australian operations 87,875 -
Eliminations (271,309) (129,259)
$ 2,172,706 $ 1,959,214
Depreciation and amortization:
Cable television $ 37,655 $ 29,695
Cellular telephone 18,481 18,030
Australian operations 6,514 -
$ 62,650 $ 47,725
Capital expenditures:
Cable television $ 11,472 $ 15,715
Cellular telephone 23,481 6,350
Australian operations 1,658 -
$ 36,611 $ 22,065
The Company's consolidated financial statements include three distinct
business segments. Century Communications owns, operates and
develops domestic cable television systems. Centennial Cellular Corp., a 31.8%
owned subsidiary, owns, operates and invests in wireless telephone systems.
The Company's Australian operations are currently in the development stage
and not yet fully operational. The Australian operations will operate and invest
in pay television services in Australia, including the development and
distribution of programming. The information provided below is that of Century
Communications before the consolidation of Centennial Cellular Corp. and Australia.
Centennial Cellular Corp, the Australian operations, as well as consolidated
information.
</TABLE>
<TABLE>
NOTE 9. SEGMENT INFORMATION (continued)
CENTURY COMMUNICATIONS CORP. AND SUBSIDIARIES
CONSOLIDATING BALANCE SHEET FINANCIAL DATA
August 31,1996
(Amounts in thousands)
<CAPTION>
Century
Communications
Corp. before
consolidation of Centennial Reclassifications
Centennial Cellular Australian and
and Australia Corp. Operations Eliminations Consolidated
<S> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and short-term investments $ 85,102 $ 42,088 $ 736 $ - $ 127,926
Accounts receivable - net 20,045 22,493 13,736 - 56,274
Prepaid expenses and
other current assets 4,150 2,870 647 - 7,667
Total current assets 109,297 67,451 15,119 - 191,867
Property, plant and equipment - net 529,062 112,267 19,066 - 660,395
Investment in marketable
equity securities 53,918 - - - 53,918
Investment in Centennial Cellular
Corp, at cost 139,685 - - (139,685) -
Equity investment in cable television and
cellular telephone systems - net 142,094 99,622 3,269 (134,032) 110,953
Debt issuance costs - net 21,305 7,462 - - 28,767
Cable television franchises - net 403,425 - 49,481 - 452,906
Wireless telephone licenses - net - 349,883 - - 349,883
Excess of purchase price over value of net
assets acquired - net 159,610 132,767 - - 292,377
Other assets 14,706 13,586 940 2,408 31,640
$ 1,573,102 $ 783,038 $ 87,875 $ (271,309) $ 2,172,706
</TABLE>
<TABLE>
NOTE 9. SEGMENT INFORMATION (continued)
CENTURY COMMUNICATIONS CORP. AND SUBSIDIARIES
CONSOLIDATING BALANCE SHEET FINANCIAL DATA
(CONTINUED)
August 31, 1996
(Amounts in thousands)
<CAPTION>
Century
Communications
Corp. before
consolidation of Centennial Reclassifications
Centennial Cellular Australian and
and Australia Corp. Operations Eliminations Consolidated
<S> <C> <C> <C> <C> <C>
LIABILITIES AND STOCKHOLDERS'
EQUITY (DEFICIENCY)
Current liabilities:
Current maturities of
long-term debt $ 50 $ - $ 15,121 $ - $ 15,171
Accounts payable and
accrued expenses 85,147 27,491 25,355 - 137,993
Customers' deposits
and prepayments 15,338 5,489 - - 20,827
Total current liabilities 100,535 32,980 40,476 - 173,991
Long-term debt 1,716,012 350,000 - - 2,066,012
Deferred liability 5,000 2,200 - (7,200) -
Deferred income taxes 36,824 54,070 - - 90,894
Minority interest
in subsidiaries 54,567 - - 102,335 156,902
Due to parent - - 142,088 (142,088) -
Convertible redeemable
preferred stock - 186,287 - - 186,287
Second series convertible
redeemable preferred stock - 7,252 - (7,252) -
Common stockholders'
equity (deficiency):
Common stock, par
value $.01 per share:
Class A 606 165 1 (166) 606
Class B 451 105 - (105) 451
Additional paid-in capital 87,141 379,883 6 (289,612) 177,418
Other (117,688) (4,801) 6,213 4,801 (111,475)
Accumulated deficit (310,346) (225,103) (100,909) 67,978 (568,380)
Total common stockholders'
equity (deficiency) (339,836) 150,249 (94,689) (217,104) (501,380)
$ 1,573,102 $ 783,038 $ 87,875 $ (271,309) $ 2,172,706
</TABLE>
<TABLE>
NOTE 9. SEGMENT INFORMATION (continued)
CENTURY COMMUNICATIONS CORP. AND SUBSIDIARIES
CONSOLIDATING STATEMENT OF OPERATIONS FINANCIAL DATA
THREE MONTH PERIOD ENDED AUGUST 31, 1996
(Amounts in thousands)
<CAPTION> Century
Communications
Corp. before
consolidation of Centennial Reclassification
Centennial Cellular Australian and
and Australia Corp. Operations Eliminations Consolidated
<S> <C> <C> <C> <C> <C>
Revenues: $ 112,728 $ 32,365 $ 7,954 $ (43) $ 153,004
Costs and expenses:
Costs of services 24,345 7,469 - - 31,814
Selling, general and
administrative 26,080 9,814 - - 35,894
Depreciation and
amortization 37,655 18,481 6,514 - 62,650
Australian operations - - 6,960 - 6,960
Australian write-down - - 40,000 - 40,000
88,080 35,764 53,474 - 177,318
Operating income (loss) 24,648 (3,399) (45,520) (43) (24,314)
Income from equity investment - 3,662 - (3,662) -
Interest 39,136 7,041 2,247 - 48,424
Gain on sale of assets - 48 - - 48
Other (income)/loss 826 - 1,468 (3,662) (1,368)
Loss before income tax
provision benefit
and minority interest (15,314) (6,730) (49,235) (43) (71,322)
Income tax benefit (5,843) (755) - - (6,598)
Loss before minority
interest (9,471) (5,975) (49,235) (43) (64,724)
Minority interest in (income)
loss of subsidiaries (533) (132) - 4,177 3,512
Net Loss $ (10,004) $ (6,107) $ (49,235) $ 4,134 $ (61,212)
</TABLE>
<TABLE>
Note 10. Changes in stockholders' deficiency
<CAPTION>
Common Stock Additional
Class A Class B Paid-In (Accumulated
Shares Dollars Shares Dollars Capital Deficit) Other Total
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at June 1, 1995 59,484,685 $ 595 45,406,115 $ 454 $ 175,545 $ (405,051)$ (123,188) $ (351,645)
Shares issued in connection
with employee
incentive plans 461,595 4 2,971 (158) 2,817
Unrealized appreciation of
marketable securities 6,397 6,397
Foreign currency translation
adjustement (753) (753)
Net Paid in Capital
contributed by minority
interests 1,238 1,238
Accretion in liquidation
value of subsidiary (4,256) (4,256)
preferred stock
Vesting of subsidary
stock options 306 306
Net loss (102,117) (102,117)
Balance at May 31, 1996 59,946,280 599 45,406,115 454 175,804 (507,168) (117,702) (448,013)
Shares issued in
connection with employee
incentive plans 299,660 4 25,000 - 2,712 2,716
Class A shares purchased
by the Company (1,588) (1,588)
Class B shares converted
to Class A shares 305,000 3 (305,000) (3) -
Accretion in liquidation
value of subsidiary
preferred stock (1,098) (1,098)
Foreign currency
translation adjustment 6,966 6,966
Unrealized appreciation of
marketable securities 849 849
Net loss (61,212) (61,212)
Balance at August 31,
1996 60,550,940 $ 606 45,126,115 $ 451 $ 177,418 $ (568,380)$ (111,475) $ (501,380)
Other stockholders' deficiency items: August 31, 1996 May 31, 1996
Treasury stock, at cost $ (139,350) $ (137,762)
Unrealized appreciation of marketable securities 21,662 20,813
Foreign currency translation adjustment 6,213 (753)
$ (111,475) $ (117,702)
</TABLE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Results of Operations (Dollar Amounts in Thousands except subscriber, pop
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 four radio stations. In addition, the Company's
31.8% owned subsidiary, Centennial Cellular Corp. ("Centennial"),
provides cellular telephone service to subscribers in three geographic
areas. 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. During the first quarter of the fiscal year ended May 31,
1996, the Company for accounting and reporting purposes, consolidated the
operations of East Coast Pay Television Pty. Limited, an Australian
Company ("ECT"). ECT was previously accounted for by the equity method
of accounting. There was no significant impact on the consolidated
statement of operations as a result of the change. ECT is pursuing
opportunities to own, operate and invest in pay television services in
Australia. (See Investments - Australian Pay Television).
Due to 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, has been negatively affected. 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. 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,
affecting 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
has appealed this determination to the FCC. On August 23,1996, the FCC
released an Order seeking comment on a proposed resolution of pending
basic and cable programming service tier rate complaints in several Los
Angeles area cable systems served by the Company. The proposed
resolution also calls for the FCC to reconsider the Letter of Inquiry
ruling adopted by the FCC with respect to the Company's Los Angeles and
Beverly Hills, California systems in December 1994. If finally adopted
by the FCC, the proposed resolution would require the Company to adjust
its rates for its basic and cable programming services tiers and make
approximately $1,900 in subscriber refunds. Under the terms of the
proposed resolution, local franchising authorities could "opt out" of the
specified refunds and decide basic service tier refunds and rates based
on the terms of the Letter of Inquiry, as reconsidered.
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 second revision to its rate formula. As a result, the
Company experienced a further decrease in the regulated portion of its
services for the fiscal year ended May 31, 1995. Under the regulatory
price cap mechanism established by the FCC, a portion of the decline was
offset in part, by allowable rate increases during fiscal 1995. Such
increases relate to adjustments for the annual change in the Gross
National Producers 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. The bulk of such price
adjustments became effective during the first quarter of fiscal years
1996 and 1997.
On February 1, 1996, Congress passed S.652, "The Telecommunications Act
of 1996" ("Act"), which was signed into law by the President. The new
law will alter federal, state and local laws and regulations regarding
telecommunications providers and services, including the cable television
industry. The Act substantially deregulates (except for basic service)
cable service rates over a three year period. Implementing regulations
of the Act are currently being written. The effect that the Act will
have on the Company cannot be determined at this time.
Three Months Ended August 31, 1996 and August 31, 1995
Revenue for the three months ended August 31, 1996 increased by $36,377
or 31.2%, over the three months ended August 31, 1995. Revenue from
cable television operations increased by $22,980 or 25.6%, over the
corresponding three months ended August 31, 1995 as a result of increases
in the number of cable television subscriptions and acquisitions.
Acquisitions of cable television systems accounted for $14,047 of the
increase or 61.1%. Average primary basic cable television subscribers
("Basic Subscribers") for the twelve months ended August 31, 1996, were
approximately 1,121,000 as compared to approximately 1,019,000 Basic
Subscribers for the twelve-month period ended August 31, 1995, an
increase of 10%. The impact of acquisitions of cable television systems
accounted for 38% of the increase. Average monthly revenue per Basic
Subscriber, including programmer's share of such revenue, was
approximately $35.90 during the twelve months ended August 31, 1996, as
compared to approximately $33.75 during the comparable prior twelve month
period, an increase of 6.3%. The Australian operations accounted for
$7,954, or 21.9% of the total increase in revenue.
Revenue from cellular telephone operations for the three months ended
August 31, 1996 increased by $5,443 or 20.2%, over the three months
ended August 31, 1995. The increase in revenue was the result of
growth in subscriptions to and the resulting increased usage of cellular
telephone service. Acquisitions accounted for increased revenue of
$2,836 or 52% of the increase for the three months ended August 31, 1996.
Costs and expenses excluding depreciation and amortization and Australian
activities for the three months ended August 31, 1996 increased by
$12,595 or 22.9% over the three months ended August 31, 1995. Cost of
services for the three months ended August 31, 1996 increased by $6,130
or 23.9% over the corresponding period in the prior year, while selling,
general and administrative expense increased by $6,465 or 22.0%.
Cost of services of the Company's cable television operations increased
by $4,374 or 21.9%, while selling, general and administrative expenses of
the Company's cable television operations increased by $4,534 or 21.0%.
The Company's recent cable television acquisitions accounted for $2,284
or 52.2% of the $4,374 increase in cost of services and $2,841 or 62.7%
of the $4,534 increase in selling, general and administrative expense.
As a result, before giving effect to increased costs associated with
acquisitions, costs of services and selling, general and administrative
expenses increased by $2,090 and $1,693, respectively during the three
months ended August 31, 1996. The principal reason for the increase in
these costs was the increase in the variable component of the Company's
cost structure which increases in relation to increased revenue.
Cost of services related to the cellular telephone operations during the
three months ended August 31, 1996 was $7,469, an increase of $1,756 or
30.7% as compared to the three months ended August 31, 1995. The reason
for the increase was a larger number of telephone units sold, the
variable costs associated with a larger revenue and subscription base and
increased cellular coverage areas resulting from the continued expansion
of Centennial's network. Included in cost of services during the quarter
ended August 31, 1996 were $504 of pre-operating costs associated with
the start-up of Centennial's Puerto Rico telecommunications business.
Selling, general and administrative expenses related to the cellular
telephone operations rose to $9,814, an increase of $1,931 or 24.5% above
the $7,883 recorded during the three months ended August 31, 1995. The
increase resulted primarily from the variable costs associated with a
larger subscription and revenue base and anticipated growth of its
cellular telephone business. Included in selling, general and
administrative expenses during the quarter ended August 31, 1996 were
$449 of pre-operating costs associated with the start-up of Centennial's
Puerto Rico telecommunications business.
The Company anticipates continued increases in the cost of services and
selling, general and administrative expenses as the growth of its cable
television and cellular telephone business continues. In addition, the
Company expects that the start-up and development of its recently
acquired wireless telephone markets and recent cable television and
cellular acquisitions will contribute to an increase in these costs and
expenses.
Depreciation and amortization (domestic) for the three months ended
August 31, 1996 increased by $8,411 or 17.6% over the three months ended
August 31, 1995. The cellular telephone operations and acquisitions
accounted for $451 of this increase, while the cable television
operations accounted for $7,960. The principal reason for the increase
was acquisitions of cable television properties which accounted for 71%
of the increase.
The Australian operations incurred expenses of $6,960 related to the
start-up and development of the Australian Pay TV market, while
depreciation and amortization expense, the result of its initial buildout
and license acquisition was $6,514.
Operating income for the three months ended August 31, 1996 decreased by
$38,103 over the quarter ended August 31, 1995, principally as a result
of the Company's $40,000 write-down of Australian assets. (See Liquidity
and Capital Resources - Australian Pay Television). The cellular
operating loss for the quarter ended August 31, 1996 of $3,399 decreased
by $1,305 or 27.7% from the loss of $4,704 for the three months ended
August 31, 1995. Including the write-down, the Australian operating loss
for the three months ended August 31, 1996 was $45,520. The Company's
operating income before the inclusion of its cellular and Australian
operations was $24,605 an increase of $6,112 or 33.0% over the three
months ended August 31, 1995.
Other income represents the Company's proportionate share of the net
income or loss of minority investment interests accounted for by the
Company using the equity method of accounting. The Company has recorded
$1,468 and $2,100 of expense for the three months ended August 31, 1996
and 1995 for its minority investments in Australia, offset, in part, by
$3,662 and $2,315 of income for the three months ended August 31, 1996
and 1995 related to minority investments of the Company's cellular
telephone operations.
Interest expense for the three months ended August 31, 1996 increased by
$2,642 or 5.8% as compared with the three months ended August 31, 1995.
After giving effect to a non-cash charge of $2,647 reflecting the write-
off of debt issuance costs during the three months ended August 31, 1995
and the capitalization of $1,299 of interest charges related to the
Company's Puerto Rico telecommunications investment during the three
months ended August 31, 1996, interest expense, on this pro forma basis,
for the quarter ended August 31, 1996, increased by $6,588 or 15.3% over
the $43,135 of pro forma interest expense for the three months ended
August 31, 1995. This increase is primarily the result of higher average
debt levels. For the three months ended August 31, 1996, the average
debt outstanding was approximately $2,063,000 or $331,000 above the
average outstanding debt balance of $1,732,000 during the three months
ended August 31, 1995. The Company's weighted average interest rate
excluding borrowings of Centennial, Australia and the Company's 50% owned
joint ventures was approximately 9.2% in the three months ended August
31, 1996 as compared to approximately 11.0% (or 10% after taking into
account the pro forma adjustments noted above) in the three months ended
August 31, 1995. The decrease in the weighted average interest rate is
primarily the result of a one time non-cash charge of $2,647 of deferred
debt issuance costs as a result of the Company's refinancing of a bank
credit facility during the three months ended August 31, 1995 (see
Financing and Capital Formation - The Company). In addition, the Company
increased the proportion of floating rate bank debt in its capital
structure. Short-term interest rates of the Company's variable rate bank
credit agreements declined from 7.5% at August 31, 1995 to 7.4% at August
31, 1996. Centennial's weighted average interest rate was 9.5% on average
debt levels of $350,000 for the three months ended August 31, 1996 and
1995.
After losses attributable to minority interests in subsidiaries for the
three months ended August 31, 1996, a pretax loss of $67,810 was
incurred, as compared to a pretax loss of $26,723 for the three months
ended August 31, 1995. The income tax benefit of $6,598 for the three
months ended August 31, 1996 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 August 31, 1996 and August 31, 1995.
The net loss for the three months ended August 31, 1996 of $61,212
represents an additional loss of $39,295 from the loss of $21,917 for the
three months ended August 31, 1995, principally as a result of the
Company's $40,000 write-down of Australian assets. (See Liquidity and
Capital Reources - Australian Investment). The Company expects net
losses to continue until such time as the operations of the wireless
telephone systems, Australian operations, cable television systems and
investments in plant associated with rebuilds and extensions of its cable
television systems and expansion of the wireless telephone system
infrastructure generate sufficient earnings to offset the associated
costs of acquisitions and operations described above.
Liquidity and Capital Resources (Dollar Amounts in Thousands except Share
Data)
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 eight
cellular telephone markets which it owns and manages, all of which are
considered to be in the early development phase of operations.
Centennial also owns minority equity investment interests in certain
other cellular telephone systems. Centennial successfully bid on March
13, 1995, for one of two Metropolitan Trading Area ("MTA") licenses to
provide broadband personal communications services ("PCS") in the
Commonwealth of Puerto Rico and the U.S. Virgin Islands. Since both the
cable television and wireless telephone activities are capital intensive,
the Company and Centennial continue to seek various sources of financing
to meet their needs, including growth in internally generated cash, bank
financing, joint ventures and partnerships and public and private
placements of debt and equity securities. Subsidiaries of the Company
have entered into credit agreements with various bank groups and private
lending institutions providing for an aggregate of approximately $1,105
of potential borrowing capacity as of October 10, 1996.
The Company's internally-generated cash along with third party financing,
primarily bank borrowings and the issuance of debt securities to the
public, has enabled it to fund its working capital requirements, capital
expenditures for property, plant and equipment, acquisitions, investments
and debt service. 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 through 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.
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 wireless
telephone systems. During the three months ended August 31, 1996 the
Company made capital expenditures of $36,611. Centennial made capital
expenditures of $23,481 or 64% of the Company's total capital
expenditures. As the Company completes capital projects started in prior
fiscal years, it anticipates an annualized rate of approximately $70,000
for cable television capital expenditures in fiscal 1997. 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. Centennial expects capital expenditures for its
cellular telephone markets of $25,000 over the next fiscal year.
Centennial during fiscal 1996 began construction of its PCS network in
Puerto Rico spending approximately $15,500. Centennial currently
estimates that the remaining cost to complete the build out of the
infrastructure of its PCS network will be approximately $51,000, to be
expended through fiscal 1998. 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 other bank borrowings, debt
or equity issuances or other financing resources.
For the three months ended August 31, 1996, earnings were less than fixed
charges by $72,420. However, such amount reflects non-cash charges
totaling $63,748, consisting of depreciation and amortization of $62,650
and non-cash subsidiary preferred stock dividends of $1,098.
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.
It is anticipated that in the next fiscal year, cash generated from
cellular telephone operations will not fully cover required capital
expenditures and the debt service under its credit agreements and
preferred stock dividends. It is currently anticipated that any
shortfall will be made up either through equity issuances or additional
borrowing. Both classes of Centennial's preferred stock are subject to
mandatory redemption in fiscal 2007. Any unpaid dividends continue to
accumulate without additional cost to Centennial.
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.
Three Months Ended August 31,
1996 1995
Amount % Amount %
Net cash provided by
operating activities $ 39,034 56.4% $ 9,304 21.1 %
Interest paid (including
debt issuance costs) 30,127 43.6 34,792 78.9
Net cash provided $ 69,161 100.0% $ 44,096 100.0 %
Principal uses of
net cash provided:
Interest paid (including
debt issuance costs) $ 30,127 43.6% $ 34,792 78.9 %
Property, plant and
equipment(excluding
acquisitions) 36,611 52.9 22,065 50.0
Total $ 66,738 96.5% $ 56,857 128.9 %
Cash provided (required) $ 2,423 3.5% $(12,761) (28.9)%
Net cash provided by operating activities of $69,161 for the three months
ended August 31, 1996 was sufficient to fund the Company's expenditures
for property, plant and equipment and debt service. 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:
Three Months Ended August 31,
1996 1995
Proceeds from long-term borrowings $523,087 $235,500
Principal payments on long-term debt (544,000) (237,906)
Purchase of treasury stock (1,588) --
Issuance of common stock 2,716 300
Cash used in financing activities (19,785) (2,106)
Net capital returned from equity
investments 1,172 2,023
Acquisition of and investments in cable
television, wireless telephone systems,
marketable securities and other assets (20,476) (47,896)
Cash required from operating activities $(39,089) $ (47,979)
Financing and Capital Formation; The Company
CCC-II, Inc. ("CCC-II"), a subsidiary of the Company, entered into a
credit agreement as amended August 12, 1996, that provides CCC-II 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 interest rates payable on borrowings under
the credit facility are based on, at the election of CCC-II, (a) the base
rate of interest announced by Citibank, N.A. plus 0% to 0.5% per annum
based upon certain conditions, or (b) the London Interbank Offering Rate
plus 0.75 to 1.375% per annum based upon certain conditions. The 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. The Company is in compliance with
the terms of the credit facility.
CCC-I, Inc. ("CCC-I"), a subsidiary of the Company, entered into a credit
agreement as amended August 12, 1996, that provides CCC-I a three year
$525,000 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 on August 7,
1995, of its existing indebtedness discharged all of the Company's
obligations under its then-existing $300,000 credit agreement and, as a
result, such agreement was terminated. The interest rates payable on
borrowings under the 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 0.625% per annum based upon certain conditions, or (b) the London
Interbank Offering Rate plus 0.75% to 1.625% per annum based upon certain
conditions. The 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. The
Company is in compliance with the terms of the credit facility.
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"). During the fiscal year ended May 31, 1996, all of the
Company's obligations with respect to Hedge Agreements expired. 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.
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. As of October 10, 1996, there was
$252,000 available for issuance under this registration.
On July 31, 1995, a subsidiary of the Company, Century Venture Corp.
("CVC") entered into a three year , $80,000 revolving credit facility
which converts to a five year term loan. The proceeds of the facility
were used by CVC to repay existing indebtedness of CVC and will be used
for working capital and general corporate purposes. The repayment by CVC
of its existing indebtedness discharged all of CVC'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 CVC, (a) "C/D Base Rate"
plus an applicable margin, as defined or (b) "Eurodollar Base Rate" plus
an applicable margin as defined or (c) "ABR" rate as defined. The
agreement expires on February 28, 2004. The credit facility restricts
the incurrence of certain additional debt of CVC, limits the ability of
CVC to pay dividends to the Company and requires that certain operating
tests be met. The Company is in compliance with the terms of the credit
facility.
Financing and Capital Formation; Centennial
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. Any unpaid dividends continue to accumulate without
additional cost to Centennial.
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 the current fiscal year 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. Although to date, Centennial has been
able to obtain financing on satisfactory terms, there is no assurance
that this will be the case in the future.
During fiscal 1994, Centennial filed a shelf registration statement with
the SEC for up to 8,000,000 shares of Centennial's Class A Common Stock
that may be offered from time to time in connection with acquisitions.
At October 10, 1996, there were 4,239,231 shares available for issuance
under this registration statement.
Centennial, on April 6, 1995, filed a shelf registration statement with
the SEC for the issuance of $500,000 of Centennial's debt securities.
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 Centennial's Class A
Common Stock. As of October 10, 1996, $400,000 remained available for
issuance.
On May 11, 1995, Centennial issued $100,000 of ten year unsecured Senior
Notes at an interest rate of 10 1/8% (the "10 1/8% Notes"). Centennial's
debt instruments contain similar limitations on certain "restricted
payments" including, but not limited to, dividends and investments in
unrestricted subsidiaries and other persons. Further, the debt
securities contain restrictions on the incurrence of certain additional
debt and limitations on Centennial's ability to incur liens with respect
to additional indebtedness.
On September 12, 1996, Centennial entered into a $50,000 credit facility
with Citibank, N.A. The facility terminates on March 20, 1998.
Approximately $34,000 of the facility was used to fund the Benton Harbor,
Michigan cellular telephone system acquisition (see Acquisitions,
Exchanges, Dispositions - Centennial). The remainder will be used for
working capital and general corporate purposes. The interest rate
payable on borrowings under the new credit facility are based on, at the
election of Centennial, (a) "Base Rate" plus a margin of 2% or (b)
"Eurodollar Rate" plus a margin of 3%. The facility is secured by the
stock of certain of Centennial's subsidiaries not otherwise subject to
restrictions under Centennial's Senior Note Indentures. The credit
facility restricts the incurrence of certain additional debt of
Centennial, limits Centennial's ability to pay dividends and requires
that certain operating tests be met.
In order to meet its obligations with respect to its debt and preferred
stock obligations, it is important that Centennial continue to improve
operating cash flow. In order to do so, Centennial's revenues must
increase at a faster rate than operating expenses. Increases in revenues
will be dependent upon continuing growth in the number of subscribers and
maximizing revenue per subscriber. Centennial has substantially completed
the development of its managerial, administrative and marketing
functions, and is continuing the construction of cellular systems in its
existing and recently acquired markets in order to achieve these
objectives. There is no assurance that growth in subscribers or revenue
will occur. In addition, Centennial's participation in the PCS business
in Puerto Rico is expected to be capital intensive, with remaining
network buildout costs of approximately $51,000 over fiscal 1997 and
1998. Further, due to the start-up nature of the PCS business,
Centennial expects the PCS business to require additional cash investment
to fund its operations over the next several years. The PCS business is
expected to be highly competitive with the two existing cellular
telephone providers as well as the other MTA PCS license holder. There
is no assurance that the PCS business will generate cash flow or reach
profitability. Even if operating cash flow does increase, it is
anticipated that cash generated from Centennial's cellular telephone
operations and PCS business will not be sufficient in the next several
years to cover interest, the preferred stock dividend requirements that
commence in the current fiscal year, and required capital expenditures.
Centennial anticipates that shortfalls may be made up either through debt
and equity issuances or additional financing agreements that may be
entered into by Centennial.
Acquisitions - Cable Television
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 was $92,900 subject to adjustment. Citizens and the
Company own and operate the cable television systems in a joint venture
structure in which each company will have a 50% ownership interest. 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. On December 1, 1995, the
second acquisition serving approximately 21,000 primary basic subscribers
was completed. The purchase price of approximately $51,900 at September
30, 1994 and $41,000 at December 1, 1995 was funded by the Company and
Citizens equally.
On May 31, 1996, the Company acquired the cable television systems
serving Anaheim, Hermosa Beach/Manhattan Beach, Fairfield and Rohnert
Park/Yountville, California for an aggregate purchase price of
approximately $287,000, subject to adjustment. Funds for this
acquisition were provided by an existing bank credit facility. At May
31, 1996, such cable television systems served an aggregate of
approximately 135,000 primary basic subscribers.
On August 16, 1996, the Company and Citizens entered into agreements to
acquire three cable television systems which serve an aggregate of
approximately 76,000 primary basic subscribers. These systems are
primarily located in Yorba Linda, Orange County, Diamond Bar, Oxnard and
Ventura County, California. The aggregate purchase price for these
systems is approximately $140,000. The Century/Citizens Joint Venture
currently expects to fund the acquisitions using commercial bank
facilities, the terms of which are currently being negotiated.
Acquisitions, Exchanges, Dispositions - Centennial
On June 30, 1995, Centennial acquired the non-wireline cellular telephone
systems serving (a) Newtown, LaPorte, Starke, Pulaski, Jasper and White,
Indiana, (b) Kosciusko, Noble, Steuben and Lagrange, Indiana, (c)
Williams, Defiance, Henry and Paulding, Ohio and (d) Copiah, Simpson,
Lawrence, Jefferson Davis, Walthall and Marion, Mississippi, representing
an aggregate of approximately 608,100 Net Pops. The above-described
systems were acquired by Centennial in exchange for Centennial's non-
wireline cellular telephone systems serving the Roanoke, Virginia MSA,
the Lynchburg, Virginia MSA, North Carolina RSA #3 and Iowa RSA #5,
representing an aggregate of approximately 644,000 Net Pops.
Simultaneously with the consummation of the transaction described above,
Centennial sold its 72.2% interest in the non-wireline cellular telephone
system serving the Charlottesville, Virginia MSA, representing an
aggregate of approximately 94,700 Net Pops, for a cash purchase price of
approximately $9,914 subject to adjustment. The Company recognized a
gain of approximately $4,176 as a result of the sale.
On October 31, 1995, Centennial acquired (i) a 94.3% interest in the non-
wireline cellular telephone system serving the Lafayette, Louisiana MSA,
representing approximately 205,700 Net Pops, in exchange for Centennial's
non-wireline cellular telephone system serving the Jonesboro, Arkansas
RSA (comprising approximately 205,000 Net Pops), the license rights and
assets located in and covering Desoto and Red River Parishes of Louisiana
3 RSA (comprising approximately 34,700 Net Pops), the license rights and
assets located in and covering a section of Morehouse Parish of Louisiana
2 RSA (comprising approximately 24,100 Net Pops) and a cash payment by
Centennial of approximately $5,580, subject to adjustment, and (ii) an
additional 14.3% minority interest in the Elkhart, Indiana RSA, a market
in which the Company now has a 91.4% interest, and an additional 12.7%
equity investment interest in the Lake Charles, Louisiana MSA, a market
in which the Company now has a 25.1% interest, for a cash payment of
approximately $2,951.
In summary, during fiscal 1996, Centennial acquired 813,800 Net Pops,
additional minority interests in existing Centennial markets and $1,383,
in cash (net), in exchange for 1,002,500 Net Pops previously owned by
Centennial.
On September 12, 1996, Centennial acquired for approximately $34,000 in
cash, 100% of the ownership interests in the partnership owning the non-
wireline cellular telephone system serving the Benton Harbor, Michigan
MSA. The Benton Harbor market represents approximately 161,400 Net Pops.
Centennial Personal Communications Services ("PCS")
Centennial was the successful bidder for one of two MTA licenses to
provide broadband personal communications services in the Commonwealth of
Puerto Rico and the U.S. Virgin Islands. The licensed area represents
approximately 3,623,000 Net Pops. The amount of the final bid submitted
by Centennial was $54,672. A non-refundable deposit of $10,934,
representing approximately 20% of the purchase price, was made in
connection with the bid, and the balance of $43,738, was paid on June 29,
1995. Approximately, $15,500 of capital expenditures were incurred during
fiscal 1996 and $8,937 during the three months ended August 31, 1996.
Centennial's participation in the PCS business is expected to be capital
intensive, requiring network buildout costs of approximately $51,000 over
fiscal years 1997 and 1998. In addition, due to the start-up nature of
the PCS business, the Company expects the PCS business to require
additional cash investment to fund its operations over the next several
years. The PCS business is expected to be highly competitive with the
two existing cellular telephone providers as well as the other MTA PCS
license holder. There is no assurance that the PCS business will
generate cash flow or reach profitability. Centennial is exploring
various sources of external financing including but not limited to bank
financing, joint ventures, partnerships and placement of debt and equity
securities of Centennial. Centennial used a portion of the net proceeds
from the sale of the 10 1/8% Notes to pay the balance of the purchase
price for the license.
Centennial also plans to participate in the alternative access business
in Puerto Rico pursuant to FCC requirements for interstate service and
pursuant to an authorization issued to Centennial in December 1994 by the
Public Service Commission of the Commonwealth of Puerto Rico for
intrastate service.
On July 31, 1996, Centennial filed applications to participate in an
upcoming FCC auction for broadband personal communications services
frequency D and E. Centennial listed Basic Trading Areas ("BTAs"), the
market designation for PCS license areas, that related to its cellular
operations. Centennial submitted a required refundable deposit of
$11,000 in order to maintain its bidding eligibility for the PCS licenses
in which its is interested. There is no assurance regarding the extent
to which any such participation will be successful.
Investments
Australian Pay Television
During fiscal 1994, 1995 and fiscal 1996 the Company has invested,
through a wholly-owned subsidiary, approximately $145,000 in its
Australian Pay TV investments, including approximately $125,000 in East
Coast Pay Television Pty Limited, an Australian Company ("ECT"). Since
the fourth fiscal quarter of 1996, the Company has written down $50,000
of this investment (see below). ECT has been pursuing opportunities to
own operate and invest in, pay television services in Australia.
Australia is considered to be an emerging pay television market. The
investment was effected through the acquisition by the Company of
convertible debentures and ordinary shares of ECT representing a 76.2%
economic interest in ECT. The Company has the right to designate five of
the seven directors of ECT and to approve certain corporate transactions.
The Company has also entered into long-term management agreements with
ECT.
ECT, through a wholly-owned subsidiary, owns Satellite Subscription
Broadcast License A ("License A"), one of three such licenses that may be
granted by Australian authorities prior to July 1997. The license allows
for Direct-To-Home ("DTH") satellite television broadcasting and allows
ECT to offer four channels of programming via DTH. Australis Media
Limited ("Australis"), another pay television company in Australia, owns
Satellite Subscription Broadcast License B ("License B"), the second of
the three licenses currently available for DTH services, allowing for the
DTH broadcast of four channels of programming. ECT and Australis have
entered into agreements pursuant to which ECT will offer its four License
A channels for distribution individually or as part of a combined package
with License B programming in a package of services known as the Galaxy
Package. License A and License B programming are to be distributed via
DTH, Microwave Multipoint Distribution Systems ("MDS") and via cable.
The Galaxy package will be distributed by Australis through DTH and MDS
in the six largest so-called capital cities in Australia (as well as
Western Australia) and in distinct regional areas outside the capital
cities by its franchisees. ECT is a franchisee of Australis in regions
covering approximately 755,000 households.
The License A and License B programming are distributed over common
infrastructure subject to a long term agreement between ECT and Australis
("The Infrastructure Utilization Agreement" or the "IUA"). Among other
terms, the IUA provides ECT with a participation in, and the right to
maintain a 25% interest in the net cash flow (as defined therein) of
Australis. The initial interest of 25% ("the Interest") was determined
based upon the proportional relationship of each Company's investment in
Australian pay TV at that time (A$300 million, Australis and A$100
million ECT). The Interest may be adjusted proportionately downward
depending upon the extent to which ECT (at its sole option) elects to
fund a specified portion (i.e. up to its then Interest) of those funds
expended by Australis in the pay television business in Australia.
Before ECT is required to make such an election (and any resulting
contribution or recalculation of the interest) certain conditions
precedent must be met.
It is ECT's position that it is not yet required to make an election to
make a contribution toward such expenditures since certain conditions
precedent have not been met by Australis. Australis has asserted that as
of January 1996, ECT's interest has decreased from 25% to approximately
10% due to ECT's failure to contribute funds (approximately $136,000).
There can be no assurance that this dispute will be resolved in ECT's
favor, or that, after reviewing the relevant information, ECT will elect
to contribute its share, or any portion of the share, of the funding.
To the extent ECT elects to contribute its share of the funding under the
IUA, funds from various sources of external financing would be required.
There is no assurance that if ECT would otherwise elect to make such a
contribution, that such external financing would be available, and if so
available, would be on terms favorable to ECT.
ECT, Australis and Australis' other Franchisee have acquired control of
substantially all of the currently issued licenses which can be used for
transmission of pay television programming via MDS in Australia. ECT
owns or controls all of the currently issued licenses which entitle it to
transmit pay television programming via MDS in most of Coastal New south
Wales and all of Tasmania (including Wollongong, Hobart and Newcastle,
Australia and surrounding areas) (the "ECT Franchise Areas") and has
entered into a franchise agreement with Australis (the "Franchise
Agreement") pursuant to which it has the exclusive right (and is
obligated) for at least a fifteen year period (with an option to renew
for an additional ten years) to deliver in each of the ECT Franchise
Areas any subscription broadcast service supplied by Australis, including
the Galaxy package. The ECT Franchise Areas contain approximately
755,000 households or approximately 12% of all Australian households.
Programming for the License A Package is provided by XYZ, a joint venture
in which the Company holds a 25% interest. The Company's 25% interest in
XYZ is derived through the Company's joint venture with United
International Holdings, Inc. ("UIH"), a leading international provider of
pay television services which holds interests in the two other
Franchisees of Australis. The above noted structure is pursuant to a
series of agreements entered into by the Company, UIH and Foxtel, a joint
venture between Telstra Corporation Limited, the government-owned
Australian national telecommunications carrier, and The News Corporation
Limited, a major international media and entertainment company.
Programming provided by XYZ includes the Discovery channel, a documentary
channel; Red, a music video channel; Nickelodeon, a children's and family
channel; and Arena, a general entertainment channel. In addition, XYZ is
developing two additional channels (channels 5 and 6) which it will seek
to have included in the Galaxy package.
ECT has entered into a long-term agreement with Foxtel (a competitive
cable television provider) pursuant to which Foxtel has agreed to
distribute the License A Package, as well as channels 5 and 6 throughout
Australia over Foxtel's cable television network. ECT receives a monthly
per subscriber fee from Foxtel for the License A Package. Foxtel, owns
the remaining 50% of XYZ. Pursuant to arrangements between ECT and
Foxtel, ECT is prohibited from granting any third party the right to
distribute the License A Package and Channels 5 and 6 by cable television
in Australia without the prior consent of Foxtel. However, ECT has
retained the non-exclusive right to distribution of the License A Package
by cable television in the East Coast Franchise areas. In addition, if
Foxtel supplies any Foxtel channels for distribution by Galaxy, Foxtel
must authorize Galaxy to provide the same Channels to the Franchisees for
distribution by MDS transmission and DTH satellite in the franchise
areas. These arrangements with Foxtel provide for fixed per subscriber
prices as well as minimum subscribers by January 1, 2001. Foxtel is
presently meeting the minimum guarantee.
The Company has also acquired an approximate 2% economic interest in
Australis for approximately $10,000. During the fourth quarter of fiscal
1996, the investment was written off by the Company based upon its then
assessment of the financial position of Australis (see below).
ECT's principal uses of capital have been to invest in and develop its
pay TV infrastructure and to fund operating losses. Specifically, ECT
has (i) invested approximately $104,721 to acquire its interest in
Satellite License A, (ii) invested approximately $11,279 to acquire
certain MDS licenses covering the geographic areas located in the ECT
Franchise Areas, and (iii) invested approximately $22,577 to build out
the network infrastructure and establish offices in its principal areas
of operation. In addition, since fiscal 1994, ECT has required
approximately $11,106 for operating activities.
ECT has generated negative cash flow from operating activities as a
result of startup costs associated with constructing and marketing
multichannel television and telecommunications service as well as
establishing the organizational infrastructure required for the operation
of the Australian Pay TV Business.
In order to generate operating cash flow, ECT's revenue must exceed
operating expenses. Increases in revenue will be dependent upon
continued growth in the number of subscriptions and maximizing revenue
per subscriber. ECT has been, and subject to the availability of
additional financing will be able to continue the process of developing
its core managerial, administrative and marketing functions and the
construction of its pay TV network in its existing markets. The
Australian Pay TV Business is expected to be highly competitive with two
potential cable television providers having announced plans for
distribution of video services throughout continental Australia. There
can be no assurance that such financing will be available or that ECT
will generate sufficient cash flow to meet its needs and, accordingly,
there can be no assurance that profitability will be achieved in the
foreseeable future.
ECT requires substantial capital to operate, construct, expand and to
invest in the Australian Pay TV Business as well as funding operating
losses and debt service. All of ECT's Australian Pay TV Business
activities are considered to be in the start-up or early development
phase of operations. ECT must continue to seek various sources of
external financing to meet its current and future financial needs, which
may include bank financing, joint ventures and partnerships, investments
by third parties and public and private placements of debt and equity
securities. Absent such financing, there can be no assurance that ECT
will be in a position to fully exploit its market potential.
The Company expects that the Australian Pay TV Business will continue to
be capital intensive. At August 31, 1996, ECT had $19,066 of property,
plant and equipment placed in service. ECT believes it would need to
spend approximately $125,000 over the next five years to expand its MDS
and satellite networks, and market and distribute services in the ECT
Franchise Areas. In order to fund these commitments, ECT must raise
additional capital either from public or private placements of its equity
or debt securities, investments by third parties, joint ventures and
partnerships or bank borrowing. Although ECT has been able to obtain
financing for its operations to date, there is no assurance such
financings will be available to it in the future, or if available, on
terms favorable to ECT.
Since commencement of its operations in the Australian Pay TV Business,
ECT has been funded by capital contributions and short-term debt
facilities from its principal security holders (including the Company),
and third party bank financings. These debt facilities are currently
payable upon demand. There is no assurance that such funding will
continue to be available, or that the lenders (including the Company)
will continue to extend the maturity of the demand loans. On September
30, 1996, ECT was notified that two of its debt facilities currently held
by a third party bank which aggregate approximately $9,600 which, had by
their terms matured, were in default. ECT is currently in negotiations
to refinance all or a portion of the facilities. There is no assurance
that such negotiations will be successful, failing same ECT may not be
able to continue its operations. In that regard, the Company's
Australian Holding Company has reserved against its short-term advances
to ECT in the aggregate amount of $40,000. As a result, the Company has
recorded this reserve in the three months ended August 31, 1996, as a
write-down of its Australian assets in accordance with Statement of
Financial Accounting Standards No. 121. In addition to the occurrence of
the default under ECT's third party debt facilities, the write-down was
based upon changes in market conditions, development plans and other
considerations regarding the events described below with respect to
Australis.
In this regard the Company and the other security holders of ECT are
currently negotiating an agreement to put in place those organizational
and structural changes in ECT necessary to raise additional capital for
investment in the Australian Pay TV marketplace necessary to meet its
operating requirements. It is anticipated that on completion, ECT may
seek to raise additional capital. There is no assurance that such
agreement will be concluded, or if concluded, that ECT will raise
sufficient funding for all of its business needs.
Under the Franchise Agreement and IUA, ECT is dependent on the efforts of
Australis in the development of the pay television industry in Australia.
The Company has become aware that Australis' financial position has
significantly deteriorated to the point where without additional funding
its ability to survive as a going concern is in doubt. ECT's financial
position (and a result, the Company's investment in ECT) may be
materially and adversely affected if Australis were to become insolvent.
The Company's pay television subscriber business is dependent on
acceptance of the Galaxy package as a well-known national product as well
as the infrastructure established by Australis, including the national
marketing and subscriber management service.
If Australis were to become insolvent, and as a result, were not able to
provide infrastructure services, subscriber management systems and other
related services for ECT, ECT would need to develop such services on its
own, which could be on economic terms to ECT less favorable than those
now available from Australis.
In addition, ECT understands that under this circumstance, ECT may be
required to seek replacement programming currently provided by Australis
which may be on less favorable terms than those provided by Australis.
Additionally, ECT could be required to continue to provide the License A
Package to Australis, while the obligation of Australis to provide the
License B Package, either by itself or as part of the Galaxy package, to
ECT as a Franchisee could be avoided, and certain agreements, including
the IUA and the Franchise Agreement, could be modified or voided by a
bankruptcy liquidation if determined to be "unprofitable". Existing
obligations of Australis under these agreements could be subject to
reorganization claims and preferences. Moreover, if Australis were
unable to expand its subscriber base, the distribution of ECT's License
Package A throughout Australia may be inhibited. Further in the event of
any such insolvency ECT may be required to pay Australis' portion of the
satellite lease payments for the transmission of the License A and B
Packages since ECT is jointly and severally liable for those payments.
The incremental cost to ECT for the Australis portion of their obligation
would be approximately $6,250 per annum.
Australis has recently announced a recapitalization plan which includes
the introduction of additional equity and the transfer of certain assets
to a joint venture with Optusvision (a competitive cable provider). The
plan is subject to lender, shareholder, and regulatory approvals as well
as an additional debt offering to be completed by October 31, 1996. ECT
is currently reviewing the plan to determine the impact, if any, on its
business and the extent to which certain consents requested by Australis
will be accommodated. ECT has been given no assurance that the plan, as
proposed, will receive the necessary approvals or that the contemplated
debt offering will be successful. On October 14, 1996, Australis
informed the market that it did not receive all the requisite shareholder
approval which it sought in connection with the refinancing. The Company
cannot currently assess the impact of same on the Australis refinancing
plan.
The Company is currently unable to predict the ultimate resolution of
these matters. At August 31, 1996 the remaining net book value of its
investments in the various aspects of Australian Pay TV after giving
effect to the aforementioned write-down of Australian assets, aggregated
approximately $40,000. The Company will continue to assess the impact,
if any, of the above noted matters on the carrying value of its
investments in the Australian Pay TV businesses.
Foreign Currency Exchange Rate Risks; Hedging
The Company's monetary assets and liabilities are subject to foreign
currency exchange risk as certain equipment purchases and payments for
certain operating expenses, such as programming expenses, are denominated
in currencies other than their own functional currency. In addition,
certain of the Company's subsidiaries have notes payable and notes
receivable which are denominated in a currency other than their own
functional currency or intercompany loans payable linked to the U. S.
dollar.
In general, the Company does not execute hedge transactions to reduce its
exposure to foreign currency exchange rate risks. Accordingly, the
Company may experience economic loss and a negative impact on earnings
with respect to its holdings solely as a result of foreign currency
exchange rate fluctuations, which include foreign currency devaluations
against the dollar. The Company may also experience economic loss and a
negative impact on earnings related to these monetary assets and
liabilities. In general, exchange rate risk to the Company's commitments
for equipment purchases and operating expanses is generally limited due
to the insignificance of the related monetary asset and liability
balances; however, exchange rate risk to the Company of these notes
payable and notes receivable and debt linked to the U. S. dollar have and
will continue to impact its reported earnings.
Australia generally does not restrict the removal or conversion of local
or foreign currency; however, there is no assurance this position will
continue.
Stock Repurchase
On March 10, 1995, the Company purchased 20,000,000 shares of its Class B
Common Stock from Sentry Insurance a Mutual Company, of Stevens Point,
Wisconsin ("Sentry Insurance"), at an aggregate price of $110,000
utilizing existing credit lines. Upon acquisition, the Class B shares
were converted automatically to Class A shares. For the present, the
acquired shares will be held in the Company's treasury. Prior to this
acquisition, 65,406,115 shares of the Company's Class B Common Stock were
outstanding of which 23,134,056 were held by Sentry Insurance.
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 has made no such purchases to date.
PART II - OTHER INFORMATION
ITEM 5. Other Information
Jones Acquisition
On August 16, 1996, the Company entered into agreements to purchase (i)
the assets related to cable television systems serving Oxnard and Walnut
Valley, California for an aggregate purchase price of approximately $104
million (subject to adjustment), payable in cash, and (ii) the assets
related to the cable television system serving Yorba Linda, California
for a purchase price of approximately $36 million (subject to
adjustment), payable in cash. At May 31, 1996, the Oxnard and Walnut
Valley cable television systems served approximately 40,764 and 18,763
equivalent basic subscribers, respectively, and at July 31, 1996, the
Yorba Linda cable television system served approximately 16,885
equivalent basic subscribers. The Company's obligation to consummate
these transactions under the agreements is subject to the satisfaction of
various closing conditions, including approval from the FCC and other
regulatory approvals. There can be no assurance that the closing
conditions will be satisfied. Effective September 1, 1996, the Company
assigned its rights and obligations as purchaser under these agreements
to Citizens Century Cable Television Venture, a joint venture owned 50%
each by the Company and Citizens Utilities Company (the "Joint Venture").
The Company anticipates that the Joint Venture will complete these
acquisitions during the fourth quarter of the fiscal year ended May 31,
1997.
ITEM 6. Exhibits and Reports on Form 8-K
a) Exhibits
i) Exhibit 11 - Statement re computation of per share
earnings
ii) Exhibit 27 - Financial Data Schedule (EDGAR filing
only)
b) Reports on Form 8-K
None.
<TABLE>
CENTURY COMMUNICATIONS CORP. AND SUBSIDIARIES
EXHIBIT TO FORM 10-Q
For the Three Months Ended
August 31, 1996
COMPUTATION OF LOSS PER COMMON SHARE
(Amounts in thousands, except per share data)
<CAPTION>
Three Months Ended
August 31, August 31,
1996 1995
<S> <C> <C>
Primary fully diluted:
Net Loss $ (61,212) $ (21,917)
Accretion in liquidation value of subsidiary
preferred stock (1,098) (1,035)
Loss applicable to common shares $ (62,310) $ (22,952)
Average number of common shares and common
share equivalents outstanding
Average number of common shares
outstanding during the period 74,069,000 73,583,000
Add common share equivalents - Options
to purchase common shares - net 379,000 814,000
Average number of common shares and common
share equivalents outstanding 74,448,000 (A) 74,397,000 (A)
Loss per common share $ (.84) (A) $ (.31) (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: October 14, 1996 /s/
_______________________________
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> 3-MOS
<FISCAL-YEAR-END> May-31-1997
<PERIOD-END> Aug-31-1996
<CASH> 127,926
<SECURITIES> 53,918
<RECEIVABLES> 56,274
<ALLOWANCES> 4,080
<INVENTORY> 0
<CURRENT-ASSETS> 191,867
<PP&E> 660,395
<DEPRECIATION> 455,526
<TOTAL-ASSETS> 2,172,706
<CURRENT-LIABILITIES> 173,991
<BONDS> 0
<COMMON> 1,057
0
186,287
<OTHER-SE> (502,437)
<TOTAL-LIABILITY-AND-EQUITY> 2,172,706
<SALES> 153,004
<TOTAL-REVENUES> 153,004
<CGS> 31,814
<TOTAL-COSTS> 177,318
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 48,424
<INCOME-PRETAX> (71,322)
<INCOME-TAX> (6,598)
<INCOME-CONTINUING> (64,724)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (61,212)
<EPS-PRIMARY> (.84)
<EPS-DILUTED> 0
</TABLE>
