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 February 28, 1997
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 - 31,012,617 outstanding shares as of April 1, 1997
Class B Common - 45,126,115 outstanding shares as of April 7, 1997
PART 1 - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CENTURY COMMUNICATIONS CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Amounts in thousands)
<TABLE>
<CAPTION> February 28, May 31,
<S> 1997 1996
ASSETS
Current assets: <C> <C>
Cash and cash equivalents $ 117,403 $164,592
Accounts receivable, less allowance
for doubtful accounts of
$3,196 and $3,008, respectively 56,833 41,002
Prepaid expenses and other current assets 19,518 6,632
Total current assets 193,754 212,226
Property, plant and equipment - net 686,594 651,607
Investment in marketable equity securities 55,657 53,069
Equity investments in cable television
and cellular telephone systems - net 104,020 108,256
Debt issuance costs, less accumulated
amortization of $16,276 and $11,652,
respectively 31,452 28,352
Cable television franchises, less
accumulated amortization of
$332,787 and $285,991, respectively 424,400 525,194
Wireless telephone licenses, less
accumulated amortization of
$201,497 and $164,786, respectively 359,382 360,213
Excess of purchase price over value
of net assets acquired, less
accumulated amortization of
$56,830 and $51,529, respectively 282,672 279,202
Other assets 21,657 16,790
$2,159,588 $2,234,909
</TABLE>
See notes to consolidated financial statements
CENTURY COMMUNICATIONS CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(CONTINUED)
(Amounts in thousands, except share data)
<TABLE>
<CAPTION>
<S> February 28, May 31,
LIABILITIES AND STOCKHOLDERS' DEFICIENCY 1997 1996
<C> <C>
Current liabilities:
Current maturities of long-term debt $ 15,224 $ 15,084
Accounts payable 32,420 26,102
Accrued interest payable 41,076 22,921
Other accrued expenses 81,666 72,757
Customers' deposits and prepayments 22,619 19,370
Total current liabilities 193,005 156,234
Long-term debt 2,108,168 2,081,611
Deferred income taxes 69,958 99,474
Minority interest in subsidiaries 143,699 162,790
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
62,551,617 and 59,946,280 shares,
respectively (includes treasury shares) 626 599
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 175,597 175,804
Other, including 31,541,264 and 31,354,622
treasury shares,respectively (109,198) (117,702)
Accumulated deficit (609,005) (507,168)
Total common stockholders' deficiency (541,529) (448,013)
$2,159,588 $2,234,909
</TABLE>
See notes to consolidated financial statements
CENTURY COMMUNICATIONS CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
(Amounts in thousands, except share data)
<TABLE>
<CAPTION> Three Months Ended Nine months Ended
February 28, February 29, February 28, February 29,
1997 1996 1997 1996
<S> <C> <C> <C> <C>
Revenue:
Cable service income $113,493 $91,774 $341,301 $272,635
Cellular service income 39,174 27,938 106,898 82,573
Australian operations 8,298 2,342 24,766 4,512
160,965 122,054 472,965 359,720
Costs and expenses:
Cost of services - Cable 25,587 20,869 75,275 60,452
Cost of services - Cellular 10,647 7,235 27,009 19,772
Selling, general
and administrative 42,665 30,710 117,618 89,329
Australian expenses 7,292 12,678 21,856 21,621
Depreciation and
amortization - domestic 57,531 48,815 172,947 143,715
Depreciation and
amortization - Australia 3,904 -- 14,120 --
Write-down of Australian
assets -- -- 40,000 --
147,626 120,307 468,825 334,889
Operating income 13,339 1,747 4,140 24,831
Gain on sale of assets 2,058 15 2,106 4,218
Interest expense 51,095 43,693 148,622 134,026
Other income 1,590 760 5,631 1,226
Loss before income tax
(benefit) and
minority interest (34,108) (41,171) (136,745) (103,751)
Income tax (benefit) (6,045) (10,025) (23,619) (22,082)
Loss before minority
interest (28,063) (31,146) (113,126) (81,669)
Minority interest in
loss of subsidiaries 4,695 7,523 11,289 14,981
Net loss $(23,368) $(23,623) $ (101,837) $ (66,688)
Dividend requirement
on subsidiary
convertible redeemable
preferred stock $ (1,250) $ (1,068) $ (3,599) $ (3,171)
Loss applicable to
common shares $(24,618) $(24,691) $ (105,436) $ (69,859)
Loss per common share $ (.33) $ (.33) $ (1.42) $ (.95)
Weighted average number
of common shares
outstanding during
the period 74,383,000 73,807,000 74,196,000 73,689,000
See notes to consolidated financial statements
</TABLE>
CENTURY COMMUNICATIONS CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands)
<TABLE>
<CAPTION> Nine Months Ended
February 28, February 29,
1997 1996
<S> <C> <C>
OPERATING ACTIVITIES:
Cash received from subscribers and others $ 555,799 $424,555
Cash paid to suppliers, employees and
governmental agencies (342,934) (269,265)
Interest paid (112,294) (103,857)
NET CASH PROVIDED BY
OPERATING ACTIVITIES 100,571 51,433
INVESTING ACTIVITIES:
Capital expenditures (111,422) (71,952)
Cable television franchise expenditures (965) (2,417)
Acquisition of other assets (7,241) (5,257)
Acquisition of cable television
and wireless telephone systems (34,908) (62,819)
Capital contributed to equity investments (292) (433)
Capital returned from equity investments 6,863 4,818
NET CASH (USED IN) INVESTING ACTIVITIES (147,965) (138,060)
FINANCING ACTIVITIES:
Proceeds from long-term borrowings 857,140 301,500
Principal payments on long-term debt (847,050) (283,456)
Debt issuance costs (7,724) (5,023)
Payment of subsidiary preferred
stock dividends (3,959) --
Issuance of common stock 3,416 2,376
Purchase of treasury stock (1,618) (158)
NET CASH PROVIDED BY
FINANCING ACTIVITIES 205 15,239
NET DECREASE IN CASH AND CASH EQUIVALENTS (47,189) (71,388)
CASH AND CASH EQUIVALENTS -
BEGINNING OF PERIOD 164,592 228,764
CASH AND CASH EQUIVALENTS - END OF PERIOD $ 117,403 $ 157,376
</TABLE>
See notes to consolidated financial statements
CENTURY COMMUNICATIONS CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(CONTINUED)
(Amounts in thousands)
<TABLE>
<CAPTION> Nine Months Ended
February 28, February 29,
1997 1996
<S> <C> <C>
RECONCILIATION OF NET LOSS TO NET CASH
PROVIDED BY OPERATING ACTIVITIES:
NET LOSS $ (101,837) $ (66,688)
Adjustments to reconcile net
loss to net cash provided
by operating activities:
Depreciation and amortization 187,067 143,715
Write-down of Australian assets 40,000 --
Gain on sale of assets -- (4,218)
Deferred income taxes - decrease (29,516) (23,500)
Minority interest in loss of subsidiaries (11,289) (22,637)
Non-cash interest charges 16,607 21,442
Other (10,209) (255)
Change in assets and liabilities,
net of effects of acquired,
exchanged and disposed cable
television and cellular
telephone systems
Accounts receivable - (increase) (6,167) (11,951)
Prepaid expenses and other
current assets - (increase) (12,822) (2,290)
Accounts payable and accrued
expenses - increase 25,488 17,096
Customers' deposits and
prepayments - increase 3,249 719
Total adjustments 202,408 118,121
NET CASH PROVIDED BY OPERATING ACTIVITIES $ 100,571 $ 51,433
</TABLE>
See notes to consolidated financial statements
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 February 28, 1997 and the results of its consolidated
operations and cash flows for the nine months ended February 28, 1997 and
February 29, 1996. 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 nine month period ended February 29, 1996, 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
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
recorded this reserve in the nine months ended February 28, 1997, as a
write-down of its Australian assets in accordance with Statement of
Financial Accounting Standards No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed of" ("SFAS No.
121") which 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. 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. At February 28, 1997, the remaining net book value of
its investments in the various aspects of the Australian pay television
industry, after giving effect to the aforementioned write-down of
Australian assets, aggregated approximately $30,000. For further
discussion see Management's Discussion and Analysis.
The Company determined to pursue a strategy to sell its investments in
its Australian operations. The Company is currently in discussion with
investment advisors with respect to the sale of these interests. The
Company has not as yet developed an estimate of the net proceeds to be
received on disposition or the expected period required for completion of
the disposition. As a result, the operating results for the Australian
operations have been reported as a component of continuing operations.
Once the Company has developed its formal plan for disposition, including
its estimate of the net proceeds upon disposition and the period expected
to be required for completion of the disposition, the Company anticipates
accounting for its Australian operations as discontinued operations.
Management believes that the fair market value exceeds the net book value
of the Australian investments.
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 $84,777 and $69,042 for the nine months ended February 28,
1997 and February 29, 1996, respectively.
Cellular telephone service income includes service revenues and charges
for installation and connections, net of land line charges of $20,678 and
$13,743 for the nine months ended February 28, 1997 and February 29,
1996, respectively.
NOTE 4. REGISTRATION STATEMENTS
On April 3, 1997, the Company filed a registration statement with the
Securities and Exchange Commission ("SEC") relating to the shelf
registration of $500,000 of the Company's debt securities. The
registration statement has not been declared effective by the SEC.
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 April 10, 1997, 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 April 10, 1997, $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 nine months ended February 28, 1997 and February 29, 1996.
The reclassifications result from the Company's acquisitions and
exchanges and consolidation of entities previously accounted for by the
equity method of accounting:
<TABLE>
<CAPTION> Nine months Ended
February 28, February 29,
1997 1996
<S> <C> <C>
Current assets $ $ 11,479
Property, plant and equipment 10,420
Equity investments (91,200)
Cable television franchises (14,963) 105,637
Wireless telephone licenses 6,138
Goodwill 14,963 (4,323)
Other assets (987)
$ -- $ 37,164
Current liabilities $(7,534) $ 23,915
Deferred taxes (1,454)
Minority interest 15,918
Additional paid in capital 1,240
Translation adjustments 7,534 (2,455)
$ -- $ 37,164
</TABLE>
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. Approximately $11,355 and $29,545 of the purchase
price was allocated to property, plant and equipment and cable television
franchise, respectively.
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. Approximately $103,695
and $183,148 of the purchase price was allocated to property, plant and
equipment and cable television franchise, respectively.
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 subject to adjustment. 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.
Approximately, $33,132 of the purchase price was allocated to cellular
telephone license.
Centennial has determined to pursue a strategy to sell or otherwise
dispose of its minority interests in cellular telephone systems
representing approximately 1,100,000 net pops. Centennial has not yet
made a final determination as to the estimated sale proceeds or the
timing of such disposition.
During fiscal 1997, Centennial made and withdrew its application to
participate in the FCC auction of PCS frequency blocks D and E and was
refunded its $11,000 deposit.
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.
<TABLE>
<CAPTION> Nine months Ended
February 28, February 29,
1997 1996
<S> <C> <C>
Revenues $498,984 $ 430,088
Net loss (102,183) (86,535)
Net loss per common share (1.40) (1.20)
</TABLE>
Pro forma net loss per common share for the nine months ended February
28, 1997 and February 29, 1996 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) On January 17, 1997, the Company issued Senior Notes Due 2007 ("8
7/8% Notes") in the principal amount of $250,000 which mature on January
15, 2007. The 8 7/8% Notes bear interest at 8 7/8% payable semiannually
on January 15 and July 15 of each year commencing July 15, 1997. The 8
7/8% Notes may not be redeemed prior to maturity.
The 8 7/8% Notes will rank pari passu with all existing and future Senior
Indebtedness (as that term is used in the Prospectus) of the Company,
including the 9 3/4% Senior Notes Due 2002, the 9 1/2% Senior Notes Due
2000, the Senior Discount Notes Due 2003 and the 9 1/2% Senior Notes due
2005 and will be senior in right of payment to all existing and future
subordinated indebtedness of the Company, including the 11 7/8% Senior
Subordinated Debentures Due 2003.
The 8 7/8% Notes provide that the holders will have the right to require
the Company to purchase the 8 7/8% Notes following a transaction or
transactions which reduce below 300 the number of record holders of the
Company's Class A Common Stock and which result in certain reduction in
ratings of the 8 7/8% Notes.
The net proceeds received by the Company from the sale of the 8 7/8%
Notes, of approximately $244,607, were used to temporarily repay a
portion of the long-term debt outstanding under two credit agreements
executed by subsidiaries of the Company. The net proceeds will be used
to retire $204,000 aggregate principal amount of 11 7/8% Senior
Subordinated Debentures due 2003 issued by the Company in October 1991
(the "11 7/8% Debentures). The 11 7/8% Debentures may be called by the
Company beginning in April 1997 at a redemption price of 105% of the
principal amount thereof. Accordingly, the amount required to retire the
11 7/8% Debentures at such time is $214,200 plus accrued and unpaid
interest through the date of retirement. The effect of the redemption
will result in an extraordinary loss during the fourth quarter of fiscal
1997 of approximately $13,016 reflecting the call premium and write-off
of deferred financing costs. The balance of the net proceeds may be used
by the Company for general corporate purposes, including but not limited
to the financing of capital expenditures, investments, purchases of the
Company's securities and acquisitions. Pending any specific application,
the net proceeds will be added to working capital and invested in short-
term interest bearing obligations.
(b) 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.
(c) 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.
(d) 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.
(e) 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 at the election of Centennial, on (a) the
"Base Rate", as defined, plus a margin of 2% or (b) the "Eurodollar
Rate", as defined, 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, limits Centennial's
ability to pay dividends and requires that certain operating tests be
met.
At February 28, 1997, the Company was in compliance with all covenants of
its respective credit facilities.
NOTE 8. NEW ACCOUNTING PRONOUNCEMENTS
In October 1995, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards ("SFAS") No. 123, "Accounting
for Stock-Based Compensation", which will be adopted by the Company in
fiscal 1997 as required by the statement. The Company has elected to
continue to measure such compensation expense using the method prescribed
by Accounting principles Board Opinion No. 25, "Accounting for Stock
Issued to Employees", as permitted by SFAS No. 123. When adopted, SFAS
No. 123 will not have any effect on the Company's financial position or
results of operations, but will require the Company to provide expanded
disclosure regarding its stock-based employee compensation plans.
In February 1997, the Financial Accounting Standards Board issued SFAS
No. 128, "Earnings per Share", which will be adopted by the Company in
fiscal 1998 as required by the statement. SFAS No. 128 simplifies the
standards for computing earnings per share required by APB Opinion No. 15
"Earnings per Share."
The Company has not yet determined the effect the adoption of SFAS No.
128 will have on the computation of earnings per share to be presented
within the Company's financial statements.
NOTE 9. SEGMENT INFORMATION
Information about the Company's operations in its three business segments
for the nine months ended February 28, 1997 and February 29, 1996 is as
follows (amounts in thousands):
<TABLE>
<CAPTION>
<S>
1997 1996
<C> <C>
Gross revenues:
Cable television $ 341,442 $ 272,755
Cellular telephone 106,898 82,573
Australian operations 24,766 4,512
Eliminations (141) (120)
$ 472,965 $ 359,720
Operating (loss) income:
Cable television $ 71,648 $ 58,618
Cellular telephone (16,157) (16,097)
Australian operations (51,210) (17,570)
Eliminations (141) (120)
$ 4,140 $ 24,831
Net loss:
Cable television $ (32,665) $ (39,406)
Cellular telephone (21,714) (19,574)
Australian operations (62,169) (25,035)
Eliminations 14,711 17,327
$ (101,837) $ (66,688)
Assets, at end of period
Cable television $1,560,232 $ 1,310,912
Cellular telephone 793,272 779,257
Australian operations 79,637 143,738
Eliminations (273,553) (263,485)
$2,159,588 $ 1,970,422
Depreciation and amortization:
Cable television $ 113,981 $ 90,141
Cellular telephone 58,966 53,574
Australian operations 14,120 --
$ 187,067 $ 143,715
Capital expenditures:
Cable television $ 49,871 $ 45,059
Cellular telephone 59,482 26,893
Australian operations 2,069 --
$ 111,422 $ 71,952
</TABLE>
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 are intended to 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 the consolidated
information.
NOTE 9 - CONTINUED
CENTURY COMMUNICATIONS CORP. AND SUBSIDIARIES
CONSOLIDATING BALANCE SHEET FINANCIAL DATA
February 28, 1997
(Amounts in thousands)
<TABLE>
<CAPTION>
Century
Communications
Corp. before
consolidation Centennial Reclassification
of Centennial Cellular Australian and
and Australia Corp. Operations Eliminations Consolidated
<S> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and short-term
investments $ 96,211 $ 15,954 $ 5,238 $ -- $ 117,403
Accounts receivable
- net 21,500 24,002 11,119 212 56,833
Prepaid expenses and
other current assets 11,784 6,417 1,317 -- 19,518
Total current assets 129,495 46,373 17,674 212 193,754
Property, plant &
equipment - net 518,333 151,697 16,564 -- 686,594
Investment in marketable
equity securities 55,657 -- -- -- 55,657
Investment in Centennial
Cellular Corp., at cost 139,685 -- -- (139,685) --
Equity investment in
cable television and
cellular telephone
systems - net 144,878 95,289 668 (136,815) 104,020
Debt issuance costs - net 24,118 7,334 -- -- 31,452
Cable television
franchises - net 379,983 -- 44,417 -- 424,400
Wireless telephone
licenses - net -- 359,382 -- -- 359,382
Excess of purchase
price over value of net
assets acquired - net 151,707 130,965 -- -- 282,672
Other assets 16,376 2,232 314 2,735 21,657
$1,560,232 $ 793,272 $ 79,637 $ (273,553) $ 2,159,588
</TABLE>
NOTE 9. CONTINUED
CENTURY COMMUNICATIONS CORP. AND SUBSIDIARIES
CONSOLIDATING BALANCE SHEET FINANCIAL DATA
(CONTINUED)
February 28, 1997
(Amounts in thousands)
<TABLE>
<CAPTION>
Century Communications
Corp. before
consolidation Centennial Reclassification
of 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 $ -- $ 15,174 $ -- $ 15,224
Accounts payable and
accrued expenses 81,410 47,105 26,647 -- 155,162
Customers' deposits
and prepayments 15,603 7,016 -- -- 22,619
Total current liabilities 97,063 54,121 41,821 -- 193,005
Long-term debt 1,739,168 369,000 -- -- 2,108,168
Deferred liability 5,000 2,200 -- (7,200) --
Deferred income taxes 22,134 47,824 -- -- 69,958
Minority interest
in subsidiaries 57,126 -- -- 86,573 143,699
Due to parent -- -- 144,878 (144,878) --
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 626 165 -- (165) 626
Class B 451 105 -- (105) 451
Additional paid-in capital 87,650 371,829 -- (283,882) 175,597
Other (115,979) (4,801) 6,781 4,801 (109,198)
Accumulated deficit (333,007) (240,710) (113,843) 78,555 (609,005)
Total common stockholders'
equity (deficiency) (360,259) 126,588 (107,062) (200,796) (541,529)
$1,560,232 $793,272 $ 79,637 $ (273,553) $2,159,588
</TABLE>
NOTE 9. CONTINUED
CENTURY COMMUNICATIONS CORP. AND SUBSIDIARIES
CONSOLIDATING STATEMENT OF OPERATIONS FINANCIAL DATA
Nine month Period Ended February 28, 1997
(Amounts in thousands)
<TABLE>
<CAPTION> Century
Communications
Corp. before
consolidation Centennial Reclassification
of Centennial Cellular Australian and
and Australia Corp. Operations Eliminations Consolidated
<S> <C> <C> <C> <C> <C>
Revenues $ 341,442 $ 106,898 $ 24,766 $ (141) $ 472,965
Costs and expenses:
Costs of services 75,275 27,009 -- -- 102,284
Selling, general & administrative 80,538 37,080 -- -- 117,618
Depreciation and amortization 113,981 58,966 14,120 -- 187,067
Australian operations -- -- 21,856 -- 21,856
Australian write-down -- -- 40,000 -- 40,000
269,794 123,055 75,976 -- 468,825
Operating income/(loss) 71,648 (16,157) (51,210) (141) 4,140
Income (loss) from
equity investments -- 10,873 -- (10,873) --
Interest 117,852 23,598 7,172 -- 148,622
Gain on sale of assets -- 2,106 -- -- 2,106
Other (income)/loss 1,455 -- 3,787 (10,873) (5,631)
Loss before income tax provision
benefit and minority interest (47,659) (26,776) (62,169) (141) (136,745)
Income tax benefit (18,087) (5,532) -- -- (23,619)
Loss before minority interest (29,572) (21,244) (62,169) (141) (113,126)
Minority interest in (income) loss
of subsidiaries (3,093) (470) -- 14,852 11,289
Net Loss $ (32,665) $(21,714) $(62,169) $ 14,711 $ (101,837)
</TABLE>
NOTE 10. Changes in stockholders' deficiency
<TABLE> Common Stock
<CAPTION> Class A Class B
Shares Dollars Shares Dollars
<S> <C> <C> <C> <C>
Balance at June 1, 1995 59,484,685 $ 595 45,406,115 $ 454
Shares issued in connection with
employee incentive plans 461,595 4
Unrealized appreciation of
marketable securities
Foreign currency translation adjustment
Net paid-in capital contributed by
minority interests
Accretion in liquidation value of
subsidiary preferred stock
Vesting of subsidiary stock options
Net loss
Balance at May 31, 1996 59,946,280 599 45,406,115 454
Shares issued in connection with
employee incentive plans 567,890 6 25,000
Class A shares purchased by
the Company
Class B shares converted to
Class A shares 305,000 3 (305,000) (3)
Class A shares issued in connection
with acquisitions 1,732,357 18
Accretion in liquidation value of
subsidiary preferred stock and
preferred stock dividends
Foreign currency translation adjustment
Unrealized loss of marketable
equity securities
Net loss
Balance at February 28, 1997 62,551,617 $ 626 45,126,115 $ 451
</TABLE>
NOTE 10. Changes in stockholders' deficiency (continued)
<TABLE>
<CAPTION> Additional Paid-In (Accumulated
Capital Deficit) Other Total
<S> <C> <C> <C> <C>
Balance at June 1, 1995 $175,545 $(405,051) $(123,188) $(351,645)
Shares issued in connection with
employee incentive plans 2,971 (158) 2,817
Change in unrealized
appreciation of
marketable securities 6,397 6,397
Foreign currency
translation adjustment (753) (753)
Net paid-in capital contributed
by minority interests 1,238 1,238
Accretion in liquidation value of
subsidiary preferred stock (4,256) (4,256)
Vesting of subsidiary stock options 306 306
Net loss (102,117) (102,117)
Balance at May 31, 1996 175,804 (507,168) (117,702) (448,013)
Shares issued in connection with
employee incentive plans 3,410 3,416
Class A shares purchased
by the Company (1,619) (1,619)
Class B shares converted
to Class A shares --
Class A shares issued in
connection with acquisition (18) --
Accretion in liquidation
value of susbisidary
preferred stock and
preferred stock dividends (3,599) (3,599)
Foreign currency translation
adjustment 7,534 7,534
Change in unrealized
appreciation of marketable
equity securities 2,589 2,589
Net loss (101,837) (101,837)
Balance at February 28, 1997 $175,597 $(609,005) $(109,198) $(541,529)
Other stockholders' deficiency items February 28, 1997 May 31, 1996
Treasury stock, at cost $ (139,381) $ (137,762)
Unrealized appreciation of marketable securities 23,402 20,813
Foreign currency translation adjustment 6,781 (753)
$ (109,198) $ (117,702)
</TABLE>
ITEM 2. 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)
The Company is primarily engaged in the ownership and operation of cable
television systems in the United States and earns its revenues primarily
from subscriber fees. At February 28, 1997, the Company owned and
operated 70 cable television systems in 25 states and Puerto Rico. At
that date, the Company's cable systems passed approximately 2,060,000
homes and served a total of approximately 1,256,000 primary basic
subscribers. Certain of the Company's cable systems are owned 50% by the
Company and 50% by unaffiliated entities. At February 28, 1997, these
systems passed approximately 541,000 homes and served approximately
271,000 primary basic subscribers.
The Company has a 31.8% common stock interest and a 73.6% voting interest
in Centennial Cellular Corp. ("Centennial") and provides management
services to Centennial. The market value of this interest, based solely
on the equivalent number of publicly-traded shares of Class A Common
Stock, was $97,391 on February 28, 1997. In accordance with Financial
Accounting Standards Board Statement No. 94, the accounts of Centennial
are consolidated with those of the Company for reporting purposes for all
periods presented. Centennial is engaged in the ownership and operation
of wireless telephone systems, primarily in four geographic areas in the
United States and Puerto Rico. Centennial also plans to participate in a
full range of telecommunications services, including, but not limited, to
wireless PCS, competitive local exchange and alternative access.
The Company has interests in businesses in the pay television industry in
Australia. The interests include investments in entities (which include
East Coast Pay Television Pty Limited ("ECT") and XYZ Entertainment Pty
Limited ("XYZ")) which have the following: (i) programming arrangements
and ownership of a satellite subscription broadcast license which permits
distribution of programming via direct-to-home (DTH) satellite television
broadcasting throughout Australia; (ii) ownership of wireless cable
distribution licenses (MDS) in areas covering approximately 755,000
households; (iii) an interest in net cash flow of Australis Media Limited
("Australis"), another Australian pay television operator; and (iv)
programming services. During the first quarter of the fiscal year ended
May 31, 1996, for accounting and reporting purposes, the Company
consolidated the operations of ECT, which 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 such change. The
Company has determined to sell its Australian investments and has
retained an investment banker to assist in the separate sale of its
interests in ECT and XYZ.
Certain of the Company's cable television systems are subject to rate
regulation which has negatively affected the Company's business. The
Company has implemented new rate and service offerings which give
subscribers 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. Several of the Company's systems, along
with numerous other cable operators, received specific inquiries from the
Federal Communications Commission (the "FCC") regarding their
implementation of this method of offering cable services. A proposed
resolution of the inquiry which is based, in part, upon pending basic and
cable programming service tier rate complaints in several Los Angeles
area cable systems served by the Company, requires the Company to adjust
its rates for its basic and cable programming services tiers and make
approximately $2,700 in subscriber refunds, which amount the Company has
reserved.
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 services 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 8, 1996, "The Telecommunications Act of 1996" (the "Act") was
enacted into law. The new law alters federal, state and local laws and
regulations regarding telecommunications providers and services,
including the cable television industry. The Act 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's cable television business
cannot be determined at this time.
Nine Months Ended February 28, 1997 and February 29, 1996
The following discussion describes the Company's three business segments:
cable television, wireless telephone and Australian investments.
Cable Television
Consolidated revenues for the nine months ended February 28, 1997
increased by $113,245 or 31.5%, over the nine months ended February 29,
1996. Revenue from cable television operations increased by $68,666 or
25.2%, over the corresponding nine months ended February 29, 1996 as a
result of increases in the number of cable television subscriptions and
acquisitions. Acquisitions of cable television systems accounted for
$38,294 of the increase or 55.8%. Average primary basic cable television
subscribers ("Basic Subscribers") for the twelve months ended February
28, 1997 were approximately 1,193,000 as compared to approximately
1,068,000 Basic Subscribers for the twelve-month period ended February
29, 1996, an increase of 11.7%. The impact of acquisitions of cable
television systems accounted for 84% of the increase. Average monthly
revenue per Basic Subscriber, including programmer's share of such
revenue, was approximately $37.66 during the twelve months ended February
28, 1997, as compared to approximately $34.42 during the comparable prior
twelve month period, an increase of 9.4%.
Cost of services of the Company's cable television operations increased
by $14,823 or 24.5%, while selling, general and administrative expenses
of the Company's cable television operations increased by $16,994 or
26.7%. The Company's recent cable television acquisitions accounted for
$6,508 or 43.9% of the $14,823 increase in cost of services and $8,037 or
47.3% of the $16,994 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 $8,315 and $8,957, respectively,
during the nine months ended February 28, 1997. 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. The Company anticipates continued increases in the cost of
services and selling, general and administrative expenses as the growth
of its businesses continues.
Consolidated depreciation and amortization (domestic) for the nine months
ended February 28, 1997 increased by $29,232 or 20.3% over the nine
months ended February 29, 1996. The cable television operations accounted
for $23,840 of which $14,921 was attributable to recent cable television
acquisitions.
Consolidated operating income for the nine months ended February 28, 1997
was $4,140 or $20,691 below the operating income for the nine months
ended February 29, 1996, principally as a result of the Company's $40,000
write-down of Australian assets. (See Liquidity and Capital Resources -
Australian Pay Television). The wireless telephone operations
contributed $16,157 of operating losses. The Company's operating income
related to its cable television operations was $71,507, an increase of
$13,009 or 22.2% over the nine months ended February 29, 1996.
Consolidated other income represents primarily 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 $3,787 and $6,430 of expense for
the nine months ended February 28, 1997 and February 29, 1996 for its
minority investments in Australia, offset, in part, by $10,873 and $7,656
of income for the nine months ended February 28, 1997 and February 29,
1996 related to minority wireless telephone investments held by
Centennial.
Consolidated interest expense for nine months ended February 28, 1997
increased by $14,596 or 10.9% as compared with the nine months ended
February 29, 1996. Each of the Company's three business segments
contributed to the increase: cable television $9,654, wireless telephone
($1,195) and Australian investments $6,137. Interest expense of the
Company's cable segment rose as a result of higher average debt levels.
For the nine months ended February 28, 1997, the average debt outstanding
was approximately $1,719,000 or $323,772 above the average outstanding
debt balance of $1,395,228 during the nine months ended February 29,
1996. The increase in expense was partially offset by a decline in
interest rates. The Company's weighted average interest rate excluding
borrowings of Centennial, the Australian investments and the Company's
50% owned joint ventures was approximately 9.2% in the nine months ended
February 28, 1997 as compared to approximately 10.4% in the nine months
ended February 29, 1996. 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 agreement
increased from 6.8% at February 29, 1996 to 7.2% at February 28, 1997.
After losses attributable to minority interests in subsidiaries for the
nine months ended February 28, 1997, a consolidated pretax loss of
$125,456 was incurred, as compared to a pretax loss of $88,770 for the
nine months ended February 29, 1996. The income tax benefit of $23,619
for the nine months ended February 28, 1997 represents a reduction of the
deferred tax liability by the tax effect of the current period losses of
the Company, offset by current state and local taxes for the period.
These tax benefits are non-cash in nature.
The consolidated net loss for the nine months ended February 28, 1997 of
$101,837 represents an increase of $35,149 from the loss of $66,688 for
the nine months ended February 29, 1996, principally as a result of the
Company's $40,000 write-down of Australian assets. (See Liquidity and
Capital Resources - Australian Investment). The Company expects net
losses to continue until such time as the cable television systems and
investments in plant associated with rebuilds and extensions of its cable
television systems and expansion of Centennial's wireless telephone
system infrastructure generate sufficient earnings to offset the
associated costs of acquisitions and operations.
Wireless Telephone
Centennial's revenue increase accounted for 21.4% of the total increase
in the revenue of the Company. Revenue from wireless telephone
operations for the nine months ended February 28, 1997 increased by
$24,325 or 29.5%, over the nine months ended February 29, 1996. The
increase in revenue was the result of growth in subscriptions to and the
resulting increased usage of wireless telephone service. Acquisitions
accounted for increased revenue of $2,949 or 12% of the increase for the
nine months ended February 28, 1997.
Cost of services related to Centennial's wireless telephone operations,
which accounted for 26.4% of the total cost of services for the Company,
during the nine months ended February 28, 1997 was $27,009, an increase
of $7,237 or 36.6% as compared to the nine months ended February 29,
1996. The increase was due in part to a larger number of telephone units
sold, the variable costs associated with a larger revenue and
subscription base and increased wireless telephone coverage areas
resulting from the continued expansion of Centennial's network and the
commencement of PCS telephone service in Puerto Rico. Included in cost
of services during the quarter ended February 28, 1997 were $1,927 of
pre-operating costs associated with the start-up of Centennial's Puerto
Rico telecommunications business.
Selling, general and administrative expenses related to Centennial's
wireless telephone operations, representing 31.5% of the total amount for
the Company, rose to $37,080, an increase of $11,756 or 46.4% above the
$25,324 recorded during the nine months ended February 29, 1996. The
increase resulted primarily from the variable costs associated with a
larger subscription and revenue base and an increase in Centennial's
managerial, customer service and sales staff to accommodate the larger
subscription and revenue base and the anticipated growth of its wireless
telephone business as well as the commencement of PCS telephone service
in Puerto Rico. Included in selling, general and administrative expenses
during the quarter ended February 28, 1997 were $5,086 of pre-operating
costs associated with the start-up of Centennial's Puerto Rico
telecommunications network.
The wireless telephone operations and acquisitions accounted for $5,392
or 12.4% of the increase in the Company's depreciation and amortization
for the 1997 period.
Centennial's wireless telephone operating loss for the nine months ended
February 28, 1997 of $16,157 increased by $60 or 0.4% from the loss of
$16,097 for the nine months ended February 29, 1996. The interest
expense of the Company's wireless segment declined as a result of the
capitalization of $2,752 of interest charges related to the acquisition
cost of Centennial's PCS license. Gross interest costs of the wireless
segment for the nine months ended February 28, 1997 and February 29, 1996
were $26,350 and $24,793. The increase is the result of additional
borrowings for acquisitions, working capital and debt service.
Centennial's average debt outstanding during the nine months ended
February 28, 1997 was $369,000, an increase of $19,000 as compared to the
average debt level of $350,000 during the nine months ended February 29,
1996. Centennial's weighted average interest rate decreased to 9.4% for
the nine months ended February 28, 1997 from 9.5% for the nine months
ended February 29, 1996.
The Company expects net losses in Centennial's wireless operations to
continue until such time as the operations of the wireless telephone
systems and expansion of the wireless telephone system infrastructure
generate sufficient earnings to offset the associated costs of
acquisitions and operations.
Australian Investments
The Australian investment accounted for $20,254, or 17.8% of the total
increase in revenue of the Company. Costs and expenses excluding
depreciation and amortization and Australian activities for the nine
months ended February 28, 1997 increased by $235 or 1% over the nine
months ended February 29, 1996. Depreciation and amortization expense,
the result of its initial buildout and license acquisition was $14,120.
These costs represented 7.5% of the total amount for the Company.
Including a $40,000 write-down of Australian assets, the Australian
operating loss for the nine months ended February 28, 1997 was $51,210.
Three Months Ended February 28, 1997 and February 29, 1996
Consolidated revenue for the three months ended February 28, 1997
increased by $38,911 or 31.9% over the three months ended February 29,
1996. Revenue from cable television operations increased by $21,719 or
23.7% over the corresponding prior three month period as a result of
increases in the number of cable television subscriptions and the
acquisition of cable television systems (see Acquisitions - Cable
Television).
Costs and expenses excluding depreciation and amortization and Australian
activities for the three month period ended February 28, 1997 increased
by $20,085 or 34.1% over the three months ended February 29, 1996. Costs
of services for the three months ended February 28, 1997 in the Company's
cable operations increased by $4,718 over the corresponding period in the
prior year, representing 23.4% of the total increase of $20,085.
Selling, general and administrative expenses increased by $11,955 over
the three months ended February 29, 1996. Depreciation and amortization
expense - domestic for the three months ended February 28, 1997 increased
by $8,716 or 17.8% over the comparable period in the prior year.
Consolidated operating income for the three months ended February 28,
1997 increased by $11,592 or 663% over the corresponding three months
ended February 29, 1996. Additionally, the Company has recorded $1,590 of
other income which represents certain minority investments in Australia
and Centennial accounted for by the Company using the equity method of
accounting.
Consolidated interest expense for the three months ended February 28,
1997 increased by $7,402 or 16.9% as compared with the three months ended
February 29, 1996 reflecting higher debt levels. The Company's weighted
average interest rate, excluding borrowings of Centennial and the
Company's 50% owned joint ventures, decreased to 9.3% for the three
months ended February 28, 1997 from 10.0% for the three months ended
February 29, 1996.
After losses attributable to minority interests in subsidiaries for the
three months ended February 28, 1997, a pretax loss of $29,413 was
incurred, as compared to a pretax loss of $33,648 in the three months
ended February 29, 1996. The income tax benefit of $6,045 and $10,025
for the three months ended February 28, 1997 and February 29, 1996,
respectively, represents a reduction of the deferred tax liability by the
tax effect of the current period losses of the Company, offset by current
state and local taxes for the period. These tax benefits are non-cash in
nature.
The consolidated net loss of $23,368 for the three months ended February
28, 1997 represents a decrease of $255 or 1.1% below the comparable loss
of $23,623 for the corresponding three month period in the prior fiscal
year. The Company expects net losses to continue until such time as the
cable television systems and investments in plant associated with
rebuilds and extensions of its cable television systems and expansion of
Centennial's wireless telephone system infrastructure generate sufficient
earnings to offset the associated costs of acquisitions and operations.
The Company believes that its Australian investments will not generate
earnings.
Wireless Telephone
Revenue from wireless telephone operations for the three month period
ended February 28, 1997 increased by $11,236 or 40.2% over the three
months ended February 29, 1996, primarily as a result of growth in
subscriptions and increased usage of wireless telephone services. Cost
of services increased by $3,412 in the wireless telephone operations in
the 1997 period. The Company's wireless telephone operations accounted
for $6,157 or 51.5% of the Company's total increase in selling, general
and administrative expenses and $3,142 or 24.9% of the increase in the
Company's depreciation and amortization expense. The wireless operating
loss for the three months ended February 28, 1997 of $8,046 increased by
$1,475 or 22.5% above the corresponding 1996 three month period.
Centennial's weighted average interest rate was 9.2% for the three months
ended February 28, 1997 and 9.5% for the three months ended February 29,
1996.
Australian Investment
The Company's Australian operations accounted for $5,956 of the
consolidated increase in revenue of the Company for the three months
ended February 28, 1997. Australian operations incurred expenses of
$11,196 for this period, including $3,904 of depreciation and
amortization.
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. 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 respective needs, including growth in internally
generated cash, bank financing, joint ventures and partnerships and
public and private placements of debt and equity securities. Certain
subsidiaries of the Company (other than Centennial) have entered into
credit agreements with various bank groups and private lending
institutions providing for an aggregate of approximately $1,055,000 of
potential borrowing capacity for cable operations. Centennial and
subsidiaries of Centennial have entered into agreements which furnish
approximately $50,000 of potential borrowing capacity for wireless
telephone operations at February 28, 1997 which indebtedness is non-
recourse to the Company.
The Company's internally-generated cash, along with third party
financing, primarily bank borrowings and the issuance of debt securities
to the public, have 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.
During the nine months ended February 28, 1997, the Company made capital
expenditures of $111,422 of which 53.3% was made by Centennial. The
Company's future commitments for property, plant and equipment in its
cable television business consist of usual upgrades, extensions,
betterments and replacements of cable plant and equipment. 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. Funds for cable television capital projects
and related equipment are currently available from internally generated
cash and other financing resources.
For the nine months ended February 28, 1997, earnings were less than
fixed charges by $143,096. However, such amount reflects non-cash
charges totaling $187,067, consisting of depreciation and amortization.
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.
Centennial's wireless telephone capital projects include the addition of
cell sites for greater coverage areas, as well as enhancements to the
existing infrastructure of the wireless system. Centennial expects
capital expenditures for its domestic wireless telephone markets of
$40,000 during the current fiscal year. During fiscal 1996, Centennial
began construction of its PCS network in Puerto Rico and had spent
approximately $26,315 during the nine month period ended February 28,
1997. Centennial currently estimates that the remaining cost to complete
the build-out of the infrastructure of its PCS network will be
approximately $45,000, to be expended through fiscal 1998. Funds for
Centennial's capital expenditure requirements may be provided by other
bank borrowings, debt or equity issuances or other financing resources.
It is anticipated that in the next fiscal year, cash generated from
Centennial's wireless telephone operations will not fully cover required
capital expenditures, the debt service under its credit agreements and
preferred stock dividends. Although to date, Centennial has been able to
obtain financing on satisfactory terms, there is no assurance that this
will continue to be the case in the future. It is currently anticipated
that any shortfall will be made up either through equity issuances or
additional borrowing.
Cash on hand was sufficient to fund the Company's expenditures for
property, plant and equipment and financing and investing activities.
The Company will continue to rely on internally generated cash as well as
various financing activities to fund these requirements.
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. CCC-II is in compliance with the
terms of the credit facility. At February 28, 1997, $340,000 was
available for borrowing under this 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 that 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. CCC-I is
in compliance with the terms of the credit facility. At February 28,
1997, $263,000 was available for borrowing under this facility.
The terms and covenants of certain of the Company's bank credit
facilities require certain of the Company's subsidiaries 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
replace the Hedge Agreements.
On January 17, 1997, the Company issued $250,000 aggregate principal
amount of 8-7/8% Senior Notes due 2007 pursuant to a registration
statement that was filed with the Securities and Exchange Commission (the
"SEC") on October 26, 1993 and became effective on July 14, 1994 relating
to the shelf registration of $500,000 of the Company's debt securities.
On April 4, 1997, the Company filed a registration statement with the SEC
relating to the shelf registration of an additional $500,000 of the
Company's debt securities, augmenting the remaining $2,000 available
under the July 1994 registration statement. 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.
On July 31, 1995, a subsidiary of the Company, Century Venture Corp.
("CVC"), entered into a three year, $80,000 revolving credit facility
that 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. CVC is in compliance with the terms of the credit
facility. At February 28,1997, $53,500 was outstanding under this
facility.
During January 1997, Citizens Century Cable Television Venture ("CCCTV")
entered into an agreement for the provision of a three-year revolving
credit facility in the principal amount of $200,000 with Bank of America
and Societe General, which converts into a five-year term loan. The
facility will be secured by the assets of CCCTV. The loan will be non-
recourse to both Citizens and the Company. Borrowings under the facility
are to be repaid in semi-annual installments. The proposed facility
requires mandatory prepayments of principal refinancing to the extent
that the loan balance exceeds the refinancing on working capital
commitment (as defined in the facility). Borrowings under the facility
bear interest, at the option of CCCTV, at either the base rate,
certificate of deposit rate, or the Eurodollar rate, plus the applicable
margin (as defined in the facility). The principal use of proceeds will
be to fund the CCCTV acquisitions as well as general corporate purposes.
The closing of the credit facility is expected during the fourth quarter
of fiscal 1997.
On March 27, 1997, the Company gave notice of redemption of the entire
principal amount outstanding of its $204,000 11-7/8% Senior Subordinated
Debentures maturing 2003. The Senior Subordinated Debentures are to be
redeemed on April 15, 1997 at a redemption price of 105% of the principal
amount thereof. Including the 5% redemption premium, the aggregate funds
required for such redemption is $214,200. The effect of the redemption
will result in an extraordinary loss during the fourth quarter of fiscal
1997 of approximately $13,016 reflecting the call premium and write-off
of deferred financing costs.
Financing and Capital Formation - Centennial
Centennial, since August 1988, has acquired 28 wireless telephone markets
that it owns and manages, some 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.
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 outstanding common equity of Centennial. In connection with an
amendment to a services agreement with the Company, Centennial issued its
Second Series Convertible Redeemable Preferred Stock valued at $5,000 to
the Company. The preferred stock carried no cash dividend requirements
through August 31, 1996, but the shares accreted liquidation preference
and redemption value at the rate of 7.5% per annum, compounded quarterly
until then. The fully accreted liquidation preference and redemption
value of the Convertible Redeemable Preferred Stock and the Second Series
Convertible Redeemable Preferred Stock held by Citizens and Century at
August 31, 1996 was $186,287 and $7,252, respectively. Beginning
September 1, 1996, the holders of the Convertible Redeemable Preferred
Stock and the Second Series Convertible Redeemable Preferred Stock are
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. Both classes of Preferred Stock are subject to mandatory
redemption in fiscal 2007. Any unpaid dividends continue to accumulate
without additional cost to Centennial. On December 19, 1996, Centennial
paid cash dividends to Citizens and Century of $3,959 and $154,
respectively and, during March 1997, declared a cash dividend in the same
amounts to each of Citizens and Century. Centennial has not made a
determination regarding the timing, amount, or distribution (if any) of
additional preferred stock dividends.
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 February 28, 1997, 4,239,231 shares were 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. At February 28, 1997, $400,000 remained available for
issuance.
On September 12, 1996, Centennial entered into a $50,000 credit facility
with Citibank, N.A. The facility terminates on March 20, 1998. Subject
to completion of formal documentation, the Company has agreed with
Citibank to extend this credit facility to September 2000. The Company
expects the amendment giving effect to this extension to close during the
fourth quarter of fiscal 1997. 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 is 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.
Additionally, a subsidiary of the Company which is engaged in the
ownership and operation of the PCS business in Puerto Rico has agreed to
enter into a four-year $130,000 revolving credit facility with Citibank,
N.A. which converts into a four year term loan. The principal use of
proceeds will be to fund the buildout of the Company's PCS business in
Puerto Rico. The proposed facility will restrict the use of borrowings,
limit the amount of long-term indebtedness in relation to the PCS
business in Puerto Rico, requires the maintenance of certain minimum
annualized cash flows (as defined) and subscribers, and requires the
maintenance of certain ratios of operating cash flow to debt service and
total outstanding debt to operating cash flow, all of the above relating
only to the PCS business in Puerto Rico. The terms of the proposed
facility will also require the PCS business in Puerto Rico to meet and
maintain certain financial and operating covenants and achieve
performance requirements including minimum subscriber levels. Failure to
satisfy such covenants would constitute a default under the credit
facility in which event Citibank, N.A. could accelerate all amounts
outstanding thereunder, and exercise certain other rights and remedies as
a secured creditor. The proposed facility will be non-recourse to the
Company.
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 wireless 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 $45,000 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 wireless
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 wireless 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 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.
Acquisitions - Cable Television
On March 2, 1993, a joint venture in which each of the Company and
Citizens have a 50% interest ("the Century/Citizens Joint Venture")
entered into agreements 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. 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 entered into agreements to acquire three
cable television systems which serve an aggregate of approximately 76,000
primary basic subscribers, which agreements were subsequently assigned to
the Century/Citizens Joint Venture. These systems are primarily located
in Yorba Linda, Orange County, Diamond Bar, Oxnard and Ventura County,
California (the "CCCTV Acquisitions"). The aggregate purchase price for
these systems is approximately $140,000.
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. Centennial recognized a gain of approximately
$4,176 as a result of the sale. "Net Pops" means a market's Pops
multiplied by the percentage interest that Centennial owns in an entity
licensed by the FCC to construct or operate a cellular telephone system
(or to provide personal communications services) in that market and
"Pops" means the population of a market based upon the final 1990 Census
Report of the Bureau of the Census, United States Department of Commerce.
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 Centennial now has a 91.4%
interest, and an additional 12.7% equity investment interest in the Lake
Charles, Louisiana MSA, a market in which Centennial 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 has determined to pursue a strategy to sell or otherwise
dispose of substantially all of its minority interests in cellular
telephone systems representing approximately 1,100,000 Net Pops.
Centennial has not yet made a final determination as to the estimated
sale proceeds or timing of such disposition.
Centennial Personal Communications Services ("PCS")
Centennial was the successful bidder for one of two MTA licenses to
provide broadband personal communications services (PCS) 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. Approximately, $15,500 of
capital expenditures were incurred during fiscal 1996 and approximately
$26,300 during the nine months ended February 28, 1997. Centennial's
participation in the PCS business is expected to be capital intensive,
requiring additional network buildout costs of approximately $45,000 over
fiscal years 1997 and 1998. In addition, 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 wireless telephone providers as well as the other MTA PCS
license holder. Centennial presently has approximately 6,900 PCS
customers. 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 wireless
operations. Centennial submitted a required refundable deposit of
$11,000 in order to maintain its bidding eligibility for the PCS licenses
in which it was interested. During the current fiscal quarter Centennial
withdrew from the auction. Centennial received the refund of its deposit
at the close of the auction process.
Investments
Australian Pay Television
During fiscal 1994, 1995 and 1996 the Company invested, through a wholly-
owned subsidiary, approximately $145,000 in its Australian pay television
investments, including approximately $125,000 in ECT. Since the fourth
fiscal quarter of 1996, the Company has written down $50,000 of this
investment. The Company has determined to pursue a strategy to sell its
investments in its Australian operations and has retained an investment
banker to assist in the separate sale of ECT and XYZ. It has also
determined to make no further investments in ECT. The Company has not as
yet developed an estimate of the net proceeds to be received on
disposition or the expected period required for completion of the
disposition. As a result, the operating results for the Australian
operations continue to be reported as a component of continuing
operations. Once the Company has developed its formal plan for
disposition, including its estimate of the net proceeds upon disposition
and the period expected to be required for completion of the disposition,
the Company anticipates accounting for its Australian operations as
discontinued operations.
ECT has been pursuing opportunities to own, operate and invest in pay
television services in Australia. The Company's investment in ECT was
effected through the acquisition 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 one of three satellite broadcast licenses that may
be granted by Australian authorities prior to July 1997. The license
allows for DTH satellite television broadcasting and allows ECT to offer
four channels of programming via DTH (the "License A Package").
Australis, another pay television company in Australia, owns a second
license.
Programming is distributed over common infrastructure subject to a long
term agreement between ECT and Australis (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.
Such interest may be adjusted proportionately downward depending upon the
extent to which ECT (at its sole option) elects to fund or not to fund a
specified portion of those funds expended by Australis in the pay
television business in Australia. 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). 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. There can be no assurance that this
dispute will be resolved in ECT's favor, that, after reviewing the
relevant information, ECT will elect to contribute its share, or any
portion of the share, of the funding, or that ECT will be able to secure
funds necessary for such funding.
Programming in Australia is provided for a subscriber-based fee by XYZ, a
joint venture in which the Company holds a 25% interest.
ECT has entered into a long-term agreement with Foxtel, the joint venture
between Telstra Corporation Limited, the government-owned Australian
national telecommunications carrier and The News Corporation Limited,
pursuant to which Foxtel has agreed to distribute the License A Package
throughout Australia over Foxtel's cable television network. ECT
receives a monthly per subscriber fee from Foxtel for the License A
Package. Foxtel owns 50% of XYZ.
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.
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 its business.
Since commencement of its operations, 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. The maturity date on two of ECT's debt facilities,
currently held by a third party bank (aggregating approximately $9,600)
have been extended to July 31, 1997. ECT is currently in compliance with
the terms and conditions of its debt facilities and is currently in
negotiations to refinance all or a portion of such facilities. There is
no assurance that such negotiations will be successful and if not
successful that ECT will be able to continue its operations. As a
result, the Company's Australian holding company has established reserves
against its short-term advances to ECT in the aggregate amount of
$40,000. The Company has recorded this reserve in the nine months ended
February 28, 1997 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.
Australis experienced liquidity problems in the first half of 1996 and,
as a result, implemented a recapitalization plan pursuant to which it
raised additional debt and equity. ECT is unable to determine if such
financing is sufficient to fund Australis' capital requirements. In
August 1996, Australis announced that it had entered into an agreement
with OptusVision, pursuant to which, on June 1, 1997, Australis will
(i) transfer its subscriber equipment and DTH infrastructure necessary to
provide management and operations services to a newly created entity and
(ii) transfer certain contractual rights and obligations related to its
branch network assets and customer service assets to a second newly
created entity, jointly owned by Australis and OptusVision. ECT and
another franchisee have initiated separate proceedings to challenge the
Australis/OptusVision agreement. In addition, the proceedings instituted
by ECT incorporates causes and action claiming breach by Australis of the
Franchise Agreement and the IUA and for breach of an agreement among
Australis, a subsidiary of ECT and Optus Networks Pty Limited relating to
access to certain satellite transponders.
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. 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 programming 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.
The Company is currently unable to predict the ultimate resolution of
these matters. At February 28, 1997, the remaining net book value of its
investments in the various aspects of the Australian pay television
industry, after giving effect to the aforementioned write-down of
Australian assets, aggregated approximately $30,000. 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 television
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 expenses 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 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.
In October 1992, the Company announced that its Board of Directors
authorized the repurchase, from time to time, of up to 2,000,000 shares
of its Class A Common Stock, depending on prevailing market conditions.
The Company has made no such purchases to date.
* * * * *
Management's Discussion and Analysis of Results of Operations and
Financial Condition contains forward-looking statements that involve
risks and uncertainties. Such statements are based on management's
current expectations and are subject to a number of factors and
uncertainties which could cause the Company's performance and the other
matters discussed in the forward-looking statements to differ
significantly from that discussed in the forward-looking statements.
PART II - OTHER INFORMATION
ITEM 5. Other Information -
On February 24, 1997, Andrew Tow resigned as a director and
officer of the Company.
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.
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: April 10, 1997
/s/ Scott N. Schneider
__________________________________
Scott N. Schneider
Senior Vice President, Treasurer,
Chief Financial Officer
(On behalf of Registrant and as
Principal Accounting Officer)
Exhibit 11
CENTURY COMMUNICATIONS CORP. AND SUBSIDIARIES
EXHIBIT TO FORM 10-Q
For the Nine Months Ended
February 28, 1997 and February 29, 1996
COMPUTATION OF LOSS PER COMMON SHARE
(Amounts in thousands, except share data)
<TABLE>
<CAPTION>
Nine Months Ended
February 28, February 29,
1997 1996
<S> <C> <C>
Primary fully diluted:
Net Loss $(101,837) $(66,688)
Accretion in liquidation value of
subsidiary preferred stock (3,599) (3,171)
Loss applicable to common shares $(105,436) $(69,859)
Average number of common shares and
common share equivalents outstanding
Average number of common shares
outstanding during the period 74,196,000 73,689,000
Add common share equivalents -
Options to purchase common shares - net 45,000 702,000
Average number of common shares and
common share equivalents 74,241,000 (A) 74,391,000 (A)
Loss per common share $ (1.42) (A) $ (.94) (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 Statement
of Operations for the periods presented do not include the common share
equivalents as their effect is anti-dilutive.
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAY-31-1997
<PERIOD-END> FEB-28-1997
<CASH> 117,403
<SECURITIES> 55,657
<RECEIVABLES> 60,029
<ALLOWANCES> 3,196
<INVENTORY> 0
<CURRENT-ASSETS> 193,754
<PP&E> 686,594
<DEPRECIATION> 428,986
<TOTAL-ASSETS> 2,159,588
<CURRENT-LIABILITIES> 193,005
<BONDS> 0
<COMMON> 1,077
0
186,287
<OTHER-SE> (542,606)
<TOTAL-LIABILITY-AND-EQUITY> 2,159,588
<SALES> 472,965
<TOTAL-REVENUES> 472,965
<CGS> 102,284
<TOTAL-COSTS> 468,825
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 148,622
<INCOME-PRETAX> (136,745)
<INCOME-TAX> (23,619)
<INCOME-CONTINUING> (113,126)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (101,837)
<EPS-PRIMARY> (1.42)
<EPS-DILUTED> 0
</TABLE>
