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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X]
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended August 31, 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 0-19603
CENTENNIAL CELLULAR CORP.
(Exact name of registrant as specified in its charter)
Delaware 06-1242753
(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 - 15,885,875 outstanding shares as of October 2, 1997
Class B Common - 10,544,113 outstanding shares as of October 2, 1997
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PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CENTENNIAL CELLULAR CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Amounts in thousands)
<TABLE>
<CAPTION>
August 31,
1997 May 31,
(Unaudited) 1997
-------- --------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 46,510 $ 43,415
Accounts receivable, less allowance for doubtful
accounts of $2,700 and $2,130, respectively 30,490 29,991
Prepaid expenses and other current assets 6,015 4,836
-------- --------
TOTAL CURRENT ASSETS 83,015 78,242
PROPERTY, PLANT AND EQUIPMENT - net 189,295 177,292
EQUITY INVESTMENTS IN WIRELESS SYSTEMS - net 93,421 94,153
DEBT ISSUANCE COSTS, less accumulated amortization of
$4,212 and $3,606, respectively 9,383 9,863
CELLULAR TELEPHONE LICENSES, less accumulated
amortization of $226,213 and $213,739, respectively 272,728 285,202
PERSONAL COMMUNICATIONS SERVICE LICENSE, less accumulated
amortization $1,147 and $755, respectively 61,611 62,004
GOODWILL, less accumulated amortization of $24,143
and $23,185, respectively 129,107 130,065
OTHER ASSETS - net 7,809 8,029
-------- --------
TOTAL $846,369 $844,850
======== ========
</TABLE>
See notes to consolidated financial statements
1
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CENTENNIAL CELLULAR CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(CONTINUED)
(Amounts in thousands, except share data)
<TABLE>
<CAPTION>
August 31,
1997 May 31,
(Unaudited) 1997
----------- ---------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 3,747 $ 1,754
Accrued expenses and other current liabilities 57,794 61,056
Payable to affiliate 603 442
--------- ---------
TOTAL CURRENT LIABILITIES 62,144 63,252
LONG-TERM DEBT 449,500 429,000
DEFERRED LIABILITY 2,200 2,200
DEFERRED INCOME TAXES 41,115 43,977
PREFERRED STOCK:
Convertible redeemable preferred stock
(at aggregate liquidation value which approximates the fair market value),
par value $.01 per share, 102,187 shares authorized; issued and outstanding
102,187 shares (redemption value of $1,823.00 per share) 186,287 186,287
Second series convertible redeemable preferred stock (at aggregate liquidation
value which approximates the fair market value), par value $.01 per share,
3,978 shares authorized; issued and outstanding 3,978 shares (redemption
value of $1,823.00 per share) 7,252 7,252
Senior preferred stock, par value $.01 per share, dividend
rate 14%, 250,000 shares authorized, none issued -- --
Additional preferred stock, par value $.01 per share, authorized 10,000,000
shares, 3,978 shares issued as second series convertible redeemable
preferred stock -- --
COMMON STOCKHOLDERS' EQUITY:
Common stock par value $.01 per share:
Class A, 1 vote per share, 100,000,000 shares authorized,
issued and outstanding 16,513,270 and 16,492,884 shares, respectively 165 165
Class B, 15 votes per share, 50,000,000 shares authorized,
issued and outstanding 10,544,113 shares 105 105
Additional paid-in capital 365,671 369,704
Accumulated deficit (259,077) (252,291)
--------- ---------
106,864 117,683
Less: Cost of 350,809, and 88,809, respectively, Class A common shares
in treasury (5,993) (1,801)
Shareholder note receivable (3,000) (3,000)
--------- ---------
TOTAL COMMON STOCKHOLDERS' EQUITY 97,871 112,882
--------- ---------
TOTAL $ 846,369 $ 844,850
========= =========
</TABLE>
See notes to consolidated financial statements
2
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CENTENNIAL CELLULAR CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(Amounts in thousands, except share data)
<TABLE>
<CAPTION>
Three Months Ended
----------------------------------------
August 31, August 31,
1997 1996
---------- ----------
<S> <C> <C>
REVENUE:
Service revenue - Domestic $ 43,707 $ 30,857
Service revenue - Puerto Rico 7,373 --
Equipment sales 1,109 766
Interest income 664 742
---------- ----------
52,853 32,365
---------- ----------
COSTS AND EXPENSES:
Cost of equipment sold 4,073 2,703
Cost of services - Domestic 5,728 4,174
Cost of services - Puerto Rico 2,154 592
Selling, general and administrative - Domestic 12,180 9,028
Selling, general and administrative - Puerto Rico 5,784 786
Depreciation and amortization - Domestic 19,974 18,464
Depreciation and amortization - Puerto Rico 5,088 17
---------- ----------
54,981 35,764
---------- ----------
OPERATING LOSS (2,128) (3,399)
---------- ----------
INCOME FROM EQUITY INVESTMENTS 4,206 3,662
GAIN ON SALE OF ASSETS 5 48
INTEREST EXPENSE - DOMESTIC 8,538 6,823
INTEREST EXPENSE - PUERTO RICO 2,167 218
---------- ----------
LOSS BEFORE INCOME TAX BENEFIT
AND MINORITY INTEREST (8,622) (6,730)
INCOME TAX BENEFIT (1,971) (755)
---------- ----------
LOSS BEFORE MINORITY INTEREST (6,651) (5,975)
MINORITY INTEREST IN INCOME OF SUBSIDIARIES (135) (132)
---------- ----------
NET LOSS $ (6,786) $ (6,107)
========== ==========
DIVIDEND REQUIREMENT ON PREFERRED STOCK $ 4,113 $ 3,610
========== ==========
LOSS APPLICABLE TO COMMON SHARES $ (10,899) $ (9,717)
========== ==========
LOSS PER COMMON SHARE $ (.41) $ (.36)
========== ==========
WEIGHTED AVERAGE NUMBER OF COMMON SHARES
OUTSTANDING DURING THE PERIOD 26,860,000 26,932,000
========== ==========
</TABLE>
See notes to consolidated financial statements
3
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CENTENNIAL CELLULAR CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMMON STOCKHOLDERS' EQUITY
(Amounts in thousands, except share data)
<TABLE>
<CAPTION>
Common Stock
-----------------------------------------------------------------------
Class A Class B
------------------------------- ------------------------------
Shares Dollars Shares Dollars
----------- ------------ ----------- -----------
<S> <C> <C> <C> <C>
Balance at June 1, 1996 16,461,858 $ 165 10,544,113 $ 105
Common Stock
issued in connection with
incentive plans 31,026 -- -- --
Preferred stock dividends -- -- -- --
Income tax benefit - stock options exercised -- -- -- --
Net loss -- -- -- --
---------- ---------- ---------- ----------
Balance at May 31, 1997 16,492,884 165 10,544,113 105
Common Stock issued in
connection with incentive
plans 20,386 -- -- --
Preferred stock dividends -- -- -- --
Treasury stock purchases
(262,000 shares) -- -- -- --
Net loss -- -- -- --
---------- ---------- ---------- ----------
Balance at August 31, 1997 - (unaudited) 16,513,270 $ 165 10,544,113 $ 105
========== ========== ========== ==========
<CAPTION>
Additional Shareholder
Paid-In Treasury Note (Accumulated
Capital Stock Receivable Deficit) Total
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Balance at June 1, 1996 $ 383,533 $ (1,801) $ (3,000) $(218,996) $ 160,006
Common Stock
issued in connection with
incentive plans 132 -- -- -- 132
Preferred stock dividends (15,948) -- -- -- (15,948)
Income tax benefit - stock options exercised 1,987 -- -- -- 1,987
Net loss -- -- -- (33,295) (33,295)
--------- --------- --------- --------- ---------
Balance at May 31, 1997 369,704 (1,801) (3,000) (252,291) 112,882
Common Stock issued in
connection with incentive
plans 80 -- -- -- 80
Preferred stock dividends (4,113) -- -- -- (4,113)
Treasury stock purchases
(262,000 shares) -- (4,192) -- -- (4,192)
Net loss -- -- -- (6,786) (6,786)
--------- --------- --------- --------- ---------
Balance at August 31, 1997 - (unaudited) $ 365,671 $ (5,993) $ (3,000) $(259,077) $ 97,871
========= ========= ========= ========= =========
</TABLE>
See notes to consolidated financial statements
4
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CENTENNIAL CELLULAR CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Amounts in thousands)
<TABLE>
<CAPTION>
Three Months Ended
-------------------------------------
August 31, August 31,
1997 1996
-------- --------
<S> <C> <C>
OPERATING ACTIVITIES:
Cash received from subscribers and others $ 57,091 $ 37,087
Cash paid to suppliers, employees and
governmental agencies (34,848) (28,888)
Interest paid (1,953) --
-------- --------
NET CASH PROVIDED BY OPERATING ACTIVITIES 20,290 8,199
-------- --------
INVESTING ACTIVITIES:
Capital expenditures (34,759) (23,481)
Acquisition of other assets (33) (11,059)
Distributions received from equity investments 5,447 1,385
Capital contributed to equity investments -- (213)
-------- --------
NET CASH USED IN INVESTING ACTIVITIES (29,345) (33,368)
-------- --------
FINANCING ACTIVITIES:
Proceeds from long-term debt 25,500 --
Repayment of long-term debt (5,000) --
Debt issuance costs paid (125) --
Proceeds from issuance of Class A and B Common Stock 80 --
Dividends paid (4,113) --
Treasury stock purchases (4,192) (40)
-------- --------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 12,150 (40)
-------- --------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 3,095 (25,209)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 43,415 67,297
-------- --------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 46,510 $ 42,088
======== ========
</TABLE>
See notes to consolidated financial statements
5
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CENTENNIAL CELLULAR CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(CONTINUED)
(Unaudited)
(Amounts in thousands)
<TABLE>
<CAPTION>
Three Months Ended
------------------------------------
August 31, August 31,
1997 1996
-------- --------
<S> <C> <C>
RECONCILIATION OF NET LOSS TO NET CASH PROVIDED BY
OPERATING ACTIVITIES:
Net loss $ (6,786) $ (6,107)
-------- --------
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation and amortization 25,062 18,481
Minority interest in income of subsidiaries 135 132
Deferred income taxes - decrease (2,862) (2,517)
Equity in undistributed earnings of investee companies (4,206) (3,662)
Other 601 (1,077)
Change in assets and liabilities net of effects of
acquired, wireless telephone systems:
Accounts receivable - (increase) (4,082) (2,229)
Prepaid expenses and other current assets -
(increase) (1,179) (712)
Accounts payable and accrued expenses -
increase 12,950 5,362
Customer deposits and prepayments -
increase 657 528
-------- --------
Total adjustments 27,076 14,306
-------- --------
Net cash provided by operating activities $ 20,290 $ 8,199
======== ========
</TABLE>
See notes to consolidated financial statements
6
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CENTENNIAL CELLULAR CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(Dollar amounts in thousands except share data)
NOTE 1. INTERIM FINANCIAL STATEMENTS
In the opinion of management, the accompanying interim unaudited consolidated
financial statements contain all adjustments (consisting only of normal
recurring accruals) necessary to present fairly the consolidated financial
position of Centennial Cellular Corp. and Subsidiaries (the "Company") as of
August 31, 1997 and the results of its consolidated operations and cash flows
for the three months ended August 31, 1997 and August 31, 1996. The statements
should be read in conjunction with the consolidated financial statements and
notes thereto included in the Company's May 31, 1997 Annual Report on Form 10-K.
The 1997 Annual Report on Form 10-K for the Company includes a summary of
significant accounting policies and other disclosures and should be read in
conjunction with this Form 10-Q. The consolidated financial statements at August
31, 1997, and for the three months ended August 31, 1997, and 1996 are
unaudited. The consolidated balance sheet at May 31, 1997 is audited. The
August 31, 1997 and 1996 financial statements do not include all disclosures
required by generally accepted accounting principles.
NOTE 2. ACCOUNT ANALYSIS
Accrued expenses and other current liabilities consists of the following:
August 31, May 31,
1997 1997
---------- --------
Accrued interest payable $11,683 $ 3,482
Customer deposits and prepayments 8,384 7,727
Accrued roamer service 4,824 4,247
Accrued dividend on preferred stock 4,113 4,113
Accrued fiber buildout 6,000 6,000
Accrued unpaid invoices -- 9,620
Accrued miscellaneous 22,790 25,867
------- -------
$57,794 $61,056
======= =======
NOTE 3. CREDIT FACILITIES
The Company entered into a $75,000 revolving credit facility with Citibank, N.A.
on September 12, 1996, which was amended on April 22, 1997 and further amended
on July 28, 1997 (the "Credit Facility"). The Credit Facility terminates on
January 31, 2001. The Credit Facility may be used for working capital and
general corporate purposes. The interest rate payable on borrowings under the
Credit Facility is based, at the election of the Company, on (a) the Base Rate,
as defined, plus a margin of 2% or (b) the Eurodollar Base Rate, as defined,
plus a margin of 3%. The Credit Facility is secured by the pledge of the stock
of certain of the Company's subsidiaries not otherwise subject to restrictions
under its Senior Note
7
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Indentures, including the subsidiary which operates the Benton Harbor system.
The Credit Facility is further guaranteed by certain subsidiaries holding
Investment Interests (as defined). The Credit Facility restricts the incurrence
of certain additional debt by the Company and limits the Company's ability to
pay dividends. As of August 31, 1997, no amounts were outstanding under the
Credit Facility. The Company was in compliance with the covenants of the Credit
Facility at August 31, 1997.
On April 25, 1997, Centennial Puerto Rico Wireless Corporation , a wholly owned
subsidiary of the Company ("CPRW"), entered into a four-year $130,000 revolving
Credit Facility with Citibank, N.A. as agent which converts into a four-year
term loan on April 25, 2001 (the "Puerto Rico Credit Facility"). The proceeds
from the Puerto Rico Credit Facility will be used by CPRW and its direct and
indirect subsidiaries primarily to finance the construction and operation of
Personal Communications Services ("PCS"), competitive access and
telecommunications networks in Puerto Rico and the United States Virgin Islands.
The proceeds will also be used by CPRW for working capital and general corporate
purposes and were used to pay certain cash dividends to the Company as permitted
by the Puerto Rico Credit Facility. The interest rate payable on borrowings
under the Puerto Rico Credit Facility is based on, at the election of CPRW, (a)
the "Base Rate", as defined, plus a margin of 1.50% or (b) the "Eurodollar
Rate", as defined, plus a margin of 2.50%, adjusted for the maintenance of
certain specified leverage ratios, as applicable. The Puerto Rico Credit
Facility, which is non-recourse to the Company, is secured by substantially all
of the assets of CPRW and its direct and indirect subsidiaries and requires CPRW
to meet and maintain certain financial and operating covenants, including the
maintenance of certain minimum annualized cash flows (as defined), the
maintenance of certain ratios of operating cash flow to debt service and total
outstanding debt to operating cash flow and performance requirements including
minimum subscriber levels. The Puerto Rico Credit Facility restricts the use of
borrowing, limits the incurrence of certain additional indebtedness by CPRW and
limits CPRW's ability to declare and pay dividends to the Company and management
fees to affiliates. Failure to satisfy such covenants would constitute a default
under the Puerto Rico Credit Facility in which event the lenders could
accelerate all amounts outstanding thereunder, and exercise certain other rights
and remedies as a secured creditor. At August 31, 1997, $99,500 was outstanding
under the Puerto Rico Credit Facility.
The Company and its subsidiaries were in compliance with all covenants of their
debt agreements at August 31, 1997.
NOTE 4. ACQUISITION
On September 12, 1996, the Company acquired, for approximately $34,908 in cash,
100% of the ownership interests in the partnership owning the wireless telephone
system serving the Benton Harbor, Michigan MSA. The Benton Harbor market
represents approximately 161,400 Net Pops. Approximately $33,429 of the purchase
price was allocated to cellular telephone licenses.
8
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The summary pro-forma information includes the operations of the Company as if
the Benton Harbor acquisition had been consummated as of June 1, 1996.
Three Months Ended
August 31, 1996
---------------
(Unaudited)
Revenues $33,635
Net loss (5,067)
Loss per common share (.32)
Pro-forma loss per common share for the three months ended August 31, 1996 is
calculated on a fully diluted basis using the pro-forma average number of common
shares outstanding during the period.
NOTE 5. REVENUE RECOGNITION
Wireless telephone service income includes earned subscriber service revenue and
charges for installation and connections, net of land line charges of $8,850 and
$7,212, for the three months ended August 31, 1997 and 1996, respectively.
NOTE 6. LOSS PER COMMON SHARE
Loss per common share does not include any shares of common stock equivalents
for the three month periods ended August 31, 1997 and 1996, respectively, as
their effect would be anti-dilutive. Loss per common share includes a charge for
the accretion in liquidation value of preferred stock and the dividend payable
on preferred stock.
NOTE 7. COMMITMENTS AND CONTINGENCIES
The Company is controlled by Century Communications Corp. ("Century"). Century
has an approximately 32% common stock interest and through ownership of the
Company's Class B Common Stock which has disproportionate votes per share (15
votes per share) an approximate 74% voting interest in the Company as of August
31, 1997. The Company and Century entered into a Services Agreement, effective
August 30, 1996 (the "Services Agreement"), pursuant to which Century, through
its personnel, provides design, construction, management, operational, technical
and maintenance services for the wireless telephone, paging and related systems
owned and operated by the Company. Such services also include providing all the
services necessary for the monitoring, to the extent possible, of the activities
of the partnerships in which the Company has investment interests in such manner
as to protect the interests of the Company. Such services have historically been
provided to the Company by Century. As consideration for the services rendered
and to be rendered under the Services Agreement, the Company will pay Century
the annual sum of $1,000 and will reimburse Century for all costs incurred by
Century or its affiliates (excluding the Company and its subsidiaries) that are
directly attributable to the design, construction, management, operation and
maintenance of the wireless telephone, paging and related systems of the Company
or to the performance by Century of its other duties under the Services
Agreement. For the three months ended August 31, 1997, the Company has recorded
expenses of $250 under the Services Agreement. Such amount is recorded within
accrued expenses on the Company's consolidated balance sheet at August 31, 1997.
9
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On December 21, 1994, the Company announced that its Board of Directors
authorized the repurchase in the open market and in privately negotiated
transactions from time to time, of up to 1,000,000, shares of Class A Common
Stock, depending on prevailing market conditions. During the three months ended
August 31, 1997, the Company announced that its Board of Directors authorized
the repurchase in the open market and in privately negotiated transactions of up
to an additional 3,000,000 shares of its Class A Common Stock, depending on
prevailing market conditions. During the three months ended August 31, 1997, the
Company purchased 262,000 shares of its own Class A Common Stock in the open
market for an aggregate purchase price of $4,192. Subsequent to August 31, 1997,
the Company purchased 280,000 additional shares of Class A Common Stock in the
open market for an aggregate purchase price of $4,938. These shares have been
accounted for as treasury shares. As of October 1, 1997, the Company is
authorized to repurchase 3,458,000 additional shares of Class A Common Stock
after giving effect to the shares repurchased to date.
The Company has determined to pursue a strategy to sell or otherwise dispose of
its minority equity investments in wireless telephone systems representing
approximately 1,100,000 Net Pops. The Company has not yet made a final
determination as to the estimated sale proceeds or the timing of such
disposition and believes that the fair market value exceeds the net book value
of the recorded assets at August 31, 1997.
NOTE 8. NEW ACCOUNTING PRONOUNCEMENTS
In 1997, the Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No. 128, "Earnings Per Share", which is effective for
financial statements ending after December 15, 1997. This statement supercedes
Accounting Principles Board Opinion No. 15 and replaces the presentation of
primary Earnings Per Share ("EPS") on the face of the statement of operations.
Adoption of SFAS 128 will not result in a change of EPS previously reported by
the Company using APB 15. Disclosure of Diluted EPS is not required due to the
anti-dilutive effect of the Company's equity instruments.
The Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No. 129, "Disclosure of Information about Capital
Structures," Statement of Financial Accounting Standards No. 130, "Reporting
Comprehensive Income" and Statement of Financial Accounting Standards No. 131,
"Disclosures about Segments of an Enterprise and Related Information" in 1997.
The Company believes these Statements will not have a material impact on the
consolidated financial statements of the Company when adopted.
NOTE 9. SEGMENT INFORMATION
The Company's consolidated financial statements include two distinct business
segments. The Domestic Wireless telephone segment ("Domestic") owns, operates
and invests in wireless telephone systems in the domestic United States. The
Company's Puerto Rico Wireless telephone segment ("Puerto Rico") began providing
wireless telephone service in Puerto Rico on December 12, 1996. The Company also
plans to participate in the alternative access business in Puerto Rico.
10
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Information about the Company's operations in its two business segments for the
three months ended August 31, 1997 and 1996 is as follows:
Three Months Ended
--------------------------
August 31, August 31,
1997 1996
---------- ---------
Gross revenue:
Domestic $ 45,133 $ 32,365
Puerto Rico 7,720 --
--------- ---------
$ 52,853 $ 32,365
========= =========
Operating income (loss):
Domestic $ 3,339 $ (2,004)
Puerto Rico (5,467) (1,395)
--------- ---------
$ (2,128) $ (3,399)
========= =========
Net income (loss):
Domestic $ 847 $ (4,494)
Puerto Rico (7,633) (1,613)
--------- ---------
$ (6,786) $ (6,107)
========= =========
Assets, at end of period:
Domestic $ 682,629 $ 697,035
Puerto Rico 163,740 86,003
--------- ---------
$ 846,369 $ 783,038
========= =========
Depreciation and amortization:
Domestic $ 19,974 $ 18,464
Puerto Rico 5,088 17
--------- ---------
$ 25,062 $ 18,481
========= =========
Capital expenditures:
Domestic $ 5,618 $ 14,544
Puerto Rico 29,141 8,937
--------- ---------
$ 34,759 $ 23,481
========= =========
11
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The information contained in this Part I, Item 2 updates, and should be read in
conjunction with, information set forth in Part II, Items 7 and 8, in the
Company's Annual Report on Form 10-K for the fiscal year ended May 31, 1997, in
addition to the interim consolidated financial statements and accompanying notes
presented in Part I, Item 1 of this Form 10-Q.
RESULTS OF OPERATIONS (Amounts in thousands, except subscriber, pop and share
data)
The Company is in a highly competitive business, competing with other providers
of wireless telephone service and providers of telephone services using
different and competing technologies. Since August 1988, the Company has
acquired cellular licenses for twenty-nine wireless telephone markets in the
United States that it owns and manages (the "Domestic Wireless Telephone
Systems"). In addition, on June 23, 1995, the Company acquired one of two
Metropolitan Trading Areas ("MTA") licenses to provide broadband personal
communications services ("PCS") in the Commonwealth of Puerto Rico and the U.S.
Virgin Islands (the "Puerto Rico Wireless Telephone System"). Certain of the
Company's operations are in a developmental stage, and the Company's Puerto Rico
Wireless Telephone System is in the start-up and construction stage. On December
12, 1996 the Company began providing wireless telephone services in Puerto Rico.
There is on-going construction to complete the buildout of the Puerto Rico
Wireless Telephone System. The Puerto Rico PCS telephone services operations
accounted for $7,720 in revenue for the three months ended August 31, 1997 and
had approximately 32,800 subscribers as of August 31, 1997.
The Company must continue to adapt its business to technological and economic
changes. It is dependent on its ability to increase its number of subscribers,
net of cancellations, and to achieve acceptable revenue per subscriber levels in
increasingly competitive markets. The Company expects net losses to continue
until such time as the wireless telephone operations, the Puerto Rico
telecommunications network and related investments associated with the
acquisition, construction and development of its wireless telephone systems and
Puerto Rico telecommunications network plant generate sufficient earnings to
offset the costs of such activities. There can be no assurance that
profitability will be achieved in the foreseeable future.
The Company is highly leveraged. The Company requires substantial capital to
operate, construct, expand and acquire wireless telephone systems, to build out
its recently acquired Puerto Rico telecommunications network, and to pay debt
service and preferred stock dividends. Historically, the Company has been
dependent upon borrowings, the issuance of its equity securities and operating
cash flow to provide funds for such purposes. There can be no assurance that the
Company will continue to have access to such sources of funds.
Three Months ended August 31, 1997 and August 31, 1996
Revenue for the three months ended August 31, 1997 was $52,853, an increase of
$20,488 or 63% over revenue of $32,365 for the three months ended August 31,
1996, reflecting growth in subscriptions to and increased usage of wireless
telephone service. The acquisition of the Benton Harbor, Michigan wireless
telephone market accounted for approximately $1,847 or 9% of the increase in
revenue. The
12
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Puerto Rico Wireless Telephone System contributed $7,720 or 38% of the increase
in revenue.
Revenue from the sale of wireless telephones to subscribers for the three months
ended August 31, 1997 increased by $343 to $1,109 or 45% as compared to the
three months ended August 31, 1996. The increase in revenue was due to a larger
number of telephone units sold during the current three month period.
Continued growth in revenue is dependent upon increased levels of wireless
subscriptions, maintenance of the current subscriber base, and the average
revenue per subscriber. Wireless subscribers at August 31, 1997 were
approximately 231,600, an increase of 65% from the 140,600 subscribers at August
31, 1996. Increases from new activations of 128,900 and 7,500 subscribers from
acquisition were offset by subscriber cancellations of 45,400. The cancellations
experienced by the Company are primarily the result of competitive factors. The
Puerto Rico Wireless Telephone System had approximately 32,800 subscribers at
August 31, 1997, and, as a result, accounted for 36% of the net increase in
subscriptions.
Consolidated revenue per subscriber per month, based upon an average number of
subscribers for the three months ended August 31, 1997, was $79 as compared to
$74 for the three months ended August 31, 1996. The average monthly revenue per
subscriber was approximately $76 in the domestic markets, as compared to
approximately $104 in the Company's Puerto Rico operations. The Company expects
that per subscriber revenue will be impacted by competition and the expansion of
its local service calling areas.
Cost of services during the three months ended August 31, 1997 was $7,882, an
increase of $3,116 or 65% from the three months ended August 31, 1996. The
increase was due to the variable costs associated with a larger revenue and
subscription base, increased wireless coverage areas resulting from both the
continued expansion of the Company's network, the acquisition completed during
the fiscal year ended May 31, 1997 and the commencement of PCS telephone service
in Puerto Rico. Cost of services for the Puerto Rico Wireless Telephone System
were $2,154 and $592 for the three months ended August 31, 1997 and 1996,
respectively.
Cost of equipment sold during the three months ended August 31, 1997 was $4,073,
an increase of $1,370 or 51% as compared to the three months ended August 31,
1996. The primary reason was an increase in the number of telephone units sold.
Cost of equipment sold for the Puerto Rico Wireless Telephone system were $160
and $0 for the three months ended August 31, 1997 and 1996, respectively.
Selling, general and administrative expenses rose to $17,964 for the three
months ended August 31, 1997, an increase of $8,150 or 83% above the expenses of
$9,814 for the three months ended August 31, 1996. The Company's managerial,
customer service and sales staff increased to accommodate the larger
subscription and revenue base, anticipated growth of its wireless telephone
business and the commencement of PCS telephone services in Puerto Rico. Selling,
general and administrative expenses for the Puerto Rico Wireless Telephone
System were $5,784 and $786 for the three months ended August 31, 1997 and 1996,
respectively.
The Company anticipates continued increases in the cost of services and selling,
general and administrative expenses as the growth of its existing wireless
telephone business continues. In addition,
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the Company expects that the development of its recently acquired markets as
well as its participation in the Puerto Rico telecommunications business will
contribute to a continued increase in the level of expenses.
Depreciation and amortization for the three months ended August 31, 1997 was
$25,062, an increase of $6,581 or 36% over the three months ended August 31,
1996. The increase results from acquisitions and capital expenditures made
during the quarter ended August 31, 1997 and during the fiscal year ended May
31, 1997 in connection with the development and network expansion of the
Company's Domestic Wireless Telephone Systems and Puerto Rico Wireless Telephone
System. Depreciation and amortization related to the Puerto Rico Wireless
Telephone System was $5,088 or 77% of the increase.
The operating loss for the three months ended August 31, 1997 was $2,128, a
decrease of $1,271 or 37% from the loss of $3,399 for the three months ended
August 31, 1996. The operating loss for the Puerto Rico Wireless Telephone
System was $5,467 for the three months ended August 31, 1997.
Interest expense was $10,705 for the three months ended August 31, 1997, an
increase of $3,664 or 52% from the three months ended August 31, 1996. Gross
interest costs for the three months ended August 31, 1996 include $1,299 of
capitalized interest charges related to the acquisition cost of the Company's
Puerto Rico PCS license during the pre-operational stage of the business. Gross
interest costs for the three months ended August 31, 1997 and 1996 were $10,705
and $8,340, respectively. The increase in gross interest costs reflects
additional borrowings for acquisitions, working capital and debt service. The
average debt outstanding during the three months ended August 31, 1997 was
$441,103, an increase of $91,103 as compared to the average debt level of
$350,000 during the three months ended August 31, 1996. The increase in average
debt outstanding is principally related to borrowings for the Puerto Rico PCS
business. The Company's weighted average interest rate increased to 9.7% for the
three months ended August 31, 1997 from 9.5% for the three months ended August
31, 1996.
After income attributable to minority interests in subsidiaries for the three
months ended August 31, 1997, a pretax loss of $8,757 was incurred, as compared
to a pretax loss of $6,862 for the three months ended August 31, 1996. The
income tax benefit of $1,971 for the three months ended August 31, 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. The tax benefits are non-cash in nature.
The net loss of $6,786 for the three months ended August 31, 1997 represents an
increase of $679 or 11% from the net loss of $6,107 for the three months ended
August 31, 1996.
LIQUIDITY AND CAPITAL RESOURCES
For the three months ended August 31, 1997, earnings were less than fixed
charges by $8,622. Fixed charges consist of interest expense, including
amortization of debt issue costs and the portion of rents deemed representative
of the interest portion of leases. The amount by which earnings were less than
fixed charges reflects non-cash charges of $25,062 relating to depreciation and
amortization.
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During the three months ended August 31, 1997, the Company made capital
expenditures of $34,759, primarily to continue the construction of its Puerto
Rico telecommunications network and its domestic wireless telephone systems as
well as to expand the coverage areas of existing properties and to upgrade its
cell sites and call switching equipment. Capital expenditures for the Company's
Puerto Rico Wireless Telephone System were $29,141 for the three months ended
August 31, 1997, representing 84% of the Company's total capital expenditures.
The Puerto Rico Wireless Telephone System capital expenditures included $19,408
to continue the buildout of the Company's PCS network infrastructure and $9,733
to purchase telephone units which remain the property of the Company while in
use by subscribers. The Company's future commitments for property and equipment
include the addition of cell sites to expand coverage, as well as enhancements
to the existing infrastructure of its wireless telephone systems. During the
twelve month period ending May 31, 1998, the Company anticipates capital
expenditures in its domestic wireless markets of approximately $30,000. The
Company currently estimates that the cost to continue the build-out of its
Puerto Rico network infrastructure through fiscal 1998 will be approximately
$35,000. The Company is exploring various sources of external financing
including, but not limited to, bank financing, joint ventures, partnerships and
placement of debt or equity securities of the Company.
In this regard, the Company entered into a $75,000 revolving credit facility
with Citibank, N.A. on September 12, 1996, which was amended on April 22, 1997
and further amended on July 28, 1997 (the "Credit Facility"). The Credit
Facility terminates on January 31, 2001. The Credit Facility may be used for
working capital and general corporate purposes. The Credit Facility restricts
the incurrence of certain additional debt by the Company and limits the
Company's ability to pay dividends. As of August 31, 1997, no amounts were
outstanding under the Credit Facility. The Company was in compliance with the
covenants of the Credit Facility at August 31, 1997.
Additionally, on April 25, 1997, Centennial Puerto Rico Wireless Corporation, a
wholly owned subsidiary of the Company ("CPRW"), entered into a four-year
$130,000 revolving credit facility with Citibank, N.A. as agent which converts
into a four-year term loan on April 25, 2001 (the "Puerto Rico Credit
Facility"). The proceeds from the Puerto Rico Credit Facility will be used by
CPRW and its direct and indirect subsidiaries primarily to finance the
construction and operation of PCS, competitive access and telecommunications
networks in Puerto Rico and the United States Virgin Islands. The proceeds will
also be used by CPRW for working capital and general corporate purposes and was
used to pay certain cash dividends to the Company as permitted by the Puerto
Rico Credit Facility. The Puerto Rico Credit Facility is non-recourse to the
Company and requires CPRW to meet and maintain certain financial and operating
covenants. The Puerto Rico Credit Facility restricts the use of borrowing,
limits the incurrence of certain additional indebtedness by CPRW and limits
CPRW's ability to declare and pay dividends to the Company and management fees
to affiliates. Breach of such covenants would constitute a default under the
facility in which event the lenders could accelerate all amounts outstanding
thereunder, and exercise certain other rights and remedies as a secured
creditor. At August 31, 1997, $99,500 was outstanding under the Puerto Rico
Credit Facility. The Company was in compliance with the covenants of the Puerto
Rico Credit Facility at August 31, 1997.
The Company has outstanding two classes of preferred stock, which are held by
Citizens Utilities Company ("Citizens") and Century, respectively. The preferred
stock issues 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
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preference and redemption value of the shares held by Citizens and Century at
August 31, 1996 was $186,287 and $7,252, respectively. Beginning September 1,
1996, the holders of the preferred stock shall receive cash dividends at the
rate of 8.5% per annum, when and as declared by the Board of Directors of the
Company, in its discretion. Assuming no change in the number of shares of such
classes outstanding, the annual dividend that may be declared and made payable,
commencing in fiscal 1997, with respect to the 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 the Company. On December 19, 1996, May 8, 1997 and August 1,
1997, the Company paid quarterly cash dividends to Citizens and Century of
$3,959 and $154, respectively. The Company will determine, the timing, amount,
or distribution (if any) of additional preferred stock dividends.
In order to meet its obligations with respect to its operating needs, capital
expenditures, debt service and preferred stock obligations, it is important that
the Company continue to improve operating cash flow. In order to do so, the
Company's revenue must increase at a faster rate than operating expenses.
Increases in revenue will be dependent upon continuing growth in the number of
subscribers and maximizing revenue per subscriber. The Company has continued 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, the Company's
participation in the Puerto Rico telecommunications business is expected to be
capital intensive. Further, due to the start-up nature of the Puerto Rico
telecommunications network, the Company expects that it will require additional
cash investment to fund its operations over the next several years. The Puerto
Rico telecommunications network is expected to be highly competitive with the
two existing wireless telephone providers, as well as the other Puerto Rico
telecommunications license holders. There is no assurance that the Puerto Rico
telecommunications network will generate cash flow or reach profitability. Even
if the Company's operating cash flow increases, it is anticipated that cash
generated from the Company's wireless telephone operations and Puerto Rico
telecommunications network will not be sufficient in the next several years to
cover interest, the preferred stock dividends that may be declared and made
payable and required capital expenditures.
The Company anticipates that shortfalls may be made up either through debt and
equity issuances or additional financing arrangements that may be entered into
by the Company. Although to date the Company has been able to obtain such
financing on satisfactory terms, there can be no assurance that this will
continue to be the case in the future.
The Company has filed a shelf registration statement with the Securities and
Exchange Commission ("SEC") for up to 8,000,000 shares of its Class A Common
Stock that may be offered from time to time in connection with acquisitions. The
registration statement was declared effective by the SEC on July 14, 1994. As of
October 1, 1997, 4,239,231 shares remain available for future acquisitions.
The Company has filed a shelf registration statement with the SEC for the
issuance of $500,000 of the Company's debt securities which was declared
effective by the SEC on April 6, 1995. The debt securities may be issued from
time to time in series on terms to be specified in one or more prospectus
supplements at the time of the offering. If so specified with respect to any
particular series, the debt securities may be convertible into shares of the
Company's Class A Common Stock. As of October 1, 1997, $400,000 remained
available for issuance.
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Although the net cash provided by operating activities for the three months
ended August 31, 1997 was not sufficient to fund the Company's expenditures for
property, plant and equipment of $34,759, funds required were available from
cash on hand. The principal source of such cash was financing activities
completed in prior fiscal years. The Company will continue to rely on various
financing activities to fund these requirements. Based upon current market
conditions, the Company expects that cash flows from operations and funds from
currently available credit facilities will be sufficient to enable the Company
to meet required cash commitments through the next twelve month period.
ACQUISITIONS, EXCHANGES AND DISPOSITIONS
The Company's primary acquisition strategy is to acquire controlling ownership
interests in wireless systems serving markets contiguous or proximate to its
current markets. The Company's strategy of clustering its wireless operations in
contiguous and proximate geographic areas enables it to achieve operating and
cost efficiencies as well as joint advertising and marketing benefits.
Clustering also allows the Company to offer its subscribers more areas of
uninterrupted service as they travel through an area or state. In addition to
expanding its existing clusters, the Company may also seek to acquire interests
in wireless systems in other geographic areas. The Company may also pursue other
communications businesses related to its wireless telephone and other mobile
service operations, as well as other communications businesses it determines to
be desirable. The consideration for such acquisitions may consist of shares of
the Company's Class A Common Stock, cash, assumption of liabilities or a
combination thereof.
On September 12, 1996, the Company acquired, for approximately $35,000 in cash,
100% of the ownership interests in the partnership owning the wireless telephone
system serving the Benton Harbor, Michigan MSA. The Benton Harbor market
represents approximately 161,400 Net Pops. A Net Pop is the market's Pops
multiplied by the percentage interest that Centennial owns in an entity licensed
by the FCC to construct or operate a wireless telephone system 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.
The Company has determined to pursue a strategy to sell or otherwise dispose of
substantially all of its equity investments in cellular telephone systems
representing approximately 1,100,000 Net Pops and has retained an investment
banker to assist it in such disposition. The Company has not yet made a final
determination as to the estimated sale proceeds or the timing of such
disposition.
COMMITMENTS AND CONTINGENCIES
On December 21, 1994, the Company announced that its Board of Directors
authorized the repurchase in the open market and in privately negotiated
transactions, from time to time, of up to 1,000,000 shares of Class A Common
Stock, depending on prevailing market conditions. Also, during the three months
ended August 31, 1997, the Company announced that its Board of Directors
authorized the repurchase in the open market and in privately negotiated
transactions of up to an additional 3,000,000 shares of its Class A Common
Stock, depending on prevailing market conditions. During the three months ended
August 31, 1997, the Company purchased 262,000 shares of its own Class A Common
Stock in the open market for an aggregate purchase price of $4,192. Subsequent
to August 31, 1997, the Company purchased 280,000 additional shares of Class A
Common Stock in the open market for an aggregate purchase price of $4,938.
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These shares have been accounted for as treasury shares. As of October 1, 1997,
the Company is authorized to repurchase 3,458,000 additional shares of Class A
Common Stock after giving effect to the shares repurchased to date.
The Company is controlled by Century. Century has an approximately 32% Common
Stock interest and through ownership of the Company's Class B Common Stock which
has disproportionate votes per share (15 votes per share) an approximate 74%
voting interest in the Company at August 31, 1997. The Company and Century
entered into a Services Agreement, effective August 30, 1996 (the "Services
Agreement"), pursuant to which Century, through its personnel, provides such
design, construction, management, operational, technical and maintenance
services for the wireless telephone, paging and related systems owned and
operated by the Company. Such services also include providing all the services
necessary for the monitoring, to the extent possible, of the activities of the
partnerships in which the Company has investment interests in such manner as to
protect the interests of the Company. Such services have historically been
provided to the Company by Century. As consideration for the services rendered
and to be rendered under the Services Agreement, the Company will pay Century
the annual sum of $1,000 and will reimburse Century for all costs incurred by
Century or its affiliates (excluding the Company and its subsidiaries) that are
directly attributable to the design, construction, management, operation and
maintenance of the wireless telephone, paging and related systems of the Company
or to the performance by Century of its other duties under the Services
Agreement. The Company has recorded expenses of $250 under the Services
Agreement for the three months ended August 31, 1997. Such amount is recorded
within Accrued Expenses on the Company's consolidated balance sheet at August
31, 1997.
* * * * *
CAUTIONARY STATEMENT FOR PURPOSES OF THE "SAFE HARBOR"
PROVISIONS OF THE PRIVATE SERCURITIES LITIGATION REFORM ACT OF 1995
This report contains or incorporates by reference forward-looking statements
within the meaning of the Private Securities Litigation Reform Act of 1995.
Where any such forward-looking statement includes a statement of the assumptions
or bases underlying such forward-looking statement, the Company cautions that
assumed facts or bases almost always vary from actual results, and the
differences between assumed facts or bases and actual results can be material
depending upon the circumstances. Where, in any forward-looking statement, the
Company or its management expresses an expectation or belief as to future
results, there can be no assurance that the statement of expectation or belief
will result or be achieved or accomplished. The words "believe", "expect",
"estimate", "anticipate", "project" and similar expressions may identify
forward-looking statements.
Taking into account the foregoing, the following are identified as important
factors that could cause actual results to differ materially from those
expressed in any forward-looking statement made by, or on behalf of, the
Company: the Company's net losses and stockholders' equity; the capital
intensity of the wireless telephone business and the Company's debt structure;
the competitive nature of the wireless telephone industry; regulation; changes
and developments in technology; subscriber cancellations; restrictive covenants
and consequences of default contained in the Company's financing arrangements;
control by certain of the Company's stockholders and anti-takeover provisions;
the Company's opportunities for growth through acquisitions and investments;
operating hazards and uninsured risks; refinancing and interest rate exposure
risks; potential for changes in accounting standards; and capital calls
associated with
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the Company' Investment Interests. A more detailed discussion of each of the
foregoing factors can be found in the Company's Annual Report on Form 10-K for
the Fiscal Year ended May 31, 1997 under the heading "CAUTIONARY STATEMENT FOR
PURPOSES OF THE "SAFE HARBOR" PROVISIONS OF THE PRIVATE SECURITIES LITIGATION
REFORM ACT OF 1995" in Item 7 of such Form 10-K. Other factors may be detailed
from time to time in the Company's filings with the SEC. The Company assumes no
obligation to update its forward-looking statements or to advise of changes in
the assumptions and factors on which they are based.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
NOT APPLICABLE
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PART II - OTHER INFORMATION
ITEM 1. Legal Proceedings
There are no material pending legal proceedings, other than routine
litigation incidental to the business, to which the Company or any of
its subsidiaries is a party to or which any of their property is
subject.
ITEM 2. Changes in Securities
None
ITEM 3. Defaults Upon Senior Securities
None
ITEM 4. Submission of Matters to a Vote of Security Holders
There were no matters submitted to a vote of the Company's shareholders
during the fiscal quarter ended August 31, 1997.
ITEM 5. Other Information
On December 21, 1994, the Company announced that its Board of Directors
authorized the repurchase in the open market and in privately negotiated
transactions, from time to time, of up to 1,000,000 shares of Class A
Common Stock, depending on prevailing market conditions. Also, during
the three months ended August 31, 1997, the Company announced that its
Board of Directors authorized the repurchase in the open market and in
privately negotiated transactions of up to an additional 3,000,000
shares of its Class A Common Stock, depending on prevailing market
conditions. During the three months ended August 31, 1997, the Company
purchased 262,000 shares of its own Class A Common Stock in the open
market for an aggregate purchase price of $4,192. Subsequent to August
31, 1997, the Company purchased 280,000 additional shares of Class A
Common Stock in the open market for an aggregate purchase price of
$4,938. These shares have been accounted for as treasury shares. As of
October 1, 1997, the Company is authorized to repurchase 3,458,000
additional shares of Class A Common Stock after giving effect to the
shares repurchased to date.
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ITEM 6. Exhibits and Report on Form 8-K
Each exhibit identified below is filed as a part of this report.
a) Exhibits
Exhibit No. Description
----------- -----------
Exhibit 10 Amendment No. 2, dated as of July 28, 1997 to the
Credit Agreement among the Company, each of the
lenders thereto, and Citibank, N.A. as agent for the
lenders.
Exhibit 11 Statement re: computation of per share earnings
Exhibit 27 Financial data schedule (EDGAR filing document only)
b) Reports on Form 8-K
None.
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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.
October 6, 1997
CENTENNIAL CELLULAR CORP.
/S/ Scott N. Schneider
----------------------------------------------
Scott N. Schneider
Chief Financial Officer, Senior Vice President
and Treasurer (Principal Financial Officer)
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Exhibit 10
Execution Counterpart
AMENDMENT NO. 2
AMENDMENT NO. 2 dated as of July 28, 1997, between CENTENNIAL
CELLULAR CORP., a corporation duly organized and validly existing under the laws
of the State of Delaware (the "Borrower"); each of the lenders that is a
signatory hereto (individually, a "Lender" and, collectively, the "Lenders");
and CITIBANK, N.A., a national banking association ("Citibank"), as agent for
the Lenders (in such capacity, together with its successors in such capacity,
the "Administrative Agent").
The Borrower, Citibank and the Administrative Agent are
parties to a Credit Agreement dated as of September 12, 1996 (as heretofore
modified and supplemented and in effect on the date hereof, the "Credit
Agreement"), providing, subject to the terms and conditions thereof, for loans
to be made by the Lenders to the Borrower in an aggregate principal amount not
exceeding $90,000,000. The Borrower wishes to increase the aggregate amount of
the Commitments (as defined in the Credit Agreement) by $25,000,000, to add
Societe Generale, New York Branch as an Additional Lender (as defined in the
Credit Agreement) under the Credit Agreement, and to amend the Credit Agreement
in certain other respects. Accordingly the Borrower, the Lenders and the
Administrative Agent hereby agree as follows:
Section 1. Definitions. Except as otherwise defined in this
Amendment No. 2, terms defined in the Credit Agreement are used herein as
defined therein.
Section 2. Amendments. Subject to the satisfaction of the
conditions precedent specified in Section 4 below, but effective as of the date
hereof, the Loan Documents shall be amended as follows:
2.01. References in the Credit Agreement (including references
to the Credit Agreement as amended hereby) to "this Agreement" (and indirect
references such as "hereunder", "hereby", "herein" and "hereof") shall be deemed
to be references to the Credit Agreement as amended hereby.
2.02. Section 1.01 of the Credit Agreement shall be amended by
amending in its entirety the following definition to read as follows:
"'Majority Lenders' means at any time Lenders holding 51% of
the then aggregate unpaid principal amount of the Notes held by the
Lenders, or, if no such principal amount is then outstanding, Lenders
having 51% of the Commitments; provided that, if the number of Lenders
at such time is less than three, 'Majority Lenders' shall mean all of
the Lenders."
<PAGE>
<PAGE>
2.03. The second paragraph of the preamble of Exhibit D-2 to
the Credit Agreement, the second paragraph of the preamble of the Subsidiary
Guaranty, the second paragraph of the preamble of Annex 1 to the Subsidiary
Guaranty and the second paragraph of the preamble of the Pledge Agreement shall
be amended by adding at the end of each such paragraph thereof:
"In addition, the Borrower may now or hereafter from time to
time be obligated to various of the Lenders in respect of
interest rate protection or hedging arrangements entered into
by the Borrower to fix the floating interest rate or float the
fixed interest rate of any Debt (as defined in the Credit
Agreement) permitted under the Credit Agreement (such
obligations being herein referred to as 'Other Debts')."
2.04. Section 2.01 of the Subsidiary Guaranty shall be amended
by inserting "and all Other Debt and interest thereon" after "Notes".
2.05. The definition of Secured Obligations in Exhibit D-2 to
the Credit Agreement and in Section 1 of each Pledge Agreement shall be amended
by inserting "including obligations in respect of Other Debt and interest
thereon" after "Subsidiary Guaranty".
2.06. Section 4.12 of each Pledge Agreement shall be amended
by inserting "and interest rate or hedging arrangements constituting Other Debt"
after "Credit Agreement".
Section 3. Representations and Warranties. The Borrower
represents and warrants to the Lenders that the representations and warranties
set forth in Section 4 of the Credit Agreement are true and complete on the date
hereof as if made on and as of the date hereof and as if each reference in said
Section 4 to "this Agreement" included reference to this Amendment No. 2.
Section 4. Conditions Precedent. As provided in Section 2
above, the amendments to the Credit Agreement set forth in said Section 2 shall
become effective, as of the date hereof, upon the satisfaction of the following
conditions precedent:
4.01. Execution by All Parties. This Amendment No. 2 shall
have been executed and delivered by each of the parties hereto, and consented to
by each of the Guarantors and Pledgors (as defined in the Pledge Agreements).
4.02 New Commitment Acceptance. The New Commitment Acceptance
in the form of Exhibit A hereto shall have been executed and delivered by
Societe Generale, New York Branch the Borrower and the Administrative Agent and
shall have become effective in accordance with paragraph 4 thereof.
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Section 5. Miscellaneous. Except as herein provided, the
Credit Agreement shall remain unchanged and in full force and effect. This
Amendment No. 2 may be executed in any number of counterparts, all of which
taken together shall constitute one and the same amendatory instrument and any
of the parties hereto may execute this Amendment No. 2 by signing any such
counterpart. This Amendment No. 2 shall be governed by, and construed in
accordance with, the law of the State of New York.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment No. 2 to be duly executed and delivered as of the day and year first
above written.
CENTENNIAL CELLULAR CORP.
By _________________________
Title:
CENTENNIAL BENTON HARBOR
CELLULAR CORP.
CENTENNIAL BENTON HARBOR HOLDING
CORP.
CENTENNIAL CELLULAR TELEPHONE
COMPANY OF COCONINO
CENTENNIAL CELLULAR TELEPHONE
COMPANY OF DEL NORTE
CENTENNIAL CELLULAR TELEPHONE
COMPANY OF LAWRENCE
CENTENNIAL CELLULAR TELEPHONE
COMPANY OF MODOC
CENTENNIAL CELLULAR TELEPHONE
COMPANY OF SACRAMENTO
VALLEY
CENTENNIAL CELLULAR TELEPHONE
COMPANY OF SAN FRANCISCO
CENTENNIAL CLAIRBORNE CELLULAR
CORP.
CENTENNIAL LAKE CHARLES CELLULAR
CORP.
By _________________________
Title:
CITIBANK, N.A., individually and as
Administrative Agent
By _________________________
Title:
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Execution Counterpart
NEW COMMITMENT ACCEPTANCE
Dated July 28, 1997
CENTENNIAL CELLULAR CORP.
CITIBANK, N.A., as Administrative Agent
for the Lenders referred to in the Credit Agreement dated as of
September 12, 1996 among Centennial Cellular Corp., the Lenders party
thereto, and Citibank, N.A., in its capacity as Administrative Agent,
(as amended, modified or supplemented from time to time, the "Credit
Agreement")
Ladies and Gentlemen:
Unless otherwise indicated in this New Commitment Acceptance
(the "Acceptance"), the capitalized terms used in this Acceptance shall have the
meanings given to such terms in the Credit Agreement.
1. Societe Generale, New York Branch (the "Additional Lender")
agrees to become a party to the Credit Agreement and to have the rights and
perform the obligations of a Lender under the Credit Agreement, and to be bound
in all respects by the terms of the Credit Agreement.
2. The Additional Lender hereby agrees to a Commitment of
$25,000,000 (the "Proposed New Commitment").
3. The Additional Lender (i) agrees that neither the
Administrative Agent nor any Lender has made any representation or warranty, or
assumes any responsibility with respect to, (x) any statements, warranties or
representations made in or in connection with the Credit Agreement or the
execution, legality, validity, enforceability, genuineness, sufficiency or value
of the Credit Agreement or any other instrument or document furnished pursuant
thereto or (y) the financial condition of the Borrower or the performance or
observance by the Borrower of any of its obligations under the Credit Agreement
or any other instrument or document furnished pursuant thereto; (ii) confirms
that it has received a copy of the Credit Agreement, together with copies of the
financial statements referred to in Section 5.03 thereof and such other
documents and information as it has deemed appropriate to make its own credit
analysis and decision to enter into this Acceptance; (iii) agrees that it will,
independently and without reliance upon the Administrative Agent or any Lender
and based on such documents and information as it shall deem appropriate at the
time, continue to make its own credit decisions in taking or not taking action
under the Credit Agreement;
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(iv) appoints and authorizes the Administrative Agent to take such action as
agent on its behalf and to exercise such powers under the Credit Agreement as
are delegated to the Administrative Agent and by the terms thereof, together
with such powers as are reasonably incidental thereto; (v) agrees that it will
perform in accordance with their terms all of the obligations which by the terms
of the Credit Agreement are required to be performed by it as a Lender; (vi)
specifies as its Domestic Lending Office (and address for notices) and
Eurodollar Lending Office the offices set forth beneath its name on the
signature page(s) hereof; and (vii) attaches the declarations, certifications
and other documents required under Section 2.13(e) of the Credit Agreement as to
the Additional Lender's status for purposes of determining exemption from
withholding taxes with respect to all payments to be made to the Additional
Lender under the Credit Agreement or to indicate that all such payments are
subject to such rates at a rate reduced by an applicable tax treaty.
4. The effective date for this Acceptance shall be the
Re-Allocation Date; provided that this Acceptance has been fully executed and
delivered to the Administrative Agent for acceptance and recording by the Agent
on or prior to such Re-Allocation Date and the conditions precedent specified in
Section 2.01A(d) of the Credit Agreement shall have been satisfied.
5. Upon such execution, delivery, acceptance and recording and
as of the Re-Allocation Date, the Additional Lender shall be a party to the
Credit Agreement with a Commitment equal to the Proposed New Commitment as it
may be adjusted or reduced pursuant to Section 2.04 of the Credit Agreement and,
to the extent provided in this Acceptance, have the rights and obligations of a
Lender thereunder.
6. Upon such acceptance and recording, from and after the
Re-Allocation Date, the Administrative Agent shall make all payments under the
Credit Agreement in respect of the Proposed New Commitment provided for in this
Acceptance (including, without limitation, all payments of principal, interest
and commitment fees with respect thereto) to the Additional Lender.
7. This Acceptance shall be governed by and construed in
accordance with the laws of the State of New York.
-2-
<PAGE>
<PAGE>
8. This Acceptance may be signed in any number of
counterparts, each of which shall be an original, with the same as if the
signatures were upon the same instrument.
ADDITIONAL ACCEPTED LENDER
SOCIETE GENERALE, NEW YORK
BRANCH
By:___________________________
Title:
Domestic Lending Office (and
address for notices):
Societe Generale, New York
Branch
1221 Avenue of the Americas
New York, New York 10020
Telephone No.: 212-278-6852
Telecopy No.: 212-278-6240
Eurodollar Lending Office:
Societe Generale, New York
Branch
1221 Avenue of the Americas
New York, New York 10020
This Acceptance is hereby acknowledged and agreed on as of the
date set forth above.
CENTENNIAL CELLULAR CORP.
By____________________________
Title:
CITIBANK, N.A., as
Administrative Agent for the
Lenders
By____________________________
Title:
-3-
<PAGE>
<PAGE>
EXHIBIT 11
CENTENNIAL CELLULAR CORP. AND SUBSIDIARIES
EXHIBIT TO FORM 10-Q
For the Three Months Ended August 31, 1997 and 1996
COMPUTATION OF LOSS PER COMMON SHARE
(Amounts in thousands, except per share data)
<TABLE>
<CAPTION>
Three Months Ended
-----------------------------------
August 31, August 31,
1997 1996
----------- ------------
(Unaudited)
<S> <C> <C>
Primary fully diluted:
Net Loss $ (6,786) $ (6,107)
Preferred stock dividends (4,113) (3,610)
----------- -----------
Loss applicable to common shares $ (10,899) $ (9,717)
=========== ===========
Average number of common shares and common
share equivalents outstanding
Average number of common shares
outstanding during this period 26,860,000 26,932,000
Add common share equivalents - Options
to purchase common shares - net 304,000 379,000
----------- -----------
Average number of common shares and common
share equivalents outstanding 27,164,000(A) 27,311,000(A)
=========== ===========
Loss per common share $ ( .40)(A) $ (.36)(A)
=========== ===========
</TABLE>
(A) In accordance with Accounting Principles Board Opinion No. 15, the
inclusion of common share equivalents in the computation of earnings per
share need not be considered if the reduction of earnings per share is less
than 3% or the effect is anti-dilutive. Therefore, loss per common share
and common share equivalents as shown on the Consolidated Statements of
Operations for the periods presented do not include certain common share
equivalents as their effect is anti-dillutive.
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAY-31-1998
<PERIOD-END> AUG-31-1997
<CASH> 46,510
<SECURITIES> 0
<RECEIVABLES> 30,490
<ALLOWANCES> 2,700
<INVENTORY> 0
<CURRENT-ASSETS> 83,015
<PP&E> 189,295
<DEPRECIATION> 46,455
<TOTAL-ASSETS> 846,369
<CURRENT-LIABILITIES> 62,144
<BONDS> 449,500
<COMMON> 270
193,539
0
<OTHER-SE> 97,601
<TOTAL-LIABILITY-AND-EQUITY> 846,369
<SALES> 52,189
<TOTAL-REVENUES> 52,853
<CGS> 11,955
<TOTAL-COSTS> 54,981
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 10,705
<INCOME-PRETAX> (8,622)
<INCOME-TAX> (1,971)
<INCOME-CONTINUING> (6,651)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (6,786)
<EPS-PRIMARY> (.41)
<EPS-DILUTED> 0
</TABLE>
