<PAGE>
<PAGE>
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, 1998
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 - 15,228,908 outstanding shares as of April 8, 1998
Class B Common - 10,544,113 outstanding shares as of April 8, 1998
<PAGE>
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CENTENNIAL CELLULAR CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Amounts in thousands)
<TABLE>
<CAPTION>
February 28,
1998 May 31,
(Unaudited) 1997
------------ -------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 14,595 $ 43,415
Accounts receivable, less allowance for doubtful
accounts of $3,538 and $2,130, respectively 29,842 29,991
Prepaid expenses and other current assets 5,740 4,836
-------- --------
TOTAL CURRENT ASSETS 50,177 78,242
PROPERTY, PLANT AND EQUIPMENT - net 244,023 177,292
EQUITY INVESTMENTS IN WIRELESS SYSTEMS - net 90,425 94,153
DEBT ISSUANCE COSTS, less accumulated amortization of
$5,494 and $3,606, respectively 9,106 9,863
CELLULAR TELEPHONE LICENSES, less accumulated
amortization of $251,160 and $213,739, respectively 247,781 285,202
PERSONAL COMMUNICATIONS SERVICES LICENSE, less accumulated
amortization of $1,931 and $755, respectively 60,827 62,004
GOODWILL, less accumulated amortization of $26,059
and $23,185, respectively 127,191 130,065
OTHER ASSETS - net 7,526 8,029
-------- --------
TOTAL $837,056 $844,850
======== ========
</TABLE>
See notes to consolidated financial statements
1
<PAGE>
<PAGE>
CENTENNIAL CELLULAR CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(CONTINUED)
(AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
February 28,
1998 May 31,
(Unaudited) 1997
------------ --------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 13,498 $ 1,754
Accrued expenses and other current liabilities 58,176 61,056
Payable to affiliate 655 442
--------- ---------
TOTAL CURRENT LIABILITIES 72,329 63,252
LONG-TERM DEBT 490,000 429,000
DEFERRED LIABILITY 2,200 2,200
DEFERRED INCOME TAXES 27,783 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 16,532,234 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 357,633 369,704
Accumulated deficit (278,373) (252,291)
--------- ---------
79,530 117,683
Less: Cost of 1,359,009, and 88,809, respectively, Class A common shares
in treasury (25,325) (1,801)
Shareholder note receivable (3,000) (3,000)
--------- ---------
TOTAL COMMON STOCKHOLDERS' EQUITY 51,205 112,882
--------- ---------
TOTAL $ 837,056 $ 844,850
========= =========
</TABLE>
See notes to consolidated financial statements
2
<PAGE>
<PAGE>
CENTENNIAL CELLULAR CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(Amounts in thousands, except share data)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
------------------------------ -------------------------------
February 28, February 28, February 28, February 28,
1998 1997 1998 1997
-------------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
REVENUE:
Service revenue - Domestic $ 42,562 $ 36,878 $ 131,262 $ 101,983
Service revenue - Puerto Rico 15,224 1,408 34,853 1,408
Equipment sales 1,155 676 3,590 2,075
Interest income 238 212 1,461 1,432
------------ ------------ ------------ ------------
59,179 39,174 171,166 106,898
------------ ------------ ------------ ------------
COSTS AND EXPENSES:
Cost of equipment sold - Domestic 4,126 4,567 12,501 11,236
Cost of equipment sold - Puerto Rico 267 167 529 167
Cost of services - Domestic 6,674 5,066 18,807 13,678
Cost of services - Puerto Rico 4,157 847 10,411 1,928
Selling, general and administrative - Domestic 15,196 12,251 42,396 31,994
Selling, general and administrative - Puerto Rico 7,261 3,147 19,746 5,086
Depreciation and amortization - Domestic 20,548 19,899 60,771 57,634
Depreciation and amortization - Puerto Rico 9,309 1,276 21,866 1,332
------------ ------------ ------------ ------------
67,538 47,220 187,027 123,055
------------ ------------ ------------ ------------
OPERATING LOSS (8,359) (8,046) (15,861) (16,157)
------------ ------------ ------------ ------------
INCOME FROM EQUITY INVESTMENTS 2,391 2,789 9,843 10,873
GAIN (LOSS) ON SALE OF ASSETS (4) 2,058 8 2,106
INTEREST EXPENSE - DOMESTIC 8,578 8,157 25,698 22,309
INTEREST EXPENSE - PUERTO RICO 2,883 682 7,564 1,289
------------ ------------ ------------ ------------
LOSS BEFORE INCOME TAX BENEFIT
AND MINORITY INTEREST (17,433) (12,038) (39,272) (26,776)
INCOME TAX BENEFIT (7,844) (2,758) (13,527) (5,532)
------------ ------------ ------------ ------------
LOSS BEFORE MINORITY INTEREST (9,589) (9,280) (25,745) (21,244)
MINORITY INTEREST IN INCOME OF SUBSIDIARIES (81) (206) (337) (470)
------------ ------------ ------------ ------------
NET LOSS $ (9,670) $ (9,486) $ (26,082) $ (21,714)
============ ============ ============ ============
DIVIDEND REQUIREMENT ON PREFERRED STOCK $ 4,112 $ 4,113 $ 12,338 $ 11,836
============ ============ ============ ============
LOSS APPLICABLE TO COMMON SHARES $ (13,782) $ (13,599) $ (38,420) $ (33,550)
============ ============ ============ ============
LOSS PER COMMON SHARE $ (.54) $ (.50) $ (1.46) $ (1.25)
============ ============ ============ ============
WEIGHTED AVERAGE NUMBER OF COMMON SHARES
OUTSTANDING DURING THE PERIOD 25,713,000 26,936,000 26,309,000 26,935,000
============ ============ ============ ============
</TABLE>
See notes to consolidated financial statements
3
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<PAGE>
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 Additional
------------------- ------------------- Paid-In
Shares Dollars Shares Dollars Capital
---------- ------- ---------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
Balance at June 1, 1996 16,461,858 $165 10,544,113 $105 $383,533
Common Stock
issued in connection with
incentive plans 31,026 - - - 132
Preferred stock dividends - - - - (15,948)
Income tax benefit - stock options exercised - - - - 1,987
Net loss - - - - -
----------- ----- ----------- ----- ---------
Balance at May 31, 1997 16,492,884 165 10,544,113 105 369,704
Common Stock issued in
connection with incentive
plans 39,350 - - - 267
Preferred stock dividends - - - - (12,338)
Treasury stock purchases
(1,270,200 shares) - - - - -
Net loss - - - - -
----------- ----- ----------- ----- ---------
Balance at February 28, 1998 - (unaudited) 16,532,234 $165 10,544,113 $105 $357,633
=========== ===== =========== ===== =========
<CAPTION>
Shareholder
Treasury Note (Accumulated
Stock Receivable Deficit) Total
--------- ----------- ------------ --------
<S> <C> <C> <C> <C> <C>
Balance at June 1, 1996 $ (1,801) $(3,000) $(218,996) $160,006
Common Stock
issued in connection with
incentive plans - - - 132
Preferred stock dividends - - - (15,948)
Income tax benefit - stock options exercised - - - 1,987
Net loss - - (33,295) (33,295)
--------- -------- ---------- ---------
Balance at May 31, 1997 (1,801) (3,000) (252,291) 112,882
Common Stock issued in
connection with incentive
plans - - - 267
Preferred stock dividends - - - (12,338)
Treasury stock purchases
(1,270,200 shares) (23,524) - - (23,524)
Net loss - - (26,082) (26,082)
--------- -------- ---------- ---------
Balance at February 28, 1998 - (unaudited) $(25,325) $(3,000) $(278,373) $ 51,205
========= ======== ========== =========
</TABLE>
See notes to consolidated financial statements
4
<PAGE>
<PAGE>
CENTENNIAL CELLULAR CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Amounts in thousands)
<TABLE>
<CAPTION>
Nine Months Ended
----------------------------
February 28, February 28,
1998 1997
------------ ------------
<S> <C> <C>
OPERATING ACTIVITIES:
Cash received from subscribers and others $ 188,957 $ 124,387
Cash paid to suppliers, employees and
governmental agencies (118,283) (87,907)
Interest paid (24,478) (14,546)
--------- ---------
NET CASH PROVIDED BY OPERATING ACTIVITIES 46,196 21,934
--------- ---------
INVESTING ACTIVITIES:
Proceeds from equipment sales 36 2,947
Capital expenditures (103,187) (59,482)
Acquisition of other assets (6,125) (69)
Acquisition, disposition and exchange of wireless telephone systems -- (34,908)
Acquisition of personal communications service license -- (2,752)
Distributions received from equity investments 10,051 6,863
Capital contributed to equity investments (65) (292)
--------- ---------
NET CASH USED IN INVESTING ACTIVITIES (99,290) (87,693)
--------- ---------
FINANCING ACTIVITIES:
Proceeds from long-term debt 196,000 40,000
Repayment of long-term debt (135,000) (21,000)
Debt issuance costs paid (1,131) (603)
Proceeds from issuance of Class A and B Common Stock 267 132
Dividends paid (12,338) (4,113)
Treasury stock purchases (23,524) --
--------- ---------
NET CASH PROVIDED BY FINANCING ACTIVITIES 24,274 14,416
--------- ---------
NET DECREASE IN CASH AND CASH EQUIVALENTS (28,820) (51,343)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 43,415 67,297
--------- ---------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 14,595 $ 15,954
========= =========
</TABLE>
See notes to consolidated financial statements
5
<PAGE>
<PAGE>
CENTENNIAL CELLULAR CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(CONTINUED)
(Unaudited)
(Amounts in thousands)
<TABLE>
<CAPTION>
Nine Months Ended
---------------------------
February 28, February 28,
1998 1997
----------- ------------
<S> <C> <C>
RECONCILIATION OF NET LOSS TO NET CASH PROVIDED BY
OPERATING ACTIVITIES:
Net loss $(26,082) $(21,714)
-------- --------
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation and amortization 82,637 58,966
Minority interest in income of subsidiaries 337 470
Deferred income taxes - decrease (16,194) (8,173)
Equity in undistributed earnings of investee companies (9,843) (10,873)
Gain on sale of assets (8) (2,106)
Other 1,889 828
Change in assets and liabilities net of effects of
acquired wireless telephone systems:
Accounts receivable - (increase) (4,791) (2,127)
Prepaid expenses and other current assets -
(increase) (904) (4,196)
Accounts payable and accrued expenses -
increase 16,971 8,825
Customer deposits and prepayments -
increase 2,184 2,034
-------- --------
Total adjustments 72,278 43,648
-------- --------
Net cash provided by operating activities $ 46,196 $ 21,934
======== ========
</TABLE>
See notes to consolidated financial statements
6
<PAGE>
<PAGE>
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
February 28, 1998 and the results of its consolidated operations and cash flows
for the periods ended February 28, 1998 and 1997. These financial statements do
not include all disclosures required by generally accepted accounting
principles. 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, which includes a summary of significant accounting
policies and other disclosures. The consolidated balance sheet at May 31, 1997
is audited.
NOTE 2. LONG-TERM DEBT
On February 27, 1998, Centennial Puerto Rico Wireless Corporation, a wholly
owned subsidiary of the Company ("CPRW"), amended its four-year revolving credit
facility (the "Puerto Rico Credit Facility") to increase the credit availability
from $130,000 to $180,000, an increase of $50,000.
The Company and its subsidiaries had the following debt outstanding at
February 28, 1998 and May 31, 1997:
<TABLE>
<CAPTION>
February 28, May 31,
1998 1997
------------ -------
<S> <C> <C>
Centennial 8 7/8% Senior Notes due 2001.......... $ 250,000 $ 250,000
Centennial 10 1/8% Senior Notes due 2005......... 100,000 100,000
Centennial Domestic Credit Facility.............. 5,000 5,000
Puerto Rico Credit Facility...................... 135,000 74,000
--------- ---------
$ 490,000 $ 429,000
========= =========
</TABLE>
The Company and CPRW were in compliance with all covenants of their debt
agreements at February 28, 1998.
NOTE 3. ACQUISITION
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. Approximately $33,429 of the purchase
price was allocated to cellular telephone licenses.
7
<PAGE>
<PAGE>
The summary pro-forma information includes the operations of the Company as if
the Benton Harbor acquisition had been completed as of June 1, 1996.
<TABLE>
<CAPTION>
Nine Months Ended
February 28, 1997
-----------------
(Unaudited)
<S> <C>
Revenue $ 108,168
Net loss (20,674)
Loss per common share (1.21)
</TABLE>
Pro-forma loss per common share for the nine months ended February 28, 1997 is
calculated using the pro-forma average number of common shares outstanding
during the period.
NOTE 4. REVENUE RECOGNITION
Wireless telephone service income includes earned subscriber service revenue and
charges for installation and connections, net of land line charges of $26,410
and $20,678 for the nine months ended February 28, 1998 and 1997, respectively.
NOTE 5. LOSS PER COMMON SHARE
Loss per common share does not include any shares of common stock equivalents
for the three or nine month periods ended February 28, 1998 and 1997,
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 6. COMMITMENTS AND CONTINGENCIES
The Company is controlled by Century Communications Corp. ("Century"). Century
has an approximately 33% 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
February 28, 1998. 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 minority equity
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 pays Century the annual sum of $1,000 and reimburses
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 nine months ended
February 28, 1998, the Company has recorded expenses of $750 under the Services
Agreement, of which $500 is recorded within payable to affiliate on the
Company's consolidated balance sheet at February 28, 1998.
8
<PAGE>
<PAGE>
On March 3, 1998, the Company entered into a two-year arrangement (the
"Arrangement") with an institution (the "Counterparty") pursuant to which, the
Counterparty may be directed by the Company from time to time to purchase in the
open market up to 710,000 shares of the Company's Class A Common Stock
("Shares") throughout the life of the Arrangement. At the end of each calendar
quarter during the term of the Arrangement, the value of the Shares held by the
Counterparty will be determined. If, as of any such determination date, such
Shares have increased in value from the date of purchase or prior determination
date (if such Shares were then held by the Counterparty), the Counterparty will
deliver to the Company an amount of Shares equal in value to such increase, less
an amount corresponding to interest on the dollar amount that the Counterparty
has committed to the purchase of the Shares (the "Interest Component"). If, as
of any such determination date, such Shares have decreased in value from the
date of purchase or prior determination date (if such Shares were then held by
the Counterparty), the Company will deliver to the Counterparty an amount of
Shares or cash equal in value to such decrease, plus the Interest Component. At
the end of the term of the Arrangement (or earlier at the option of the Company
or upon the occurrence of certain events of default or certain mandatory unwind
events) the Company may elect to purchase the Shares held by the Counterparty
for cash in lieu of the resale of such Shares into the market. Failing an
election by the Company to effect such purchase, the Counterparty may resell
into the market the Shares held by it pursuant to a registration statement. It
is the Company's current intent to acquire the shares upon termination. To date,
273,200 Shares have been purchased by the Counterparty under the Arrangement at
a price of approximately $5,289.
During the nine months ended February 28, 1998, the Company directly purchased
1,270,200 shares of its Class A Common Stock in the open market for an aggregate
purchase price of $23,524 pursuant to previous authorizations by the Company's
Board of Directors. These shares have been accounted for as treasury shares.
Subsequent to February 28, 1998, the Company has not directly purchased any
additional shares of its Class A Common Stock in the open market. As of April 8,
1998, the Company is authorized to directly purchase 2,729,800 additional shares
of its Class A Common Stock in the open market after giving effect to the shares
purchased 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 February 28, 1998.
The Board of Directors of the Company has determined to explore strategic
alternatives available to it. In connection with this exploration, the
Company has retained the services of Donaldson, Lufkin & Jenrette.
NOTE 7. NEW ACCOUNTING PRONOUNCEMENTS
Effective with the quarter ended February 28, 1998, the Company adopted the
provisions of Statement of Financial Accounting Standards No. 128, "Earnings Per
Share" ("SFAS 128"), which is effective for financial statements ending after
December 15, 1997. This statement supersedes Accounting Principles Board Opinion
No. 15 ("APB15") and replaces the presentation of primary earnings per share
("EPS") and fully diluted EPS on the face of the statement of operations with
basic and diluted EPS. Basic EPS is calculated by dividing loss applicable to
common shares by weighted average common shares
9
<PAGE>
<PAGE>
outstanding. Diluted EPS reflects the potential dilution that could occur if
potential common stock instruments of the Company were exercised, converted or
issued. The Company is not currently required to present diluted EPS due to the
anti-dilutive effect of the Company's potential common stock instruments.
Adoption of SFAS 128 did not result in a change of EPS previously reported by
the Company using APB 15.
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 8. 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 telephone segment includes the accounts of Centennial
Puerto Rico Wireless Corporation ("Wireless" or the "Puerto Rico Wireless
Telephone System"). Wireless is wholly owned by the Company. Wireless began
providing wireless telephone service in Puerto Rico on December 12, 1996 and
participates in the alternative access business in Puerto Rico pursuant to the
Federal Communications Commission's requirements for interstate service and
pursuant to an authorization issued to Wireless in December 1994 by the Public
Service Commission of the Commonwealth of Puerto Rico for intrastate service.
Wireless began providing competitive access service in September 1997.
10
<PAGE>
<PAGE>
Information about the Company's operations in its two business segments for the
nine months ended February 28, 1998 and 1997 is as follows:
<TABLE>
<CAPTION>
Nine Months Ended February 28,
------------------------------
1998 1997
------- -------
<S> <C> <C>
Gross revenue:
Domestic $135,242 $105,405
Puerto Rico 35,924 1,493
-------- --------
$171,166 $106,898
======== ========
Operating income (loss):
Domestic $ 767 $ (9,137)
Puerto Rico (16,628) (7,020)
-------- --------
$(15,861) $(16,157)
======== ========
Net loss:
Domestic $ (1,890) $(13,405)
Puerto Rico (24,192) (8,309)
-------- --------
$(26,082) $(21,714)
======== ========
Assets, at end of period:
Domestic $722,877 $728,112
Puerto Rico 205,389 117,438
Elimination (91,210) (52,278)
-------- --------
$837,056 $793,272
======== ========
Depreciation and amortization:
Domestic $ 60,771 $ 57,634
Puerto Rico 21,866 1,332
-------- --------
$ 82,637 $ 58,966
======== ========
Capital expenditures:
Domestic $ 31,363 $ 33,167
Puerto Rico 71,824 26,315
-------- --------
$103,187 $ 59,482
======== ========
</TABLE>
The information provided below is that of Centennial Cellular Corp. (before the
consolidation of Puerto Rico), Puerto Rico, and the Company's consolidated
information.
11
<PAGE>
<PAGE>
NOTE 8 - CONTINUED
CENTENNIAL CELLULAR CORP. AND SUBSIDIARIES
CONSOLIDATING BALANCE SHEET FINANCIAL DATA
February 28, 1998
(Unaudited)
(Amounts in thousands)
<TABLE>
<CAPTION>
Centennial
Cellular
Corp. Before
Consolidation
of Puerto Rico Puerto Rico Eliminations Consolidated
-------------- ----------- ------------ ------------
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 9,015 $ 5,580 $ -- $ 14,595
Accounts receivable - net 23,868 5,974 -- 29,842
Prepaid expenses and other
current assets 3,882 1,858 -- 5,740
--------- --------- --------- ---------
Total current assets 36,765 13,412 -- 50,177
Property, plant & equipment - net 122,105 121,918 -- 244,023
Investment in Puerto Rico, at cost 90,100 -- (90,100) --
Equity investments in wireless
telephone systems-net 90,425 -- -- 90,425
Debt issuance costs - net 5,832 3,274 9,106
Cellular telephone licenses - net 247,781 -- -- 247,781
Personal communications services
licenses - net -- 60,827 -- 60,827
Goodwill - net 127,191 -- -- 127,191
Other assets - net 2,678 5,958 (1,110) 7,526
--------- --------- --------- ---------
$ 722,877 $ 205,389 $ (91,210) $ 837,056
========= ========= ========= =========
</TABLE>
12
<PAGE>
<PAGE>
NOTE 8. CONTINUED
CENTENNIAL CELLULAR CORP. AND SUBSIDIARIES
CONSOLIDATING BALANCE SHEET FINANCIAL DATA
(CONTINUED)
February 28, 1998
(Unaudited)
(Amounts in thousands)
<TABLE>
<CAPTION>
Centennial Cellular
Corp. before
Consolidation
of Puerto Rico Puerto Rico Eliminations Consolidated
-------------- ----------- ------------ ------------
<S> <C> <C> <C> <C>
LIABILITIES AND STOCKHOLDERS'
EQUITY
Current liabilities:
Accounts payable $ 2,453 $ 11,045 $ -- $ 13,498
Accrued expenses and other
current liabilities 47,663 10,513 -- 58,176
Payable to affiliate 500 155 -- 655
--------- --------- --------- ---------
Total current liabilities 50,616 21,713 -- 72,329
Long-term debt 355,000 135,000 -- 490,000
Deferred liability 2,200 1,110 (1,110) 2,200
Deferred income taxes 27,783 -- -- 27,783
Convertible redeemable preferred stock 186,287 -- -- 186,287
Second series convertible redeemable
preferred stock 7,252 -- -- 7,252
Common stockholders' equity:
Common stock, par value $.01 per share:
Class A 165 -- -- 165
Class B 105 -- -- 105
Additional paid-in capital 357,633 90,100 (90,100) 357,633
Other (28,325) -- -- (28,325)
Accumulated deficit (235,839) (42,534) -- (278,373)
--------- --------- --------- ---------
Total common stockholders'
equity 93,739 47,566 (90,100) 51,205
--------- --------- --------- ---------
$ 722,877 $ 205,389 $ (91,210) $ 837,056
========= ========= ========= =========
</TABLE>
13
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NOTE 8. CONTINUED
CENTENNIAL CELLULAR CORP. AND SUBSIDIARIES
CONSOLIDATING STATEMENT OF OPERATIONS FINANCIAL DATA
NINE MONTH PERIOD ENDED FEBRUARY 28,1998
(Unaudited)
(Amounts in thousands)
<TABLE>
<CAPTION>
Centennial
Cellular
Corp. before
consolidation
of Puerto Rico Puerto Rico Eliminations Consolidated
-------------- ----------- ------------ ------------
<S> <C> <C> <C> <C>
Revenue $ 135,242 $ 35,924 $ -- $ 171,166
--------- --------- ------- ---------
Costs and expenses:
Cost of equipment sold 12,501 529 -- 13,030
Cost of services 18,807 10,411 -- 29,218
Selling, general & administrative 42,396 19,746 -- 62,142
Depreciation and amortization 60,771 21,866 -- 82,637
--------- --------- ------- ---------
134,475 52,552 -- 187,027
--------- --------- ------- ---------
Operating income (loss) 767 (16,628) -- (15,861)
--------- --------- ------- ---------
Income from equity investments 9,843 -- -- 9,843
Gain on sale of assets 8 -- -- 8
Interest expense 25,698 7,564 -- 33,262
--------- --------- ------- ---------
Loss before income tax
benefit and minority interest (15,080) (24,192) -- (39,272)
Income tax benefit (13,527) -- -- (13,527)
--------- --------- ------- ---------
Loss before minority interest (1,553) (24,192) -- (25,745)
Minority interest in income
of subsidiaries (337) -- -- (337)
--------- --------- ------- ---------
Net loss $ (1,890) $ (24,192) $ -- $ (26,082)
========= ========= ======= =========
</TABLE>
14
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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, the Company acquired 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
("Wireless" or the "Puerto Rico Wireless Telephone System"). The Company also
participates in the alternative access business in Puerto Rico. Wireless is
wholly owned by the Company. 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 Wireless Telephone System accounted for $35,924 in revenue for the nine
months ended February 28, 1998 and had approximately 60,600 subscribers as of
February 28, 1998.
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 its 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 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.
Nine Months ended February 28, 1998 and February 28, 1997
Revenue for the nine months ended February 28, 1998 was $171,166, an increase of
$64,268 or 60% over revenue of $106,898 for the nine months ended February 28,
1997, reflecting growth in subscriptions to, and increased usage of, wireless
telephone service, partially offset by lower reciprocal per minute roaming rates
with other cellular carriers. The Puerto Rico Wireless Telephone System
accounted for $34,431 or 54% of the total increase in revenue.
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Revenue from the sale of wireless telephones and accessories to subscribers for
the nine months ended February 28, 1998 increased by $1,515 to $3,590 or 73% as
compared to the nine months ended February 28, 1997. The increase in revenue was
due to a larger number of telephone units sold during the current nine-month
period. The Puerto Rico Wireless Telephone System accounted for $895 and $85 of
the equipment sales for the nine months ended February 28, 1998 and 1997,
respectively.
Continued growth in revenue is dependent upon increased levels of wireless
subscriptions and maintenance of the current subscriber base and the average
revenue per subscriber. Wireless subscribers at February 28, 1998 were
approximately 298,500, an increase of 63% from the 183,400 subscribers at
February 28, 1997. Increases from new activations of 176,900 were offset by
subscriber cancellations of 61,800. The cancellations experienced by the Company
are primarily the result of competitive factors. The Puerto Rico Wireless
Telephone System had approximately 60,600 and 6,900 subscribers at February 28,
1998, and 1997, respectively, and, as a result, accounted for 47% of the net
increase in subscriptions.
Consolidated revenue per subscriber per month, based upon an average number of
subscribers for the nine months ended February 28, 1998, was $73 as compared to
$75 for the nine months ended February 28, 1997. The average monthly revenue per
subscriber was approximately $70 in the domestic markets, as compared to
approximately $94 in the Company's Puerto Rico Wireless Telephone System . The
Company expects that per subscriber revenue will be impacted by competition, the
expansion of its local service calling areas and lower reciprocal per minute
roaming rates with other cellular carriers.
Cost of services during the nine months ended February 28, 1998 was $29,218, an
increase of $13,612 or 87% from the nine months ended February 28, 1997. The
increase was due to the variable costs associated with a larger revenue and
subscription base and increased wireless coverage areas resulting from both the
continued expansion of the Company's network and the commencement of PCS
telephone service in Puerto Rico. Cost of services for the Puerto Rico Wireless
Telephone System was $10,411 and $1,928 for the nine months ended February 28,
1998 and 1997, respectively.
Cost of equipment sold during the nine months ended February 28, 1998 was
$13,030, an increase of $1,627 or 14% as compared to the nine months ended
February 28, 1997. The primary reason was an increase in the number of telephone
units sold. Cost of equipment sold for the Puerto Rico Wireless Telephone System
was $529 and $167 for the nine months ended February 28, 1998 and 1997,
respectively.
Selling, general and administrative expenses rose to $62,142 for the nine months
ended February 28, 1998, an increase of $25,062 or 68% above the expenses of
$37,080 for the nine months ended February 28, 1997. 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 $19,746 and $5,086 for the nine months ended February 28, 1998 and
1997, 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, the Company expects that the
continued development of its markets as well as its participation in the
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Puerto Rico telecommunications business will contribute to a continued increase
in the level of expenses.
Depreciation and amortization for the nine months ended February 28, 1998 was
$82,637, an increase of $23,671 or 40% over the nine months ended February 28,
1997. The increase resulted from capital expenditures made during the nine
months ended February 28, 1998 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 accounted for $20,534 or 87% of the increase.
The operating loss for the nine months ended February 28, 1998 was $15,861, a
decrease of $296 or 2% from the loss of $16,157 for the nine months ended
February 28, 1997. The operating loss for the Puerto Rico Wireless Telephone
System was $16,628 and $5,688 for the nine months ended February 28, 1998 and
1997, respectively.
Interest expense was $33,262 for the nine months ended February 28, 1998, an
increase of $9,664 or 41% from the nine months ended February 28, 1997. Interest
expense for the nine months ended February 28, 1997 was reduced by $2,752 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 nine months ended February 28, 1998 and 1997 were $33,262
and $26,350, respectively. The increase in gross interest costs reflects
additional borrowings for acquisitions, working capital and debt service. The
average debt outstanding during the nine months ended February 28, 1998 was
$461,106, an increase of $92,351 as compared to the average debt level of
$368,755 during the nine months ended February 28, 1997. The increase in average
debt outstanding is principally related to borrowings for the Puerto Rico
Wireless Telephone System. The Company's weighted average interest rate
increased to 9.6% for the nine months ended February 28, 1998 from 9.5% for the
nine months ended February 28, 1997.
After income attributable to minority interests in subsidiaries for the nine
months ended February 28, 1998, a pretax loss of $39,609 was incurred, as
compared to a pretax loss of $27,246 for the nine months ended February 28,
1997. The income tax benefit of $13,527 for the nine months ended February 28,
1998 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 $26,082 for the nine months ended February 28, 1998 represents
an increase of $4,368 or 20% from the net loss of $21,714 for the nine months
ended February 28, 1997.
Three Months ended February 28, 1998 and February 28, 1997
Revenue for the three months ended February 28, 1998 was $59,179, an increase of
$20,005 or 51% over revenue of $39,174 for the three months ended February 28,
1997, reflecting growth in subscriptions to, and increased usage of, wireless
telephone service, partially offset by lower reciprocal per minute roaming rates
with other cellular carriers. The Puerto Rico Wireless Telephone System
accounted for $14,171 or 71% of the increase in revenue.
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<PAGE>
Revenue from the sale of wireless telephones to subscribers for the three months
ended February 28, 1998 increased by $479 to $1,155 or 71% as compared to the
three months ended February 28, 1997. The increase in revenue was due to a
larger number of telephone units sold during the current three- month period.
The Puerto Rico Wireless Telephone System accounted for $369 and $85 of the
equipment sales for the three months ended February 28, 1998 and 1997,
respectively.
Consolidated revenue per subscriber per month, based upon an average number of
subscribers for the three months ended February 28, 1998, was $67 as compared to
$73 for the three months ended February 28, 1997. This reduction in revenue per
subscriber was due to lower reciprocal per minute roaming rates with other
cellular carriers during the three months ended February 28, 1998. The average
monthly revenue per subscriber was approximately $62 in the Company's domestic
markets, as compared to approximately $88 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 as well as
decreased revenue due to lower reciprocal roaming rates.
Cost of services during the three months ended February 28, 1998 was $10,831, an
increase of $4,918 or 83% from the three months ended February 28, 1997. The
increase was due to the variable costs associated with a larger revenue and
subscription base and increased wireless coverage areas resulting from both the
continued expansion of the Company's network and the commencement of PCS
telephone service in Puerto Rico. Cost of services for the Puerto Rico Wireless
Telephone System were $4,157 and $847 for the three months ended February 28,
1998 and 1997, respectively.
Cost of equipment sold during the three months ended February 28, 1998 was
$4,393, a decrease of $341 or 7% as compared to the three months ended February
28, 1997. The primary reason was a decrease in the cost of the cellular
equipment purchased partially offset by an increase in the number of telephone
units sold. Cost of equipment sold for the Puerto Rico Wireless Telephone System
was $267 and $167 for the three months ended February 28, 1998 and 1997,
respectively.
Selling, general and administrative expenses rose to $22,457 for the three
months ended February 28, 1998, an increase of $7,059 or 46% above the expenses
of $15,398 for the three months ended February 28, 1997. 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 $7,261 and $3,147 for the three months ended February 28, 1998 and
1997, 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, 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 February 28, 1998 was
$29,857, an increase of $8,682 or 41% over the three months ended February 28,
1997. The increase resulted from acquisitions and capital expenditures made
during the nine months ended February 28, 1998 and during
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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 accounted for $8,033 or 93% of the
increase.
The operating loss for the three months ended February 28, 1998 was $8,359, an
increase of $313 or 4% from the loss of $8,046 for the three months ended
February 28, 1997. The operating loss for the Puerto Rico Wireless Telephone
System was $5,330 and $2,668 for the three months ended February 28, 1998 and
1997, respectively.
Interest expense was $11,461 for the three months ended February 28, 1998, an
increase of $2,622 or 30% from the three months ended February 28, 1997.
Interest expense for the three months ended February 28, 1997 was reduced by
$154 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 February 28, 1998 and
1997 were $11,461 and $8,993, 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 February 28,
1998 was $480,777, an increase of $104,333 as compared to the average debt level
of $376,444 during the three months ended February 28, 1997. The increase in
average debt outstanding is principally related to borrowings for the Puerto
Rico Wireless Telephone System. The Company's weighted average interest rate
decreased to 9.5% for the three months ended February 28, 1998 from 9.6% for the
three months ended February 28, 1997.
After income attributable to minority interests in subsidiaries for the three
months ended February 28, 1998, a pretax loss of $17,514 was incurred, as
compared to a pretax loss of $12,244 for the three months ended February 28,
1997. The income tax benefit of $7,844 for the three months ended February 28,
1998 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 $9,670 for the three months ended February 28, 1998 represents
an increase of $184 or 2% from the net loss of $9,486 for the three months ended
February 28, 1997.
LIQUIDITY AND CAPITAL RESOURCES
For the nine months ended February 28, 1998, earnings were less than fixed
charges by $39,272. 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 $82,637 relating to depreciation and
amortization.
During the nine months ended February 28, 1998, the Company made capital
expenditures of $103,187, primarily to continue the construction of its Puerto
Rico Wireless Telephone System and its Domestic Wireless Telephone Systems 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 $71,824 for the nine months ended February 28,
1998, representing 70% of the Company's total capital expenditures. The Puerto
Rico Wireless Telephone System capital
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expenditures included $45,129 to continue the buildout of the Company's PCS
network infrastructure and $26,695 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 and 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 the Domestic Wireless Telephone
Systems of approximately $40,000. The Company currently estimates that the cost
to continue the build-out of its Puerto Rico network infrastructure through
fiscal 1999 will be approximately $50,000. This expenditure level primarily
relates to an acceleration of expenditures that would otherwise take place in
future years. This acceleration is related to the growth the Company has
experienced in its Puerto Rico Wireless Telephone System). 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.
On February 27, 1998, Centennial Puerto Rico Wireless Corporation, a wholly
owned subsidiary of the Company ("CPRW"), amended its four-year revolving credit
facility (the "Puerto Rico Credit Facility") to increase the credit availability
from $130,000 to $180,000, an increase of $50,000. As of February 28, 1998, the
Puerto Rico Credit Facility had $135,000 outstanding. The interest rate payable
by CPRW on borrowings under the Puerto Rico Credit Facility is based, at the
election of CPRW, on (a) the Base Rate, as defined, plus a margin of 1.50% or
(b) the Eurodollar Base Rate, as defined, plus a margin of 2.25%, adjusted for
the maintenance of certain specified ratios, as applicable.
As of February 28, 1998, the Company had $5,000 outstanding under its $75,000
domestic revolving credit facility (the "Domestic Credit Facility"). The
interest rate payable on the Domestic 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 2.5%.
The Company also has two outstanding public issuances of debt securities, its
$250,000 8 7/8% Senior Notes due 2001 and its $100,000 10 1/8% Senior Notes due
2005, which bear interest at the rate of 8 7/8% per annum and 10 1/8% per annum,
respectively.
The Domestic Credit Facility, the Puerto Rico Credit Facility and the Company's
public debt instruments require the maintenance of certain financial and
operating covenants, restrict the use of borrowing, limit the incurrence of
additional indebtedness and limit the ability to pay dividends and management
fees. The Company and CPRW were in compliance with all covenants of their debt
instruments at February 28,1998.
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 30, 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 shares held by Citizens and Century at
August 30, 1996 was $186,287 and $7,252, respectively. Beginning September 1,
1996, the holders of the preferred stock were eligible to 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, with respect to the preferred stock is $15,834 and $616, respectively.
Both classes of preferred stock are subject to mandatory
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redemption in fiscal 2007. Any unpaid dividends continue to accumulate without
additional cost to the Company. Through February 28, 1998, the Company has paid
five 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 has been, and is
expected to continue 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 has been, and is
expected to continue 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 in cash flow 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 (the "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
April 8, 1998, 4,239,231 shares remain available for issuance under this shelf
registration .
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 April 8, 1998, $400,000 remained available
for issuance under this shelf registration.
Although the net cash provided by operating activities for the nine months ended
February 28, 1998 was not sufficient to fund the Company's expenditures for
property, plant and equipment of $103,187, funds required were available from
current fiscal year financing activities and 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,
21
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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 100% of the ownership interests in
the partnership owning the wireless telephone system serving the Benton Harbor,
Michigan MSA for approximately $35,000 in cash. 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 minority equity investments in wireless 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.
The Board of Directors of the Company has determined to explore strategic
alternatives available to it. In connection with this exploration, the
Company has retained the services of Donaldson, Lufkin & Jenrette.
COMMITMENTS AND CONTINGENCIES
On March 3, 1998, the Company entered into a two-year arrangement (the
"Arrangement") with an institution (the "Counterparty") pursuant to which, the
Counterparty may be directed by the Company from time to time to purchase in the
open market up to 710,000 shares of the Company's Class A Common Stock
("Shares") throughout the life of the Arrangement. At the end of each calendar
quarter during the term of the Arrangement, the value of the Shares held by the
Counterparty will be determined. If, as of any such determination date, such
Shares have increased in value from the date of purchase or prior determination
date (if such Shares were then held by the Counterparty), the Counterparty will
deliver to the Company an amount of Shares equal in value to such increase, less
an amount corresponding to interest on the dollar amount that the Counterparty
has committed to the purchase of the Shares (the
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"Interest Component"). If, as of any such determination date, such Shares have
decreased in value from the date of purchase or prior determination date (if
such Shares were then held by the Counterparty), the Company will deliver to the
Counterparty an amount of Shares or cash equal in value to such decrease, plus
the Interest Component. At the end of the term of the Arrangement (or earlier at
the option of the Company or upon the occurrence of certain events of default or
certain mandatory unwind events) the Company may elect to purchase the Shares
held by the Counterparty for cash in lieu of the resale of such Shares into the
market. Failing an election by the Company to effect such purchase, the
Counterparty may resell into the market the Shares held by it pursuant to a
registration statement. It is the Company's current intent to acquire the shares
upon termination. To date, 273,200 Shares have been purchased by the
Counterparty under the Arrangement at a price of approximately $5,289.
During the nine months ended February 28, 1998, the Company directly purchased
1,270,200 shares of its Class A Common Stock in the open market for an aggregate
purchase price of $23,524 pursuant to previous authorizations by the Company's
Board of Directors. These shares have been accounted for as treasury shares.
Subsequent to February 28, 1998, the Company has not directly purchased any
additional shares of its Class A Common Stock in the open market. As of April 8,
1998, the Company is authorized to directly purchase 2,729,800 additional shares
of its Class A Common Stock in the open market after giving effect to the shares
purchased to date.
The Company is controlled by Century. Century has an approximate 33% 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 February 28, 1998. 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 minority equity 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 pays Century the
annual sum of $1,000 and reimburses 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
nine months ended February 28, 1998, the Company has recorded expenses of $750
under the Services Agreement, of which $500 is recorded within payable to
affiliate on the Company's consolidated balance sheet at February 28, 1998.
The Company is currently in the process of evaluating its computer software and
data bases to determine whether modifications will be required to prevent
problems related to the Year 2000, including its billing and collection
activities. These problems, which have been widely reported in the media, could
cause malfunctions in certain software and data bases with respect to dates on
or about 2000. Most of the Company's customer related computer systems and data
bases are managed by third parties under contractual arrangements. The Company
has requested that such third parties advise the Company as to whether or not
they anticipate any difficulties for clients in addressing Year 2000 problems
and, if so, whether or not the Company would be adversely affected by any such
problems. Until such time as its
23
<PAGE>
<PAGE>
service providers respond to the Company, the impact of Year 2000 on the
Company's future operations and financial condition cannot be assessed. The
Company will continue to monitor Year 2000 and will work with its service
providers to remedy problems that arise.
* * * * *
CAUTIONARY STATEMENT FOR PURPOSES OF THE "SAFE HARBOR"
PROVISIONS OF THE PRIVATE SECURITIES 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; risks associated with
Year 2000; 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 the Company's 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
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.
24
<PAGE>
<PAGE>
ITEM 2. Changes in Securities
None
ITEM 3. Defaults Upon Senior Securities
None
ITEM 4. Submission of Matters to a Vote of Security Holders
None
ITEM 5. Other Information
On March 3, 1998, the Company entered into a two-year arrangement
(the "Arrangement") with an institution (the "Counterparty")
pursuant to which, the Counterparty may be directed by the
Company from time to time to purchase in the open market up to
710,000 shares of the Company's Class A Common Stock ("Shares")
throughout the life of the Arrangement. At the end of each
calendar quarter during the term of the Arrangement, the value of
the Shares held by the Counterparty will be determined. If, as of
any such determination date, such Shares have increased in value
from the date of purchase or prior determination date (if such
Shares were then held by the Counterparty), the Counterparty will
deliver to the Company an amount of Shares equal in value to such
increase, less an amount corresponding to interest on the dollar
amount that the Counterparty has committed to the purchase of the
Shares (the "Interest Component"). If, as of any such
determination date, such shares have decreased in value from the
date of purchase or prior determination date (if such Shares were
then held by the Counterparty), the Company will deliver to the
Counterparty an amount of Shares or cash equal in value to such
decrease, plus the Interest Component. At the end of the term of
the Arrangement (or earlier at the option of the Company or upon
the occurrence of certain events of default or certain mandatory
unwind events) the Company may elect to purchase the Shares held
by the Counterparty for cash in lieu of the resale of such Shares
into the market. Failing an election by the Company to effect
such purchase, the Counterparty may resell into the market the
Shares held by it pursuant to a registration statement. It is the
Company's current intent to acquire the shares upon termination.
To date, 273,200 Shares have been purchased by the Counterparty
under the Arrangement at a price of $5,289.
During the nine months ended February 28, 1998, the Company
directly purchased 1,270,200 shares of its Class A Common Stock
in the open market for an aggregate purchase price of $23,524
pursuant to previous authorizations by the Company's Board of
Directors. These shares have been accounted for as treasury
shares. Subsequent to February 28, 1998, the Company has not
directly purchased any additional shares of Class A Common Stock
in the open market. As of April 8, 1998, the Company is
authorized to directly purchase 2,729,800 additional shares of
its Class A Common Stock in the open market after giving effect
to the shares purchased to date.
25
<PAGE>
<PAGE>
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 Amended and Restated Credit Agreement
dated as of February 27, 1998 between
Centennial Puerto Rico Wireless
Corporation, each of the lenders that
is a signatory thereto (the "lenders"),
and Citibank, N.A., as administrative
agent for the lenders.
Exhibit 11 Statement re: computation of per share
earnings
Exhibit 27 Financial data schedule (EDGAR filing
document only)
Exhibit 99 Press Release of the Company dated
April 14, 1998
b) Reports on Form 8-K
None
26
<PAGE>
<PAGE>
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.
April 14, 1998
CENTENNIAL CELLULAR CORP.
/S/ Scott N. Schneider
-------------------------------------
Scott N. Schneider
Chief Financial Officer, Senior Vice
President and Treasurer
(Principal Financial Officer)
27
<PAGE>
<PAGE>
EXHIBIT 10
EXECUTION COPY
*****************************************************************
U.S. $180,000,000
AMENDED AND RESTATED CREDIT AGREEMENT
Dated as of February 27, 1998
Among
CENTENNIAL PUERTO RICO WIRELESS CORPORATION
as Borrower
and
THE BANKS NAMED HEREIN
as Banks
and
CITIBANK, N.A.
as Administrative Agent
and
CIBC INC.
CREDIT LYONNAIS,
NEW YORK BRANCH
LTCB TRUST COMPANY
THE SUMITOMO BANK, LTD.
CHICAGO BRANCH
and
SOCIETE GENERALE,
NEW YORK BRANCH
as Co-Agents
*****************************************************************
<PAGE>
<PAGE>
AMENDED AND RESTATED CREDIT AGREEMENT
AMENDED AND RESTATED CREDIT AGREEMENT dated as of February 27,
1998, between CENTENNIAL PUERTO RICO WIRELESS CORPORATION, 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, as administrative agent for the Lenders (in such capacity,
together with its successors in such capacity, the "Administrative Agent").
The Borrower, certain of the Lenders and the Administrative
Agent are parties to a Credit Agreement dated as of April 25, 1997 (as
heretofore modified and supplemented and in effect on the date hereof, the
"Existing Credit Agreement"), providing, subject to the terms and conditions
thereof, for extensions of credit (by the making of loans and the issuing of
letters of credit) to be made by said Lenders to the Borrower in an aggregate
principal or face amount not exceeding $130,000,000. The banks listed on the
signature pages hereto under the caption "New Lenders" (collectively, the "New
Lenders") wish to become parties to the Existing Credit Agreement as "Lenders"
thereunder, and the Borrower, the Lenders and the Administrative Agent wish to
increase the aggregate amount of the Commitments under the Credit Agreement from
$130,000,000 to $180,000,000 and to amend the Existing Credit Agreement in
certain other respects and, as so amended, to restate the Existing Credit
Agreement in its entirety. Accordingly, the parties hereto agree that the
Existing Credit Agreement shall be amended as set forth herein and that the
Existing Credit Agreement, which is hereby incorporated herein by reference with
the amendments set forth herein, shall be restated to read (as so amended and
restated, the "Credit Agreement"):
Section 1. Definitions. Except as otherwise defined in herein,
terms defined in the Existing Credit Agreement are used herein as defined
therein.
Section 2. Amendments. Subject to the satisfaction of the
conditions precedent specified in Section 5 below, but effective as of the date
hereof, the Existing Credit Agreement shall be amended as follows:
2.01. References in the Existing Credit Agreement to "this
Agreement" (and indirect references such as "hereunder", "hereby", "herein" and
"hereof") shall be deemed to be references to the Existing Credit Agreement as
amended and restated hereby. References in the Credit Agreement to "the Notes"
shall be deemed to include reference to the New Notes under and as defined in
Section 5.02 below. Each of the New Lenders shall be deemed to be a "Lender"
under and for all purposes of the Credit Agreement and each reference therein to
"Lender" shall be deemed to include the New Lenders.
Amendment and Restatement
<PAGE>
<PAGE>
-2-
2.02. Section 1.01 of the Existing Credit Agreement shall be
amended by adding the following new definitions (to the extent not already
included in said Section 1.01) and inserting the same in the appropriate
alphabetical locations and amending the following definitions (to the extent
already included in said Section 1.01) to read in their entirety as follows:
"Agreement" shall mean, on any date after the Effective Date,
this Agreement as originally in effect on the Effective Date and as
thereafter modified and supplemented and in effect from time to time.
"Amendment and Restatement" shall refer to the Amended and
Restated Credit Agreement dated as of February 27, 1998 between the
Company, the Lenders and the Administrative Agent.
"Annualized EBITDA" means, for any Fiscal Period, EBITDA for
such Fiscal Period multiplied by two; provided, that solely for purposes
of the calculation of the Leverage Ratio as used in Section 5.01(j), and
the Interest Coverage Ratio as used in Section 5.01(k), on any date
ending on or before February 28, 1999, Annualized EBITDA shall mean the
product of (a) EBITDA for the Fiscal Quarter ending on or most recently
ended prior to such date plus sales, marketing, advertising and
equipment subsidy expenses for such Fiscal Quarter multiplied by (b)
four.
"Effective Date" shall mean the date upon which the conditions
precedent to the effectiveness of the amendments set forth in Section 5
of the Amendment and Restatement shall be satisfied or waived.
"Subordinated Debt" means Debt (i) for which the Borrower is
directly and primarily liable, (ii) in respect of which none of its
Subsidiaries is contingently or otherwise obligated, (iii) none of the
principal of which shall be required to be repaid prior to February 28,
2006, (iv) that bears interest at a rate per annum not in excess of 12%
and (v) that is subordinated to the obligations of the Borrower to pay
principal of and interest on the Advances, Reimbursement Obligations and
Notes hereunder on terms, and pursuant to documentation containing other
terms (including interest, covenants and events of default), in form and
substance satisfactory to the Majority Lenders.
2.03. The first sentence of Section 2.01A of the Existing Credit
Agreement is hereby amended to read as follows:
"Each Lender severally agrees, on the terms and conditions
hereinafter set forth, to make Advances to the Borrower from time to
time on any Business Day during the period from the date hereof until
the Termination Date in an aggregate amount not to exceed at any time
outstanding the amount set forth opposite such Lender's name on
Amendment and Restatement
<PAGE>
<PAGE>
-3-
Schedule II to the Amendment and Restatement or, if such Lender has
entered into any Assignment and Acceptance after the date of the
Amendment and Restatement, set forth for such Lender in the Register
maintained by the Administrative Agent pursuant to Section 8.07(c), as
such amount may be reduced pursuant to Section 2.04 (such Lender's
"Commitment"), provided that in no event shall (a) the Aggregate
Financing Amount exceed the aggregate amount of the Commitments as in
effect from time to time or (b) the Aggregate Financing Amount exceed
the aggregate amount of the Borrowing Base as in effect from time to
time prior to the Borrowing Base Release Date."
2.04. Section 5.01(j) of the Existing Credit Agreement is hereby
amended to read as follows:
"(j) Leverage Ratio. Maintain, as of the last day of each Fiscal
Quarter whose last day occurs during any period set out below, a
Leverage Ratio less than the ratio set out below next to such period:
Period Ratio
------ -----
from December 1, 1998
through May 31, 1999 10.00:1
from June 1, 1999
through November 30, 1999 8.00:1
from December 1, 1999
through February 28, 2000 7.00:1
from March 1, 2000
through May 31, 2000 6.00:1
from June 1, 2000
through November 30, 2000 5.00:1
from December 1, 2000 and
at all times thereafter 4.00:1"
2.05. Section 5.01(l) of the Existing Credit Agreement is hereby
amended to read as follows:
Amendment and Restatement
<PAGE>
<PAGE>
-4-
"(l) Subscriber Levels. Maintain, as of each date specified
below, a number of Subscribers not less than the number set out below
next to such date:
Period Level
------ -----
February 28, 1998 40,000
May 31, 1998 50,000
August 31, 1998 60,000
November 30, 1998 70,000
February 28, 1999
and at all times thereafter 75,000"
2.06. Schedule I to the Existing Credit Agreement is hereby
amended to read as set forth in Schedule I to this Amended and Restated Credit
Agreement, and a Schedule II to the Existing Credit Agreement is hereby added to
the Credit Agreement in the form of Schedule II to this Amended and Restated
Credit Agreement.
Section 3. Commitment Fee. Notwithstanding that the increase of
the Commitments contemplated by Section 2 above shall not become effective until
the satisfaction of the conditions precedent specified in Section 5 below, for
purposes of calculating the amount of commitment fee payable under Section
2.03(a) of the Credit Agreement, the Commitments of the Lenders shall be deemed
to have been so increased (and the Commitments of the New Lenders shall be
deemed to have become effective) immediately upon the execution of this Amended
and Restated Credit Agreement by each of the Lenders.
Section 4. Representations and Warranties. The Borrower
represents and warrants to the Lenders that the representations and warranties
set forth in Section 4.01 of the Existing 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 4.01 to "this Agreement" and "the Notes" included
reference to this Amended and Restated Credit Agreement and to the New Notes.
Section 5. Conditions Precedent. As provided in Section 2 above,
the amendment and restatement of the Existing Credit Agreement contemplated
hereby shall become effective, as of the date hereof, upon the satisfaction of
the following conditions precedent:
5.01. Execution by All Parties. This Amended and Restated Credit
Agreement shall have been executed and delivered by each of the parties hereto,
and Holdings and each Guarantor shall have consented to this Amended and
Restated Credit Agreement by affixing its signature where indicated below on
the signature pages hereto.
5.02. Notes and Initial Advances. The Borrower shall have
delivered to the Administrative Agent for each Lender a new promissory note of
the Borrower in substantially
Amendment and Restatement
<PAGE>
<PAGE>
-5-
the form of Exhibit A to the Existing Credit Agreement, dated the date hereof,
payable to such Lender in a principal amount equal to its Commitment (after
giving effect to this Amended and Restated Credit Agreement) and otherwise duly
completed, and each of such promissory notes (a "New Note") shall constitute a
"Note" under the Existing Credit Agreement as amended and restated hereby. In
addition, simultaneously with the effectiveness of such amendment and
restatement, the Borrower shall have prepaid the Advances outstanding under the
Existing Credit Agreement immediately prior to such effectiveness from the
proceeds of new Advances made by the Lenders under the Credit Agreement (ratably
in accordance with their respective Commitments as increased hereby), and the
Borrower shall have paid accrued interest in respect of the principal so prepaid
together with accrued interest and any amounts payable under Section 8.04(b) of
the Existing Credit Agreement as a result of such prepayment, so that after
giving effect to such Advances and prepayments, the Advances (and the Interest
Periods therefor, if applicable) shall be held by the Lenders pro rata in
accordance with the respective amounts of their Commitments (as increased
hereby).
5.03. Documents. The Administrative Agent shall have received
the following documents, each of which shall be satisfactory to the
Administrative Agent in form and substance:
(1) Corporate Documents. Certified copies of the charter and
by-laws (or equivalent documents) of each Credit Party (or, in the
alternative, a certification to the effect that none of such documents
has been modified since delivery thereof on April 25, 1997 pursuant to
the Existing Credit Agreement) and of all corporate authority for each
Credit Party (including, without limitation, board of director
resolutions and evidence of the incumbency of officers for the Borrower)
with respect to execution, delivery and performance of this Amended and
Restated Credit Agreement and the Existing Credit Agreement as amended
hereby and the extensions of credit under the Existing Credit Agreement
as amended and restated hereby, the New Notes and each other document to
be delivered by such Credit Party from time to time in connection with
the Existing Credit Agreement as amended and restated hereby (and the
Administrative Agent and each Lender may conclusively rely on such
certificate until it receives notice in writing from such Credit Party
to the contrary).
(2) Puerto Rico Security Documents. The Obligors shall have
entered into such modifications to the Puerto Rico Security Documents,
and shall have made such filings and recordations of the same, as the
Administrative Agent shall have requested in order to protect and
preserve the validity, perfection and priority of the Liens created
thereby.
(3) Legal Opinions:
(a) A favorable opinion of Leavy Rosensweig & Hyman,
special New York counsel for the Credit Parties, in form and
substance satisfactory to the
Amendment and Restatement
<PAGE>
<PAGE>
-6-
Administrative Agent (and each Credit Party hereby instructs
such counsel to deliver such opinion to the Lenders and the
Administrative Agent);
(b) A favorable opinion of Axtmayer, Adsuar, Muniz &
Goyco, PSC, special Puerto Rico counsel for the Credit Parties,
in form and substance satisfactory to the Administrative Agent
(and each Obligor hereby instructs such counsel to deliver such
opinion to the Lenders and the Administrative Agent);
(c) A favorable opinion of Milbank, Tweed, Hadley &
McCloy, special New York counsel for the Administrative Agent,
in form and substance satisfactory to the Administrative Agent
(and the Administrative Agent hereby instructs such counsel to
deliver such opinion to the Lenders and the Administrative
Agent); and
(d) A favorable opinion of Fiddler, Gonzalez &
Rodriguez, special Puerto Rico counsel for the Administrative
Agent, in form and substance satisfactory to the Administrative
Agent (and the Administrative Agent hereby instructs such
counsel to deliver such opinion to the Lenders and the
Administrative Agent).
(4) Other Documents. Such other documents as the Administrative
Agent or any Lender or special New York counsel to Citibank may
reasonably request.
Section 6. Confirmation of Security Documents. By their
signatures below, each of the Borrower, Holdings and each Guarantor hereby
consents to this Amended and Restated Credit Agreement for purposes of the
Holdings Pledge Agreement, the Obligor Pledge Agreement, each Subsidiary
Guarantee, each Puerto Rico Security Document and any Additional Puerto Rico
Security Document, as applicable, and hereby agrees that the obligations of the
Borrower as increased pursuant to this Amended and Restated Credit Agreement
shall constitute "Secured Obligations" (as respectively defined in the Holdings
Pledge Agreement and the Obligor Pledge Agreement) and "Guaranteed Obligations"
(as defined in each Subsidiary Guarantee), or words of similar import for the
Puerto Rico Security Documents and any Additional Puerto Rico Security
Documents, under and for all purposes of said instruments, and each reference in
said instruments to the "Credit Agreement" shall be deemed to refer to the
foregoing Amended and Restated Credit Agreement.
Section 7. Miscellaneous. Except as herein provided, the
Existing Credit Agreement shall remain unchanged and in full force and effect
and it is not the intention of the parties hereto that this Agreement represent
a novation of the obligations and undertakings under the Existing Credit
Agreement. This Amended and Restated Credit Agreement 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
Amended and Restated Credit Agreement by signing any such counterpart. This
Amended and Restated Credit
Amendment and Restatement
<PAGE>
<PAGE>
-7-
Agreement shall be governed by, and construed in accordance with, the law of the
State of New York.
Amendment and Restatement
<PAGE>
<PAGE>
-8-
IN WITNESS WHEREOF, the parties hereto have caused this Amended
and Restated Credit Agreement to be duly executed and delivered as of the day
and year first above written.
Borrower
CENTENNIAL PUERTO RICO WIRELESS
CORPORATION
By /S/
---------------------------
Title:
Lenders
CITIBANK, N.A.
BANCO SANTANDER,
PUERTO RICO
By /S/ By /S/
------------------------ ---------------------
Title: Title:
CREDIT LYONNAIS, NEW SOCIETE GENERALE, NEW
YORK BRANCH YORK BRANCH
By /S/ By /S/
----------------------- ---------------------
Title: Title:
CIBC INC. LTCB TRUST COMPANY
By /S/ By /S/
---------------------- ---------------------
Title: Executive Director Title:
CIBC Oppenheimer Corp.,
AS AGENT
THE SUMITOMO BANK, LTD. THE SANWA BANK, LTD.
CHICAGO BRANCH
Amendment and Restatement
<PAGE>
<PAGE>
-9-
By /S/ By /S/
-------------------------- ---------------------
Title: Title:
New Lenders
BANQUE NATIONALE DE PARIS BANQUE PARIBAS
By /S/ By /S/
-------------------------- ---------------------
Title: Title:
By /S/
--------------------------
Title:
Amendment and Restatement
<PAGE>
<PAGE>
-10-
By their signatures below, each of the undersigned hereby
consents to the foregoing Amended and Restated Credit Agreement as more fully
provided in Section 6 thereof.
CENTENNIAL CELLULAR WIRELESS LAMBDA COMMUNICATIONS,
HOLDING CORP. INCORPORADO
By /S/ By /S/
--------------------------- -----------------------
Title: Title:
LAMBDA OPERATIONS CORP. CENTENNIAL WIRELESS PCS
OPERATIONS CORP.
By /S/ By /S/
--------------------------- ------------------------
Title: Title:
CENTENNIAL WIRELESS PCS CENTENNIAL PUERTO RICO
LICENSE CORP. REALTY CORPORATION
By /S/ By /S/
--------------------------- ------------------------
Title: Title:
Amendment and Restatement
<PAGE>
<PAGE>
Schedule I
Lender Domestic Lending Office
- ------ -----------------------
Citibank, N.A. Citibank, N.A.
399 Park Avenue
New York, New York 10043
Banco Santander, Puerto Rico Avenida Ponce de Leon 207
Hato Rey, PR 00936
Credit Lyonnais, Credit Lyonnais, New York Branch
New York Branch 1301 Avenue of the Americas
New York, New York 10019
Societe Generale, Societe Generale, New York Branch
New York Branch 1221 Avenue of the Americas
New York, New York 10020
CIBC Inc. CIBC Inc.
Two Paces West
2727 Paces Ferry Road
Suite 1200
Atlanta, Georgia 30339
LTCB Trust Company LTCB Trust Company
165 Broadway, 49th Floor
New York, New York 10006
The Sumitomo Bank, Ltd., 233 South Wacker Dr., Suite 4800
Chicago Branch Chicago, IL 60607
Banque Nationale De Paris 499 Park Avenue
New York, New York 10022
Banque Paribas 787 Seventh Avenue
New York, New York 10019
The Sanwa Bank, Ltd. 55 East 52nd St.
New York, New York 10055
Schedule I
<PAGE>
<PAGE>
Schedule II
Lender Commitment
- ------ -----------
Citibank, N.A. $ 25,000,000
Banco Santander, Puerto Rico $ 25,000,000
Credit Lyonnais, $ 25,000,000
New York Branch
Societe Generale, $ 25,000,000
New York Branch
CIBC Inc. $ 20,000,000
LTCB Trust Company $ 15,000,000
The Sumitomo Bank, Ltd. $ 15,000,000
Chicago Branch
Banque Nationale De Paris $ 10,000,000
Banque Paribas $ 10,000,000
The Sanwa Bank, Ltd. $ 10,000,000
============
TOTAL $180,000,000
Schedule II
<PAGE>
<PAGE>
Exhibit 11
CENTENNIAL CELLULAR CORP. AND SUBSIDIARIES
EXHIBIT TO FORM 10-Q
For the Nine Months Ended February 28, 1998 and 1997
COMPUTATION OF LOSS PER COMMON SHARE
(Amounts in thousands, except per share data)
<TABLE>
<CAPTION>
Nine Months Ended
----------------------------------
February 28, February 28,
1998 1997
------------ -------------
(Unaudited)
<S> <C> <C>
Primary fully diluted:
Net Loss $ (26,082) $ (21,714)
Preferred stock dividends (12,338) (11,836)
----------- -----------
Loss applicable to common shares $ (38,420) $ (33,550)
=========== ===========
Average number of common shares and common
share equivalents outstanding
Average number of common shares
outstanding during this period 26,309,000 26,935,000
Add common share equivalents - Options
to purchase common shares - net 382,000 232,000
----------- -----------
Average number of common shares and common
share equivalents outstanding 26,691,000 (A) 27,167,000 (A)
=========== ===========
Loss per common share $ (1.44)(A) $ (1.24)(A)
=========== ===========
</TABLE>
(A) In accordance with SFAS 128, 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 anti-dilutive. Therefore, loss per
common share and common share equivalents as shown on the Cnsolidated
Statements of Operations for the periods presented do not include certain
common share equivalents as their effect is anti-dilutive.
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAY-31-1998
<PERIOD-END> FEB-28-1998
<CASH> 14,595
<SECURITIES> 0
<RECEIVABLES> 29,842
<ALLOWANCES> 3,538
<INVENTORY> 0
<CURRENT-ASSETS> 50,177
<PP&E> 244,023
<DEPRECIATION> 70,052
<TOTAL-ASSETS> 837,056
<CURRENT-LIABILITIES> 72,329
<BONDS> 490,000
<COMMON> 270
193,539
0
<OTHER-SE> 79,260
<TOTAL-LIABILITY-AND-EQUITY> 837,056
<SALES> 171,166
<TOTAL-REVENUES> 171,166
<CGS> 42,248
<TOTAL-COSTS> 187,027
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 33,262
<INCOME-PRETAX> (39,272)
<INCOME-TAX> (13,527)
<INCOME-CONTINUING> (25,745)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (26,082)
<EPS-PRIMARY> (1.46)
<EPS-DILUTED> 0
<PAGE>
<PAGE>
Exhibit 99
CENTENNIAL CELLULAR CORP.
PRESS RELEASE
From: W.M. Kraus Company Contact:
946 Spaight St. Scott N. Schneider, Senior Vice President
Madison, WI 53703 and Chief Financial Officer
(203) 972-2002
For: Centennial Cellular Louis Friedman, Managing Director
(NASDAQ SYMBOL: CYCL) Donaldson Lufkin & Jenrette
(212) 892-3545
FOR IMMEDIATE RELEASE
CENTENNIAL CELLULAR ANNOUNCES EXPLORATION
OF STRATEGIC ALTERNATIVES
New York, NY. April 14, 1998 - Centennial Cellular Corp. today
announced that its board of directors has determined to explore strategic
alternatives available to the Company. The Company has engaged the services of
Donaldson, Lufkin & Jenrette to assist it in exploring these various available
strategic alternatives.
Centennial Cellular Corp. acquires, operates and invests in wireless
telephone systems throughout the continental United States and the Commonwealth
of Puerto Rico. The Company's current wireless telephone interests represent
approximately 10.1 million Net Pops. Approximately 6.5 million of these Net Pops
are represented by the Company's wireless telephone systems located in the
continental United States, including approximately 1.1 million Net Pops related
to the Company's minority equity investments in partnerships owning wireless
telephone systems. The balance of approximately 3.6 million Net Pops represents
the Company's interest in its wireless telephone systems in Puerto Rico.
