PROSPECTUS SUPPLEMENT
(To Prospectus Dated November 1, 1999)
180,000 SHARES
Centennial Cellular Corp.
CLASS A COMMON STOCK
We are one of the largest independent wireless telecommunications service
providers in the United States and Puerto Rico with approximately 486,300
subscribers as of August 31, 1999.
This Prospectus Supplement relates to the sale or other distribution of (i)
up to 100,000 shares of our Class A Common Stock that we will issue to Allegan
Cellular, L.P., a Delaware Limited Partnership (or its designee), as part of the
consideration for our acquisition of the ownership interests in the Allegan
partnership that owns the wireless telephone system serving the Allegan,
Michigan rural service area and (ii) up to 80,000 shares of our Class A Common
Stock that we will issue to Integrated Systems, Inc., a Delaware Corporation, as
part of the consideration for our acquisition of all of the issued and
outstanding shares of capital stock of Integrated Systems, which is engaged in
the business of computer systems integration, consulting and sales, information
systems consulting, software engineering and internet access and website
development and design.
We will not receive any portion of the proceeds from the re-sale of the
shares by the selling shareholders.
Our Class A Common Stock is traded in The Nasdaq Stock Market under the
symbol CYCL. On October 29, 1999, the last reported sales price for our Class
A Common Stock was $55 1/8.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE
SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED THESE
SECURITIES OR DETERMINED IF THIS PROSPECTUS SUPPLEMENT
IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
This prospectus is dated November 1, 1999
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THE COMPANY
We are one of the largest independent wireless communications providers in
the United States and Puerto Rico. Our service areas have a total population of
approximately 10.8 million, decreased by the percent of our subsidiaries serving
those areas owned by third parties. For example, if a third party owns 40% of
our subsidiary, the actual population of those areas served by that subsidiary
will be decreased by 40% for our calculations. This adjusted population is
commonly referred to as net pops. We had approximately 486,300 subscribers as of
August 31, 1999. Our domestic operations serve 5.8 million net pops and its
service area covers approximately 81,645 square miles. Our subsidiary in Puerto
Rico provides wireless and traditional telephone services over a common
communications network in Puerto Rico. Its licensed service areas cover 3.8
million net pops in Puerto Rico and the U.S. Virgin Islands. In addition, we own
minority shares, representing approximately 1.2 million net pops, in other
cellular operations controlled and managed by other cellular operators, referred
to as minority cellular investment interests.
DOMESTIC CELLULAR SYSTEMS
Our domestic consolidated systems are among the leading independent
providers of rural wireless telecommunications services. We attempt to acquire
cellular systems next to our existing markets. We focus on underdeveloped rural
and small-city cellular areas that have a significant number of potential
customers for wireless communications.
Our domestic cellular interests consist primarily of three operating
clusters:
o MICHIANA CLUSTER contains approximately 3.4 million net pops in
Michigan, Ohio and Indiana, covering portions of three major
interstate highways that connect Chicago, Detroit and Indianapolis.
o EAST TEXAS/LOUISIANA CLUSTER contains approximately 2.1 million net
pops, covering portions of interstate highway I-10, as well as
sections of Texas, Louisiana and Mississippi adjacent to Houston, New
Orleans, Shreveport and Baton Rouge.
o SOUTHWESTERN CLUSTER contains approximately 296,000 net pops, covering
the Yuma, Arizona and El Centro, California markets and is bordered by
Los Angeles to the northwest, San Diego to the west, Phoenix to the
east and Mexicali, Mexico to the south.
PUERTO RICO SYSTEMS
Our Puerto Rico business, which is conducted through our subsidiary in
Puerto Rico, provides a broad range of wireless and traditional telephone
services in the Commonwealth of Puerto Rico, an area covering approximately 3.8
million net pops. Our subsidiary in Puerto Rico owns its own communications
network, making it a so-called "facilities-based" provider of communications
services. It is
o one of two providers of personal communications services in the Puerto
Rico market,
o a provider of wireless telephone services to both business and
residential customers, and
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o a provider of local and long distance telephone services and data
services through its subsidiary, Lambda Operations, Inc., which
competes with the incumbent Puerto Rico Telephone Company.
Our subsidiary in Puerto Rico offers wireless communications and
traditional telephone services using its own switch and sophisticated fiber
optic network, which contains over 314 miles of fiber laid throughout the island
of Puerto Rico. The digital personal communications services network allows for
coverage in most areas of Puerto Rico using its established base of 120 wireless
antenna sites and digital technology to transmit its calls.
The address of our principal executive offices is 1305 Campus Parkway, Neptune,
New Jersey 07753. Our telephone number is (732) 919-1000.
THE MERGER
On January 7, 1999, we merged with CCW Acquisition Corp., a corporation
formed at the direction of Welsh, Carson, Anderson & Stowe VIII, L.P. As a
result of the merger, a new group of equity investors acquired a 92.9% ownership
interest in us. The remaining 7.1% interest is owned by public stockholders.
USE OF PROCEEDS
We will not receive any proceeds from the re-sale of the shares by the
selling shareholders.
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RISK FACTORS
You should carefully consider the following factors and other information
in this prospectus before deciding to purchase shares. Any of the following
risks could have a material adverse impact on our business, financial condition
or results of operations or on the value of the shares.
WE EXPECT TO INCUR LOSSES FOR THE FORESEEABLE FUTURE.
We cannot assure you that our business will generate cash flow or that we
will be able to obtain funding sufficient to satisfy our debt service
requirements. Our business operations have incurred net losses for each of the
past five fiscal years, and we expect to report net losses for the foreseeable
future due to increased interest payments and non-cash charges such as
depreciation and amortization. In addition, prevailing economic conditions and
financial, business and other factors in the markets we serve, many of which are
beyond our control, will affect our ability to satisfy our debt obligations.
PAYMENT OF OUR DEBT OBLIGATIONS REDUCES THE CASH AVAILABLE TO USE IN OUR
BUSINESS.
After the merger our total long term debt was significantly greater than
before the merger. Our large amount of debt could adversely affect our business
and you because we must use a substantial portion of our cash to pay our debt
obligations. As a result, we have less cash to use in other areas of our
business. In addition, our debt service obligations increase our vulnerabilities
to:
o adverse economic and industry conditions;
o interest rate increases because borrowings under our credit facility
are at variable interest rates; and
o competitive pressures, as many of our competitors will be less
leveraged than we are.
In addition, we may incur significantly more debt. This may further reduce
the cash we have available to invest in our operations. If we cannot generate
sufficient cash from operations to meet our debt obligations, we will need to
refinance, obtain additional financing or sell assets.
WE MAY BE ADVERSELY AFFECTED BY OUR COMPETITORS, MANY OF WHOM HAVE GREATER
FINANCIAL RESOURCES THAN WE DO.
Our principal business, wireless telephone service, is highly competitive.
We compete with at least one wireless licensee in each geographic area. Most of
these competitors are larger, have greater financial resources than we do and
may be less leveraged than we are. We also face competition from paging
companies, traditional telephone companies and resellers. The Federal
Communications Commission ("FCC") requires all cellular and personal
communication system operators to provide service on a nondiscriminatory basis
to resellers. Resellers provide service to customers but do not hold an FCC
license or own facilities to provide such services. Instead, a reseller buys
blocks of cellular telephone numbers from a licensed carrier, usually at a
discounted rate, and resells service to the public. Thus, a reseller may be both
a customer of a cellular or personal communications services provider and also a
competitor.
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WE FACE INCREASED COMPETITION FROM ENTITIES USING COMMUNICATIONS TECHNOLOGIES
COMPARABLE TO CELLULAR SERVICE.
Competing technologies or any new technologies may provide significant
competition for us. We cannot assure you that one or more of the technologies
that we currently use in our business will not become inferior or obsolete at
some time in the future. New technologies that are comparable to cellular
service include:
o personal communications services ("PCS"),
o enhanced specialized mobile radio ("ESMR") and
o satellite-based services.
Personal communications services refer to the series of two-way
communication licenses recently awarded by the FCC which are expected to use
digital wireless technologies. Many personal communication services licensees
who will compete with us have access to substantial capital resources. In
addition, many of these companies, or their affiliates, already operate large
cellular telephone systems and thus bring significant wireless experience to
this new marketplace.
ESMR is a two-way wireless communications service that incorporates
characteristics of cellular technology, including many low-power transmitters
and connection with the network that provides traditional telephone services.
ESMR service may compete with cellular service by providing digital
communication technology, lower rates, enhanced privacy and additional features
such as electronic mail and built-in paging. Nextel Communications, Inc. is the
primary provider of such services today.
The FCC has issued a number of licenses for satellite-based services that
would enable subscribers to access mobile communications systems throughout the
world. Additional proposals for the provision of satellite services remain
pending with the FCC and foreign regulatory bodies must approve certain aspects
of some satellite systems.
COMPETITION FROM OTHER WIRELESS AND TRADITIONAL TELEPHONE SERVICE PROVIDERS IN
PUERTO RICO MAY REDUCE OUR MARKET SHARE AND ADVERSELY AFFECT PRICES.
The market for wireless services is highly competitive in Puerto Rico.
Competition from telecommunications providers may reduce our market share and
have an adverse effect on our prices and profitability. Our main competitors for
wireless services in the Puerto Rico market are Cellular Communications of
Puerto Rico, Inc., the Puerto Rico Telephone Company and Telecorp. Both Cellular
Communications and Puerto Rico Telephone Company were earlier entrants into the
Puerto Rico wireless market and have greater resources than we do. Telecorp is a
recent entrant into the Puerto Rico wireless market, providing personal
communications services. Cellular Communications and the Puerto Rico Telephone
Company offer cellular service based on both analog and digital technology and
offer greater cellular capability than we do to their customers traveling
outside Puerto Rico. We only offer digital service in Puerto Rico.
We expect increased competition in the wireless market from other broadband
personal communication services license holders. They include ClearComm L.P.,
which through a joint venture with Telefonica Larga Distancia ("TLD"), a
subsidiary of Telefonica International S.A., is expected to enter the wireless
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market shortly. In June 1999, TeleCorp PCS Inc., an affiliate of AT&T Corp.,
doing business as SunCom, entered the Puerto Rico marketplace as the second PCS
entrant.
The Puerto Rico Telephone Company is also our primary competitor for
traditional telephone service. GTE has bought a majority stake in the Puerto
Rico Telephone Company and may make changes to improve its competitive position.
Any increase in our market presence will depend upon our ability to obtain
customers that are underserved by the Puerto Rico Telephone Company or looking
for an alternative.
IF WE ARE SUCCESSFUL IN MAKING ACQUISITIONS, THE ACQUIRED PROPERTIES MAY
ADVERSELY AFFECT OUR BUSINESS.
We face risks that the systems we own and those we acquire in the future
will not perform as expected and that such systems will not generate the returns
necessary to repay the indebtedness incurred to acquire, or fund the capital
expenditures needed to develop, the systems. We intend to expand our current
business in adjacent areas through acquisition and also to acquire other small
to mid-sized metropolitan service areas and strategic rural service areas that
we believe are undervalued or underdeveloped or that possess traits that
indicate high potential cellular use and superior financial performance.
In addition, expansion of our operations may place a significant strain on
our management, financial and other resources. Our ability to manage future
growth will depend upon our ability to:
o monitor operations;
o control costs;
o integrate acquired properties;
o maintain effective quality controls; and
o significantly expand our internal management, technical and accounting
systems.
Management of those areas will result in higher operating expenses. A
failure to expand these areas or to implement and improve our systems,
procedures and controls in an efficient manner and at a pace consistent with the
growth of our business could have a material adverse effect on our business,
prospects, operating results and ability to service our indebtedness, including
the notes.
RAPID AND SIGNIFICANT TECHNOLOGICAL CHANGES IN THE TELECOMMUNICATIONS INDUSTRY
MAY ADVERSELY AFFECT US.
We face rapid and significant changes in technology. New technologies may
be protected by patents or other intellectual property laws and therefore may
not be available. In particular, the wireless telecommunications industry is
experiencing significant technological change, including:
o the increasing pace of digital upgrades in existing analog wireless
systems;
o evolving industry standards;
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o the allocation of new radio frequency spectrum in which to license and
operate wireless services;
o ongoing improvements in the capacity and quality of digital
technology;
o shorter development cycles for new products and enhancements; and
o changes in end-user requirements and preferences.
Like others in the industry, we are uncertain about the extent of customer
demand as well as the extent to which airtime and monthly access rates may
continue to decline. We cannot predict the effect of technological changes on
our business, and it is possible that technological developments will have a
material adverse effect on us.
WE MAY NOT BE ABLE TO MODIFY OUR BUSINESS TO COMPLY WITH REGULATORY CHANGES.
The telecommunications industry is subject to federal and state regulation
that is continually evolving. As new telecommunications laws and regulations are
issued, we may be required to modify our business plans or operations. There can
be no assurance that we can do so in a cost-effective manner. Further, we cannot
assure you that federal or state governments or the government of the
Commonwealth of Puerto Rico will not make regulations or take other actions that
might have a material adverse effect on our business. If the FCC allocates radio
spectrum for services that compete with our business thereby introducing
additional competitors, these changes could materially and adversely affect our
business prospects, operating results or our ability to service our
indebtedness.
The FCC and state regulatory agencies continue to issue rules implementing
the requirements of the 1996 Telecommunications Act. Such rules address
obligations, which include the obligation of incumbent telephone companies to
allow other carriers to connect to their network by reasonable means at rates
based on cost. The interpretation and implementation of these and other
provisions of the 1996 Telecommunications Act and the FCC rules implementing the
Telecommunications Act continue to be heavily debated and may have a material
adverse impact on our business.
THE LOSS OF OUR LICENSES COULD ADVERSELY AFFECT OUR ABILITY TO PROVIDE WIRELESS
AND WIRELINE SERVICES.
Cellular and personal communications services licenses are valid for 10
years from the effective date of the license. Failure to file for such renewal
or failure to meet any licensing requirements could lead to a denial of the
application and thus adversely effect our ability to continue to provide service
in that license area. Licensees may renew their licenses for additional ten year
periods by filing a renewal application with the FCC. The renewal applications
are subject to FCC review and are put out for public comment to ensure that the
licensees meet their licensing requirements and comply with other applicable FCC
mandates.
The FCC requires that our subsidiary in Puerto Rico cover at least
one-third of the population of Puerto Rico in five years and two-thirds of the
population in ten years under its B Block license for personal communication
services. Failure to meet these build-out requirements could have a material
effect on our ability to continue operations.
Lambda Operations Corp., our wholly owned telephone subsidiary, is subject
to the regulation of the Puerto Rico Telecommunications Board. The Puerto Rico
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Telecommunications Board may determine that our subsidiary's rates are not cost
based or its tariffs are not in the public interest. This determination could
have a material adverse effect on our business and could result in the denial of
our subsidiary's authorization to provide telephone service.
Both the wireless and local telephone subsidiaries are subject to siting
and zoning regulation which could materially affect our ability to build new
sites and expand our coverage. All telecommunication providers are obligated to
contribute to the federal universal service fund based upon a percentage of
interstate and intrastate revenue. Universal service funds are used to provide
local telephone service to individuals or families qualifying for federal
assistance or households in areas not served by the local telephone company.
Many states, including those we operate in, are implementing local universal
service programs that would also require carriers to contribute additional
funds.
OUR CELLULAR LICENSES MAY DECREASE IN VALUE, REDUCING THE ASSET BASE THAT
SUPPORTS OUR DEBT.
If the market value of our cellular licenses decreases significantly, we
may realize a material loss upon the sale of any of our licenses and our ability
to sell assets to repay debt would be significantly affected. A substantial
portion of our assets consists of our interests in cellular licenses held by
subsidiaries. The market for the purchase and sale of cellular licenses may not
exist in the future or the values of our licenses in that market may fall. The
future value of our interests in our cellular licenses will depend significantly
upon the success of our business. Moreover, the transfer of interests in such
licenses is subject to prior FCC approval, which may have the effect of reducing
the value of the license.
BUSINESS AND ECONOMIC FACTORS, SEVERE WEATHER AND POLITICAL CONDITIONS IN PUERTO
RICO MAY SIGNIFICANTLY AFFECT OUR OPERATIONS IN PUERTO RICO AND HURT OUR OVERALL
PERFORMANCE.
Our business in Puerto Rico is dependent on the business and economic
conditions and consumer spending generally in Puerto Rico. If existing economic
conditions in Puerto Rico were to deteriorate, the market for wireless or
telephone services in Puerto Rico may grow more slowly or decline. This would
have an adverse impact on our business in Puerto Rico and, because our Puerto
Rico operations currently generate approximately 30% of our company's adjusted
EBITDA, on our financial condition and results of operations generally. Adjusted
EBITDA is defined, for any period, as earnings before income from minority
cellular investment interests, allocations to minority interests in consolidated
subsidiaries, interest expense, interest income, income taxes, depreciation and
amortization, and gain on sale of assets, recapitalization costs and other
non-recurring charges.
In particular, our business in Puerto Rico may be materially adversely
affected by events such as hurricanes, labor strikes and the like which affect
Puerto Rico generally. Any change in Puerto Rico's political status with the
U.S., or the ongoing debate on such status, could also affect the economy of
Puerto Rico. The ultimate effect of possible changes in Puerto Rico's
governmental and political status is uncertain and, accordingly, we cannot
assure you that such changes will not materially adversely affect our business
and results of operations.
A SUBSTANTIAL INCREASE IN FRAUDULENT AND/OR UNBILLED USE OF OUR NETWORK WOULD
AFFECT OUR BUSINESS OPERATIONS.
We incur costs associated with unauthorized use of our network. Fraud
adversely affects our business by increasing:
o interconnection costs;
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o capacity costs;
o administrative costs;
o costs incurred for fraud prevention; and
o payments to other carriers for unbillable fraudulent roaming.
We cannot assure you that costs associated with unauthorized use of our cellular
network will not become substantial in the future.
OUR RESULTS OF OPERATIONS MAY DECLINE BECAUSE OF A MARKET DECLINE IN ROAMING
RATES AND OUR STRATEGY OF AGGRESSIVELY PRICING ROAMING RATES.
We earn much of our revenue from customers of other wireless communications
providers who enter our service areas and use their wireless phones. The use of
wireless phones outside a subscriber's local area is commonly referred to as
roaming. Roaming rates per minute under reciprocal roaming arrangements have
declined over the last several years. We expect that such declines will continue
for the foreseeable future. We have also implemented a strategy of aggressively
pricing roaming rates to encourage other cellular and personal communications
services providers to include portions of our service areas within their home
calling regions and to discourage wireless providers from expanding the reach of
their service into our service areas. Our results of operations may decline
because the decline in roaming rates may not be offset by the decrease in
roaming expenses we pay to other cellular and personal communication services
providers for roaming changes incurred by our subscribers in other calling
regions.
OUR OPERATIONS IN PUERTO RICO MAY BE ADVERSELY AFFECTED IF CHANGES IN TAX
BENEFITS AVAILABLE TO BUSINESSES IN PUERTO RICO CAUSE COMPANIES TO REDUCE THEIR
BUSINESS ACTIVITIES IN PUERTO RICO.
The demand for our services in Puerto Rico is significantly affected by the
level of business activity in the island providing tax incentives for U.S.
companies to operate in Puerto Rico and to reinvest the earnings from their
Puerto Rico operations in Puerto Rico. As a result of a 1996 amendment to the
Internal Revenue Code, the tax benefits available to corporations doing business
in Puerto Rico phase out in annual increments through 2005. Consequently, such
corporations may reduce or close their Puerto Rico operations and may reduce
their re-investments in Puerto Rico. The changes may also reduce the incentives
for new investments in Puerto Rico. Our business in Puerto Rico may be adversely
affected by such changes in the tax law.
THE FAILURE OF OUR COMPUTER SYSTEMS AND THOSE OF THIRD PARTIES WITH WHOM WE DEAL
TO RECOGNIZE THE YEAR 2000 COULD SIGNIFICANTLY DISRUPT OUR OPERATIONS, CAUSING A
DECLINE IN CASH FLOW AND REVENUE AND OTHER DIFFICULTIES.
The year 2000 issue is the result of many computer programs being written
abbreviating dates by using two digits rather that four digits in the year
field. As a result, unless corrected, a computer program that has date sensitive
software may recognize a date using "00" in the year field as 1900 rather than
the year 2000. This could result in system failures and errors causing
disruptions to various aspects of our business, including computer systems,
voice and data networks and building infrastructures.
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The failure of our computer systems to recognize the year 2000 may involve
the interruption of telecommunications services and/or interruption of customer
billing. Either or both of these events could have a material adverse effect on
our financial condition, results of operations or cash flows.
Most of our customer-related computer systems and databases, including our
billing systems, are managed by third parties under contractual arrangements. In
addition, our systems are interconnected with various networks and systems
operated by third parties, including traditional land-based communications
networks, long-distance networks, the networks of other wireless service
providers as well as public utilities. The ability of our systems to operate,
including the ability to provide wireless service, is dependent upon these third
party networks and systems being year 2000 compliant. We cannot assure you that
these third parties will have taken the necessary corrective actions prior to
the year 2000.
OUR MANAGEMENT TEAM IS NEWLY-FORMED AND HAS NOT YET DEMONSTRATED ITS
EFFECTIVENESS IN MANAGING CENTENNIAL.
Michael J. Small 41, is President Chief Executive Officer and a director of
Centennial. He joined Centennial upon the consummation of the merger. Prior to
joining Centennial, Mr. Small served as Executive Vice President and Chief
Financial Officer of 360 degrees Communications Company (now a subsidiary of
ALLTEL Corporation) since 1995. Prior to 1995, he served as President of Lynch
Corporation, a diversified acquisition-oriented company with operations in
telecommunications, manufacturing and transportation services. Mr. Small has had
no prior experience managing our operations.
The loss of any of our senior management employees could have a material
adverse effect on our company unless we can obtain a suitable replacement in a
timely manner. We have employment contracts with numerous members of senior
management, including Mr. Small, whose contract expires on September 30, 2002,
and Peter Chehayl, who became Senior Vice President and Chief Financial Officer
following the merger. In the event of vacancies in senior management, the
commitment of additional time and resources toward recruitment, hiring and
training to fill such positions, could result in a material adverse effect on
our business, prospects, operations or results of operations. If management
vacancies are not filled, or if our executive officers do not achieve their
management objectives in a timely manner, our business, prospects, operating
results and ability to service our indebtedness may be materially adversely
affected.
A GROUP OF AFFILIATED STOCKHOLDERS CONTROL THE VOTING POWER OF CENTENNIAL WHICH
MAY HAVE INTERESTS ADVERSE TO THE OTHER HOLDERS OF OUR STOCK.
Welsh Carson VIII, certain of its affiliates and certain other equity
investors hold 92.9% of Centennial's outstanding shares of common stock.
Accordingly, these equity investors, directly or indirectly, control our company
and have the power to elect all of our directors, appoint new management and
approve or reject any action requiring the approval of stockholders, including
adopting amendments to our charter and approving mergers and sales of all or
substantially all of our assets. The equity investors may make decisions that
are adverse to your interests. In addition, the existence of a controlling
stockholder may have the effect of making it difficult for a third party to
acquire, or of discouraging a third party from seeking to acquire, a majority of
the outstanding Centennial common stock.
A PORTION OF OUR OPERATIONS ARE CONDUCTED THROUGH PARTNERSHIPS IN WHICH WE HAVE
A MINORITY INTEREST. WE DO NOT CONTROL SUCH OPERATIONS AND ARE SUBJECT TO
CAPITAL CALLS MADE BY THE CONTROLLING PARTNER.
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We have a limited ability to direct the operation of any system conducted
through a partnership in which we hold a minority investment as a limited
partner. In addition, these investment partnerships are entitled to make certain
demands for capital contributions, including to complete acquisitions by the
limited partnerships. If we do not meet such a capital call, our ownership
interest in such system may be diluted. Capital calls with respect to such
investment interests for the fiscal years ended May 31, 1999, 1998 and 1997 were
approximately $0, $787,000 and $2.9 million, respectively. We cannot assure you
that we will be able to pay future capital calls when due. We account for these
partnerships on an equity basis and, therefore, include our pro rata share of
partnership net income in Income from Minority Cellular Investment Interests.
OUR OPERATIONS MAY BE ADVERSELY AFFECTED BY EQUIPMENT FAILURES OR BY NATURAL
DISASTERS THAT DISRUPT OUR NETWORK.
A major equipment failure or a natural disaster affecting any one of our
network control centers or certain of our wireless antenna sites or microwave
links could have a material adverse effect on our business, prospects, operating
results or ability to service our indebtedness.
POSSIBLE HEALTH EFFECTS OF RADIO FREQUENCY EMISSION MAY ADVERSELY AFFECT THE
DEMAND FOR CELLULAR TELEPHONE SERVICES.
Media reports have suggested that certain radio frequency emissions from
portable cellular telephones may be linked to cancer and interfere with heart
pacemakers and other medical devices. Concerns over radio frequency emissions
and interference may have the effect of discouraging the use of cellular
telephones, which could have an adverse effect upon our business. We cannot
assure you that government authorities would not increase regulation of cellular
telephones resulting from these concerns or that cellular telephone companies
may be liable for costs or damages associated with these concerns.
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SELECTED CONSOLIDATED FINANCIAL DATA
The selected consolidated financial data set forth below for each of the
five years in the period ended May 31, 1999 was derived from the Company's
audited Consolidated Financial Statements. The selected consolidated financial
data set forth below for the three months ended August 31, 1999 and 1998 has
been derived from the Company's unaudited consolidated financial statements,
which in the opinion of management reflect all adjustments (consisting only of
normal recurring adjustments) necessary for a fair presentation of interim data.
The following information should be read in conjunction with Management's
Discussion and Analysis of Results of Operations and Financial Condition and the
Consolidated Financial Statements and notes thereto, each of which are
incorporated herein by reference.
<TABLE>
<CAPTION>
Three Months Ended
August 31, Years ended May 31,
----------- ----------- ----------- ----------- ---------- ----------- -----------
1999 1998 1999 1998 1997 1996 1995
----------- ----------- ----------- ----------- ---------- ----------- -----------
(unaudited)
(dollars in thousands, except per share amounts)
<S> <C> <C> <C> <C> <C> <C> <C>
Statement of
Operations Data:
Domestic revenue.............. $ 72,519 $ 53,902 $ 241,902 $ 181,502 $ 143,317 $ 108,110 $ 82,651
Puerto Rico revenue........... 44,753 23,544 127,249 54,314 5,895 - -
----------- ----------- ----------- ----------- ---------- ----------- ----------
Total revenue................. 117,272 77,446 369,151 235,816 149,212 108,110 82,651
Cost of services and
equipment sold.............. 23,304 14,915 72,897 54,818 38,228 26,129 22,152
----------- ----------- ----------- ----------- ---------- ----------- ----------
Gross profit.................. 93,968 62,531 296,254 180,998 110,984 81,981 60,499
Selling, general and
administrative.............. 36,042 23,896 112,756 81,790 55,132 34,188 26,055
Depreciation and amortization. 18,984 31,804 114,696 114,194 83,720 70,989 65,642
Recapitalization costs........ - - 52,831 - - - -
----------- ----------- ----------- ----------- ---------- ----------- ---------
Operating income (loss)....... 38,942 6,831 15,971 ( 14,986) (27,868) (23,196) (31,198)
Interest expense--net......... 35,934 11,131 87,693 43,470 31,568 23,799 20,589
(Loss) gain on disposition
of assets................... (2) 9,556 8,031 5 3,819 8,310 -
Income from Minority
Cellular Investment
Interests(1)................ 3,484 3,649 11,502 13,069 15,180 10,473 4,670
----------- ----------- ----------- ----------- ---------- ----------- ----------
Income (loss) before
income tax expense
(benefit) and
minority interest........... 6,490 8,905 (52,189) (45,382) (40,437) (28,212) (47,117)
Income tax expense
(benefit)................... 856 3,008 (6,820) (13,597) (7,295) (11,596) (14,456)
Minority interest in loss
(income) of
subsidiaries(2)............. 45 (242) 281 (162) (153) (15) (69)
----------- ----------- ----------- ----------- ---------- ----------- ----------
Income (loss) before
extraordinary item.......... 5,679 5,655 (45,088) (31,947) (33,295) (16,631) (32,730)
Extraordinary loss on
early extinguishment
of debt, net of tax......... - - (35,079) - - - -
----------- ----------- ----------- ----------- ---------- ----------- ----------
Net income (loss)............. $ 5,679 $ 5,655 $ (80,167) $ (31,947) $ (33,295) $ (16,631) $ (32,730)
=========== =========== =========== =========== ========== =========== ==========
Dividend requirements on
Preferred Stock............. $ - $ 4,113 $ 9,906 $ 16,451 $ 15,948 $ 13,590 $ 12,634
----------- ----------- ----------- ----------- ---------- ----------- ----------
Income (loss) applicable to
common shares............... $ 5,679 $ 1,542 $ (90,073) $ (48,398) $ (49,243) $ (30,221) $ (45,364)
=========== =========== =========== =========== ========== =========== ==========
Diluted earnings per share:
Income (loss) before
extraordinary item (3)...... $ 0.18 $ 0.03 $ (1.20) $ (0.84) $ (0.82) $ (0.51) $ (0.90)
=========== =========== =========== =========== ========== =========== ==========
Extraordinary loss on
early extinguishment
of debt(3) ................. $ - $ - $ (0.76) $ - $ - $ - $ -
=========== =========== =========== =========== ========== =========== ==========
<PAGE>
Net income (loss)
applicable to
common shares(3)............ $ 0.18 $ 0.03 $ (1.96) $ (0.84) $ (0.82) $ (0.51) $ (0.90)
=========== =========== =========== =========== ========== =========== ==========
Weighted average number of
diluted common shares
outstanding during the
period..................... 32,334 57,782 46,032 57,455 59,714 59,222 50,476
=========== =========== =========== =========== ========== =========== ==========
</TABLE>
<TABLE>
<CAPTION>
As of August 31, As of May 31,
----------- ----------- ----------- ----------- ---------- ----------- -----------
1999 1998 1999 1998 1997 1996 1995
----------- ----------- ----------- ----------- ---------- ----------- -----------
(dollars in thousands)
Balance Sheet Data:
<S> <C> <C> <C> <C> <C> <C> <C>
Total Assets...................$ 984,449 $ 850,756 $ 986,281 $ 847,417 $ 844,850 $ 785,812 $ 844,384
Long-term Debt................. 1,474,902 500,000 1,459,295 510,000 429,000 350,000 350,000
Redeemable preferred stock - 193,539 - 193,539 193,539 189,930 176,340
Common stockholders' (deficit)
equity......................... (595,769) 42,156 (602,978) 40,409 112,882 160,006 188,831
</TABLE>
See notes 13 and 14 of the fiscal 1999 consolidated financial statements
incorporated herein by reference regarding recent acquisitions and the effect of
such acquisitions on the comparability of the historical financial statements of
the Company. See Notes 1 and 2 of the fiscal 1999 consolidated financial
statements incorporated herein by reference regarding a change in accounting
estimate made during fiscal 1999.
(1) Represents our proportionate share of profits and losses based on our
interest in earnings of limited partnership controlled and managed by other
cellular operators which we account for on the equity method.
(2) Represents the percentage share of earnings of our consolidated
subsidiaries that is allocable to unaffiliated holders of minority
interests.
(3) Years prior of fiscal 1999 have been restated to give effect to the
three-for-one stock split distributed on January 13, 1999 in the form of a
stock dividend,
S-12
<PAGE>
THE SELLING SHAREHOLDERS
The shares being offered hereby are being offered on behalf of (i) Allegan
Cellular, L.P., a Delaware limited partnership which will receive up to 100,000
shares from us as part of the consideration for our acquisition of the ownership
interests in the Allegan partnership that owns the wireless telephone system
serving the Allegan, Michigan rural service area and (ii) Integrated Systems,
Inc., a Delaware corporation which will receive up to 80,000 shares from us as
part of the consideration for our acquisition of all of the issued and
outstanding shares of capital stock of Integrated Systems which is engaged in
the business of computer systems integration, consulting and sales, information
systems consulting, software engineering and internet access and website
development and design. The selling shareholders have advised us that they do
not own any shares of Class A Common Stock in addition to the shares. The
selling shareholders have indicated that they intend to sell the shares at such
time or from time to time as they may determine depending on a number of factors
including the price of the Class A Common Stock from time to time. The table
below sets forth the names and addresses of the selling shareholders and the
maximum number of shares that such shareholders will receive from us in
connection with the acquisitions described above.
NAME AND ADDRESS MAXIMUM NUMBER OF SHARES
Allegan Cellular L.P. 100,000
c/o Steven G. Kull
7409 Fairfax Road
Bethesda, Maryland 20814
Integrated Systems, Inc. 80,000
33 Bolivia Street, Penthouse Floor
Hato-Rey
San Juan, Puerto Rico 00918
PLAN OF DISTRIBUTION
The shares are being sold by the selling shareholders for their own
account; we will not receive any proceeds from the sale of the shares by the
selling shareholders. The selling shareholders are not restricted as to the
price or prices at which they may sell the shares or in any other manner with
respect to the shares. The aggregate proceeds to the selling shareholders from
the sale of the shares will be the purchase price of such shares sold less the
aggregate agents' or brokers' commissions and other expenses of issuance and
distribution not borne by us. Further, the selling shareholders are not
restricted as to the number of shares that may be sold at any one time.
The selling shareholders, or their pledgees, donees, transferees or other
successors, may sell the shares in any of three ways: (1) through
broker-dealers; (2) through agents; and (3) directly to one or more purchasers.
The distribution of the shares may be effected from time to time in one or more
transactions (which may involve crosses or block transactions) (A) in the
over-the-counter market, (B) in transactions otherwise than in the
over-the-counter market, or (C) through the writing of options on the shares
(whether such options are listed on any options exchange or otherwise). Any of
such transactions may be effected at market prices prevailing at the time of
sale, at prices related to such prevailing market prices, at negotiated prices
or at fixed prices. The selling shareholders may effect such transactions by
selling shares to or through broker-dealers, and such broker-dealers may receive
compensations in the form of discounts, concessions or commissions from the
selling shareholders and/or commissions from purchasers of the shares for whom
they may act as agent (which discounts, concessions or commissions as to a
particular broker-dealer might be in excess of those customary in the types of
transactions involved).
S-13
<PAGE>
In connection with any sales, the selling shareholders and any
broker-dealer participating in such sales may be deemed to be underwriters
within the meaning of the Securities Act of 1933. Any commissions paid or any
discounts or concessions allowed to any such broker-dealers, and, if any such
broker-dealer purchases shares as principal, any profits received on the resale
of such shares, may be deemed to be underwriting discounts and commissions under
the Securities Act. The selling shareholders may indemnify any broker-dealer
that participates in transactions involving the sale of the shares against
certain liabilities, including liabilities arising under the Securities Act.
The shares may also be sold pursuant to Rule 145 under the Securities Act.
S-14
<PAGE>
PROSPECTUS
CENTENNIAL CELLULAR CORPORATION
The Prospectus relates to up to 8,000,000 shares of Class A Common Stock,
par value $.01 per share (the "Class A Common Stock"), of Centennial Cellular
Corp. (the "Company") that may be offered and issued by the Company from time to
time in the acquisition of other businesses or properties.
It is anticipated that such acquisitions will consist principally of the
acquisition, directly or indirectly, of entities that have received or may
receive from the Federal Communications Commission (the "FCC") a license to
provide cellular telephone service. The consideration for such acquisitions will
consist of shares of Class A Common Stock, cash, assumption of liabilities or a
combination thereof, as determined from time to time by negotiations between the
Company and the owners or controlling persons of the businesses or properties to
be acquired. It is anticipated that shares of Class A Common Stock issued in any
such acquisition will be valued at a price reasonably related to the current
market value of the Class A Common Stock, either at the time the terms of the
acquisition are tentatively agreed upon or at or about the time of closing or
during a specified period prior to delivery of the shares.
See "Outstanding Securities Covered by this Prospectus" for information
relating to the resale pursuant to this Prospectus of shares of Class A Common
Stock issued in connection with one or more acquisitions.
The Class A Common Stock is traded in The NASDAQ Stock Market under the
symbol CYCL.
--------------------------------------------
See "Risk Factors" for certain factors that should be considered by
prospective investors.
--------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION NOR HAS THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY
OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE
CONTRARY IS A CRIMI-
NAL OFFENSE.
--------------------------------------------
The date of this Prospectus is November 1, 1999
<PAGE>
AVAILABLE INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission") a registration statement on Form S-4 (together with all amendments
and exhibits, referred to as the "Registration Statement") under the Securities
Act of 1933, as amended (the "Securities Act"), with respect to the Class A
Common Stock. This Prospectus does not contain all of the information set forth
in the Registration Statement, certain parts of which are omitted in accordance
with the rules and regulations of the Commission. For further information
pertaining to the Class A Common Stock and the Company, reference is made to the
Registration Statement.
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Commission. Such reports, proxy statements and other information can be
inspected and copied at the public reference facilities maintained by the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, and at the
Commission's Regional Offices at 7 World Trade Center, 13th Floor, New York, New
York 10048, and Citicorp Center, 500 West Madison, Suite 1400, Chicago, Illinois
60621-2511. Copies of such material can be obtained from the Public Reference
Section of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549 at
prescribed rates.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Annual Report on Form 10-K for the fiscal year ended May 31, 1999, the
Quarterly Report on Form 10-Q for the fiscal quarter ended August 31, 1999 and
the Current Report on Form 8-K dated November 1, 1999 filed by the Company with
the Commission pursuant to the Exchange Act are incorporated herein by
reference.
All documents subsequently filed by the Company pursuant to Section 13(a),
13(c), 14 or 15(d) of the Exchange Act prior to the termination of the offering
of the Class A Common Stock offered hereby shall be deemed to be incorporated by
reference in this Prospectus and to be a part hereof from the respective date of
filing of each such document. Any statement contained in a document incorporated
or deemed to be incorporated by reference herein shall be deemed to be modified
or superseded for purposes of this Prospectus to the extent that a statement
contained herein or in any other subsequently filed document which also is, or
is deemed to be, incorporated by reference herein modifies or supersedes such
statement. Any such statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of this Prospectus.
-2-
<PAGE>
THE COMPANY WILL PROVIDE WITHOUT CHARGE TO EACH PERSON TO WHOM THIS
PROSPECTUS IS DELIVERED, UPON WRITTEN OR ORAL REQUEST, A COPY OF ANY OR ALL OF
THE DOCUMENTS INCORPORATED BY REFERENCE HEREIN, OTHER THAN CERTAIN EXHIBITS TO
SUCH DOCUMENTS. REQUESTS FOR SUCH DOCUMENTS SHOULD BE DIRECTED TO CENTENNIAL
CELLULAR CORP. AT 1305 CAMPUS PARKWAY, NEPTUNE, NEW JERSEY 07753, ATTENTION:
CHIEF FINANCIAL OFFICER (TELEPHONE: (732) 919-1000). IN ORDER TO ENSURE TIMELY
DELIVERY OF THE DOCUMENTS, ANY REQUEST SHOULD BE MADE AT LEAST FIVE BUSINESS
DAYS PRIOR TO THE DATE ON WHICH THE FINAL INVESTMENT DECISION IS TO BE MADE.
-3-
<PAGE>
USE OF PROCEEDS
This Prospectus relates to shares of Class A Common Stock which may be
offered and issued by the Company from time to time in the acquisition of other
businesses or properties. Other than the businesses or properties acquired,
there will be no proceeds to the Company from this offering.
DIVIDEND POLICY
Centennial has not paid any cash dividends on its common stock and
currently intends for the foreseeable future to retain all cash inflows
generated for use in the Company's business. Centennial is effectively
prohibited from paying cash dividends on its common stock by the provisions of
the Company's credit facility.
PRICE RANGE OF CLASS A COMMON STOCK
The Class A Common Stock is traded in the NASDAQ Stock Market under the
symbol CYCL. The table set forth below lists the high asked and low bid prices
for the Class A Common Stock reported by the NASDAQ Stock Market for the fiscal
quarters indicated.
High Low
1998
First Quarter $6.04 $4.29
Second Quarter 7.04 5.25
Third Quarter 7.38 6.00
Fourth Quarter 11.77 5.50
1999
First Quarter 13.83 11.21
Second Quarter 13.46 7.33
Third Quarter 35.38 13.17
Fourth Quarter 76.75 30.50
2000
First Quarter
(through August 31, 1999) 49.50 34.88
DESCRIPTION OF CAPITAL STOCK
The Company's authorized capital stock consists of 50,000,000 shares of
Class A Common Stock. As of October 29, 1999, 31,200,961 shares of Class A
Common Stock were issued and outstanding.
The transfer agent and registrar for the Class A Common Stock is American
Stock Transfer & Trust Company, 40 Wall Street, New York, NY 10005.
The Company will distribute annual reports to its stockholders which will
contain its financial statements.
-4-
<PAGE>
OUTSTANDING SECURITIES COVERED BY THE PROSPECTUS
This Prospectus may also be used by the persons who receive Class A Common
Stock from the Company in connection with acquisitions and who offer such Class
A Common Stock for resale under circumstances requiring use of a Prospectus
(such persons being referred to under this caption as "Stockholders"); provided,
however, that no Stockholder will be authorized to use this Prospectus for any
offer of such Class A Common Stock without first obtaining the consent of the
Company. In such event, information with respect to the Stockholders will be set
forth in a prospectus supplement filed pursuant to Rule 424 under the Securities
Act. The Company may consent to the use of this Prospectus for limited period of
time by the Stockholders and subject to limitations and conditions that may be
varied by agreement between the Company and the Stockholders. Resales of such
shares may be made in the over-the-counter market, in private transactions, or
pursuant to underwriting agreements.
Agreements with Stockholders permitting use of this Prospectus for resales
may provide that any such offering be effected in an orderly manner through
securities dealers, acting as broker or dealer, selected by the Company; that
Stockholders enter into custody agreements with one or more banks with respect
to such shares; and that sales be made only by one or more of the methods
described in this Prospectus, as appropriately supplemented or amended when
required. The Stockholders may be deemed to be underwriters within the meaning
of the Securities Act.
When resales are to be made through a broker or dealer selected by the
Company, it is anticipated that a member firm of the National Association of
Securities Dealers, Inc. will be engaged to act as the Stockholders' agent in
the sale of shares by such Stockholders. The member firm will be entitled to
commissions (including negotiated commissions to the extent permissible). Sales
of shares by the member firm may be made over the counter from time to time at
prices related to prices then prevailing. Any such sales may be by block trade.
Any such member firm may be deemed to be an underwriter within the meaning of
the Securities Act and any commissions earned by such member firm may be deemed
to be underwriting discounts and commissions under the Securities Act.
Upon the Company being notified by a Stockholder that any block trade has
taken place, a prospectus supplement, if required, will be filed pursuant to
Rule 424 under the Securities Act, disclosing the name of the member firm, the
number of shares involved, the price at which such shares were sold by such
Stockholder, and the commissions to be paid by such Stockholder to such member
firm.
LEGAL OPINIONS
Certain legal matters in connection with the offering of the Class A Common
Stock will be passed upon for the Company by Reboul, MacMurray, Hewitt, Maynard
& Kristol, New York, New York.
-5-
<PAGE>
EXPERTS
The consolidated financial statements and the related financial statement
schedule incorporated in this Prospectus by reference from the Company's Annual
Report on Form 10-K for the fiscal year ended May 31, 1999 have been audited by
Deloitte & Touche LLP, independent auditors, as stated in their reports which
are incorporated herein by reference and have been so incorporated in reliance
upon the reports of such firm given upon their authority as experts in
accounting and auditing.
-6-
