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 November 30, 2000
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 Communications 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.)
3349 Route 138, Building A
Wall, NJ 07719
(Address of principal executive offices, including zip code)
(732) 556-2200
(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.
Common stock - 94,587,677 outstanding shares as of January 9, 2001
<PAGE>
Part I - Financial Information
Item 1. - Financial Statements
CENTENNIAL COMMUNICATIONS CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Amounts in thousands)
<TABLE>
<CAPTION>
November 30,
2000 May 31,
(Unaudited) 2000
----------------- ---------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 212,472 $ 12,879
Restricted investments - 19,888
Accounts receivable, less allowance for doubtful
accounts of $7,518 and $6,539, respectively 81,173 69,692
Inventory - phones and accessories, less allowance for
obsolescence of $1,280 and $1,052, respectively 24,012 10,835
Prepaid expenses and other current assets 7,106 6,452
----------------- ----------------
TOTAL CURRENT ASSETS 324,763 119,746
PROPERTY, PLANT AND EQUIPMENT - net 504,325 398,345
EQUITY INVESTMENTS IN WIRELESS SYSTEMS - net 2,008 72,894
DEBT ISSUANCE COSTS, less accumulated amortization of
$13,981 and $10,112, respectively 52,240 56,109
DOMESTIC CELLULAR LICENSES, less accumulated
amortization of $290,071 and $304,922, respectively 269,901 241,855
CARIBBEAN WIRELESS LICENSES, less accumulated
amortization of $6,329 and $5,462, respectively 121,429 122,297
GOODWILL, less accumulated amortization of $24,127
and $34,462, respectively 209,083 137,545
OTHER ASSETS - net 40,219 23,942
----------------- ----------------
TOTAL $ 1,523,968 $ 1,172,733
================= ================
</TABLE>
See notes to condensed consolidated financial statements
1
<PAGE>
CENTENNIAL COMMUNICATIONS CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(CONTINUED)
(Amounts in thousands, except share data)
<TABLE>
<CAPTION>
November 30,
2000 May 31,
(Unaudited) 2000
----------------- ----------------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES:
Current portion of long-term debt $ 13,832 $ 11,725
Short-term debt - 6,688
Accounts payable 33,888 32,238
Accrued expenses and other current liabilities 253,539 106,943
Payable to affiliates 125 125
----------------- ----------------
TOTAL CURRENT LIABILITIES 301,384 157,719
LONG-TERM DEBT 1,530,976 1,566,048
DEFERRED FEDERAL INCOME TAXES 38,787 -
MINORITY INTEREST IN SUBSIDIARIES 22,328 25,296
COMMON STOCKHOLDERS' EQUITY (DEFICIT):
Common stock par value $.01 per share:
1 vote per share, 150,000,000 shares authorized;
issued, 94,653,155 and 94,413,714 shares, respectively;
and outstanding 94,582,652 and 94,343,211 shares, respectively 947 944
Common stock issuable - 2,355
Additional paid-in capital 429,692 426,675
Accumulated deficit (798,819) (1,004,910)
----------------- ----------------
(368,180) (574,936)
Less: Cost of 70,503 common shares in treasury (1,077) (1,077)
Deferred compensation (250) (317)
----------------- ----------------
TOTAL COMMON STOCKHOLDERS' EQUITY (DEFICIT) (369,507) (576,330)
----------------- ----------------
TOTAL $ 1,523,968 $ 1,172,733
================= ================
</TABLE>
See notes to condensed consolidated financial statements
2
<PAGE>
CENTENNIAL COMMUNICATIONS CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(Amounts in thousands, except per share data)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
---------------------------------- ----------------------------------
November 30, November 30, November 30, November 30,
2000 1999 2000 1999
--------------- --------------- ---------------- ---------------
<S> <C> <C> <C> <C>
REVENUE:
Service revenue $ 147,476 $ 118,575 $ 286,289 $ 231,530
Equipment sales 6,885 4,955 13,316 9,272
--------------- --------------- ---------------- ---------------
154,361 123,530 299,605 240,802
--------------- --------------- ---------------- ---------------
COSTS AND EXPENSES:
Cost of equipment sold 10,028 7,365 19,734 14,964
Cost of services 24,645 14,711 45,417 30,416
Sales and marketing 22,799 19,224 44,619 36,998
General and administrative 28,383 22,204 52,963 40,472
Depreciation and amortization 27,192 19,655 49,738 38,639
Gain on disposition of assets (331,209) (2) (363,344) -
--------------- --------------- ---------------- ---------------
(218,162) 83,157 (150,873) 161,489
--------------- --------------- ---------------- ---------------
OPERATING INCOME 372,523 40,373 450,478 79,313
INCOME FROM EQUITY INVESTMENTS 4,314 3,856 9,629 7,340
INTEREST EXPENSE - NET (42,501) (36,495) (84,085) (72,429)
--------------- --------------- ---------------- ---------------
INCOME BEFORE INCOME TAX EXPENSE AND MINORITY INTEREST 334,336 7,734 376,022 14,224
INCOME TAX EXPENSE (154,226) (700) (172,904) (1,556)
--------------- --------------- ---------------- ---------------
INCOME BEFORE MINORITY INTEREST 180,110 7,034 203,118 12,668
MINORITY INTEREST IN LOSS OF SUBSIDIARIES 2,130 15 2,973 60
--------------- --------------- ---------------- ---------------
NET INCOME $ 182,240 $ 7,049 $ 206,091 $ 12,728
=============== =============== ================ ===============
EARNINGS PER COMMON SHARE:
BASIC $ 1.93 $ 0.08 $ 2.18 $ 0.14
=============== =============== ================ ===============
DILUTED $ 1.88 $ 0.07 $ 2.13 $ 0.13
=============== =============== ================ ===============
WEIGHTED AVERAGE NUMBER OF COMMON SHARES
OUTSTANDING DURING THE PERIOD:
BASIC 94,559 93,750 94,527 93,693
=============== =============== ================ ===============
DILUTED 96,943 97,164 96,805 97,083
=============== =============== ================ ===============
</TABLE>
See notes to condensed consolidated financial statements
3
<PAGE>
CENTENNIAL COMMUNICATIONS CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMMON STOCKHOLDERS' EQUITY (DEFICIT)
(Amounts in thousands, except share data)
<TABLE>
<CAPTION>
Common Additional
Common Stock Stock Paid-In Treasury Deferred Accumulated
-------------------- Compen-
Shares Dollars Issuable Capital Stock sation Deficit Total
----------- -------- -------- ----------- --------- ------------ ------------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at June 1, 1999 93,673,386 $ 937 $ - $ 418,749 $ (1,077) $ - $ (1,021,587) $(602,978)
Common stock issued in conjunction
with acquisitions 420,000 4 - 5,226 - - - 5,230
Common stock issued in
connection with incentive plans 295,680 3 - 1,390 - - - 1,393
Deferred compensation 24,648 - - 438 - (438) - -
Amortization of deferred compensation - - - - - 121 - 121
Income tax benefit from stock options - - - 872 - - - 872
exercised
Common stock issuable - - 2,355 - - - - 2,355
Net income - - - - - - 16,677 16,677
------------ -------- -------- ----------- --------- ------------ ------------- ----------
Balance at May 31, 2000 94,413,714 944 2,355 426,675 (1,077) (317) (1,004,910) (576,330)
Common stock issued in conjunction
with acquisitions 120,000 1 (2,355) 2,354 - - - -
Common stock issued in
connection with incentive plans 119,441 2 - 663 - - - 665
Amortization of deferred compensation - - - - - 67 - 67
Net income - - - - - - 206,091 206,091
------------ -------- -------- ----------- --------- ------------ ------------ ----------
Balance at November 30, 2000 (unaudited) 94,653,155 $ 947 $ - $ 429,692 $ (1,077) $ (250) $ (798,819) $(369,507)
============ ======== ======== =========== ========= ============ ============ ==========
</TABLE>
See noted to condensed consolidated financial statements
4
<PAGE>
CENTENNIAL COMMUNICATIONS CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Amounts in thousands)
<TABLE>
<CAPTION> Six Months Ended
---------------------------------------
November 30, November 30,
2000 1999
------------------ ------------------
OPERATING ACTIVITIES:
<S> <C> <C>
Net income $ 206,091 $ 12,728
------------------ ------------------
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 49,738 38,639
Minority interest in loss of subsidiaries (2,973) (60)
Deferred income taxes 42,400 (624)
Equity in undistributed earnings of investee companies (9,629) (7,340)
Gain on disposition of assets (363,344) -
Other 3,933 3,539
Change in assets and liabilities net of effects of
acquisitions and dispositions:
Accounts receivable - (increase) (12,119) (10,535)
Prepaid expenses and other current assets -
(increase) (16,319) (2,574)
Accounts payable, accrued expenses and
other current liabilities- increase (decrease) 139,749 (5,524)
Customer deposits and prepayments -
increase 2,740 608
------------------ ------------------
Total adjustments (165,824) 16,129
------------------ ------------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 40,267 28,857
------------------ ------------------
INVESTING ACTIVITIES:
Proceeds from disposition of assets 493,325 22
Capital expenditures (107,532) (76,371)
Purchase of restricted securities - (19,998)
Proceeds from maturity of restricted securities 19,888 39,996
Acquisitions, net of cash acquired (216,188) (32,820)
Distributions received from equity investments 11,238 5,047
Capital contributed to equity investments (821) -
------------------ ------------------
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES 199,910 (84,124)
------------------ ------------------
FINANCING ACTIVITIES:
Proceeds from the issuance of long-term debt 238,400 19,343
Repayment of debt (279,651) (2,250)
Debt issuance costs paid - (267)
Proceeds from the exercise of stock options 667 -
------------------ ------------------
NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES (40,584) 16,826
------------------ ------------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 199,593 (38,441)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 12,879 51,141
------------------ ------------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 212,472 $ 12,700
================== ==================
SUPPLEMENTAL CASH FLOW DISCLOSURE:
Cash paid for interest $ 75,338 $ 78,858
================== ==================
</TABLE>
See notes to condensed consolidated financial statements
5
<PAGE>
CENTENNIAL COMMUNICATIONS CORP. AND SUBSIDIARIES
NOTES TO CONDENSED 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 condensed
consolidated financial statements contain all adjustments (consisting only of
normal recurring accruals) necessary to present fairly the consolidated
financial position of Centennial Communications Corp. and Subsidiaries (the
"Company") as of November 30, 2000 and the results of its consolidated
operations and cash flows for the periods ended November 30, 2000 and 1999.
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, 2000 Annual Report on Form 10-K, which includes a summary of
significant accounting policies and other disclosures. The consolidated balance
sheet at May 31, 2000 is audited.
Reclassifications
In fiscal 2001, the Company changed the format of its statements of cash flows
from the direct method to the indirect method for purposes of reporting cash
flows from operating activities. This and certain other prior period information
have been reclassified to conform with the current period presentation.
Stock Split
On January 21, 2000, all outstanding shares of common stock were split
three-for-one. In connection with the stock split, the Company increased its
authorized shares of common stock to 150,000,000 shares. All common share and
per share amounts have been restated to reflect the stock split.
6
<PAGE>
Note 2. Debt
Short-term debt consists of the following:
November 30, May 31,
2000 2000
----------- --------
13% Notes due July 2000 $ - $ 6,544
Other - 144
----------- --------
$ - $ 6,688
=========== ========
Short-term debt was assumed as part of the acquisitions of All America Cables
and Radio, Inc. ("AACR") and Infochannel Limited. This debt was repaid during
the six months ended November 30, 2000.
Long-term debt consists of the following:
<TABLE>
<CAPTION>
November 30, May 31,
2000 2000
-------------- --------------
<S> <C> <C>
8 7/8% Senior Notes due 2001 $ 1,388 $ 1,388
10 1/8% Senior Notes due 2005 219 219
Term Loans 990,250 993,000
Revolving Credit Facility - 30,000
Mezzanine Debt 171,055 169,931
10 3/4% Senior Subordinated Notes due 2008 370,000 370,000
Notes Payable 11,896 13,235
-------------- --------------
Total Long-Term Debt 1,544,808 1,577,773
Current Portion of Long-Term Debt (13,832) (11,725)
-------------- --------------
Net Long-Term Debt $ 1,530,976 $1,566,048
============== ==============
</TABLE>
On February 29, 2000, the Company amended and restated its existing senior term
loan and revolving credit facilities and increased the commitment thereunder by
$200,000 to an aggregate of $1,250,000. The amended and restated credit
facilities are referred to as the New Credit Facility. The New Credit Facility
consists of four term loans in an aggregate principal amount of $1,000,000 and a
revolving credit facility in an aggregate principal amount of $250,000, of which
$990,250 and $0, respectively, were outstanding as of November 30, 2000. The
borrowers under the New Credit Facility are Centennial Cellular Operating Co.
LLC for a $325,000 term loan and Centennial Puerto Rico Operations Corp. for
three separate term loans aggregating $675,000. The revolving credit facility
portion of the New Credit Facility is available to both of the borrowers.
Notes Payable were assumed as part of the acquisition of AACR and have
maturities from January 2001 to April 2002.
7
<PAGE>
The aggregate annual principal payments for the next five years and thereafter
under the Company's debt at November 30, 2000 are summarized as follows:
November 30, 2001 $ 13,832
November 30, 2002 55,452
November 30, 2003 73,000
November 30, 2004 95,500
November 30, 2005 118,219
November 30, 2006 and thereafter 1,188,805
--------------
$ 1,544,808
==============
The Company was in compliance with all covenants of its debt agreements at
November 30, 2000.
Interest expense, as reflected in the financial statements, has been partially
offset by interest income. The gross interest expense for the six months ended
November 30, 2000 and 1999 were $85,824 and $74,849, respectively.
Note 3. Acquisitions/Dispositions
In November 2000, the Company sold its interest in the Sacramento-Valley Limited
Partnership for $236,000 in cash. The Company recorded a pre-tax gain of
approximately $152,600, which is included in gain on disposition of assets in
the consolidated statement of operations.
In November 2000, the Company sold its Southwest cluster for approximately
$202,500 in cash, subject to adjustment. The Company recorded a pre-tax gain of
approximately $183,800, which is included in gain on disposition of assets in
the consolidated statement of operations.
In September 2000, the Company completed the acquisition of the cable television
assets of Pegasus Communications for $170,000 in cash. The newly-acquired cable
systems have over 57,000 subscribers and serve Aguadilla, Mayaguez, San German
and surrounding communities in the western part of Puerto Rico, and pass over
approximately 170,000 homes with their 123 route miles of fiber optic and 1,268
miles of coaxial cable. The excess of the purchase price over the fair value of
the net assets acquired has been recorded as goodwill.
In September 2000, the Company sold its 25% equity investment interest in the
Modoc, California Partnership and our 14.29% equity investment interest in the
Pennsylvania RSA No. 6 (II) Partnership in Lawrence, Pennsylvania for cash of
approximately $6,900.
In August 2000, GTE Mobilnet of California Limited Partnership redeemed the
Company's approximate 2.9% equity investment interest in the San Francisco Bay
Area cluster for approximately $48,000 of current assets. The Company recorded a
pre-tax gain of approximately $24,900 which is included in gain on disposition
of assets in the consolidated statement of operations.
8
<PAGE>
In July 2000, the Company purchased a 60% interest in Infochannel Limited, a
Jamaican Internet Service Provider for cash of approximately $8,000. The excess
of the purchase price over the fair value of the net assets acquired has been
recorded as goodwill.
In July 2000, the Company acquired the remaining 74.9% of the non-wireline
(A-Side) cellular license and wireless telephone system serving Lake Charles,
Louisiana MSA No. 197 that it did not own. The purchase price was approximately
$42,300 in cash, subject to adjustment.
In May 2000, the Company acquired a 51% interest in Paradise Wireless (Jamaica)
Limited, a Jamaican company which holds a 20 MHz CDMA license covering the
island of Jamaica. The purchase price was $25,500 in cash. The excess of the
purchase price over the fair value of the net assets acquired has been recorded
as goodwill.
In April 2000, the Company acquired a wireless telephone system in the Kokomo,
Indiana MSA for cash of approximately $25,600.
In April 2000, the Company acquired a 70% interest in AACR in the Dominican
Republic. AACR is an international long distance provider that also holds a 30
MHz PCS license, a LMDS license and a certificate to provide a broad range of
telecommunications services in the Dominican Republic. The purchase price was
approximately $19,800 in cash, subject to adjustment. The excess of the purchase
price over the fair value of the net assets acquired has been recorded as
goodwill.
In November 1999, the Company acquired the wireless telephone system in Allegan,
Michigan (Michigan-8) for cash of approximately $31,000 and 300,000 shares of
the Company's common stock (valued at $3,700 on the closing date), subject to
adjustment.
In August 1999, the Company acquired Integrated Systems, Inc. and Spiderlink
Puerto Rico Internet Services for cash of approximately $2,000 and 240,000
shares of the Company's common stock (valued at $3,885 on the closing dates).
120,000 of the shares were issued in December 1999 and the remaining 120,000
shares were issued in the first quarter of fiscal 2001. The excess of the
purchase price over the fair value of the net assets acquired has been recorded
as goodwill.
9
<PAGE>
The following summary pro forma information includes the operations of the
Company as if the above acquisitions had been consummated as of June 1, 1999:
Six Months Ended
----------------
November 30, November 30,
2000 1999
------------- -------------
Revenues $ 309,200 $ 274,129
Net income $ 205,995 $ 11,928
Earnings per common share-
Basic $ 2.18 $ 0.13
======= =======
Diluted $ 2.13 $ 0.12
======= =======
Note 4. New Accounting Pronouncements
In December, 1999, the Securities and Exchange Commission ("SEC") issued Staff
Accounting Bulletin No. 101 "Revenue Recognition in Financial Statements" ("SAB
No. 101"). SAB No. 101 provides additional guidance on revenue recognition as
well as criteria for when revenue is generally realized and earned. The Company
plans to adopt SAB No. 101 effective in the fourth quarter of fiscal 2001. The
Company has not determined the impact of the adoption on its results of
operations and financial position. This change will not affect cash flows.
In July 1999, the Financial Accounting Standards Board ("FASB") issued Statement
of Financial Accounting Standards ("SFAS") No. 137 "Deferral of the Effective
Date of SFAS No. 133", which defers the effective date of SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities" to all fiscal
quarters of fiscal years beginning after June 15, 2000. In June 2000, the FASB
issued SFAS No. 138, an amendment to SFAS No. 133. The Company is currently
evaluating the financial impact of adoption of SFAS No. 133, as amended by SFAS
No. 138. The adoption is not expected to have a material effect on the Company's
results of operations, financial position and cash flows.
In March 2000, the FASB issued Interpretation No. 44, "Accounting for Certain
Transactions Involving Stock Compensation - an interpretation of Accounting
Principles Board ("APB") Opinion No. 25" ("FIN No. 44"). The interpretation
provides guidance on certain issues relating to stock compensation involving
employees that arose in applying APB Opinion No. 25. Among other things, this
Interpretation clarifies (a) the definition of an employee for purposes of
applying APB No. 25, (b) the criteria for determining whether a plan qualifies
as a noncompensatory plan, (c) the accounting for an exchange of stock
compensation awards in a business combination. The Company adopted the
provisions of FIN No. 44 effective July 1, 2000. The adoption did not have a
material effect on the Company's results of operations, financial position and
cash flows.
10
<PAGE>
Note 5. Subsequent Events
In December 2000, the Company signed a definitive agreement to purchase the
Teleponce cable television company for approximately $108,000 in cash. The
Teleponce cable systems serve areas in and around Ponce in the southwestern part
of Puerto Rico, and have over 37,000 subscribers, and pass over 124,500 homes.
This transaction is subject to customary closing conditions and is expected to
close prior to the end of fiscal 2001.
In December 2000, the Company acquired Com Tech International Corporation ("Com
Tech"), an owner of undersea fiber optic cable capacity for approximately
$16,900. Com Tech's cable ownerships extend around the Caribbean on the ARCOS-1
cable network, from the U.S. to Europe on the TAT-14 cable network and from the
U.S. to Japan on the Japan-U.S. cable network. Com Tech's name has been changed
to Centennial Undersea Cable Corp.
Note 6. Segment Information
The Company adopted SFAS No. 131 "Disclosures about Segments of an Enterprise
and Related Information" during fiscal 1999. The Company's consolidated
financial statements include three distinct business segments: Domestic,
Caribbean Wireless and Caribbean Wireline. The Company determines its segments
based on the types of services offered as well as geographic location. Domestic
represents the Company's markets in the United States that it owns and manages.
Caribbean Wireless represents the Company's PCS operations in Puerto Rico as
well as the recently acquired wireless licenses in the Dominican Republic and
Jamaica. Caribbean Wireline represents the Company's participation in the
alternative access and cable television businesses and its offering of Internet
related services in Puerto Rico and its offering of long distance services in
the Dominican Republic. The Company changed its business segments for the year
ended May 31, 2000, to reflect the way management now evaluates its businesses
given the growth of the Company. Accordingly, all prior period segment results
have been restated to reflect the new segments. The Company measures the
operating performance of each segment based on EBITDA. EBITDA is defined 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, gain on disposition of
assets and non-recurring charges.
11
<PAGE>
Information about the Company's operations in its three business segments for
the six months ended November 30, 2000 and 1999 is as follows:
<TABLE>
<CAPTION>
Caribbean Caribbean
Domestic Wireless Wireline Eliminations Consolidated
------------ ------------- ------------- ---------------- ---- ------------------
<S> <C> <C> <C> <C> <C> <C>
Six months ended
November 30, 2000
-----------------
Total revenues $ 172,506 $ 92,764 $ 37,589 $ (3,254) (a) $ 299,605
EBITDA 89,491 36,794 10,587 - 136,872
Total assets 1,742,406 409,104 311,093 (938,635) (b) 1,523,968
Capital expenditures 24,393 55,887 27,252 - 107,532
Six months ended
November 30, 1999
-----------------
Total revenues $ 146,747 $ 76,844 $ 20,953 $ (3,742) (a) $ 240,802
EBITDA 76,886 36,266 4,800 - 117,952
Total assets 851,605 263,905 69,059 (181,394) (b) 1,003,175
Capital expenditures 26,576 31,259 18,536 - 76,371
</TABLE>
(a) Elimination of intercompany revenue, primarily from Caribbean Wireline to
Caribbean Wireless
(b) Elimination of intercompany investments
Reconciliation of Income before Income Taxes and Minority Interest
<TABLE>
<CAPTION>
Six months ended November 30,
--------------------------------
2000 1999
----------- -----------
<S> <C> <C>
EBITDA for reportable segments $ 136,872 $ 117,952
Interest expense (net) (84,085) (72,429)
Depreciation and amortization 49,738 38,639
Income from equity investments 9,629 7,340
Gain on disposition of assets (363,344) -
----------- -----------
Income before income taxes and minority
interest $ 376,022 $ 14,224
=========== ===========
</TABLE>
12
<PAGE>
Note 7. Consolidating Financial Data
Centennial Cellular Operating Co. LLC ("CCOC") and Centennial Puerto Rico
Operations Corp. ("CPROC") are wholly-owned subsidiaries of the Company.
CCOC is a joint and several co-issuer on the $370,000 senior subordinated
notes issued by the Company, and CPROC has guaranteed the notes. Separate
financial statements and other disclosures concerning CCOC and CPROC are
not presented because they are not material to investors.
CONSOLIDATING BALANCE SHEET FINANCIAL DATA
As of November 30, 2000
(Amounts in thousands)
<TABLE>
<CAPTION>
Centennial Centennial
Centennial Cellular Centennial Communications
Puerto Rico Operating Co. Communications Corp. and
Operations Corp. LLC Non-Guarantors Corp. Eliminations Subsidiaries
--------------- ------------- -------------- -------------- ------------- --------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 6,255 $ - $ 206,217 $ - $ - $ 212,472
Accounts receivable - net 28,541 - 52,632 - - 81,173
Inventory - phones and accessories - net 565 - 23,447 - - 24,012
Prepaid expenses and other current assets 2,413 - 4,693 - - 7,106
-------------- -------------- -------------- -------------- ------------- --------------
Total current assets 37,774 - 286,989 - - 324,763
Property, plant & equipment - net 221,476 - 282,849 - - 504,325
Equity investments in wireless systems - net - - 2,008 - - 2,008
Debt issuance costs - net 22,376 - 29,864 - - 52,240
Domestic cellular licenses - net - - 269,901 - - 269,901
Caribbean wireless licenses - net - - 121,429 - - 121,429
Goodwill - net 5,334 - 203,749 - - 209,083
Intercompany 35,141 1,140,500 951,848 588,419 (2,715,908) -
Investment in subsidiaries - (290,524) 472,529 (765,524) 583,519 -
Other assets - net 5,650 - 34,569 - - 40,219
-------------- -------------- -------------- -------------- ------------- --------------
Total $ 327,751 $ 849,976 $ 2,655,735 $ (177,105) $(2,132,389) $ 1,523,968
============== ============== ============== ============== ============= ==============
</TABLE>
13
<PAGE>
CONSOLIDATING BALANCE SHEET FINANCIAL DATA
(CONTINUED)
As of November 30, 2000
(Amounts in thousands)
<TABLE>
<CAPTION>
Centennial Centennial
Centennial Cellular Centennial Communications
Puerto Rico Operating Co. Communications Corp. and
Operations Corp. LLC Non-Guarantors Corp. Eliminations Subsidiaries
----------------- -------------- -------------- -------------- ------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
LIABILITIES AND STOCKHOLDERS'
EQUITY (DEFICIT)
Current liabilities:
Current portion of long term-debt $ 5,500 $ - $ 6,944 $ 1,388 $ - $ 13,832
Accounts payable 16,855 - 17,033 - - 33,888
Accrued expenses and other
current liabilities 33,628 - 219,179 732 - 253,539
Payable to affiliates - - 125 - - 125
----------------- -------------- -------------- -------------- ------------- ---------------
Total current liabilities 55,983 - 243,281 2,120 - 301,384
Long-term debt 659,750 695,000 4,952 171,274 - 1,530,976
Deferred federal income taxes - - 38,787 - - 38,787
Minority interest in subsidiaries - - 22,328 - - 22,328
Intercompany 98,957 920,500 1,678,234 19,008 (2,716,699) -
Stockholders' equity (deficit):
Common stock - - - 947 - 947
Preferred stock 465,000 - - - (465,000) -
Additional paid-in capital (883,226) - 1,375,577 429,692 (492,351) 429,692
Accumulated deficit (68,713) (765,524) (707,424) (798,819) 1,541,661 (798,819)
----------------- -------------- -------------- -------------- ------------- ---------------
(486,939) (765,524) 668,153 (368,180) 584,310 (368,180)
Less: treasury shares - - - (1,077) - (1,077)
Deferred compensation - - - (250) - (250)
----------------- -------------- -------------- -------------- ------------- ---------------
Total stockholders' equity (deficit) (486,939) (765,524) 668,153 (369,507) 584,310 (369,507)
----------------- -------------- -------------- -------------- ------------- ---------------
Total $ 327,751 $ 849,976 $ 2,655,735 $ (177,105) $(2,132,389) $ 1,523,968
================= ============== ============== ============== ============= ===============
</TABLE>
14
<PAGE>
CONSOLIDATING STATEMENT OF OPERATIONS FINANCIAL DATA
FOR THE SIX MONTHS ENDED NOVEMBER 30, 2000
(Amounts in thousands)
<TABLE>
<CAPTION>
Centennial Centennial
Centennial Cellular Centennial Communications
Puerto Rico Operating Co. Communications Corp. and
Operations Corp. LLC Non-Guarantors Corp. Eliminations Subsidiaries
--------------- -------------- -------------- -------------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
Revenue $ 109,292 $ - $ 192,508 $ - $ (2,195) $ 299,605
--------------- -------------- -------------- -------------- ------------ -------------
Costs and expenses:
Cost of equipment sold 5,015 - 14,719 - - 19,734
Cost of services 16,588 - 29,049 - (220) 45,417
Sales and marketing 18,021 - 26,598 - - 44,619
General and administrative 22,129 - 32,809 - (1,975) 52,963
Depreciation and amortization 22,925 - 26,813 - - 49,738
Gain on disposition of assets (5) - (363,339) - - (363,344)
--------------- -------------- -------------- -------------- ------------ -------------
84,673 - (233,351) - (2,195) (150,873)
--------------- -------------- -------------- -------------- ------------ -------------
Operating income 24,619 - 425,859 - - 450,478
--------------- -------------- -------------- -------------- ------------ -------------
Income from equity investments - - 9,629 - - 9,629
Income from investments in subsidiaries - 216,678 (10,611) 216,678 (422,745) -
Interest expense - net (35,230) (35,145) (3,123) (10,587) - (84,085)
Intercompany interest allocation - 35,145 (35,145) - - -
--------------- -------------- -------------- -------------- ------------ -------------
(Loss) income before income tax expense
and minority interest (10,611) 216,678 386,609 206,091 (422,745) 376,022
Income tax expense - - (172,904) - - (172,904)
--------------- -------------- -------------- -------------- ------------ -------------
(Loss) income before minority interest (10,611) 216,678 213,705 206,091 (422,745) 203,118
Minority interest in loss of subsidiaries - - 2,973 - - 2,973
--------------- -------------- -------------- -------------- ------------ -------------
Net (loss) income $ (10,611) $ 216,678 $ 216,678 $ 206,091 $ (422,745) $ 206,091
=============== ============== ============== ============== ============ =============
</TABLE>
15
<PAGE>
CONSOLIDATING STATEMENT OF CASH FLOWS FINANCIAL DATA
For the Six Months Ended November 30, 2000
(Amounts in thousands)
<TABLE>
<CAPTION>
Centennial Centennial Centennial
Puerto Rico Cellular Centennial Communications
Operations Operating Co. Non- Communications Elimin- Corp. and
Corp. LLC Guarantors Corp. ations Subsidiaries
---------- ------------- ------------ ------------ ---------- --------------
<S> <C> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES:
Net (loss) income $ (10,611) $ 216,678 $ 216,678 $ 206,091 $(422,745) $ 206,091
----------- ------------ ------------ ------------ ---------- --------------
Adjustments to reconcile net (loss) income to net cash
provided by (used in) operating activities:
Depreciation and amortization 22,925 - 26,813 - - 49,738
Minority interest in loss of subsidiaries - - (2,973) - - (2,973)
Deferred income taxes - - 42,400 - - 42,400
Equity in undistributed earnings of investee companies - - (9,629) - - (9,629)
Equity in undistributed earnings of subsidiaries - (216,678) 10,611 (216,678) 422,745 -
Gain on disposition of assets (5) - (363,339) - - (363,344)
Noncash expenses 5,842 - (6,967) 1,125 - -
Other 1,714 - 2,219 - - 3,933
acquisitions and dispositions:
Accounts receivable - (increase) (3,500) - (8,619) - - (12,119)
Prepaid expenses and other current assets -
(increase) (1,200) - (15,119) - - (16,319)
Accounts payable, accrued expenses and
other current liabilities- increase 4,002 - 135,747 - - 139,749
(decrease) increase (1) - 2,741 - - 2,740
----------- ------------ ------------ ------------ ---------- --------------
Total adjustments 29,777 (216,678) (186,115) (215,553) 422,745 (165,824)
----------- ------------ ------------ ------------ ---------- --------------
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES 19,166 - 30,563 (9,462) - 40,267
----------- ------------ ------------ ------------ ---------- --------------
INVESTING ACTIVITIES:
Proceeds from disposition of assets 5 - 493,320 - - 493,325
Capital expenditures (41,794) - (65,738) - - (107,532)
Proceeds from maturity of restricted securities - - 19,888 - - 19,888
Acquisitions, net of cash acquired - - (216,188) - - (216,188)
Distributions received from equity investments - - 11,238 - - 11,238
Capital contributed to equity investments - - (821) - - (821)
----------- ------------ ------------ ------------ ---------- --------------
NET CASH (USED IN) PROVIDED BY INVESTING ACTIVITIES (41,789) - 241,699 - - 199,910
----------- ------------ ------------ ------------ ---------- --------------
FINANCING ACTIVITIES:
Proceeds from the issuance of long-term debt 213,400 25,000 - - - 238,400
Repayment of debt (236,150) (35,000) (8,501) - - (279,651)
Proceeds from the exercise of stock options - - - 667 - 667
Cash received from (paid to) affiliates 46,650 10,000 (56,650) - - -
Cash advances from subsidiaries (to parent) 63 - (8,858) 8,795 - -
----------- ------------ ------------ ------------ ---------- --------------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 23,963 - (74,009) 9,462 - (40,584)
----------- ------------ ------------ ------------ ---------- --------------
NET INCREASE IN CASH AND CASH EQUIVALENTS 1,340 - 198,253 - - 199,593
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 4,915 - 7,964 - - 12,879
----------- ------------ ------------ ------------ ---------- --------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 6,255 $ - $ 206,217 $ - $ - $ 212,472
=========== ============ ============ ============ ========== ==============
</TABLE>
16
<PAGE>
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, 2000, in
addition to the interim consolidated financial statements and accompanying notes
presented in Part 1, Item 1 of this Form 10-Q.
Results of Operations (Amounts in thousands, except subscriber, pop and share
data)
We are a leading independent provider of mobile wireless communications
domestically and of mobile wireless communications and competitive local
exchange services in the Caribbean. Domestically, we own and operate cellular
systems in two clusters located in Michigan/Indiana/Ohio and
Texas/Louisiana/Mississippi, incorporating approximately 6.0 million Net Pops as
of November 30, 2000. These clusters of small city and rural markets are
adjacent to major metropolitan markets and benefit from the rapidly growing
levels of traffic generated by subscribers roaming into our coverage areas. Our
Caribbean operations provide wireless and wireline communications services in
Puerto Rico, the Dominican Republic and Jamaica, incorporating approximately
11.4 million Net Pops as of November 30, 2000. We commenced operations in Puerto
Rico (approximately 3.9 million Net Pops) in December 1996, where we provide
wireless PCS and wireline services including switched voice, Internet, video and
private line services over our own fiber optic, coaxial and microwave network.
During fiscal 2000, we acquired controlling interests in All America Cables and
Radio, Inc. ("AACR") in the Dominican Republic and Paradise Wireless (Jamaica)
Limited in Jamaica, which collectively expanded our Net Pops by 7.5 million.
Additionally, with the recently completed acquisition of the cable television
assets of Pegasus Communications, we participate in the cable television
business in Puerto Rico. We believe these operations benefit from dominant scale
and scope, as well as from substantial unmet demand for communications services
in the Caribbean.
Overview
We had 664,400 wireless subscribers at November 30, 2000, as compared to 525,100
at November 30, 1999, an increase of 27%. We reported net income of $182,240 and
$206,091 for the three and six months ended November 30, 2000, respectively, as
compared to net income of $7,049 and $12,728 for the three and six months ended
November 30, 1999. Included in net income for the six months ended November 30,
2000 were pre-tax gains of approximately $363,300 ($200,200 after-tax) we
recognized on the sale of our southwest properties and the sale of our interests
in Sacramento-Valley Limited Partnership, the Modoc, California Partnership, the
Pennsylvania RSA No. 6 (II) Partnership in Lawrence, Pennsylvania and the
redemption of our interest in the GTE Mobilnet partnership serving the San
Francisco Bay area. Earnings per common share, basic and diluted, for the three
months ended November 30, 2000 were $1.93 and $1.88 per share, respectively, as
compared to earnings per common share basic and diluted of $0.08 and $0.07,
respectively, for the three months ended November 30, 1999. Excluding the effect
of the sales and redemption above, earnings per common share, basic and diluted,
would have been $0.02 for the three months ended November 30, 2000. Earnings per
common share, basic and diluted, for the six months ended November 30, 2000 were
$2.18 and $2.13 per share, respectively, as compared to earnings per common
17
<PAGE>
share, basic and diluted, of $0.14 and $0.13, respectively, for the six months
ended November 30, 1999. Excluding the effect of the sales and redemption above,
earnings per common share, basic and diluted, would have been $0.07 for the six
months ended November 30, 2000. The table below summarizes results of operations
for each period:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
11/30/00 11/30/99 % Change 11/30/00 11/30/99 % Change
----------- ----------- -------- ---------- ---------- --------
<S> <C> <C> <C> <C> <C> <C>
EBITDA (1) $ 68,506 $ 60,026 14% $ 136,872 $ 117,952 16%
Operating income $ 372,523 $ 40,373 823% $ 450,478 $ 79,313 468%
Net income $ 182,240 $ 7,049 2,485% $ 206,091 $ 12,728 1,519%
Earnings per common share-
Basic $ 1.93 $ 0.08 2,313% $ 2.18 $ 0.14 1,457%
Diluted $ 1.88 $ 0.07 2,586% $ 2.13 $ 0.13 1,538%
</TABLE>
(1) Earnings before income from minority cellular investment interests,
allocations to minority interests in consolidated subsidiaries, interest
expense, interest income, income taxes, depreciation and amortization, (gain)
loss on disposition of assets and non-recurring charges ("EBITDA") is presented
because it is a financial indicator used in the telecommunications industry. Our
calculation of EBITDA may or may not be consistent with the calculation of
EBITDA by other companies and should not be viewed as an alternative to
generally accepted accounting principles (GAAP) measurements such as operating
income, net income or cash flows from operations.
Domestic Operations
<TABLE>
<CAPTION>
Revenue
Three Months Ended Six Months Ended
11/30/00 11/30/99 % Change 11/30/00 11/30/99 % Change
---------- ---------- -------- ---------- ---------- --------
<S> <C> <C> <C> <C> <C> <C>
Service revenue $ 81,653 $ 70,483 16% $ 164,827 $ 139,892 18%
Equipment sales 4,122 3,745 10% 7,679 6,855 12%
---------- ---------- ---------- ----------
Total revenue $ 85,775 $ 74,228 16% $ 172,506 $ 146,747 18%
========== ========== ========== ==========
</TABLE>
Total Domestic service revenue, excluding roaming revenue, increased $8,058 or
19% to $49,947 in the second quarter and increased $16,492 or 20% to $99,772 for
the six months ended November 30, 2000, as compared to the same periods in
fiscal 2000. These increases were primarily due to an increase in revenue from
new subscribers of $13,541 and $28,814, for the three and six months ended
November 30, 2000, respectively, partially offset by a decrease in retail
revenue per subscriber of $5,483 and $12,322 for the same periods. The decrease
in retail revenue per subscriber was primarily due to the rollout of digital
plans that include a larger amount of plan minutes as compared to analog rate
plans. Revenue from domestic roaming usage increased to $31,706 or 11% over
roamer revenues of $28,594 for the three months ended November 30, 1999, and
increased to $65,055 or 15% over roamer revenues of $56,612 for the six months
ended November 30, 1999. These increases were primarily due to increased roaming
usage of $7,475 and $18,907 for the three and six months ended November 30,
2000, respectively, partially offset by a reduction in roaming rates per minute
of $4,363 and $10,464 for the same periods.
18
<PAGE>
The increase in equipment sales of wireless telephones and accessories to
subscribers was due to a larger number of telephone and accessory units sold
during the current period.
Our Domestic operations had approximately 454,700 and 363,300 subscribers at
November 30, 2000 and November 30, 1999, respectively. Increases from new
activations of 191,500 were offset by subscriber cancellations of 104,300. The
monthly churn rate increased to 2.3% and 2.1% for the three and six months ended
November 30, 2000, respectively, as compared to 2.0% for both the three and six
months ended November 30, 1999. Included in the number of subscribers as of
November 30, 2000 are approximately 26,800 subscribers acquired in the Lake
Charles, Kokomo and Allegan acquisitions, less 22,600 subscribers removed as a
result of the sale of the southwest properties. The cancellations experienced by
the Domestic operations were primarily the result of competitive factors and
non-payment.
Domestic revenue per subscriber per month, based upon an average number of
subscribers, was $61 and $62 for the three and six months ended November 30,
2000, respectively, as compared to $70 and $71 for the three and six months
ended November 30, 1999, respectively. The decrease in retail revenue per
subscriber was primarily due to the rollout of digital plans that include a
larger amount of plan minutes as compared to analog rate plans.
<TABLE>
<CAPTION>
Costs and expenses
Three Months Ended Six Months Ended
11/30/00 11/30/99 % Change 11/30/00 11/30/99 % Change
----------- ---------- -------- ---------- ---------- --------
<S> <C> <C> <C> <C> <C> <C>
Cost of equipment sold $ 7,442 $ 6,743 10% $ 14,237 $ 12,298 16%
Cost of services $ 9,183 $ 7,773 18% $ 18,756 $ 14,992 25%
Sales and marketing $ 11,737 $ 11,679 0% $ 23,105 $ 21,959 5%
General and administrative $ 13,800 $ 9,897 39% $ 26,917 $ 20,612 31%
EBITDA $ 43,613 $ 38,136 14% $ 89,491 $ 76,886 16%
Gain on disposition of assets (331,209) (2) N/A (363,344) - N/A
Depreciation and amortization 11,166 8,388 33% 21,687 $ 16,361 33%
----------- --------- ----------- -----------
Operating income $ 363,656 $ 29,750 1,122% $ 431,148 $ 60,525 612%
=========== ========= =========== ===========
</TABLE>
Cost of equipment sold increased during the three and six months ended November
30, 2000, primarily due to an increase in the number of telephone units sold and
the higher costs associated with digital phones.
Cost of services increased during the three and six months ended November 30,
2000, primarily due to the variable costs associated with a larger revenue and
subscription base, increased usage per subscriber and increased wireless
coverage areas resulting from the continued expansion of the Domestic network.
19
<PAGE>
Sales and marketing expenses increased during six months ended November 30,
2000, primarily due to a larger number of retail locations and expanded sales
force, offset partially by reduced agent commissions. Cost to acquire per
activation was $286 for the three months ended November 30, 2000, as compared to
$296 for the three months ended November 30, 1999.
General and administrative expenses increased during the three and six months
ended November 30, 2000, primarily due to increased costs to support the
expanding subscriber base, as well as increased bad debt expense and
subscription fraud.
EBITDA for the Domestic operations for the three and six months ended November
30, 2000 was $43,613 and $89,491, respectively, an increase of $5,477 or 14% and
$12,605 or 16% over the same periods in fiscal 2000.
The gain on disposition of assets for the three and six months ended November
30, 2000 represents the pre-tax gains we recognized on the sale of the southwest
properties and the sale of our interests in the Sacramento-Valley Limited
Partnership, the Modoc, California Partnership and Pennsylvania RSA No. 6 (II)
Partnership in Lawrence, Pennsylvania. Also included in gain on disposition of
assets for the six months ended November 30, 2000 is a gain we recognized on the
redemption of our interest in the GTE Mobilnet partnership serving the San
Francisco Bay area.
Depreciation and amortization for the three and six months ended November 30,
2000 was $11,166 and $21,687, respectively, an increase of $2,778 or 33% and
$5,326 or 33% from the same periods in fiscal 2000. This increase was the result
of depreciation related to capital expenditures made during fiscal 2001 and 2000
in connection with the continued expansion of our Domestic operations as well as
depreciation and amortization related to the assets acquired in the Lake
Charles, Kokomo and Allegan acquisitions.
Operating income for the three and six months ended November 30, 2000 was
$363,656 and $431,148, respectively, an increase of $333,906 and $370,623 from
the operating income of $29,750 and $60,525 for the same periods in fiscal 2000.
20
<PAGE>
Caribbean Wireless Operations
<TABLE>
<CAPTION>
Revenue
Three Months Ended Six Months Ended
11/30/00 11/30/99 % Change 11/30/00 11/30/99 % Change
---------- ---------- -------- ---------- ---------- --------
<S> <C> <C> <C> <C> <C> <C>
Service revenue $ 44,609 $ 38,792 15% $ 87,348 $ 74,518 17%
Equipment sales 2,704 1,169 131% 5,416 2,326 133%
---------- ---------- ---------- ----------
Total revenue $ 47,313 $ 39,961 18% $ 92,764 $ 76,844 21%
========== ========== ========== ==========
</TABLE>
Total Caribbean Wireless service revenue increased $5,817 or 15% and $12,830 or
17% for the three and six months ended November 30, 2000, respectively, to
$44,609 and $87,348 for the same periods. These increases were primarily due to
an increase in revenues from new subscribers of $13,311 and $26,637 for the
three and six months ended November 30, 2000, respectively, partially offset by
a decrease in retail revenue per subscriber, which accounted for a decrease of
$7,494 and $13,807 for the same periods.
The increase in equipment sales of wireless telephones and accessories to
subscribers was primarily due to an increase in the number of telephone units
sold.
Our Caribbean Wireless operations had approximately 209,700 subscribers at
November 30, 2000, an increase of 30% from the 161,800 subscribers at November
30, 1999. Increases from new activations of 113,700 were offset by subscriber
cancellations of 65,800. The monthly churn rate decreased to 2.1% and 2.2% for
the three and six months ended November 30, 2000, respectively, as compared to
3.5% and 3.6% for the three and six months ended November 30, 1999,
respectively. The cancellations experienced by our Caribbean Wireless operations
were primarily the result of competitive factors and non-payment.
Caribbean Wireless revenue per subscriber per month, based upon an average
number of subscribers, was $78 and $79 for the three and six months ended
November 30, 2000, respectively, as compared to $87 and $88 for the three and
six months ended November 30, 1999, respectively. The decrease in revenue per
subscriber is primarily due to increased competition.
21
<PAGE>
<TABLE>
<CAPTION>
Costs and expenses
Three Months Ended Six Months Ended
11/30/00 11/30/99 % Change 11/30/00 11/30/99 % Change
---------- ---------- -------- ---------- ---------- --------
<S> <C> <C> <C> <C> <C> <C>
Cost of equipment sold $ 2,321 $ 586 296% $ 5,027 $ 2,569 96%
Cost of services $ 7,096 $ 5,286 34% $ 13,421 $ 10,859 24%
Sales and marketing $ 9,090 $ 6,234 46% $ 17,725 $ 12,395 43%
General and administrative $ 10,962 $ 7,452 47% $ 19,797 $ 14,755 34%
EBITDA $ 17,844 $ 20,403 (13%) $ 36,794 $ 36,266 1%
Depreciation and amortization 10,401 10,023 4% 19,662 $ 20,029 (2%)
---------- ---------- ---------- ----------
Operating income $ 7,443 $ 10,380 (28%) $ 17,132 $ 16,237 6%
========== ========== ========== ==========
</TABLE>
Cost of equipment sold increased during the three and six months ended November
30, 2000 due to the sale of phones under certain low-end rate plans and an
increase in phones sold for prepaid plans.
Cost of services increased during the three and six months ended November 30,
2000, primarily due to the variable costs associated with a larger revenue and
subscription base and increased wireless coverage areas resulting from the
continued expansion of our wireless network in the Caribbean.
Sales and marketing expenses increased during the three and six months ended
November 30, 2000, primarily due to the increase in gross subscriber additions
as well as marketing expenses related to the Dominican Republic.
General and administrative expenses increased during the three and six months
ended November 30, 2000, primarily due to increased costs to support the
expanding subscriber base and the initiation of service in the Dominican
Republic.
EBITDA for the Caribbean Wireless operations for the three months ended November
30, 2000 was $17,844, a decrease of $2,559 or 13% over the same period in fiscal
2000. EBITDA for the Caribbean Wireless operations for the six months ended
November 30, 2000 was $36,794, an increase of $528 or 1% over the same period in
fiscal 2000.
Depreciation and amortization for the three months ended November 30, 2000 was
$10,401, an increase of $378 or 4% from the three months ended November 30,
1999. Depreciation and amortization for the six months ended November 30, 2000
was $19,662, a decrease of $367 or 2% from the six months ended November 30,
1999. The increase for the three months ended November 30, 2000 primarily
resulted from fixed assets placed into operation during the second quarter in
the Dominican Republic, partially offset by PCS phones in Puerto Rico becoming
fully depreciated. In addition, depreciation increased due to capital
expenditures made during fiscal 2001 and 2000 in connection with the development
and network expansion of our Caribbean wireless telephone systems and the
purchase of additional PCS phones.
Operating income for the three months ended November 30, 2000 was $7,443, a
decrease of $2,937 from operating income of $10,380 for the same period in
22
<PAGE>
fiscal 2000. Operating income for the six months ended November 30, 2000 was
$17,132, an increase of $895 from operating income of $16,237 for the same
period in fiscal 2000.
Caribbean Wireline Operations
<TABLE>
<CAPTION>
Revenue
Three Months Ended Six Months Ended
11/30/00 11/30/99 % Change 11/30/00 11/30/99 % Change
---------- ---------- -------- ---------- ---------- --------
<S> <C> <C> <C> <C> <C> <C>
Service revenue $ 22,871 $ 11,219 104% $ 37,368 $ 20,862 79%
Equipment sales 59 41 44% 221 91 143%
---------- ---------- ---------- ----------
Total revenue $ 22,930 $ 11,260 104% $ 37,589 $ 20,953 79%
========== ========== ========== ==========
</TABLE>
Total Caribbean Wireline revenue increased $11,670 or 104% and $16,636 or 79%
for the three and six months ended November 30, 2000, respectively, to $22,930
and $37,589 for the same periods. Termination revenue decreased $3,138 or 64%,
and $5,762 or 64% for the three and six months ended November 30, 2000,
respectively, to $1,792 and $3,286. Terminating minutes of use decreased by 3%
for the three months ended November 30, 2000 as compared to the three months
ended November 30, 1999. Terminating minutes of use increased by 8% for the six
months ended November 30, 2000 as compared to the six months ended November 30,
1999. Termination revenue was negatively effected by a decrease in rate per
terminating minute for both the three and six months ended November 30, 2000.
The decrease in rate per terminating minute reflects a new rate with the Puerto
Rico Telephone Company ("PRTC") effective as of April 7, 2000.
Business switched and private line revenue increased 87% to $6,821 and 81% to
$12,413 for the three and six months ended November 30, 2000, respectively. This
increase reflects a 55% increase in business access lines to 19,754 lines as of
the end of the second quarter as well as a 209% increase in dedicated access
line equivalents to 73,936 at November 30, 2000.
Revenue from the Puerto Rico cable, AACR and Infochannel acquisitions totaled
$11,633 and $16,509 for the three and six months ended November 30, 2000,
respectively.
23
<PAGE>
<TABLE>
<CAPTION>
Costs and expenses
Three Months Ended Six Months Ended
11/30/00 11/30/99 % Change 11/30/00 11/30/99 % Change
---------- ---------- -------- ---------- ---------- --------
<S> <C> <C> <C> <C> <C> <C>
Cost of equipment sold $ 265 $ 36 636% $ 470 $ 97 385%
Cost of services $ 9,903 $ 2,737 262% $ 16,262 $ 6,677 144%
Sales and marketing $ 1,972 $ 1,311 50% $ 3,789 $ 2,644 43%
General and administrative $ 3,741 $ 5,689 (34%) $ 6,481 $ 6,735 (4%)
EBITDA $ 7,049 $ 1,487 374% $ 10,587 $ 4,800 121%
Depreciation and amortization 5,625 1,244 352% 8,389 $ 2,249 273%
---------- ---------- ---------- ----------
Operating income $ 1,424 $ 243 486% $ 2,198 $ 2,551 (14%)
========== ========== ========== ==========
</TABLE>
Cost of services increased during the three and six months ended November 30,
2000, primarily due to increased costs to support the expanding Wireline
business and expenses related to AACR.
Sales and marketing expenses increased during the three and six months ended
November 30, 2000, primarily due to increased advertising as well as the hiring
of additional sales force to support the growing business.
General and administrative expenses decreased during the three and six months
ended November 30, 2000, primarily due to a decrease in the reserve for bad
debt, partially offset by increased expenses related to the acquisition of AACR
as well as increased costs to support the expanding customer base.
EBITDA for the Caribbean Wireline operations for the three and six months ended
November 30, 2000 was $7,049 and $10,587, respectively, an increase of $5,562 or
374% and $5,787 or 121% over the same periods in fiscal 2000.
Depreciation and amortization for the three and six months ended November 30,
2000 was $5,625 and $8,389, respectively, an increase of $4,381 or 352% and
$6,140 or 273% over the same periods in fiscal 2000. These increases were due to
increased depreciation associated with the expansion of our network in addition
to increased depreciation and amortization related to the Puerto Rico cable,
AACR, Infochannel and Integrated Systems acquisitions.
Operating income for the three months ended November 30, 2000 was $1,424, an
increase of $1,181 from the operating income of $243 for same period in fiscal
2000. Operating income for the six months ended November 30, 2000 was $2,198, a
decrease of $353 from the operating income of $2,551 for same period in fiscal
2000.
24
<PAGE>
Consolidated
Other non-operating income and expenses
Net interest expense was $42,501 and $84,085 for the three and six months ended
November 30, 2000, respectively, an increase of $6,006 or 16% and $11,656 or 16%
from the three and six months ended November 30, 1999. Gross interest expense
for the three and six months ended November 30, 2000 was $43,758 and $85,824,
respectively, as compared to $37,289 and $74,849 for the three and six months
ended November 30, 1999. Total debt increased $62,795 from November 30, 1999.
The increase in total debt from November 30, 1999 was the result of borrowings
for acquisitions, assumed debt for completed acquisitions of $19,923, additional
borrowings for capital expenditures related to the expansion of the Caribbean
Wireless operation's PCS network infrastructure, the expansion of the Caribbean
Wireline network and the purchase of PCS telephones, offset by a paydown of debt
with a portion of the $493,325 of proceeds from the recently completed
dispositions. Total cash paid for acquisitions, net of cash acquired, during the
twelve months ended November 30, 2000 was approximately $283,700. The average
debt outstanding during the three and six months ended November 30, 2000 was
$1,720,590 and $1,663,137, increases of $240,881 and $188,589 as compared to the
average debt levels of $1,479,709 and $1,474,548 during the three and six months
ended November 30, 1999, respectively. Our weighted average interest rate
decreased to 10.0% for the three months ended November 30, 2000 from 10.1% for
the three months ended November 30, 1999. Our weighted average interest rate
increased to 10.3% for the six months ended November 30, 2000 from 10.2% for the
six months ended November 30, 1999.
After loss attributable to minority interests in subsidiaries for the three and
six months ended November 30, 2000, pre-tax income was $336,466 and $378,995,
respectively, as compared to pre-tax income of $7,749 and $14,284 for the three
and six months ended November 30, 1999. The income tax expense was $154,226 and
$172,904 for the three and six months ended November 30, 2000, respectively, as
compared to income tax expense of $700 and $1,556 for the three and six months
ended November 30, 1999. The increase in income tax expense for the three months
ended November 30, 2000 is primarily the result of taxes related to the gains we
recognized on the sale of our southwest properties and the sale of our interest
in the Sacramento-Valley Limited Partnership. The increase in income tax expense
for the six months ended November 30, 2000 also reflects the taxes related to
the gain we recognized on the redemption of our interest in the GTE Mobilnet
partnership serving the San Francisco Bay area.
These factors resulted in net income of $182,240 and $206,091 for the three and
six months ended November 30, 2000, respectively, which represents increases of
$175,191 and $193,363 from the net income of $7,049 and $12,728 for the three
and six months ended November 30, 1999, respectively.
Liquidity and Capital Resources
On February 29, 2000, we amended and restated our existing senior term loan and
revolving credit facilities and increased the commitment thereunder by $200,000
to an aggregate of $1,250,000. The amended and restated credit facilities are
referred to as the New Credit Facility. The New Credit Facility consists of four
25
<PAGE>
term loans in an aggregate principal amount of $1,000,000 and a revolving credit
facility in an aggregate principal amount of $250,000. The borrowers under the
New Credit Facility are Centennial Cellular Operating Co. LLC for a $325,000
term loan and Centennial Puerto Rico Operations Corp. for three separate term
loans aggregating $675,000. The revolving credit facility portion of the New
Credit Facility is now equally available to both of the borrowers. The amount
available under the revolving credit facility as of November 30, 2000 was
$250,000.
For the six months ended November 30, 2000, earnings exceeded fixed charges by
$377,631. Fixed charges consist of interest expense, including amortization of
debt issuance costs and the portion of rents deemed representative of the
interest portion of leases. The amount by which earnings exceeded fixed charges
reflects non-cash charges of $49,738 relating to depreciation and amortization.
As of November 30, 2000, we had $504,325 of property, plant and equipment (net)
placed in service. During the six months ended November 30, 2000, we made
capital expenditures of $107,532 to continue the construction of our new network
in the Dominican Republic and to expand the coverage areas and upgrade our cell
sites and call switching equipment of existing Domestic and Caribbean
properties. Capital expenditures for the Caribbean operations were $83,139 for
the six months ended November 30, 2000, representing 77% of our total capital
expenditures. The Caribbean operations capital expenditures included $31,669 to
add capacity and services and to continue the expansion of our PCS network
infrastructure, $10,235 to purchase telephone units which remain our property
while in use by subscribers, $40,049 related to the initial buildout of our PCS
network in the Dominican Republic and $1,026 to upgrade our cable operations in
Puerto Rico. During fiscal year 2001 and 2002, we anticipate capital
expenditures of approximately $250,000 and $200,000, respectively.
We expect to finance our capital expenditures primarily from cash flow generated
from operations, proceeds from asset sales and borrowings under our existing
revolving credit facility. We may also seek various other sources of external
financing, including, but not limited to, bank financing, joint ventures,
partnerships and placement of debt or equity securities.
In October 2000, our subsidiary, Centennial Digital Jamaica Ltd. ("Centennial
Digital Jamaica") signed a commitment with Lucent Technologies ("Lucent"),
subject to negotiation and signing of definitive documentation, whereby Lucent
agreed to provide Centennial Digital Jamaica with a credit facility ("Lucent
Credit Facility") in the amount up to $75,000 in connection with the build-out
and operation of our communications network in Jamaica. Borrowings under the
Lucent Credit Facility will bear interest at a rate of LIBOR plus 650 basis
points. The Lucent Credit Facility will mature six years from the date of
closing with principal repayments beginning in the fourth year, and Centennial
Digital Jamaica may borrow amounts under the facility until the second
anniversary of the closing date. Under the Lucent Credit Facility, Centennial
Digital Jamaica is required to maintain certain financial and operating
covenants, and is limited in its ability to, among other things, pay dividends
and incur additional indebtedness. No amounts were outstanding under the Lucent
Credit Facility as of November 30, 2000.
In order to meet our obligations with respect to our operating needs, capital
expenditures, and debt service obligations, it is important that we continue to
improve operating cash flow. Increases in revenue will be dependent upon
continued growth in the number of subscribers and maximizing revenue per
26
<PAGE>
subscriber. We have continued the development of our managerial, administrative
and marketing functions, and are continuing the construction of wireless systems
in our 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, our participation in the Caribbean telecommunications
business has been, and is expected to continue to be, capital intensive.
Further, due to the start-up nature of our Dominican Republic and Jamaica
operations, we expect that it will require additional cash investment to fund
our operations over the next several years.
The following table sets forth, for the periods indicated, our net cash
provided by operating activities before interest payments (net cash provided),
our principal uses of such cash and the cash available for (required from) other
financing and investing activities:
<TABLE>
<CAPTION>
Six Months Ended November 30,
-----------------------------
2000 1999
---- ----
% of net % of net
cash cash
Amount provided Amount provided
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Net cash provided by operating
activities $ 40,267 35% $ 28,857 27%
Interest paid 75,338 65% 78,858 73%
---------- ---------- ---------- ---------
Net cash provided $ 115,605 100% $ 107,715 100%
========== ========== ========== =========
Principal uses of cash
Interest paid $ 75,338 65% $ 78,858 73%
Property, plant & equipment 107,532 93% 76,371 71%
---------- ---------- ---------- ---------
Total $ 182,870 158% $ 155,229 144%
========== ========== ========== =========
Cash required from other financing and
investing activities $ (67,265) (58%) $ (47,514) (44)%
========== ========== =========== =========
</TABLE>
Net cash provided by operating activities for the three months ended
November 30, 2000 was not sufficient to fund our expenditures for property,
plant and equipment of $107,532.
27
<PAGE>
The following table sets forth the primary cash flows provided by other
financing and investing activities for the periods indicated:
<TABLE>
<CAPTION>
Six Months Ended November 30,
-----------------------------
2000 1999
---------- -----------
<S> <C> <C>
Proceeds from disposition of assets $ 493,325 $ 22
Proceeds from the exercise of stock options 667 -
Proceeds from issuance of long-term debt 238,400 19,343
Proceeds from maturity of restricted
securities 19,888 39,996
Distributions received from equity investments-net 10,417 5,047
---------- -----------
Cash provided by other financing and
investing activities 762,697 64,408
---------- -----------
Repayment of debt (279,651) (2,250)
Purchase of restricted securities - (19,998)
Debt issuance costs paid - (267)
Acquisitions, net of cash acquired (216,188) (32,820)
---------- -----------
Cash available for operations and capital
expenditures $ 266,858 $ 9,073
========== ===========
</TABLE>
Based upon current market conditions and our current capital structure, we
believe that cash flows from operations and funds from currently available
credit facilities will be sufficient to enable us to meet required cash
commitments through the next twelve month period.
Acquisitions, Exchanges and Dispositions
Our primary acquisition strategy is to acquire controlling ownership interests
in communications systems serving markets which are proximate to or share a
community of interest with our current markets. Our strategy of clustering our
operations in proximate geographic areas enables us to achieve operating and
cost efficiencies as well as joint marketing benefits. Clustering also allows us
to offer our subscribers more areas of uninterrupted service as they travel. In
addition to expanding our existing clusters, we also may seek to acquire
interests in wireless systems in other geographic areas. We also may pursue
other communications businesses we determine to be desirable. The consideration
for such acquisitions may consist of shares of stock, cash, assumption of
liabilities or a combination thereof.
In November 2000, we sold our interest in the Sacramento-Valley Limited
Partnership for $236,000 in cash. The Company recorded a pre-tax gain of
approximately $152,600, which is included in gain on disposition of assets in
the consolidated statement of operations.
28
<PAGE>
In November 2000, we sold our Southwest cluster for approximately $202,500 in
cash, subject to adjustment. The Company recorded a pre-tax gain of
approximately $183,800, which is included in gain on disposition of assets in
the consolidated statement of operations.
In September 2000, we completed the acquisition of the cable television assets
of Pegasus Communications for $170,000 in cash. The newly-acquired cable systems
have over 57,000 subscribers and serve Aguadilla, Mayaguez, San German and
surrounding communities in the western part of Puerto Rico, and pass over
approximately 170,000 homes with their 123 route miles of fiber optic and 1,268
miles of coaxial cable.
In September 2000, we sold our 25% equity investment interest in the Modoc,
California Partnership and our 14.29% equity investment interest in the
Pennsylvania RSA No. 6 (II) Partnership in Lawrence, Pennsylvania for cash of
approximately $6,900.
In August 2000, GTE Mobilnet of California Limited Partnership redeemed the
Company's approximate 2.9% equity investment interest in the San Francisco Bay
Area cluster for approximately $48,000 of current assets. The Company recorded a
pre-tax gain of approximately $24,900, which is included in gain on disposition
of assets in the consolidated statement of operations.
In July 2000, we acquired a 60% interest in Infochannel Limited, a leading
Internet Service Provider on the island of Jamaica for $8,000 in cash.
In July 2000, we purchased the remaining 74.9% of the non-wireline (A-Side)
cellular license and wireless telephone system serving Lake Charles, Louisiana
MSA No. 197 that we did not own. The Lake Charles market represents
approximately 180,000 Net Pops. The purchase price was approximately $42,300 in
cash, subject to adjustment.
In May 2000, we acquired a 51% interest in Paradise Wireless (Jamaica) Limited,
a Jamaican company which holds a 20 MHz CDMA license covering the island of
Jamaica. Jamaica has a population of approximately 2.6 million. The purchase
price was $25,500 in cash.
In April 2000, we acquired a wireless telephone system serving the Kokomo,
Indiana Metropolitan Statistical Area #271. The Kokomo market represents
approximately 101,000 Net Pops. The purchase price was approximately $25,600 in
cash.
In April 2000, we acquired a 70% interest in AACR in the Dominican Republic for
approximately $19,800 in cash, subject to adjustment. AACR is an international
long distance provider that also holds a 30 MHz PCS license, a Local Multipoint
Distribution System license and a certificate to provide a broad range of
telecommunications services in the Dominican Republic. The PCS license covers
approximately 8.9 million Pops in the Dominican Republic.
In March 2000, we acquired an international gateway switch in Miami, Florida.
With the purchase of this switch, we expect to deliver our growing outbound
traffic from our Caribbean service areas much closer to its destination. We
believe that there is a significant community of interest between the Puerto
Rican, Dominican and Jamaican population on the East Coast of the United States
29
<PAGE>
and our Caribbean customers. This switch allows us to more cost effectively
serve our customers in the Caribbean. In addition, we hope to attract southbound
minutes for termination in Puerto Rico, the Dominican Republic, Jamaica and
around the region.
Stock Split
On January 21, 2000, we effected a three-for-one stock split of all outstanding
shares of our common stock. In connection with the stock split, we increased our
authorized shares of common stock to 150,000,000 shares.
Name Change
On February 29, 2000, we changed our name from Centennial Cellular Corp. to
Centennial Communications Corp. to better reflect the integrated communications
services we offer.
New Accounting Standards
In December, 1999, the Securities and Exchange Commission ("SEC") issued Staff
Accounting Bulletin No. 101 "Revenue Recognition in Financial Statements" ("SAB
No. 101"). SAB No. 101 provides additional guidance on revenue recognition as
well as criteria for when revenue is generally realized and earned. We plan to
adopt SAB No. 101 effective in the fourth quarter of fiscal 2001. We have not
determined the impact of the adoption on our results of operations and financial
position. This change will not affect cash flows.
In July 1999, the Financial Accounting Standards Board ("FASB") issued Statement
of Financial Accounting Standards ("SFAS") No. 137 "Deferral of the Effective
Date of SFAS No. 133", which defers the effective date of SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities" to all fiscal
quarters of fiscal years beginning after June 15, 2000. In June 2000, the FASB
issued SFAS No. 138, an amendment to SFAS No. 133. We are currently evaluating
the financial impact of adoption of SFAS No. 133, as amended by SFAS No. 138.
The adoption is not expected to have a material effect on our results of
operations, financial position and cash flows.
In March 2000, the FASB issued Interpretation No. 44, "Accounting for Certain
Transactions Involving Stock Compensation - an interpretation of Accounting
Principles Board ("APB") Opinion No. 25" ("FIN No. 44"). The interpretation
provides guidance on certain issues relating to stock compensation involving
employees that arose in applying APB Opinion No. 25. Among other things, this
Interpretation clarifies (a) the definition of an employee for purposes of
applying APB No. 25, (b) the criteria for determining whether a plan qualifies
as a noncompensatory plan, (c) the accounting for an exchange of stock
compensation awards in a business combination. We adopted the provisions of FIN
No. 44 effective July 1, 2000. The adoption did not have a material effect on
our results of operations, financial position and cash flows.
30
<PAGE>
Commitments and Contingencies
We have filed a shelf registration statement with the SEC for up to 72,000,000
shares of our 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 January 10, 2001, 37,613,079 shares remain available for
future acquisitions.
On July 7, 2000, the Securities and Exchange Commission declared our universal
shelf registration statement effective which registered an aggregate of $750,000
of securities (debt, common stock, preferred stock and warrants) as well as 20
million shares of our common stock out of approximately 87 million shares owned
by our controlling stockholders (Welsh, Carson, Anderson & Stowe and an
affiliate of the Blackstone Group).
Subsequent Events
In December 2000, we signed a definitive agreement to purchase the Teleponce
cable television company for approximately $108,000 in cash. The Teleponce cable
systems serve areas in and around Ponce in the southwestern part of Puerto Rico,
have over 37,000 subscribers, and pass over 124,500 homes. This transaction is
subject to customary closing conditions and is expected to close prior to the
end of fiscal 2001.
In December 2000, we acquired Com Tech International Corporation ("Com Tech"),
an owner of undersea fiber optic cable capacity for approximately $16,900. Com
Tech's cable ownerships extend around the Caribbean on the ARCOS-1 cable
network, from the U.S. to Europe on the TAT-14 cable network and from the U.S.
to Japan on the Japan-U.S. cable network. Com Tech's name has been changed to
Centennial Undersea Cable Corp.
31
<PAGE>
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. Some of the statements made in this report are not historical or current
facts, but deal with potential future circumstances and developments. Where, in
any forward-looking statement, the Company or its management expresses an
expectation or belief as to future results or actions, there can be no assurance
that the statement of expectation or belief will result or be achieved or
accomplished. Forward-looking statements can be identified by the use of words
"believe", "expect", "estimate", "anticipate", "project", "intend", "may",
"will", "estimate" and similar expressions, or by discussion of strategy that
involve risks and uncertainties. We warn you that these forward-looking
statements are only predictions and estimates, which are inherently subject to
risks and uncertainties.
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:
o general economic, business, political and social conditions in the areas
in which we operate;
o our substantial debt obligations;
o local operating hazards and risks in the areas in which we operate;
o the ability to attract and retain qualified personnel;
o the capital intensity of the telecommunications industry;
o the competitive nature of the telecommunications industry, including
potential overbuilding by personal communications service providers;
o price declines in roaming rates;
o foreign currency risks;
o opportunities for growth through acquisitions and investments and our
ability to manage this growth;
o governmental regulation;
o changes and developments in technology;
o subscriber cancellations;
o restrictive covenants and consequences of default contained in our
financing arrangements;
o our ability to manage and monitor billing;
o safety concerns associated with using wireless telephones while operating
an automobile;
o possible health effects of radio frequency transmission;
o control by certain of our stockholders and anti-takeover provisions; and
o other factors referenced in our filings with the Securities and Exchange
Commission.
Given these uncertainties, readers are cautioned not to place undue
reliance on these forward-looking statements. We undertake no obligation to
update or revise these forward-looking statements to reflect events,
developments or circumstances after the date hereof.
32
<PAGE>
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is subject to market risks due to fluctuations in interest rates. A
majority of the Company's long-term debt has variable interest rates. The
Company utilizes interest rate swap and collar agreements to hedge variable
interest rate risk on a portion of its variable interest rate debt as part of
its interest rate risk management program.
The table below presents principal (or notional) amounts and related average
interest rate by year of maturity for the Company's long-term debt and interest
rate swap and collar agreements. Weighted average variable rates are based on
implied forward rates in the yield curve as of November 30, 2000 (based on
information provided by one of the Company's lending institutions):
<TABLE>
<CAPTION>
Amounts in thousands:
Year ended
November 30, November 30, November 30, November 30, November 30, Fair
2001 2002 2003 2004 2005 There-after Total value
------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Long-term debt:
Fixed rate $ 8,332 $ 4,952 - - $ 219 $ 541,055 $ 554,558 $ 520,519
Average interest rate 8.31% 8.08% - - 10.13% 10.51% 10.46% -
Variable rate $ 5,500 $ 50,500 $ 73,000 $ 95,500 $ 118,000 $ 647,750 $ 990,250 $ 990,250
Average interest rate (1) 6.45% 6.33% 6.57% 6.75% 6.81% 6.89% 6.81% -
Interest rate swaps (pay
fixed, receive variable):
Notional amount $ 350,000 $ 300,000 - - - - - $ 4,732
Average pay rate 5.40% 5.92% - - - - - -
Average receive rate 6.45% 6.33% - - - - - -
Interest rate collar:
Notional amount $ 100,000 $ 100,000 $ 100,000 - - - - $ 365
Cap 7.00% 7.00% 7.00% - - - - -
Floor 4.45% 4.45% 4.45% - - - - -
(1) Represents the average interest rate before applicable margin
</TABLE>
33
<PAGE>
PART II - OTHER INFORMATION
ITEM 1. Legal Proceedings
To our knowledge, there are no material legal proceedings to which we or
our subsidiaries are a party or to which any of our property is subject.
ITEM 2. Changes in Securities and Use of Proceeds
None
ITEM 3. Defaults Upon Senior Securities
None
ITEM 4. Submission of Matters to a Vote of Security Holders
a) The Company's annual meeting of shareholders was held on September 21,
2000.
b) The following persons were elected as directors at the Company's annual
meeting pursuant to the following votes:
Number of Votes
-------------------
Directors For Withheld
--------- ------- ----------
Carmen A. Culpeper 91,514,631 18,132
Anthony J. de Nicola 91,216,047 316,716
Mark T. Gallogly 91,216,047 316,716
Lawrence H. Guffey 91,216,047 316,716
Thomas E. McInerney 91,216,047 316,716
Rudolph E. Rupert 91,514,631 18,132
Jack M. Scanlon 91,514,631 18,132
Michael J. Small 91,514,631 18,132
J. Stephen Vanderwoude 91,514,631 18,132
c) The shareholders approved a proposal at the annual meeting to ratify the
approval and adoption by the Board of Directors of the Centennial
Communications Corp. and its Subsidiaries Employee Stock Purchase Plan. The
following sets forth the number of votes on this proposal:
For Against Abstain
-------- ----------- -----------
91,524,461 6,952 1,350
34
<PAGE>
d) The shareholders approved a proposal at the annual meeting to ratify the
selection by the Board of Directors of Deloitte & Touche LLP as independent
auditors for the Company for the fiscal year ending May 31, 2001. The
following sets forth the number of votes on this proposal:
For Against Abstain
--------- ----------- -----------
91,527,647 3,966 1,150
ITEM 5. Other Information
None
ITEM 6. Exhibits and Report on Form 8-K
Each exhibit identified below is filed as a part of this report.
a) Exhibits
None
b) Reports on Form 8-K
None
35
<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.
January 11, 2001
CENTENNIAL COMMUNICATIONS CORP.
/s/
---------------------
Peter W. Chehayl
Chief Financial Officer,
Sr. Vice President and Treasurer
(Chief Financial Officer)
/s/
----------------------
Thomas E. Bucks
Sr. Vice President-Controller
(Chief Accounting Officer)
36
