Financial: Centennial Cellular Corp. Announces Record Results for the Second Quarter Ended November 30, 1998 – Company Business and Marketing
Centennial Cellular Corp. announced record results for the quarter ending November 30, 1998. Centennial also announced that it expects to consummate in early January the previously announced merger with an entity controlled by Welsh, Carson, Anderson & Stowe VIII, L.P. and affiliates of Blackstone Capital Partners, L.P. The consummation of the Merger is subject to certain conditions, including the funding of committed financing. Total revenue for the quarter ended November 30, 1998 was $87,152,000 up $28,577,000 or 48.8% over revenue of $58,575,000 in the quarter ended November 30, 1997. Operating income before depreciation and amortization for the quarter ended November 30, 1998 was $42,935,000, an increase of $21,150,000 or 97.1% over the $21,785,000 recorded for the quarter ended November 30, 1997. Revenue from Centennial’s domestic wireless telephone business was $58,934,000 for the quarter ended November 30, 1998, an increase of $12,843,000 or 27.9% over revenue of $46,091,000 recorded for the quarter ended November 30, 1997. Operating income before depreciation and amortization for the quarter ended November 30, 1998 in Centennial’s domestic wireless telephone business was $31,154,000, an increase of $10,950,000 or 25.5% above the quarter ended November 30, 1997. Revenue from the Company’s Puerto Rico Wireless Telephone System for the quarter ended November 30, 1998 was $28,218,000 an increase of $15,734,000 over revenue of $12,484,000 recorded for the quarter ended November 30, 1997. Operating income before depreciation and amortization in the Puerto Rico Wireless Telephone System for the quarter ended November 30, 1998 was $11,781,000, an increase of $10,200,000 above the operating income before depreciation and amortization of $1,581,000 for the quarter ended November 30, 1997. The consolidated net income for the quarter ended November 30, 1998 was $688,000 compared to a net loss of $9,626,000 for the quarter ended November 30, 1997. After dividends payable on preferred stock, the Company’s earnings (loss) per common share was $(.13) and $(.52) for the quarters ended November 30, 1998 and 1997, respectively. Total revenue for the six month period ended November 30, 1998 was $164,598,000 up $53,834,000 or 48.6% over revenue of $110,764,000 for the six month period ended November 30, 1997. Operating income before depreciation and amortization for the six months ended November 30, 1998 was $81,570,000, an increase of $37,515,000 or 85.2% over the $44,055,000 recorded for the six months ended November 30, 1997. Revenue from Centennial’s domestic wireless telephone business was $112,836,000 for the six months ended November 30, 1998, an increase of $22,229,000 or 24.5 % over revenue of $90,607,000 recorded for the six months ended November 30, 1997. Operating income before depreciation and amortization for the six months ended November 30, 1998 in Centennial’s domestic wireless telephone business was $60,266,000, an increase of $17,368,000 or 40.5% above the quarter ended November 30, 1997. Revenue from the Company’s Puerto Rico Wireless Telephone System for the six months ended November 30, 1998 was $51,762,000 an increase of $31,605,000 over revenue of $20,157,000 recorded for the six months ended November 30, 1997. Operating income before depreciation and amortization in the Puerto Rico Wireless Telephone System for the six months ended November 30, 1998 was $21,304,000, an increase of $20,147,000 above the operating income before depreciation and amortization of $1,157,000 for the six months ended November 30, 1997. The consolidated net income for the six month period ended November 30, 1998 was $6,343,000 compared to a net loss of $16,412,000 for the six months ended November 30, 1997. After dividends payable on preferred stock, the Company’s earnings (loss) per common share was $(.07) and $(.93) for the six months ended November 30, 1998 and 1997, respectively. The Company’s wireless telephone subscribers at November 30, 1998 were 384,600 as compared to 268,600 at November 30, 1997, an increase of 116,000 subscribers or 43.2 %. Domestic wireless telephone subscribers increased by 68,000 or 31.2% from 217,900 subscribers at November 30, 1997, due primarily to internal growth of subscribers in systems which it owned and operated at November 30, 1997. Subscribers of the Company’s Puerto Rico Wireless Telephone System totaled 98,700 and 50,700 at November 30, 1998 and 1997, respectively. The Company’s Puerto Rico Wireless Telephone System accounted for 41.4% of the Company’s total subscriber increase. On November 29, 1998, the Company and CCW Acquisition Corp. (“Acquisition”), a Delaware corporation organized at the direction of Welsh, Carson, Anderson & Stowe VIII, L.P. (“WCAS VIII”), executed an Amendment to the Agreement and Plan of Merger, dated as of July 2, 1998 (as amended, the “Merger Agreement”), providing for the merger of Acquisition with and into Centennial (the “Merger”). The Company expects to close the Merger in January 1999. Centennial will continue as the surviving corporation (the “Surviving Corporation”) in the Merger. Subject to the effects of proration, in the Merger, outstanding shares of Class A Common Stock (“Class A Common Stock”) will be converted into the right to receive $41.50 per share in cash or to receive common shares of the Surviving Corporation (the “Surviving Corporation Shares”) representing up to 7.1% of the Surviving Corporation Shares outstanding immediately after the Merger. Outstanding shares of Class B Common Stock (“Class B Common Stock”) will be converted into the right to receive $41.50 per share in cash; provided, that if the aggregate number of Surviving Corporation Shares elected to be received by holders of Class A Common Stock is less than 7.1% of the common shares of the Surviving Corporation outstanding immediately after the Merger, then a number of shares of Class B Common Stock equal to a portion of such shortfall will be converted into Surviving Corporation Shares on a pro rata basis with shares of Class A Common Stock with respect to which an election to receive Surviving Corporation Shares has not been made. All outstanding shares of Convertible Redeemable Preferred Stock (the “Convertible Redeemable Preferred Stock”) and Second Series Convertible Redeemable Preferred Stock (the “Second Series Convertible Redeemable Preferred Stock” and, together with the Convertible Redeemable Preferred Stock, the “Preferred Stock”) will be converted into the right to receive $41.50 per share in cash on an as-converted basis. Because existing holders of common stock of the Company must receive in the Merger an amount of Surviving Corporation Shares equal to 7.1% of the common shares of the Surviving Corporation outstanding immediately after the effective time of the Merger (the “Effective Time”), holders of Class A Common Stock who do not elect to receive any shares and holders of Class B Common Stock may, due to proration, be required to receive some Surviving Corporation Shares. In addition, holders of Class A Common Stock who elect to receive shares may, due to proration, receive Surviving Corporation Shares and receive cash in amounts which vary from the amounts such holders elected. Pursuant to the Merger Agreement, it is anticipated that each option to purchase shares of Class A Common Stock (an “Option”) granted under the Company’s 1991 Employee Stock Option Plan and Non-Employee/Officer Director Option Plan, as amended (collectively, the “Option Plans”) will be exercised or canceled pursuant to its terms or canceled in exchange for a cash amount equal to the difference between $41.50 and the exercise price of the Option prior to the Effective Time. Each Option that is not exercised or canceled will remain outstanding immediately following the Effective Time and such Options will be subject to adjustment pursuant to the terms of the Option Plans. In connection with the execution of the Merger Agreement, Century Communications Corp. (“Century”), the Company’s principal stockholder, entered into a Stockholder Agreement, dated as of July 2, 1998, with Acquisition (the “Stockholder Agreement”). Pursuant to the Stockholder Agreement, Century, which has an approximate 33% Common Stock interest and, through its beneficial ownership of approximately 81.2% of the Company’s outstanding Class B Common Stock, which has disproportionate votes per share (15 votes per share), an approximate 74% voting interest in the Company as of November 30, 1998, agreed to vote its shares in favor of the Merger so long as the Merger Agreement remains in effect. Because Century agreed to approve the Merger by written consent in lieu of meeting, and controls, on a fully diluted basis, more than a majority of the outstanding votes of the Company required to approve the Merger, no further vote is necessary to approve the Merger. On December 4, 1998, Century executed a written stockholder’s consent in lieu of meeting to approve the Merger. On December 8, 1998, the Company’s Registration Statement on Form S-4 with respect to the issuance of common stock of the Company, as the Surviving Corporation in the Merger, was declared effective by the Securities and Exchange Commission (the “SEC”). Upon consummation of the Merger, such common stock of the Surviving Corporation will be received by (i) current holders of Class A Common Stock who make an effective election to receive such shares, (ii) by current holders of Class A Common Stock with respect to which an election to receive Surviving Corporation Shares has not been made who are required to receive such shares due to proration or (iii) by current holders of Class B Common Stock who are required to receive such shares due to proration. A holder of Class A Common Stock electing to receive Surviving Corporation Shares must make an election by 5:00 p.m., New York City time, on January 6, 1999. The consummation of the Merger is subject to certain conditions, including, without limitation, the funding of committed financing, which financing is no longer subject to any material adverse change in relevant capital markets. Whether or not the Merger is consummated, all costs and expenses incurred in connection with the Merger, the Merger Agreement and the transactions contemplated by the Merger Agreement shall be paid by the party incurring such expenses. However, in the event the Company or Acquisition shall have terminated the Merger Agreement as a result of either the Company entering into a definitive written agreement with respect to any merger, consolidation or other business combination, tender or exchange offer, recapitalization transaction, asset or stock purchase or other similar transaction with a third party (an “Acquisition Transaction”) or the Board of Directors of the Company having withdrawn, modified or amended in any manner adverse to Acquisition or the stockholders of Acquisition its approval or recommendation of the Merger Agreement or approved, recommended or endorsed any proposal for an Acquisition Transaction, then the Company shall simultaneously reimburse Acquisition for documented fees and expenses (subject to a maximum of $25,000,000) and pay Acquisition a termination fee of $40,000,000. In connection with the Merger, Acquisition has received a commitment from third parties for financing for Acquisition and certain existing and future subsidiaries of the Company in the aggregate amount of approximately $1,050,000,000 in the form of a senior secured credit facility. Additionally, an affiliate of WCAS VIII has agreed to purchase approximately $180,000,000 aggregate amount of unsecured subordinated notes of the Surviving Corporation. Finally, WCAS VIII and other equity investors have agreed to purchase approximately $400,000,000 of common stock of the Surviving Corporation. It is anticipated that this funding will be used to pay the merger consideration described above, repay or repurchase certain indebtedness of the Company and pay related fees and expenses. Additionally, pursuant to the Merger Agreement, the Company has agreed that, upon the request of Acquisition, it will commence offers to repurchase its two outstanding issuances of public debt (the “Debt Offers”). Pursuant to the Merger Agreement and at the request of Acquisition, the Company commenced the Debt Offers and consent solicitations with respect to these two public debt issuances on September 8, 1998. The Company has extended the expiration date for the Debt Offers to January 6, 1999. Through January 4, 1999, over 99% of the Company’s public debt was tendered and consents were delivered to the Company. As a condition to the closing of the Merger, the Company must complete the Debt Offers for its two public debt issuances of $350,000,000 in the aggregate, prior to the closing date of the Merger. The final cost to the Company of the redemption, including accrued interest, is approximately $398,000,000. The Company’s obligation to accept for purchase, and to pay for, the public debt validly tendered is subject to certain conditions, including the consummation of the Merger, which, in turn, is subject to certain other conditions. Acquisition notified the Company that on December 14, 1998, as part of the financing necessary to effect the Merger, a corporation formed in connection with the Merger, which will be a subsidiary of the Surviving Corporation following the Merger, issued $370,000,000 of senior subordinated debt securities to qualified institutional buyers under a private placement offering pursuant to Rule 144A and Regulation S of the Securities Act of 1933, as amended. There can be no assurance that Acquisition will receive the other funding referred to above and, in the event that Acquisition must seek alternative financing to consummate the Merger, there can be no assurance that it will be able to secure alternative financing on terms no less favorable than the terms of the above commitments. Additionally, there can be no assurance that the Debt Offers will be consummated. Centennial Cellular Corp. acquires, operates, and invests in wireless telephone systems throughout the continental United States and the Commonwealth of Puerto Rico. The Company’s current wireless telephone interests represent approximately 10.1 million Net Pops (derived from the 1990 Census Report of the Bureau of the Census, United States Department of Commerce). Approximately 6.5 million of these Net Pops are represented by the Company’s wireless telephone systems located in the continental United States, including approximately 1.1 million Net Pops related to the Company’s minority equity investments in partnerships owning wireless telephone systems. The balance of approximately 3.6 million Net Pops represents the Company’s interest in its wireless telephone systems in Puerto Rico. Based on 1996 Pops included in the 1997 Kagan Cellular Telephone Atlas, the Company’s current wireless telephone interests represent approximately 10.9 million Net Pops. Approximately 7.1 million of these Net Pops are represented by the Company’s wireless telephone systems located in the continental United States, including approximately 1.2 million Net Pops related to the Company’s minority equity investments in partnerships owning wireless telephone systems. The balance of approximately 3.8 million Net Pops represents the Company’s interest in its wireless telephone systems in Puerto Rico.
CENTENNIAL CELLULAR CORP.
Three Months Three Months
Ended 11/30/98 Ended 11/30/97 % Change
Revenue from Wireless
Telephone Services $87,152,000 $58,575,000 48.8%
Operating Income Before
Deprec. & Amortization 42,935,000 21,785,000 97.1%
Operating Income Before
Deprec. & Amortization
– Domestic 31,154,000 20,204,000 25.5%
Operating Income Before
Deprec. & Amortization
– Puerto Rico 11,781,000 1,581,000 645.2%
Operating Income (Loss) 10,196,000 (5,933,000) 271.9%
Interest Expense – Net 10,809,000 10,537,000 2.6%
Net Income (Loss) 688,000 (9,626,000) 107.1%
(1)(Loss) Per Share (.13) (.52)
Weighted Average Number
Of Shares 25,630,000 26,340,000
(1) After preferred stock dividends
CENTENNIAL CELLULAR CORP.
Six Months Six Months
Ended 11/30/98 Ended 11/30/97 % Change
Revenue from Wireless
Telephone Services $164,598,000 $110,764,000 48.6%
Operating Income Before
Deprec. & Amortization 81,570,000 44,055,000 85.2%
Operating Income Before
Deprec. & Amortization
– Domestic 60,266,000 42,898,000 40.5%
Operating Income Before
Deprec. & Amortization
– Puerto Rico 21,304,000 1,157,000 1741.3%
Operating Income (Loss) 17,027,000 (8,725,000) 295.2%
Interest Expense – Net 21,940,000 20,578,000 6.6%
Net Income (Loss) 6,343,000 (16,412,000) 138.6%
(1)(Loss) Per Share (.07) (.93)
Weighted Average Number
Of Shares 25,629,000 26,601,000
(1) After preferred stock dividends
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