SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report: May 15, 1995
(Date of earliest event reported)
Commission file number 1-9676
CENTURY COMMUNICATIONS CORP.
(Exact name of registrant as specified in its charter)
New Jersey 06-1158179
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
50 Locust Avenue
New Canaan, Connecticut 06840
(Address of principal executive office) (Zip Code)
Registrant's telephone number include area code: (203)
972-2000
ITEM 5. Other Events
On November 28, 1994, the Company entered into an
agreement with ML Media Partners, L.P. to acquire the
cable television systems serving Anaheim, Hermosa
Beach/Manhattan Beach, Fairfield and Rohnert
Park/Yountville, California for an aggregate purchase
price of $286 million, subject to adjustment, payable in
cash. At September 30, 1994, such systems served
approximately 135,000 primary basic subscribers. The
obligation of the Company to consummate this transaction
is subject to certain closing conditions, including the
approval of the relevant franchise authorities of both the
transfer and extension of the franchises and other
regulatory approvals. The Company anticipates completing
this acquisition during the first six months of fiscal
1996.
ITEM 7. Financial Statements and Exhibits
(a) The following combined financial statements for
ML California Cable Division, a Division of ML Media
Partners, L.P. are filed as part of this Current Report on
Form 8-K:
Page
Independent Auditors' Report F-1
Combined Balance Sheets F-2
Combined Statements of Operations and
Division Equity F-3
Combined Statements of Cash Flows F-4
Notes to Combined Financial Statements F-5
(b) The following pro forma combined financial
statements for Century Communications Corp. and
Subsidiaries are filed as part of this Current Report on
Form 8-K:
Pro Forma Combined Financial Statements F-13
Pro Forma Combined Balance Sheet -
February 28, 1995 F-14
Pro Forma Combined Statement of Operations -
February 28, 1995 F-15
Pro Forma Combined Statement of Operations -
Nine Months Ended February 28, 1995 F-16
Notes to Pro Forma Combined Financial
Statements F-17
(c) The following exhibit is filed as part of this
Current Report on Form 8-K:
23 - Consent of Deloitte & Touche LLP
INDEPENDENT AUDITORS' REPORT
ML Media Partners, L.P.:
We have audited the accompanying combined balance sheets
of ML California Cable Division (the "Division"), a
division of ML Media Partners, L.P. as of December 30,
1994 and December 31, 1993, and the related combined
statements of operations and division equity, and of cash
flows for the years then ended. These financial statements
are the responsibility of the Division's management. Our
responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally
accepted auditing standards. Those standards require that
we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also
includes assessing the accounting principles used and
significant estimates made by management, as well as
evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for
our opinion.
In our opinion, such combined financial statements present
fairly, in all material respects, the financial position
of the Division as of December 30, 1994 and December 31,
1993 and the results of its operations and its cash flows
for the years then ended in conformity with generally
accepted accounting principles.
The accompanying combined financial statements have been
prepared assuming that the Division will continue as a
going concern. As discussed in Note 6 to the combined
financial statements, the Division is experiencing
difficulty in generating sufficient cash flows to meet its
scheduled 1995 long term debt maturity repayments, which
raises substantial doubt about the Division's ability to
continue as a going concern. Management's plans in regard
to this matter are also described in Note 6. The
financial statements do not include any adjustments that
might result from the outcome of this uncertainty.
As discussed in Note 8 to the combined financial
statements, during the fourth quarter of 1994, Orange
County, California filed for bankruptcy. At December 30,
1994 and December 31, 1993, the Division had a net
receivable from Orange County, California relating to
property tax refunds totaling approximately $1.7 million.
Deloitte & Touche LLP
Stamford, Connecticut
March 9, 1995
ML CALIFORNIA CABLE DIVISION
A DIVISION OF ML MEDIA PARTNERS, L.P.
COMBINED BALANCE SHEETS
DECEMBER 30, 1994 AND DECEMBER 31, 1993
1994 1993
(In thousands)
ASSETS
Cash $ 728 $ 9,500
Short-term investments held by agent 6,000
Accounts receivable - net of allowance for doubtful
accounts of $188 and $231 in 1994 and 1993,
respectively 1,196 1,155
Prepaid and other assets 4,936 3,931
Property, plant and equipment - net 56,636 62,282
Goodwill, net of accumulated amortization of $7,781
and $6,807 in 1994 and 1993, respectively 31,177 32,151
Cable television franchises, net of accumulated amortization
of $56,271 and $50,745 in 1994 and 1993, respectively 17,661 22,957
Other assets - net 2,088 1,114
$ 120,422 $ 133,090
LIABILITIES AND DIVISION EQUITY
Accounts payable and accrued expenses $ 9,172 $ 8,135
Customers' deposits and prepayments 493 860
Due to ML Media Partners, L.P. 5,111 3,322
Notes payable 103,857 117,375
118,633 129,692
COMMITMENTS AND CONTINGENCIES (See Notes)
DIVISION EQUITY 1,789 3,398
$ 120,422 $ 133,090
See notes to combined financial statements.
ML CALIFORNIA CABLE DIVISION
A DIVISION OF ML MEDIA PARTNERS, L.P.
COMBINED STATEMENTS OF OPERATIONS AND DIVISION EQUITY
FOR THE YEARS ENDED DECEMBER 30, 1994 AND DECEMBER 31, 1993
1994 1993
(In thousands)
SERVICE INCOME $ 54,689 $ 54,989
COSTS AND EXPENSES:
Cost of services 16,187 13,488
Selling, general and administrative 11,906 11,245
Management fees and expenses 3,406 2,256
Depreciation and amortization 18,186 17,784
49,685 44,773
OPERATING INCOME 5,004 10,216
INTEREST EXPENSE 6,613 8,064
NET (LOSS) INCOME (1,609) 2,152
DIVISION EQUITY - beginning of year 3,398 1,246
DIVISION EQUITY - end of year $ 1,789 $ 3,398
See notes to combined financial statements.
ML CALIFORNIA CABLE DIVISION
A DIVISION OF ML MEDIA PARTNERS, L.P.
COMBINED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 30, 1994 AND DECEMBER 30, 1993
1994 1993
(In thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) income $ (1,609) $ 2,152
Adjustments to reconcile net (loss) income to
net cash provided by operating activities:
Provision for doubtful accounts (43) 38
Gain on disposal of assets (122) (273)
Depreciation and amortization 18,186 17,784
Changes in assets and liabilities:
Decrease in accounts receivable 2 138
Increase in prepaid and other assets (1,005) (1,712)
Increase in intangibles and other assets (1,431) (386)
Increase (decrease) in accounts payable
and accrued expenses 1,408 (767)
(Decrease) increase in customers' deposits
and prepayments (367) 244
Increase in amounts due to ML Media Partners, L.P. 1,789 789
Net cash provided by operating activities 16,808 18,007
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (6,305) (8,075)
Proceeds from disposal of assets 243 448
Net cash used in investing activities (6,062) (7,627)
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on long-term borrowings (13,518) (8,630)
Net cash used in financing activities (13,518) 8,630
NET (DECREASE) INCREASE IN CASH (2,772) 1,750
CASH - beginning of year 9,500 7,750
CASH AND SHORT-TERM INVESTMENTS HELD
BY AGENT - end of year $ 6,728 $ 9,500
See notes to combined financial statements.
ML CALIFORNIA CABLE DIVISION
A DIVISION OF ML MEDIA PARTNERS, L.P.
NOTES TO COMBINED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 30, 1994 AND DECEMBER 31,
1993
1. THE DIVISION
ML California Cable Division (the "Division") includes the
California Cable television systems (the "Cable Systems")
of ML Media Partners L.P. (the "Partnership") and the
cable television franchise licenses held by ML California
Associates, a partnership formed between the Partnership
and Media Management Partners, the general partner of the
Partnership. The Division was formed to acquire, own,
maintain and operate cable television systems in
California. The capital contributed to the Division
consisted of the equity of the former ML California Cable
Corporation ("Cable Corp.") which was a wholly-owned
subsidiary of the Partnership prior to its liquidation
into the Partnership on December 30, 1986. Cable Corp.
transferred all of its assets, except its Federal
Communication Commission ("FCC") licenses for the cable
television franchises, and liabilities to the Partnership
upon such liquidation. The licenses were transferred to
ML California Associates for the purpose of holding the
licenses, for the unrestricted use of the Cable Systems.
In January 1994, the Partnership engaged Merrill Lynch &
Co. and Daniels & Associates to act as the Partnership's
financial advisors in connection with a possible sale of
all or a portion of the Division.
On November 28, 1994, the Partnership entered into an
agreement (the "Asset Purchase Agreement") with Century
Communications Corp. ("Century") to sell to Century
substantially all of the Division's assets used in the
operations of the cable systems serving the Anaheim,
Hermosa Beach/Manhattan Beach, Rohnert Park/Yountville and
Fairfield communities. The base purchase price for the
Division will be $286,000,000, subject to further
adjustment as provided in the Asset Purchase Agreement.
Consummation of the transactions provided for in the Asset
Purchase Agreement is subject to the satisfaction of
certain conditions, including obtaining approvals from the
FCC and the municipal authorities issuing the franchises
for the systems.
The Division is currently unable to determine the impact
of the February 22, 1994 FCC action and previous FCC
actions, as discussed in Note 10, on its ability to
consummate the sale of the Division or the potential
timing and ultimate value of such sale.
2. SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation - The combined financial statements
include the accounts of the Division as of December 30,
1994 and December 31, 1993 and the results of its
operations for the years then ended. The combined
financial statements include only those assets,
liabilities and results of operations which relate to the
business of the Division. The combined financial
statements do not include any assets, liabilities or
operations attributable to the Partnership's or the
Partners' individual activities.
The fiscal year of the Division ends on the last Friday of
each calendar year.
Revenue Recognition - Service income includes earned
subscriber service revenues and charges for installation
and connections. Subscriber services paid for in advance
are recorded as income when earned.
Franchise Fees - In September 1993, as a result of
recently enacted cable regulation legislation which allows
for the direct pass through of franchise fees to
subscribers, the Division changed its policy for
accounting for franchise fees billed to subscribers and
paid to various franchising authorities. Such amounts are
now recorded in a balance sheet account with no effect on
the Division's results of operations.
Prior to September 1993, for certain of its franchises,
the Division factored franchise fees into the amounts
billed to subscribers and recorded such amounts as
revenues on the accrual basis. For these franchises,
amounts paid to franchising authorities were recorded as
expenses on the accrual basis. Franchise fee expense
recorded by the Division during 1993 amounted to
approximately $837,000. This amount approximates the
franchise fees which were billed to subscribers and
included in revenues in 1993.
Short-Term Investments Held by Agent - Short-term
investments held by agent represents investments with
maturities of less than 30 days.
Goodwill - Goodwill represents the excess of purchase
price over the values assigned to the tangible and
intangible assets acquired and is being amortized using
the straight-line method over 40 years. The Division
periodically evaluates the recoverability of goodwill and
other intangible assets by assessing whether the
unamortized intangible asset can be recovered over its
remaining life through operating results and cash flows.
Amortization expense for each of the years ended December
30, 1994 and December 31, 1993 was approximately $974,000.
Property, Plant and Equipment - Property, plant and
equipment from acquisitions are recorded at their fair
values based upon an independent appraisal at the date of
acquisition. Property, plant and equipment additions are
stated at cost. Depreciation is computed using the
straight-line method over the following estimated useful
lives of the assets:
Buildings 20-30 years
Cable television transmission and
distribution systems and related
equipment 3-12 years
Miscellaneous equipment and
fixtures 3-7 years
Initial subscriber connection costs are capitalized and
included as part of the distribution systems. Costs
related to disconnects and reconnects are expensed as
incurred. Expenditures for maintenance and repairs are
charged to cost of services as incurred. Betterments,
replacement equipment and additions are capitalized and
depreciated over the remaining life of the assets.
Cable Television Franchises - Cable television franchise
rights from cable television acquisitions are recorded at
their fair values based upon an independent appraisal.
Such amounts are amortized over the weighted-average
useful lives of the franchises (6-15 years) using the
straight-line method.
Amortization expense for the years ended December 30, 1994
and December 31, 1993 was $5,526,000 and $5,869,000,
respectively.
Other Assets - Other assets includes deferred financing
costs which are amortized over the life of the outstanding
debt (10 years) using the straight-line method and
organization costs which are amortized over the average
lives of the franchises (13 years) using the straight-line
method.
Additionally, the Division had funds in an escrow account
totaling approximately $791,000, which funds were included
in other assets on the balance sheet at December 30, 1994.
The funds were deposited in such account in accordance
with the Division's agreement with Cable
Telecommunications Joint Powers Agency ("CTJPA") to be
held for the benefit of CTJPA's subscribers pending
determination of the Division's potential need to make
refunds to the subscribers in connection with rate re-
regulation. In the first quarter of 1995, the Division
was required to deposit $680,000 in an escrow account
pursuant to an agreement with the City of Fairfield,
California to be held for the benefit of the City of
Fairfield's subscribers pending determination of the
Division's potential need to make refunds to the
subscribers in connection with rate re-regulation.
Management currently believes that under the FCC's
existing decisions, the most material issues in the
Division's rate cases should ultimately be decided in a
manner predominantly favorable to the Division.
Income Taxes - No provision or benefit has been made for
federal or state income taxes as taxable income or losses
of the Division are allocated to the partners for
inclusion in their respective income tax returns.
3. RELATED PARTIES
The Division has an agreement with the Partnership whereby
the Division incurs a management fee for services provided
by Media Management Partners. The Division's allocated
portion of the management fee aggregated approximately
$1,469,000 for 1994 and $774,000 for 1993 and such amounts
were included in due to ML Media Partners, L.P. at
December 30, 1994 and December 31, 1993, respectively.
The Division has an agreement with MultiVision Cable TV
Corp. ("MultiVision"), which is owned by an officer of
Media Management Partners, whereby MultiVision provides
the Division with certain administrative services. The
net cost to the Division of such services for the years
ended December 30, 1994 and December 31, 1993 was
$1,937,000 and $1,482,000, respectively.
Included in prepaid and other assets is a receivable of
approximately $1,233,000 due from Multivision resulting
from normal funding for the Division's operating
activities.
4. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment at December 30, 1994 and
December 31, 1993 consists of the following (in
thousands):
1994 1993
Land $ 3,121 $ 3,121
Buildings and improvements 2,781 2,702
Cable distribution systems
and equipment 112,206 107,327
Other 3,581 3,607
121,689 116,757
Less accumulated
depreciation (65,053) (54,475)
$56,636 $ 62,282
Depreciation expense for the years ended December 30, 1994
and December 31, 1993 were $11,459,000 and $10,531,000,
respectively.
5. OTHER ASSETS
Other assets at December 30, 1994 and December 31, 1993
consists of the following (in thousands):
1994 1993
Deferred financing costs $1,975 $ 1,925
Organizational costs 159 159
Other 1,297 146
3,431 2,230
Less accumulated
amortization (1,343) (1,116)
$ 2,088 $ 1,114
Amortization expense for the years ended December 30, 1994
and December 31, 1993 were $227,000 and $411,000
respectively.
6. NOTES PAYABLE
On May 15, 1990, the Partnership entered into a
$160,000,000 Amended and Restated Credit Agreement (the
Revised "ML California Credit Agreement") with a group of
banks led by Bank of America National Trust and Savings
Association ("Bank of America"). The Revised ML
California Credit Agreement is secured by substantially
all of the assets of the Cable Systems and two affiliated
radio stations, KORG-AM and KEZY-FM (collectively "the
Affiliates"). The original bank credit agreement was
amended and restated to allow the Partnership to borrow up
to $160,000,000 if certain operating levels outlined in
the agreement were met. At closing, approximately
$137,000,000 was borrowed under the Revised ML California
Credit Agreement, with the proceeds used to refinance all
outstanding borrowings under the $115,000,000 original
bank credit agreement, repay all outstanding borrowings
under a $16,500,000 loan of the two affiliated radio
stations, repay working capital advances to the
Partnership, and pay various refinancing expenses. At
December 30, 1994 and December 31, 1993, $129,188,000 and
$141,375,000, respectively, was outstanding under the
Revised ML California Credit Agreement of which
$103,857,000 and $117,375,000 respectively relates to the
Division and $25,331,000 and $24,000,000 respectively,
relates to the two affiliated radio stations.
The Revised ML California Credit Agreement was structured
as a revolving credit facility through September 30, 1992,
at which time all outstanding borrowings under the
facility ($150,000,000 as of that date) were converted to
a term loan scheduled to fully amortize by September 30,
1999.
As of September 30, 1994 and December 30, 1994, due in
part to the negative impact of rate-reregulation on the
operations of the Division, the Affiliates were in default
of certain financial covenants contained in the Revised ML
California Credit Agreement. These defaults were cured
during the first quarter of 1995 (see below). In
addition, as of December 30, 1994, the Affiliates expected
to be unable to meet during 1995 the principal payment
requirements then contained in the Revised ML California
Credit Agreement.
Effective February 23, 1995, the Partnership and the banks
entered into a first amendment (the "First Amendment") to
the Revised ML California Credit Agreement that provided
for reduced principal payments and less restrictive
covenants during the first three quarters of 1995. In
exchange, the Affiliates paid an amendment fee of $322,969
to the banks and agreed to allow the banks to charge a
higher interest rate on outstanding borrowings under the
Revised ML California Credit Agreement. (A further fee
will be due to the lenders if the sale of the Division is
not consummated prior to December 29, 1995). Certain
other terms of the Revised ML California Credit Agreement
were also affected by the First Amendment.
The Division currently expects that the Affiliates will be
able to remain in compliance with the terms of the Revised
ML California Credit Agreement, as amended by the First
Amendment, until December 29, 1995, during which period
the Partnership will seek to consummate the sale of the
Division. Management currently expects that if the sale
of the Division is not consummated prior to December 29,
1995, the Affiliates will be unable to meet the scheduled
December 29, 1995 principal payment due to the banks
pursuant to the Revised ML California Credit Agreement, as
amended by the First Amendment.
The following table summarizes the required borrowing
reductions on the Division's fiscal year-end and on a
calendar year-end basis (in thousands) based on amounts
separately allocated to the Division and on Total Debt of
the Affiliates:
Debt Allocated Total Debt of
to the Division the Affiliates
Fiscal Year Year Ending Fiscal Year Year Ending
Ending December 31, Ending December 31,
1995 $ 14,169 $ 14,169 $ 17,625 $ 17,625
1996 11,306 16,581 14,063 20,625
1997 21,103 22,610 26,250 28,125
1998 27,132 27,887 33,750 34,688
Thereafter 30,147 22,610 37,500 28,125
$103,857 $103,857 $129,188 $129,188
Borrowings under the Revised ML California Credit
Agreement originally bore interest at an annual rate equal
to, at the Partnership's option, either Bank of America's
Reference Rate or an Offshore Rate plus the Applicable
Margin, as defined, which ranged from .75% to 1.50% in the
case of Reference Rate Loans and from 1.25% to 2.50% in
the case of Offshore Rate Loans, depending on the Funded
Debt Ratio of the Affiliates.
On May 18, 1990, the Partnership entered into two interest
rate swap agreements covering $100,000,000 of borrowings
under the agreements. Under the terms of the swap
agreements, $80,000,000 was fixed at a rate of 8.82% per
annum, and $20,000,000 was fixed at a rate of 9.04%.
The agreements were effective through May 24 and May 22,
1993, respectively. All borrowings under the Revised ML
California Credit Agreement currently bear interest at
floating rates. The overall effective interest rate for
the borrowings under the Revised ML California Credit
Agreement was approximately 5.83%, and 6.48% during 1994
and 1993, respectively. Pursuant to the terms of the
First Amendment, the applicable margin was increased for
periods following December 31, 1994, to between 2.50% and
2.75% for Offshore Rate Loans and between 1.50% and 1.75%
for Reference Rate Loans.
The Revised ML California Credit Agreement as amended by
the First Amendment requires the Borrower to maintain
certain minimum ratios and generally restricts the
Borrower's rights relating to capital distributions,
investments, dispositions, additional indebtedness,
mergers, consolidations and capital expenditures.
7. STATEMENT OF CASH FLOWS
Cash paid for interest for the years ended December 30,
1994 and December 31, 1993 was approximately $6,287,000
and $8,441,000, respectively. Property, plant and
equipment of approximately $696,000 and $1,067,000 was
acquired but not paid for as of December 30, 1994 and
December 31, 1993, respectively.
8. PROPERTY TAXES
The Division filed property tax assessment appeals with
various counties in California related to changes in the
methods used by assessors to value tangible property and
possessory interests. The revised methods had
significantly increased property taxes since they included
values attributed to what the Division believed to be
nontaxable, intangible assets. These appeals covered the
tax years from 1987 to present.
In December 1993, the Division received a favorable
decision with respect to a property tax appeal filed with
one county served by the Division. The county had the
right to appeal the decision for a period of six months.
This period expired without appeal during the second
quarter of 1994. Also in December of 1993, the Division
reached a favorable agreement in principle with a second
county served by the Division where an appeal relating to
property taxes had also been filed. During 1994, the
Division finalized assessed property values with, and
received a refund of approximately $700,000 from, this
second county. In part, as a result of these
developments, the Division continues to be entitled to
receive tax refunds. On December 31, 1993, the Division
reduced by approximately $2,200,000 general and
administrative expense in order to account for these tax
refunds. During the fourth quarter of 1994, Orange
County, California, in which a significant percentage of
the Division's cable systems are located, filed for
bankruptcy. At December 30, 1994 and December 31, 1993,
the net property tax refund receivable from Orange County
was approximately $1,700,000. The Division ultimately
expects to file a claim for such property tax refunds for
approximately $2,800,000.
9. COMMITMENTS AND CONTINGENCIES
Commitments - The Division rents office space, equipment
and space on utility poles under leases with terms of less
than one year or under agreements which are generally
terminable on short notice. Rental expense was $360,000
and $355,000 for years ended December 30, 1994 and
December 31, 1993, respectively. Rental commitments under
lease obligations subsequent to December 30, 1994 are not
significantly different than those shown above.
Contingencies - The Division is involved in litigation
matters which involve certain claims which arise in the
normal course of business, none of which, in the opinion
of management, is expected to have a material adverse
effect on the Division's financial position or results of
operations.
10. REGULATORY MATTERS
On October 5, 1992, Congress enacted the 1992 Cable Act.
The 1992 Cable Act substantially re-regulates the cable
television industry and imposes numerous requirements,
including provisions regarding rates which may be
regulated by the applicable local franchising authority or
the FCC, exclusive programming arrangements, the carriage
of broadcast signals, customer service standards and
various other matters.
In complying with the benchmark regulatory scheme, the
Division was required to reduce present combined basic
service rates effective September 1, 1993. In addition,
pursuant to the 1992 Cable Act, revenue from secondary
outlets and from remote control units was eliminated or
reduced significantly. The Division has defrayed some of
these resulting revenue declines by taking certain actions
which, among others, includes instituting charges for
converters, as permitted by the 1992 Cable Act.
On February 22, 1994, the FCC adopted a series of
additional measures that expand and substantially alter
its cable rate regulations. The FCC's major actions
include the following: (1) modification of its benchmark
methodology in a way which will effectively require cable
rates to be reduced, on average, an additional 7% (i.e.,
beyond the 10% reduction previously ordered in 1993) from
their September 30, 1992 level or to the new benchmark,
whichever is less; (2) the issuance of new standards and
requirements to be used in making cost-of-service showings
by cable operators who seek to justify rates above the
levels determined by the benchmark approach; and (3) the
clarification and/or reaffirmation of a number of "going
forward" issues that had been the subject of various
petitions for reconsideration.
On November 10, 1994, the FCC adopted new "going forward"
rules and further tightened its regulation of a-la-carte
packages. These new rules allow operators to pass through
the costs, plus a 20 cent per channel mark-up, for
channels newly added to regulated tiers. Through 1996,
however, operators will be subject to an aggregate $1.50
cap on the amount they may increase cable program service
tier rates due to channel additions. The FCC also
established a "new product tier" intended to provide
operators unregulated pricing and packaging flexibility,
particularly for newer services, so long as they preserve
the fundamental nature of their preexisting regulated
tiers.
The Division is currently unable to assess the full impact
of the FCC's further rate regulation decisions and the
1992 Cable Act generally upon its business prospects or
future financial results. However, the rate reductions
mandated by the FCC in May of 1993 and February of 1994
have had, and will most likely continue to have, a
detrimental impact on the revenues and profits on the
Division's cable television operations. Although the
impact of the 1992 Cable Act and the recent FCC actions
cannot yet be ascertained precisely, once fully
implemented, certain aspects of the new law may have an
additional negative impact on the financial condition,
liquidity, and value of the Division. The rate reductions
and limits on the pricing of a-la-carte tiers are
principally responsible for the occurrence of since-cured
and possible future defaults under the Revised ML
California Credit Agreement.
In addition, the Division is currently unable to determine
the impact of the February 22, 1994 FCC action and
previous FCC actions on its ability to consummate the sale
of the Division or the potential timing and ultimate value
of such sale.
See Note 1 for more information regarding the possible
sale of the Division.
CENTURY COMMUNICATIONS CORP. AND SUBSIDIARIES
PRO FORMA COMBINED FINANCIAL STATEMENTS
The following pro forma combined balance sheet and
statements of operations include the accounts of Century
Communications Corp. and subsidiaries (the Company) and
the pending acquisition of ML California Cable Division, a
division of ML Media Partners, L.P. See Note 2 of Notes to
Pro Forma Combined Financial Statements for a discussion
of the effect of this transaction. The pro forma combined
balance sheet assumes ML California Cable Division was
acquired on February 28, 1995. The pro forma combined
statements of operations assume that the acquisition of ML
California Cable Division was completed as of the
beginning of each fiscal period presented.
The pro forma combined financial statements also assume
that the Company will borrow $250 million (approximately
$245 million net o fdebt issuance costs) from available
credit facilities at terms which approximate the Company's
current incremental borrowing rate, to purchase the net
assets of ML California Cable Division. Any additional
funds required to fund the acquisition of ML California
Cable Division will come from existing cash on hand. In
the opinion of management, all adjustments necessary to
present fairly such pro forma combined financial
statements were made. The pro forma combined financial
statements are not necessarily indicative of what the
actual results of operations or financial position would
have been had the transactions occurred as of the
beginning of the period or date thereof, nor does it
purport to indicate the results of future operations of
the Company.
Century Communications Corp. and Subsidiaries
Pro Forma Combined Balance Sheet
February 28, 1995 (Amounts in Thousands)
Century ML California Pro Forma Adjustments Pro Forma
Comm. Cable Division Combined Acquisition Combined
Corp. Pending Acquisition Debit Credit Acquisition
ASSETS
CURRENT ASSETS:
Cash and short term investments $ 175,168 $ 6,728 $ 42,146 (a) $ 139,750
Accounts Receivable - net 29,720 1,196 30,916
Prepaid expenses and other current assets 9,119 4,936 1,689 (b) 12,366
TOTAL CURRENT ASSETS 214,007 12,860 43,835 183,032
PROPERTY,PLANT & EQUIPMENT - NET 472,117 56,636 $ 5,664 (c) 534,417
INVESTMENTS IN MARKETABLE EQUITY
SECURITIES 54,341 54,341
EQUITY INVESTMENTS IN CABLE TELEVISION
AND CELLULAR TELEPHONE SYSTEMS 210,276 210,276
DEBT ISSUANCE COSTS - NET 22,219 4,983 (d) 27,202
CABLE TELEVISION FRANCHISES - NET 180,044 17,661 205,902 (e) 403,607
CELLULAR TELEPHONE LICENSE - NET 309,295 309,295
GOODWILL - NET 242,491 31,177 31,177 (f) 242,491
OTHER ASSETS - NET 25,438 2,088 6,951 (g) 20,575
TOTAL $ 1,730,228 $ 120,422 $ 216,549 $ 81,963 $ 1,985,236
LIABILITIES AND STOCKHOLDERS'
EQUITY
CURRENT LIABILITIES
Current maturities of long term debt $ 6,030 103,857 $ 103,857 (h) $ 6,030
Accounts payable 22,499 186 22,685
Accrued interest payable 23,575 1,688 1,688 (h) 23,575
Other accrued expenses 36,146 12,409 8,080 (i) 40,475
Customer deposits and prepayments 13,105 493 13,598
TOTAL CURRENT LIABILITIES 101,355 118,633 113,625 106,363
LONG TERM DEBT 1,470,470 250,000 (j) 1,720,470
DEFERRED INCOME TAXES 93,344 93,344
MINORITY INTEREST IN SUBSIDIARIES 131,447 131,447
SUBSIDIARY CONVERTIBLE REDEEMABLE
PREFERRED STOCK 166,565 166,565
COMMON STOCKHOLDERS' (DEFIENCY)
EQUITY (232,953) 1,789 1,789 (k) (232,953)
TOTAL $ 1,730,228 $ 120,422 $ 115,414 $ 250,000 $ 1,985,236
See notes to pro forma combined financial statements.
Century Communications Corp. and Subsidiaries
Pro Forma Combined Statement of Operations
Nine Months Ended February 28, 1995 (Amounts in Thousands, Except Share Data)
Century ML California Pro Forma Adjustments Pro Forma
Comm. Cable Division Combined Acquisition Combined
Corp. Pending Acquisition Debit Credit Acquisition
REVENUES
Cable service income $ 246,857 $ 41,017 $ 287,874
Cellular service income 60,964 60,964
307,821 41,017 348,838
COSTS AND EXPENSES
Cost of services - Cable 61,027 12,140 73,167
Cost of services - Cellular 16,644 16,644
Selling general & administrative 81,841 11,484 $ 2,554 (a) 90,771
Depreciation and amortization 123,169 13,640 $ 21,814 (c) 13,640 (b) 144,983
282,681 37,264 21,814 16,194 325,565
Operating income 25,140 3,753 23,273
Interest 99,543 4,960 17,813 (e) 4,960 (d) 117,356
Loss before income tax benefit
and minority interest (74,403) (1,207) (94,083)
Income tax benefit 3,849 0 (f) 3,849
Loss before minority interest (70,554) (1,207) (90,234)
Minority interest in loss of subsidiaries 18,922 18,922
NET LOSS $ (51,632) $ (1,207) $ (71,312)
Dividend Requirement on subsidiary convertible
redeemable preferred stock $ 3,363 $ 3,363
Loss applicable to common shares $ (54,995) $ (74,675)
Loss per common share $ (.61) $ (.83)
Weighted average number of common shares
and common share equivalents outstanding
during the period 89,634,000 89,634,000
See notes to pro forma combined financial statements.
CENTURY COMMUNICATIONS CORP. AND SUBSIDIARIES
NOTES TO PRO FORMA COMBINED FINANCIAL STATEMENTS (Amounts in
Thousands)
1. BASIS OF PRESENTATION
The pro forma combined financial statements include the
financial position and results of operations of Century
Communications Corp. and subsidiaries (the "Company") and
the pending acquisition of ML California Cable Division
(the "Pending Acquisition"), a division of ML Media
Partners, L.P., as if such pending acquisition had been
consummated as of the beginning of each fiscal period
presented for the combined pro forma statements of
operations and as of February 28, 1995 for the combined
pro forma balance sheet.
The purchase price of the Pending Acquisition will be $286
million, subject to further adjustments as specified in
the Asset Purchase Agreement.
2. PRO FORMA ADJUSTMENTS
Combined Balance Sheet.
(a) Reverse cash and short term investments of the
Pending Acquisition which will not be acquired by the
Company and record the additional funds required to fund
the Pending Acquisition.
(b) Reverse receivable from an affiliate of the Pending
Acquisition and certain other assets which will not be
acquired by the Company.
(c) Record purchase price allocated to property, plant
and equipment.
(d) Record debt issuance costs related to $250,000 of
assumed borrowings under available credit facilities.
(e) Record purchase price allocated to Cable Television
Franchises.
(f) Reverse historical goodwill of the Pending
Acquisition based on purchase price allocation.
(g)Reverse other intangible assets capitalized by the
Pending Acquisition which represent no future value to the
Company and reverse the escrow payment made by the Company
in relation to the Pending Acquisition.
(h) Reverse accrued interest and current and long term
debt of the Pending Acquisition which will not be assumed
by the Company.
(i) Reverse accrued programming costs and payable to
affiliate, which will not be assumed by the Company.
(j) Record $250,000 of assumed borrowings under available
credit facilities.
(k) Reverse equity of the Pending Acquisition
Combined Statements of Operations
(a) Reverse management fees and expenses recorded by the
Pending Acquisition as such management agreements will be
terminated after acquisition.
(b) Reverse depreciation and amortization costs related
to capitalized assets of the Pending Acquisition.
(c) Record depreciation of fixed assets and amortization
of Cable Television Franchises and debt issuance costs in
accordance with the Company's accounting policies. The
depreciation of fixed assets for the year ended May 31,
1994 and the nine months ended February 28, 1995 are
$6,230 and $4,673, respectively, assuming an average 10
year life. The amortization of Cable Television
franchises assumes an average ten year life for related
franchises, over which the costs will be amortized. The
amortization of Cable Television Franchises for the year
ended May 31, 1994 and the nine months ended February 28,
1995 are $22,356 and $16,767, respectively. The
amortization of debt issuance costs assumes the $250,000
of additional borrowings under available credit facilities
were issued at the beginning of the fiscal periods
presented. The amortization of debt issuance costs for
the year ended May 31, 1994 and the nine months ended
February 28, 1995 are $499 and $374, respectively,
assuming a ten year life.
(d) Reverse interest expense incurred by the Pending
Acquisition on debt not assumed by the Company.
(e) Record incremental interest expense as if the
$250,000 of additional borrowings under available credit
facilities were outstanding for each fiscal period
presented at an interest rate of 9.5% for each period
which approximates the Company's current incremental
borrowing rate.
(f) Assumes that no income tax benefit will be recorded
related to the loss before income taxes of the Pending
Acquisition after considering pro forma adjustments. This
assumption is based on a full valuation allowance being
recorded against the resulting deferred tax asset, given
the pending acquisition's history of losses.
SIGNATURES
Pursuant to the requirements of the Securities Exchange
Act of 1934, as amended, the Company has duly caused this
report to be signed on its behalf by the undersigned,
thereunto duly authorized, on the 15th day of May 1995.
CENTURY COMMUNICATIONS CORP.
By:___________________________
SCOTT N. SCHNEIDER
Senior Vice President,
Treasurer and Chief
Accounting Officer
(principal accounting
officer)
Exhibit 23
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in
Registration Statement No. 33-50779 of Century
Communications Corp. on Form S-3 of our report dated March
9, 1995, of ML California Cable Division, a Division of ML
Media Partners, L.P., for the years ended December 30,
1994 and December 31, 1993, included in the Century
Communications Corp. Form 8-K dated May 15, 1995, and to
the reference to us under the heading "Experts" in the
Prospectus, which is part of this Registration Statement.
Deloitte & Touche LLP
Stamford, Connecticut
May 15, 1995