<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1996
-------------
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 33-96804
--------
LENFEST COMMUNICATIONS, INC.
----------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 23-2094942
-------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
1105 North Market St., Suite 1300,
P.O. Box 8985,
Wilmington, Delaware 19899
---------------------------------------------------
(Address of Principal executive offices) (Zip Code)
(302) 427-8602
--------------
(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 class of
common stock, as of August 7, 1996: 158,896 shares of Common Stock, $0.01 par
value per share.
<PAGE>
LENFEST COMMUNICATIONS, INC.
Index
Page
Part I. Financial Information
Item 1. Financial Statements
Report on Review by Independent Certified Public Accountants 4
Condensed Consolidated Balance Sheets as of June 30, 1996
(unaudited) and as of December 31, 1995 5
Consolidated Statements of Operations for the three
months and six months ended June 30, 1996 (unaudited) and June 30,
1995 (unaudited) 7
Consolidated Statements of Cash Flows for the six
months ended June 30, 1996 (unaudited) and June 30, 1995
(unaudited) 8
Notes to Condensed Consolidated Financial Statements 10
Statement by Management Concerning Review of Interim Financial
Information by Independent Certified Public Accountants 16
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations 17
Part II. Other Information
Item 1. Legal Proceedings 28
Item 4. Submission of Matters to a Vote of Security Holders 28
Item 6. Exhibits and Reports on Form 8-K 29
2
<PAGE>
Part I. Financial Information
Item 1. Financial Statements
3
<PAGE>
REPORT ON REVIEW BY INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders
Lenfest Communications, Inc. and Subsidiaries:
We have reviewed the accompanying condensed consolidated balance sheet of
Lenfest Communications, Inc. and subsidiaries as of June 30, 1996, and the
related consolidated statements of operations for the three month and six month
periods ended June 30, 1996 and 1995, and the consolidated statements of cash
flows for the six months ended June 30, 1996 and 1995, included in the
accompanying Securities and Exchange Commission Form 10-Q for the period ended
June 30, 1996. These condensed consolidated financial statements are the
responsibility of the Company's management.
We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical procedures to financial
data and making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in accordance
with generally accepted auditing standards, the objective of which is the
expression of an opinion regarding the condensed consolidated financial
statements taken as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the accompanying condensed consolidated financial statements for them
to be in conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet as of December 31, 1995, and the
related consolidated statements of operations, stockholders' equity (deficit)
and cash flows for the year then ended (not presented herein). In our report
dated July 18, 1996, we expressed an unqualified opinion on those consolidated
financial statements. In our opinion, the information set forth in the
accompanying condensed consolidated balance sheet as of December 31, 1995, is
fairly stated in all material respects in relation to the consolidated balance
sheet from which it has been derived.
PRESSMAN CIOCCA & SMITH
Hatboro, Pennsylvania
August 13, 1996
4
<PAGE>
LENFEST COMMUNICATIONS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
<TABLE>
<CAPTION>
June December
30, 1996 31, 1995
---------------- ----------------
(Unaudited) (*)
<S> <C> <C>
ASSETS
Cash and cash equivalents $ 3,242 $ 164,943
Marketable securities 29,028 169,581
Accounts receivable, trade and other - unrelated parties, less allowance for
doubtful accounts of $1,651 in 1996 and $1,104 in 1995 18,913 12,787
Accounts receivable - affiliates, less allowance for doubtful
accounts of $1,900 in 1996 3,047 103
Note receivable and accrued interest, due from
an affiliate - Australis Media Limited, less allowance for doubtful account
of $19,685 in 1996 - -
Inventories 3,809 4,932
Prepaid expenses 3,367 3,946
Property and equipment, net of accumulated depreciation
of $279,684 in 1996 and $327,096 in 1995 383,865 211,780
Investments, principally in affiliates 50,549 59,482
Goodwill, net of amortization of $23,992 in 1996 and
$22,390 in 1995 75,816 52,874
Deferred franchise costs, net of amortization of $124,271 in
1996 and $126,796 in 1995 521,133 133,525
Other intangible assets, net of amortization of $11,425 in
1996 and $10,495 in 1995 22,490 20,519
Deferred Federal tax asset, net 45,213 14,707
Other assets 7,430 2,569
---------------- ----------------
$ 1,167,902 $ 851,748
================ ================
(*) Condensed from audited financial statements.
See independent certified public accountants' review report and accompanying notes.
</TABLE>
5
<PAGE>
LENFEST COMMUNICATIONS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS, (continued)
(Dollars in thousands)
<TABLE>
<CAPTION>
June December
30, 1996 31, 1995
---------------- ----------------
(Unaudited) (*)
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Notes payable and obligations under capital leases $ 1,269,698 $ 817,725
Accounts payable and accrued expenses - unrelated parties 30,563 33,926
Accounts payable - affiliate 20,042 7,205
Deferred state tax liability 8,740 9,940
Customer service prepayments and deposits 9,447 9,255
Investment in Garden State Cablevision, L.P. 19,117 15,451
---------------- ----------------
TOTAL LIABILITIES 1,357,607 893,502
MINORITY INTEREST in equity of consolidated subsidiaries 3,472 3,438
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY (DEFICIT)
Common stock, $.01 par value, 158,896 shares authorized,
issued and outstanding 2 2
Additional paid-in capital 50,747 50,747
Unrealized gain on marketable securities, net of deferred
taxes 793 40,410
Cumulative foreign currency translation adjustment,
net of deferred taxes - 7,560
Accumulated deficit (244,719) (143,911)
---------------- ----------------
(193,177) (45,192)
---------------- ----------------
$ 1,167,902 $ 851,748
================ ================
(*) Condensed from audited financial statements.
See independent certified public accountants' review report and accompanying notes.
</TABLE>
6
<PAGE>
LENFEST COMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(Dollars in thousands)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
-------------------------------- -------------------------------
1996 1995 1996 1995
--------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
REVENUES $ 104,298 $ 67,157 $ 184,665 $ 131,263
OPERATING EXPENSES
Service 9,176 4,905 15,668 9,699
Programming - from affiliate 14,059 9,593 25,315 18,989
Programming - other cable 6,311 4,158 11,192 8,182
Programming - non-cable 3,444 2,515 6,538 5,235
Selling and marketing 4,530 2,271 7,803 4,166
General and administrative 17,353 12,552 32,231 24,338
Cost of sales - equipment 1,366 1,673 3,141 3,745
Depreciation 17,766 12,870 31,832 25,242
Amortization 11,896 5,490 19,605 11,176
-------------- --------------- -------------- ---------------
85,901 56,027 153,325 110,772
-------------- --------------- -------------- ---------------
OPERATING INCOME 18,397 11,130 31,340 20,491
OTHER INCOME (EXPENSE)
Interest expense (27,750) (13,982) (47,971) (28,261)
Equity in net (losses) of unconsolidated
affiliates (2,022) (3,496) (9,207) (6,588)
Net gain (loss) on sales of securities 280 (9) 307 13,106
Recognized (loss) on decline in market value
of securities (66,945) - (66,945) -
Provision for potential reduction in value of
- note receivable and accrued
interest (19,685) - (19,685) -
Gain on disposition of partnership interest - - 6,974 -
Other income and expense (net) (566) 485 3,379 1,670
-------------- --------------- -------------- ---------------
(116,688) (17,002) (133,148) (20,073)
-------------- --------------- -------------- ---------------
INCOME (LOSS) BEFORE INCOME
TAXES AND EXTRAORDINARY LOSS (98,291) (5,872) (101,808) 418
INCOME TAX BENEFIT (EXPENSE) 3,134 1,916 3,484 (367)
-------------- --------------- -------------- ---------------
INCOME (LOSS) BEFORE
EXTRAORDINARY LOSS (95,157) (3,956) (98,324) 51
EXTRAORDINARY LOSS
Early extinguishment of debt, net of
deferred taxes of $1,337 (2,484) - (2,484) -
-------------- --------------- -------------- ---------------
NET INCOME (LOSS) (97,641) (3,956) (100,808) 51
BEGINNING ACCUMULATED DEFICIT (147,078) (121,670) (143,911) (125,677)
-------------- --------------- -------------- ---------------
ENDING ACCUMULATED DEFICIT $ (244,719) $ (125,626) $ (244,719) $ (125,626)
============== =============== ============== ===============
See independent certified public accountants' review report and accompanying notes.
</TABLE>
7
<PAGE>
LENFEST COMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Dollars in thousands)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
---------------------------------------
1996 1995
---------------- ----------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ (100,808) $ 51
Adjustments to reconcile net income (loss) to net cash provided
by operating activities
Depreciation and amortization 51,437 36,418
Extraordinary loss 3,821 -
Accretion of debt discount 308 -
Net (gains) on sales of marketable securities (307) (13,106)
Recognized loss on decline in market value of securities 66,945 -
Provision for potential reduction in value of
note receivable and accrued interest 19,685 -
(Gain) on disposition of partnership interest (6,974) -
Deferred income tax (benefit) (6,300) (33)
(Gain) on sale of property and equipment (27) (53)
Equity in net losses of unconsolidated affiliates 9,207 6,588
Deferred interest on capital leases - 3
Minority interest (943) (187)
Changes in operating assets and liabilities, net of effects
from acquisitions
Cash - restricted escrow - 3,273
Accounts receivable
Affiliate (2,944) -
Unrelated parties 2,368 586
Accrued interest receivable (1,155) -
Inventories 1,123 (240)
Prepaid expenses 343 1,372
Other assets (438) 6
Accounts payable and accrued expenses:
Affiliate 10,381 (530)
Unrelated parties (3,791) (2,924)
Customer service prepayments and deposits 1,573 1,256
---------------- ----------------
NET CASH PROVIDED BY
OPERATING ACTIVITIES 43,504 32,480
---------------- ----------------
See independent certified public accountants' review report and accompanying notes.
</TABLE>
8
<PAGE>
LENFEST COMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS, (continued)
(Unaudited)
(Dollars in thousands)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
---------------------------------------
1996 1995
---------------- ----------------
<S> <C> <C>
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisitions of cable systems $ (604,032) $ -
Acquisition of the minority interest of South Jersey
Cablevision Associates - (8,838)
Non cable acquisitions (1,100) (198)
Purchases of property and equipment (21,700) (25,112)
Purchases of marketable securities (326) (2,352)
Purchases of other investments - (20)
Proceeds from sales of property and equipment 182 57
Proceeds from sales of marketable securities 1,662 15,359
Loans to Australis Media Limited (34,030) -
Proceeds from note receivable - Australis Media Limited 15,500 19,240
Investments in unconsolidated affiliates (2,761) (10,573)
Distributions from unconsolidated affiliates - 75
(Increase) in other intangible assets - investing (1,076) (154)
Loans and advances to unconsolidated affiliates (121) (2,084)
Loans and advances from unconsolidated affiliates 1,145 212
---------------- ----------------
NET CASH (USED BY)
INVESTING ACTIVITIES (646,657) (14,388)
CASH FLOWS FROM FINANCING ACTIVITIES
Increases in debt 907,201 24,000
Early extinguishment of debt (448,821) -
Other debt reduction:
Notes (10,500) (42,388)
Obligations under capital leases (36) (19)
(Increase) in other intangible assets - financing (6,392) (154)
---------------- ----------------
NET CASH PROVIDED BY (USED BY)
FINANCING ACTIVITIES 441,452 (18,561)
---------------- ----------------
NET (DECREASE) IN CASH (161,701) (469)
CASH AND CASH EQUIVALENTS AT BEGINNING
OF PERIOD 164,943 4,302
---------------- ----------------
CASH AND CASH EQUIVALENTS
AT END OF PERIOD $ 3,242 $ 3,833
================ ================
See independent certified public accountants' review report and accompanying notes.
</TABLE>
9
<PAGE>
LENFEST COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1 - BASIS OF PRESENTATION
Condensed Financial Information and Results of Operations
In the opinion of the management of Lenfest Communications, Inc. and
subsidiaries (the Company), the accompanying condensed unaudited consolidated
financial statements have been prepared in accordance with generally accepted
accounting principles and with the regulations of the Securities and Exchange
Commission and contain all adjustments (consisting of only normal recurring
adjustments) necessary to make the condensed consolidated financial statements
not misleading and to present fairly the consolidated financial condition as of
June 30, 1996, the consolidated results of operations for the three and six
months ended June 30, 1996 and 1995, and consolidated cash flows for the six
months ended June 30, 1996 and 1995.
Certain information and note disclosures normally included in the Company's
annual consolidated financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted. These condensed
consolidated financial statements should be read in conjunction with the audited
consolidated financial statements and notes thereto included in the Company's
Form 10-K dated March 29, 1996. The results of operations for the periods ended
June 30, 1996 and 1995, are not necessarily indicative of operating results for
the full year.
The condensed consolidated financial statements include the accounts of Lenfest
Communications, Inc. and those of all wholly owned and majority owned
subsidiaries. During 1996, the Company acquired an additional 50% interest in
Atlantic Communication Enterprises, Inc. and an additional 25% interest in Cable
Adcom, which increased its holdings to 100% and 54%, respectively. Accordingly,
the Company changed its method of accounting for these investments from the
equity method to consolidation as required by generally accepted accounting
principles. This change in consolidation policy had no effect on net income
(loss) for 1996 or 1995. Since the amounts are not material and have no effect
on net income (loss), the prior period financial statements have not been
restated.
Prior period financial statements have been reclassified to conform with current
period presentation.
NOTE 2 - INVENTORIES
Inventories are stated at the lower of cost or market on a first-in, first-out
basis. Inventories consist of equipment sold by the Company's promotional and
advertising subsidiaries.
Inventories are summarized as follows:
June December
30, 1996 31, 1995
---------------- ----------------
(Dollars in thousands)
Raw materials $ 2,829 $ 3,428
Finished goods and work-in process 980 1,504
----------------- ----------------
$ 3,809 $ 4,932
================= ================
10
<PAGE>
LENFEST COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, (continued)
(Unaudited)
NOTE 3 - SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
<TABLE>
<CAPTION>
Six Months Ended
June 30,
---------------------------------------
1996 1995
---------------- ----------------
(Dollars in thousands)
<S> <C> <C>
Cash paid during the period for
Interest $ 46,139 $ 28,420
================= ================
Income taxes $ - $ 110
================= ================
Supplemental Schedule Relating to Acquisitions
1996 1995
---------------- ----------------
(Dollars in thousands)
Property and equipment $ 167,965 $ 4,932
Goodwill and other intangible assets 25,848 6,158
Deferred franchise costs 406,819 2,124
Other assets 4,500 -
Minority interest in partnership equity - 3,129
Customer prepayments and deposits - (307)
----------------- ----------------
605,132 16,036
Amount financed - 7,000
----------------- ----------------
NET CASH PAID $ 605,132 $ 9,036
================= ================
</TABLE>
Noncash Investing and Financing Transactions
In February 1996, the Company exchanged the assets of its cable television
systems in the East San Francisco Bay area with a book value of $33,053,000, its
41.67% partnership interest in Bay Cable Advertising with a book value of
$3,781,000 and a fair market value of $10,755,000, and the right to purchase a
cable television system located in Fort Collins, CO, which right was acquired
for $54,385,000, less preliminary settlement adjustments of $9,219,000 for a
Wilmington, Delaware and surrounding area cable television system. The assets of
the Wilmington system have been recorded at the net book value of the cable
television system assets exchanged and the market value of the partnership
interest, less the settlement adjustment. A gain of $6,974,000, which represents
the excess of the market value of the partnership interest over its book value
has been included in the statement of operations.
In 1995, the Company financed its $19,240,000 loan to Australis Media Limited
and $20,000,000 of its additional investment in Garden State Cablevision, L.P.,
$10,000,000 of which was borrowed from a stockholder and then repaid.
NOTE 4 - NEW BUSINESS AND ACQUISITIONS
On April 30, 1996, the Company acquired from Tri-County Cable Television
Company, an affiliate of Time Warner, its Salem cable television system for
approximately $16,000,000. The system, located in Salem, N.J., passes
approximately 10,600 homes and serves approximately 7,700 basic subscribers. On
the same date, the Company acquired from Shore Cable Company of New Jersey its
Shore cable television system for approximately $11,000,000. The system passes
approximately 6,100 homes and serves approximately 5,000 basic subscribers. For
financial reporting purposes, the Company accounts for the acquisition of these
assets under the purchase method. These acquisitions were funded in part by the
existing bank credit facility at that date.
11
<PAGE>
LENFEST COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, (continued)
(Unaudited)
NOTE 4 - NEW BUSINESS AND ACQUISITIONS (continued)
On February 29, 1996, the Company acquired four cable television systems from
Sammons Communications, Inc. for approximately $531,000,000. The systems, which
are located in Bensalem and Harrisburg, PA and in Vineland and Atlantic
City/Pleasantville, N.J., pass approximately 358,000 homes and service
approximately 282,000 basic subscribers. For financial reporting purposes, the
Company accounts for the acquisition of these assets under the purchase method.
The Company paid for a fifth system, located in Gettysburg, PA, but did not take
title to it. The Company is managing the system and has signed an agreement to
transfer it to GS Communications, Inc. The acquisition was funded in part by
$420,000,000 borrowed under the Company's bank credit facility existing at that
date, and the remaining proceeds from a public offering of debt securities in
November 1995.
Effective February 12, 1996, the Company exchanged the assets of its cable
television systems in the East San Francisco Bay area and its 41.67% partnership
interest in Bay Cable Advertising for the Wilmington, Delaware and surrounding
area cable television system, owned by a subsidiary of Tele-Communications, Inc.
("TCI"). In connection with the exchange, the Company acquired the right to
purchase a cable system for approximately $54 million. This right, along with
the underlying cable television system assets, were included with the assets
transferred to TCI. For financial reporting purposes, the Company is accounting
for this exchange as a nonmonetary exchange of productive assets in accordance
with Accounting Principles Board Opinion Number 29, whereby the assets acquired
are valued at the historical cost values of the assets disposed. (See Note 3).
The acquisition of these cable systems were financed with proceeds from the
Company's public offering of debt securities in November 1995.
On June 23, 1995, the Company, through its newly formed subsidiary, Lenfest
South Jersey Investments, Inc., purchased the remaining 40% minority general
partnership interest in South Jersey Cablevision Associates for $8,838,000.
On January 10, 1995, the Company, through its subsidiary, Lenfest Jersey, Inc.,
acquired a 10.005% general partnership interest in Garden State Cablevision,
L.P. for $29,250,000, increasing its ownership to a total of 50% of the
partnership.
On January 4, 1995, the Company acquired all of the general and limited
partnership interest of OPM Real Estate, L.P., a company that provided microwave
transmission services throughout Delaware, Maryland and Virginia, for price of
$7,500,000 before deductions for customer prepayments and deposits. The Company
acquired these interests through MicroNet Diversified Investments, Inc. and
MicroNet Delmarva, Inc., newly formed, wholly owned subsidiaries of MicroNet,
Inc., a wholly owned subsidiary of the Company. Immediately upon acquisition,
the name of the limited partnership was changed to MicroNet Delmarva Associates,
L.P. ("Associates"). As an indirect, wholly owned subsidiary of the Company,
Associates is included in the consolidated financial statements of the Company.
This acquisition was financed in part by a $7,000,000 credit facility issued by
PNC Bank, N.A., to MicroNet, Inc.
NOTE 5 - INVESTMENTS, PRINCIPALLY IN AFFILIATES
The Company, through several subsidiaries, owns non-controlling partnership
interests in several general partnerships. Under the equity method, the initial
investments are recorded at cost. Subsequently, the carrying amount of the
investments are adjusted to reflect the Company's share of net income or loss of
the affiliates as they occur. Losses in excess of amounts recorded as
investments on the Company's books have been offset against loans and advances
to these unconsolidated affiliates to the extent they exist.
12
<PAGE>
LENFEST COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, (continued)
(Unaudited)
NOTE 5 - INVESTMENTS, PRINCIPALLY IN AFFILIATES (continued)
The Company, through its subsidiary, Lenfest Jersey, Inc., owns a 10.005%
general partnership interest and a 39.995% limited partnership interest in
Garden State Cablevision L.P. ("Garden State"), a cable company now serving
approximately 202,000 subscribers in Southern New Jersey. The Company accounts
for its investment in Garden State under the equity method. The Company is
allocated a total of 50% of Garden State's losses. In addition, the Company is
required to make up its partner capital deficits upon termination or liquidation
of the Garden State partnership. Because of the requirement to make up capital
deficits, the accompanying financial statements reflect equity in accumulated
losses, net of related receivables, in excess of the investments in Garden State
in the amount of $19,117,000 and $15,451,00 at June 30, 1996 and December 31,
1995, respectively.
Summarized statements of operations of Garden State, accounted for under the
equity method for the six months ended June 30, 1996 and 1995, is as follows:
<TABLE>
<CAPTION>
1996 1995
---------------- ----------------
<S> <C> <C>
Results of Operations
Revenues $ 49,469 $ 46,546
Operating expenses (21,682) (20,682)
Depreciation and amortization (24,169) (23,338)
----------------- ----------------
OPERATING INCOME 3,618 2,526
Interest expense (8,382) (9,698)
Other expense (2,968) (2,793)
----------------- ----------------
NET LOSS $ (7,732) $ (9,965)
================= ================
</TABLE>
NOTE 6 - COMMITMENTS AND CONTINGENCIES
On April 1, 1993, the Federal Communications Commission ("FCC") adopted
regulations ("Rate Rule I") under The Cable Television Consumer Protection and
Competition Act of 1992 (the "1992 Cable Act") governing rates charged to
subscribers for basic and tier service and for equipment and installation
charges (the "Regulated Services"). The 1992 Cable Act placed the Company's
regulated services under the jurisdiction of local franchising authorities and
the FCC. The rate regulations do not apply to services offered on an individual
service basis, such as per-channel or pay-per-view services. The FCC's rate
regulations became effective on September 1, 1993. Under Rate Rule I, the
regulated services were evaluated against competitive "benchmark" rates
established by the FCC. Cable operators could justify basic and service tier
rates that were above the benchmarks by using reasonable cost-of-service
principles. During 1995, the FCC announced its revised benchmark rules ("Rate
Rule II") and its interim cost-of-service rule. Rate Rule II revised the
benchmark formulas established by the FCC in 1993 and is applied prospectively
from May 15, 1994. Rate Rule II requires cable operators to reduce existing
rates to the higher of (i) the rates calculated using the revised benchmarks or
(ii) a level 17 percent below such cable operators' rates as of June 30, 1992,
adjusted for inflation and certain increases in programming costs. Rates may be
increased periodically to reflect inflation and increases in certain external
costs. In addition, rates may be increased for tier service when new programming
channels are added. At the end of 1995, the FCC adopted final cost of service
rules ("COS Rule"). Cable operators which cannot or do not wish to comply with
Rate Rule II may choose to justify their existing rates under the "COS Rule".
This rule established a cost-of-service rate system which evaluates the rates
charged by cable operators based on their operating expenses and capital costs.
13
<PAGE>
LENFEST COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, (continued)
(Unaudited)
NOTE 6 - COMMITMENTS AND CONTINGENCIES (continued)
The Company believes that it has complied in all material respects with the
provision of the 1992 Cable Act, including its rate setting provisions. However,
the Company's rates for Regulated Services are subject to review by the FCC, if
a complaint has been filed, or the appropriate franchise authority, if such
authority has been certified. If, as a result of the review process, a cable
system cannot substantiate its rates, it could be required to retroactively
reduce its rates to the appropriate benchmark and refund the excess portion of
rates received. Any refunds of the excess portion of tier service rates would be
retroactive to the date of complaint. Any refunds of the excess portion of all
other Regulated Service rates would be retroactive to the later of September 1,
1993, or one year prior to the Refund Order issued by the applicable franchise
authority. The amount of refunds, if any, which could be payable by the Company
in the event that systems rates are successfully challenged by franchising
authorities is not considered to be material.
On April 24, 1996, the Company guaranteed up to $75,000,000 of a new
$125,000,000 Australis Media Limited ("Australis") bank facility as part of
recapitalization plans currently being pursued by Australis. Australis has
announced that it plans to repay the Australis bank facility with the proceeds
of long-term debt and equity financing in conjunction with its proposed
recapitalization. In connection with such long-term financing, the Company has
agreed to make an additional $20,000,000 equity investment in Australis, subject
to a number of conditions, including the completion of the recapitalization and
the equity contributions of certain other investors. If the Australis long-term
financing is completed, Australis will repay the $18,500,000 loan, with
interest, and the $75,000,000 guaranty will expire. There can be no assurance
that the Australis long-term financing will be completed or completed on a
timely basis. The board of directors of Australis has publicly stated that if
Australis is unable to obtain the long-term financing prior to the expiration of
the Australis bank facility (scheduled to expire on October 31, 1996), there is
substantial doubt as to Australis' ability to continue as a going concern. If
the Australis long-term financing is not completed, the $18,500,000 loan may not
be repaid, the $75,000,000 guaranty may be drawn in whole or in part and the
Company's existing equity investment in Australis may lose all or a substantial
portion of its value. While the ultimate outcome of this situation is not
determinable at this time, substantial uncertainty exists as to whether
Australis' long-term financing can successfully be completed. Accordingly, the
Company has provided a 100% allowance for doubtful account for its note
receivable and accrued interest from Australis. As of August 12, 1996, the
Australis securities held by the Company had a market value of approximately
$24.0 million. Due to the uncertainty regarding the long-term financing of
Australis, the Company has determined that the decline in market value is other
than temporary and, accordingly, the Company has recognized a loss of $66.9
million resulting from a write-down of the Australis investment from cost in the
accompanying consolidated statement of operations. As of June 30, 1996, the
Company has not provided for any losses that it might suffer under its
$75,000,000 guaranty or its possible $33.5 million indemnification (described
below) because present conditions make it impossible to determine whether such
losses will be incurred by the Company and to what extent, if any.
H.F. Lenfest, the Company's president and chief executive officer, and TCI have
jointly and severally guaranteed a $67 million obligation of Australis incurred
in connection with the purchase of program licenses in April 1995. The terms of
the guarantees provide that the amount of the guarantees will be reduced on a
dollar-for-dollar basis with the provision of one or more letters of credit,
which may not exceed $33.5 million. The Company is currently in discussions with
Australis and a bank with regard to obtaining a letter of credit in the amount
of $33.5 million for the benefit of the beneficiaries under the guarantees. If
the Company obtains such a letter of credit facility, the Company would be
directly obligated for $33.5 million and may remain indirectly obligated for the
balance of the program license payment obligations. Under the terms of its bank
credit facility, however, Mr. Lenfest's claims for indemnification are limited
to $33.5 million, which amount will be further reduced by the aggregate face
amount of any letters of credit issued under the Company's bank credit facility
with respect to program payment obligation guarantees. In addition, in
February 1996, Mr. Lenfest provided his personal guaranty of an approximately
$18.7 million loan to Lenfest Australia, Inc. by two commercial banks. The
Company has agreed to indemnify Mr. Lenfest against losses incurred by him in
connection with his guarantees to the fullest extent permitted under the
Company's debt obligations. Mr. Lenfest has unilaterally agreed to limit the
amount of the indemnity he would seek to the amount available under the
Company's bank credit facility.
On May 3, 1996, The News Corporation Limited ("News") filed an action against
the Company for unspecified damages in the Supreme Court of New South Wales,
Australia. The action claims that the Company violated an alleged oral agreement
it made to inform News prior to taking any steps to effect a recapitalization
plan for Australis Media Limited. The Company does not believe that the suit has
merit. On June 6, 1996, the Company filed suit in federal court in Philadelphia
seeking a declaration that no oral agreement was made with News to notify News
prior to making a separate refinancing proposal to Australis and that there is
no agreement whatsoever with News that would delay or prevent the Company's
participation in providing refinancing to Australis.
14
<PAGE>
LENFEST COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, (continued)
(Unaudited)
NOTE 6 - COMMITMENTS AND CONTINGENCIES (continued)
On March 28, 1996, the Company signed an agreement to acquire from Cable TV Fund
14-A, Ltd., an affiliate of Jones Intercable, Inc., its Turnersville cable
television system in New Jersey for approximately $84,500,000, subject to
certain adjustments. At closing, which the parties have agreed will occur in the
first quarter of 1997, the Company expects that the Turnersville system will
pass approximately 46,200 homes and serve approximately 36,300 basic
subscribers. For financial reporting purposes, the Company will account for the
acquisition of these assets under the purchase method.
On January 20, 1995, an individual (the "Plaintiff") filed suit in the Federal
Court of Australia, New South Wales District Registry against the Company and
several other entities and individuals (the "Defendants") including Mr. Lenfest,
involved in the acquisition of a company owned by the Plaintiff, the assets of
which included the right to acquire Satellite License B from the Australian
government. The Plaintiff alleges that the Defendants defrauded him by making
certain representations to him in connection with the acquisition of his company
and claims total damages of Australian $718 million (approximately U.S. $554
million). The Plaintiff also alleges that Australis and Mr. Lenfest owed to him
a fiduciary duty and that both parties breached his duty. The Defendants have
denied all claims made against them by the Plaintiff and stated their belief
that the Plaintiff's allegations are without merit and their intention to defend
this action vigorously.
The Company has also been named as a defendant in various legal proceedings
arising in the ordinary course of business. In the opinion of management, the
ultimate amount of liability with respect to the above actions will not
materially affect the financial position or the results of operations of the
Company.
The Company is obligated to purchase additional shares of stock valued at a
total of 49.8 million French francs (approximately $9,884,000) in Videopole for
the years 1996-1997. The Company's future commitment in dollars is subject to
change in the exchange rate.
NOTE 7 - SUBSEQUENT EVENT
Australis has informed the Company that Australis has extended until 5:00 p.m.
(New York City time) on August 14, 1996 the time by which Australis' current
bond holders must consent to the proposed form of recapitalization.
15
<PAGE>
LENFEST COMMUNICATIONS AND SUBSIDIARIES
STATEMENT BY MANAGEMENT CONCERNING REVIEW OF
INTERIM FINANCIAL INFORMATION BY INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANTS
The June 30, 1996 and 1995 condensed consolidated financial statements included
in this filing on Form 10-Q have been reviewed by Pressman Ciocca & Smith,
Independent Certified Public Accountants, in accordance with established
professional standards and procedures for such a review.
The review report of Pressman Ciocca & Smith is included in Part I, Item 1.
16
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
GENERAL
Substantially all of the Company's revenues are earned from
customer fees for cable television programming services, the sale of
advertising, commissions for products sold through home shopping networks and
ancillary services (such as rental of converters and remote control devices and
installations). Federal law and regulations, including the decision to
re-regulate certain aspects of the cable television industry, have affected the
Company's ability to increase or restructure its rates for certain services.
These re-regulation activities are intended to reduce customer rates for basic
cable television service and limit future rate increases.
The Company has generated increases in revenues and EBITDA for the
six months ended June 30, 1996 primarily through internal customer growth,
acquisitions, increases in monthly revenue per basic customer and, to a lesser
extent, through growth in advertising and pay-per-view revenues. EBITDA
represents earnings before interest, income taxes, depreciation, amortization
and equity in net losses of unconsolidated affiliates. EBITDA also excludes
non-operating revenue and expenses, such as interest income, capital gains and
gains on sale of equipment. EBITDA is presented because it is a widely accepted
financial indicator of a company's ability to incur and service debt. EBITDA
should not be considered as an alternative to net income, as an indicator of the
operating performance of the Company or as an alternative to cash flows as a
measure of liquidity. EBITDA is not a measure under generally accepted
accounting principles. The high level of depreciation and amortization
associated with the Company's acquisitions and capital expenditures, and
interest costs related to its financing activities have caused the Company to
report net losses. Management believes that such net losses are common for cable
television companies and that the Company may continue to incur net losses in
the near future. Management does not expect the Company to generate net income
prior to 1998.
RESULTS OF OPERATIONS
The following tables, which are derived from, and should be read
in conjunction with, the Company's Condensed Consolidated Financial Statements
included elsewhere in this Quarterly Report, set forth the historical percentage
relationship of the components of operating income for the periods indicated.
The tables provide information on the Company's predominant business unit, its
Core Cable Television Operations, and for the Company as a whole. The Core Cable
Television Operations historically have achieved better results than have the
Company's non-cable, communications-related business subsidiaries.
17
<PAGE>
CONSOLIDATED RESULTS
Percentage of Revenues
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1996 1995 1996 1995
----- ----- ----- -----
<S> <C> <C> <C> <C>
Revenues ......................... 100.0% 100.0% 100.0% 100.0%
Programming expenses ............. 22.8 24.2 23.3 24.7
Selling, general & administrative 21.0 22.1 21.7 21.8
Technical and other .............. 10.1 9.8 10.2 10.2
Depreciation and amortization .... 28.4 27.3 27.8 27.7
----- ----- ----- -----
82.3 83.4 83.0 84.4
----- ----- ----- -----
Operating income ................. 17.7% 16.6% 17.0% 15.6%
===== ===== ===== =====
EBITDA ........................... 46.1% 43.9% 44.8% 43.3%
CORE CABLE TELEVISION OPERATIONS (RESTRICTED GROUP)
Percentage of Revenues
Three Months Ended Six Months Ended
June 30, June 30,
1996 1995 1996 1995
----- ----- ----- -----
Revenues ......................... 100.0% 100.0% 100.0% 100.0%
Programming expenses ............. 22.0 23.8 22.6 24.0
Selling, general & administrative . 17.7 19.6 18.5 19.4
Technical and other .............. 8.3 6.3 7.9 6.4
Depreciation and amortization .... 30.3 29.0 29.5 29.4
----- ----- ------ -----
78.3 78.7 78.5 79.2
----- ----- ------ -----
Operating income ................. 21.7% 21.3% 21.5% 20.8%
===== ===== ====== =====
EBITDA ........................... 52.0% 50.3% 51.0% 50.2%
</TABLE>
THREE MONTHS ENDED JUNE 30, 1996 COMPARED WITH THREE MONTHS
ENDED JUNE 30, 1995
CONSOLIDATED RESULTS
Assets for the Company increased 37.1% to $1,168 million over the
December 31, 1995 year-end. There were large increases in deferred franchise
costs of 290.3% to $521.1 million and in property, plant and equipment of 81.3%
to $383.9 million. In both cases, the increases were primarily attributable to
the TCI Exchange (as defined herein) and the
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<PAGE>
Sammons Acquisition (as defined herein). On February 12, 1996, the Company
completed an acquisition (the "TCI Exchange") in which it received TCI's
Wilmington, Delaware area cable television systems in exchange for the Company's
cable television systems in the East San Francisco Bay area, a 41.67%
partnership interest in Bay Area Advertising (an advertising interconnect), and
certain other non-contiguous cable television properties having a net value of
approximately $45 million. On February 29, 1996, the Company acquired from
Sammons Communications, Inc. its Bensalem and Harrisburg cable television
systems in Pennsylvania and its Vineland and Atlantic City/Pleasantville systems
in New Jersey (the "Sammons Acquisition"). Likewise, the total liabilities of
the Company increased 51.9% to $1,358 million over the December 31, 1995 year
end due largely to the TCI Exchange and the Sammons Acquisition. The largest
increases were in accounts payable of 23.0% to $50.6 million, and an increase of
55.3% to $1,270 million for notes payable, in each case as a result of the
foregoing transactions.
Revenues for the Company increased 55.3% to $104.3 million in the 1996
three-month period as compared to the 1995 three-month period, primarily as a
result of a 59.9% increase in revenues from the Company's Core Cable Television
Operations. The increase was primarily attributable to the TCI Exchange and the
Sammons Acquisition.
Operating expenses increased 53.3% to $85.9 million (82.3% of total
revenues) in the 1996 three-month period. Depreciation and amortization
increased 61.6% to $29.7 million (28.4% of total revenues) in the 1996
three-month period. All increases were due largely to the TCI Exchange and the
Sammons Acquisition.
Interest expense increased 98.5% to $27.7 million in the 1996
three-month period. The increase was primarily the result of additional
indebtedness associated with the 8 3/8% Senior Notes issued in November 1995
and borrowings under the Company's previous bank credit facility (the "Old Bank
Credit Facility") for the purpose of funding acquisitions.
Other expenses increased by $85.9 million to $88.9 million in the 1996
three-month period due largely to recognition of a $66.9 million decline in the
market value of its equity ownership interest in securities of Australis Media
Limited ("Australis") and the provision for potential reduction in value of note
receivable and accrued interest in the amount of $19.7 million in connection
with the note receivable and accrued interest due from Australis.
Loss before income taxes and extraordinary loss increased to $98.3
million in the 1996 three-month period from a loss of $5.9 million in the 1995
three-month period. This increase in the loss was primarily attributable to the
recognition of losses associated with Australis.
EBITDA increased $18.6 million to $48.1 million in the 1996 three-month
period as compared to the 1995 three-month period. The increase was primarily
attributable to the TCI Exchange and the Sammons Acquisition.
19
<PAGE>
CORE CABLE TELEVISION OPERATIONS
Revenues increased 59.9% to $92.5 million in the 1996 three-month
period as compared to the 1995 three-month period. Premium service revenues grew
by 186.3% to $23.1 million. Pay-per-view revenues increased 171.3% to $2.4
million. Equipment rental revenue increased by 274.9% to $4.0 million. All the
increases are primarily attributable to the TCI Exchange and the Sammons
Acquisition.
In the 1996 three-month period, programming expense increased 48.1% to
$20.4 million (22.0% of revenues of Core Cable Television Operations) as a
result of an increase in the number of basic cable television subscribers served
by the Company attributable to the TCI Exchange and the Sammons Acquisition.
Selling, general and administrative expense increased 44.6% to $16.4 million
(17.7% of total revenues of Core Cable Television Operations) as a result of
increased number of employees attributable to the acquisitions. Technical and
other expenses increased 110.6% to $7.7 million (8.3% of total revenues of Core
Cable Television Operations) in the 1996 three-month period as compared to the
1995 three-month period and depreciation and amortization increased 66.8% to
$28.0 million, primarily as a result of the TCI Exchange and the Sammons
Acquisition.
Operating income increased 62.6% to $20.0 million (21.7% of total
revenues of Core Cable Television Operations), as the increase in revenues more
than offset the increases in other operating expenses due largely to the TCI
Exchange and the Sammons Acquisition.
UNRESTRICTED SUBSIDIARIES
The largest of the Company's unrestricted subsidiaries are MicroNet,
Inc. ("MicroNet"), StarNet, Inc. ("StarNet") and StarNet Development, Inc.
("StarNet Development"). Revenues increased 26.9% to $11.8 million in the
1996 three-month period as compared to the 1995 three-month period,
primarily as a result of increased activity in the satellite transmission and
increased equipment sales of the Company's MicroNet and StarNet Development
subsidiaries.
Programming expense increased 36.9% to $3.4 million; selling, general
and administrative expense increased 57.5% to $5.5 million; and technical and
other expense increased 18.0% to $1.5 million. Depreciation and amortization
increased 6.1% to $1.7 million in the 1996 three-month period as compared to the
1995 three-month period.
Operating loss was $1.7 million as compared to a $1.2 million loss in
the same period in 1995.
20
<PAGE>
SIX MONTHS ENDED JUNE 30, 1996 COMPARED WITH SIX MONTHS ENDED JUNE 30, 1995
CONSOLIDATED RESULTS
Revenues for the Company increased 40.7% to $184.7 million in the 1996
six-month period as compared to the 1995 six-month period, primarily as a result
of a 42.9% increase in revenues from the Company's Core Cable Television
Operations. The increase was primarily attributable to the TCI Exchange and the
Sammons Acquisition.
Operating expenses increased 38.4% to $153.3 million (83.0% of total
revenues) in the 1996 six-month period. Depreciation and amortization increased
41.2% to $51.4 million (27.8% of total revenues) in the 1996 six-month period.
All increases were due largely to the TCI Exchange and the Sammons Acquisition.
Interest expense increased 69.7% to $48.0 million in the 1996 six-month
period. The increase was primarily the result of additional indebtedness
associated with the 8 3/8 % Senior Notes issued in November 1995 and borrowings
under the Company's Old Bank Credit Facility for the purpose of funding
acquisitions.
Other expense increased by $93.4 million to $85.2 million in the 1996
six-month period due largely to recognition of a $66.9 million decline in the
market value of its equity ownership interest in securities of Australis and the
provision for potential reduction in value of note receivable and accrued
interest in the amount of $19.7 million in connection with the note receivable
and accrued interest due from Australis. In the comparable 1995 six-month period
other income included a $13.1 million gain on the sale of marketable securities.
Loss before income taxes and extraordinary loss increased to $101.8
million in the 1996 six-month period from an income of $.4 million in the 1995
six-month period primarily due to recognition of losses associated with
Australis and the increase in interest expense.
EBITDA increased $25.9 million to $82.8 million in the 1996 six-month
period as compared to the 1995 six-month period. The increase was primarily
attributable to the TCI Exchange and the Sammons Acquisition.
CORE CABLE TELEVISION OPERATIONS
Revenues increased 42.9% to $161.5 million in the 1996 six-month period
as compared to the 1995 six-month period. Premium service revenues grew by 44.3%
to $35.5 million. Pay-per-view revenues increased 58.7% to $3.8 million.
Equipment rental revenue increased by 83.3% to $5.5 million. All the increases
are primarily attributable to the TCI Exchange and the Sammons Acquisition.
In the 1996 six-month period, programming expense increased 34.4% to
$36.5 million (22.6% of revenues of Core Cable Television Operations) as a
result of the TCI Exchange and the Sammons Acquisition.
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<PAGE>
Selling, general and administrative expense increased 36.3% to $29.9 million
(18.5% of total revenues of Core Cable Television Operations) as a result of
increased number of employees attributable to the acquisitions. Technical and
other expenses increased 77.4% to $12.8 million (7.9% of total revenues of Core
Cable Television Operations) in the 1996 six-month period as compared to the
1995 six-month period and depreciation and amortization increased 43.4% to $47.6
million, primarily as a result of the TCI Exchange and the Sammons Acquisition.
Operating income increased 47.6% to $34.7 million (21.5% of total
revenues of Core Cable Television Operations), as the increase in revenues more
than offset the increases in other operating expenses due largely to the TCI
Exchange and the Sammons Acquisition.
UNRESTRICTED SUBSIDIARIES
Revenues increased 27.0% to $23.1 million in the 1996 six-month period
as compared to the 1995 six-month period, primarily as a result of increased
activity in the satellite transmission and increased equipment sales of the
Company's MicroNet and StarNet Development subsidiaries.
Programming expense increased 24.9% to $6.5 million; selling, general
and administrative expense increased 54.2% to $10.1 million; and technical and
other expense increased 16.1% to $2.9 million. Depreciation and amortization
increased 19.0% to $3.8 million in the 1996 six-month period as compared to the
1995 six-month period.
Operating loss was $3.4 million as compared to a $3.0 million loss in
the same period in 1995.
RECENT ACCOUNTING PRONOUNCEMENTS
The Financial Accounting Standards Board has issued its Statement 123
on accounting for stock-based compensation, which encourages employers to
account for stock compensation awards based on their fair value at the date the
awards are granted. Statement 123 is effective for calendar year 1996; however,
it will not apply since the Company does not have stock options or stock
compensation.
22
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
GENERAL
The Company's businesses require cash for operations and for capital
expenditures. In addition, the Company has followed a strategy of expansion
through selective acquisitions of cable television systems and
communications-related businesses for cash. As of June 30, 1996, the Company had
a commitment to purchase a cable television system for an aggregate cash
purchase price of approximately $84.5 million. On April 30, 1996, the Company
completed two acquisitions for an aggregate purchase price of approximately
$27.0 million.
To date, cash requirements have been funded by cash flow from
operations and borrowings. At June 30, 1996, the Company had aggregate total
indebtedness of approximately $1,238.7 million and bank debt at the subsidiary
level of approximately $25.7 million. The Company's senior indebtedness portion
of approximately $945.2 million consisted of (i) three debt obligations in the
amount of approximately $75.0 million, $21.0 million and $14.2 million
(collectively, the "Private Placement Notes"), (ii) $700.0 million in principal
amount of 8 3/8% Senior Notes (the "8 3/8% Senior Notes") and (iii) a $450
million bank credit facility (the "New Bank Credit Facility"), consisting of a
$150.0 million term loan and a $300.0 million revolving credit facility. The
Company issued the Private Placement Notes from 1988 to 1991 in connection with
the refinancing of revolving bank debt, initially incurred to make acquisitions.
The Company issued the 8 3/8% Senior Notes on November 14, 1995 pursuant to a
registration statement on Form S-1 and used a portion of the approximately
$685.7 million in net proceeds (a) to retire then-existing bank debt and a
portion of the Private Placement Notes, (b) to fund the Company's obligation to
deliver cable television system assets at a net cost to the Company of
approximately $45.0 million in order to complete the TCI Exchange and (c) to
fund approximately $106.6 million of the approximately $531.0 million (including
the reimbursement of approximately $2.0 million in capital expenditures)
purchase price for the Sammons Acquisition. On February 29, 1996, the Company
borrowed $400.0 million under the term loan portion of the Old Bank Credit
Facility and $20.0 million under the revolving credit portion of the Old Bank
Credit Facility to fund a portion of the purchase price for the Sammons
Acquisition.
On June 27, 1996, the Company issued $300,000,000 in principal amount
of 10 1/2% Senior Subordinated Notes Due 2006 (the "Senior Subordinated Notes").
The Senior Subordinated Notes are general unsecured obligations of the Company
subordinate in right of payment to all present and future senior indebtedness of
the Company. Interest on the Senior Subordinated Notes is payable semi-annually
on June 15 and December 15 of each year, commencing December 15, 1996. The
Senior Subordinated Notes may not be redeemed at the option of the Company prior
to maturity. The net proceeds from the offering of the Senior Subordinated Notes
(approximately $293.5 million) were used, together with $150 million of proceeds
from initial borrowings under the term loan portion of the New Bank Credit
Facility and cash on hand in the amount of $1 million, to prepay all amounts
outstanding under the Company's Old Bank Credit Facility.
On June 27, 1996, the Company entered into the New Bank Credit Facility
consisting of a $150 million term loan and a $300 million revolving credit
facility. Principal payments under the term loan facility and commitment
reductions under the revolving loan facility will commence on March 31, 1999,
with quarterly reductions thereafter until the termination of the New Bank
Credit Facility on September 30, 2003. Loans outstanding under the New Bank
Credit Facility will bear interest, at the Company's option, at either (i) the
Base Rate plus an applicable margin ranging from 0% to 1 3/8% or (ii) LIBOR plus
an applicable margin ranging from 3/4% to 2 3/8%, in each case based upon
certain levels of leverage ratios.
The terms of the New Bank Credit Facility prohibit the Company from (i)
incurring certain additional Indebtedness in excess of $10 million until the
ratio of Total Debt to Annualized Operating Cash Flow is less than 6.00:1, (ii)
having a Senior Debt Leverage Ratio for the most recent quarter end in excess of
5.75:1 through December 30, 1996, and declining therafter to 4.50:1 beginning
December 31, 1999, (iii) having a ratio of Operating Cash Flow to Total Interest
Expense of less than 1.50:1 through December 31, 1997, and less than 1.75:1
thereafter and (iv) having a Total Debt Leverage Ratio in excess of 7.50:1
through December 30, 1996, and decling thereafter to 6.00:1 beginning on
December 31, 1998. In addition, the New Bank Credit Facility contains certain
restrictions on the Company and its Restricted Subsidiaries with respect to,
among other things, the payment of dividends, the repurchase of stock, the
making of Restricted Payments and Restricted Purchases, the making of
investments, the creation of Liens, certain asset sales, sale-leaseback
transactions, transactions with Affiliates, the disposition of certain
securities of its Restricted Subsidiaries, the designation of subsidiaries as
Restricted Subsidiaries and Unrestricted Subsidiaries and mergers and
consolidations; provided, however, that the Company will be permitted under the
terms of the New Bank Credit Facility (a) to make investments in related
businesses not to exceed $70 million so long as the Lenfest Australia Credit
Facility or any payment obligation of Lenfest Australia, Inc. thereunder remains
outstanding, and $90 million in the aggregate, until the ratio of Total Debt to
Annualized Operating Cash Flow is less than 6.00:1 for two consecutive fiscal
quarters, and (b) to make acquisitions in an aggregate amount of $100 million,
including the acquisition of Cable TV Fund 14-A, Ltd.'s Turnersville Cable
television system. In addition, the Company will be permitted to make
distributions equal to 50% of Excess Cash Flow once the ratio of Total Debt to
Annualized Operating Cash Flow is less than 6.00:1 for two consecutive fiscal
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<PAGE>
quarters. In addition, it is an event of default if neither H.F. Lenfest
(individually or by written proxy of the voting rights of the members of his
immediate family with respect to the capital stock of the Company) nor TCI own
beneficially 50% or more of the voting shares of the Company's capital stock and
have the right to elect at least 50% of the members of the board of directors of
the Company. Terms capitalized but not defined above have the meanings assigned
to them in the New Bank Credit Facility.
The Company's operations are conducted through its direct and indirect
subsidiaries. As a holding company, the Company has no independent operations
and, therefore, is dependent on the cash flow of its subsidiaries to meet its
own obligations, including the payment of interest and principal obligations on
the Senior Subordinated Notes, the Private Placement Notes, the 8 3/8 % Senior
Notes and the New Bank Credit Facility when due. There are no restrictions
relating to the payment to the Company of dividends, advances or other payments
by the Restricted Subsidiaries of the Company.
Cash flow generated from continuing operations, excluding changes in
operating assets and liabilities that result from timing issues and considering
only adjustments for noncash charges was approximately $36.0 million for the six
months ended June 30, 1996 compared to approximately $29.7 million for the six
months ended June 30, 1995. The increase in cash flow was a result of the
completion of the TCI Exchange and the Sammons Acquisition and the realization
of the effect of rate increases which were implemented. During the 1996
six-month period the Company was required to make interest payments of
approximately $46.1 million on its outstanding debt, whereas during the 1995
six-month period, the Company was required under its then existing debt
obligations to make interest payments of approximately $28.3 million. This
increase was primarily attributable to increased debt incurred by the Company in
connection with the TCI Exchange and the Sammons Acquisition.
For the period 1996 through 2000, the Company's Core Cable Television
Operations expect to incur approximately $300.0 million in capital expenditures
related to its upgrade program and approximately $150.0 million for routine
maintenance capital expenditures. For the six months ended June 30, 1996, the
Company has expended approximately $18.4 million for capital expenditures for
Core Cable Television Operations.
The Company is obligated to make additional investments of FF49.8
million in 1996 and 1997 (approximately $9.9 million in the aggregate, subject
to currency exchange rate fluctuations) related to its indirect investment in
Videopole. The foregoing amounts assume that the Company will continue to be
required to make the investments required to be provided by the Company's joint
venture partner, Tele-Communications, Inc. ("TCI"). Any funds provided by the
Company as a result of the failure by TCI to make its required investments will
result in an adjustment to the partnership interests.
Future minimum lease payments under all capital leases and
noncancellable operating leases for each of the years 1996 through 1999 are $6.6
million (of which $845,000 is payable to a principal stockholder), $5.1 million
(of which $891,000 is payable to a principal stockholder), $4.4 million (of
which $938,000 is payable to a principal stockholder) and $2.3 million (of which
$988,000 is payable to a principal stockholder), respectively.
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<PAGE>
The Company has net operating loss carryforwards which it expects to
utilize notwithstanding recent and expected near term losses. The net operating
losses begin to expire in the year 2001 and will fully expire in 2009.
Management bases its expectation on its belief that depreciation and
amortization expense will level off and that interest expense will decline as
debt is repaid, resulting in higher levels of pretax income.
The Company is a party to interest rate cap agreements to reduce the
impact of changes in interest rates on its floating rate indebtedness. The
Company does not ordinarily enter into interest rate or currency hedge
agreements except as described above.
The Turnersville Acquisition is expected to be completed in the first
quarter of 1997 for approximately $84.5 million.
LENFEST AUSTRALIA, INC.
The Company, through its Lenfest Australia, Inc. subsidiary, holds an
approximately 31.4% aggregate equity investment in Australis Media Limited, an
Australian public company which provides pay television programming and services
to substantially all of Australia's major population centers. The Company
acquired its interest in Australis for an aggregate investment of approximately
U.S.$91.0 million. As of March 22, 1996, the investment had a market value of
approximately U.S.$74.9 million. On March 29, 1996, Australis' securities were
suspended from trading on the Australian stock exchange pending an announcement
from Australis regarding its recapitalization plans. On April 22, 1996, the
securities were reinstated for trading. On July 25, 1996, Australis requested
that its securities be suspended from trading, and trading was suspended on July
29, 1996. Australis stated that it had requested the trading halt to provide it
with an opportunity to correct information concerning its recapitalization plans
and operations which Australis believed was being incorrectly reported by the
press. On July 31, 1996, Australis issued a press release, and its securities
were reinstated for trading. As of August 12, 1996, the investment had a market
value of approximately U.S.$24.0 million. As a result of increased uncertainties
associated with the successful completion by Australis of its proposed
racapitalization, the Company has recognized a loss of approximately $66.9
million on the decline of the market value of its equity ownership in Australis
and the provision for potential reduction in value of note receivable and
accrued interest in the amount of $19.7 million in connection with the note
receivable and accrued interest due from Australis.
On January 19, 1996, Lenfest Australia, Inc. loaned Australis
approximately $18.5 million on an unsecured basis. Such loan had an original due
date of February 26, 1996, but has been extended to the earlier of August 29,
1996 or the refinancing by Australis of the Australis Credit Facility (as
defined). The Company loaned the funds to Lenfest Australia, Inc., a subsidiary
of the Company (but not part of the Restricted Group), on an intercompany basis.
On February 29, 1996, Lenfest Australia, Inc. entered into a credit facility (as
subsequently amended, the "Lenfest Australia Credit Facility") with two of the
banks which are parties to the New Bank Credit Facility. The amount borrowed,
approximately $18.7 million, was used to repay the intercompany advance from the
Company and transaction costs associated with the loan to Lenfest Australia,
Inc. The Lenfest Australia Credit Facility is an unsecured facility which must
be repaid on the earlier of repayment of the loans by Australis
25
<PAGE>
or August 29, 1996. The full payment and performance of the Lenfest Australia
Credit Facility was guaranteed by Mr. Lenfest. As a condition to granting their
consent to the entering into of the Lenfest Australia Credit Facility, the
lenders under the New Bank Credit Facility required the Company to agree to
reduce the aggregate principal amount available for advances under the revolving
credit portion of the New Bank Credit Facility by $20.0 million so long as any
portion of the Lenfest Australia Credit Facility remains outstanding. In March
and April 1996, the Company loaned an additional $15.5 million to Australis from
cash on hand. These loans were repaid, with interest, on May 11, 1996.
The Company and certain other investors in Australis (collectively, the
"Australis Guarantors") have agreed to assist in a recapitalization of
Australis. On May 10, 1996, Australis, Toronto Dominion Australia Limited
("TDAL") and the Australis Guarantors entered into agreements which provided for
TDAL to lend Australis up to $125.0 million (the "Australis Bank Facility") and
for the Australis Guarantors to severally guarantee borrowings under the
Australis Bank Facility. The terms of the agreements provide that the Company's
several portion (the "Australis Guaranty") of the guaranty is up to $75.0
million of the Australis Bank Facility. The Australis Bank Facility requires
that it be repaid on or before October 31, 1996. In connection with the closing
on the Australis Bank Facility, Australis repaid the $15.5 million of loans made
by the Company in March and April 1996. Australis has announced that it plans to
repay the Australis Credit Facility with the proceeds of long-term debt and
equity financing in conjunction with a proposed recapitalization. If the
long-term financing is completed, the $18.5 million loan to Australis by Lenfest
Australia, Inc. will be repaid from the proceeds of such financing. In
connection with such long term financing the Company has agreed to make an
additional $20.0 million equity investment in Australis, subject to a number of
conditions, including the completion of the recapitalization and the equity
contribution of certain other investors. Australis has informed the Company that
Australis has extended until 5:00 p.m. (New York City time) on August 14, 1996
the time by which Australis' current bond holders must consent to the proposed
form of recapitalization.
In connection with the Australis Guaranty, the Company entered into a
stand-by $75.0 million senior subordinated credit facility (the "Stand-by
Facility") on May 2, 1996 with The Toronto-Dominion Bank (the Administrative
Agent under the Existing Bank Credit Facility and an affiliate of TDAL) in order
to provide any required funding under the Australis Guaranty. The terms of the
Stand-by Facility provide that any loan will be subordinated to the senior
lenders to the Company, be unsecured and be due on the first to occur of
November 18, 1996, the issuance of public debt by Australis in an amount
sufficient to repay the Australis Bank Facility or the issuance of additional
public securities by the Company. In addition, any such loan will not require
principal amortization prior to maturity.
There can be no assurances that the Australis long-term financing will
be completed or completed on a timely basis. The board of directors of Australis
has publicly stated that if
26
<PAGE>
Australis is unable to obtain the long-term financing prior to the expiration of
the Australis Bank Facility (scheduled to expire on October 31, 1996), there is
substantial doubt as to Australis' ability to continue as a going concern. If
the Australis long-term financing is not completed, the $18.5 million loan may
not be repaid, the $75.0 million guaranty may be drawn in whole or in part and
the Company's existing equity investment in Australis may lose all or a
substantial portion of its value. The Company's financial statements, included
herein, recognize a decline in the market value of its equity ownership interest
in securities of Australis in the amount of $66.9 million and the provision for
potential reduction in value of note receivable and accrued interest in the
amount of $19.7 million in connection with the note receivable and accrued
interest due from Australis.
Additionally, in November 1994, Mr. Lenfest and TCI International, Inc.
jointly and severally guaranteed $67.0 million in program license payment
obligations of the distributor of Australis' movie programming. The Company has
agreed to indemnify Mr. Lenfest against loss from such guaranty to the fullest
extent permitted under the Company's debt obligations. The Company has neither
sought nor obtained any consents which may be required in connection with this
indemnification obligation. The terms of the guarantees provide that the amount
of the guarantees will be reduced on a dollar-for-dollar basis with the
provision of one or more letters of credit, which may not exceed $33.5 million.
The Company is currently in discussions with Australis and a bank with regard to
obtaining a letter of credit in the amount of $33.5 million for the benefit of
the beneficiaries under the guarantees. If the Company obtains such a letter of
credit facility, the Company would be directly obligated for $33.5 million and
may remain indirectly obligated for the balance of the program license payment
obligations. Under the terms of the New Bank Credit Facility, however, Mr.
Lenfest's claims for indemnification are limited to $33.5 million, which amount
will be further reduced by the aggregate face amount of any letters of credit
issued under the New Bank Credit Facility with respect to the program license
payment obligations guarantees.
FUTURE CAPITAL REQUIREMENTS
Management believes that cash flow generated from the operating
activities of the Core Cable Television Operations will be sufficient to enable
the Company for the foreseeable future to meet operating expenses and pay the
taxes of the Company, to service its indebtedness and to fund its cable plant
capital expenditures. The Company's ability to borrow funds to make non-cable
plant capital expenditures, additional investments in or acquisitions of cable
television systems, and to borrow funds under the New Bank Credit Facility if
required to repay the Lenfest Australia Credit Facility, will require that the
Company be in compliance with the Senior and Total Debt Leverage Ratios or
obtain the consent of the holders of the Company's indebtedness to a waiver or
amendment of the applicable Senior or Total Debt Leverage Ratio. Management
believes that the Company will either be in compliance with such Debt Leverage
Ratios or obtain the required consents.
INFLATION
The net impact of inflation on operations has not been material in the
last three years due to the relatively low rates of inflation during this
period. If the rate of inflation increases the Company may increase customer
rates to keep pace with the increase in inflation, although there may be timing
delays.
27
<PAGE>
Part II. Other Information
Item 1. Legal Proceedings
On May 3, 1996 the News Corporation Limited ("News") filed in the
Supreme Court of New South Wales, Australia an action seeking unspecified
damages as a result of the alleged violation by the Company of an alleged oral
agreement to inform News prior to the Company taking any steps to effect a
recapitalization plan for Australis. The Company believes that the suit is
without merit. In addition, on June 6, 1996, the Company filed suit in federal
court in Philadelphia seeking a declaration that no oral agreement was made with
News to notify News prior to making a separate refinancing proposal to
Australis, and that there is no agreement whatsoever with News that would delay
or prevent the Company's participation in providing refinancing to Australis.
On December 6, 1995, the Securities and Exchange Commission (the "SEC")
sued H.F. Lenfest and Marguerite Lenfest in the United States District Court for
the Eastern District of Pennsylvania. The SEC alleges that, in October 1993, Mr.
Lenfest, while in possession of non-public information, recommended that his son
purchase TCI stock and that Marguerite Lenfest traded in TCI stock in October
1993 on the basis of information she misappropriated from her husband. H.F.
Lenfest and Marguerite Lenfest have categorically denied that they engaged in
any improper conduct and are defending this action vigorously. The Company has
agreed to pay the legal expenses of H.F. Lenfest and Marguerite Lenfest related
to this action. H.F. Lenfest and Marguerite Lenfest have agreed to repay such
expenses if it is subsequently determined that the Company is not permitted to
make such payments under Delaware corporate law.
Item 4. Submission of Matters to a Vote of Security Holders
The Company held an annual meeting of the shareholders on April 4,
1996. All of the shareholders were present in person or by proxy. The
shareholders unanimously elected five directors to serve on the Company's
Board of Directors: John C. Malone, Brendan R. Clouston, H.F. Lenfest,
Marguerite B. Lenfest and Samuel W. Morris, Jr.
The shareholders also unanimously voted to amend the Certificate of
Incorporation and the Bylaws of the Company. An amended and restated Certificate
of Incorporation was adopted in its entirety to change the number of directors
of the Company from three to five and to allow Mr. Lenfest to designate a
majority of the Board of Directors until 2002. See Exhibit 10.14. The Bylaws
were amended to incorporate the terms of the Letter Agreement, dated as of
December 18, 1991, among Liberty Media Corporation, Lenfest Communications,
Inc., Marguerite B. Lenfest, Diane A. Lenfest, H. Chase Lenfest, Brook J.
Lenfest and the Lenfest Foundation, which sets forth the rights of Mr. Lenfest
to hold the office of President/CEO of the Company until the first to occur of
his death, resignation or December 31, 2001. The Bylaws were also amended to
require the Board of Directors to hold at least two but no more than four
regular meetings annually and to allow special
28
<PAGE>
meetings of the Board of Directors to be called by the Chairman of the Board or
any two directors. The Bylaws were also amended to set out the duties of the
President/CEO of the Company and also to amend the provisions allowing for
amendments to the Bylaws. The shareholders also unanimously voted to ratify the
actions of the Board of Directors during the 12 months preceding the date of the
annual meeting. The shareholders also unanimously approved Pressman Ciocca &
Smith as auditors of the Company for the coming year.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits.
The following Exhibits are furnished as part of this Report:
*2.1 Amended and Restated Asset Exchange Agreement, dated September
8, 1995, between LenComm, Inc. and Lenfest West, Inc. and
Heritage Cablevision of Delaware, Inc.
*2.2 Asset Purchase Agreement, dated as of May 9, 1995, by and
between TCI Communications Inc. and Sammons Communications of
New Jersey, Inc., Oxford Valley Cablevision, Inc., Sammons
Communications of Pennsylvania, Inc., NTV Realty, Inc., Capital
Telecommunications, Inc. and AC Communications, Inc.
*2.3 Assignment and Assumption Agreement, dated as of June 1, 1995,
among TCI Communications, Inc., TKR Cable Company and Lenfest
Communications, Inc.
*2.4 Asset Purchase Agreement, dated as of September 7, 1995, by and
between Lenfest Atlantic, Inc. and Tri-County Cable Television
Company.
*2.5 Letter Agreement, dated July 13, 1995, between Suburban Cable
TV Co., Inc., and Service Electric Cable TV, Inc.
*2.6 Letter Agreement, dated August 11, 1995, between Suburban Cable
TV Co., Inc., and Service Electric Cablevision, Inc.
***2.7 Assignment and Assumption Agreement, dated as of February 16,
1996, by and between Heritage Cablevision of Delaware, Inc. and
Lenfest New Castle County, a Delaware general partnership.
***2.8 Bill of Sale, Assignment and Assumption and Release, dated as
of February 16, 1996, by and among Lenfest New Castle County,
Heritage Cablevision of Delaware, Inc. and The World Company.
+2.9 Asset Purchase Agreement, dated March 28, 1996, between Cable
TV Fund 14-A, Ltd. and Lenfest Atlantic, Inc.
29
<PAGE>
+++3.1 Restated Certificate of Incorporation of the Company.
+++3.2 Amended and Restated Bylaws of the Company.
*4.1 Form of $700,000,000 8 3/8% Senior Note Due 2005.
**4.2 Indenture between the Company and The Bank of New York, dated
as of November 1, 1995.
+++4.3 Indenture, dated as of June 15, 1996, between the Company and
The Bank of New York.
+++4.4 Form of Certificated Note, dated June 27, 1996, between the
Company and Salomon Brothers Inc (In accordance with Item 601 of
Regulation S-K similar Notes between the Company and Salomon
Brothers Inc have not been filed because they are identical in
all material respects to the filed exhibit.)
+++4.5 Form of 10 1/2% Senior Subordinated Note, dated June 27, 1996,
in the principal sum of $296,700,000.
+++4.6 Registration Agreement, dated as of June 20, 1996, between the
Company and Salomon Brothers Inc, Toronto Dominion Securities
(USA) Inc., CIBC Wood Gundy Securities Corp. and Nationsbanc
Capital Markets, Inc.
*10.1 Credit Agreement, dated as of June 24, 1994, as amended December
16, 1994 and January 10, 1995, among Lenfest Communications,
Inc., the Toronto-Dominion Bank and PNC Bank, National
Association as Managing Agents, the Lenders and Toronto-Dominion
(Texas), Inc., as Administrative Agent.
*10.2 Note Agreement, dated as of May 22, 1989, among Lenfest
Communications, Inc. and the Prudential Insurance Company of
America with respect to $50,000,000 10.69% Senior Notes due
1998.
*10.3 Note Agreement, dated as of September 14, 1988, among Lenfest
Communications, Inc. and certain Institutions described therein
with respect to $125,000,000 10.15% Senior Notes due 2000.
*10.4 Note Agreement, dated as of September 27, 1991, among Lenfest
Communications, Inc. and Certain Institutions described therein
with respect to $100,000,000 9.93% Senior Notes due 2001.
*10.5 Programming Supply Agreement, effective as of September 30,
1986, between Satellite Services, Inc. and Lenfest
Communications, Inc.
30
<PAGE>
*10.6 Lease, dated as of May 1, 1990, by and between H.F. Lenfest and
Marguerite Lenfest and Suburban Cable TV Co. Inc.
*10.7 Lease, dated as of May 1, 1990, by and between H.F. Lenfest and
Marguerite Lenfest and Suburban Cable TV Co. Inc.
*10.8 Lease, dated as of May 24, 1990, by and between H.F. Lenfest
and Marguerite Lenfest and MicroNet, Inc.
*10.9 Lease, dated as of June 20, 1991, as amended January 1, 1995,
by and between H.F. Lenfest and Marguerite Lenfest and StarNet,
Inc. (as successor to NuStar).
*10.10 Supplemental Agreement, dated December 15, 1981, by and between
TCI Growth, Inc., H.F. Lenfest, Marguerite Lenfest and Lenfest
Communications, Inc. and Joinder Agreement executed by LMC
Lenfest, Inc.
*10.11 Amendment to Supplemental Agreement, dated May 4, 1984 between
Lenfest Communications, Inc. and TCI Growth, Inc.
*10.12 Agreement, dated July 1, 1990, between H.F. Lenfest, Marguerite
B. Lenfest, Diane A. Lenfest, H. Chase Lenfest, Brook J.
Lenfest and the Lenfest Foundation, Telecommunications, Inc.
and Liberty Media Corporation.
*10.13 Agreement and Consent, dated as of November 1, 1990, by and
among TCI Development Corporation, TCI Holdings, Inc., TCI
Liberty, Inc., Liberty Cable, Inc., H.F. Lenfest, Marguerite B.
Lenfest, H. Chase Lenfest, Brook J. Lenfest, Diane A. Lenfest
and Lenfest Communications, Inc.
*10.14 Letter Agreement, dated as of December 18, 1991, among Liberty
Media Corporation, Lenfest Communications, Inc., Marguerite B.
Lenfest, Diane A. Lenfest, H. Chase Lenfest, Brooke J. Lenfest
and the Lenfest Foundation.
*10.15 Irrevocable Proxies of H. Chase Lenfest, Diane A. Lenfest and
Brook J. Lenfest, each dated March 30, 1990.
*10.16 Partnership Agreement of L-TCI Associates, dated April, 1993,
between Lenfest International, Inc. and UA-France, Inc.
*10.17 Stock Pledge Agreement, dated May 28, 1993, between Lenfest
York, Inc. and CoreStates Bank, N.A., as Collateral Agent.
*10.18 Pledge Agreement, dated July 29, 1994, between Lenfest Raystay
Holdings, Inc. and Farmers Trust Company as Collateral Agent.
31
<PAGE>
*10.19 Agreement, dated September 30, 1986, between Lenfest
Communications, Inc. and Tele-Communications, Inc.
*10.20 Agreement for the Sale of Advertising on Cable Television
Stations, dated as of November 25, 1991 between Suburban Cable
TV Co. Inc. and Cable AdNet Partners.
**10.21 Letter Agreement, dated November 8, 1995, between the Company
and The Prudential Insurance Company of America. (In accordance
with Item 601 of Regulation S-K, agreements between the Company
and J.P. Morgan Investment Management Co. and Banker's Trust
have not been filed because they are identical in all material
respects to the filed exhibit.)
**10.22 Letter Agreement, dated November 8, 1995, between the Company
and The Prudential Insurance Company of America. (In accordance
with Item 601 of Regulation S-K, agreements between the Company
and MBL Life Assurance Corp., Full & Co., AUSA Life Insurance
Company, Inc. and Equitable Life Assurance Society have not
been filed because they are identical in all material respects
to the filed exhibit.)
**10.23 Letter Agreement, dated October 31, 1995, between the Company
and PPM America. (In accordance with Item 601 of Regulation
S-K, agreements between the Company and Unum Life Insurance
Company of America and First Unum Life Insurance Company, New
York Life Insurance Co., SAFECO Life Insurance Co., American
Enterprise Life Insurance Company, IDS Life Insurance Company
of New York and Teachers Insurance and Annuity Association of
America have not been filed because they are identical in all
material respects to the filed exhibit.)
**10.24 Letter Agreement, dated November 9, 1995, between the Company
and Unum Life Insurance Company of America and First Unum Life
Insurance Company.
**10.25 Credit Agreement, dated as of December 14, 1995, among Lenfest
Communications, Inc., The Toronto-Dominion Bank, PNC Bank,
National Association and NationsBank of Texas, N.A., as Arranging
Agents, the Lenders and Toronto-Dominion (Texas), Inc., as
Administrative Agent.
+10.26 First Amendment, dated as of February 29, 1996, to Credit
Agreement, dated as of December 14, 1995, by and among Lenfest
Communications, Inc., The Toronto-Dominion Bank, PNC Bank,
National Association and NationsBank of Texas, N.A., as Arranging
Agents, the Lenders and Toronto-Dominion (Texas), Inc., as
Administrative Agent.
32
<PAGE>
+10.27 Agreement, dated as of February 29, 1996, in favor of the
Company by H.F. Lenfest.
+10.28 Credit Agreement, dated as of February 29, 1996, between
Lenfest Australia, Inc. and The Toronto-Dominion Bank and
NationsBank of Texas, N.A. and Toronto- Dominion (Texas), Inc.,
as Administrative Agent.
+10.29 Sublease Agreement, dated March 21, 1996, between Suburban
Cable TV Co. Inc. and Surgical Laser Technologies, Inc.
+10.30 Letter Agreement, dated November 30, 1995, between the Company
and The Prudential Insurance Company of America.
+10.31 Letter Agreement, dated November 30, 1995, between the Company
and The Prudential Insurance Company of America. (In accordance
with Item 601 of Regulation S-K, agreements between the Company
and MBL Life Assurance Corp. and Full & Co. have not been filed
because they are identical in all material respects to the
filed exhibit.)
++10.32 Form of Second Amendment, dated as of April 29, 1996, to Credit
Agreement, dated as of December 14, 1995, by and among Lenfest
Communications, Inc., The Toronto-Dominion Bank, PNC Bank,
National Association and NationsBank of Texas, N.A., as
Arranging Agents, the Lenders and Toronto-Dominion (Texas),
Inc., as Administrative Agent.
++10.33 Form of Letter Agreement, dated May 2, 1996, between the
Company and The Prudential Insurance Company of America.
++10.34 Form of Letter Agreement, dated May 2, 1996, between the
Company and The Prudential Insurance Company of America. (In
accordance with Item 601 of Regulation S-K, agreements between
the Company and ECM Fund, L.P. I and Equitable Life Assurance
Society have not been filed because they are identical in all
material respects to the filed exhibit.)
++10.35 Form of Senior Subordinated Credit Agreement, dated as of May
2, 1996, between Lenfest Communications, Inc. and The
Toronto-Dominion Bank.
+++10.36 Letter Agreement, dated June 11, 1996, and accepted June 20,
1996, between the Company and MBL Life Assurance Corporation. (In
accordance with Item 601 of Regulation S-K, an agreement between
the Company and The Prudential Insurance Company of America has
not been filed because it is identical in all material respects
to the filed exhibit.)
33
<PAGE>
+++10.37 Letter Agreement, dated June 20, 1996, between the Company and
The Prudential Insurance Company of America.
+++10.38 Credit Agreement, dated June 27, 1996, between the Company, the
Toronto-Dominion Bank, PNC Bank, National Association and
NationsBank of Texas, as Arranging Agents, the Lenders and
Toronto-Dominion (Texas), Inc., as Administrative Agent.
27. Financial Data Schedule.
- ------------------------
* Incorporated by reference to the Company's Registration Statement on
Form S-1, No. 33-96804, declared effective by the Securities and
Exchange Commission on November 8, 1995.
** Incorporated by reference to the Company's Report on Form 10-Q, File
No. 33-96804, dated December 22, 1995, for the quarter ended September
30, 1995.
*** Incorporated by reference to the Company's Report on Form 8-K, File No.
33-96804, dated February 26, 1996.
+ Incorporated by reference to the Company's Report on Form 10-K, File
No. 33-96804, dated March 29, 1996, for the year ended December 31,
1995.
++ Incorporated by reference to the Company's Report on Form 10-Q, File
No. 33-96804, for the quarter ended March 31, 1996.
+++ Incorporated by reference to the Company's Registration Statement on
Form S-4, No. 333-09631, dated August 6, 1996.
(b) Reports on Form 8-K.
On April 26, 1996, the Company filed a Form 8-K/A, amending its Form
8-K filed on February 26, 1996, to provide the required audited financial
statements and the required pro forma financial information in connection with
the previously filed Form 8-K.
On May 13, 1996, the Company filed a Form 8-K/A, amending its Form
8-K filed on March 13, 1996, to provide the required audited financial
statements and the required pro forma financial information in connection with
the previously filed Form 8-K.
34
<PAGE>
SIGNATURE
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.
LENFEST COMMUNICATIONS, INC.
August 14, 1996 By: /s/ Harry F. Brooks
--------------- ---------------------
Date Harry F. Brooks,
Executive Vice President (authorized officer
and Principal Financial Officer)
35
<PAGE>
EXHIBIT INDEX
Exhibit
Number Title or Description Page Number
- ------- -------------------- -----------
27 Financial Data Schedule.
<PAGE>
Exhibit 27. Financial Data Schedule.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
ARTICLE 5 - FINANCIAL DATA SCHEDULE FOR 2ND QUARTER 1996 FORM 10-Q
(DOLLARS IN THOUSANDS)
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONDENSED
CONSOLIDATED BALANCE SHEET AS OF JUNE 30, 1996 AND THE CONSOLIDATED STATEMENT OF
OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 1996 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS
</LEGEND>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 3,242
<SECURITIES> 29,028
<RECEIVABLES> 45,196
<ALLOWANCES> 23,236
<INVENTORY> 3,809
<CURRENT-ASSETS> 0
<PP&E> 663,549
<DEPRECIATION> 279,684
<TOTAL-ASSETS> 1,167,902
<CURRENT-LIABILITIES> 0
<BONDS> 1,269,698
0
0
<COMMON> 2
<OTHER-SE> (193,179)
<TOTAL-LIABILITY-AND-EQUITY> 1,167,902
<SALES> 184,665
<TOTAL-REVENUES> 184,665
<CGS> 3,141
<TOTAL-COSTS> 150,184
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 21,891
<INTEREST-EXPENSE> 47,971
<INCOME-PRETAX> (101,808)
<INCOME-TAX> 3,484
<INCOME-CONTINUING> (98,324)
<DISCONTINUED> 0
<EXTRAORDINARY> (2,484)
<CHANGES> 0
<NET-INCOME> (100,808)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
