<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1997
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 Registrant's
classes of common stock, as of November 14, 1997: 158,896 shares of Common
Stock, $0.01 par value per share. All shares of the Registrant's Common Stock
are privately held, and there is no market price or bid and asked price for said
Common Stock.
<PAGE>
LENFEST COMMUNICATIONS, INC.
Index
<TABLE>
<CAPTION>
Part I. Financial Information Page
----
<S> <C> <C>
Item 1. Financial Statements
Report on Review by Independent Certified Public Accountants 2
Condensed Consolidated Balance Sheets as of September 30, 1997
(unaudited) and as of December 31, 1996 3
Consolidated Statements of Operations for the three months and nine
months ended September 30, 1997 (unaudited) and September 30,
1996 (unaudited) 5
Consolidated Statements of Cash Flows for the nine months
ended September 30, 1997 (unaudited) and September 30, 1996
(unaudited) 6
Notes to Condensed Consolidated Financial Statements
(unaudited) 8
Statement by Management Concerning Review of Interim Financial
Information by Independent Certified Public Accountants 17
Item 2. Management's Discussion and Analysis of Financial Condition and 18
Results of Operations
Part II. Other Information
Item 5. Other Information 24
Item 6. Exhibits and Reports on Form 8-K 25
</TABLE>
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
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 September 30, 1997, and the
related consolidated statements of operations for the three month and nine month
periods ended September 30, 1997 and 1996, and the consolidated statements of
cash flows for the nine months ended September 30, 1997 and 1996, included in
the accompanying Securities and Exchange Commission Form 10-Q for the period
ended September 30, 1997. These condensed consolidated financial statements are
the responsibility of the Company's management.
We conducted our reviews 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 reviews, 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, 1996, 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 March 24, 1997, we expressed an unqualified opinion on those consolidated
financial statements. We also audited the adjustments described in Note 2 that
were applied to restate the 1996 financial statements. In our opinion, the
information set forth in the accompanying condensed consolidated balance sheet
as of December 31, 1996, as restated, is fairly stated in all material respects
in relation to the consolidated balance sheet from which it has been derived.
As discussed in Note 2 to the financial statements, the Company has sold
substantially all of the assets of MicroNet, Inc. and MicroNet Delmarva
Associates, LP, wholly owned subsidiaries of the Company. Prior period financial
statements have been restated to reflect the continuing operations of the
Company.
/s/ Pressman Ciocca Smith LLP
Hatboro, Pennsylvania
November 10, 1997
<PAGE>
LENFEST COMMUNICATIONS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
<TABLE>
<CAPTION>
September December
30, 1997 31, 1996
-------------- --------------
(Unaudited) (*)
<S> <C> <C>
ASSETS
Cash and cash equivalents $ 9,441 $ 19,162
Marketable securities 18,133 79,830
Accounts receivable, trade and other, less allowance for
doubtful accounts of $2,702 in 1997 and $1,985 in 1996 24,867 19,885
Inventories 3,581 2,757
Prepaid expenses 3,938 2,364
Property and equipment, net of accumulated depreciation
of $347,413 in 1997 and $288,869 in 1996 409,727 372,387
Investments, principally in affiliates, and related receivables 57,174 51,743
Goodwill, net of amortization of $27,537 in 1997 and
$25,202 in 1996 71,755 74,404
Deferred franchise costs, net of amortization of $175,874 in
1997 and $144,563 in 1996 522,835 494,568
Other intangible assets, net of amortization of $14,892 in 1997
and $11,540 in 1996 23,138 24,908
Deferred Federal tax asset, net 64,655 52,257
Net assets of discontinued operations 17,885 20,971
Other assets 4,271 6,552
-------------- --------------
$ 1,231,400 $ 1,221,788
============== ==============
</TABLE>
(*) Condensed from audited and restated financial statements.
See independent certified public accountants' review report and accompanying
notes.
<PAGE>
LENFEST COMMUNICATIONS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS, (continued)
(Dollars in thousands)
<TABLE>
<CAPTION>
September December
30, 1997 31, 1996
-------------- --------------
(Unaudited) (*)
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Notes payable and obligations under capital leases $ 1,341,529 $ 1,312,863
Accounts payable and accrued expenses - unrelated parties 67,652 38,781
Accounts payable - affiliate 12,889 12,855
Deferred state tax liability 8,716 9,066
Customer service prepayments and deposits 7,401 8,614
Investment in Garden State Cablevision, L.P. 76,499 72,454
----------- -----------
TOTAL LIABILITIES 1,514,686 1,454,633
MINORITY INTEREST in equity of consolidated subsidiaries 65 945
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 (loss) on marketable securities, net of
deferred taxes 1,519 (9,866)
Accumulated deficit (335,619) (274,673)
----------- -----------
(283,351) (233,790)
----------- -----------
$ 1,231,400 $ 1,221,788
=========== ===========
</TABLE>
(*) Condensed from audited and restated financial statements.
See independent certified public accountants' review report and accompanying
notes.
<PAGE>
LENFEST COMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(Dollars in thousands)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
------------------------------ ------------------------------
1997 1996 1997 1996
------------ ------------- ------------ -------------
<S> <C> <C> <C> <C>
REVENUES $ 112,351 $ 102,064 $ 332,136 $ 279,929
OPERATING EXPENSES
Service 8,151 7,328 26,057 20,083
Programming - from affiliate 15,767 15,694 47,048 41,009
Programming - other cable 6,718 5,725 21,837 16,241
Selling, general and administrative 26,857 22,967 75,510 61,706
Direct costs - non-cable 5,052 6,561 15,617 16,240
Depreciation 19,710 17,823 57,828 48,187
Amortization 12,461 12,339 38,410 31,538
----------- ------------- ------------ -------------
94,716 88,437 282,307 235,004
----------- ------------- ------------ -------------
OPERATING INCOME 17,635 13,627 49,829 44,925
OTHER INCOME (EXPENSE)
Interest expense (30,956) (29,774) (91,820) (77,295)
Equity in net (losses) of unconsolidated
affiliates (2,503) (4,734) (3,321) (13,941)
Recognized (loss) on decline in market value
of securities - Australis Media Limited (32,457) - (32,457) (66,945)
Elimination of provision for reduction in value
of note receivable and accrued interest - 19,685 - -
Gain on disposition of partnership interest - - - 7,210
Other income and expense (net) 878 686 2,236 4,121
----------- ------------ ----------- ------------
(65,038) (14,137) (125,362) (146,850)
----------- ------------ ----------- ------------
(LOSS) BEFORE INCOME TAXES (47,403) (510) (75,533) (101,925)
INCOME TAX BENEFIT 5,308 6,217 13,434 9,607
----------- ------------ ----------- ------------
INCOME (LOSS) FROM
CONTINUING OPERATIONS (42,095) 5,707 (62,099) (92,318)
DISCONTINUED OPERATIONS
Income (loss) from operations of MicroNet,
Inc. (net of applicable income taxes of
$449 in 1997 and $45 in 1996) (117) 181 1,153 (118)
----------- ------------ ----------- ------------
INCOME (LOSS) BEFORE
EXTRAORDINARY LOSS (42,212) 5,888 (60,946) (92,436)
EXTRAORDINARY LOSS
Early extinguishment of debt, net of applicable
income taxes of $1,337 - - - (2,484)
----------- ------------ ----------- ------------
NET INCOME (LOSS) (42,212) 5,888 (60,946) (94,920)
BEGINNING ACCUMULATED DEFICIT (293,407) (244,719) (274,673) (143,911)
----------- ------------ ----------- ------------
ENDING ACCUMULATED DEFICIT $ (335,619) $ (238,831) $ (335,619) $ (238,831)
=========== ============ =========== ============
</TABLE>
See independent certified public accountants' review report and accompanying
notes.
<PAGE>
LENFEST COMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Dollars in thousands)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
-------------------------------------
1997 1996
-------------- --------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net (loss) $ (60,946) $ (94,920)
Adjustments to reconcile net (loss) to net cash provided
by operating activities
Depreciation and amortization 96,238 79,725
Extraordinary loss - 3,821
Accretion of debt discount 1,389 709
Accretion of discount on marketable securities (net) (477) -
Net (gains) on sales of marketable securities (361) (307)
Recognized loss on decline in market value of securities 32,457 66,945
(Gain) on disposition of partnership interest - (7,210)
Deferred income tax (benefit) (13,250) (12,900)
(Gain) on sale of property and equipment (28) (186)
Equity in net losses of unconsolidated affiliates 3,321 13,941
Minority interest (880) (1,007)
Change in net assets of discontinued operations 3,086 (158)
Changes in operating assets and liabilities, net of effects
from acquisitions
Accounts receivable (4,982) 4,183
Accrued interest receivable - (1,812)
Inventories (824) 1,780
Prepaid expenses (1,574) 1,533
Other assets 2,281 (630)
Accounts payable and accrued expenses:
Affiliate 34 10,395
Unrelated parties 28,871 23,562
Customer service prepayments and deposits (1,213) 627
------------- -------------
NET CASH PROVIDED BY
OPERATING ACTIVITIES 83,142 88,091
------------- -------------
</TABLE>
See independent certified public accountants' review report and accompanying
notes.
<PAGE>
LENFEST COMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Dollars in thousands)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
-------------------------------------
1997 1996
-------------- --------------
<S> <C> <C>
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisitions of cable systems $ (84,500) $ (604,032)
Non cable acquisitions - (5,600)
Purchases of property and equipment (69,124) (37,310)
Purchases of marketable securities (1,700) (582)
Proceeds from sales of property and equipment 199 256
Proceeds from sales of marketable securities 43,665 1,662
Proceeds from transfer of cable system - 4,500
Loans to Australis Media Limited - (41,139)
Proceeds from note receivable - 15,500
Investments in unconsolidated affiliates (6,637) (4,111)
Distributions from unconsolidated affiliates 475 1,922
(Increase) in other intangible assets - investing (3,103) (4,496)
Loans and advances to unconsolidated affiliates (1,350) (259)
Loans and advances from unconsolidated affiliates 2,804 2,035
------------- -------------
NET CASH (USED BY)
INVESTING ACTIVITIES (119,271) (671,654)
CASH FLOWS FROM FINANCING ACTIVITIES
Increases in debt 105,000 906,855
Early extinguishment of debt - (448,821)
Other debt reduction:
Notes (77,000) (25,500)
Obligations under capital leases (1,245) (152)
(Increase) in other intangible assets - financing (347) (6,392)
------------- -------------
NET CASH PROVIDED BY
FINANCING ACTIVITIES 26,408 425,990
------------- -------------
NET (DECREASE) IN CASH (9,721) (157,573)
CASH AND CASH EQUIVALENTS AT BEGINNING
OF PERIOD 19,162 164,422
------------- -------------
CASH AND CASH EQUIVALENTS
AT END OF PERIOD $ 9,441 $ 6,849
============= =============
</TABLE>
See independent certified public accountants' review report and accompanying
notes.
<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
September 30, 1997, the consolidated results of operations for the three and
nine months ended September 30, 1997 and 1996, and consolidated cash flows for
the nine months ended September 30, 1997 and 1996.
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 for the period ended December 31, 1996, dated March 26, 1997. The
results of operations for the periods ended September 30, 1997 and 1996, are not
necessarily indicative of operating results for the full year.
Prior period financial statements have been restated to reflect the continuing
operations of the Company. Certain prior period amounts have been reclassified
to conform with the 1997 presentation.
NOTE 2 - DISCONTINUED OPERATIONS
Effective October 31, 1997, MicroNet, Inc. and MicroNet Delmarva Associates, LP
(collectively, "MicroNet") each a wholly owned subsidiary of the Company, sold
substantially all of their assets and Suburban Cable TV Co. Inc., Lenfest
Atlantic, Inc. and Lenfest New Castle County sold certain of their towers. The
purchase price was approximately $70.3 million, subject to adjustments. The sale
represents the disposition of the major segment of the Company's tower rental
and microwave service businesses. The assets sold were not material to the cable
television operations of the Company. The net assets of MicroNet have been
separately classified in the accompanying consolidated balance sheets and
consist of the following at September 30, 1997 and December 31, 1996:
September December
30, 1997 31, 1996
----------- -------------
(Dollars in thousands)
Cash $ 1,369 $ 1,471
Accounts receivable 3,154 2,916
Prepaid expenses 359 460
Property and equipment 15,569 16,642
Goodwill 3,734 4,120
Other intangible assets 920 1,168
Deferred federal tax asset 3,363 3,363
Other assets 76 60
Notes payable (7,000) (7,000)
Accounts payable and accrued expenses (3,060) (1,596)
Deferred state tax liability (99) (99)
Customer service prepayments (500) (534)
-------- --------
$ 17,885 $ 20,971
======== ========
<PAGE>
LENFEST COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 2 DISCONTINUED OPERATIONS, (continued)
Operating results of MicroNet for the three month and nine month periods ended
September 30, 1997 and 1996, are shown separately in the accompanying
consolidated statements of operations and consist of the following:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
------------------------------ -----------------------------
1997 1996 1997 1996
------------ ------------- ------------ ------------
<S> <C> <C> <C> <C>
Revenues $ 4,457 $ 3,907 $ 13,853 $ 10,707
Operating expenses (3,524) (2,527) (9,028) (7,411)
Depreciation and amortization (951) (893) (2,727) (2,767)
----------- ------------ ----------- -----------
OPERATING INCOME (LOSS) (18) 487 2,098 529
Interest expense (176) (266) (526) (716)
Other income - 9 30 24
Income tax (expense) benefit 77 (49) (449) 45
----------- ------------ ----------- -----------
NET INCOME (LOSS) $ (117) $ 181 $ 1,153 $ (118)
=========== ============ =========== ===========
</TABLE>
NOTE 3 - INVENTORIES
Inventories are stated at the lower of cost or market on a first-in, first-out
basis. Inventories consist of equipment assembled and sold by the Company's
wholly owned non-cable subsidiaries.
Inventories are summarized as follows:
<TABLE>
<CAPTION>
September December
30, 1997 31, 1996
-------------- --------------
(Dollars in thousands)
<S> <C> <C>
Raw materials $ 2,832 $ 2,285
Finished goods and work-in process 749 472
-------------- --------------
$ 3,581 $ 2,757
============== ==============
</TABLE>
NOTE 4 - SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
------------------------------------
1997 1996
-------------- --------------
(Dollars in thousands)
<S> <C> <C>
Cash paid during the period for
Interest $ 68,049 $ 53,294
============== ==============
Income taxes $ 1,522 $ 211
============== ==============
</TABLE>
<PAGE>
LENFEST COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, (continued)
(Unaudited)
NOTE 4 - SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION, (continued)
Supplemental Schedule Relating to Acquisitions
<TABLE>
<CAPTION>
1997 1996
-------------- --------------
(Dollars in thousands)
<S> <C> <C>
Property and equipment $ 25,350 $ 170,085
Goodwill and other intangible assets - 32,543
Deferred franchise costs 59,150 398,260
Equity interests in affiliates - 2,877
Other assets - 5,867
-------------- --------------
$ 84,500 $ 609,632
============== ==============
</TABLE>
Noncash Investing and Financing Transactions
On September 30, 1996, the Company contributed the assets of a cable television
system for a partnership interest. Also, in September 1996, the Company
contributed the assets that comprise the business known as "the Barker" to a
newly formed joint venture.
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 $33,194,000, its
41.67% partnership interest in Bay Cable Advertising with a book value of
$3,545,000 and a fair market value of $10,755,000, and the right to receive
assets of a cable television system located in Fort Collins, CO, which right was
acquired for $54,385,000, less settlement adjustments of $8,799,000, for the
assets of a cable television system serving Wilmington, Delaware and the
surrounding area. 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
$7,210,000, which represents the excess of the market value of the partnership
interest over its book value, has been included in the statements of operations.
In 1997 and 1996, the Company incurred additional capital lease obligations of
$523,000 and $968,000, respectively.
NOTE 5 - NEW BUSINESS AND ACQUISITIONS
On January 10, 1997, the Company acquired a cable television system from Cable
TV Fund 14-A, Ltd., an affiliate of Jones Intercable, Inc., for approximately
$84,500,000, subject to certain adjustments. The system, located in
Turnersville, New Jersey, passed approximately 47,000 homes and served
approximately 36,900 basic customers. For financial reporting purposes, the
Company accounts for the acquisition of these assets under the purchase method.
This acquisition was funded in part by borrowings under the bank credit
facility.
On September 30, 1996, the Company, through its subsidiary, Lenfest Advertising,
Inc., d/b/a Radius Communications, ("Radius"), acquired the assets of Metrobase
Cable Advertising from a subsidiary of Harron Communications Corp. for
approximately $4,500,000. For financial reporting purposes, the Company accounts
for the acquisition of these assets under the purchase method. This acquisition
was funded from available cash.
<PAGE>
LENFEST COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, (continued)
(Unaudited)
NOTE 5 - NEW BUSINESS AND ACQUISITIONS, (continued)
On September 30, 1996, the Company through its newly formed subsidiary, Lenfest
Clearview, Inc. ("Clearview") completed the acquisition of a 30% general
partnership interest in a newly formed general partnership, Clearview Partners
(the "Partnership"). The Company contributed $500,000 and its right to receive
the assets of the Gettysburg, PA cable television system (see acquisition from
Sammons Communications, Inc. discussed below) and its right to exchange the
assets of the Gettysburg system for the assets of the Stewartstown, PA cable
television system owned by GS Communications, Inc. The Company received a
payment of $4,500,000 from GS Communications, Inc. in connection with these
transactions. No gain or loss was recorded on the exchange. Clearview CATV,
Inc., an unaffiliated company, contributed the assets and certain liabilities of
its cable television system located in Maryland and Pennsylvania to the
Partnership for a 70% general partnership interest. The Partnership's systems
passed approximately 13,400 homes and served approximately 9,650 basic
customers. The Company reports its proportionate share of partnership net income
(loss) on the equity method. The Company's cash contribution was made from
available cash.
On September 11, 1996, StarNet, Inc. ("StarNet"), a wholly owned subsidiary of
the Company, entered into a joint venture with Prevue Networks, Inc. ("Prevue"),
a wholly owned subsidiary of United Video Satellite Group, Inc. (UVSG) to
combine the two companies' pay-per-view promotion services. StarNet contributed
its Barker(R) service to the joint venture and received a 28% partnership
interest. The new joint venture, Sneak Prevue, L.L.C., is based in Tulsa,
Oklahoma and is managed and controlled by UVSG. The Company reports its
proportionate share of net income (loss) on the equity method.
On April 30, 1996, the Company acquired from Tri-County Cable Television
Company, an affiliate of Time Warner, its Salem, NJ cable television system for
approximately $16,000,000. The system passed approximately 10,600 homes and
served approximately 7,700 basic customers. On the same date, the Company
acquired from Shore Cable Company of New Jersey its Ventnor, NJ cable television
system for approximately $11,000,000. The system passed approximately 6,100
homes and served approximately 5,000 basic customers. For financial reporting
purposes, the Company accounts for the acquisition of these assets under the
purchase method. These acquisitions were funded in part by borrowings under the
bank credit facility existing at that date.
On February 29, 1996, the Company acquired the assets of four cable television
systems and equity interests in three affiliates from Sammons Communications,
Inc. for approximately $531,000,000. The systems, located in Bensalem and
Harrisburg, PA and in Vineland and Atlantic City/Pleasantville, N.J., passed
approximately 358,000 homes and served approximately 282,000 basic customers.
The equity interests consist of a 50% partnership interest in Hyperion
Telecommunications of Harrisburg, a 50% partnership interest in Atlantic
Communication Enterprises and a 25% partnership interest in Cable Adcom. For
financial reporting purposes, the Company accounted for the acquisition of these
assets under the purchase method. 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. The purchase price included the assets of a fifth system, located
in Gettysburg, PA, to which the Company did not take title. The Company managed
the system from February 29, 1996, until the assets of the system were
transferred to GS Communications, Inc. on September 30, 1996.
<PAGE>
LENFEST COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, (continued)
(Unaudited)
NOTE 5 - NEW BUSINESS AND ACQUISITIONS, (continued)
In February 1996, the Company completed an exchange transaction with a
subsidiary of Tele-Communications, Inc. ("TCI") whereby the Company exchanged
the assets of its cable television systems in the East San Francisco Bay area
with a book value of $33,194,000, its 41.67% partnership interest in Bay Cable
Advertising with a book value of $3,545,000 and a fair market value of
$10,755,000, and the right to receive assets of a cable television system
located in Fort Collins, CO, which right was acquired for $54,385,000, less
settlement adjustments of $8,799,000, for the assets of a cable television
system, serving Wilmington, Delaware and the surrounding area. 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 $7,210,000, which represents
the excess of the market value of the partnership interest over its book value,
has been included in the statements of operations. The acquisition of the assets
of these cable systems was financed with proceeds from the Company's public
offering of debt in November 1995.
On February 12, 1996, the Company purchased the Philadelphia area assets of
Cable AdNet, Inc., a subsidiary of TCI for approximately $1,100,000.
NOTE 6 - MARKETABLE SECURITIES
The Company's investment in the securities of Australis Media Limited
("Australis") consists of 77,982,000 shares of voting common stock and
269,427,000 non-voting convertible debentures. The debentures are classified as
equity securities by Australis as the debentures are unsecured non-voting
securities that have interest entitlements equivalent in both timing and amount
to the dividend entitlements attaching to common stock and will be subordinated
to all creditors other than common stock shareholders upon any liquidation or
winding up. The convertible debentures will not be redeemable for cash but will
be convertible into ordinary shares on a one-for-one basis providing that
certain conditions are met.
The aggregate cost basis and market values of the securities at September 30,
1997 and December 31, 1996 are as follows:
<TABLE>
<CAPTION>
Gross
Aggregate Unrealized
Cost Gain Fair
Basis (Loss) Value
-------------- -------------- --------------
<S> <C> <C> <C>
September 30, 1997 (Dollars in thousands)
Australis Media Limited common stock $ 2,720 $ - $ 2,720
Australis Media Limited convertible debentures 9,396 - 9,396
Other marketable equity securities 3,680 2,337 6,017
-------------- ------------- --------------
$ 15,796 $ 2,337 $ 18,133
============== ============= ==============
December 31, 1996
Australis Media Limited common stock $ 10,885 $ (2,505) $ 8,380
Australis Media Limited convertible debentures 33,687 (7,952) 25,735
Australis Holdings Pty Limited senior secured
discount notes 41,026 - 41,026
Other marketable equity securities 3,781 908 4,689
-------------- ------------- --------------
$ 89,379 $ (9,549) $ 79,830
============== ============= ==============
</TABLE>
<PAGE>
LENFEST COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, (continued)
(Unaudited)
NOTE 6 - MARKETABLE SECURITIES, (continued)
In December 1993, the Company acquired 11,000,000 shares of the voting stock and
173,000,000 non-voting debentures of Australis Media Limited ("Australis") for
$90,972,000. As of August 12, 1996, the Australis securities held by the Company
had a market value of approximately $24,000,000. Due to uncertainty regarding
the long-term financing of Australis, the Company determined that the decline in
market value was other than temporary and, accordingly, the Company recognized a
loss of $66.9 million, as of June 30, 1996, resulting from a write-down of the
Australis investment from cost. The write-down established a new cost basis in
the Australis investment.
On October 31, 1996, the Company purchased senior secured discount notes of
Australis Holdings Pty Limited, with a face value of $71,339,000 and 71,339
warrants of Australis for an aggregate of $40,000,000. These discount notes and
warrants were sold in May 1997, for $41,503,000. In connection with the
Australis long-term financing, the Company purchased 43,482,000 shares of voting
stock and 49,188,779 non-voting debentures for $40,000,000. At the time of the
transaction, these securities had a fair value of $13,600,000, and the Company
recognized a loss of $26,400,000.
On December 23, 1996, the Company received 18,000,000 shares of voting stock and
52,238,547 non-voting debentures of Australis in connection with the termination
of a technical services agreement with Australis and also received 500,000
shares of voting stock for late repayment of a loan to the Company by Australis.
The securities were recorded at the fair value when received, which was
$7,000,000 and the income recognized has been offset against the recognized
losses on the decline in market value. On December 23, 1996, the Company
converted 5,000,000 non-voting debentures of Australis into 5,000,000 shares of
voting stock.
As of November 10, 1997, the Australis securities held by the Company had a
market value of approximately $12,000,000. The Company determined that the
decline in market value was other than temporary and, accordingly, the Company
recognized a loss of $32.5 million, as of September 30, 1997, resulting from a
write-down of the Australis investment. The write-down establishes a new cost
basis in the Australis investment.
In accordance with the Statement of Financial Accounting Standards No. 115,
"Accounting for Certain Investments in Debt and Equity Securities", all of the
Company's securities are classified as available for sale. Net realized gains
from the sale of marketable securities, in the amount of $361,000 and $307,000
are included in the accompanying consolidated statements of operations for the
nine months ended September 30, 1997 and 1996, respectively. The specific
identification method is used to determine the cost of each security at the time
of sale.
NOTE 7 - INVESTMENTS, PRINCIPALLY IN AFFILIATES
The Company, through several subsidiaries, owns non-controlling interests in
several partnerships and corporations. 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.
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 serving
approximately 204,000 customers in southern New Jersey at September 30, 1997.
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 $76,499,000 and $72,454,000 at September 30,
1997 and December 31, 1996, respectively.
<PAGE>
LENFEST COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, (continued)
(Unaudited)
NOTE 7 - INVESTMENTS, PRINCIPALLY IN AFFILIATES, (continued)
Summarized statements of operations of Garden State, accounted for under the
equity method for the nine months ended September 30, 1997 and 1996, are as
follows:
<TABLE>
<CAPTION>
1997 1996
-------------- --------------
(Dollars in thousands)
<S> <C> <C>
Results of Operations
Revenues $ 81,754 $ 74,863
Operating expenses (34,240) (32,548)
Depreciation and amortization (33,853) (36,367)
------------- -------------
OPERATING INCOME 13,661 5,948
Interest expense (17,049) (12,338)
Other expense (4,905) (4,492)
------------- -------------
NET LOSS $ (8,293) $ (10,882)
============= =============
</TABLE>
NOTE 8 - LONG-TERM DEBT
Notes payable and obligations under capital leases consisted of the following at
September 30, 1997 and December 31, 1996:
<TABLE>
<CAPTION>
September 30, December 31,
1997 1996
-------------- --------------
(Dollars in thousands)
<S> <C> <C>
8 3/8% senior notes due November 1, 2005 $ 686,793 $ 685,970
10 1/2% senior subordinated notes due June 15, 2006 293,670 293,105
Bank credit facility 285,000 230,000
11.30% senior promissory notes due September 1, 2000 45,000 60,000
11.84% senior promissory notes due May 15, 1998 10,500 21,000
9.93% senior promissory notes due September 30, 2001 11,625 13,125
Obligations under capital leases 8,941 9,663
-------------- --------------
$ 1,341,529 $ 1,312,863
============== ==============
</TABLE>
NOTE 9 - CORPORATE INCOME TAXES
The Company uses the asset and liability method of accounting for income taxes
in accordance with Financial Accounting Standards Board Statement (SFAS) No.
109, "Accounting for Income Taxes". SFAS 109 requires recognition of deferred
tax assets and liabilities for the expected future tax consequences of events
that have been recognized in the financial statement or tax returns. Under this
method, deferred tax liabilities and assets are determined based on the
differences between the financial statement carrying amounts and tax bases of
assets and liabilities using enacted tax rates in effect in the years in which
the differences are expected to reverse. Differences between financial reporting
and tax bases arise most frequently from differences in timing of income and
expense recognition. Deferred income tax expense is measured by the change in
the net deferred income tax asset or liability during the period.
The net income tax benefit differs from amounts expected by applying the U.S.
Federal income tax rate of 35% to loss before income taxes primarily from
nondeductible amortization on goodwill and certain other intangibles and
provision for state income taxes.
<PAGE>
LENFEST COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, (continued)
(Unaudited)
NOTE 10 - COMMITMENTS AND CONTINGENCIES
The Federal Communications Commission ("FCC") has adopted regulations 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 basic service, equipment and installation rates
under the jurisdiction of local franchising authorities and its tier service
rates under the jurisdiction of 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 rate regulations adopt a benchmark price cap system
for measuring the reasonableness of existing basic and tier service rates.
Alternatively, cable operators have the opportunity to make cost-of-service
showings which, in some cases, may justify rates above the applicable
benchmarks. The rules also require that charges for cable-related equipment
(e.g., converter boxes and remote control devices) and installation services be
unbundled from the provision of cable service and based upon actual costs plus a
reasonable profit. The regulations also provide that future rate increases may
not exceed an inflation-indexed amount, plus increases in certain costs beyond
the cable operator's control, such as taxes, franchise fees and increased
programming costs. Cost based adjustments to these capped rates can also be made
in the event a cable operator adds or deletes channels. In addition, new product
tiers consisting of services new to the cable system can be created free of rate
regulation as long as certain conditions are met, such as not moving services
from existing tiers to the new tier. There is also a streamlined cost-of-service
methodology available to justify a rate increase on basic and regulated nonbasic
tiers for "significant" system rebuilds or upgrades.
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 Cable Programming Services Tier are subject to review by
the FCC if a complaint has been filed by a franchising authority. The
appropriate franchise authority, if such authority has been certified, may
regulate the Basic Service Tier, equipment charges and installation rates. 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 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 November 10, 1997, Australis announced that it was unable to obtain the
commitment of either News Corporation Limited ("News") or Telstra Corporation
Limited ("Telstra") to complete the previously announced merger of Australis and
Foxtel after November 15, 1997, the date required by the merger agreement. As a
result, Australis said that it was likely to commence insolvency proceedings
prior to December 1, 1997. Australis also said it will continue to work closely
with its U.S. bondholders and representatives of certain Hollywood studios in an
effort to ensure that, if Australis commences insolvency proceedings, it will
continue to supply Foxtel with programming under Australis' licensing
arrangements.
If Australis commences insolvency proceedings, the Company's investment in
Australis' equity securities could be lost in its entirety. However, so long as
Australis is able to supply Foxtel with programming and pays its program
suppliers, the Company should not be called upon to indemnify H.F. Lenfest under
his guarantee described below.
<PAGE>
LENFEST COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, (continued)
(Unaudited)
NOTE 10 - COMMITMENTS AND CONTINGENCIES, (continued)
Mr. Lenfest, on behalf of the Company, and TCI have jointly and severally
guaranteed an aggregate of $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 payments made by Australis under the licenses and
with the provision of one or more letters of credit, which letters of credit may
not exceed $33.5 million. The Company has agreed to indemnify Mr. Lenfest
against loss from such guaranty to the fullest extent permitted under the
Company's debt obligations. Under the terms of the Company's 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 with respect to the guarantees. Effective March 6,
1997, Mr. Lenfest released the parent Company and its cable operating
subsidiaries from their indemnity obligation until the last to occur of
September 30, 1997, and the last day of any fiscal quarter during which the
Company could incur the indemnity obligation without violating the terms of its
bank credit facility. Certain of the Company's non-cable subsidiaries have
indemnified Mr. Lenfest for his obligations under the guarantee under an
agreement dated June 5, 1997.
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. $521
million as of September 30, 1997). The Plaintiff also alleges that Australis and
Mr. Lenfest owed to him a fiduciary duty and that both parties breached this
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. They
are defending 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, on behalf of L-TCI Associates, is scheduled to pay 15.6 million
French francs (approximately U.S. $2.6 million as of September 30, 1997)
representing the balance of its five year capital commitment to Videopole, in
1997. Videopole has requested that its shareholders fund proportionately its
projected outstanding loans at December 31, 1997 of 181.5 million FF
(approximately U.S. $30.6 million as of September 30, 1997) by making
shareholder loans to Videopole. The Company, as the managing partner of L-TCI
Associates, has informed Videopole that it does not believe it has a legal
obligation to make such a shareholder loan and does not intend to do so.
NOTE 11 - SUBSEQUENT EVENTS
On October 31, 1997, the Company terminated all four interest rate swap
agreements, with an aggregate notional amount of $300,000,000, and received
$8,750,000 in consideration of early termination.
On November 7, 1997, the Company paid down $45,000,000 of its bank debt from net
proceeds received from the sale of its tower rental and microwave service
businesses (See Note 2).
<PAGE>
LENFEST COMMUNICATIONS AND SUBSIDIARIES
STATEMENT BY MANAGEMENT CONCERNING REVIEW OF
INTERIM FINANCIAL INFORMATION BY INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANTS
The September 30, 1997 and 1996 condensed consolidated financial statements
included in this filing on Form 10-Q have been reviewed by Pressman Ciocca Smith
LLP, Independent Certified Public Accountants, in accordance with established
professional standards and procedures for such a review.
The review report of Pressman Ciocca Smith LLP is included in Part I, Item 1.
<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, remote control devices and
installations).
The Company has generated increases in revenues and EBITDA for the
three and nine months ended September 30, 1997 primarily due to increases in
monthly revenue per customer and internal customer growth. As used herein,
"EBITDA" represents consolidated net income plus the provision for income taxes,
interest expense, depreciation, amortization, any other non-cash items reducing
consolidated net income and cash actually distributed by an unconsolidated
affiliate, minus all non-cash items increasing consolidated net income. 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.
RESULTS OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30, 1997 COMPARED WITH THREE MONTHS ENDED
SEPTEMBER 30, 1996
CONSOLIDATED RESULTS
Revenues for the Company increased 10.1% to $112.4 million for the 1997
three-month period as compared to the 1996 three-month period, primarily as a
result of an 11.5% increase in revenues from the Company's Core Cable Television
Operations. The increase in revenue was primarily attributable to rate increases
and an increase in the number of customers through internal customer growth and
the acquisition of a cable system in January 1997 (the "Turnersville
Acquisition").
Operating expenses increased 7.1% to $94.7 million (84.3% of total
revenues) in the 1997 three-month period as compared to the 1996 three-month
period primarily due to Core Cable Television operations and, to a lesser
extent, decreased expenses in the Unrestricted Subsidiaries, as described below.
Interest expense increased 4.0% to $31.0 million due to an increase in
average indebtedness to $1,352.9 million for the 1997 three-month period from
$1,258.4 million for the 1996 three-month period as a result of borrowings in
connection with the Turnersville Acquisition and the investments in Australis
Media Limited (Australis) made on October 31, 1996.
Equity in net losses of unconsolidated affiliates decreased 47.1% to
$2.5 million primarily due to decreased losses, directly and indirectly, from
The Box Worldwide, Inc. (previously named Video Jukebox Network, Inc.).
Loss before income taxes increased to $47.4 million in the 1997
three-month period from $0.5 million in the 1996 three-month period. The
increase in loss was primarily attributable to the 1997 loss associated with the
write down of the Company's investment in Australis of $32.5 million and the
recognition of $19.7 million of income in the 1996 three-month period from the
subsequent collection of note receivable and accrued interest from Australis,
which note and interest amount was previously written off. Without the write
down, the loss during the 1997 three-month period would have been $14.9 million.
Without the recognition of income related to the recovery of the note receivable
and accrued interest, the loss during the 1996 three-month period would have
been $20.2 million.
.
<PAGE>
EBITDA increased 17.9% to $51.6 million in the 1997 three-month period
as compared to the 1996 three-month period. EBITDA margin increased to 46.0%
from 42.9%.
Core Cable Television Operations
At September 30, 1997, the Company had approximately 998,000 basic
customers and passed approximately 1,387,000 homes as compared to approximately
927,000 basic customers and approximately 1,271,000 homes passed at September
30, 1996. During the three-month period ended September 30, 1997, the Company
added approximately 11,800 basic customers for an annualized internal growth
rate of 5.0% as compared to 6,910 basic customers added (3.0% internal growth
rate) for the comparable 1996 three-month period. Revenues increased 11.5% to
$104.3 million in the 1997 three-month period as compared to the 1996 three-
month period. The increase in revenue was primarily attributable to rate
increases, internal customer growth and the addition of approximately 36,900
basic customers as a result of the Turnersville Acquisition.
Operating expenses increased 10.7% to $84.3 million (80.9% of Core
Cable Television Operations revenues) in the 1997 three-month period, primarily
due to the Acquisitions (as defined below) and costs associated with
implementing the Company's consolidation strategy. The increase was comprised of
the following: (i) service expense increase of 11.2% to $8.1 million (7.8% of
Core Cable Television Operations revenues) attributable to technical salaries
and general operating expenses; (ii) cable programming expense increase of 5.0%
to $22.5 million (21.6% of Core Cable Television Operations revenues); (iii)
selling, general and administrative expense increase of 22.6% to $22.5 million
(21.6% of Core Cable Television Operations revenues); and (iv) depreciation and
amortization increase of 7.3% to $31.2 million (29.9% of Core Cable Television
Operations revenues).
EBITDA increased 15.4% to $53.6 million in the 1997 three-month period
compared to the 1996 three-month period. The EBITDA margin increased to 51.4%
from 49.7% in the 1996 three-month period.
Unrestricted Subsidiaries
Effective October 31, 1997, MicroNet, Inc. and MicroNet Delmarva
Associates, LP (collectively, "MicroNet"), each a wholly owned subsidiary of the
Company, sold substantially all of their assets, and Suburban Cable TV Co. Inc.,
Lenfest Atlantic, Inc. and Lenfest New Castle County sold certain of their
towers. The purchase price was approximately $70.3 million, subject to
adjustments. Effective with the three-month period ended June 30, 1997, the
Company's Unrestricted Subsidiary, MicroNet, is accounted for as discontinued
operations. The revenues and expenses of MicroNet are not included with the
consolidated revenues and expenses of the Company, but are reflected as income
(loss) from discontinued operations. The prior period financial statements have
been restated to reflect the continuing operations of the Company.
The largest of the Company's remaining Unrestricted Subsidiaries are
StarNet, Inc. ("StarNet") and Radius Communications ("Radius"). Revenues for the
Unrestricted Subsidiaries
<PAGE>
decreased 26.6% to $8.1 million in the 1997 three-month period as compared to
the 1996 three-month period.
Operating expenses decreased 27.0% to $10.4 million (128.9% of
Unrestricted Subsidiaries revenues) in the 1997 three-month period as compared
to the 1996 three-month period. The decrease was comprised of the following: (i)
service expense and direct costs decrease of 13.0% to $5.0 million (62.6% of
Unrestricted Subsidiaries revenues); (ii) selling, general and administrative
expense decrease of 32.3% to $4.4 million (54.4% of Unrestricted Subsidiaries
revenues); and (iii) depreciation and amortization decrease of 51.1% to $1.0
million (11.9% of Unrestricted Subsidiaries revenues).
EBITDA was negative $1.4 million in the 1997 three-month period and
negative $1.3 million in the 1996 three-month period, and the operating loss was
$2.4 million as compared to $3.3 million.
StarNet revenues decreased by 38.5% to $1.3 million in the 1997
three-month period as compared to the 1996 three-month period, primarily due to
a decrease in network advertising revenue during the Company's transition to
Customized NuStar service. Direct costs decreased 27.9% due to decreased
production activities related to StarNet's multimedia equipment and services.
Selling, general and administrative expenses decreased 40.7% due to the staff
reduction of StarNet's administrative department. Depreciation expense decreased
by 40.2% as a result of the contribution of assets related to the Company's
Barker(R) service from StarNet to Sneak Prevue, L.L.C., a partnership between
StarNet and Sneak Prevue, Inc. Operating loss was $0.3 million in the 1997
three-month period as compared to $0.5 million for the 1996 three-month period.
Radius began operations on February 12, 1996. In addition, on September
30, 1996 it purchased assets which contribute a significant portion of its
revenues and expenses. For these reasons, no meaningful comparison can be made
between the three-month periods ended September 30, 1997 and 1996. For the three
month period ended September 30, 1997, Radius had revenues of $5.8 million.
Expenses were comprised of: affiliate fees of $2.7 million, production and
programming expenses of $0.6 million, selling, general, and administrative
expenses of $2.2 million and depreciation and amortization of $0.5 million. Its
operating income was $0.3 million for the period.
The loss from discontinued operations of MicroNet was $0.1 million
for the 1997 three-month period compared to income of $0.2 million for the 1996
three-month period.
NINE MONTHS ENDED SEPTEMBER 30, 1997 COMPARED WITH NINE MONTHS ENDED
SEPTEMBER 30, 1996
CONSOLIDATED RESULTS
Revenues for the Company increased 18.6% to $332.1 million for the 1997
nine-month period as compared to the 1996 nine-month period, primarily as a
result of a 21.0% increase in revenues from the Company's Core Cable Television
Operations. The increase in revenue was a result of the realization of the full
effect of the TCI Exchange and the Sammons Acquisition (completed near the end
of the first quarter of 1996), the Salem and Shore Acquisitions (completed in
the middle of the second quarter of 1996) and the Turnersville Acquisition
completed on January 10, 1997 (collectively, the "Acquisitions"). The
Acquisitions, including revenue growth directly attributable to the acquired
systems added after the completion of the Acquisitions, accounted for $30.5
million of the increase, a
<PAGE>
10.9% increase. Rate increases and internal customer growth accounted for $21.7
million, a 7.7% increase.
Operating expenses increased 20.1% to $282.3 million (85.0% of total
revenues) in the 1997 nine-month period as compared to the 1996 nine-month
period primarily due to Core Cable Television Operations and, to a lesser
extent, decreased expenses in the Unrestricted Subsidiaries as described below.
The Acquisitions accounted for $26.7 million, an 11.3% increase, while $20.6
million, an 8.8% increase, resulted from costs associated with internal growth.
These increases were comprised of the following: (i) service expense and direct
costs increase of 14.7% to $41.7 million (12.6% of total revenues), $3.5 million
of which was attributable to the Acquisitions; (ii) cable programming expense
increase of 20.3% to $68.9 million (20.7% of total revenues), $6.5 million of
which was attributable to the Acquisitions; (iii) selling, general and
administrative expense increase of 22.4% to $75.5 million (22.7% of total
revenues), $1.2 million of which was attributable to the Acquisitions; and (iv)
depreciation and amortization increase of 20.7% to $96.2 million (29.0% of total
revenues), $15.5 million of which was attributable to the Acquisitions.
Interest expense increased 18.9% to $91.8 million in the 1997
nine-month period as compared to the 1996 nine-month period. The increase was
primarily the result of an increase in average indebtedness to $1,372.7 million
for the 1997 nine-month period from $1,064.3 million for the 1996 nine-month
period as a result of borrowings in connection with the Acquisitions and the
investments in Australis made in October 31, 1996.
Equity in net losses of unconsolidated affiliates decreased to a loss
of $3.3 million from a loss of $13.9 million during the 1996 nine-month period.
The Company's unconsolidated affiliates include several cable television
operators which incur high levels of depreciation, amortization and interest
expenses. This decrease was primarily due to Raystay Co., which realized a gain
on the sale of cable systems and L-TCI Associates, whose equity loss decreased
$2.1 million.
During the 1996 nine-month period, there was also a $7.2 million gain
on disposition of a partnership interest.
Loss before income taxes decreased to $75.5 million in the 1997
nine-month period from $101.9 million in the 1996 nine-month period. The
decrease was primarily attributable to the 1997 recognized loss on the Company's
investment in Australis of $32.5 million compared to a $66.9 million loss in
1996. Without the write downs, the loss during the 1997 nine-month period would
have been $43.0 million compared to a loss of $35.0 million in 1996.
During the 1996 nine-month period, the Company incurred extraordinary
charges from the write-off of the unamortized loan costs associated with a bank
credit facility that was prepaid with the proceeds of the Company's Subordinated
Notes and with initial borrowings under the Bank Credit Facility (See Liquidity
and Capital Resources). These charges increased net loss by $2.5 million, net of
income tax benefit of $1.3 million.
EBITDA increased 19.4% to $148.8 million in the 1997 nine-month period
as compared to the 1996 nine-month period. The EBITDA margin increased to
44.8% from 44.5%.
Core Cable Television Operations
Excluding basic customers added in the Turnersville Acquisition and
seasonal customers of approximately 2,331 during the nine-months ended September
30, 1997, the Company added approximately 25,769 basic customers for an
annualized internal growth rate of 3.7%. The Turnersville Acquisition added
approximately 36,900 basic customers. Revenues increased 21.0% to $308.6 million
in the 1997 nine-month period as
<PAGE>
compared to the 1996 nine-month period. The increase in revenue was
primarily attributable to the Acquisitions and internal customer growth. The
Acquisitions accounted for $30.5 million, a 12.0% increase.
Operating expenses increased 22.9% to $249.4 million (80.8% of Core
Cable Television Operations revenues) in the 1997 nine-month period. The
Acquisitions accounted for $26.7 million, a 13.2% increase, while 9.7% resulted
from costs associated with the internal customer growth and increased costs
associated with implementing the Company's consolidation strategy. These
increases were comprised of the following: (i) service expense increase of 29.8%
to $26.0 million (8.5% of Core Cable Television Operations revenues)
attributable to technical salaries and general operating expenses, $3.5 million
of which was attributable to the Acquisitions; (ii) cable programming expense
increase of 20.3% to $68.9 million (22.3% of Core Cable Television Operations
revenues), $6.5 million of which was attributable to the Acquisitions; (iii)
selling, general and administrative expense increase of 26.3% to $61.8 million
(20.0% of Core Cable Television Operations revenues), $1.2 million of which was
attributable to the Acquisitions; and (iv) depreciation and amortization
increase of 20.8% to $92.7 million (30.0% of Core Cable Television Operations
revenues), $15.5 million of which was attributable to the Acquisitions.
EBITDA increased 21.7% to $156.8 million in the 1997 nine-month period
compared to the 1996 nine-month period. The EBITDA margin increased to 50.8%
from 50.5% in the 1996 nine-month period.
Unrestricted Subsidiaries
Revenues of the Unrestricted Subsidiaries decreased 33.9% to $23.5
million in the 1997 nine-month period as compared to the 1996 nine-month period
primarily due to StarNet and its subsidiaries.
Operating expenses decreased 22.1% to $32.9 million (139.9% of
Unrestricted Subsidiaries revenues) in the 1997 nine-month period as compared to
the 1996 nine-month period primarily due to StarNet (see below). The decrease
was comprised of the following: (i) service expense and direct costs decrease of
24.7% to $15.6 million (66.4% of Unrestricted Subsidiaries revenues); (ii)
selling, general and administrative expense decrease of 12.7% to $13.7 million
(58.3% of Unrestricted Subsidiaries revenues); and (iii) depreciation and
amortization decrease of 38.2% to $3.6 million (15.2% of Unrestricted
Subsidiaries revenues).
EBITDA was negative $5.8 million in the 1997 nine-month period and
negative $0.9 million in the 1996 nine-month period, and the operating loss was
$9.4 million as compared to $6.7 million.
StarNet revenues decreased by 44.3% to $3.5 million in the 1997
nine-month period as compared to the 1996 nine-month period, primarily due to a
decrease in service revenue caused by the contribution of The Barker(R) service
to Sneak Prevue LLC in September, 1996 and lost network advertising revenue
during the Company's transition to the new Customized NuStar service. Direct
costs decreased 36.5% to $3.0 million due primarily to the reduction of
operational expenses associated with The Barker (R) service. Selling, general
and administrative expense decreased 31.0% to $1.6 million due to eliminating
The Barker(R) service and Promoter services in 1996. Operating loss was $2.0
million in the 1997 nine-month period as compared to $1.9 million for the 1996
nine-month period.
<PAGE>
As noted above, no meaningful comparison can be made between the
nine-month periods ended September 30, 1997 and 1996 for Radius. For the nine
month period ended September 30, 1997, Radius had revenues of $17.6 million and
total expenses of $18.1 million. Expenses were comprised of the following:
affiliate fees of $8.2 million, production and programming expenses of $1.8
million, selling, general, and administrative expenses of $6.6 million and
depreciation and amortization of $1.5 million. Its operating loss was $0.5
million for the period.
The income from the discontinued operations of MicroNet increased to
$1.2 million from a loss of $0.1 million during the 1996 nine-month period.
Recent Accounting Pronouncements
The Financial Accounting Standards Board (the "FASB") has issued
Statement No. 128 "Earnings Per Share". Since the Company's stock is not
publicly held, this statement does not apply to the Company. The FASB also
issued Statement No. 129 "Disclosure of Information about Capital Structure",
which is effective for periods ending after December 15, 1997, and also issued
Statements No. 130 "Reporting Comprehensive Income" and No. 131 "Disclosures
about Segments of an Enterprise and Related Information". Statements 130 and 131
are effective for periods beginning after December 15, 1997. Statements 129, 130
and 131, when applied, will provide additional information and disclosures
regarding the Company's capital structure, comprehensive income and segments.
LIQUIDITY AND CAPITAL RESOURCES
The Company's businesses require cash for operations, debt service,
capital expenditures and acquisitions. To date, cash requirements have been
funded by cash flow from operations and borrowings. At September 30, 1997, the
Company had aggregate total indebtedness of approximately $1,341.5 million,
which excluded bank debt at the subsidiary level of $7.0 million. The Company's
senior indebtedness of approximately $1,047.9 million consisted of: (i) three
debt obligations in the amount of approximately $45.0 million, $10.5 million and
$11.6 million (collectively, the "Private Placement Notes"); (ii) $686.8 million
of 8 3/8% Notes; (iii) $285.0 million under a bank credit facility dated as of
June 27, 1996 (the "Bank Credit Facility"); and (iv) obligations under capital
leases of approximately $9.0 million. The Bank Credit Facility consists of a
$150.0 million term loan facility and a $300.0 million revolving credit
facility. At September 30, 1997, the term loan was fully drawn and $135.0
million was drawn under the revolving credit facility.
At September 30, 1997, the only outstanding senior subordinated
indebtedness was the Company's Subordinated Notes in the amount of $293.7
million. The Subordinated Notes are general unsecured obligations of the Company
subordinate in right of payment to all present and future senior indebtedness of
the Company.
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
when due, on its indebtedness. There are no restrictions relating to the payment
to the Company of dividends, advances or other payments by any of the Company's
subsidiaries except MicroNet.
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
<PAGE>
approximately $60.5 million for the nine-month period ended September
30, 1997 compared to approximately $48.5 million for the nine-month period ended
September 30, 1996. The increase was primarily the net result of increased cash
flow from the Acquisitions, internal customer growth and increased revenue per
customer offset by increased interest expense incurred as a result of borrowings
made in connection with the Acquisitions and investments in Australis. During
the 1997 nine-month period, the Company was required to make interest payments
of approximately $68.0 million on outstanding debt obligations, whereas in the
1996 nine-month period, the Company was required under its then existing debt
obligations to make interest payments of approximately $53.3 million.
The Company, on behalf of L-TCI Associates, expects to pay
approximately $2.7 million (15.6 million FF), the balance of its five year
capital commitment to Videopole, on November 17, 1997. Videopole has requested
that its shareholders fund proportionately its projected outstanding loans at
December 31, 1997 of 181.5 million FF by making shareholder loans to Videopole.
The Company, as the managing partner of L-TCI Associates, has informed Videopole
that it does not believe it has a legal obligation to make such a shareholder
loan and does not intend to do so.
On October 31, 1997, the disposition of substantially all of the assets
of MicroNet and MicroNet Delmarva and certain assets of Suburban Cable, Lenfest
Atlantic, Inc. and Lenfest New Castle County related to their tower rental and
microwave service businesses was completed for approximately $70.3 million. The
proceeds from the sale were used to repay bank indebtedness ($45.0 million)
under the revolving credit portion of the Company's Bank Credit Facility, repay
bank indebtedness related to MicroNet, Inc. ($7.0 million) and pay debt service.
Future minimum lease payments under all capital leases and
noncancellable operating leases for each of the years 1997 through 2001 are $9.1
million (of which $849,000 is payable to a principal stockholder), $8.1 million
(of which $680,000 is payable to a principal stockholder), $6.6 million (of
which $714,000 is payable to a principal stockholder), $5.5 million (of which
$750,000 is payable to a principal stockholder), and $4.2 million (of which
$788,000 is payable to a principal stockholder).
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 2011.
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.
On October 31, 1997, the Company terminated its four existing interest
rate swap agreements in aggregate amount of $300 million, and received $8.75
million in consideration for early termination.
On November 10, 1997, Australis announced that it was unable to obtain
the commitment of either News Corporation Limited ("News") or Telstra
Corporation Limited ("Telstra") to complete the previously announced merger of
Australis and Foxtel after November 15, 1997, the date required by the merger
agreement. As a result, Australis said it was likely to commence insolvency
proceedings prior to December 1, 1997. Australis also said it will continue to
work closely with its U.S. bondholders and representatives of certain Hollywood
studios in an effort to ensure that, if Australis commences
<PAGE>
insolvency proceedings, it will continue to supply Foxtel with programming under
Australis' licensing arrangements.
If Australis commences insolvency proceedings, the balance of the
Company's investment in Australis' equity securities could be lost in its
entirety. As of November 10, 1997, the Company's investment in Australis had a
market value of approximately U.S. $12.0 million. The Company determined that
the decline in market value was other than temporary and, accordingly, the
Company recognized a loss of $32.5 million, as of September 30, 1997, resulting
from a write down of the Australis investment.
In November 1994, Mr. Lenfest and TCI International, Inc. jointly and
severally guaranteed $67.0 million in program license obligations of the
distributor of Australis' movie programming. At September 30, 1997, the amount
subject to the guarantee under the license agreements was approximately U.S.
$51.8 million.
The Company had agreed to indemnify Mr. Lenfest against loss from such
guaranty to the fullest extent permitted under the Company's debt obligations.
Under the terms of the Bank Credit Facility, 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 with
respect to the guarantees. Effective March 6, 1997, however, Mr. Lenfest
released the parent Company and its cable operating subsidiaries from their
indemnity obligation until the last to occur of September 30, 1997, and the last
day of any fiscal quarter during which the Company could incur the indemnity
obligation without violating the terms of the Bank Credit Facility. Certain of
the Company's Unrestricted Subsidiaries indemnified Mr. Lenfest for his
obligations under the guarantee under an agreement dated June 5, 1997. However,
so long as Australis is able to supply Foxtel with programming and pay its
program suppliers, the Company should not be called upon to indemnify Mr.
Lenfest under his guaranty.
Management believes that the Company has sufficient funds available
from operating cash flow and from borrowing capacity under the Bank Credit
Facility to fund its operations, capital expenditure plans and debt service
throughout 1997. However, the Company's ability to borrow funds under the Bank
Credit Facility requires that the Company be in compliance with the Senior and
Total Debt Leverage Ratios or obtain the consent of the lenders thereunder to a
waiver or amendment of the applicable Senior or Total Debt Leverage Ratio.
Management believes that the Company will be in compliance with such Debt
Leverage Ratios.
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.
Part II. OTHER INFORMATION
Item 5. OTHER INFORMATION
On October 24, 1997, LMC Lenfest, Inc. ("LMC") designated Jerome H.
Kern to fill one of the two positions on the Company's Board of Directors that
LMC has the right to select. LMC indicated that it does not intend to fill the
other position at this time. For a further description of
<PAGE>
the Company's recent changes to the Board of Directors, see the Company's report
on Form 8-K filed on October 14, 1997.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
The following Exhibits are furnished as part of this Report:
Exhibit
Number Title or Description
- ------ --------------------
(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.
###2.10 Asset Purchase Agreement, dated as of July 8, 1997, between Suburban
Cable TV Co.Inc. and American Tower Systems, Inc.
<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.
*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.
<PAGE>
*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, Brook 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.
*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
<PAGE>
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.
+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.
<PAGE>
++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. 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.)
+++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.
+++10.39 First Amendment, dated August 29, 1996, to Credit Agreement, dated
as of February 29, 1996, by and among Lenfest Australia, Inc., The
Toronto-Dominion Bank, NationsBank of Texas, N.A. and Toronto
Dominion (Texas), Inc.
#10.40 Second Amendment, dated September 30, 1996, to Credit Agreement,
dated as of February 29, 1996, by and among Lenfest Australia, Inc.,
The Toronto-Dominion Bank, NationsBank of Texas, N.A. and Toronto
Dominion (Texas), Inc.
#10.41 Form of First Amendment, dated as of October 28, 1996, to Credit
Agreement, dated as of June 27, 1996, 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.
##10.42 Letter, dated March 6, 1997, from H. F. Lenfest to the Company.
###10.43 Agreements dated as of June 5, 1997, by and between H. F. Lenfest
and Lenfest Jersey, Inc., Lenfest York, Inc., Lenfest Raystay, Inc.
and MicroNet, Inc.
+21. Subsidiaries of the Company.
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,
dated December 22, 1995, for the quarter ended September 30, 1995.
<PAGE>
*** Incorporated by reference to the Company's Report on Form 8-K, dated
February 26, 1996.
+ Incorporated by reference to the Company's Report on Form 10-K,
dated March 29, 1996, for the year ended December 31, 1995.
++ Incorporated by reference to the Company's Report on Form 10-Q, 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.
# Incorporated by reference to the Company's Report on Form 10-Q,
dated November 14, 1996, for the quarter ended September 30, 1996.
## Incorporated by reference to the Company's Report on Form 10-K,
dated March 22, 1997, for the year ended December 31, 1996.
### Incorporated by reference to the Company's Report on Form 10-Q,
for the quarter ended June 30, 1997.
(b) Reports on Form 8-K.
October 14, 1997.
<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.
DATE: November 14, 1997 By: /s/ Harry F. Brooks
----------------------------
Harry F. Brooks
Executive Vice President (authorized
officer and Principal Financial Officer)
<TABLE> <S> <C>
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<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET AS OF SEPTEMBER 30, 1997, AND THE CONSOLIDATED
STATEMENT OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997, AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS
</LEGEND>
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<S> <C>
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<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
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<SECURITIES> 18,133
<RECEIVABLES> 27,569
<ALLOWANCES> 2,702
<INVENTORY> 3,581
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<SALES> 332,136
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