<PAGE> 1
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 AND EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES AND 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)
<TABLE>
<S> <C>
DELAWARE 23-2094942
-------- ----------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
</TABLE>
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 May 15, 1998: 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> 2
LENFEST COMMUNICATIONS, INC.
Index
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION Page
----
<S> <C>
Item 1. Financial Statements
Condensed Consolidated Balance Sheets as of March 31, 1998
(unaudited) and as of December 31, 1997 2
Consolidated Statements of Operations and Comprehensive Income (Loss)
for the three months ended March 31, 1998 (unaudited) and
March 31, 1997 (unaudited) 4
Consolidated Statements of Cash Flows for the three months ended
March 31, 1998 (unaudited) and March 31, 1997 (unaudited) 5
Notes to Condensed Consolidated Financial Statements (unaudited) 7
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations 12
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 17
</TABLE>
1
<PAGE> 3
LENFEST COMMUNICATIONS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
<TABLE>
<CAPTION>
March 31, December 31,
1998 1997
----------- --------------
(Unaudited) (*)
<S> <C> <C>
ASSETS
Cash and cash equivalents $ 22,017 $ 15,623
Marketable securities 11,825 14,452
Accounts receivable, trade and other, less allowance for
doubtful accounts of $2,659 in 1998 and $2,923 in 1997 17,510 23,206
Inventories 2,242 2,153
Prepaid expenses 3,278 2,960
Property and equipment, net of accumulated depreciation
of $381,128 in 1998 and $359,125 in 1997 409,677 413,787
Investments, principally in affiliates, and related receivables 67,262 56,881
Goodwill, net of amortization of $29,508 in 1998 and
$28,594 in 1997 72,222 73,136
Deferred franchise costs, net of amortization of $198,459 in
1998 and $186,027 in 1997 494,601 507,023
Other intangible assets, net of amortization of $14,400 in 1998
and $16,668 in 1997 24,333 28,341
Deferred Federal tax asset, net 77,671 74,251
Net assets of discontinued operations 375 2,660
Other assets 6,355 5,247
-------------- -------------
$ 1,209,368 $ 1,219,720
============== =============
</TABLE>
(*) Condensed from audited financial statements.
See accompanying notes to condensed consolidated financial statements.
2
<PAGE> 4
LENFEST COMMUNICATIONS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS, (continued)
(Dollars in thousands)
<TABLE>
<CAPTION>
March 31, December 31,
1998 1997
----------- -------------
(Unaudited) (*)
<C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Notes payable and obligations under capital leases $ 1,286,145 $ 1,295,306
Accounts payable and accrued expenses - unrelated parties 61,201 50,867
Accounts payable - affiliate 21,653 26,304
Customer service prepayments and deposits 7,310 6,984
Deferred interest 6,930 7,063
Deferred state tax liability (net) 9,505 9,580
Investment in Garden State Cablevision, L.P. 77,747 77,880
------------- ------------
TOTAL LIABILITIES 1,470,491 1,473,984
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
Accumulated deficit (317,144) (310,269)
Accumulated other comprehensive income, arising from
unrealized net gains on marketable securities, net of
deferred taxes of $2,839 in 1998 and $2,830 in 1997 5,272 5,256
------------- ------------
(261,123) (254,264)
------------- ------------
$ 1,209,368 $ 1,219,720
============= ============
</TABLE>
(*)Condensed from audited financial statements.
See accompanying notes to condensed consolidated financial statements.
3
<PAGE> 5
LENFEST COMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
AND COMPREHENSIVE INCOME (LOSS)
(Unaudited)
(Dollars in thousands)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
------------------------------------
1998 1997
-------------- -------------
<S> <C> <C>
REVENUES $ 110,665 $ 107,668
OPERATING EXPENSES
Service 10,779 8,755
Programming - from affiliate 17,335 15,687
Programming - other cable 7,584 7,775
Selling, general and administrative 22,719 22,391
Direct costs - non-cable 3,559 5,452
Depreciation 22,133 18,611
Amortization 14,523 13,514
-------------- -------------
98,632 92,185
-------------- -------------
OPERATING INCOME 12,033 15,483
OTHER INCOME (EXPENSE)
Interest expense (31,499) (31,917)
Equity in net income (losses) of unconsolidated
affiliates (814) 1,292
Gain on exchange of partnership interest 11,489 -
Other income and expense (net) 4,122 510
-------------- -------------
(16,702) (30,115)
-------------- -------------
(LOSS) FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES (4,669) (14,632)
INCOME TAX BENEFIT (NET) 855 4,271
-------------- -------------
(LOSS) FROM CONTINUING OPERATIONS (3,814) (10,361)
DISCONTINUED OPERATIONS
Income from discontinued operations of Lenfest MCN, Inc.
(formerly known as MicroNet, Inc. and affiliates),
net of income taxes of $371 - 900
-------------- -------------
(LOSS) BEFORE EXTRAORDINARY LOSS (3,814) (9,461)
EXTRAORDINARY LOSS
Early extinguishment of debt, net of income taxes of $1,645 (3,061) -
-------------- -------------
NET (LOSS) (6,875) (9,461)
OTHER COMPREHENSIVE INCOME, net of tax
Unrealized gains on securities: 3,680 9,492
Unrealized holding gains arising during the period
Less: reclassification adjustment for gains included
in net (loss) (3,664) (73)
-------------- -------------
16 9,419
-------------- -------------
COMPREHENSIVE INCOME (LOSS) $ (6,859) $ (42)
============== =============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
4
<PAGE> 6
LENFEST COMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Dollars in thousands)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
------------------------------------
1998 1997
-------------- -------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net (loss) $ (6,875) $ (9,461)
(Income) from discontinued operations - (900)
Extraordinary loss 3,061 -
-------------- -------------
Loss from continuing operations (3,814) (10,361)
Adjustments to reconcile loss from continuing operations to
net cash provided by operating activities:
Depreciation and amortization 36,656 32,125
Accretion of debt discount 438 376
Accretion of deferred interest (132) -
Accretion of discount on marketable securities (net) - (26)
(Gain) on exchange of partnership interest (11,489) -
Net (gains) on sales of marketable securities (3,664) (73)
Deferred income tax (benefit) (1,855) (4,271)
(Gain) on sale of property and equipment (33) (28)
Equity in net (income) losses of unconsolidated affiliates 814 (1,292)
Minority interest - (282)
Changes in operating assets and liabilities, net of effects
from acquisitions
Accounts receivable 5,696 (611)
Inventories (89) 497
Prepaid expenses (318) (995)
Other assets (1,108) (1,227)
Accounts payable and accrued expenses:
Unrelated parties 10,334 18,273
Affiliate (4,651) (491)
Customer service prepayments and deposits (156) (278)
-------------- -------------
NET CASH PROVIDED BY
OPERATING ACTIVITIES 26,629 31,336
-------------- -------------
</TABLE>
See accompanying notes to condensed consolidated financial statements.
5
<PAGE> 7
LENFEST COMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS, (continued)
(Unaudited)
(Dollars in thousands)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
------------------------------------
1998 1997
-------------- -------------
<S> <C> <C>
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisitions of cable systems $ - $ (84,500)
Purchases of property and equipment (18,023) (14,508)
Purchases of marketable securities (1,078) (301)
Proceeds from sales of property and equipment 33 28
Proceeds from sales of marketable securities 7,878 189
Discontinued operations 2,285 1,083
Investments in unconsolidated affiliates - (6,592)
Distributions from unconsolidated affiliates 475 75
(Increase) in other intangible assets - investing (165) (747)
Loans and advances to unconsolidated affiliates (890) (181)
Loans and advances from unconsolidated affiliates 570 1,966
-------------- -------------
NET CASH (USED) IN
INVESTING ACTIVITIES (8,915) (103,488)
CASH FLOWS FROM FINANCING ACTIVITIES
Increases in debt 296,386 75,000
Early extinguishment of debt (67,375) -
Other debt reduction:
Notes (240,000) (15,000)
Obligations under capital leases (331) (170)
(Increase) in other intangible assets -- financing - (252)
-------------- -------------
NET CASH PROVIDED BY (USED IN)
FINANCING ACTIVITIES (11,320) 59,578
-------------- -------------
NET INCREASE
(DECREASE) IN CASH 6,394 (12,574)
CASH AND CASH EQUIVALENTS AT BEGINNING
OF PERIOD 15,623 19,162
-------------- -------------
CASH AND CASH EQUIVALENTS
AT END OF PERIOD $ 22,017 $ 6,588
============== =============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
6
<PAGE> 8
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 the Company 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 March 31, 1998,
the consolidated results of operations and consolidated cash flows for the three
months ended March 31, 1998 and 1997.
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 27, 1998. The results of operations for the periods ended
March 31, 1998 and 1997, are not necessarily indicative of operating results for
the full year.
Prior period financial statements and notes thereto have been restated to
reflect the continuing operations of the Company.
NOTE 2 DISCONTINUED OPERATIONS
Effective October 31, 1997, Lenfest MCN, Inc., (formerly MicroNet, Inc.) and
Lenfest MCN Delmarva Associates LP (formerly MicroNet Delmarva Associates LP),
collectively "MCN", 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 $70.3 million, subject to adjustments. The sale represents
the disposition of the major segment of the Company's tower rental, microwave
service, video, voice and data service businesses. The assets sold were not
material to the cable television operations of the Company. The net assets of
MCN have been separately classified in the accompanying condensed consolidated
balance sheet under the caption Net assets of discontinued operations and
consist of the following at March 31, 1998 and December 31, 1997:
<TABLE>
<CAPTION>
March 31, December 31,
1998 1997
---------- -------------
(Dollars in thousands)
<S> <C> <C>
Accounts receivable $ 375 $ 2,660
========== ==========
</TABLE>
7
<PAGE> 9
LENFEST COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, (continued)
(Unaudited)
NOTE 2 DISCONTINUED OPERATIONS, (continued)
Operating results of MCN for the three months ended March 31, 1997, are shown
separately in the accompanying consolidated statements of operations and
comprehensive income (loss) under the caption "Income from discontinued
operations of Lenfest MCN, Inc." and consist of the following:
<TABLE>
<CAPTION>
Three Months Ended
March 31, 1997
-----------------------
(Dollars in thousands)
<S> <C>
Revenues $ 5,068
Operating expenses (2,783)
Depreciation and amortization (909)
-------------
OPERATING INCOME 1,376
Interest expense (117)
Other income 12
Income tax (expense) (371)
-------------
NET INCOME $ 900
=============
</TABLE>
NOTE 3 - SUPPLEMENTAL DISCLOSURES TO STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Three Months Ended
March 31,
-----------------------------------
1998 1997
------------- -------------
(Dollars in thousands)
<S> <C> <C>
CASH PAID DURING THE PERIOD FOR
Interest $ 8,703 $ 8,346
============= =============
Income taxes $ - $ 1,522
============= =============
SUPPLEMENTAL SCHEDULE RELATING TO ACQUISITIONS
1998 1997
------------- -------------
(Dollars in thousands)
Property and equipment $ - $ 27,965
Deferred franchise costs - 53,797
Goodwill and other intangible assets - 2,738
------------- -------------
$ - $ 84,500
============= =============
</TABLE>
NONCASH INVESTING AND FINANCING ACTIVITIES
On February 12, 1998, the Company exchanged a partnership interest for a
warrant to acquire Class A common stock in Hyperion Telecommunications, Inc.
(See Note 4).
8
<PAGE> 10
LENFEST COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, (continued)
(Unaudited)
NOTE 4 - GAIN FROM EXCHANGE OF PARTNERSHIP INTEREST
On February 12, 1998, the Company's wholly owned subsidiary, Lenfest Telephony,
Inc., exchanged its 50% general partnership interest in Hyperion
Telecommunications of Harrisburg ("HTH") for a warrant to acquire 731,624
shares (the effective number of shares after a stock split) of Class A common
stock of Hyperion Telecommunications, Inc. ("Hyperion"), the other 50%
general partner in HTH. No exercise price is payable with the exercise of the
warrant. The value of the warrant was estimated to be $11.7 million, based on
the initial public offering of the Class A common stock of Hyperion in May 1998.
A gain of $11.5 million, which represents the excess of the market value of the
partnership interest over its book value, has been included in the accompanying
consolidated statement of operations and comprehensive income (loss). The stock
is included in investments in the accompanying condensed consolidated balance
sheet as it was not readily marketable at March 31, 1998.
NOTE 5 - MARKETABLE SECURITIES
The aggregate cost basis and market values of marketable securities at March
31, 1998 and December 31, 1997 are as follows:
<TABLE>
<CAPTION>
Aggregate Gross
Cost Unrealized Fair
Basis Gain Value
------------ -------------- -------------
(Dollars in thousands)
<S> <C> <C> <C>
March 31, 1998 $ 3,715 $ 8,110 $ 11,825
============= ============= =============
December 31, 1997 $ 6,366 $ 8,086 $ 14,452
============= ============= =============
</TABLE>
All of the Company's securities are considered to be available for sale. Net
realized gains from the sale of marketable securities, in the amount of
$3,664,000 and $73,000 are included in the accompanying consolidated statements
of operations for 1998 and 1997, respectively. The specific identification
method is used to determine the cost of each security at the time of sale.
NOTE 6 - INVESTMENTS, PRINCIPALLY IN AFFILIATES
The Company, through several subsidiaries, owns non-controlling interests in
several general 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 209,000 customers in southern New Jersey at March 31, 1998. 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 $77,747,000 and $77,880,000 at March 31, 1998 and
December 31, 1997, respectively.
9
<PAGE> 11
LENFEST COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, (continued)
(Unaudited)
NOTE 6 - INVESTMENTS, PRINCIPALLY IN AFFILIATES, (continued)
Summarized statements of operations of Garden State, accounted for under the
equity method for the three months ended March 31, 1998 and 1997, are as
follows:
<TABLE>
<CAPTION>
1998 1997
----------- -------------
(Dollars in thousands)
<S> <C> <C>
RESULTS OF OPERATIONS
Revenues $ 27,730 $ 26,730
Operating expenses (11,391) (11,574)
Depreciation and amortization (8,725) (11,481)
------------- -------------
OPERATING INCOME 7,614 3,675
Interest expense (5,605) (5,766)
Other expense (1,663) (1,604)
------------- -------------
NET INCOME (LOSS) $ 346 $ (3,695)
============= =============
</TABLE>
NOTE 7 - LONG-TERM DEBT
Notes payable and obligations under capital leases consisted of the following
at March 31, 1998 and December 31, 1997:
<TABLE>
<CAPTION>
March 31, December 31,
1998 1997
----------- -------------
(Dollars in thousands)
<S> <C> <C>
8-3/8% senior notes due November 1, 2005 $ 687,374 $ 687,082
10-1/2% senior subordinated notes due June 15, 2006 293,897 293,781
7-5/8% senior notes due February 15, 2008 (a) 148,258 -
8-1/4% senior subordinated notes due February 15, 2008 (b) 148,159 -
Bank credit facility - 240,000
11.30% senior promissory notes due September 1, 2000 - 45,000
11.84% senior promissory notes due May 15, 1998 1,470 10,500
9.93% senior promissory notes due September 30, 2001 - 11,625
Obligations under capital leases 6,987 7,318
------------- -------------
$ 1,286,145 $ 1,295,306
============= =============
</TABLE>
(a) These notes, which are stated net of unamortized discount of $1.7
million at March 31, 1998, were issued through a private placement in
February 1998. The notes require semi-annual interest payments. The
notes are not redeemable at the option of the Company prior to
maturity. Upon a Change of Control Triggering Event, holders of the
notes may require the Company to purchase all or a portion of the notes
at a purchase price equal to 101% of the principal amount thereof, plus
accrued and unpaid interest. The net proceeds, together with the
proceeds from the 8-1/4% senior subordinated notes discussed below,
were used to provide funds for the early extinguishment of debt and
to pay down the bank credit facility.
(b) These notes, which are stated net of unamortized discount of $1.8 million
at March 31, 1998, were issued through a private placement in February
1998. The notes require semi-annual interest payments. The 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 may prepay the notes in 2003. The net proceeds were
used as discussed in (a) above.
10
<PAGE> 12
LENFEST COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, (continued)
(Unaudited)
NOTE 8 - 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.
NOTE 9 - COMMITMENTS AND CONTINGENCIES
In November 1994, Mr. Lenfest and TCI International, Inc., an affiliate of TCI,
jointly and severally guaranteed $67 million in program license obligations of
the distributor of Australis' movie programming. As of March 31, 1998, the
Company estimates that the guarantee under the license agreements was
approximately $42.9 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 its bank credit facility,
however, Mr. Lenfest's claims for indemnification are limited to $33.5 million.
Effective March 6, 1997, as subsequently amended, Mr. Lenfest released the
parent Company and its cable operating subsidiaries from their indemnity
obligation until the last to occur of January 1, 1999, 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 agreed to indemnify Mr. Lenfest for his
obligations under the guarantee under an agreement dated June 5, 1997. As a
result, the Company will remain indirectly liable under the non-cable
subsidiary indemnity.
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 $718 million (approximately U.S. $475 million as of
March 31, 1998). 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.
11
<PAGE> 13
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 months
ended March 31, 1998 primarily due to increases in monthly revenue per
customer generated during 1997 and internal customer growth. As used
herein, EBITDA is defined as operating income plus depreciation,
amortization and cash distributions received from unconsolidated affiliates.
EBITDA and similar measurements of cash flows are commonly used in the cable
industry to analyze and compare cable companies on the basis of operating
performance. 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 MARCH 31, 1998 COMPARED WITH THREE MONTHS ENDED
MARCH 31, 1997
CONSOLIDATED RESULTS
REVENUES increased $3.0 million, or 2.8%, to $110.7 million for the quarter
ended March 31, 1998 as compared to the corresponding 1997 period. The
increase was primarily due to strong internal customer growth and the full
effect of the rate increases implemented during 1997 associated with the
Company's Core Cable Television Operations.
In the quarter ended March 31, 1998, the Company changed its treatment of
franchise fees. Previously, the franchise fees were treated as an item of
revenue and an item of expense. Beginning with the quarter ended March 31,
1998, the Company determined that franchise fees collected would not be
included in revenue or as an item of expense since the Company merely acts as a
pass through agent in the same way it does for collection and payment of
applicable sales taxes. For the period ended March 31, 1998 this had the
effect of reducing Revenue by $2.0 million. Had the Company used the current
methodology in the corresponding 1997 period, the increase in Revenue for the
quarter ended March 31, 1998 would have been approximately $5.0 million, a 4.8%
increase from the corresponding 1997 period.
SERVICE EXPENSES increased 23.1% to $10.8 million for the quarter ended March
31, 1998 compared to the corresponding 1997 period. The increase was primarily
due to costs associated with the Company's Core Cable Television Operations.
PROGRAMMING EXPENSES increased 6.2% to $24.9 million for the quarter ended March
31, 1998 compared to the corresponding 1997 period. The increase was due to
increases in programming costs associated with the Company's Core Cable
Television Operations.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSE increased 0.3% million, or 1.5%, to
$22.7 million for the quarter ended March 31, 1998 compared to the
corresponding 1997 period. These expenses are associated with salaries,
facility, and marketing costs. The increase was primarily due to legal fees
incurred in connection with The Australis Media, Ltd. litigation. See "Legal
Proceedings" in the Company's Form 10-K, filed March 27, 1998. As a result of
th changed treatment of accounting for franchise fees, selling, general and
administrative expense for the quarter ended March 31, 1998 is reduced by $2
million, the amount of franchise fees collected and paid in the quarter. Had
the Company used the current methodology in the corresponding 1997 period, the
increase in selling, general and administrative expense for the quarter ended
March 31, 1998 would have been approximately $2.3 million, a 10.4% increase
over the corresponding 1997 period.
DIRECT COSTS NON-CABLE decreased 34.7% to $3.6 million for the quarter ended
March 31, 1998 compared to the corresponding 1997 period. The decrease was
primarily due to the elimination of certain activities conducted by the
Company's Non-Cable Operations.
12
<PAGE> 14
DEPRECIATION AND AMORTIZATION EXPENSE increased 14.1% to $36.7 million for the
quarter ended March 31, 1998 compared to the corresponding 1997 period primarily
as a result of additional capital expenditures associated with the Company's
Core Cable Television Operations.
EBITDA increased 3.7% to $49.8 million for the quarter ended March 31, 1998
compared to the corresponding 1997 period. The EBITDA margin increased to 45.0%
in the 1998 period compared to 44.6% for 1997 period. These increases were
primarily related to the Company's Core Cable Television Operations.
INTEREST EXPENSE decreased 1.3% to $31.5 million for the quarter ended March 31,
1998 compared to the corresponding 1997 period. The decrease was primarily due
to lower interest rates on outstanding borrowings and lower average outstanding
indebtedness.
LOSS FROM CONTINUING OPERATIONS BEFORE INCOME TAX decreased 68.1% to $4.7
million. The decrease was attributable to a gain realized on the exchange of a
partnership interest.
CORE CABLE TELEVISION OPERATIONS
REVENUES increased 3.5% to $103.5 million for the quarter ended March 31, 1998
compared to the corresponding 1997 period. Revenues for basic and CPS tiers,
customer equipment, and installation ("regulated services") increased 11.2 % or
$8.1 million compared to the corresponding 1997 period. This increase was
primarily attributable to strong internal customer growth of approximately 3.3%
over the prior year period and the realization of the full effect of rate
increases implemented over the course of 1997. Non-regulated service revenue
decreased 16.6% or $3.5 million for the quarter ended March 31, 1998 compared to
the corresponding 1997 period. This decrease was primarily a result of the
discontinuation of the Prism regional sports network service which occurred as
of October 1, 1997. Other revenue decreased 16.0% or $1.1 million compared to
the corresponding 1997 period. The decrease was primarily a result of the
Company changing its methodology of recording franchise fee revenues and
expenses as described above.
SERVICE EXPENSES increased 23.1% to $10.8 million for the quarter ended March
31, 1998 compared to the corresponding 1997 period. These expenses are related
to technical salaries and general operating expenses. The increase was
primarily associated with customer installation, plant maintenance costs and
the continuing expense related to the consolidation efforts of the Company.
PROGRAMMING EXPENSES increased 6.2% to $24.9 million for the quarter ended March
31, 1998 compared to the corresponding 1997 period. The programming expense
increase was primarily due to increased network programming costs and increased
number of customers associated with the basic and CPS tier services.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSE decreased 9.2% to $16.5 million for
the quarter ended March 31, 1998 compared to the corresponding 1997 period.
These expenses are associated with salaries, facility, and marketing costs.
The decrease was primarily a result of the Company changing its methodology of
recording franchise fee revenues and expenses as described above.
DEPRECIATION AND AMORTIZATION EXPENSE increased 15.2% to $35.7 million for the
quarter ended March 31, 1998 compared to the corresponding 1997 period. This
increase was primarily due to increased capital expenditures.
EBITDA increased 3.4% to $52.4 million for the quarter ended March 31, 1998
compared to the corresponding 1997 period. The increase was primarily
attributable to strong internal customer growth of approximately 3.3% and the
realization of the full effect of the rate increases implemented during 1997.
The EBITDA margin was 50.6% in both 1998 and 1997.
NON-CABLE INVESTMENTS
Radius Communications
REVENUES, prior to payment of affiliate fees, increased 20.8% to $6.4 million
for the quarter ended March 31, 1998 compared to the corresponding 1997 period.
13
<PAGE> 15
OPERATING EXPENSES increased 9.0% to $5.7 million for the quarter ended March
31, 1998 compared to the corresponding 1997 period. The increase was primarily
due to increased selling expenses. Affiliate fees increased 2.2% to $2.5
million of which $1.4 million was paid to the Company. Affiliate fees paid to
the Company are eliminated in consolidation.
EBITDA was $0.7 million for the quarter ended March 31, 1998 compared to $0.1
million for the corresponding 1997 period.
DEPRECIATION AND AMORTIZATION EXPENSE increase by 17.5% to $0.5 million for the
quarter ended March 31, 1998 compared to the corresponding 1997 period. The
increase was primarily due to the continued deployment of digital advertising
insertion equipment used for operations and expansion of sales offices.
OPERATING INCOME was $0.3 million for the quarter ended March 31, 1998 compared
to an Operating Loss of $0.4 million for the corresponding 1997 period.
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.
FINANCING ACTIVITIES. On February 5, 1998, the Company issued $150 million in
principal amount of Senior Notes and $150 million in principal amount of Senior
Subordinated Notes. The proceeds and cash on hand were used to prepay existing
indebtedness, accrued interest and prepayment premiums in the aggregate amount
of $313.8 million. As a result, at March 31, 1998, the Company had aggregate
total indebtedness of approximately $1,286.1 million. The Company's senior
indebtedness of $844.1 million consisted of: (i) a debt obligation in the
amount of $1.5 million due May 15, 1998; (ii) $835.6 million of Senior Notes;
and (iii) obligations under capital leases of approximately $7.0 million. At
March 31, 1998, the outstanding subordinated indebtedness was approximately
$442.0 million of 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.
In addition, the Company has in place a $300 million revolving credit facility
with a group of banks ("Bank Credit Facility"). As of May 14, 1998, the
Company's Bank Credit Facility had no outstanding borrowings. The Bank
Credit Facility contains provisions which limit the Company's ability to make
certain investments in excess of $50 million in the aggregate and prohibiting
the Company from having: (i) a Senior Debt Leverage Ratio for the quarter
ended March 31, 1998 through December 30, 1999 in excess of 5.00:1 and 4.50:1
commencing on December 31, 1999 and thereafter; and (ii) a Total Debt
Leverage Ratio in excess of 6.50:1 at March 31, 1998, and declining to
6.00:1 commencing on December 31, 1998 and thereafter. The Company expects
to refinance the Bank Credit Facility in 1998. The Company is prohibited
from paying dividends under the Bank Credit Facility. In addition, the Company
is limited in the amount of dividends it can pay pursuant to the terms of the
Notes.
OPERATIONS. Cash flow generated from continuing operations, excluding changes
in operating assets and liabilities that result from timing issues and
considering only adjustments for non-cash charges, was approximately $16.9
million for the three month period ended March 31, 1998 compared to
approximately $16.2 million for the three month period ended March 31, 1997.
During the three month period ended March 31, 1998, the Company was required to
make interest payments of approximately $8.7 million on outstanding debt
obligations, whereas in the same period in the prior year, the Company was
required under its then existing debt obligations to make interest payments of
$8.3 million.
Future minimum lease payments under all capital leases and non-cancelable
operating leases for each of the years 1998 through 2001 are $5.9 million (of
which $680,000 is payable to a principal stockholder), $5.9 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 $3.8 million (of which $788,000 is
payable to a principal stockholder), respectively.
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<PAGE> 16
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 2012. Management bases
its expectation on its plans to elect slower tax depreciation methods,
continuing annual growth in EBITDA, and interest expense that is primarily at
fixed rates, and, therefore, is not expected to increase.
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. As of March 31, 1998, the Company believes the
guarantee under the license agreements was approximately $42.9 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 Bank Credit Facility, however, Mr. Lenfest's claims for
indemnification are limited to $33.5 million. Effective March 6, 1997, as
subsequently amended, Mr. Lenfest released the parent Company and its cable
operating subsidiaries from their indemnity obligation until the last to occur
of January 1, 1999 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 non-cable subsidiaries have
agreed to indemnify Mr. Lenfest for his obligations under the guarantee. As a
result, the Company will remain indirectly liable under the non-cable
subsidiaries' indemnity.
On May 5, 1998, the Trustee for the holders of Australis' bond indebtedness
appointed receivers in order to wind up the affairs of Australis. Consequently,
it is probable that Australis will not continue to make payments to the movie
partnership for film product thereby denying that partnership funds with which
to pay the movie studios whose license payments are guaranteed by Mr. Lenfest
and TCI International, Inc. However, the Company believes that the movie
partnership has entered into back up arrangements with Foxtel, the partnership
of News Corporation and Telstra, to purchase movies from the partnership at
approximately the same price and under the same minimum guarantee arrangements
that the partnership had with Australis. Because of this arrangement, the
Company believes that payments will continue to be made by the partnership
pursuant to its license agreements with the movie studios. Consequently, the
Company believes that Mr. Lenfest's guarantee will not be called, and so the
Company's non-cable subsidiaries will not be required to pay any amounts to
Mr. Lenfest pursuant to the indemnification.
CAPITAL EXPENDITURES. During 1998, the Company expects to make approximately
$100 million of capital expenditures, of which approximately $90.0 million
will be spent for capital expenditures for its Core Cable Television
Operations. These capital expenditures will be for the upgrading of certain
of its cable television systems, including wide deployment of fiber optics,
maintenance including plant extensions, installations, and other fixed assets
as well as other capital projects associated with implementing the
Company's clustering strategy. The amount of such capital expenditures for
years subsequent to 1998 will depend on numerous factors, many of which
are beyond the Company's control, including responding to competition and
increasing capacity to handle new product offerings in affected cable
television systems. The Company anticipates that capital expenditures for
years subsequent to 1998 will continue to be significant.
RESOURCES. Management believes, based on its current business plans, 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. To the extent the Company seeks
additional acquisitions, it may need to obtain additional financing. 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.
YEAR 2000 ISSUE. The Year 2000 Issue is the result of computer programs
being written using two digits rather than four to define the applicable
year. Certain of the Company's and supporting vendors' computer programs and
other electronic equipment have date-sensitive software which may recognize
"00" as the year 1900 rather than the year 2000 (the "Year 2000 Issue"). If
this situation occurs, the potential exists for computer system failure or
miscalculations by computer programs, which could cause disruption of
operations.
15
<PAGE> 17
The Company is in the process of identifying the computer systems that will
require modification or replacement so that all of the Company's systems will
properly recognize dates beyond December 31, 1999. The Company has initiated
communications with most of its significant software suppliers to determine
their plans for remediating the Year 2000 Issue in their software which the
Company uses or relies upon. The Company expects to have identified all
systems in need of remediation not later than September 30, 1998. As it
identifies systems in need of remediation, the Company will develop and
implement appropriate remediation measures. The Company expects to complete the
remediation processes for all of its operations not later than the end of the
third quarter of 1999. However, there can be no guarantee that the systems of
other companies on which the Company relies will be converted on a timely
basis, or that a failure to convert by another company would not have a
material adverse effect on the Company.
RECENT ACCOUNTING PRONOUNCEMENTS
The Financial Accounting Standards Board ("FASB") Statement No. 130, "Reporting
Comprehensive Income" ("SFAS No. 130") establishes standards for reporting
and display of comprehensive income and its components in the financial
statements. SFAS No. 130 is effective for fiscal years beginning after
December 15, 1997. In accordance with the provisions of SFAS No. 130, the
Company has adopted the pronouncement, effective January 1, 1998, by
reporting net consolidated comprehensive income (loss) in the Consolidated
Statements of Operations and Comprehensive Income (Loss). Prior periods have
been restated for comparative purposes as required.
The FASB has also recently issued SFAS No. 131, "Disclosures about Segments
of an Enterprise and Related Information" ("SFAS No. 131"). SFAS No. 131
established standards for the way that public business enterprises report
information about operating segments in interim financial reports issued to
stockholders. It also established standards for related disclosures about
products and services, geographic areas, and major customers. The Company
will adopt SFAS 131 by December 31, 1998. The adoption of SFAS No. 131 will
not have a significant impact on the Company's Consolidated Financial Statements
and the related footnotes.
The FASB has also recently issued SFAS No. 132, "Employers' Disclosure about
Pensions and Other Post Retirement Benefits" ("SFAS No. 132"). SFAS No. 132
establishes standards for the way businesses disclose pension and other post
retirement benefit plans. SFAS No. 132 is effective for fiscal years
beginning after December 15, 1997. The Company adopted SFAS No. 132
effective January 1, 1998. Financial statement disclosures for prior
periods do not require restatement since the adoption of SFAS No. 132 does not
have a significant impact on the Company's financial statement disclosures.
The American Institute of Certified Public Accountants ("AICPA") recently
issued Statement of Position 98-1, "Accounting for the Costs of Computer
Software Developed or Obtained for Internal Use" ("SOP 98-1"). SOP 98-1
defines which costs of computer software developed or obtained for internal use
are capital and which costs are expense. SOP 98-1 is effective for fiscal
years beginning after December 15, 1998. Earlier application is encouraged.
The Company has not yet adopted SOP 98-1.
The AICPA recently issued Statement of Position 98-5, "Reporting on the Costs of
Start-Up Activities" ("SOP 98-5"). SOP 98-5 requires that entities expense
start-up costs and organization costs as they are incurred. SOP 98-5 is
effective for fiscal years beginning after December 15, 1998. Earlier
application is encouraged. The Company has adopted SOP 98-1 effective January
1, 1998. The adoption of SOP 98-5 does not have a significant impact on the
Company's Consolidated Financial Statements and the related footnotes.
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.
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<PAGE> 18
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8K
(a) Exhibits.
<TABLE>
<CAPTION>
Exhibit
Number Title or Description
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<S> <C>
The following Exhibits are furnished as part of this Report:
*2.1 Amended and Restated Asset Exchange Agreement, dated September 8, 1995, between LenCom, 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 the Company.
*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.
+++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
</TABLE>
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<PAGE> 19
<TABLE>
<S> <C>
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.
####4.7 Registration Agreement, dated January 30, 1998, between the Company, Salomon Brothers Inc.
and NationsBanc Montgomery Securities LLC.
####4.8 Indenture, dated as of February 5, 1998, between the Company and The Bank of New York
relating to the $150,000,000 7 5/8% Senior Notes due 2008.
####4.9 Form of $150,000,000 7 5/8% Senior Notes due 2008. (In accordance with Item 601 of
Regulation S-K similar notes between the same parties which reference CUSIP No. 526055 AF 5
and CUSIP No. U52547 AA 1 have not been filed because they are identical in all material
respects to the filed exhibit.)
####4.10 Indenture, dated as of February 5, 1998, between the Company and The Bank of New York
relating to the $150,000,000 8 1/4% Senior Subordinated Notes due 2008.
####4.11 Form of $150,000,000 8 1/4% Senior Subordinated Notes due 2008. (In accordance with Item 601
of Regulation S-K similar notes between the same parties which reference CUSIP No. U52547 AB
9 and CUSIP No. 526055 AH 1 have not been filed because they are identical in all material
respects to the filed exhibit.)
++++10.1 Programming Supply Agreement, effective as of September 30, 1986, between ease , dated as of
May Marguerite Lenfest and Satellite Services, Inc. and the Company.
*10.2 Note Agreement, dated as of May 22, 1989, among the Company and the Prudential Insurance
Company of America with respect to $50,000,000 10.69% Senior Notes due 1998.
*10.3 Lease, dated as of May 1, 1990, by and between H.F. Lenfest and Marguerite Lenfest and
Suburban Cable TV Co. Inc.
*10.4 Lease, dated as of May 1, 1990, by and between H.F. Lenfest and Marguerite Lenfest and
Suburban Cable TV Co. Inc.
*10.5 Lease, dated as of May 24, 1990, by and between H.F. Lenfest and Marguerite Lenfest and
MicroNet, Inc.
*10.6 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).
*10.7 Supplemental Agreement, dated December 15, 1981, by and between TCI Growth, Inc., H.F.
Lenfest, Marguerite Lenfest and the Company and Joinder Agreement executed by LMC Lenfest,
Inc.
*10.8 Amendment to Supplemental Agreement, dated May 4, 1984 between the Company and TCI Growth,
Inc.
*10.9 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, Tele-Communications,
Inc. and Liberty Media Corporation.
*10.10 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,
</TABLE>
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<PAGE> 20
<TABLE>
<S> <C>
Marguerite B. Lenfest, H. Chase Lenfest, Brook J. Lenfest, Diane A. Lenfest and
the Company
*10.11 Letter Agreement, dated as of December 18, 1991, among Liberty Media Corporation, the
Company, Marguerite B. Lenfest, Diane A. Lenfest, H. Chase Lenfest, Brook J. Lenfest and the
Lenfest Foundation.
*10.12 Irrevocable Proxies of H. Chase Lenfest, Diane A. Lenfest and Brook J. Lenfest, each dated
March 30, 1990.
*10.13 Partnership Agreement of L-TCI Associates, dated April, 1993, between Lenfest International,
Inc. and UA-France, Inc.
*10.14 Stock Pledge Agreement, dated May 28, 1993, between Lenfest York, Inc. and CoreStates Bank,
N.A., as Collateral Agent.
*10.15 Pledge Agreement, dated July 29, 1994, between Lenfest Raystay Holdings, Inc. and Farmers
Trust Company as Collateral Agent.
*++++10.16 Agreement, dated September 30, 1986, between the Company and Tele-Communications, Inc.
*10.17 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.
**10.18 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 Bankers's Trust have not been filed
because they are identical in all material respects to the filed exhibit.)
**10.19 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 exhibits.)
+10.20 First Amendment, dated as of February 29, 1996, to Credit Agreement, dated as of December
14, 1995, by and among the Company, 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.
+10.21 Agreement, dated as of February 29, 1996, in favor of the Company by H.F. Lenfest.
+10.22 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.
+10.23 Sublease Agreement, dated March 21, 1996, between Suburban Cable TV Co. Inc. and Surgical
Laser Technologies, Inc.
+10.24 Letter Agreement, dated November 30, 1995, between the Company and The Prudential Insurance
Company of America.
+10.25 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.)
++10.26 Form of Second Amendment, dated as of April 29, 1996, to Credit Agreement, dated as of
December 14, 1995, by and among the Company, 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 Form of Letter Agreement, dated May 2, 1996, between the Company and The Prudential
Insurance Company of America.
++10.28 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
</TABLE>
19
<PAGE> 21
<TABLE>
<S> <C>
Society have not been filed because they are identical in all material respects
to the filed exhibit.)
++10.29 Form of Senior Subordinated Credit Agreement, dated as of May 2, 1996, between the Company
and The Toronto-Dominion Bank.
+++ 10.30 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.)
+++10.31 Letter Agreement, dated June 20, 1996, between the Company and The Prudential Insurance
Company of America.
+++10.32 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.
+++10.33 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.
#10.34 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.
#10.35 Form of First Amendment, dated as of October 28, 1996, to Credit Agreement, dated as of June
27, 1996, by and among the Company, 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.
##10.36 Letter, dated March 6, 1997, from H. F. Lenfest to the Company.
###10.37 Agreements, dated as of June 5, 1997, between H. F. Lenfest and Lenfest Jersey, Inc.,
Lenfest York, Inc., Lenfest Raystay, Inc. and Lenfest MCN, Inc. (formerly, MicroNet, Inc.).
####10.38 Letter, dated March 26, 1998 (effective September 30, 1997), from H. F. Lenfest to the
Company.
!10.39 Form of Second Amendment, dated as of January 27, 1998, to Credit Agreement, dated as
of June 27, 1996, by and among the Company, The Toronto-Dominion Bank, PNC Bank, National
Association an NationsBank of Texas, N.A., 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, dated December 22, 1995,
for the quarter ended September 30, 1995.
*** Incorporated by reference to the Company's Report on Form 8-K, dated February 26, 1996.
</TABLE>
20
<PAGE> 22
<TABLE>
<S> <C>
+ 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.
++++ Confidential portions have been omitted pursuant to Rule 406 and filed separately
with the Commission.
# 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, dated August 14, 1997,
for the quarter ended June 30, 1997.
#### Incorporated by reference to the Company's Report on Form 10-K, dated March 27, 1998,
for the year ended December 31, 1997.
! Incorporated by reference to the Company's Registration Statement on Form
S-4, No. 333- 51589, dated May 1, 1998.
(b) Reports on Form 8-K.
None.
</TABLE>
21
<PAGE> 23
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: May 15, 1998 By: /s/ Maryann V. Bryla
Maryann V. Bryla
Vice President (authorized
officer and Principal Financial Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
FINANCIAL DATA SCHEDULE FOR MARCH 31, 1998 FORM 10-Q
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET AS OF MARCH 31, 1998, AND THE CONSOLIDATED
STATEMENT OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 1998, AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> MAR-31-1998
<CASH> 22,017
<SECURITIES> 11,825
<RECEIVABLES> 20,169
<ALLOWANCES> 2,659
<INVENTORY> 2,242
<CURRENT-ASSETS> 0
<PP&E> 790,805
<DEPRECIATION> 381,128
<TOTAL-ASSETS> 1,209,368
<CURRENT-LIABILITIES> 0
<BONDS> 1,286,145
0
0
<COMMON> 2
<OTHER-SE> (261,125)
<TOTAL-LIABILITY-AND-EQUITY> 1,209,368
<SALES> 110,665
<TOTAL-REVENUES> 110,665
<CGS> 0
<TOTAL-COSTS> 98,632
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 1,679
<INTEREST-EXPENSE> 31,499
<INCOME-PRETAX> (4,699)
<INCOME-TAX> 855
<INCOME-CONTINUING> (3,814)
<DISCONTINUED> 0
<EXTRAORDINARY> (3,061)
<CHANGES> 0
<NET-INCOME> (6,875)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
