<PAGE>
FORM 10-Q/A
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)
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 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.
This Form 10-Q/A is being filed to amend Part I Items 1 and 2 of the
quarterly report on Form 10-Q of Lenfest Communications, Inc. for the quarterly
period ended March 31, 1998, which was filed with the Securities and Exchange
Commission on May 15, 1998.
<PAGE>
1. The following Notes to Condensed Consolidated Financial Statements are
amended and restated in their entirety as follows:
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) or approximately 2% 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. Due
to the small percentage of ownership and the Company's
inability to exercise influence over Hyperion, the Company has
discontinued the usage of the equity method. The Company
accounts for this investment in accordance with SFAS 115.
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. As a result, the Company will
remain indirectly liable under the non-cable subsidiary
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
<PAGE>
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.
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.
2
<PAGE>
2. Management's Discussion and Analysis of Financial Condition and Results
of Operations is amended and restated in its entirety as follows:
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
Adjusted 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, Adjusted EBITDA represents EBITDA (earnings before
interest expense, income taxes, depreciation and amortization)
adjusted to include cash distributions received from
unconsolidated and unrestricted affiliates. Adjusted EBITDA
corresponds to the definition of "EBITDA" contained in the
Company's publicly held debt securities and is presented for
the convenience of the holders of the Company's public debt
securities. Adjusted 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. Adjusted EBITDA and EBITDA are
not measures 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.
3
<PAGE>
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 the changed treatment of accounting
for franchise fees, selling, general and administrative
expense for the quarter ended March 31, 1998 was 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.
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.
Adjusted EBITDA increased 3.7% to $49.8 million for the
quarter ended March 31, 1998 compared to the corresponding
1997 period. The Adjusted 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.
4
<PAGE>
The Company has not established a valuation
allowance for the net operating losses, because it believes
that all of the Company's net operating losses will be
utilized before they expire. The Company bases its belief on
continued growth in Adjusted EBITDA, slower tax depreciation
from the utilization of slower depreciation methods for tax
purposes and the expiration of depreciation and amortization
from previous acquisitions. Because of these factors, it
appears more likely than not that the Company will utilize its
net operating losses prior to expiration.
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.
Adjusted 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 Adjusted EBITDA margin was
50.6% in both 1998 and 1997.
5
<PAGE>
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.
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.
Adjusted 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 increased 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.
6
<PAGE>
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
ratio of operating cash flow for the most recently completed
financial quarter multiplied by four to senior indebtedness
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 ("Senior Debt Leverage Ratio"); and (ii) a
ratio of operating cash flow for the most recently completed
financial quarter multiplied by four to total indebtedness in
excess of 6.50:1 at March 31, 1998, and declining to 6.00:1
commencing on December 31, 1998 and thereafter ("Total Debt
Leverage Ratio"). 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.
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
Adjusted EBITDA and interest expense that is primarily at
fixed rates, and, therefore, 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.
7
<PAGE>
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.
8
<PAGE>
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 utilize
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 has retained a consultant to review its systems, to
identify which systems are in need of remediation and to
prepare a remediation report. The Company expects to receive
the consultant's report and 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 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.
9
<PAGE>
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.
10
<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: July 2, 1998 By: /s/ Maryann V. Bryla
--------------------
Maryann V. Bryla
Treasurer (authorized officer and
Principal Financial Officer)
11