<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------------
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1999
COMMISSION FILE NUMBERS: 333-77637
333-77637-01
----------------------
BRESNAN COMMUNICATIONS GROUP LLC
BRESNAN CAPITAL CORPORATION
(EXACT NAME OF REGISTRANTS AS SPECIFIED IN THEIR CHARTERS)
<TABLE>
<S> <C>
DELAWARE 38-2558446
DELAWARE 13-3887244
(State or Other Jurisdiction (I.R.S. Employer
of Incorporation or Organization) Identification Number)
</TABLE>
709 WESTCHESTER AVENUE
WHITE PLAINS, NEW YORK 10604
(Address of Registrants' Principal Executive Offices,
including zip code)
(914) 993-6600
(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 Security and Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. [ ] Yes [X] No
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
Bresnan Communications Group LLC Not Applicable
Bresnan Capital Corporation 100 shares
<PAGE> 2
INDEX
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Bresnan Communications Group LLC
Unaudited Consolidated Financial Statements
Consolidated Balance Sheets as at December 31, 1998 and September 30,1999...............................3
Consolidated Statements of Operations and Member's Equity (Deficit) for the three months
ended September 30, 1998 and 1999 and the six months ended September 30, 1998 and 1999...........4
Consolidated Statements of Cash Flows for the six months ended September 30, 1998 and 1999..............5
Notes to Consolidated Financial Statements .............................................................6
Bresnan Capital Corporation
Balance Sheets as at December 31, 1998 and September 30,1999............................................13
Note to Balance Sheets..................................................................................14
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations..............15
Item 3. Quantitative and Qualitative Disclosures about Market Risk.........................................23
PART II. OTHER INFORMATION
Item 1. Legal Proceedings - Not Applicable
Item 2. Changes in Securities and Use of Proceeds - Not Applicable
Item 3. Defaults Upon Senior Securities - Not Applicable
Item 4. Submission of Matters to a Vote of Security Holders - Not Applicable
Item 5. Other Information..................................................................................24
Item 6. Exhibits and Reports on Form 8-K...................................................................24
</TABLE>
<PAGE> 3
ITEM 1. FINANCIAL STATEMENTS
BRESNAN COMMUNICATIONS GROUP LLC
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1998 1999
------------ -------------
ASSETS
<S> <C> <C>
Cash and cash equivalents.................................................. $ 6,636 $ 877
Restricted cash............................................................ 47,199 338
Trade and other receivables, net........................................... 8,874 9,653
Property and equipment, at cost:
Land and buildings....................................................... 4,123 6,860
Distribution systems..................................................... 443,114 505,946
Support equipment........................................................ 50,178 56,243
--------- ---------
497,415 569,049
Less accumulated depreciation............................................ 190,752 215,185
--------- ---------
306,663 353,864
Franchise costs, net....................................................... 291,103 320,650
Other assets, net of accumulated amortization.............................. 3,961 20,198
--------- ---------
Total assets........................................................ $ 664,436 $ 705,580
========= =========
LIABILITIES AND MEMBER'S EQUITY (DEFICIT)
Accounts payable........................................................... $ 3,193 $ 3,035
Accrued expenses........................................................... 13,395 21,036
Accrued interest........................................................... 21,835 7,622
Due to affiliated companies................................................ -- 12,969
Debt....................................................................... 232,617 869,211
Other liabilities.......................................................... 11,648 7,329
--------- ---------
Total liabilities................................................... 282,688 921,202
Member's equity (deficit).................................................. 381,748 (215,622)
--------- ---------
Commitments and contingencies
Total liabilities and member's equity (deficit)..................... $ 664,436 $ 705,580
========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE> 4
BRESNAN COMMUNICATIONS GROUP LLC
CONSOLIDATED STATEMENTS OF OPERATIONS AND MEMBER'S EQUITY (DEFICIT)
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS NINE MONTHS
ENDED SEPTEMBER 30, ENDED SEPTEMBER 30,
------------------- -------------------
1998 1999 1998 1999
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Revenue.................................................. $ 66,402 $ 72,458 $192,855 $209,749
Operating costs and expenses:
Programming............................................ 15,931 17,426 47,129 53,178
Operating.............................................. 5,516 7,360 19,898 23,058
Selling, general and administrative ................... 16,406 18,757 42,269 51,563
Depreciation and amortization.......................... 13,752 16,618 40,193 42,653
-------- --------- -------- ---------
51,605 60,161 149,489 170,452
-------- --------- -------- ---------
Operating income.................................. 14,797 12,297 43,366 39,297
Other income (expense):
Interest expense:
Related party....................................... (480) -- (1,424) (152)
Other............................................... (4,007) (17,245) (12,491) (49,034)
Gain on sale of cable television systems............... -- 592 6,869 422
Other, net............................................. (181) (253) (190) (690)
-------- --------- -------- ---------
(4,668) (16,906) (7,236) (49,454)
-------- --------- -------- ---------
Net earnings (loss)............................... 10,129 (4,609) 36,130 (10,157)
Member's equity (deficit)
Beginning of period.................................... 360,385 (208,471) 359,098 381,748
Operating expense allocations and charges.............. 20,774 -- 50,789 --
Cash transfers, net.................................... (25,541) -- (80,270) --
Capital contributions by members ...................... -- -- -- 136,500
Capital distributions to members....................... -- (2,542) -- (723,713)
-------- --------- -------- ---------
End of period.......................................... $365,747 $(215,622) $365,747 $(215,622)
======== ========= ======== =========
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE> 5
BRESNAN COMMUNICATIONS GROUP LLC
CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1999
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
1998 1999
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net earnings (loss).................................................. $ 36,130 $ (10,157)
Adjustments to reconcile net earnings to net cash provided
by operating activities:
Depreciation and amortization..................................... 40,193 42,653
Gain on sale of cable systems..................................... (6,869) (422)
Amortization of debt discount and deferred financing costs........ - 14,011
Changes in operating assets and liabilities, net of
effects of acquisitions:
Change in receivables............................................ 4,639 (752)
Change in other assets........................................... 332 (1,070)
Change in accounts payable, accrued expenses and
other liabilities.............................................. 401 1,916
other, net..................................................... (381) 1,955
-------- ---------
Net cash provided by operating activities..................... 74,445 48,134
-------- ---------
Cash flows from investing activities:
Capital expended for property and equipment.......................... (33,317) (59,367)
Capital expended for franchise costs................................. (3,915) -
Cash paid in acquisitions............................................ (28,439) (66,387)
Proceeds on dispositions of cable televisions systems................ 12,000 4,795
Change in restricted cash............................................ (250) 46,861
-------- ---------
Net cash provided by (used in) investing activities.......... 53,921 (74,098)
-------- ---------
Cash flows from financing activities:
Borrowings under note agreement...................................... 42,900 901,851
Repayments under note agreement...................................... (26,225) (276,137)
Deferred finance costs paid.......................................... - (18,297)
Contributions from members........................................... - 136,500
Distributions to members............................................. (29,481) (723,712)
-------- ---------
Net cash provided by (used in) financing activities.......... (12,806) 20,205
-------- ---------
Net increase (decrease) in cash.............................. 7,718 (5,759)
Cash and cash equivalents:
Beginning of period.................................................. 6,957 6,636
-------- ---------
End of period........................................................ $ 14,675 $ 877
======== =========
Supplemental disclosure of cash flow information -- cash
paid during the period for interest.................................. $ 12,694 $ 49,388
======== =========
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE> 6
BRESNAN COMMUNICATIONS GROUP LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1999
(UNAUDITED)
(IN THOUSANDS)
(1) BASIS OF PRESENTATION
Bresnan Communications Group LLC and its subsidiaries ("BCG" or the
"Company") are wholly owned by Bresnan Communications Company Limited
Partnership, a Michigan limited partnership ("BCCLP"). BCG is a Delaware limited
liability corporation formed on August 5, 1998 for the purpose of acting as
co-issuer with its wholly-owned subsidiary, Bresnan Capital Corporation ("BCC"),
of $170,000 aggregate principal amount at maturity of 8% Senior Notes and
$275,000 aggregate principal amount at maturity of 9.25% Senior Discount Notes,
both due in 2009 (collectively the "Notes"). Prior to the issuance of the Notes
on February 2, 1999, BCCLP completed the terms of a contribution agreement dated
June 3, 1998, as amended, whereby certain affiliates of Tele-Communications,
Inc. ("TCI") contributed certain cable television systems along with assumed TCI
debt of approximately $708,854 to BCCLP. In addition, Blackstone BC Capital
Partners L.P. and affiliates contributed $136,500 to BCCLP. Upon completion of
the Notes offering on February 2, 1999 BCCLP contributed all of its assets and
liabilities to BCG, which formed a wholly owned subsidiary, Bresnan
Telecommunications Company LLC ("BTC"), into which it contributed all of its
assets and certain liabilities. The above noted contributed assets and
liabilities were accounted for at predecessor cost because of the common
ownership and control of TCI and have been reflected in the accompanying
financial statements in a manner similar to a pooling of interests.
The Company owns and operates cable television systems in small- and
medium-sized communities in the midwestern United States.
The accompanying interim consolidated financial statements are unaudited
but, in the opinion of management, reflect all adjustments (consisting of normal
recurring accruals) necessary for a fair presentation of the results of such
periods. The results of operations for the period ended September 30, 1999 are
not necessarily indicative of results for a full year. These consolidated
financial statements should be read in conjunction with the combined financial
statements and notes thereto of the predecessor to the Company contained in the
Bresnan Communications Group Systems financial statements for the year ended
December 31, 1998. The accompanying comparative consolidated financial
statements include the financial information of Bresnan Communications Group
Systems (the predecessor of the Company) prior to February 2, 1999.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities at the
date of the financial statements and the reported amounts of revenue and
expenses during the reporting period. Actual results could differ from those
estimates.
(2) ACQUISITIONS AND DISPOSITIONS
In September 1998, the Company acquired certain cable television assets
located in Minnesota, which were accounted for under the purchase method. The
purchase price was allocated to the cable television assets acquired in relation
to their fair values as increases in property and equipment of $3,396 and
franchise costs of $8,354. In addition, the Company acquired two additional
systems in the first quarter of 1999 which were accounted for under the purchase
method. The purchase prices were allocated to the cable television assets
acquired in relation to their estimated fair values as increases in property and
equipment of $22,200 and franchise costs of $44,600.
6
<PAGE> 7
BRESNAN COMMUNICATIONS GROUP LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
SEPTEMBER 30, 1999
(UNAUDITED)
(IN THOUSANDS)
The results of operations of these cable television systems have been
included in the accompanying consolidated statements of operations from their
dates of acquisition. Pro forma information has not been presented because the
effect was not significant.
The Company also disposed of cable television systems during 1998 and 1999
for gross proceeds of $12,000 and $4,400 respectively, resulting in gains on
sale of cable television systems of $6,869 and $422 for 1998 and 1999,
respectively. The results of operations of these cable television systems
through the dates of the dispositions and the gain (loss) from the dispositions
have been included in the accompanying consolidated statements of operations. As
part these dispositions, the Company received cash that is restricted to
reinvestment in additional cable television systems.
On August 31, 1999 and September 29, 1999, a subsidiary of the company
entered into agreements to acquire cable television systems serving
approximately 11,400 basic subscribers in Minnesota for an aggregate of
approximately $26 million. On August 31, 1999, a company subsidiary also entered
into agreements to acquire cable television systems serving approximately 12,300
basic subscribers in Wisconsin for an aggregate of approximately $36.9 million.
The Company anticipates the transactions to be consummated late in the fourth
quarter of 1999 or in the first quarter of 2000 and will be financed through
operating cash flows and additional borrowings under our Senior Credit Facility.
(3) DEBT
Debt is summarized as follows:
<TABLE>
<CAPTION>
SEPTEMBER 30, 1999
------------------
<S> <C>
Senior Credit Facility(a)....................... $512,000
Senior Notes Payable(b)......................... 170,000
Senior Discount Notes Payable(b)................ 185,902
Other Debt...................................... 1,309
--------
$869,211
========
</TABLE>
(a) The Senior Credit Facility represents borrowings under a $650,000 senior
reducing revolving credit and term loan facility as documented in the loan
agreement as of February 2, 1999. The Senior Credit Facility has a current
available commitment of $650,000 of which $512,000 is outstanding at
September 30, 1999. The Senior Credit Facility provides for three tranches,
a revolving loan tranche for $150,000 (the "Revolving Loan"), a term loan
tranche of $328,000 (the "A Term Loan" and together with the Revolving
Loan, "Facility A") and a term loan tranche of $172,000 (the "Facility B").
7
<PAGE> 8
BRESNAN COMMUNICATIONS GROUP LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
SEPTEMBER 30, 1999
(UNAUDITED)
(IN THOUSANDS)
The commitments under the Senior Credit Facility will reduce commencing
with the quarter ending March 31, 2002. Facility A permanently reduces in
quarterly amounts ranging from 2.5% to 7.5% of the Facility A amount
starting March 31, 2002 and matures approximately eight and one half years
after February 2, 1999. Facility B is also to be repaid in quarterly
installments of .25% of the Facility B amount beginning in March 2002 and
matures approximately nine years after February 2, 1999, on which date all
remaining amounts of Facility B will be due and payable. Additional
reductions of the Senior Credit Facility will also be required upon certain
asset sales, subject to the right of the Company and its subsidiaries to
reinvest asset sale proceeds under certain circumstances. The interest rate
options include a LIBOR option and a Prime Rate option plus applicable
margin rates based on the Company's total leverage ratio, as defined. The
rate applicable to balances outstanding at September 30, 1999 ranged from
7.06% to 8.27%. Covenants of the Senior Credit Facility require, among
other conditions, the maintenance of specific levels of the ratio of cash
flows to future debt and interest expense and certain limitations on
additional investments, indebtedness, capital expenditures, asset sales and
affiliate transactions. In addition, the Company is required to pay a
commitment fee on the unused revolver portion of Facility A which will
accrue at a rate ranging from .25% to .375% per annum, depending on the
Company's total leverage ratio, as defined.
(b) On February 2, 1999, the Company issued $170,000 aggregate principal amount
senior notes payable (the "Senior Notes"). In addition, on the same date,
the Company issued $275,000 aggregate principal amount at maturity of
senior discount notes, (the "Senior Discount Notes") for approximately
$175,021 gross proceeds (collectively the "Notes").
The Senior Notes are unsecured and will mature on February 1, 2009. The
Senior Notes bear interest at 8% per annum payable semi-annually on
February 1 and August 1 of each year, commencing August 1, 1999.
The Senior Discount Notes are unsecured and will mature on February 1,
2009. The Senior Discount Notes were issued at a discount to their
aggregate principal amount at maturity and will accrete at a rate of
approximately 9.25% per annum, compounded semi-annually, to an aggregate
principal amount of $275,000 on February 1, 2004. Subsequent to February 1,
2004, the Senior Discount Notes will bear interest at a rate of 9.25% per
annum payable semi-annually in arrears on February 1 and August 1 of each
year, commencing August 1, 2004.
The Company may elect, upon not less than 60 days prior notice, to commence
the accrual of interest on all outstanding Senior Discount Notes on or
after February 1, 2002, in which case the outstanding principal amount at
maturity of each Senior Discount Note will on such commencement date be
reduced to the accreted value of such Senior Discount Note as of such date
and interest shall be payable with respect to the Senior Discount Notes on
each February and August 1 thereafter.
8
<PAGE> 9
BRESNAN COMMUNICATIONS GROUP LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
SEPTEMBER 30, 1999
(UNAUDITED)
(IN THOUSANDS)
The Company may not redeem the Notes prior to February 1, 2004 except that
prior to February 1, 2002, the Company may redeem up to 35% of the Senior
Notes and Senior Discount Notes at redemption prices equal to 108% and 109%
of the applicable principal amount and accreted value, respectively.
Subsequent to February 1, 2004, the Company may redeem the Notes at
redemption prices declining annually from approximately 104% of the
principal amount or accreted value.
Bresnan Communications Group LLC and its wholly owned subsidiary Bresnan
Capital Corporation are the sole obligors of the Senior Notes and Senior
Discount Notes. Bresnan Communications Group LLC has no other assets or
liabilities other than its investment in its wholly owned subsidiary
Bresnan Telecommunications Company LLC. Bresnan Capital Corporation has no
other assets or liabilities.
On August 6, 1999, the Company and Bresnan Capital Corporation commenced an
offer to exchange all of the privately placed and outstanding $170,000,000
aggregate principal amount of their 8% Senior Notes due 2009 and
$275,000,000 aggregate principal amount at maturity of their 9.25% Senior
Discount Notes due 2009 for an aggregate principal amount of $170,000,000
of their registered 8% Senior Notes due 2009, Series B and an aggregate
principal amount at maturity of $275,000,000 of their registered 9.25%
Senior Discount Notes due 2009, Series B. At the completion of the exchange
offer on September 3, 1999, all of the outstanding notes had been tendered
for exchange.
Upon change of control of the Company, the holders of the notes have the
right to require the Company to purchase the outstanding notes at a price
equal to 101% of the principal amount or accreted value plus accrued and
unpaid interest. (See note 6 "Proposed Sale of the Company").
The Company has entered into interest rate swap agreements to effectively
fix or set maximum interest rates on a portion of its floating rate
long-term debt. The Company is exposed to credit loss in the event of
nonperformance by the counterparties to the interest rate swap agreements.
At September 30, 1999, such Interest Rate Swap agreements effectively fixed
or set a maximum LIBOR base interest rates between 8.0% and 8.02% on an
aggregate notional principal amount of $50,000 which rates would become
effective upon the occurrence of certain events. The effect of the Interest
Rate Swap on interest expense for the nine months ended September 30, 1998
and 1999 was not significant. The expiration dates of the Interest Rate
Swaps ranges from April 1, 2000 to April 3, 2000. The difference between
the fair market value and book value of long-term debt and the Interest
Rate Swaps at September 30, 1998 and 1999 is not significant.
(4) TRANSACTIONS WITH RELATED PARTIES
BCG and its predecessor purchased, at TCI's cost, substantially all of its
pay television and other programming from affiliates of TCI. Charges for such
programming were $40,730 and $46,144 for the nine months ended September 30,
1998 and 1999, respectively, and are included in programming expenses in the
accompanying consolidated financial statements.
9
<PAGE> 10
BRESNAN COMMUNICATIONS GROUP LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
SEPTEMBER 30, 1999
(UNAUDITED)
(IN THOUSANDS)
Prior to February 2, 1999, certain affiliates of the predecessor to BCG
provided administrative services to BCG and assumed managerial responsibility of
BCG's cable television system operations and construction. As compensation for
these services, BCG paid a monthly fee calculated pursuant to certain agreed
upon formulas. Subsequent to the TCI Transaction on February 2, 1999, certain
affiliates of BCG provide administrative services and have assumed managerial
responsibilities of BCG. As compensation for these services BCG pays a monthly
fee equal to approximately 3% of gross revenues. Such aggregate charges totaled
$10,059 and $7,690 and have been included in selling, general and administrative
expenses for the nine months ended September 30, 1998 and 1999, respectively.
(5) COMMITMENTS AND CONTINGENCIES
The Cable Television Consumer Protection and Competition Act of 1992 (the
"1992 Cable Act") imposed certain rate regulations on the cable television
industry. Under the 1992 Cable Act, all cable systems are subject to rate
regulation, unless they face "effective competition," as defined by the 1992
Cable Act and expanded in the Telecommunications Act of 1996 (the "1996 Act"),
in their local franchise area.
Although the Federal Communications Commission (the "FCC") has established
regulations required by the 1992 Cable Act, local government units (commonly
referred to as local franchising authorities) are primarily responsible for
administering the regulation of a cable system's basic service tier ("BST"). The
FCC itself directly administered rate regulation of any cable programming
service tier ("CPST"). The FCC's authority to regulate CPST rates expired on
March 31, 1999. The FCC has taken the position that it will still adjudicate
CPST complaints filed after this sunset date (but no later than 180 days after
the last CPST rate increase imposed prior to March 31, 1999), and will strictly
limit its review (and possible refund orders) to the time period predating the
sunset date.
Under the FCC's rate regulations, most cable systems were required to
reduce their BST and CPST rates in 1993 and 1994, and have since had their rate
increases governed by a complicated price structure that allows for the recovery
of inflation and certain associated costs, as well as providing some incentive
for expanding channel carriage. Operators also have the opportunity to bypass
this "benchmark" regulatory structure in favor of the traditional
"cost-of-service" regulation in cases where the latter methodology appears
favorable. Premium cable service offered on a per-channel or per-program basis
remain unregulated, as do affirmatively marketed packages consisting entirely of
new programming product.
The management of BCG believes that it has complied in all material
respects with the provisions of the 1992 Cable Act and the 1996 Act, including
its rate setting provisions. If, as a result of the review process, a 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 CPST rates would be retroactive
to the date of complaint. Any refunds of the excess portion of BST or equipment
rates would be retroactive to one year prior to the implementation of the rate
reductions.
10
<PAGE> 11
BRESNAN COMMUNICATIONS GROUP LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
SEPTEMBER 30, 1999
(UNAUDITED)
(IN THOUSANDS)
Certain plaintiffs have filed or threatened separate class action
complaints against certain of the systems of BCG, alleging that the systems'
practice of assessing an administrative fee to the subscribers whose payments
are delinquent constitutes an invalid liquidated damage provision and a breach
of contract, and violates local consumer protection statutes. Plaintiffs seek
recovery of all late fees paid to the subject systems as a class purporting to
consist of all subscribers who were assessed such fees during the applicable
limitation period, plus attorney fees and costs.
BCG has additional contingent liabilities related to legal proceedings and
other matters arising in the ordinary course of business. Although it is
possible that BCG may incur losses upon conclusion of these matters and the
matters referred to above, an estimate of any loss or range of loss cannot
presently be made. Based upon the facts available, management believes that,
although no assurance can be given as to the outcome of these actions, the
ultimate disposition should not have material adverse effect upon the combined
financial condition of BCG.
BCG leases business offices, has entered into pole attachment agreements
and uses certain equipment under lease arrangements. Rental expense under such
arrangements amounted to $2,218 and $2,605 during the nine months ended
September 30, 1998 and 1999, respectively.
Future minimum lease payments under noncancelable operating leases are
estimated to approximate $2,240 per year for each of the next five years. It is
expected that, in the normal course of business, expiring leases will be renewed
or replaced by leases on the same or other properties.
During 1999, BCG has continued enterprise-wide comprehensive efforts to
assess and remediate its respective computer systems and related software and
equipment to ensure such systems, software and equipment recognize, process and
store information in the year 2000 and thereafter. Such year 2000 remediation
efforts include an assessment of its most critical systems, such as customer
service and billing systems, headends and other cable plant, business support
operations, and other equipment and facilities. BCG also continued its efforts
to verify the year 2000 readiness of its significant suppliers and vendors and
continued to communicate with significant business partners and affiliates to
assess affiliates' year 2000 status.
BCG formed a year 2000 program management team to organize and manage its
year 2000 remediation efforts. The program management team is responsible for
overseeing, coordinating and reporting on its respective year 2000 remediation
efforts.
During 1999, the project management team continued its surveys of
significant third-party vendors and suppliers whose systems, services or
products are important to its operations (e.g., suppliers of addressable
controllers and set-top boxes, and the provider of billing services). BCG has
instituted a verification process to determine the vendors' year 2000 readiness.
Such verification includes, as deemed necessary, reviewing vendors' test and
other data and engaging in regular conferences with vendors' year 2000 teams.
BCG is also requiring testing to validate the year 2000 compliance of certain
critical products and services. The year 2000 readiness of such providers is
critical to continued provision of cable service.
11
<PAGE> 12
BRESNAN COMMUNICATIONS GROUP LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
SEPTEMBER 30, 1999
(UNAUDITED)
(IN THOUSANDS)
The failure to correct a material year 2000 problem could result in an
interruption or failure of certain important business operations. There can be
no assurance that the systems of BCG or the systems of other companies on which
they rely will be converted in time, or that any such failure to convert by BCG
or other companies will not have a material adverse effect on the financial
position, results of operations or cash flows of BCG.
(6) PROPOSED SALE OF THE COMPANY
In June 1999, the Partners of BCCLP entered into an agreement to sell all
of their partnership interests in BCCLP to Charter Communications Holding
Company, LLC for a purchase price of approximately $3.1 billion in cash and
equity which will be reduced by the assumption of BCCLP's debt at closing. BCCLP
anticipates that this transaction will close in the first half of 2000. (See
Note 3 "Debt" for discussion of the impact on outstanding indebtedness)
12
<PAGE> 13
BRESNAN CAPITAL CORPORATION
BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1998 1999
---- ----
ASSETS
<S> <C> <C>
Cash and cash equivalents................................... $ 1 $ 1
------- -------
$ 1 $ 1
======= =======
LIABILITIES AND
STOCKHOLDER'S EQUITY
Stockholder's equity........................................ $ 1 $ 1
------- -------
Common stock, $.01 par value. 100
shares authorized, issued and
outstanding........................................... $ 1 $ 1
======= =======
</TABLE>
See accompanying note.
13
<PAGE> 14
BRESNAN CAPITAL CORPORATION
NOTE TO CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 1999
(UNAUDITED)
(1) ORGANIZATION
Bresnan Capital Corporation, a wholly-owned subsidiary of Bresnan
Communications Group LLC (BCG), was incorporated in the state of
Delaware on April 25, 1996 for the sole purpose of acting as a
co-issuer with BCG of $170,000,000 aggregate principal amount of
senior notes and $275,000,000 aggregate principal amount of Senior
Discount Notes. The notes were issued on February 2, 1999 with all
proceeds received by BCG.
On August 6, 1999, the Company and Bresnan Capital Corporation
commenced an offer to exchange all of the privately placed and
outstanding senior notes and senior discount notes. At the completion
of the exchange offer on September 3, 1999, all of the outstanding
notes had been tendered for exchange.
14
<PAGE> 15
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
GENERAL
On June 3, 1998, Blackstone BC Capital Partners L.P., Bresnan
Communications Company Limited Partnership, William J. Bresnan and certain of
his affiliates, TCID of Michigan, Inc. and certain TCI affiliates entered into a
contribution agreement. Under that agreement, on February 2, 1999, certain
affiliates of TCI transferred several cable systems to us. The combined
financial statements of Bresnan Communications Group Systems are the combination
of the financial statements of Bresnan Communications Company and the cable
systems transferred to us by certain affiliates of TCI. Before certain
affiliates of TCI transferred to us several of their cable systems, Bresnan
Communications Company and the affiliates of TCI which contributed cable systems
to us, were under the common ownership and control of TCI and its affiliates.
Based on such common ownership and control, the financial statements are
presented at historical cost on a combined basis. The following discussion
relates to the combined financial statements of Bresnan Communications Group
Systems (for period prior February 2, 1999) and Bresnan Communications Group LLC
(for the period thereafter).
Revenue. Substantially all of our revenue is earned from:
subscriber fees for cable television programming services;
- the sale of advertising;
- commissions for products sold through home shopping networks, fees for
ancillary services, such as the rental of converters and remote
control devices and installations; and
- fees for high-speed Internet service and other data services.
The operation of our cable television systems is regulated at the federal,
state and local levels. Under federal law, certain services are regulated if the
appropriate franchise authority is certified by the FCC to regulate rates. Until
March 31, 1999, rates for the cable programming service tier were also subject
to regulation.
The following table sets forth for the periods indicated the percentage of
our total revenue attributable to the sources indicated:
<TABLE>
<CAPTION>
Nine Months Ended,
------------------
1998 1999
---- ----
<S> <C> <C>
Basic and preferred basic...................... 76.7% 78.9%
Premium........................................ 9.5% 8.1%
Other.......................................... 13.8% 13.0%
----- -----
Total revenue............................. 100.0% 100.0%
===== =====
</TABLE>
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<PAGE> 16
Operating Costs and Expenses. Our operating costs and expenses consist of:
- programming expenses;
- operating costs;
- selling, general and administrative expenses; and
- depreciation and amortization expense.
Our programming expenses have historically increased at rates in excess of
inflation due to system acquisitions, and increases in the number, quality and
cost of programming services we offered. Operating costs primarily include
expenses related to wages and employee benefits of technical personnel,
electricity, systems supplies and vehicles.
Selling, general and administrative expenses include:
- wages and employee benefits of customer service;
- accounting and administrative personnel;
- franchise fees;
- marketing and advertising costs; and
- expenses related to billing, payment processing, office administration
and corporate overhead.
Depreciation and amortization expense relates to the depreciation of our
tangible assets and the amortization of our franchise costs.
Three Months Ended September 30, 1999 Compared with Three Months Ended September
30, 1998
Revenue increased $6.1 million or 9.1% to $72.5 million for the three
months ended September 30, 1999 as compare to the same period in 1998, primarily
as a result of basic and preferred basic tier rate increases, acquisitions and,
to a lesser extent, growth in advertising, equipment rental and pay-per-view
revenue. The basic and preferred basic tier rate increases included (1) amounts
to cover our increase in programming costs and (2) regulated rate increases.
Advertising and home shopping revenue grew by $1.2 million or 28.5% to $5.5
million due to an increase in customer buy rates and additional advertising
insertion.
Operating costs and expenses increased $8.6 million or 16.6% to $60.2
million for the three months ended September 30, 1999 as compared to the same
period in 1998. In the three months ended September 30, 1999, programming
expense increased $1.5 million or 9.4% to $17.4 million, operating expense
increased $1.8 million or 33.4% to $7.4 million and selling, general and
administrative expense increased $2.4 million or 14.3% to $18.8 million, in each
case as compared to the same period in 1998.
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<PAGE> 17
The increase in programming expense was caused by increases in rates
charged by programming suppliers, including increases in rates relating to
sports programming and the offering of new channels to our customers. Management
anticipates that our programming costs will continue to increase in future
periods.
The increase in operating expense was primarily related to increases in
insurance, taxes and supplies relating to merging the contributed TCI systems
with the operations of Bresnan Communications Company. This increase in
operating costs was partially offset by increases in capitalized labor and
overhead resulting primarily from increased installation and construction
activities. Selling, general and administrative expense increased due to
increases in marketing expenses, advertising expenses and costs related to the
reorganization. All other variable expenses increased as a result of an increase
in the number of subscribers served.
Depreciation and amortization increased $2.9 million or 20.8% to $16.6
million for the three months ended September 30, 1999 as compared to the same
period in 1998 as a result of additional capital expenditures relating to the
upgrade of the cable systems transferred to us by certain affiliates of TCI.
Interest expense increased $12.8 million or 284.3% to $17.3 million for the
three months ended September 30, 1999 as compared to the same period in 1998 as
a result of the financings completed in February 1999.
Operating income and net earnings decreased $2.5 million or 16.9% to $12.3
million and $14.7 million or 145.5% to a loss of $4.6 million, respectively, for
the three months ended September 30, 1999 as compared to the same period in
1998.
EBITDA increased $.4 million or 1.3% to $28.9 million for the three months
ended September 30, 1999 as compared to the same period in 1998 as a result of
increases in revenue being substantially offset by increases in programming
expenses and selling, general and administrative expense. We believe that EBITDA
is a meaningful measure of performance because it is commonly used in the cable
television industry to analyze and compare cable television companies on the
basis of operating performance, leverage, and liquidity. In addition, our credit
facility and the indenture which governs the notes contain certain covenants in
which compliance is measured by computations substantially similar to those used
in determining EBITDA. There are no legal restrictions on the use of EBITDA,
other than those contained in our credit facility and indenture. Management
expects that EBITDA will be used to satisfy working capital, debt service and
capital expenditure requirements and other commitments and contingencies. EBITDA
margin decreased from 43.0% to 39.9%, primarily as a result of expenses
increasing at a rate greater than revenue.
Nine Months Ended September 30, 1999 Compared with Nine Months Ended September
30, 1998
Revenue increased $16.9 million or 8.8% to $209.7 million for the nine
months ended September 30, 1999 as compared to the same period in 1998,
primarily as a result of basic and preferred basic tier rate increases,
acquisitions and, to a lesser extent, growth in advertising, equipment rental
and pay-per-view revenue. The basic and preferred basic tier rate increases
included (1) amounts to cover our increase in programming costs and (2)
regulated rate increases. This increase in revenue was partially offset by a
decrease in revenue from premium services of $1.1 million or 5.9% to $16.9
million due to a decrease in customers subscribing to such services resulting
from changes in marketing of the premium services and the need, in certain
instances, for customers to use a converter to receive these services.
Advertising and home shopping revenue grew by $3.0 million or 24.5% to
$15.0 million due to an increase in customer buy rates and additional
advertising insertion.
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<PAGE> 18
Operating costs and expenses increased $21.0 million or 14.0% to $170.5
million for the nine months ended September 30, 1999 as compared to the same
period in 1998. In the nine months ended September 30, 1999, programming expense
increased $6.0 million or 12.8% to $53.2 million, operating expense increased
$3.2 million or 15.9% to $23.1 million and selling, general and administrative
expense increased $9.3 million or 22.0% to $51.6 million, in each case as
compared to the same period in 1998.
The increase in programming expense was caused by increases in rates
charged by programming suppliers, including substantial increases in rates
relating to sports programming and the offering of new channels to our
customers. Management anticipates that our programming costs will continue to
increase in future periods.
The increase in operating expense was primarily related to increases in
insurance, taxes and supplies relating to merging the contributed TCI systems
with the operations of Bresnan Communications Company. This increase in
operating costs was partially offset by increases in capitalized labor and
overhead resulting primarily from increased installation and construction
activities. Selling, general and administrative expense increased due to
increases in marketing expenses, advertising expenses, costs related to the
reorganization and public relations costs incurred after February 2, 1999.
Marketing and advertising expense increased $3.1 million to $12.8 million
for the nine months ended September 30, 1999 as compared to the same period in
1998, as we increased our marketing efforts upon completion of the contribution
agreement, described above, on February 2, 1999. All other variable expenses
increased as a result of an increase in the number of subscribers served.
Depreciation and amortization increased $2.4 million or 6.1% to $42.7
million for the nine months ended September 30, 1999 as compared to the same
period in 1998.
Interest expense increased $35.3 million or 253.5% to $49.2 million for the
nine months ended September 30, 1999 as compared to the same period in 1998 as a
result of the financings completed during this period.
Operating income and net earnings decreased $4.1 million or 9.4% to $39.3
million and $46.3 million or 128.1% to a loss of $10.2 million, respectively,
for the nine months ended September 30, 1999 as compared to the same period in
1998.
EBITDA decreased $1.6 million or 1.9% to $82.0 million for the nine months
ended September 30, 1999 as compared to the same period in 1998 as a result of
increases in programming expenses and selling, general and administrative
expense. EBITDA margin decreased from 43.3% to 39.1%, primarily as a result of
expense increasing at a rate greater than revenue.
LIQUIDITY AND CAPITAL RESOURCES
During the nine months ended September 30, 1999, we made capital
expenditures of $59.4 million as we continued to upgrade the cable systems
transferred to us by certain affiliates of TCI and continued rolling out digital
cable and advanced analog cable services to our systems. Our business requires
substantial cash for operations and capital expenditures. In addition, we have
followed a strategy of expansion through selective acquisitions of cable
television systems. To date, cash requirements have been funded by cash flow
from operating activities, borrowings and the financings which occurred on
February 2, 1999.
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<PAGE> 19
Cash provided by operating activities was $48.2 million for the nine months
ended September 30, 1999, a decrease of $26.3 million from the same period in
1998. This decrease was primarily a result of increased debt servicing costs
associated with the February 2, 1999 formation transaction.
As part of our transactions with certain affiliates of TCI, we became
liable for debt assumed from TCI's affiliates in an aggregate amount of $708.9
million. The net proceeds from the financings related to the transfer of cable
systems from certain affiliates of TCI to us and the cash contribution from
Blackstone were used to pay amounts outstanding under Bresnan Communications
Company's credit facility, the promissory note in favor of certain affiliates of
TCI and debt assumed from TCI's affiliates. We will also be making cash
distributions to William J. Bresnan and his affiliates and TCI and its
affiliates upon finalizing the working capital adjustment under the terms of the
contribution agreement. As of September 30, 1999, we have borrowed approximately
$512 million under our credit facility and would have the ability to borrow an
additional $134.6 million in revolving loans under this facility, subject to the
covenants contained therein, after giving effect to the transfer of cable
systems by certain affiliates of TCI and the related financings. We expect to
continue to borrow funds under our credit facility. We may use such borrowings
for general purposes, such as capital expenditures, and to finance future
acquisitions. We have evaluated and expect to continue to evaluate possible
strategic acquisitions and dispositions of related businesses and assets, some
of which may be significant, on an ongoing basis and at any given time we may be
engaged in discussions or negotiations or enter into agreements with respect
thereto. In the event that we enter into additional definitive agreements with
respect to acquisitions or joint ventures, we may require additional financing.
We have entered into fixed interest rate exchange agreements to effectively
fix or set maximum interest rates on portions of our floating rate long-term
debt. We are exposed to credit loss in the event of nonperformance by the
counterparties to the fixed interest rate exchange agreements. These exchange
agreements have been entered into with a number of the institutions that are
lenders under Bresnan Communications Company's old credit facility. As of
September 30, 1999, the fixed interest rate exchange agreements effectively fix
or set a maximum interest rates on an aggregate notional principal amount of
$50.0 million with a LIBOR base rate between 8.00% and 8.02% upon the occurrence
of certain events. The expiration dates of the exchange agreements range from
April 1, 2000 to April 3, 2000. The difference between the fair market value and
the book value of long-term debt and the exchange agreements as of June 30, 1999
was not material.
Management believes that based on our current level of operations, cash
flow provided from operating activities, together with expected availability
under our subsidiaries' credit facility, subject to the covenants contained in
that facility, will be sufficient to enable us to service indebtedness, make
capital expenditures and meet operating costs and expenses for the next 18
months. If and when appropriate, we or our affiliates may elect to incur
additional indebtedness or to raise equity in the public or private markets.
In June 1999, the owners of Bresnan Communications Company, our parent,
entered into an agreement to sell their partnership interests to Charter
Communications Holding Company, LLC for a purchase price of approximately $3.1
billion in cash and equity which will be reduced by the assumption of our debt
at closing. This sale will result in a change of control under the terms of our
credit facility and the notes. This change of control, if not waived by the
lenders, would result in a default under our credit facility and the right of
the bondholders to require us to purchase all or any part of their notes at a
purchase price equal to 101% of the principal amount of the notes, plus accrued
and unpaid interest. Charter Communications has represented to us that they will
have available funds, or access to such funds, at closing to meet our
obligations, should any of the bondholders tender their bonds as a result of
this change of control. They have also represented to us that they will arrange
for a refinancing of our credit facility, if necessary.
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<PAGE> 20
YEAR 2000
During 1998 and the nine months of 1999, BCG, TCI, its affiliates and
Bresnan Communications Company continued comprehensive efforts to assess and
correct BCG's computer systems to ensure that the systems, software and
equipment recognize, process and store information in the year 2000 and
thereafter. Such year 2000 remedial efforts, include an assessment of our most
critical systems, such as customer service and billing systems, headends and
other cable plant, business support operations, and other equipment and
facilities. We also continued our efforts to verify the year 2000 readiness of
their significant suppliers and vendors and continued to communicate with
significant business partners and affiliates to assess our partners and
affiliates' year 2000 status.
BCG, TCI, and its affiliates have formed year 2000 program management teams
to organize and manage our year 2000 remedial efforts. The program management
teams are responsible for overseeing, coordinating and reporting on their
respective year 2000 remedial efforts. Since the transfer of cable systems from
certain affiliates of TCI, assessment and the remediation of year 2000 issues
for the systems transferred to us by certain affiliates of TCI has become our
responsibility. We have continued the approach of the respective project teams
since we obtained the cable systems from certain affiliates of TCI.
The program management teams have defined a four-phase approach to
determining the year 2000 readiness of their respective internal systems,
software and equipment. This approach is intended to provide a detailed method
for tracking the evaluation, repair and testing of their respective systems,
software and equipment.
Phase 1 - Assessment, involves the inventory of all systems, software and
equipment and the identification of any year 2000 issues. Phase 1 also includes
the preparation of the work plans needed for remediation.
Phase 2 - Remediation, involves repairing, upgrading and/or replacing any
non-compliant equipment and systems.
Phase 3 - Testing, involves testing their respective systems, software, and
equipment for year 2000 readiness, or in certain cases, relying on test results
provided to TCI or affiliates, or Bresnan Communications Company
Phase 4 - Implementation, involves placing compliant systems, software and
equipment into production or service.
As of September 30, 1999, the status of Bresnan Communications Company's
projects related to those systems were as follows, with the majority of the
Company's mission critical system being substantially complete.
Phase 1 of the projects is complete;
Phase 2 is in progress with expected completion by November 1999; and
Phases 3 and 4 are underway, and will be completed in December 1999.
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<PAGE> 21
The completion dates set forth above are based on current expectations.
However, due to the uncertainties inherent in year 2000 remedial efforts, no
guarantees can be given that the projects will be completed on these dates.
The project management teams have completed an inventory of their important
systems with embedded technologies and are determining the correct remedial
approach. The embedded technologies assessments are expected to be complete by
November, 1999.
Third Party Systems, Software and Equipment
The project management teams continue their surveys of significant
third-party vendors and suppliers whose systems, services or products are
important to their operations, including suppliers of addressable controllers
and set-top boxes, and the provider of billing services. The year 2000 readiness
of such providers is critical to continued provision of cable television
service. The project management teams have received information that the most
critical systems, services or products supplied to their respective cable
television systems by third parties are either year 2000 ready or are expected
to be year 2000 ready by the end of 1999.
In addition to the survey process described above, management have
identified their most critical supplier/vendor relationships and have instituted
a verification process to determine the vendors' year 2000 readiness. Such
verification includes, as deemed necessary, reviewing vendors' test and other
data and engaging in regular conferences with vendors' year 2000 teams. Bresnan
Communications Company is testing to validate the year 2000 compliance of
certain critical products and services.
Costs
To date, year 2000 costs have been approximately $1.4 million. Management
of Bresnan Communications Company currently estimate our remaining year 2000
costs to be at least $.6 million. Although no assurances can be given,
management currently expects that:
(1) cash flow from operations will fund the costs associated with year
2000 compliance, and
(2) the total projected cost associated with the year 2000 programs will
not be material to our financial position, results of operations or
cash flows.
Contingency Plans
The failure to correct a material year 2000 problem could result in an
interruption or failure of certain important business operations. Management
believes that our year 2000 program will significantly reduce risks associated
with the changeover to the year 2000 and is currently developing certain
contingency plans to minimize the effect of any potential year 2000 related
disruptions. The risks and the uncertainties discussed below and the associated
contingency plans relate to systems, software, equipment, and services that
Bresnan Communications Company have deemed critical in regard to customer
service, business operations, financial impact or safety.
The failure of addressable controllers contained in the cable television
system headends could disrupt the delivery of premium services to customers and
could necessitate crediting customers for failure to receive such premium
services. In this unlikely event, management expects that it will identify and
transmit the lowest cost programming tier. Unless other contingency plans are
developed with the program suppliers, premium and adult content channels would
not be transmitted until the addressable controller failure has been repaired.
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<PAGE> 22
Customer service networks and/or automated voice response systems failure
could prevent access to customer account information, hamper installation
scheduling, and disable the processing of pay-per-view requests. We plan to have
our customer service representatives answer telephone calls from customers in
the event of outages and expect to retrieve needed customer information manually
from the billing service provider.
A failure of the services provided by billing systems service providers
could result in a loss of customer records which could disrupt the ability to
bill customers for a protracted period. We plan to prepare electronic backup
records of their customer billing information prior to the year 2000 to allow
for data recovery and to continue to monitor the year 2000 readiness of our key
customer-billing suppliers.
Advertising revenue could be adversely affected by the failure of certain
equipment which could impede or prevent the insertion of advertising spots in
cable television programming. Management anticipates that it can minimize such
effect by manually resetting the dates each day until the equipment is repaired.
Security and fire protection systems failure could leave facilities
vulnerable to intrusion and fire. Management expects to return its systems to
normal functioning by turning the power off and then on again. Management also
plans to have additional security staff on site and plans to implement a backup
plan for communicating with local fire and police departments. Also, certain
personal computers interface with and control elevators, escalators, wireless
systems, public access systems and certain telephony systems. In the event such
computers cease operating, turning the power off then on again is expected to
resume normal functioning. If turning the power off then on again does not
resume normal functioning, management expects to resolve the problem by
resetting the computer to a pre-designated date which precedes the year 2000.
In the event that the local public utility cannot supply power, we expect
to supply power for a limited time to cable headends and office sites through
backup generators.
The financial impact of any or all of the above worst-case scenarios has
not been and cannot be estimated by management due to the numerous uncertainties
and variables associated with such scenarios.
INFLATION
The net impact of inflation on our results of 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, we may increase
subscriber rates to keep pace with the increase in inflation, although there may
be timing delays and other market considerations.
RECENT ACCOUNTING STANDARDS
The Financial Accounting Standards Board recently issued Statement of
Financial Accounting Standards No. 135, "Accounting for Derivative Instruments
and Hedging Activities" ("SFAS 133"), which is effective for all fiscal years
beginning after June 15, 2000. SFAS 133 establishes accounting and reporting
standards for derivative instruments and hedging activities by requiring that
all derivative instruments be reported as assets or liabilities and measured at
their fair values. Under SFAS 133, changes in the fair values of derivative
instruments are recognized immediately in earnings unless those instruments
qualify as hedges of the (1) fair values of existing assets, liabilities, or
firm commitments, (2) variability of cash flows of forecasted transactions, or
(3) foreign currency exposures of net investments in foreign operations.
Although management of the Company has not completed its assessment of the
impact of SFAS 133 on its consolidated results of operations and financial
position, management estimates that the impact of SFAS 133 is not expected to be
material.
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<PAGE> 23
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Neither Bresnan Communications Group nor its predecessor engages in the
trading of derivatives. We manage our overall exposure to fluctuations in
interest rates by issuing both fixed- and floating-rate debt instruments and by
entering into interest rate hedging transactions to achieve a targeted mix
within our debt portfolio.
Our total debt outstanding as of September 30, 1999 is $866 million,
include approximately $512 million of variable rate debt which is subject to
interest rate exposure. A one percent increase in interest rates would increase
our annual interest expense related to all our variable debt by approximately
$5.1 million. Management considers it unlikely that interest rate fluctuations
applicable to these instruments will result in a material adverse effect on our
financial position, results of operations or liquidity. We have effectively
converted $50 million of variable-rate debt to fixed-rate debt through the use
of interest rate swaps that set a maximum LIBOR interest rate of approximately
8%.
Our operations and expenses are all incurred in the United States and,
therefore, we have no foreign currency exposure.
23
<PAGE> 24
BRESNAN COMMUNICATIONS GROUP LLC
PART II. OTHER INFORMATION
Item 5. Other Information
On August 31, 1999 and September 29, 1999, the Company's subsidiary,
BTC entered into agreements to acquire cable television systems serving
approximately 11,400 basic subscribers in Minnesota for an aggregate of
approximately $26 million. On August 31, 1999, BTC also entered into
agreements to acquire cable television systems serving approximately 12,300
basic subscribers in Wisconsin for an aggregate of approximately $36.9
million. The Company anticipates the transactions to be consummated either
late in the fourth quarter of 1999 or in the first quarter of 2000.
On August 6, 1999, the Company and Bresnan Capital Corporation
commenced an offer to exchange all of the privately placed and outstanding
$170,000,000 aggregate principal amount of their 8% Senior Notes due 2009
and $275,000,000 aggregate principal amount at maturity of their 9.25%
Senior DiscountNotes due 2009 for an aggregate principal amount of
$170,000,000 of their registered 8% Senior Notes due 2009, Series B and an
aggregate principal amount at maturity of $275,000,000 of their registered
9.25% Senior Discount Notes due 2009, Series B. At the completion of the
exchange offer on September 3, 1999, all of the outstanding notes had been
tendered for exchange.
Item 6. Exhibit and Reports on Form 8-K
(a) Exhibit -
(2) Purchase and Contribution Agreement dated as of June 3,
1999 among BCI (USA), LLC, William J. Bresnan,
Blackstone BC Capital Partners L.P., Blackstone B.C.
Offshore Capital Partners, LP, Blackstone Family
Investment Partnership III LP, TCI Bresnan LLC and TCID
of Michigan, Inc., as Sellers, and Charter
Communications Holding Company, LLC, as Buyer
(incorporated by reference to Exhibit 10.3 to
Registration Statement on Form S-4 of Bresnan
Communications Group LLC and Bresnan Capital
Corporation (File Nos. 333-77637 and 333-77637-01)
filed with the Commission on August 5, 1999.
(27) Bresnan Communications Group LLC Financial Data
Schedule
(b) Reports on Form 8-K filed during the quarter ended September
30, 1999:
None
24
<PAGE> 25
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on is behalf by the
undersigned thereunto duly authorized.
BRESNAN COMMUNICATIONS GROUP, LLC
By: Bresnan Communications Company
Limited Partnership, its member
By: BCI (USA) LLC, its Managing Partner
By: Bresnan Communications, Inc., its
Managing Member
Date: November 12, 1999 By: /s/ Jeffrey S. DeMond
----------------------------
Name: Jeffrey S. DeMond
Title: Executive Vice President and
Chief Financial Officer
BRESNAN CAPITAL CORPORATION
Date: November 12, 1999 By: /s/ Jeffrey S. DeMond
----------------------------
Name: Jeffrey S. DeMond
Title: Vice President
25
<PAGE> 26
EXHIBIT INDEX
The following exhibit is filed herewith (according to the number assigned to it
in Item 601 of Regulation S-K) as noted:
(27) Bresnan Communications Group, LLC Financial Data Schedule
26
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