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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X]ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended December 31, 1999
OR
[_]TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission file numbers: 333-36519, 333-36519-01 and 333-75567-01
FrontierVision Holdings, L.P.
FrontierVision Holdings Capital Corporation*
FrontierVision Holdings Capital II Corporation*
(Exact names of Registrants as specified in their charters)
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Delaware 84-1432334
Delaware 84-1432976
Delaware 84-1481765
(States or other jurisdiction of (IRS Employer
incorporation or organization) Identification Numbers)
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One North Main Street
Coudersport, PA 16915-1141
(Address of principal executive (Zip Code)
offices)
(814) 274-9830
(Registrants' telephone number, including area code)
Securities registered pursuant to section 12(b) of the Act: None.
Securities registered pursuant to section 12(g) of the Act: None.
Indicate by check mark whether the Registrants (1) have 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
Registrants were required to file such reports), and (2) have been subject to
such filing requirements for the past 90 days. Yes [X] No [_]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained to
the best of the Registrants' knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
Number of shares of common stock of FrontierVision Holdings Capital
Corporation and FrontierVision Holdings Capital II Corporation outstanding as
of March 30, 2000: 100 and 1,000, respectively.
* FrontierVision Holdings Capital Corporation and FrontierVision Holdings
Capital II Corporation meet the conditions set forth in General Instruction
I(1)(a) and (b) to the Form 10-K and are therefore filing with the reduced
disclosure format.
Document Incorporated by Reference: None.
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FRONTIERVISION HOLDINGS, L.P.
FRONTIERVISION HOLDINGS CAPITAL CORP.
FRONTIERVISION HOLDINGS CAPTIAL II CORP.
TABLE OF CONTENTS
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PART I
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Item 1. BUSINESS....................................................... 3
Item 2. PROPERTIES..................................................... 18
Item 3. LEGAL PROCEEDINGS.............................................. 19
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS............ 19
PART II
Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS........................................................ 20
Item 6. SELECTED FINANCIAL DATA........................................ 20
Item 7. MANAGEMENT'S DISCUSSION AND ANAYLSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.......................................... 22
Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK..... 28
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.................... 29
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE........................................... 58
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT............. 59
Item 11. EXECUTIVE COMPENSATION......................................... 59
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT..................................................... 60
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS................. 60
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-
K.............................................................. 62
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PART I
ITEM 1. BUSINESS
(Dollars in thousands, except subscriber rates)
Introduction
FrontierVision Holdings, L.P. ("Holdings"), wholly-owned by FrontierVision
Partners, L.P., a Delaware limited partnership ("FVP"), is a Delaware limited
partnership formed on September 3, 1997 for the purpose of acting as co-issuer
with its wholly-owned subsidiary, FrontierVision Holdings Capital Corporation
("Holdings Capital"), of 11 7/8% Senior Discount Notes due 2007 (the "Discount
Notes"). FVP contributed to Holdings, both directly and indirectly, all of the
outstanding partnership interests of FrontierVision Operating Partners, L.P.
("FVOP") prior to the issuance of the Discount Notes on September 19, 1997
(the "Formation Transaction") and, as a result FVOP and its wholly-owned
subsidiary, FrontierVision Capital Corporation ("Capital"), are wholly-owned,
consolidated subsidiaries of Holdings. The Formation Transaction was accounted
for at predecessor cost. As used herein, the "Company" collectively refers to
Holdings, Holdings Capital, FrontierVision Operating Partners, Inc. ("FVOP
Inc."), FVOP, Capital and FrontierVision Holdings Capital II Corporation
("Holdings Capital II").
On October 1, 1999, FVP completed its sale of all outstanding partnership
interests of FVP to Adelphia Communications Corporation ("Adelphia") in
exchange for approximately $543,000 in cash (subject to post closing
adjustments), 7.0 million shares of Adelphia Class A common stock and the
assumption of certain liabilities (the "Acquisition"). Adelphia is a leader in
the telecommunications industry with cable television and local telephone
operations. As of December 31, 1999, Adelphia owned and managed cable
television systems with broadband networks that passed in front of 7,902,707
homes and served 5,124,594 basic subscribers.
Selected financial and other data and consolidated financial statements
presented for periods prior to October 1, 1999 are referred to herein as "Old
Holdings". Selected financial and other data and consolidated financial
statements presented for periods subsequent to October 1, 1999 are referred to
herein as "New Holdings". As a result of the application of purchase
accounting resulting from Adelphia's October 1, 1999 acquisition of FVP, the
assets and liabilities of New Holdings have been recorded at their fair values
on October 1, 1999. The final allocation of Adelphia's purchase price to
acquire FVP is pending the completion of third party valuations.
Holdings operates cable television systems ("Systems") in small and medium-
sized suburban and exurban communities in the United States in three primary
operating clusters--New England, Ohio and Kentucky--with a fourth smaller
group of cable television systems in the southeast. As of December 31, 1999,
the Company owned systems with broadband networks that passed in front of
approximately 1,000,000 homes and served approximately 700,000 basic
subscribers. In addition to traditional analog cable television, the Company
offers or intends to offer a wide range of telecommunication services
including digital cable television, high speed data and Internet access,
paging and telephony.
The Private Securities Litigation Reform Act of 1995 provides a "safe
harbor" for forward-looking statements. Certain information included in this
Annual Report on Form 10-K, including Management's Discussion and Analysis of
Financial Condition and Results of Operations, is forward-looking, such as
information relating to the effects of future regulation, future capital
commitments and the effects of competition. Such forward-looking information
involves important risks and uncertainties that could significantly affect
expected results in the future from those expressed in any forward-looking
statements made by, or on behalf of, the Company. These "forward looking
statements" can be identified by the use of forward-looking terminology such
as "believes", "expects", "may", "will," "should," "intends" or "anticipates"
or the negative thereof or other variations thereon or comparable terminology
or by discussions of strategy that involve risks and uncertainties. These
risks and uncertainties include, but are not limited to, uncertainties
relating to economic
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conditions, acquisitions and divestitures, government and regulatory policies,
the availability and cost of capital, the pricing and availability of
equipment, materials, inventories and programming, product acceptance,
technological developments and changes in the competitive environment in which
the Company operates. Persons reading this Annual Report on Form 10-K are
cautioned that forward-looking statements herein are only predictions, that no
assurance can be given that the future results will be achieved, and that
actual events or results may differ materially as a result of the risks and
uncertainties facing the Company. For further information regarding those
risks and uncertainties and their potential impact on the Company, see the
prospectus and most recent prospectus supplement filed under Registration
Statement No. 333-78027 of Adelphia Communications Corporation, under the
heading "Risk Factors", or under Registration Statement Nos. 333-75567 and
333-36519 of Holdings, under the heading "Risk Factors".
Business
Video Services
Cable television systems receive a variety of television, radio and data
signals transmitted to receiving sites ("headends") by way of off-air
antennas, microwave relay systems and satellite earth stations. Signals are
then modulated, amplified and distributed primarily through fiber optic and
coaxial cable to subscribers, who pay fees for the service. Cable television
systems are generally constructed and operated pursuant to non-exclusive
franchises awarded by state or local government authorities for specified
periods of time.
Cable television systems typically offer subscribers a package of basic
video services consisting of local and distant television broadcast signals,
satellite-delivered non-broadcast channels (which offer programming such as
news, sports, family entertainment, music, weather, shopping, etc.) and
public, governmental and educational access channels.
In addition, premium service channels, which provide movies, live and taped
concerts, sports events and other programming, are offered for an extra
monthly charge. Many of the Systems subscribers were also offered pay-per-view
programming, which allows the subscriber to order special events or movies and
to pay on a per event basis. Local, regional and national advertising time is
sold in the majority of the Systems, with commercial advertisements inserted
on certain satellite-delivered non-broadcast channels.
Digital video services are now available to certain of the Company's
subscribers who lease or purchase a digital converter. Digital TV is a
computerized method of defining, transmitting and storing information that
makes up a television signal. Since digital signals can be "compressed," the
Company can transmit up to 12 channels in the space currently used to transmit
just one analog channel.
Holdings' digital TV subscribers may also receive "multichannel" premium
services, such as HBO 1, 2, 3 and 4 from East and West Coast satellite feeds,
enhanced pay-per-view options with eighteen movie channels, up to 40 channels
of CD-quality music from Music Choice and an interactive on-screen program
guide to help them navigate the new digital choices.
High Speed Data and Internet Access
Beginning in 2000, the Company will begin to deploy Power Link, Adelphia's
high-speed data service. Power Link, which includes residential, institutional
and business applications, constitutes an alternative to the traditional
slower speed data offerings available through Internet Service Providers
("ISPs"). Power Link offers customers speeds comparable to those available
through a T1 line, at costs that compare to a typical ISP plus a second
telephone line.
The Company's fiber design allows the use of the expanded bandwidth
potential of digital compression technology for cable data and video services.
High speed cable data services are now available at speeds far in excess of
that which is currently available via traditional telephone modem. In
addition, using a high speed cable
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modem and special ethernet card allows the user to bypass telephone lines,
does not require the user to log on, and allows for multiple sessions or
connections to multiple services simultaneously.
In addition to the cable modems, the Company will also sell traditional dial
up Internet access for those customers who initially prefer this method of
Internet access to the higher speeds of our broadband network. This
establishes the Company as a full service Internet provider and creates a
customer base that can be upgraded to the high speed service in the future.
Other Services
In 2000, the Company expects to begin offering wireless messaging services
to its subscribers through an affiliate, Page Time, Inc., a wholly-owned
subsidiary of Adelphia which provides one-way messaging services to Adelphia
and its subsidiaries via resale arrangements with existing paging network
operators.
In the fourth quarter of 1999, the Company began selling long distance
telephone service on a resale basis. Services offered include state-to-state
and in-state long distance, as well as 800 service, international calling,
calling card services and debit card services. The Company's sales effort is
focused on the consumer market and emphasizes the simplicity and savings of
one low a competitive usage fee available 24 hours a day, 7 days a week, with
no monthly fee.
Operating Strategy
The Company's strategy is to construct and operate a broadband network
capable of offering a broad range of telecommunications services and providing
superior customer service while maximizing operating efficiencies. The Company
intends to continue as a cable television service provider as well as
providing bundled communications services combining cable television service
with high speed data and Internet access, paging and telephony within its
communities. The Company expects to achieve these goals through internal
growth and investment in and upgrade of its networks.
The Company considers technological innovation to be an important component
of its service offerings and customer satisfaction. The Company intends to
continue the upgrade of its network infrastructure to add channel capacity,
increase digital transmission capabilities and further improve system
reliability.
Management believes the concentration of its customer base contributes
favorably to the Company's cash flow margin.
Recent Development of the Systems
The Company has completed numerous acquisitions since its inception through
December 31, 1999. As of December 31, 1999, the Company owned cable television
systems with broad band networks that passed in front of approximately
1,000,000 homes and served approximately 700,000 basic subscribers. The
Company has focused on selectively acquiring cable television properties from
both small and large multiple system operators, thereby establishing core
geographic clusters and subscriber mass. During 1995, 1996, 1997 and 1998, the
Company purchased systems serving approximately 92,500, 270,200, 212,000 and
140,000 subscribers, respectively.
On January 7, 1999, the Company sold certain cable television system assets
serving approximately 4,400 basic subscribers to Helicon Partners I, L.P., for
an aggregate sales price of approximately $5,220.
On June 1, 1999, the Company completed the exchange of five systems located
in northern Kentucky for five Intermedia Partners, L.P. IV systems located
near Lexington, Kentucky which are contiguous to other of the Company's
Kentucky systems. The Company paid approximately $13,300 as consideration for
approximately 5,300 subscribers the Company gained in the transactions.
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Financial Information
The financial data regarding the Company's revenues, results of operations
and identifiable assets for each of the Company's last three fiscal years is
set forth in, and incorporated herein by reference to, Item 8, Financial
Statements and Supplementary Data of this Form 10-K.
Technological Developments
The Company has made a substantial commitment to the technological
development of the Systems and is currently upgrading the technical
capabilities of its cable plant in a cost efficient manner. System development
will allow the Company to increase the plant capacity, provide two-way
communication and other digital services and at the same time further increase
the reliability of the plant.
The upgraded System, on average, will include only two active pieces of
equipment between the headend and the home. Limiting the number of active
pieces of equipment combined with the small number of homes per fiber node
reduces the potential for mechanical failure and the number of customers
affected by such a failure, all of which provides increased reliability to the
customers.
Subscriber Services and Rates
The Company's revenues are derived principally from monthly subscription
fees for various services. Rates to subscribers vary in accordance with the
type of service selected. Although service offerings vary across franchise
areas because of differences in plant capabilities, each of the areas
typically offer services at monthly prices ranging as follows:
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Service Rate Range
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Basic Cable Television............................. $ 7.00--28.00
Premium Cable Television........................... $ 9.00--14.00
Digital Television................................. $10.00
Paging............................................. $ 7.00--35.00
Long Distance...................................... $ .07--.08 per minute
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An installation fee, which the Company may wholly or partially waive during
a promotional period, is usually charged to new subscribers. Subscribers are
free to terminate services at any time without charge, but often are charged a
fee for reconnection or change of service.
The Cable Communications Policy Act of 1984 (the "1984 Cable Act," as
amended by the 1992 Cable Act), deregulated basic service rates for systems in
communities meeting the FCC's definition of effective competition. Pursuant to
the FCC's definition of effective competition adopted following enactment of
the 1984 Cable Act, substantially all of the Company's franchises were rate
deregulated. However, in June 1991, the FCC amended its effective competition
standard, which increased the number of cable systems that could be subject to
local rate regulation. The 1992 Cable Act contains a new definition of
effective competition under which nearly all cable systems in the United
States are subject to regulation of basic service rates. Additionally, the
legislation (i) eliminates the 5% annual basic rate increase allowed by the
1984 Cable Act without local approval; (ii) allows the FCC to adjudicate the
reasonableness of rates for non-basic service tiers, other than premium
services, for cable systems not subject to effective competition in response
to complaints filed by franchising authorities and/or cable subscribers; (iii)
prohibits cable systems from requiring subscribers to purchase service tiers
above basic service in order to purchase premium services if the system is
technically capable of doing so; (iv) allows the FCC to impose restrictions on
the retiering and rearrangement of cable services under certain circumstances;
and (v) permits the FCC and franchising authorities more latitude in
controlling rates and rejecting rate increase requests. The Telecommunications
Act of 1996 (the "1996 Act") ended FCC regulation on nonbasic tier rates on
March 31, 1999.
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For a discussion of FCC rate regulation and related developments, see
"Legislation and Regulation" and "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Regulatory and Competitive
Matters."
Franchises
The 1984 Cable Act provides that cable operators may not offer cable service
to a particular community without a franchise unless such operator was
lawfully providing service to the community on July 1, 1984 and the
franchising authority does not require a franchise. The Systems operate
pursuant to franchises or other authorizations issued by governmental
authorities, substantially all of which are nonexclusive. Such franchises or
authorizations awarded by a governmental authority generally are not
transferable without the consent of the authority. As of December 31, 1999,
the Company held 1,164 franchises. Most of these franchises can be terminated
prior to their stated expiration by the relevant governmental authority, after
due process, for breach of material provisions of the franchise.
Under the terms of most of the Company's franchises, a franchise fee
(generally ranging up to 5% of the gross revenues of the cable system) is
payable to the governmental authority. For the past three years, franchise fee
expense incurred by the Company has averaged approximately 2.7% of gross
system revenues.
The franchises issued by the governmental authorities are subject to
periodic renewal. In renewal hearings, the authorities generally consider,
among other things, whether the franchise holder has provided adequate service
and complied with the franchise terms. In connection with a renewal, the
authority may impose different and more stringent terms, the impact of which
cannot be predicted. To date, all of the Company's material franchises have
been renewed or extended, at or effective upon their stated expiration,
generally on modified terms. Such modified terms have not been materially
adverse to the Company.
The Company believes that all of its material franchises are in good
standing. From time to time, the Company notifies the franchising authorities
of the Company's intent to seek renewal of the franchise in accordance with
the procedures set forth in the 1984 Cable Act. The 1984 Cable Act process
requires that the governmental authority consider the franchise holder's
renewal proposal on its own merits in light of the franchise holder's past
performance and the community's needs and interests, without regard to the
presence of competing applications. See "Legislation and Regulation." The 1992
Cable Act alters the administrative process by which operators utilize their
1984 Cable Act franchise renewal rights. Such changes could make it easier in
some instances for a franchising authority to deny renewal of a franchise.
Competition
Although the Company and the cable television industry have historically
faced modest competition, the competitive landscape is changing and
competition has increased. The Company believes that the increase in
competition within its communities will continue to occur over the next
several years.
At the present time, cable television systems compete with other
communications and entertainment media, including off-air television broadcast
signals which a viewer is able to receive directly using the viewer's own
television set and antenna. The extent to which a cable system competes with
over-the-air broadcasting depends upon the quality and quantity of the
broadcast signals available by direct antenna reception compared to the
quality and quantity of such signals and alternative services offered by a
cable system. In many areas, television signals, which constitute a
substantial part of basic service, can be received by viewers who use their
own antennas. Local television reception for residents of apartment buildings
or other multi-unit dwelling complexes may be aided by use of private master
antenna services. Cable systems also face competition from alternative methods
of distributing and receiving television signals and from other sources of
entertainment such as live sporting events, movie theaters and home video
products, including videotape recorders and cassette players. In recent years,
the FCC has adopted policies providing for authorization of new technologies
and more favorable operating environment for certain existing technologies
that provide, or may provide, substantial additional
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competition for cable television systems. The extent to which cable television
service is competitive depends in significant part upon the cable television
system's ability to provide an even greater variety of programming than that
available off-air or through competitive alternative delivery sources. In
addition, certain provisions of the 1992 Cable Act and the 1996 Act are
expected to increase competition significantly in the cable industry. See
"Legislation and Regulation."
The 1992 Cable Act prohibits the award of exclusive franchises, prohibits
franchising authorities from unreasonably refusing to award additional
franchises and permits them to operate cable systems themselves without
franchises.
Individuals presently have the option to purchase earth stations, which
allow the direct reception of satellite-delivered program services formerly
available only to cable television subscribers. Most satellite-distributed
program signals are being electronically scrambled to permit reception only
with authorized decoding equipment, generally at a cost to the viewer. From
time to time, legislation has been introduced in Congress which, if enacted
into law, would prohibit the scrambling of certain satellite-distributed
programs or would make satellite services available to private earth stations
on terms comparable to those offered to cable systems. Broadcast television
signals are being made available to owners of earth stations under the
Satellite Home View Copyright Act of 1988, which became effective January 1,
1989 for a six-year period. This Act establishes a statutory compulsory
license for certain transmissions made by satellite owners to home satellite
dishes for which carriers are required to pay a royalty fee to the Copyright
Office. This Act was formally extended through December 31, 1999 and
deliberations relative to further extension of this Act are ongoing. The 1992
Cable Act enhances the right of cable competitors to purchase nonbroadcast
satellite-delivered programming. See "Legislation and Regulation--Federal
Regulation."
Video programming is now being delivered to individuals by high-powered
direct broadcast satellites ("DBS") utilizing video compression technology.
This technology has the capability of providing more than 100 channels of
programming over a single high-powered DBS satellite with significantly higher
capacity available if multiple satellites are placed in the same orbital
position. Video compression technology may also be used by cable operators in
the future to similarly increase their channel capacity. DBS service can be
received virtually anywhere in the United States through the installation of a
small rooftop or side-mounted antenna, and it is more accessible than cable
television service where a cable plant has not been constructed or where it is
not cost effective to construct cable television facilities. DBS is being
heavily marketed on a nationwide basis by competing service providers.
Congress passed the Satellite Home Viewer Act in late 1999. This law allows
DBS providers to begin offering local broadcast channels. DBS companies have
since added a limited number of local channels in some regions, a trend that
may continue, thus lessening the distinction between cable television and DBS
service.
Cable communications systems also compete with wireless program distribution
services such as multichannel, multipoint distribution service ("MMDS"),
commonly called wireless cable systems, which use low-power microwave
frequencies to transmit video programming over-the-air to subscribers. There
are MMDS operators who are authorized to provide or are providing broadcast
and satellite programming to subscribers in areas served by the Company's
Systems. MMDS systems are less capital intensive, are not required to obtain
local franchises or to pay franchise fees and are subject to fewer regulatory
requirements than cable television systems. MMDS systems' ability to compete
with cable television systems has previously been limited by channel capacity,
the inability to obtain programming and regulatory delays. Recently, however,
MMDS systems have developed digital compression technology, which provides for
more channel capacity and better signal delivery. Although relatively few MMDS
systems in the United States are currently in operation or under construction,
virtually all markets have been licensed or tentatively licensed. A series of
actions taken by the FCC, including reallocating certain frequencies to
wireless services, are intended to facilitate the development of wireless
cable television spectrum that will be used by wireless operators to provide
additional channels of programming over longer distances. Several Regional
Bell Operating Companies acquired interests in major MMDS companies. The
Company is unable to predict whether wireless video services will have a
material impact on its operations.
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Additional competition may come from private cable television systems
servicing condominiums, apartment complexes and certain other multiple unit
residential developments. The operators of these private systems, known as
satellite master antenna television ("SMATV") systems, often enter into
exclusive agreements with apartment building owners or homeowners'
associations which preclude franchised cable television operators from serving
residents of such private complexes. However, the 1984 Cable Act gives
franchised cable operators the right to use existing compatible easements
within their franchise areas upon nondiscriminatory terms and conditions.
Accordingly, where there are preexisting compatible easements, cable operators
may not be unfairly denied access or discriminated against with respect to the
terms and conditions of access to those easements. There have been conflicting
judicial decisions interpreting the scope of the access right granted by the
1984 Cable Act, particularly with respect to easements located entirely on
private property. Further, while a franchised cable television system
typically is obligated to extend service to all areas of a community
regardless of population density or economic risk, a SMATV system may confine
its operation to small areas that are easy to serve and more likely to be
profitable. Under the 1996 Act, SMATV systems can interconnect non-commonly
owned buildings without having to comply with local, state and federal
regulatory requirements that are imposed upon cable systems providing similar
services, as long as they do not use public rights-of-way. The U.S. Copyright
Office has concluded that SMATV systems are "cable systems" for purposes of
qualifying for the compulsory copyright license established for cable systems
by federal law.
The FCC has authorized a new interactive television service, which will
permit non-video transmission of information between an individual's home and
entertainment and information service providers. This service will provide an
alternative means for DBS systems and other video programming distributors,
including television stations, to initiate the new interactive television
services. This service may also be used by the cable television industry.
The FCC also has initiated a new rulemaking proceeding looking toward the
allocation of frequencies in the 28 Ghz range for a new multi-channel wireless
video service that could make 98 video channels available in a single market.
The Company cannot predict at this time whether competitors will emerge
utilizing such frequencies or whether such competition would have a material
impact on the operations of cable television systems.
The FCC has recently allocated a sizable amount of spectrum in the 31 Ghz
band for use by a new wireless service, Local Multipoint Distribution Service
("LMDS"), which among other uses, can deliver over 100 channels of digital
programming directly to consumers' homes. The FCC auctioned this spectrum to
the public during 1998, with cable operators and local telephone companies
restricted in their participation in this auction. The extent to which the
winning licenses in this service will use this spectrum in particular regions
of the country to deliver multichannel video programming to subscribers, and
therefore provide competition for franchised cable systems, is at this time
uncertain.
The 1996 Act eliminates the restriction against ownership and operation of
cable systems by local telephone companies within their local exchange service
areas. Telephone companies are now free to enter the retail video distribution
business through any means, such as DBS, MMDS, SMATV or as traditional
franchised cable system operators. Alternatively, the 1996 Act authorizes
local telephone companies to operate "open video systems" without obtaining a
local cable franchise, although telephone companies operating such systems can
be required to make payments to local governmental bodies in lieu of cable
franchise fees. Up to two-thirds of the channel capacity of an "open video
system" must be available to programmers unaffiliated with the local telephone
company. The open video system concept replaces the FCC's video dialtone
rules. The 1996 Act also includes numerous provisions designed to make it
easier for cable operators and others to compete directly with local exchange
telephone carriers. With certain limited exceptions, neither a local exchange
carrier nor a cable operator can acquire more than 10% of the other entity
operating within its own service area.
Advances in communications technology, as well as changes in the marketplace
and the regulatory and legislative environment, are constantly occurring.
Thus, it is not possible to predict the effect that ongoing or
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future developments might have on the cable industry. The ability of cable
systems to compete with present, emerging and future distribution media will
depend to a great extent on obtaining attractive programming. The availability
and exclusive use of a sufficient amount of quality programming may in turn be
affected by developments in regulation or copyright law. See "Legislation and
Regulation."
The cable television industry competes with radio, television and print
media for advertising revenues. As the cable television industry continues to
develop programming designed specifically for distribution by cable,
advertising revenues may increase. Premium programming provided by cable
systems is subject to the same competitive factors that exist for other
programming discussed above. The continued profitability of premium services
may depend largely upon the continued availability of attractive programming
at competitive prices.
Employees
At February 26, 2000, there were 829 full-time employees of the Company, of
which 22 were covered by collective bargaining agreements. The Company
considers its relations with its employees to be good.
Legislation and Regulation
The cable television industry is regulated by the FCC, some state
governments and most local governments. In addition, various legislative and
regulatory proposals under consideration from time to time by Congress and
various federal agencies may materially affect the cable television industry.
The following is a summary of federal laws and regulations affecting the
growth and operation of the cable television industry and a description of
certain state and local laws.
Cable Television/Federal Laws and Regulations
Cable Communications Policy Act of 1984
The 1984 Cable Act became effective on December 29, 1984. This federal
statute, which amended the Communications Act of 1934 (the "Communications
Act"), created uniform national standards and guidelines for the regulation of
cable television systems. Violations by a cable television system operator of
provisions of the Communications Act, as well as of FCC regulations, can
subject the operator to substantial monetary penalties and other sanctions.
Among other things, the 1984 Cable Act affirmed the right of franchising
authorities (state or local, depending on the practice in individual states)
to award one or more franchises within their jurisdictions. It also prohibited
non-grandfathered cable television systems from operating without a franchise
in such jurisdictions. In connection with new franchises, the 1984 Cable Act
provides that in granting or renewing franchises, franchising authorities may
establish requirements for cable-related facilities and equipment, but may not
establish or enforce requirements for video programming or information
services other than in broad categories.
Cable Television Consumer Protection and Competition Act of 1992
On October 5, 1992, Congress enacted the 1992 Cable Act. This legislation
effected significant changes to the legislative and regulatory environment in
which the cable industry operates. It amended the 1984 Cable Act in many
respects. The 1992 Cable Act became effective on December 4, 1992, although
certain provisions, most notably those dealing with rate regulation and
retransmission consent, became effective at later dates. The legislation also
required the FCC to initiate a number of rulemaking proceedings to implement
various provisions of the statute. The 1992 Cable Act allows for a greater
degree of regulation on the cable industry with respect to, among other
things: (i) cable system rates for both basic and certain nonbasic services;
(ii) programming access and exclusivity arrangements; (iii) access to cable
channels by unaffiliated programming services; (iv) leased access terms and
conditions; (v) horizontal and vertical ownership of cable systems; (vi)
customer service requirements; (vii) franchise renewals; (viii) television
broadcast signal carriage and retransmission consent; (ix)
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technical standards; (x) subscriber privacy; (xi) consumer protection issues;
(xii) cable equipment compatibility; (xiii) obscene or indecent programming;
and (xiv) requiring subscribers to subscribe to tiers of service other than
basic service as a condition of purchasing premium services. Additionally, the
legislation encourages competition with existing cable systems by: allowing
municipalities to own and operate their own cable systems without having to
obtain a franchise; preventing franchising authorities from granting exclusive
franchises or unreasonably refusing to award additional franchises covering an
existing cable system's service area; and prohibiting the common ownership of
cable systems and co-located MMDS or SMATV systems. The 1992 Cable Act also
precludes video programmers affiliated with cable television companies from
favoring cable operators over competitors and requires such programmers to
sell their programming to other multichannel video distributors. This
provision may limit the ability of cable program suppliers to offer exclusive
programming arrangements to cable television companies. A number of provisions
in the 1992 Cable Act relating to, among other things, rate regulation, have
had a negative impact on the cable industry and the Company's business.
Telecommunications Acts of 1996
The 1996 Act significantly revised the federal regulatory structure. As it
pertains to cable television, the 1996 Act, among other things, (i) eliminated
the regulation of certain nonbasic programming services in 1999; (ii) expands
the definition of effective competition, the existence of which displaces rate
regulation; (iii) eliminates the restriction against the ownership and
operation of cable systems by telephone companies within their local exchange
service areas; and (iv) liberalizes certain of the FCC's cross-ownership
restrictions. The FCC has been conducting a number of rulemaking proceedings
in order to implement many of the provisions of the 1996 Act.
FCC Regulation
The FCC, the principal federal regulatory agency with jurisdiction over
cable television, has promulgated regulations covering such areas as the
registration of cable systems, cross-ownership between cable systems and other
communications businesses, carriage of television broadcast programming,
consumer education and lockbox enforcement, origination cablecasting and
sponsorship identification, children's programming, the regulation of basic
cable service rates in areas where cable systems are not subject to effective
competition, signal leakage and frequency use, technical performance,
maintenance of various records, equal employment opportunity, and antenna
structure notification, marking and lighting. The FCC has the authority to
enforce these regulations through the imposition of substantial fines, the
issuance of cease and desist orders and/or the imposition of other
administrative sanctions, such as the revocation of FCC licenses needed to
operate certain transmission facilities often used in connection with cable
operations. Furthermore, the 1992 Cable Act required the FCC to adopt
implementing regulations covering, among other things, cable rates, signal
carriage, consumer protection and customer service, leased access, indecent
programming, programmer access to cable television systems, programming
agreements, technical standards, consumer electronics equipment compatibility,
ownership of home wiring, program exclusivity, equal employment opportunity,
and various aspects of direct broadcast satellite system ownership and
operation. The 1996 Act requires certain changes to various provisions of
these regulations. A brief summary of the most material federal regulations as
adopted to date follows.
Rate Regulation
The 1984 Cable Act codified existing FCC preemption of rate regulation for
premium channels and optional nonbasic program tiers. The 1984 Cable Act also
deregulated basic cable rates for cable television systems determined by the
FCC to be subject to effective competition. The 1992 Cable Act substantially
changed the statutory and FCC rate regulation standards. The 1992 Cable Act
replaced the FCC's old standard for determining effective competition, under
which most cable systems were not subject to local rate regulation, with a
statutory provision that has resulted in nearly all cable television systems
becoming subject to local rate regulation of basic service. The 1996 Act
expands the definition of effective competition to cover situations where a
local telephone company or its affiliate, or any multichannel video provider
using telephone company facilities, offers
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comparable video service by any means except DBS. Satisfaction of this test
deregulates both basic and nonbasic tiers. The 1996 Act ended FCC regulation
of nonbasic tier rates on March 31, 1999.
The FCC's regulations set standards for the regulation of basic and nonbasic
cable service rates (other than per-channel or per-program services). The
FCC's original rules became effective on September 1, 1993. The rules have
been amended several times. The rate regulations adopt a benchmark price cap
system for measuring the reasonableness of existing basic and nonbasic service
rates, and a formula for evaluating future rate increases. Alternatively,
cable operators have the opportunity to make cost-of-service showings that, in
some cases, may justify rates above the applicable benchmarks. The rules also
require that charges for cable-related equipment (e.g., converter boxes and
remote control devices) and installation services be unbundled from the
provision of cable service and based upon actual costs plus a reasonable
profit. Local franchising authorities and/or the FCC are empowered to order a
reduction of existing rates that exceed the benchmark level for either basic
and/or non-basic cable services and associated equipment, and refunds could be
required. The retroactive refund period for basic cable service rates is
limited to one year. In general, the reductions for basic and nonbasic cable
service rates require an aggregate reduction of up to 17 percent, adjusted
forward for inflation and certain other factors, from the rates in force as of
September 30, 1992. The regulations also provide that future rate increases
may not exceed an inflation-indexed amount, plus increases in certain costs
beyond the cable operator's control, such as taxes, franchise fees and
increased programming costs. Cost-based adjustments to these capped rates can
also be made in the event a cable operator adds or deletes programming
channels or completes a significant system rebuild or upgrade. A significant
number of franchising authorities have become certified by the FCC to regulate
the rates charged by the Company for basic cable service and for associated
equipment. Complaints have also been filed with the FCC seeking review of the
rates charged for nonbasic cable service. The Company's ability to implement
rate increases consistent with its past practices will likely be limited by
the regulations that the FCC has adopted.
Carriage of Broadcast Television Signals
The 1992 Cable Act contains new mandatory carriage requirements. These new
rules allow commercial television broadcast stations which are "local" to a
cable system (i.e., the system is located in the station's area of dominant
influence), to elect every three years whether to require the cable system to
carry the station, subject to certain exceptions, or whether the cable system
will have to negotiate for "retransmission consent" to carry the station.
Local, noncommercial television stations are also given mandatory carriage
rights, subject to certain exceptions, within the larger of (i) a 50 mile
radius from the station's city of license or (ii) the station's Grade B
contour (a measure of signal strength). Unlike commercial stations,
noncommercial stations are not given the option to negotiate retransmission
consent for the carriage of their signal. In addition, cable systems will have
to obtain retransmission consent for the carriage of all "distant" commercial
broadcast stations, except for certain "superstations," (i.e., commercial
satellite-delivered independent stations such as WTBS). The 1992 Cable Act
also eliminated, effective December 4, 1992, the FCC's regulations requiring
the provision of input selector switches. The statutory must-carry provisions
for noncommercial stations became effective on December 4, 1992. Must-carry
rules for both commercial and noncommercial stations and retransmission
consent rules for commercial stations were adopted by the FCC on March 11,
1993. The must-carry requirement for commercial stations went into effect on
June 2, 1993, and any stations for which retransmission consent had not been
obtained (other than must-carry stations, non-commercial stations and
superstations) had to be dropped as of October 6, 1993. The most recent
election between must-carry and retransmission consent for local commercial
television broadcast stations was on October 1, 1996. A number of stations
previously carried by the Company's cable television systems elected
retransmission consent. The Company was able to reach agreements with
broadcasters who elected retransmission consent and has therefore not been
required to pay cash compensation to broadcasters for retransmission consent
or been required by broadcasters to remove broadcast stations from the cable
television channel line-ups. The Company has, however, agreed to carry some
services (e.g., ESPN2 and a new service by FOX) in specified markets pursuant
to retransmission consent arrangements which it believes are comparable to
those entered into by most other large cable operators.
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Channel Set-Asides
The 1984 Cable Act permits local franchising authorities to require cable
operators to set aside certain channels for public, educational and
governmental access programming. The Company believes that none of the
Systems' franchises contain unusually onerous access requirements. The 1984
Cable Act further requires cable systems with 36 or more activated channels to
designate a portion of their channel capacity for commercial leased access by
unaffiliated third parties. While the 1984 Cable Act presently allows cable
operators substantial latitude in setting leased access rates, the 1992 Cable
Act requires leased access rates to be set according to a formula determined
by the FCC. The FCC has revised the existing rate formula in a way which will
significantly lower the rates cable operators have been able to charge. It is
possible that such leased access will result in competition to services
offered by the Company on the other channels of its cable systems.
Competing Franchises
Questions concerning the ability of municipalities to award a single cable
television franchise and to impose certain franchise restrictions upon cable
television companies have been considered in several recent federal appellate
and district court decisions. These decisions have been somewhat inconsistent
and, until the U.S. Supreme Court rules definitively on the scope of cable
television's First Amendment protections, the legality of the franchising
process and of various specific franchise requirements is likely to be in a
state of flux. It is not possible at the present time to predict the
constitutionally permissible bounds of cable franchising and particular
franchise requirements. However, the 1992 Cable Act, among other things,
prohibits franchising authorities from unreasonably refusing to grant
franchises to competing cable systems and permits franchising authorities to
operate their own cable systems without franchises.
Cross-Ownership
The 1996 Act repealed the 1984 Cable Act's prohibition on Local Exchange
Carriers ("LECs") providing video programming directly to customers within
their local exchange telephone service areas, except in rural areas or by
specific waiver of FCC rules. The 1996 Act also authorized LECs to operate
"open video systems" without obtaining a local cable franchise, although LECs
operating such systems can be required to make payments to local governmental
bodies in lieu of cable franchise fees. Where demand exceeds channel capacity,
up to two-thirds of the channels on an "open video system" must be available
to programmers unaffiliated with the LEC.
The 1996 Act eliminated the FCC rule prohibiting common ownership between a
cable system and a national broadcast television network. The 1996 Act also
eliminated the statutory ban covering certain common ownership interests,
operation or control between a television station and cable system within the
station's Grade B signal coverage area. However, the parallel FCC rules
against cable/television station cross-ownership remains in place, subject to
review by the FCC within two years. Finally, the 1992 Cable Act prohibits
common ownership, control or interest in cable television systems and MMDS
facilities or SMATV systems having overlapping service areas, except in
limited circumstances. The 1996 Act exempts cable systems facing "effective
competition" from the MMDS and SMATV cross-ownership restrictions.
Pursuant to the 1992 Cable Act, the FCC has imposed limits on the number of
cable systems which a single cable operator can own. In general, no cable
operator can have an attributable interest in cable systems which pass more
than 30% of all homes nationwide. Attributable interests for these purposes
include voting interests of 5% or more (unless there is another single holder
of more than 50% of the voting stock), officerships, directorships and general
partnership interests. The FCC has stayed the effectiveness of these rules
pending the outcome of the appeal from the U.S. District Court decision
holding the multiple ownership limit provision of the 1992 Cable Act
unconstitutional.
The FCC has also adopted rules which limit the number of channels on a cable
system which can be occupied by programming in which the cable system's owner
has an attributable interest. The limit is 40% of all activated channels.
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Franchise Transfers
The 1992 Cable Act requires franchising authorities to act on any franchise
transfer request submitted after December 4, 1992 within 120 days after
receipt of all information required by FCC regulations and by the franchising
authority. Approval is deemed to be granted if the franchising authority fails
to act within such period.
Technical Requirements
Historically, the FCC has imposed technical standards applicable to the
cable channels on which broadcast stations are carried, and has prohibited
franchising authorities from adopting standards which were in conflict with or
more restrictive than those established by the FCC. The FCC has recently
revised such standards and made them applicable to all classes of channels
that carry downstream NTSC video programming. Local franchising authorities
are permitted to enforce the FCC's new technical standards. The FCC also has
adopted additional standards applicable to cable television systems using
frequencies in the 108-137 Mhz and 225-400 Mhz bands in order to prevent
harmful interference with aeronautical navigation and safety radio services,
and has also established limits on cable system signal leakage. Periodic
testing by cable operators for compliance with these technical standards and
signal leakage limits is required. The Company believes that the Systems are
in compliance with these standards in all material respects. The 1992 Cable
Act requires the FCC to update periodically its technical standards to take
into account changes in technology. The FCC has adopted regulations to
implement the requirements of the 1992 Cable Act designed to improve the
compatibility of cable systems and consumer electronics equipment.
Pole Attachments
The FCC currently regulates the rates and conditions imposed by certain
public utilities for use of their poles, unless under the Federal Pole
Attachments Act state public service commissions are able to demonstrate that
they regulate rates, terms and conditions of the cable television pole
attachments. A number of states (including Massachusetts, Michigan, New
Jersey, New York, Ohio and Vermont) and the District of Columbia have
certified to the FCC that they regulate the rates, terms and conditions for
pole attachments. In the absence of state regulation, the FCC administers such
pole attachment rates through use of a formula, which it has devised and from
time to time revises. The 1996 Act directs the FCC to adopt a new rate formula
for any attaching party, including cable systems, which offers
telecommunications services. This new formula will result in significantly
higher attachment rates for cable systems that choose to offer such services.
Other Matters
FCC regulation also includes matters regarding a cable system's carriage of
local sports programming; restrictions on origination and cablecasting by
cable system operators; application of the fairness doctrine and rules
governing political broadcasts; customer service; home wiring; and limitations
on advertising contained in nonbroadcast children's programming.
Copyright
Cable television systems are subject to federal copyright licensing covering
carriage of broadcast signals. In exchange for making semi-annual payments to
a federal copyright royalty pool and meeting certain other obligations, cable
operators obtain a statutory license to retransmit broadcast signals. The
amount of this royalty payment varies, depending on the amount of system
revenues from certain sources, the number of distant signals carried, and the
location of the cable system with respect to over-the-air television stations.
Various bills have been introduced into Congress over the past several years
that would eliminate or modify the cable television compulsory license. The
FCC has recommended to Congress that it repeal the cable industry's compulsory
copyright license. The FCC determined that the statutory compulsory copyright
license
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for local and distant broadcast signals no longer serves the public interest
and that private negotiations between the applicable parties would better
serve the public. Without the compulsory license, cable operators might need
to negotiate rights from the copyright owners for each program carried on each
broadcast station in the channel lineup. Such negotiated agreements could
increase the cost to cable operators of carrying broadcast signals. The 1992
Cable Act's retransmission consent provisions expressly provide that
retransmission consent agreements between television broadcast stations and
cable operators do not obviate the need for cable operators to obtain a
copyright license for the programming carried on each broadcaster's signal.
Copyrighted music performed in programming supplied to cable television
systems by pay cable networks (such as HBO) and basic cable networks (such as
USA Network) has generally been licensed by the networks through private
agreements with the American Society of Composers and Publishers ("ASCAP") and
BMI, Inc. ("BMI"), the two major performing rights organizations in the United
States. As a result of extensive litigation, ASCAP and BMI are both now
required to offer "through to the viewer" licenses to the cable networks which
would cover the retransmission of the cable networks' programming by cable
systems to their subscribers.
Copyrighted music performed by cable systems themselves on local origination
channels, PEG channels and in locally inserted advertising and cross
promotional announcements must also be licensed. A blanket license is
available from BMI. Cable industry negotiations with ASCAP are still in
progress.
Cable Television/State and Local Regulation
Because a cable television system uses local streets and rights-of-way,
cable television systems are subject to state and local regulation, typically
imposed through the franchising process. State and/or local officials are
usually involved in franchise selection, system design and construction,
safety, service rates, consumer relations, billing practices and community
related programming and services.
Cable television systems generally are operated pursuant to nonexclusive
franchises, permits or licenses granted by a municipality or other state or
local government entity. Franchises generally are granted for fixed terms and
in many cases are terminable if the franchise operator fails to comply with
material provisions. The 1984 Cable Act established renewal procedures and
criteria designed to protect incumbent franchises against arbitrary denials of
renewal. While these formal procedures are not mandatory unless timely invoked
by either the cable operator or the franchising authority, they can provide
substantial protection to incumbent franchisees. Even after the formal renewal
procedures are invoked, franchising authorities and cable operators remain
free to negotiate a renewal outside the formal process. Nevertheless, renewal
is by no means assured, as the franchisee must meet certain statutory
standards. Even if a franchise is renewed, a franchising authority may impose
new and more onerous requirements such as upgrading facilities and equipment,
although the municipality must take into account the cost of meeting such
requirements. The 1992 Cable Act makes several changes to the process under
which a cable operator seeks to enforce its renewal rights which could make it
easier in some cases for a franchising authority to deny renewal.
Franchises usually call for the payment of fees, often based on a percentage
of the system's gross subscriber revenues, to the granting authority. Although
franchising authorities may impose franchise fees under the 1984 Cable Act,
such payments cannot exceed 5% of a cable system's annual gross revenues. In
those communities in which franchise fees are required, the Company currently
pays franchise fees ranging up to 5% of gross revenues. Franchising
authorities are also empowered in awarding new franchises or renewing existing
franchises to require cable operators to provide cable-related facilities and
equipment and to enforce compliance with voluntary commitments. In the case of
franchises in effect prior to the effective date of the 1984 Cable Act,
franchising authorities may enforce requirements contained in the franchise
relating to facilities, equipment and services, whether or not cable-related.
The 1984 Cable Act, under certain limited circumstances, permits a cable
operator to obtain modifications or franchise obligations.
Upon receipt of a franchise, the cable system owner usually is subject to a
broad range of obligations to the issuing authority directly affecting the
business of the system. The terms and conditions of franchises vary
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materially from jurisdiction to jurisdiction, and even from city to city
within the same state, historically ranging from reasonable to highly
restrictive or burdensome. The 1984 Cable Act places certain limitations on a
franchising authority's ability to control the operation of a cable system
operator and the courts have from time to time reviewed the constitutionality
of several general franchise requirements, including franchise fees and access
channel requirements, often with inconsistent results. On the other hand, the
1992 Cable Act prohibits exclusive franchises, and allows franchising
authorities to exercise greater control over the operation of franchised cable
systems, especially in the area of customer service and rate regulation. The
1992 Cable Act also allows franchising authorities to operate their own
multichannel video distribution system without having to obtain a franchise
and permits states or local franchising authorities to adopt certain
restrictions on the ownership of cable systems. Moreover, franchising
authorities are immunized from monetary damage awards arising from regulation
of cable systems or decisions made on franchise grants, renewals, transfers
and amendments.
The specific terms and conditions of a franchise and the laws and
regulations under which it was granted directly affect the profitability of
the cable television system. Cable franchises generally contain provisions
governing charges for basic cable television services, fees to be paid to the
franchising authority, length of the franchise term, renewal, sale or transfer
of the franchise, territory of the franchise, design and technical performance
of the system, use and occupancy of public streets and number and types of
cable services provided. The 1996 Act prohibits a franchising authority from
either requiring or limiting a cable operator's provision of
telecommunications services.
Various proposals have been introduced at the state and local levels with
regard to the regulation of cable television systems, and a number of states
have adopted legislation subjecting cable television systems to the
jurisdiction of centralized state governmental agencies, some of which impose
regulation of a character similar to that of a public utility. Attempts in
other states to regulate cable television systems are continuing and can be
expected to increase. Such proposals and legislation may be preempted by
federal statute and/or FCC regulation. To date, the states in which the
Company operates that have enacted such state level regulations are
Massachusetts and Vermont. The Company cannot predict whether other states in
which it currently operates, or in which it may acquire systems, will engage
in such regulation in the future.
The foregoing does not purport to describe all present and proposed federal,
state and local regulations and legislation relating to the cable television
industry. Other existing federal regulations, copyright licensing and, in many
jurisdictions, state and local franchise requirements currently are the
subject of a variety of judicial proceedings, legislative hearings and
administrative and legislative proposals which could change, in varying
degrees, the manner in which cable television systems operate. Neither the
outcome of these proceedings nor their impact upon the cable television
industry or the Systems can be predicted at this time.
Telephony and Telecommunications/Federal Laws and Regulations
The 1996 Act also alters federal, state and local laws and regulations
regarding telecommunications providers and services, including the Company,
and creates a favorable environment in which the Company may provide telephone
and other telecommunications services and facilities. The following is a
summary of the key provisions of the 1996 Act that could materially affect the
telecommunications business of the Company.
The 1996 Act was intended to promote the provision of competitive telephone
services and facilities by cable television companies and others. The 1996 Act
declares that no state or local laws or regulations may prohibit or have the
effect of prohibiting the ability of any entity to provide any interstate or
intrastate telecommunications service. States are authorized to impose
"competitively neutral" requirements regarding universal service, public
safety and welfare, service quality, and consumer protection. The 1996 Act
further provides that cable operators and affiliates providing
telecommunications services are not required to obtain a separate franchise
from local franchising authorities ("LFAs") for such services. An LFA may not
order a cable operator or affiliate to discontinue providing
telecommunications services or discontinue operating its cable system on the
basis that it has failed to obtain a separate franchise or renewal for the
provision of
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telecommunications services. The 1996 Act prohibits LFAs from requiring cable
operators to provide telecommunications service or facilities as a condition
of the grant of a franchise, franchise renewal, or franchise transfer, except
that LFAs may seek "institutional networks" as part of such franchise
negotiations.
The 1996 Act provides that, when cable operators provide telecommunications
services, LFAs may require reasonable, competitively neutral compensation for
management of the public rights-of-way. The LFA must publicly disclose such
compensation requirements.
The Company believes that it qualifies as a connecting carrier under federal
law and therefore does not need FCC certification to provide intrastate
service. In the event that it is determined that the Company must seek FCC
certification, the Company believes that such certification will be granted by
the FCC in a timely manner. The Company may be required to file certain
tariffs and reports with the FCC.
Interconnection and Other Telecommunications Carrier Obligations
To facilitate the entry of new telecommunications providers (including cable
operators), the 1996 Act imposes interconnection obligations on all
telecommunications carriers. All carriers must interconnect their networks
with other carriers and must not deploy network features and functions that
interfere with interoperability. LECs also have a set of separate identified
obligations beyond those that apply to new entrants: (i) good faith
negotiation with those seeking interconnection, (ii) unbundling, equal access
and non-discrimination requirements, (iii) resale of services, including
"resale at wholesale rates," (iv) notice of changes in the network that would
affect interconnection and interoperability and (v) physical collocation
unless shown that practical technical reasons, or space limitations, make
physical collocation impractical.
Under the 1996 Act, individual interconnection rates must be just and
reasonable, based on cost, and may include a reasonable profit. Traffic
termination charges shall be "mutual and reciprocal." The 1996 Act permits
carriers to agree on a "bill and keep" system, but does not require such a
system.
The 1996 Act contemplates that interconnection agreements will be negotiated
by the parties and submitted to a state public service commission ("SPSC") for
approval. A SPSC may become involved, at the request of either party, if
negotiations fail. If the state regulator refuses to act, the FCC may
determine the matter. If the SPSC acts, an aggrieved party's remedy is to file
a case in federal district court. The 1996 Act provides for a rural exemption
to interconnection requests, but also provides that the exception does not
apply where a cable operator makes an interconnection request of a rural LEC
within the operator's franchise area.
The 1996 Act requires that all telecommunications providers (including cable
operators that provide telecommunications services) must contribute equitably
to a Universal Service Fund ("USF"), and the FCC may exempt an interstate
carrier or class of carriers if their contribution would be minimal under the
USF formula. The 1996 Act allows states to determine which intrastate
telecommunications providers contribute to the USF. The 1996 Act prohibits
geographic end user rate de-averaging to protect rural subscribers' rates.
FCC Interconnection Order
The FCC released its First Report and Order to effectuate the
interconnection provisions of the 1996 Act. In general, the FCC's First Report
and Order appears favorable to the promotion of competition at the local
level. To summarize, the FCC first has asserted broad federal jurisdiction
over interconnection issues and the power to bind both state and local
governments. The FCC also has established procedures for the negotiation,
arbitration and resolution of interconnection agreements. It also has stated
that new entrants essentially always benefit from the terms of subsequent
interconnection agreements entered into by a given LEC with third parties and
cannot waive their "most favored nation" rights in this respect. The FCC also
has specified the manner in which actual physical interconnection must be made
available to new entrants and, in this connection, has specified the manner in
which rates charged to new entrants for physical interconnection must be
calculated. The FCC also has set forth the manner in which LECs must make
essential network elements available to new entrants for resale, again
including the manner in which actual rates are to be calculated.
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In July 1997, the United States Court of Appeals for the Eighth Circuit
vacated in part the FCC's local competition rules. That court concluded that
the FCC did not have the authority to establish rules to govern the pricing of
interconnection, network elements, and resale services provided by incumbent
local exchange carriers. In addition, it found certain other FCC rules to be
unlawful. On January 25, 1999, the Supreme Court issued an opinion in which it
reversed portions of the court of appeals decision. The Supreme Court held
that the FCC has authority under the Communications Act to establish rules,
including pricing rules, to implement the local competition provisions of the
Telecommunications Act of 1996, even with respect to intrastate services. The
Supreme Court did not address the merits of the FCC's 1996 pricing rules. In
addition, the Supreme Court affirmed several of the other rules which had been
promulgated by the FCC, but which had been found unlawful by the court of
appeals. These included a rule allowing requesting carriers to select
provisions from among different interconnection agreements approved by state
commissions (the so-called "pick-and-choose" rule) and a rule allowing
requesting carriers to obtain from incumbent local exchange carriers assembled
combinations of unbundled network elements (sometimes called unbundled network
element platforms). The Supreme Court vacated a FCC rule identifying specific
network elements which incumbent local exchange carriers must make available
to requesting carriers on the basis that the FCC had failed to consider 1)
whether such network elements were necessary, and 2) whether the failure to
make network elements available would impair the ability of requesting
carriers to provide the services they seek to offer. The FCC has indicated
that it will conduct further proceedings to comply with the Supreme Court's
opinion regarding the availability of network elements. Whether incumbent
local exchange carriers will be required to make available combined platforms
of network elements will depend on how the FCC implements the "necessary" and
"impair" standards governing network element availability in light of the
Supreme Court opinion.
Internet Services/Federal Laws and Regulations
Transmitting indecent material via the Internet was made criminal by the
1996 Act. However, on-line access providers are exempted from criminal
liability for simply providing interconnection service; they are also granted
an affirmative defense from criminal or other action where in "good faith"
they restrict access to indecent materials. These provisions have been
challenged in federal court. The 1996 Act further exempts on-line access
providers from civil liability for actions taken in good faith to restrict
access to obscene, excessively violent or otherwise objectionable material.
Forced Internet Access
Cable operators have begun to offer high-speed Internet access to
subscribers. These services are in direct competition with a number of other
companies, many of which have substantial resources, such as existing ISPs and
local and long distance telephone companies.
Recently, a number of ISPs have asked local franchising authorities and the
FCC to grant them rights of access to cable systems' broadband infrastructure
so that they can deliver their service directly to cable systems' customers.
Several local franchising authorities and state legislatures have been
examining the issue and a few local authorities have required cable operators
to provide such access. A U.S. District Court recently ruled that the City of
Portland, OR was authorized to require such access. This decision is on
appeal. Some cable companies have initiated their own litigation challenging
municipal forced access requirements. Congress and the FCC have thus far
declined to take action on the issue of ISP's access to broadband cable
facilities. If Holdings is subject to this forced access, it could prohibit
the Company from entering into or limited existing agreements with ISPs which
could adversely impact our anticipated revenues from high-speed Internet
access services. Franchise renewals and transfers could become more difficult
depending upon the outcome of this issue.
ITEM 2. PROPERTIES
The Company's principal physical assets consist of cable television
operating plant and equipment, including signal receiving, encoding and
decoding devices, headends and distribution systems and subscriber
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house drop equipment for each of its cable television systems. The signal
receiving apparatus typically includes a tower, antenna, ancillary electronic
equipment and earth stations for reception of satellite signals. Headends,
consisting of associated electronic equipment necessary for the reception,
amplification and modulation of signals, are located near the receiving
devices. The Company's distribution system consists primarily of coaxial and
fiber optic cables and related electronic equipment. Subscriber devices
consist of decoding converters. The physical components of cable television
systems require maintenance and periodic upgrading to keep pace with
technological advances.
The Company's cables and related equipment are generally attached to utility
poles under pole rental agreements with local public utilities, although in
some areas the distribution cable is buried in underground ducts or trenches.
See "Legislation and Regulation-FCC Regulation."
The Company owns or leases parcels of real property for signal reception
sites (antenna towers and headends), microwave facilities and business offices
in each of its market areas, and owns most of its service vehicles.
Substantially all of the assets of Holdings' subsidiaries are subject to
encumbrances as collateral in connection with the Company's credit
arrangements, either directly with a security interest or indirectly through a
pledge of the stock or partnership interests in the respective subsidiaries.
See Note 4 to the FrontierVision Holdings, L.P. consolidated financial
statements. The Company believes that its properties, both owned and leased,
are in good operating condition and are suitable and adequate for the
Company's business operations.
ITEM 3. LEGAL PROCEEDINGS
There are no material pending legal proceedings, other than routine
litigation incidental to the business, of which the Company or any of its
subsidiaries is a part or to which any of their property is subject.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the fourth
quarter of 1999.
19
<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Not applicable.
ITEM 6. SELECTED FINANCIAL DATA
(Dollars in thousands)
As described in Part I, the acquisition of the Company by Adelphia occurred
on October 1, 1999. Accordingly, the following tables present selected
consolidated financial data derived from Holdings' financial statements as of
and for the three months ended December 31, 1999 (referred to herein as "New
Holdings"), which has been audited by Deloitte & Touche, LLP, independent
auditors. Also included are consolidated selected financial data derived from
Holdings' consolidated financial statements as of December 31, 1995, 1996,
1997 and 1998 and for the period from inception (April 17, 1995) through
December 31, 1995, the years ended December 31, 1996, 1997, 1998 and the nine
months ended September 30, 1999 (referred to herein as "Old Holdings") which
have been audited by KPMG LLP, independent auditors.
The following table also presents combined historical financial data as of
and for the year ended December 31, 1995 for the predecessor United Video
Cablevision systems, C4 Media systems, Cox Communications systems, American
Cable Entertainment of Kentucky-Indiana systems, and Triax Southeast systems.
The summary unaudited combined selected historical financial data are derived
from the audited and unaudited historical financial statements of these
systems and should be read in conjunction with the audited financial
statements and related notes thereto of the systems. Holdings previously filed
these audited financial statements on the Form 10-K for the year ended
December 31, 1998. The selected financial data are derived from the audited
and unaudited historical financial statements of these systems and should be
read in conjunction with the audited financial statements and related notes
thereto of the systems.
<TABLE>
<CAPTION>
New
Old Holdings Holdings
---------------------------------------------------------- ------------
Predecessor From
Systems April 17, 1995 Nine Three
Year Ended (inception) to Year Ended December 31, Months Ended Months Ended
December 31, December 31, ---------------------------- September 30, December 31,
1995(a)(b) 1995 1996 1997 1998 1999 1999
------------ -------------- -------- -------- -------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Statement of Operations
Data:
Revenues................ $109,765 $ 4,369 $ 76,464 $145,126 $245,134 $221,032 $ 75,375
Operating expenses (c).. 62,098 2,438 42,111 78,732 130,783 130,162 37,381
Depreciation and
amortization........... 42,354 2,377 36,723 67,327 117,120 108,987 24,234
Management fees......... -- -- -- -- -- -- 1,879
Transaction costs....... -- 940 -- -- -- 17,077 269
-------- ------- -------- -------- -------- -------- --------
Operating income
(loss)................. 5,313 (1,386) (2,370) (933) (2,769) (35,194) 11,612
Interest expense--net... (37,898) (1,317) (21,423) (46,180) (85,910) (75,551) (25,399)
Other income (expense).. (4,409) -- (8) (57) (526) 8,961 --
-------- ------- -------- -------- -------- -------- --------
Loss before income taxes
and extraordinary
loss (d)............... (36,994) (2,703) (23,801) (47,170) (89,205) (101,784) (13,787)
Income tax benefit
(expense).............. -- -- -- -- 2,927 2,082 (271)
Extraordinary loss (d).. -- -- -- (5,046) -- -- --
-------- ------- -------- -------- -------- -------- --------
Net loss................ $(36,994) $(2,703) $(23,801) $(52,216) $(86,278) $(99,702) $(14,058)
======== ======= ======== ======== ======== ======== ========
</TABLE>
20
<PAGE>
<TABLE>
<CAPTION>
New
Old Holdings Holdings
------------------------------------- ------------
Predecessor Year Ended December 31,
Systems ------------------------------------- December 31,
1995(b) 1995 1996 1997 1998 1999
----------- -------- -------- -------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Balance Sheet Data:
Total assets............ $288,253 $143,512 $549,168 $927,275 $1,210,421 $2,221,105
Total debt (e).......... 285,144 93,159 398,194 787,047 1,121,142 1,169,196
Partners' equity........ 46,407 130,003 115,440 29,162 974,799
</TABLE>
- --------
(a) Includes the unaudited combined results of operations of the systems
acquired from United Video Cablevision, C4 Media Cable Southeast, Cox
Communications, American Cable Entertainment and Triax Associates for the
year ended December 31, 1995 (except for the United Video systems, which
is for the period ended November 8, 1995). As the results of operations of
the United Video systems are included in the historical results of
operations subsequent to the date of the acquisition thereof (November 9,
1995), the amounts do not include $4.2 million in revenue, $2.4 million in
operating expenses and $2.2 million in depreciation and amortization
(computed after the application of purchase accounting adjustments)
attributable to such systems.
(b) Includes combined balance sheet data for the United Video systems as of
November 9, 1995, the date of the acquisition, and combined balance sheet
data for the C4 systems, the Cox systems, the American Cable Entertainment
systems and the Triax systems as of December 31, 1995, because such
acquisitions occurred subsequent to that date.
(c) Includes direct operating and programming and selling, general and
administrative expenses.
(d) Extraordinary loss relates to loss on the early retirement of debt.
(e) Excludes affiliate debt.
21
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
(Dollars in thousands)
RESULTS OF OPERATIONS
General
FrontierVision Holdings, L.P. ("Holdings"), wholly-owned by FrontierVision
Partners, L.P., a Delaware limited partnership ("FVP"), is a Delaware limited
partnership formed on September 3, 1997 for the purpose of acting as co-issuer
with its wholly-owned subsidiary, FrontierVision Holdings Capital Corporation
("Holdings Capital"), of 11 7/8% Senior Discount Notes due 2007 (the "Discount
Notes"). FVP contributed to Holdings, both directly and indirectly, all of the
outstanding partnership interests of FrontierVision Operating Partners, L.P.
("FVOP") prior to the issuance of the Discount Notes on September 19, 1997
(the "Formation Transaction") and, as a result FVOP and its wholly-owned
subsidiary, FrontierVision Capital Corporation ("Capital"), are wholly-owned,
consolidated subsidiaries of Holdings. The Formation Transaction was accounted
for at predecessor cost. As used herein, the "Company" collectively refers to
Holdings, Holdings Capital, FrontierVision Operating Partners, Inc. ("FVOP
Inc."), FVOP, Capital and FrontierVision Holdings Capital II Corporation.
On October 1, 1999, FVP completed its sale of all outstanding partnership
interests of FVP to Adelphia in exchange for approximately $543,000 (subject
to post closing adjustments) in cash, 7.0 million shares of Adelphia Class A
common stock and the assumption of certain liabilities.
Holdings operates cable television systems ("Systems") in small and medium-
sized suburban and exurban communities in the United States in three primary
operating clusters--New England, Ohio and Kentucky--with a fourth smaller
group of cable television systems in the southeast. As of December 31, 1999,
the Company owned systems with broadband networks that passed in front of
approximately 1,000,000 homes and served approximately 700,000 basic
subscribers. In addition to traditional analog cable television, the Company
offers or intends to offer a wide range of telecommunication services
including digital cable television, high speed data and Internet access,
paging and telephony.
Please refer to the discussion of the Private Securities Litigation Reform
Act of 1995 which is incorporated herein by reference to Item 1, "Business--
Introduction".
Comparison of the Years Ended December 31, 1997, 1998 and 1999
For purposes of the following table and discussion, the operating results
for the nine months ended September 30, 1999 of Old Holdings have been
combined with the operating results for the three months ended December 31,
1999 of New Holdings in order to provide a more meaningful basis for comparing
the years ended December 31, 1998 and 1999. The combined results of Old
Holdings and New Holdings will be referred to as "Combined Holdings" in the
table below and discussion that follows. The following table sets forth the
historical percentage relationship to revenues of operating income. As a
result of Holdings' limited operating history, and the fact that acquired
systems are only included from the date of acquisition, we believe that the
results of operations for the periods presented in this table are not
indicative of our future results. Depreciation, amortization and certain other
line items included in the operating results of Combined Holdings are not
necessarily comparable between periods as the three month New Holdings period
ended December 31, 1999 includes the effect of the preliminary purchase
accounting adjustments related to Adelphia's acquisition of FVP. The combining
of Old Holdings and New Holdings accounting periods is not in accordance with
generally accepted accounting principles. See Note 1 to the accompanying
consolidated financial statements.
22
<PAGE>
<TABLE>
<CAPTION>
Percentage of Revenues
Year Ended December
31,
------------------------
Combined
Old Holdings Holdings
-------------- --------
1997 1998 1999
------ ------ --------
<S> <C> <C> <C>
Revenues............................................ 100.0% 100.0% 100.0%
Expenses:
Operating expenses................................ 54.3 53.4 56.5
Depreciation and amortization..................... 46.4 47.8 44.9
Transaction costs................................. -- -- 5.9
Management fees to managing affiliate............. -- -- 0.6
------ ------ ------
Operating loss.................................... (0.7%) (1.2%) (7.9%)
====== ====== ======
</TABLE>
Revenues. Revenues increased 68.9%, or approximately $100,008, to $245,134
for the year ended December 31, 1998 from approximately $145,126 for the year
ended December 31, 1997 primarily attributable to acquisition activity during
1998 and 1997. Revenues increased 20.9%, or approximately $51,273, to $296,407
for the combined year ended December 31, 1999 primarily attributable to
acquisition activity during 1998.
Operating Expenses. These expenses, which are comprised mainly of
programming costs, technical expenses, and costs relating to system offices,
customer service representatives and sales and administrative employees,
increased 66.1%, or approximately $52,051, to $130,783 for the year ended
December 31, 1998. This increase was primarily attributable to acquisition
activity during 1998 and 1997. Operating expenses increased 28.1%, or
approximately $36,760, to $167,543 for the combined year ended December 31,
1999 primarily attributable to the acquisition activity during 1998. This
increase in operating expenses was also somewhat offset by synergies realized
from a reduction in corporate overhead and a reduction in programming costs
due to the acquisition of FVP by Adelphia.
Transaction Costs. Transaction costs amounting to approximately $17,346 were
recognized in the combined year ended December 31, 1999. These costs were
incurred in connection with the acquisition of FVP by Adelphia and are mainly
comprised of bonus, severance and deferred compensation paid to certain of the
Company's former executives.
Depreciation and Amortization. Depreciation and amortization was higher for
the year ended December 31, 1998 compared with the respective prior year,
primarily due to increased depreciation and amortization related to
acquisitions and increased capital expenditures. Depreciation and amortization
was higher for the year ended December 31, 1999 compared with the respective
prior year, primarily due to increased depreciation related to 1998
acquisitions, capital expenditures and additional depreciation and
amortization expenses resulting from the acquisition of FVP by Adelphia. This
increase in depreciation and amortization in the year ended December 31, 1999
was partially offset in the fourth quarter of 1999 by a reduction in
depreciation and amortization expense caused by conforming the Company's
depreciation and amortization periods to those of Adelphia. Also, during the
nine months ended September 30, 1999, the Company disposed of certain cable
television systems which offset a portion of the increase.
Management Fees to Managing Affiliate. On October 1, the Company entered
into an agreement with Adelphia which provides for payment of management fees
by the Company of up to 5% of the Company's gross revenues. The amount of such
payment for the year ended December 31, 1999 was $1,879.
Interest Expense--net. For the years ended December 31, 1998 and 1999,
interest expense increased 86.0% and 17.5%, respectively. The increase in
interest expense was primarily attributable to an increase in the average
amount of debt outstanding due to acquisitions and capital expenditures.
Other (Expense) Income. Included in other income for the year ended December
31, 1999 is a gain of approximately $1,600 recognized on the January 7, 1999
sale of certain cable television system assets to Helicon Partners I, L.P. and
a gain of approximately $7,324 recognized on the June 1, 1999 exchange of five
cable television systems with Intermedia Partners, L.P. IV.
23
<PAGE>
Liquidity and Capital Resources
The cable television business is capital intensive and typically requires
continual financing for the construction, modernization, maintenance,
expansion and acquisition of cable systems. During the three years in the
period ended December 31, 1999, the Company committed substantial capital
resources for these purposes. These expenditures were funded through bank
borrowings, equity investments, debt issued by affiliates and advances from
affiliates and internally generated funds. The Company's aggregate outstanding
borrowings as of December 31, 1999 were $1,169,196. The Company's ability to
generate cash to meet its future needs will depend generally on its results of
operations and the continued availability of external financing.
Capital Expenditures
Capital expenditures for the years ended December 31, 1997, 1998 and 1999
were $32,738, $65,570 and $89,024, respectively. The increases in capital
expenditures for the years ended December 31, 1998 and 1999 compared to the
respective prior years were primarily due to the impact of acquired systems
and increased investment related to the rebuilding of the Company's cable
plant. The Company expects capital expenditures for 2000 to range from
$110,000 to $150,000.
Financing Activities
Drawings on our amended bank credit facility, along with cash flow generated
from operations and debt financing, have been sufficient to finance capital
improvement projects as well as acquisitions.
On December 19, 1997, FVOP amended its existing senior bank indebtedness and
entered into an $800,000 amended bank credit facility with The Chase Manhattan
Bank, as Administrative Agent, J.P. Morgan Securities Inc., as Syndication
Agent, CIBC Inc., as Documentation Agent, and the other lenders signatory
thereto. The amended bank credit facility includes a $300,000, 7.75-year
reducing revolving credit facility, a $250,000, 7.75-year term loan and a
$250,000, 8.25-year term loan.
At December 31, 1999, FVOP had $175,000 outstanding under the revolving
credit facility, $237,500 outstanding under the 7.75 year term loan and
$249,500 outstanding under the 8.25 year term loan. The weighted average
interest rates at December 31, 1999 on the outstanding borrowings under the
revolving credit facility were approximately 8.33%, and under the 7.75 year
term loan and the 8.25 year term loan were approximately 8.32% and 8.71%,
respectively. FVOP entered into interest rate protection agreements to hedge
the underlying LIBOR rate exposure for $240,000 of borrowings through April
2002.
In general, the amended bank credit facility requires FVOP to use the
proceeds from any equity or subordinated debt issuance or any cable system
disposition to reduce indebtedness for borrowings under the amended bank
credit facility and to reduce permanently commitments thereunder, subject to
certain exceptions allowing FVOP to use such proceeds to fund certain
permitted acquisitions, provided that FVOP is otherwise in compliance with the
terms of the amended bank credit facility.
The amended bank credit facility is secured by a pledge of all limited and
general partnership interests in FVOP and in any of FVOP's restricted
subsidiaries and a first priority lien on all the tangible and intangible
assets of FVOP and each of its restricted subsidiaries. In addition, in the
event of the occurrence and continuance of an event of default under the
amended bank credit facility, the Administrative Agent is entitled to replace
FVOP's general partner with its designee. Holdings, as the general partner of
FVOP, guarantees the indebtedness under the amended bank credit facility on a
limited recourse basis.
Under the terms of the amended bank credit facility, with certain
exceptions, FVOP has a mandatory prepayment obligation upon a change of
control of FVOP and the sale of any of its operating systems. This obligation
was waived in connection with the acquisition of FVP by Adelphia with the
consent of the majority of the lenders.
24
<PAGE>
Notes Marked to Market
The aggregate fair value assigned in purchase accounting to New Holdings'
debt was greater than the aggregate recorded value at the date of the merger
by $22,042. The fair value of the Company's debt is estimated based on the
quoted market prices for the same or similar issues or on the current rates
offered to the Company for debt of the same remaining maturities. Such excess
will be amortized over the respective remaining lives of the respective
underlying debt obligations.
Senior Subordinated Notes
On October 7, 1996, FVOP issued $200,000 aggregate principal amount of 11%
senior subordinated notes due 2006. The notes mature on October 15, 2006 and
bear interest at 11%, with interest payments due semiannually commencing on
April 15, 1997. The notes are general unsecured obligations of Holdings and
rank subordinate in right of payment to all existing and any future senior
indebtedness.
Holders of the Senior Subordinated Notes have the right to require FVOP to
repurchase their notes at 101% of principal upon a change of control (as
defined in the Indenture). The acquisition of FVP by Adelphia constituted a
change of control in accordance with the Indenture and, upon the closing of
the transaction, FVOP was required to offer to repurchase all of the notes.
FVOP's offer to repurchase the notes expired without any holders exercising
their option.
Senior Discount Notes, Series A
Holdings and Holdings Capital were formed for the purpose of acting as co-
issuers of $237,700 aggregate principal amount at maturity of 11 7/8% senior
discount notes due 2007. FVP contributed to Holdings, both directly and
indirectly, all of the outstanding partnership interests of FVOP prior to the
issuance of the discount notes on September 19, 1997 and as a result, FVOP and
Capital are wholly-owned consolidated subsidiaries of Holdings. Holdings
contributed the majority of the net proceeds of the discount notes totaling
approximately $142,300 to FVOP as a capital contribution.
Senior Discount Notes, Series B
Holdings and Holdings Capital II acted as co-issuers of $91,300 aggregate
principal amount at maturity of 11 7/8% senior discount notes due 2007.
Holdings II Capital was formed for the purpose of acting as co-issuer on these
discount notes. The discount notes were issued on December 2, 1998. Holdings
contributed the majority of the net proceeds of approximately $72,800 from the
issuance of the discount notes to FVOP as a capital contribution.
Holders of the Series A and B Senior Discount Notes have the right to
require Holdings to repurchase their notes at 101% of principal upon a change
of control (as defined in the Indenture). The acquisition of FVP by Adelphia
constituted a change of control in accordance with the Indenture and, upon the
closing of the transaction, Holdings was required to offer to repurchase all
of the notes. Tenders were paid by Holdings in the amount of $290 under this
offer to repurchase.
Resources
The Company plans to continue to explore and consider new commitments,
arrangements or transactions to refinance existing debt, increase the
Company's liquidity or decrease the Company's leverage. These could include,
among other things, the future issuance by the Company, or its subsidiaries of
public or private debt and the negotiation of new or amended credit
facilities. These could also include entering into acquisitions, joint
ventures or other investment or financing activities, although no assurance
can be given that any such transactions will be consummated. The Company's
ability to borrow under current credit facilities and to enter into
refinancings and new financings is limited by covenants contained in its and
its subsidiaries' credit agreements and indentures, including covenants under
which the ability to incur indebtedness is in part a function of applicable
ratios of total debt to cash flow.
25
<PAGE>
The Company believes that cash and cash equivalents, internally generated
funds, borrowings under existing credit facilities, advances from affiliates
and future financing sources will be sufficient to meet its short-term and
long-term liquidity and capital requirements. Although in the past the Company
has been able to refinance its indebtedness or obtain new financing, there can
be no assurance that the Company will be able to do so in the future or that
the terms of such financings would be favorable.
Management believes that the telecommunications industry, including the
cable television and telephone industries, continues to be in a period of
consolidation characterized by mergers, joint ventures, acquisitions, sales of
all or part of cable companies or their assets, and other partnering and
investment transactions of various structures and sizes involving cable or
other telecommunications companies. The Company continues to evaluate new
opportunities that allow for the expansion of its business through the
acquisition of additional cable television systems in geographic proximity to
its existing regional markets or in locations that can serve as a basis for
new market areas. The Company, like other cable television companies, has
participated from time to time and is participating in preliminary discussions
with third parties regarding a variety of potential transactions, and the
Company has considered and expects to continue to consider and explore
potential transactions of various types with other cable and
telecommunications companies. However, no assurances can be given as to
whether any such transaction may be consummated or, if so, when.
Recent Accounting Pronouncements
Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting
for Derivative Instruments and Hedging Activities," establishes accounting and
reporting standards for derivative instruments and for hedging activities. It
requires that an entity recognize all derivatives as either assets or
liabilities in the statement of financial position and measure those
instruments at fair value. Management of the Company has not completed its
evaluation of the impact of SFAS No. 133 on the Company's consolidated
financial statements. In July 1999, SFAS No. 137 was issued to delay the
effective date of SFAS No. 133 to fiscal quarters of fiscal years beginning
after June 15, 2000.
At its January 2000 meeting, the Emerging Issues Task Force ("EITF") reached
consensus with respect to certain issues related to EITF 98-3, "Determining
whether a transaction is an Exchange of Similar Productive Assets or a
Business Combination." As a result of this consensus, the Company will be
required to treat cable system swaps as a purchase of a business and a
disposition of a business at fair value. Management of the Company will
monitor the impact of EITF 98-3 as it relates to future transactions of the
Company.
Inflation
The Company believes that inflation did not have a significant effect on its
results of operations during the three year period ended December 31, 1999.
Periods of high inflation could have an adverse effect to the extent that
increased borrowing costs for floating-rate debt may not be offset by
increases in subscriber rates. At December 31, 1999, after giving effect to
interest rate hedging agreements, approximately $421,981 of the Company's
total debt was subject to floating interest rates.
Regulatory and Competitive Matters
The cable television operations of the Company may be adversely affected by
changes and developments in governmental regulation, competitive forces and
technology. The cable television industry and the Company are subject to
extensive regulation at the federal, state and local levels. The 1992 Cable
Act significantly expanded the scope of regulation of certain subscriber rates
and a number of other matters in the cable industry, such as mandatory
carriage of local broadcast stations and retransmission consent, and increased
the administrative costs of complying with such regulations. The FCC has
adopted rate regulations that establish, on a system-by-system basis, maximum
allowable rates for (i) basic and cable programming services (other than
programming offered on a per-channel or per-program basis), based upon a
benchmark methodology, and (ii) associated equipment and installation services
based upon cost plus a reasonable profit. Under the FCC rules, franchising
authorities
26
<PAGE>
are authorized to regulate rates for basic services and associated equipment
and installation services, and the FCC will regulate rates for regulated cable
programming services in response to complaints filed with the agency. The
Telecommunications Act of 1996 (the "1996 Act") ended FCC regulation of cable
programming service tier rates on March 31, 1999.
Rates for basic and cable programming services are set pursuant to a
benchmark formula. Alternatively, a cable operator may elect to use a cost-of-
service methodology to show that rates for basic and cable programming
services are reasonable. Refunds with interest will be required to be paid by
cable operators who are required to reduce regulated rates. The FCC has
reserved the right to reduce or increase the benchmarks it has established.
The rate regulations also limit increases in regulated rates to an inflation
indexed amount plus increases in certain costs such as taxes, franchise fees,
costs associated with specific franchise requirements and increased
programming costs. Cost-based adjustments to these capped rates can also be
made in the event a cable operator adds or deletes channels or completes a
significant system rebuild or upgrade. Because of the limitation on rate
increases for regulated services, future revenue growth from cable services
will rely to a much greater extent than has been true in the past on increased
revenues from unregulated services and new subscribers than from increases in
previously unregulated rates.
The FCC has adopted regulations implementing all of the requirements of the
1992 Cable Act. The FCC is also likely to continue to modify, clarify or
refine the rate regulations. Holdings cannot predict the effect of the 1996
Act on future rulemaking proceedings or changes to the rate regulations.
Cable television companies operate under franchises granted by local
authorities, which are subject to renewal and renegotiation from time to time.
Because such franchises are generally non-exclusive, there is a potential for
competition with the systems from other operators of cable television systems,
including public systems operated by municipal franchising authorities
themselves, and from other distribution systems capable of delivering
television programming to homes. The 1992 Cable Act and the 1996 Act contain
provisions that encourage competition from such other sources. The Company
cannot predict the extent to which competition will materialize from other
cable television operators, local telephone companies, other distribution
systems for delivering television programming to the home, or other potential
competitors, or, if such competition materializes, the extent of its effect on
the Company.
The 1996 Act repealed the prohibition on competitive local telephone
exchange carriers ("CLECs") from providing video programming directly to
customers within their local exchange areas other than in rural areas or by
specific waiver of FCC rules. The 1996 Act also authorized CLECs to operate
"open video systems" ("OVS") without obtaining a local cable franchise,
although CLECs operating such a system can be required to make payments to
local governmental bodies in lieu of cable franchise fees. Where demand
exceeds capacity, up to two-thirds of the channels on an OVS must be available
to programmers unaffiliated with the CLEC. The statute states that the OVS
scheme supplants the FCC's "video dialtone" rules. The FCC has promulgated
rules to implement the OVS concept, and New Jersey Bell Telephone Company has
been granted permission to convert its video dialtone authorization in Dover
Township, New Jersey to an OVS authorization.
The Company believes that the provision of video programming by telephone
companies in competition with the Company's existing operations could have an
adverse effect on the Company's financial condition and results of operations.
At this time, the impact of any such effect is not known or estimable.
The Company also competes with DBS service providers. DBS has been available
to consumers since 1994. A single DBS satellite can provide more than 100
channels of programming. DBS service can be received virtually anywhere in the
United States through the installation of a small outdoor antenna. DBS service
is being heavily marketed on a nationwide basis by several service providers,
some of which are now offering local programming channels. At this time, any
impact of DBS competition on the Company's future results is not known or
estimable.
27
<PAGE>
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company uses fixed and variable rate debt to fund its working capital
requirements, capital expenditures and acquisitions. These debt arrangements
expose the Company to market risk related to changes in interest rates. The
Company has entered into interest rate swap and collar agreements to reduce
the impact of changes in interest rates. As of December 31, 1999, the Company
had interest rate swap agreements covering notional principal of $40,000 that
expire during 2000 that fix the interest rate at an average of 7.70%. As of
December 31, 1999, the Company had interest rate collar agreements covering a
notional amount of $200,000, with $100,000 expiring in 2001 and 2002. The
interest rate collar agreements have floor rates of 5.95% and 6.30% and cap
rates of 5.95% and 6.30%, respectively, for the agreements expiring in 2001
and 2002, with maximum cap rates of 6.64% and maximum floor rates of 4.65% and
4.95%, respectively. The Company does not enter into any interest rate collar
agreements for trading purposes. The Company is exposed to market risk in the
event of non-performance by the banks. No such non-performance is expected.
The table below summarizes the fair values and contract terms of the Company's
financial instruments subject to interest rate risk as of December 31, 1999.
<TABLE>
<CAPTION>
Expected Maturity
--------------------------------------------- Fair
2000 2001 2002 2003 2004 Thereafter Total Value
------- -------- -------- ------- ------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Debt:
Fixed Rate.............. $ -- $ -- $ -- $ -- $ -- $528,658 $528,658 $492,646
Average Interest Rate.. 11.54% 11.54% 11.54% 11.54% 11.54% 11.54% -- --
Variable Rate........... $24,575 $ 34,575 $ 44,575 $55,825 $60,213 $442,218 $661,981 $661,981
Average Interest Rate.. 8.50% 9.01% 9.09% 9.10% 9.12% 9.20% -- --
Interest Rate Swaps:
Variable to Fixed....... $40,000 $ -- $ -- $ -- $ -- $ -- $ 40,000 $ (111)
Average pay rate........ 7.70% -- -- -- -- -- -- --
Average Receive rate.... 6.28% -- -- -- -- -- -- --
Interest Rate Collars:
Interest Rate Collars... $ -- $100,000 $100,000 $ -- $ -- $ -- $200,000 $ (41)
Maximum Cap Rate........ -- 6.64% 6.64% -- -- -- -- --
Cap and Floor Rate...... -- 5.95% 6.30% -- -- -- -- --
Minimum Floor Rate...... -- 4.65% 4.95% -- -- -- -- --
</TABLE>
Interest rates on variable debt are estimated by us using the average
implied forward London Interbank Offer Rate ("LIBOR") rates for the year of
maturity based on the yield curve in effect at December 31, 1999, plus the
borrowing margin in effect at December 31, 1999. Average receive rates on the
variable to fixed swaps are estimated by the Company using the average implied
forward LIBOR rates for the year of maturity based on the yield curve in
effect at December 31, 1999.
28
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The consolidated financial statements and related notes thereto and
independent auditors' report follow.
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
FrontierVision Holdings, L.P. and Subsidiaries:
Independent Auditors' Report--KPMG LLP................................... 30
Independent Auditors' Report--Deloitte & Touche LLP...................... 31
Consolidated Balance Sheets as of December 31, 1998 and 1999............. 32
Consolidated Statements of Operations for the Years Ended December 31,
1997 and 1998, the Nine Months Ended September 30, 1999 and the Three
Months Ended December 31, 1999.......................................... 33
Consolidated Statements of Partners' Equity (Deficiency) for the Years
Ended December 31, 1997 and 1998, the Nine Months Ended September 30,
1999 and the Three Months Ended December 31, 1999....................... 34
Consolidated Statements of Cash Flows for the Years Ended December 31,
1997 and 1998, the Nine Months Ended September 30, 1999 and the Three
Months Ended December 31, 1999.......................................... 35
Notes to Consolidated Financial Statements............................... 36
FrontierVision Holdings Capital Corporation:
Independent Auditors' Report--KPMG LLP................................... 50
Independent Auditors' Report--Deloitte & Touche LLP...................... 51
Balance Sheets as of December 31, 1998 and 1999.......................... 52
Note to Balance Sheets................................................... 53
FrontierVision Holdings Capital II Corporation:
Independent Auditors' Report--KPMG LLP................................... 54
Independent Auditors' Report--Deloitte & Touche LLP...................... 55
Balance Sheets as of December 31, 1998 and 1999.......................... 56
Note to Balance Sheets................................................... 57
</TABLE>
29
<PAGE>
INDEPENDENT AUDITORS' REPORT
FrontierVision Holdings, L.P.:
We have audited the accompanying consolidated balance sheet of
FrontierVision Holdings, L.P. and subsidiaries as of December 31, 1998, and
the related consolidated statements of operations, partners' equity
(deficiency) and cash flows for each of the years in the two year period ended
December 31, 1998 and the nine months ended September 30, 1999. In connection
with our audits of the consolidated financial statements, we also have audited
the financial statements schedules as of and for each of the two years ended
December 31, 1998 and the nine months ended September 30, 1999 listed in the
index at Item 14. These consolidated financial statements and the financial
statement schedules are the responsibility of the Partnership's management.
Our responsibility is to express an opinion on these consolidated financial
statements and the financial statement schedules based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of
FrontierVision Holdings, L. P. and subsidiaries as of December 31, 1998 and
the results of their operations and their cash flows for each of the years in
the two year period ended December 31, 1998 and the nine months ended
September 30, 1999 in conformity with generally accepted accounting
principles. Also in our opinion, the related financial statement schedule,
when considered in relation to the basic consolidated financial statements
taken as a whole, present fairly, in all material respects, the information
set therein.
KPMG LLP
Denver, Colorado
November 10, 1999
30
<PAGE>
INDEPENDENT AUDITORS' REPORT
FrontierVision Holdings, L.P.:
We have audited the accompanying consolidated balance sheet of
FrontierVision Holdings, L.P. and subsidiaries as of December 31, 1999, and
the related consolidated statements of operations, partners' equity, and cash
flows for the three months ended December 31, 1999. Our audit also included
the financial statement schedules as of and for the three months ended
December 31, 1999 listed in the Index at Item 14. These financial statements
and financial statement schedules are the responsibility of the Partnership's
management. Our responsibility is to express an opinion on these financial
statements and financial statement schedules based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of FrontierVision Holdings, L.P.
and subsidiaries at December 31, 1999 and the results of their operations and
their cash flows for the three months ended December 31, 1999 in conformity
with generally accepted accounting principles. Also, in our opinion, such
financial statement schedules, when considered in relation to the basic
consolidated financial statements taken as a whole, present fairly in all
material respects the information set forth therein.
Deloitte & Touche LLP
Pittsburgh, Pennsylvania
March 29, 2000
31
<PAGE>
FRONTIERVISION HOLDINGS, L.P. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
<TABLE>
<CAPTION>
Old Holdings New Holdings
December 31, 1998 December 31, 1999
----------------- -----------------
<S> <C> <C>
ASSETS:
Cable systems, at cost, net of accumulated
depreciation and amortization:
Property, plant and equipment........... $ 342,754 $ 407,554
Intangible assets....................... 820,524 1,764,221
---------- ----------
Total................................. 1,163,278 2,171,775
Cash and cash equivalents................. 5,091 7,412
Subscriber receivables--net............... 13,602 13,800
Prepaid expenses and other assets--net.... 28,450 28,118
---------- ----------
Total assets.......................... $1,210,421 $2,221,105
========== ==========
LIABILITIES AND PARTNERS' EQUITY:
Subsidiary debt........................... $ 870,125 $ 874,522
Parent debt............................... 249,532 284,501
Other debt................................ 1,485 10,173
Accounts payable.......................... 18,233 34,871
Subscriber advance payments and deposits.. 3,312 8,404
Accrued interest and other liabilities.... 26,716 23,790
Deferred income taxes..................... 11,856 10,045
---------- ----------
Total liabilities..................... 1,181,259 1,246,306
Commitments and contingencies (Note 9)
Partners' equity:
FrontierVision Partners, L.P............ 29,133 973,824
FrontierVision Holdings, LLC............ 29 975
---------- ----------
Total partners' equity................ 29,162 974,799
---------- ----------
Total liabilities and partners'
equity............................... $1,210,421 $2,221,105
========== ==========
</TABLE>
See notes to consolidated financial statements.
32
<PAGE>
FRONTIERVISION HOLDINGS, L.P. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands)
<TABLE>
<CAPTION>
Old Holdings New Holdings
--------------------------------- ------------
Nine Months Three Months
Year Ended Ended Ended
December 31, September 30, December 31,
------------------ ------------- ------------
1997 1998 1999 1999
-------- -------- ------------- ------------
<S> <C> <C> <C> <C>
Revenues....................... $145,126 $245,134 $221,032 $ 75,375
Operating expenses:
Direct operating and
programming................. 51,623 89,424 86,813 24,461
Selling, general and
administrative.............. 27,109 41,359 43,349 12,920
Depreciation and
amortization................ 67,327 117,120 108,987 24,234
Transaction costs............ -- -- 17,077 269
Management fees to managing
affiliate................... -- -- -- 1,879
-------- -------- -------- --------
Total...................... 146,059 247,903 256,226 63,763
-------- -------- -------- --------
Operating (loss) income........ (933) (2,769) (35,194) 11,612
Other (expense) income:
Interest expense--net........ (46,180) (85,910) (75,551) (25,399)
Other........................ (57) (526) 8,961 --
-------- -------- -------- --------
Total...................... (46,237) (86,436) (66,590) (25,399)
Loss before income taxes and
extraordinary loss............ (47,170) (89,205) (101,784) (13,787)
Income tax benefit (expense)... -- 2,927 2,082 (271)
-------- -------- -------- --------
Loss before extraordinary
loss.......................... (47,170) (86,278) (99,702) (14,058)
Extraordinary loss on early
retirement of debt............ (5,046) -- -- --
-------- -------- -------- --------
Net loss....................... $(52,216) $(86,278) $(99,702) $(14,058)
======== ======== ======== ========
</TABLE>
See notes to consolidated financial statements.
33
<PAGE>
FRONTIERVISION HOLDINGS, L.P. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF PARTNERS' EQUITY (DEFICIENCY)
(Dollars in thousands)
<TABLE>
<CAPTION>
FrontierVision FrontierVision
Partners, L.P. Holdings, LLC
(General Partner) (Limited Partner) Total
----------------- ----------------- --------
<S> <C> <C> <C>
Old Holdings
Balance, December 31, 1996....... $129,874 $ 129 $130,003
Capital contributions............ 37,615 38 37,653
Net loss......................... (52,164) (52) (52,216)
-------- ------ --------
Balance, December 31, 1997....... $115,325 $ 115 $115,440
Net loss......................... (86,192) (86) (86,278)
-------- ------ --------
Balance, December 31, 1998....... $ 29,133 $ 29 $ 29,162
Capital contributions............ 11,988 12 12,000
Net loss......................... (99,602) (100) (99,702)
-------- ------ --------
Balance, September 30, 1999...... $(58,481) $ (59) $(58,540)
- -------------------------------------------------------------------------------
New Holdings
Excess of purchase price of
acquired assets and liabilities
over predecessor owners' net
book value...................... $998,126 $1,000 $999,126
-------- ------ --------
Balance, October 1, 1999......... 939,645 941 940,586
Capital Contribution............. 48,223 48 48,271
Net loss......................... (14,044) (14) (14,058)
-------- ------ --------
Balance, December 31, 1999....... $973,824 $ 975 $974,799
======== ====== ========
</TABLE>
See notes to consolidated financial statements.
34
<PAGE>
FRONTIERVISION HOLDINGS, L.P. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
<TABLE>
<CAPTION>
New
Old Holdings Holdings
--------------------------------- ------------
Year Ended Nine Months Three Months
December 31, Ended Ended
------------------ September 30, December 31,
1997 1998 1999 1999
-------- -------- ------------- ------------
<S> <C> <C> <C> <C>
Cash flows from operating
activities:
Net loss...................... $(52,216) $(86,278) $(99,702) $(14,058)
Adjustments to reconcile net
loss to net cash provided by
(used for) operating
activities:
Depreciation and
amortization............... 67,327 117,120 108,987 24,234
Income tax (benefit)
expense.................... -- (2,927) (2,082) 271
Extraordinary loss on early
retirement of debt......... 5,046 -- -- --
Gain on disposal of assets.. -- (2,362) (9,193) --
Non cash interest expense... 5,768 19,485 19,388 6,318
Changes in operating assets
and liabilities, net of
effects of acquisitions:
Subscriber receivables...... (582) (3,480) (407) (429)
Prepaid expenses and other
assets..................... (1,549) (1,092) (721) (23,476)
Accounts payable and accrued
interest and other
liabilities................ 1,926 20,181 41,721 (13,876)
Subscriber advance payments
and deposits............... (1,523) 1,086 (447) 543
-------- -------- -------- --------
Net cash provided by (used for)
operating activities........... 24,197 61,733 57,544 (20,473)
-------- -------- -------- --------
Cash flows used for investing
activities:
Expenditures for property,
plant and equipment.......... (32,738) (65,570) (75,120) (13,904)
Acquisitions.................. (392,631) (307,595) (12,436) --
Proceeds from disposal of
assets....................... -- -- 6,698 --
Other......................... (406) (12) -- --
-------- -------- -------- --------
Net cash flows used for
investing activities........... (425,775) (373,177) (80,858) (13,904)
-------- -------- -------- --------
Cash flows from financing
activities:
Proceeds from debt............ 523,000 316,485 13,229 --
Repayments of debt............ (289,915) (76,875) (6,345) (6,577)
Issuance of Senior Discount
Notes........................ 150,000 75,000 -- --
Costs associated with debt
financings................... (18,071) (2,803) (566) --
Partner capital
contributions................ 37,653 -- 12,000 48,271
-------- -------- -------- --------
Net cash provided by financing
activities..................... 402,667 311,807 18,318 41,694
-------- -------- -------- --------
Increase (decrease) in cash and
cash equivalents............... 1,089 363 (4,996) 7,317
Cash and cash equivalents,
beginning of period............ 3,639 4,728 5,091 95
-------- -------- -------- --------
Cash and cash equivalents, end
of period...................... $ 4,728 $ 5,091 $ 95 $ 7,412
======== ======== ======== ========
Supplemental disclosure of cash
flow activity--
Cash payments for interest.... $ 42,226 $ 62,789 $ 50,619 $ 35,017
======== ======== ======== ========
</TABLE>
See notes to consolidated financial statements.
35
<PAGE>
FRONTIERVISION HOLDINGS, L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands)
1. The Partnership and Basis of Presentation
FrontierVision Holdings, L.P. ("Holdings"), wholly-owned by FrontierVision
Partners, L.P., a Delaware limited partnership ("FVP"), is a Delaware limited
partnership formed on September 3, 1997 for the purpose of acting as co-issuer
with its wholly-owned subsidiary, FrontierVision Holdings Capital Corporation
("Holdings Capital"), of $237,650 aggregate principal amount at maturity of 11
7/8% Senior Discount Notes due 2007 (the "Discount Notes"). FVP contributed to
Holdings, both directly and indirectly, all of the outstanding partnership
interests of FrontierVision Operating Partners, L.P. ("FVOP") prior to the
issuance of the Discount Notes on September 19, 1997 (the "Formation
Transaction") and, as a result FVOP and its wholly-owned subsidiary,
FrontierVision Capital Corporation ("Capital"), are wholly-owned, consolidated
subsidiaries of Holdings. The Formation Transaction was accounted for at
predecessor cost. As used herein, the "Company" collectively refers to
Holdings, Holdings Capital, FrontierVision Operating Partners, Inc. ("FVOP
Inc."), FVOP, Capital and FrontierVision Holdings Capital II Corporation
("Holdings Capital II").
On October 1, 1999, Adelphia Communications Corporation ("Adelphia")
purchased all outstanding FVP partnership interests in exchange for
approximately $543,000 in cash (subject to post-closing adjustments), 7.0
million shares of Adelphia Class A common stock and the assumption of certain
liabilities. Subsequent to the Definitive Sale Agreement that was entered into
February 22, 1999, Adelphia assumed the liability for payment to the Company's
programming vendors. The Company continued to incur programming costs at their
existing contractual rates. This liability of approximately $28,200 was
settled at the closing of the sale of FVP. At closing, Adelphia advanced an
additional $15,000 to the Company to cover the majority of bonus, severance
and deferred compensation payments of approximately $17,100, which are
included in transaction costs in the accompanying statement of operations for
the nine months ended September 30, 1999.
The Company owns and operates cable television systems in three primary
operating clusters--New England, Ohio and Kentucky--with a fourth, smaller
group of cable television systems in the Southeast.
The consolidated financial statements include the accounts of Holdings and
its majority owned subsidiaries. All significant intercompany accounts and
transactions have been eliminated in consolidation.
On December 2, 1998, Holdings, along with Holdings Capital II, co-issued
$91,298 aggregate principal amount at maturity of Discount Notes, Series B.
Net proceeds from the issuance were contributed to FVOP as a capital
contribution.
On June 1, 1999, Adelphia loaned $12,000 to FVP to be used by FVOP to fund
an asset exchange with Intermedia Partners, L.P. IV. This asset exchange was
consummated on June 1, 1999. FVP contributed the $12,000 to Holdings as a
capital contribution. Holdings in turn contributed this amount to FVOP as a
capital contribution.
Generally, Holdings' Partnership Agreement provides that profits, losses and
distributions are allocated to the general partner and the limited partner pro
rata based on capital contributions.
Consolidated financial statements for periods prior to October 1,1999 are
referred to herein as "Old Holdings", whereas; periods subsequent to October
1, 1999 are referred to herein as "New Holdings".
The acquisition of FVP by Adelphia has been accounted for using the purchase
method of accounting. Accordingly, the preliminary allocation of Adelphia's
purchase price to acquire FVP has been reflected in New Holdings' consolidated
financial statements as of October 1, 1999. A final allocation of Adelphia's
purchase price to acquire FVP is pending the completion of third-party
valuations.
36
<PAGE>
FRONTIERVISION HOLDINGS, L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Dollars in thousands)
The approximate $2,099,997 aggregate purchase price was comprised of the
following:
<TABLE>
<S> <C>
Issuance of Adelphia Class A common stock........................... $ 406,686
Assumption of debt and working capital.............................. 1,150,000
Cash (subject to post-closing adjustments).......................... 543,311
----------
$2,099,997
==========
</TABLE>
The value assigned to the 7.0 million shares of Adelphia Class A common
stock was based on the average closing price of Adelphia Class A common stock
a few days before and after the acquisition was agreed to and announced on
February 22, 1999.
The following table reflects the opening condensed consolidated balance
sheet of New Holdings which includes the effects of the preliminary purchase
accounting adjustments resulting from the allocation of Adelphia's purchase
price to acquire FVP.
<TABLE>
<CAPTION>
New Holdings
October 1, 1999
---------------
<S> <C>
ASSETS:
Cable systems:
Property, plant and equipment................................. $ 403,448
Intangible assets............................................. 1,759,777
----------
Total....................................................... 2,163,225
Cash and cash equivalents....................................... 95
Subscriber receivables--net..................................... 13,371
Prepaid expenses and other assets--net.......................... 23,522
----------
Total assets................................................ $2,200,213
==========
LIABILITIES AND PARTNERS' EQUITY:
Subsidiary debt................................................. $ 880,500
Parent debt..................................................... 277,961
Other debt...................................................... 10,994
Accounts payable................................................ 40,798
Subscriber advance payments and deposits........................ 7,861
Accrued interest and other liabilities.......................... 31,739
Deferred income taxes........................................... 9,774
----------
Total liabilities........................................... 1,259,627
Partners' equity................................................ 940,586
----------
Total liabilities and partners' equity...................... $2,200,213
==========
</TABLE>
As a result of the application of purchase accounting, New Holdings has
recorded its assets and liabilities at their preliminary fair values on
October 1, 1999. As of December 31, 1999, the allocation of Adelphia's
purchase price to acquire Holdings had not been finalized. Accordingly, the
Company may make additional refinements to the preliminary allocation of
Adelphia's purchase prices to acquire FVP in future periods based upon the
results of the completion of third-party valuations. Certain of the more
significant effects of purchase accounting are described below.
37
<PAGE>
FRONTIERVISION HOLDINGS, L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Dollars in thousands)
The $403,448 assigned to New Holdings' property, plant and equipment will be
depreciated over useful lives ranging primarily from 3 to 20 years. The
$1,759,777 assigned to New Holdings' intangible assets, which are primarily
comprised of franchise costs and will be amortized over useful lives of
primarily 40 years.
2. Summary of Significant Accounting Policies
Subscriber Revenues
Subscriber revenues are recognized in the month in which the service is
provided.
Subscriber Receivables
An allowance for doubtful accounts of $666 and $851 is recorded as a
reduction of subscriber receivables at December 31, 1998 and 1999,
respectively.
Programming Expense
Subsequent to the acquisition, Adelphia allocates charges from programmers
to affiliates (including New Holdings) based on the number of subscribers to
each programming service.
Property, Plant and Equipment
Property, plant and equipment are comprised of the following:
<TABLE>
<CAPTION>
Old Holdings New Holdings
------------ ------------
December 31, December 31,
1998 1999
------------ ------------
<S> <C> <C>
Operating plant and equipment......................... $374,697 $353,219
Real estate and improvements.......................... 21,373 25,845
Support equipment..................................... 25,320 14,477
Construction in progress.............................. 14,141 23,811
-------- --------
435,531 417,352
Accumulated depreciation.............................. (92,777) (9,798)
-------- --------
$342,754 $407,554
======== ========
</TABLE>
Depreciation for Old Holdings was computed on a straight-line basis using an
average estimated useful life of 8 years for operating plant and equipment,
support equipment and real estate and improvements. New Holdings' depreciation
is computed on a straight-line basis using estimated useful lives of 5 to 12
years for operating plant and equipment and 3 to 20 years for support
equipment and real estate and improvements. Depreciation expense amounted to
$32,176, $44,346, $49,642 and $9,798 for the years ended December 31, 1997 and
1998, the nine months ended September 30, 1999 and the three months ended
December 31, 1999. Additions to property, plant and equipment are recorded at
cost, which includes amounts for material, applicable labor and interest.
38
<PAGE>
FRONTIERVISION HOLDINGS, L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Dollars in thousands)
Intangible Assets
Intangible assets are comprised of the following:
<TABLE>
<CAPTION>
Old Holdings New Holdings
December 31, December 31,
------------ ------------
1998 1999
------------ ------------
<S> <C> <C>
Purchased franchises.................................. $717,614 $1,330,869
Purchased subscriber lists............................ 146,411 101,971
Covenants not to compete.............................. 16,856 6,232
Goodwill.............................................. 53,937 338,468
-------- ----------
934,818 1,777,540
Accumulated amortization.............................. (114,294) (13,319)
-------- ----------
$820,524 $1,764,221
======== ==========
</TABLE>
A portion of the aggregate purchase price of cable television systems
acquired has been allocated to purchased franchises, purchased subscriber
lists, covenants not to compete and goodwill. Purchased franchises and
goodwill are amortized on the straight-line method over periods of up to 15
years for Old Holdings and 40 years for New Holdings. Purchased subscriber
lists are amortized on the straight-line method over the average periods that
the listed subscribers are expected to receive service from the date of
acquisition, which are 7 years for Old Holdings and 10 years for New Holdings.
Covenants not to compete are amortized on the straight-line method over 5
years for Old Holdings and New Holdings.
Other Assets
The unamortized amount of deferred debt financing costs included in prepaid
expenses and other assets was $24,080 and $21,370 at December 31, 1998 and
1999, respectively. Such costs are amortized over the term of the related
debt.
Asset Impairments
Holdings periodically reviews the carrying value of its long-lived assets
for impairment whenever events or changes in circumstances indicate that the
carrying value of assets may not be recoverable. Measurement of any impairment
would include a comparison of estimated future operating cash flows
anticipated to be generated during the remaining life of the assets with their
net carrying value. An impairment loss would be recognized as the amount by
which the carrying value of the assets exceeds their fair value.
Noncash Financing and Investing Activities
Capital leases entered into during the years ended December 31, 1997 and
1998, the nine months ended September 30, 1999 and the three months ended
December 31, 1999 totaled $0, $1,545, $9,527 and $0, respectively.
Cash and Cash Equivalents
The Company considers all highly liquid investments with original maturities
of three months or less to be cash equivalents.
39
<PAGE>
FRONTIERVISION HOLDINGS, L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Dollars in thousands)
Derivative Financial Instruments
Net settlement amounts under interest rate swap and collar agreements are
recorded as adjustments to interest expense during the period incurred (see
Note 4).
Franchise Expense
The typical term of the Company's franchise agreements upon renewal is 10
years. Franchise fees range from 3% to 5% of subscriber revenue and are
expensed currently.
Use of Estimates in the Preparation of Financial Statements
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 and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Income Taxes
The Company and most of its direct and indirect subsidiaries are limited
partnerships or limited liability companies and pay no income taxes as
entities. All of the income, gains, losses, deductions and credits of the
Company are passed through to its partners. Nominal taxes are assessed by
certain state and local jurisdictions. The basis in the Company's assets and
liabilities differs for financial and tax reporting purposes.
Certain subsidiaries are corporations and are subject to federal and state
income taxes, which have not been significant. Deferred taxes relate
principally to the difference between book and tax basis of the cable
television assets, partially offset by the tax effect of related net operating
loss carryforwards.
Recent Accounting Pronouncements
Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting
for Derivative Instruments and Hedging Activities," establishes accounting and
reporting standards for derivative instruments and for hedging activities. It
requires that an entity recognize all derivatives as either assets or
liabilities in the statement of financial position and measure those
instruments at fair value. Management of the Company has not completed its
evaluation of the impact of SFAS No. 133 on the Company's consolidated
financial statements. In July 1999, SFAS No. 137 was issued to delay the
effective date of SFAS No. 133 fiscal quarters of fiscal years beginning after
June 15, 2000.
At its January 2000 meeting, the Emerging Issues Task Force ("EITF") reached
consensus with respect to certain issued related to EITF 98-3, "Determining
Whether a Transaction is an Exchange of Similar Productive Assets or a
Business Combination." As a result of this consensus, the Company will be
required to treat cable system swaps as a purchase of a business and a
disposition of a business at fair value. Management of the Company will
monitor the impact of EITF 98-3 as it relates to future transactions of the
Company.
Reclassification
Certain 1997 and 1998 amounts have been reclassified to conform with the
1999 presentation.
40
<PAGE>
FRONTIERVISION HOLDINGS, L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Dollars in thousands)
3. Acquisitions and Dispositions
Acquisitions
The Company completed several acquisitions in 1997 and 1998. All of the
acquisitions have been accounted for using the purchase method of accounting,
and, accordingly, the purchase price has been allocated to the assets acquired
and liabilities assumed based upon their fair values at the respective dates
of acquisition. Amounts allocated to property and equipment and to intangible
assets are depreciated and amortized, prospectively from the date of
acquisition based upon remaining useful lives and amortization periods. The
financial information does not include the effect of certain acquisitions and
dispositions of cable systems because these transactions were not material on
an individual or aggregate basis.
The combined purchase price of certain acquisitions has been allocated to
the acquired assets and liabilities as follows:
<TABLE>
<CAPTION>
Old Holdings
-------------------------
Acquisitions Acquisitions
through through
December 31, December 31,
1997(a) 1998(a)
------------ ------------
<S> <C> <C>
Property, plant and equipment......................... $ 48,805 $ 79,526
Intangible assets..................................... 344,490 244,492
-------- --------
393,295 324,018
-------- --------
Net working capital (deficit)......................... (164) 410
Deferred income taxes................................. -- (14,783)
Less--Earnest money deposits applied.................. (500) (2,050)
-------- --------
Total cash paid for acquisitions.................... $392,631 $307,595
======== ========
</TABLE>
- --------
(a) The combined purchase price includes certain purchase price adjustments
for acquisitions consummated prior to the respective periods.
The Company has reported the operating results of its acquired cable systems
from the dates of their respective acquisition. Unaudited pro forma summarized
operating results of the Company, assuming the Triax I, Cablevision, TCI-
VT/NH, Cox-Central Ohio, NECMA, TCI-Bryan and State Cable acquisitions had
been consummated on January 1, 1997, are as follows:
<TABLE>
<CAPTION>
Old Holdings
--------------------
Year Ended
December 31,
--------------------
1997 1998
--------- ---------
<S> <C> <C>
Revenue.................................................. $ 250,659 $ 276,976
Operating expenses....................................... (135,044) (151,028)
Depreciation and amortization............................ (113,045) (129,701)
--------- ---------
Operating income (loss).................................. 2,570 (3,753)
Interest and other expenses.............................. (100,345) (107,098)
--------- ---------
Net loss................................................. $ (97,775) $(110,851)
========= =========
</TABLE>
41
<PAGE>
FRONTIERVISION HOLDINGS, L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Dollars in thousands)
The pro forma financial information presented above has been prepared for
comparative purposes only and does not purport to be indicative of the
operating results which actually would have resulted had the above
acquisitions been consummated on the dates indicated. Furthermore, the above
pro forma financial information does not include the effect of certain
acquisitions and dispositions of cable systems because these transactions were
not material on an individual or aggregate basis.
Dispositions
On January 7, 1999, the Company sold certain cable television system assets
serving approximately 4,400 basic subscribers to Helicon Partners I, L.P., for
an aggregate sales price of approximately $5,220.
System Swaps
On June 1, 1999, the Company completed the exchange of five systems located
in northern Kentucky for five Intermedia Partners, LP IV systems located in
communities near Lexington, Kentucky which are contiguous to other of the
Company's Kentucky systems. The Company paid approximately $13,300 as
consideration for approximately 5,300 subscribers the Company gained in the
transaction.
4. Debt
The aggregate fair value assigned in purchase accounting to New Holdings'
debt was greater than the aggregate recorded value at the date of the
acquisition by $22,042. The fair value of Holdings' debt is estimated based on
the quoted market prices for the same or similar issue or on the current rates
offered to Holdings' for debt of the same remaining maturities. Such excess
will be amortized over the respective remaining 6 to 8 year lives of the
underlying debt obligations.
The Company's debt was comprised of the following:
<TABLE>
<CAPTION>
Old Holdings New Holdings
------------ ------------
December 31, December 31,
1998 1999
------------ ------------
<S> <C> <C>
Subsidiary Debt:
Bank Credit Facility:
Revolving Credit Facility, interest based on
various floating rate options (7.25% and 8.33%
average at December 31, 1998 and 1999,
respectively), payable monthly.................. $172,000 $175,000
Term loans, interest based on various floating
LIBOR options (7.46% and 8.52% weighted average
at December 31, 1998 and 1999, respectively),
payable monthly................................. 498,125 486,981
11% Senior Subordinated Notes due 2006............. 200,000 212,541
-------- --------
Total.......................................... $870,125 $874,522
======== ========
Parent Debt:
11 7/8% Senior Discount Notes due 2007............. $249,532 $284,501
======== ========
Other Debt:
Capital leases..................................... $ 1,485 $ 10,173
======== ========
</TABLE>
42
<PAGE>
FRONTIERVISION HOLDINGS, L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Dollars in thousands)
Bank Credit Facility
On December 19, 1997, FVOP entered into a Second Amended and Restated Credit
Agreement (the "Amended Credit Facility"). The amount available under the
Amended Credit Facility includes two term loans of $250,000 each ("Facility A
Term Loan" and "Facility B Term Loan") and a $300,000 revolving credit
facility ("Revolving Credit Facility"). The Facility A Term Loan and the
Revolving Credit Facility both mature on September 30, 2005. The entire
outstanding principal amount of the Revolving Credit Facility is due on
September 30, 2005, with escalating principal payments due quarterly beginning
December 31, 1998 under the Facility A Term Loan. The Facility B Term Loan
matures March 31, 2006 with 95% of the principal being repaid in the last two
quarters of the term of the facility.
Under the terms of the Amended Credit Facility, with certain exceptions,
FVOP has a mandatory prepayment obligation upon a change of control of FVOP
and the sale of any of its operating systems. This obligation was waived in
connection with the acquisition of FVP by Adelphia with the consent of the
majority of the lenders. Further, beginning with the year ending December 31,
2001, FVOP is required to make prepayments equal to 50% of its excess cash
flow, as defined in the Amended Credit Facility. FVOP also pays commitment
fees ranging from 1/2% - 3/8% per annum on the average unborrowed portion of
the total amount available under the Amended Credit Facility.
The Amended Credit Facility also requires FVOP to maintain compliance with
various financial covenants including, but not limited to, covenants relating
to total indebtedness, debt ratios, interest coverage ratio and fixed charges
ratio. In addition, the Amended Credit Facility has restrictions on certain
partnership distributions by FVOP.
All partnership interests in FVOP and all assets of FVOP and its
subsidiaries are pledged as collateral for the Amended Credit Facility.
Subsidiary Debt
On October 7, 1996, FVOP issued $200,000 aggregate principal amount of 11%
Senior Subordinated Notes (the "Notes"). The Notes are unsecured subordinated
obligations of FVOP (co-issued by Capital) that mature on October 15, 2006.
Interest accrues at 11% per annum beginning from the date of issuance, and is
payable each April 15 and October 15, commencing April 15, 1997.
In connection with the anticipated issuance of the Notes, FVOP entered into
deferred interest rate setting agreements to reduce FVOP's interest rate
exposure in anticipation of issuing the Notes. The cost of such agreements
were recognized as a component of interest expense by Old Holdings.
The Subordinated Notes Indenture (the "Indenture") has certain restrictions
on incurrence of indebtedness, distributions, mergers, asset sales and changes
in control of FVOP. Holders of the Notes have the right to require FVOP to
repurchase their notes at 101% of principal upon a change of control (as
defined in the Indenture). The acquisition of FVP by Adelphia constituted a
change of control in accordance with the Indenture and, upon the closing of
the transaction, FVOP was required to offer to repurchase all of the Notes.
FVOP's offer to repurchase the Notes expired without any holders exercising
their option.
J.P. Morgan Investment Corporation and First Union Capital Partners, Inc.
("Former Equity Holders") were affiliates of the Company, owning in the
aggregate, a 37.6% limited partnership interest in FVP prior to the Adelphia
purchase. Affiliates of the Former Equity Holders received underwriting fees
of approximately $3.6 million in connection with the issuance of the Notes.
43
<PAGE>
FRONTIERVISION HOLDINGS, L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Dollars in thousands)
Parent Debt
On September 19, 1997, Holdings issued, pursuant to a private offering, 11
7/8% Senior Discount Notes due 2007 (the "Discount Notes"). The Discount Notes
were sold at approximately 63.1% of the stated principal amount at maturity
and provided net proceeds of $144,750, after underwriting fees of
approximately $5,250.
On December 2, 1998, Holdings issued, pursuant to a private offering, the
Discount Notes, Series B. The Discount Notes were sold at approximately
82.149% of the stated principal amount at maturity and provided net proceeds
of $72,750, after underwriting fees of approximately $2,250.
The Discount Notes are unsecured obligations of Holdings, Holdings Capital
and Holdings Capital II, respectively (collectively, the "Issuers"), ranking
pari passu in right of payment to all existing and future unsecured
indebtedness of the Issuers and will mature on September 15, 2007. The
discount on the Discount Notes is being accreted using the interest method
until September 15, 2001, the date at which cash interest begins to accrue.
Cash interest will accrue at a rate of 11 7/8% per annum and will be payable
each March 15 and September 15, commencing March 15, 2002.
The Discount Notes are redeemable at the option of the Issuers, in whole or
in part, at any time on or after September 15, 2001, at redemption prices set
forth in the Indenture for the Discount Notes (the "Discount Notes
Indenture"), plus any unpaid interest, if any, at the date of the redemption.
The Issuers may redeem, prior to September 15, 2001, up to 35% of the
principal amount at maturity of the Discount Notes with the net cash proceeds
received from one or more public equity offerings or strategic equity
investments at a redemption prices set forth in the Discount Notes Indenture,
plus any unpaid interest, if any, at the date of the redemption.
The Discount Notes Indenture has certain restrictions on incurrence of
indebtedness, distributions, mergers, asset sales and changes in control of
Holdings. Holders of the Discount Notes have the right to require Holdings to
repurchase their notes at 101% of principal upon a change of control (as
defined in the Indenture). The acquisition of FVP by Adelphia constituted a
change of control in accordance with the Indenture and, upon the closing of
the transaction, Holdings was required to offer to repurchase all of the
Discount Notes. Tenders were paid by Holdings in the amount of $290 under this
offer to re-purchase.
Affiliates of the Former Equity Holders received compensation in the
aggregate of approximately $3.1 million in connection with the issuance of the
Discount Notes.
Other Debt
Other debt consists of capital leases which were incurred in connection with
the acquisition of, and are collateralized by, certain equipment. The interest
rate on such debt is primarily based on the Federal Funds rate or U.S.
Treasury rates plus the applicable margin and is adjusted monthly.
Interest Rate Swaps and Collars
Holdings has entered into interest rate swap and collar agreements with
banks to reduce the impact of changes in interest rates on its bank debt.
Holdings enters into interest rate swap agreements to effectively convert a
portion of its variable-rate debt to fixed-rate debt, while interest rate
collar agreements reduce the risk of incurring higher interest costs due to
rising interest rates. Holdings is exposed to credit loss in the event of
nonperformance by the banks. Holdings does not expect any such nonperformance.
The following table summarizes the notional amounts outstanding and weighted
average interest rate data for all interest rate swaps and collars, which
expire at various dates through 2002.
44
<PAGE>
FRONTIERVISION HOLDINGS, L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Dollars in thousands)
<TABLE>
<CAPTION>
New Holdings
------------
December 31,
1999
------------
<S> <C>
Interest Rate Swaps:
Notional amount.................................................... $ 40,000
Average pay rate................................................... 7.70%
Average receive rate............................................... 6.28%
Interest Rate Collars:
Notional amount.................................................... $200,000
Average maximum cap rate........................................... 6.64%
Average cap and floor rate......................................... 6.13%
Average minimum floor rate......................................... 4.80%
</TABLE>
Maturities of Debt
The following table sets forth the mandatory reductions in principal under
all agreements for indebtedness at December 31 of each of the next five years
based on amounts outstanding at December 31, 1999:
<TABLE>
<S> <C>
Year ending December 31, 2000.......................................... $26,610
Year ending December 31, 2001.......................................... 36,610
Year ending December 31, 2002.......................................... 45,084
Year ending December 31, 2003.......................................... 56,334
Year ending December 31, 2004.......................................... 60,721
</TABLE>
Holdings intends to fund its debt maturities through borrowing under new
credit agreements and internally generated funds. Changing conditions in the
financial markets may have an impact on how Holdings will refinance its debt
in the future.
5. Guarantor Subsidiaries
The Indenture for the Discount Notes has been amended to add certain
subsidiaries as guarantors ("Guarantor Subsidiaries") of the Discount Notes.
The guaranty is full and unconditional. Separate financial statements of the
Guarantor Subsidiaries are not presented because management believes that they
are not material to investors.
45
<PAGE>
FRONTIERVISION HOLDINGS, L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Dollars in thousands)
Following is unaudited condensed consolidating financial information for the
Company:
<TABLE>
<CAPTION>
Balance Sheet as of December 31, 1999
-------------------------------------------------------------------------------------------------
Guarantor Non-Guarantor Consolidating Consolidated
Holdings FVOP Subsidiaries Subsidiaries Entries Holdings
-------------- -------------- --------------- -------------------------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Cash.................... $ -- $ 6,859 $ 445 $ 108 $ -- $ 7,412
Subscriber receivables.. -- 13,202 476 122 -- 13,800
Prepaid expenses and
other assets........... 1,191,691 69,582 (11,703) (339) (1,221,113) 28,118
Cable television
systems, at cost, net
of accumulated
depreciation and
amortization........... 67,609 1,846,466 50,276 6,760 200,664 2,171,775
-------------- -------------- ------------ ---------- --------------- --------------
Total assets.......... $ 1,259,300 $ 1,936,109 $ 39,494 $ 6,651 $ (1,020,449) $ 2,221,105
============== ============== ============ ========== =============== ==============
Accounts payable........ $ -- $ 32,104 $ 2,608 $ 159 $ -- $ 34,871
Subscriber advance
payments and deposits.. -- 8,523 (261) 142 -- 8,404
Accrued interest and
other liabilities...... -- 23,195 189 406 -- 23,790
Deferred income taxes... -- -- 10,045 -- -- 10,045
Debt.................... 284,501 884,695 -- -- -- 1,169,196
Total partners' equity.. 974,799 987,592 26,913 5,944 (1,020,449) 974,799
-------------- -------------- ------------ ---------- --------------- --------------
Total liabilities and
partners' equity...... $ 1,259,300 $ 1,936,109 $ 39,494 $ 6,651 $ (1,020,449) $ 2,221,105
============== ============== ============ ========== =============== ==============
<CAPTION>
Old Holdings Statement of Operations for the Nine Months Ended September 30, 1999
-------------------------------------------------------------------------------------------------
Guarantor Non-Guarantor Consolidating Consolidated
Holdings FVOP Subsidiaries Subsidiaries Entries Holdings
-------------- -------------- --------------- -------------------------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Revenues................ $ -- $ 211,331 $ 8,944 $ 757 $ -- $ 221,032
Operating expenses...... -- 123,961 5,547 654 -- 130,162
Transaction costs....... -- 16,565 450 62 -- 17,077
Depreciation and
amortization............ 743 103,822 4,239 183 -- 108,987
-------------- -------------- ------------ ---------- --------------- --------------
Operating income........ (743) (33,017) (1,292) (142) -- (35,194)
Interest expense, net... (19,390) (49,740) (6,416) (5) -- (75,551)
Equity in losses of
affiliate............... (79,569) (5,760) (5,614) (80) 91,023 --
Other income............ -- 8,948 13 -- -- 8,961
Income tax benefit...... -- -- 2,082 -- -- 2,082
-------------- -------------- ------------ ---------- --------------- --------------
Net loss................ $ (99,702) $ (79,569) $ (11,227) $ (227) $ 91,023 $ (99,702)
============== ============== ============ ========== =============== ==============
<CAPTION>
New Holdings Statement of Operations for the Three Months Ended December 31, 1999
-------------------------------------------------------------------------------------------------
Guarantor Non-Guarantor Consolidating Consolidated
Holdings FVOP Subsidiaries Subsidiaries Entries Holdings
-------------- -------------- --------------- -------------------------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Revenues................ $ -- $ 72,062 $ 3,080 $ 233 $ -- $ 75,375
Operating expenses...... 8 35,715 1,450 208 -- 37,381
Management fees......... -- 1,801 78 -- -- 1,879
Transaction costs....... -- 269 -- -- -- 269
Depreciation and
amortization............ 1,961 21,373 648 252 -- 24,234
-------------- -------------- ------------ ---------- --------------- --------------
Operating income........ (1,969) 12,904 904 (227) -- 11,612
Interest expense, net... (6,777) (18,622) -- -- -- (25,399)
Equity in losses of
affiliate............... (5,312) 406 633 (6) 4,279 --
Income tax expense...... -- -- (271) -- -- (271)
-------------- -------------- ------------ ---------- --------------- --------------
Net (loss) income....... $ (14,058) $ (5,312) $ 1,266 $ (233) $ 4,279 $ (14,058)
============== ============== ============ ========== =============== ==============
</TABLE>
46
<PAGE>
FRONTIERVISION HOLDINGS, L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Dollars in thousands)
At December 31, 1998, the assets of the guarantor and non-guarantor
subsidiaries represented 4.8% and 0.4%, respectively of consolidated assets.
For the year ended December 31, 1998, the revenue of the guarantor and non-
guarantor subsidiaries represented 3.4% and 0.1%, respectively of consolidated
revenue.
6. Disclosures about Fair Values of Financial Instruments
Included in Holdings' financial instrument portfolio are cash, notes payable
to banks, Notes, Discount Notes and interest rate swap and collar agreements.
The carrying values of the notes payable to banks approximate their fair
values at December 31, 1999. The fair value of the Notes and Discount Notes
exceeded their carrying cost in aggregate by approximately $45,498 and their
carrying cost exceeded their fair values by approximately $4,396 at December
31, 1998 and 1999, respectively. At December 31, 1999, Holdings would have
been required to pay approximately $152 in the aggregate to settle its
interest rate swap and collar agreements, representing the difference between
fair value and carrying cost of these agreements. The fair values of the debt
and interest rate swap and collar agreements were based upon quoted market
prices of similar instruments or on rates available to Holdings for
instruments of the same remaining maturities.
7. Employee Benefit Plans
Old Holdings participated in an FVP savings plan (401(k)) which provides
that eligible full-time employees may contribute from 1% to 15% of their pre-
tax compensation subject to certain limitations. Old Holdings matched
contributions not exceeding 3% of each participant's pre-tax compensation.
During the years ended December 31, 1997 and 1998 and the nine months ended
September 30, 1999, no significant matching contributions were made by Old
Holdings.
New Holdings participates in an Adelphia savings plan (401(k)) and an
Adelphia stock incentive plan. The 401(k) savings plan provides that eligible
full-time employees may contribute from 2% to 16% of their pre-tax
compensation subject to certain limitations. New Holdings matches
contributions not exceeding 1.5% of each participant's pre-tax compensation.
During the three months ended December 31, 1999, no significant matching
contributions were made by New Holdings. The stock incentive plan rewards full
time employees with compensation bonuses based on Adelphia Class A common
stock performance. During the three months ended December 31, 1999, no
significant costs associated with this plan were allocated to the Company.
8. Taxes on Income
Certain subsidiaries of Holdings are corporations that file separate federal
and state income tax returns. At December 31, 1999, these subsidiaries had net
operating loss carryforwards for federal income tax purposes of approximately
$506 expiring through 2019. The partnership investments of Holdings are tax
entities in which the filing of returns and related tax liabilities are the
responsibility of the individual owners.
Deferred income taxes reflect the net tax effects of: (a) temporary
differences between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for income tax purposes, and
(b) operating loss and tax credit carryforwards.
47
<PAGE>
FRONTIERVISION HOLDINGS, L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Dollars in thousands)
The tax effects of significant items comprising Holdings' net deferred tax
liability as of December 31, 1999 are as follows:
<TABLE>
<CAPTION>
December 31,
1999
------------
<S> <C>
Deferred tax liabilities:
Differences between book and tax basis of property, plant and
equipment and intangible assets................................ $10,171
Deferred tax assets:
Operating loss carryforwards.................................... 126
-------
Net deferred tax liability........................................ $10,045
=======
</TABLE>
The income tax benefit for the years ended December 31, 1999 is as follows:
<TABLE>
<CAPTION>
Three Months
Ended
December 31,
1999
------------
<S> <C>
Federal:
Current.......................................................... $ --
Deferred......................................................... (219)
State:
Current.......................................................... --
Deferred......................................................... (52)
-----
$(271)
=====
</TABLE>
Reconciliations between the statutory federal income tax rate and Holdings'
effective income tax rate as a percentage of loss before income taxes are as
follows:
<TABLE>
<CAPTION>
Three Months
Ended
December 31,
1999
------------
<S> <C>
Statutory federal income tax rate.................................. 35%
Operating losses passed through to partners........................ (36%)
State net of federal benefit....................................... (1%)
-----
Effective income tax rate.......................................... (2%)
=====
</TABLE>
9. Commitments and Contingencies
The Company has annual commitments under lease agreements for office space,
equipment, pole rental and land upon which certain of its towers and antennae
are constructed. Rent expense for the years ended December 31, 1997 and 1998,
the nine months ended September 30, 1999 and the three months ended December
31, 1999 was $4,065, $5,806, $5,162 and $1,543, respectively.
The cable television industry and Holdings are subject to extensive
regulation at the federal, state and local levels. Pursuant to the Cable
Television Consumer Protection and Competition Act of 1992 (the "1992 Cable
Act"), which significantly expanded the scope of regulation of certain
subscriber rates and a number of other
48
<PAGE>
FRONTIERVISION HOLDINGS, L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Dollars in thousands)
matters in the cable industry, the FCC has adopted rate regulations that
establish, on a system-by-system basis, maximum allowable rates for (i) basic
and cable programming services (other than programming offered on a per-
channel or per-program basis), based upon a benchmark methodology or, in the
alternative, a cost of service showing and (ii) associated equipment and
installation services based upon cost plus a reasonable profit. Under the FCC
rules, franchising authorities are authorized to regulate rates for basic
services and associated equipment and installation services, and the FCC will
regulate rates for regulated cable programming services in response to
complaints filed with the agency. The original rate regulations became
effective on September 1, 1993. Several amendments to the rate regulations
have subsequently been added.
The FCC has adopted regulations implementing virtually all of the
requirements of the 1992 Cable Act. The FCC is also likely to continue to
modify, clarify or refine the rate regulations. The Telecommunications Act of
1996 (the "1996 Act") deregulated the rates for cable programming services on
March 31, 1999. Holdings cannot predict the effect or outcome of the future
rulemaking proceedings, changes to the rate regulations or litigation.
10. Extraordinary Item
Old Holdings refinanced its Senior Credit Facility in December 1997.
Accordingly, the deferred financing costs related to the initial debt were
written off. The effect of this write-off was a $5,046 charge to expense and
was recorded as an extraordinary item. Additional costs related to the Amended
Credit Facility were recorded as deferred financing costs during 1997.
11. Transactions with Related Parties
Holdings has an agreement with a subsidiary of Adelphia (the "Managing
Affiliate") which provides for the payment of management fees by Holdings of
up to 5% of gross revenues. For the three month period ended December 31,
1999, payments in the amount of $1,879 were made to the Managing Affiliate.
49
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Shareholders of
FrontierVision Holdings Capital Corporation:
We have audited the accompanying consolidated balance sheet of
FrontierVision Holdings Capital Corporation as of December 31, 1998. This
financial statement is the responsibility of the Company's management. Our
responsibility is to express an opinion on this financial statement based on
our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the balance sheet. An audit also
includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall balance sheet referred
to above. We believe that our audit provides a reasonable basis for our
opinion.
In our opinion, the balance sheet presents fairly, in all material respects,
the financial position of FrontierVision Holdings Capital Corporation as of
December 31, 1998 in conformity with generally accepted accounting principles.
KPMG LLP
Denver, Colorado
November 10, 1999
50
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Shareholders of
FrontierVision Holdings Capital Corporation:
We have audited the accompanying consolidated balance sheet of
FrontierVision Holdings Capital Corporation as of December 31, 1999. This
financial statement is the responsibility of the Company's management. Our
responsibility is to express an opinion on this financial statement based on
our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the balance sheet. An audit also
includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall balance sheet referred
to above. We believe that our audit provides a reasonable basis for our
opinion.
In our opinion, the balance sheet presents fairly, in all material respects,
the financial position of FrontierVision Holdings Capital Corporation as of
December 31, 1999 in conformity with generally accepted accounting principles.
Deloitte & Touche LLP
Pittsburgh, Pennsylvania
March 29, 2000
51
<PAGE>
FRONTIERVISION HOLDINGS CAPITAL CORPORATION
BALANCE SHEETS
<TABLE>
<CAPTION>
Old Holdings New Holdings
------------ ------------
December 31, December 31,
1998 1999
------------ ------------
<S> <C> <C>
ASSETS:
Cash................................................. $100 $100
---- ----
Total assets....................................... $100 $100
==== ====
LIABILITIES AND OWNER'S EQUITY:
Owner's equity:
Common stock, par value $.01; 1,000 shares
authorized;
100 shares issued and outstanding................. $ 1 $ 1
Additional paid-in capital......................... 99 99
---- ----
Total owner's equity............................. 100 100
---- ----
Total liabilities and owner's equity............. $100 $100
==== ====
</TABLE>
See note to balance sheets.
52
<PAGE>
FRONTIERVISION HOLDINGS CAPITAL CORPORATION
NOTE TO BALANCE SHEETS
FrontierVision Holdings Capital Corporation, a Delaware corporation
("Holdings Capital"), is a wholly owned subsidiary of FrontierVision Holdings,
L.P. ("Holdings"), and was organized on August 22, 1997 for the sole purpose
of acting as co-issuer with Holdings of $237.7 million aggregate principal
amount at maturity of the 11 7/8% Senior Discount Notes. Holdings Capital had
no operations from September 18, 1997 through December 31, 1999.
53
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Shareholders of
FrontierVision Holdings Capital II Corporation:
We have audited the accompanying consolidated balance sheet of
FrontierVision Holdings Capital II Corporation as of December 31, 1998. This
financial statement is the responsibility of the Company's management. Our
responsibility is to express an opinion on this financial statement based on
our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the balance sheet. An audit also
includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall balance sheet referred
to above. We believe that our audit provides a reasonable basis for our
opinion.
In our opinion, the balance sheet presents fairly, in all material respects,
the financial position of FrontierVision Holdings Capital II Corporation as of
December 31, 1998 in conformity with generally accepted accounting principles.
KPMG LLP
Denver, Colorado
November 10, 1999
54
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Shareholders of
FrontierVision Holdings Capital II Corporation:
We have audited the accompanying consolidated balance sheet of
FrontierVision Holdings Capital II Corporation as of December 31, 1999. This
financial statement is the responsibility of the Company's management. Our
responsibility is to express an opinion on this financial statement based on
our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the balance sheet. An audit also
includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall balance sheet referred
to above. We believe that our audit provides a reasonable basis for our
opinion.
In our opinion, the balance sheet presents fairly, in all material respects,
the financial position of FrontierVision Holdings Capital II Corporation as of
December 31, 1999 in conformity with generally accepted accounting principles.
Deloitte & Touche LLP
Pittsburgh, Pennsylvania
March 29, 2000
55
<PAGE>
FRONTIERVISION HOLDINGS CAPITAL II CORPORATION
BALANCE SHEETS
<TABLE>
<CAPTION>
Old Holdings New Holdings
------------ ------------
December 31, December 31,
1998 1999
------------ ------------
<S> <C> <C>
ASSETS:
Cash................................................. $1,000 $1,000
------ ------
Total assets....................................... $1,000 $1,000
====== ======
LIABILITIES AND OWNER'S EQUITY:
Owner's equity:
Common stock, par value $.01; 1,000 shares
authorized; 1,000 shares issued and outstanding... $ 10 $ 10
Additional paid-in capital......................... 990 990
------ ------
Total owner's equity............................. 1,000 1,000
------ ------
Total liabilities and owner's equity............. $1,000 $1,000
====== ======
</TABLE>
See note to the balance sheets.
56
<PAGE>
FRONTIERVISION HOLDINGS CAPITAL II CORPORATION
NOTE TO BALANCE SHEETS
FrontierVision Holdings Capital II Corporation, a Delaware corporation
("Holdings Capital II"), is a wholly owned subsidiary of FrontierVision
Holdings, L.P. ("Holdings"), and was organized on December 2, 1998 for the
sole purpose of acting as co-issuer with Holdings of $91.3 million aggregate
principal amount at maturity of the 11 7/8% Senior Discount Notes, Series B.
Holdings Capital II had no operations from inception through December 31,
1999.
57
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Effective February 10, 2000, Holdings dismissed its independent public
accountants, KPMG LLP and subsequently engaged Deloitte & Touche LLP as
Holdings' principal independent public accountants. Holdings had no
disagreements with KPMG through the date of dismissal, nor did any of KPMG's
reports on the financial statements of Holdings contain an adverse opinion or
disclaimer of opinion, nor was any report modified as to uncertainty, audit
scope, or accounting principle. The change in accountants is fully disclosed
in Holdings' Form 8-K filed with the SEC on February 11, 2000.
58
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Executive Officers of the Registrant
The directors and executive officers of ACC Operations, Inc., the Adelphia
subsidiary which indirectly wholly owns Holdings and FVP, the managing general
partner of Holdings, are:
<TABLE>
<CAPTION>
Name Age Position
- ---- --- --------
<S> <C> <C>
John J. Rigas........... 75 Chairman and Director of ACC Operations, Inc.
Michael J. Rigas........ 46 Executive Vice President and Director of ACC Operations, Inc.
Timothy J. Rigas........ 43 Executive Vice President, Treasurer and Director of ACC Operations, Inc.
James P. Rigas.......... 42 Executive Vice President and Director of ACC Operations, Inc.
</TABLE>
John J. Rigas is Chairman and Director of ACC Operations, Inc. and is the
founder, Chairman, Chief Executive Officer and President of Adelphia. Mr.
Rigas has owned and operated cable television systems since 1952. Among his
business and community service activities, Mr. Rigas is Chairman of the Board
of Directors of Citizens Bank Corp., Inc., Coudersport, Pennsylvania and a
member of the Board of Directors of the Charles Cole Memorial Hospital. He is
a director of the National Cable Television Association and a member of its
Pioneer Association and a past President of the Pennsylvania Cable Television
Association. He is also a member of the board of directors of C-SPAN and the
Cable Advertising Bureau, and is a Trustee of St. Bonaventure University. He
graduated from Rensselaer Polytechnic Institute with a B.S. in Management
Engineering in 1950.
John J. Rigas is the father of Michael J. Rigas, Timothy J. Rigas and James
P. Rigas, each of whom currently serves as a director and executive officer of
ACC Operations, Inc.
Michael J. Rigas is an Executive Vice President and Director of ACC
Operations, Inc., Executive Vice President, Operations of Adelphia and a Vice
President of Adelphia's other subsidiaries. He has been with Adelphia since
1981. From 1979 to 1981, he worked for Webster, Chamberlain & Bean, a
Washington, D.C. law firm. Mr. Rigas graduated from Harvard University (magna
cum laude) in 1976 and received his J.D. degree from Harvard Law School in
1979.
Timothy J. Rigas is an Executive Vice President, Treasurer, and Director of
ACC Operations, Inc., Executive Vice President, Chief Financial Officer and
Treasurer of Adelphia, and a Vice President of Adelphia's other subsidiaries.
He has been with Adelphia since 1979. Mr. Rigas graduated from the University
of Pennsylvania, Wharton School, with a B.S. degree in Economics (cum laude)
in 1978.
James P. Rigas is an Executive Vice President and Director of ACC
Operations, Inc., Executive Vice President, Strategic Planning of Adelphia and
a Vice President of Adelphia's other subsidiaries. He has been with Adelphia
since 1986. Mr. Rigas graduated from Harvard University (magna cum laude) in
1980 and received a J.D. degree and an M.A. degree in Economics from Stanford
University in 1984. From June 1984 to February 1986, he was a consultant with
Bain & Co., a management consulting firm.
ITEM 11. EXECUTIVE COMPENSATION
Neither the Company nor ACC Operations, Inc. has any employment contracts in
effect with the executive officers of Holdings or those named in Item 10 of
this Form 10-K, including any compensatory plans or arrangements resulting
from the resignation, retirement or other termination of such executive
officers. Each of the executive officers named in Item 10 is an executive
officer of Adelphia. As executive officers of Adelphia, such individuals are
parties to employment contracts with Adelphia and are compensated by Adelphia
in accordance with the decisions and policies of the Board of Directors of
Adelphia and the Compensation
59
<PAGE>
Committee of the Board of Directors of Adelphia. Pursuant to the Partnership
Agreement, the Company pays Adelphia a management fee representing an
allocation of the corporate overhead of Adelphia, which includes a portion for
executive salaries.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The sole general partner (owning 99.9% of the partnership interests therein)
of FrontierVision Operating Partners, L.P. is Holdings. Holdings' sole general
partner (owning 99.9% of the partnership interests therein) is FVP. Holdings'
sole limited partner (owning 0.1% of the partnership interests therein) is
FrontierVision Holdings, LLC, which is a wholly owned subsidiary of FVP. FVP's
sole general partner (owning 1% of the partnership interests therein) is
Adelphia GP Holdings, LLC. FVP's sole limited partner (owning 99% of the
partnership interests therein) is ACC Operations, Inc., which is wholly-owned
by Adelphia Communications Corporation. The executive officers of Adelphia
named in Item 10 of this Form 10-K and their affiliates hold various ownership
interests in Adelphia, as set forth on a Schedule 13D, as amended, filed by
them with respect to Adelphia under the Securities Exchange Act of 1934, as
amended, and as set forth in filings by Adelphia under the Securities Exchange
Act of 1934, as amended.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The sole general partner (owning 99.9% of the partnership interests therein)
of FrontierVision Operating Partners, L.P. is Holdings. Holdings' sole general
partner (owning 99.9% of the partnership interests therein) is FVP. Holdings'
sole limited partner (owning 0.1% of the partnership interests therein) is
FrontierVision Holdings, LLC, which is a wholly owned subsidiary of FVP.
Prior to October 1, 1999 Acquisition by Adelphia. FVP's sole general partner
(owning 1% of the partnership interests therein) was FVP GP. FVP's limited
partners (owning 99% of the partnership interests therein) consisted of J.P.
Morgan Investment Corporation, an affiliate of J.P. Morgan Securities Inc.,
First Union Capital Partners, Inc., and various institutional investors and
accredited investors. FVP GP's sole general partner (owning 1% of the
partnership interests therein) was FrontierVision Inc., which was owned by
James C. Vaughn and John S. Koo.
As of December 31, 1998, J.P. Morgan Investment Corporation and First Union
Capital Partners, Inc. had committed approximately $44.9 million and $30.0
million, respectively, to FVP, all of which has been contributed to FVP. As of
December 31, 1998, FrontierVision Inc. had committed and contributed
approximately $19,935 to FVP, representing contributions of approximately
$13,290 and $6,645 by James C. Vaughn and John S. Koo, respectively, who were
directors of FrontierVision Inc. Such capital commitments were contributed as
equity to FVOP in connection with the closing of acquisitions by FVOP, for
escrow deposits for acquisitions by FVOP under contract and for FVOP working
capital requirements.
J.P. Morgan Investment Corporation and First Union Capital Partners, Inc.
were "Special Class A Limited Partners" of FVP. Upon the termination of FVP
and in connection with distributions to its partners in respect of their
partnership interests, J.P. Morgan Investment Corporation, First Union Capital
Partners, Inc. and FVP GP were entitled to receive "carried interest"
distributions or were allocated a portion of 15% of any remaining capital to
be distributed by FVP after certain other distributions were made. J.P. Morgan
Securities Inc. acted as placement agent for the initial offering of limited
partnership interests of FVP (other than with respect to the investment made
by J.P. Morgan Investment Corporation) and the placement of debt securities of
FVP and in connection with those activities received customary fees and
reimbursement of expenses.
J.P. Morgan Securities Inc., The Chase Manhattan Bank, an affiliate of Chase
Securities Inc. and CIBC Inc., an affiliate of CIBC Wood Gundy Security
Corporation, were agents and lenders under the amended bank credit facility
and have received customary fees for acting in such capacities. In addition,
J.P. Morgan Securities Inc. and Chase Securities Inc. received:
60
<PAGE>
(1) compensation in the aggregate of approximately $6.0 million in
connection with the issuance of the Senior Subordinated Notes;
(2) received compensation in the aggregate of approximately $5.3 million
in connection with the issuance of the Senior Discount Notes, Series A
of Holdings;
(3) received compensation in the aggregate of approximately $1.5 million
in connection with the issuance of the Senior Discount Notes, Series B
of Holdings.
To the knowledge of the Company, during the nine months ended September 30,
1999, there were no other arrangements between FVOP, J.P. Morgan Securities
Inc. and Chase Securities Inc. and their affiliates and Holdings or any of its
affiliates in which J.P. Morgan Securities Inc. and Chase Securities Inc. or
their affiliates received any additional compensation from Holdings or any of
its affiliates.
After the October 1, 1999 Acquisition by Adelphia. Holdings has an agreement
with a subsidiary of Adelphia (the "Managing Affiliate") which provides for
the payment of management fees by Holdings of up to 5% of gross revenues. For
the three month period ended December 31, 1999, payments in the amount of
$1,879 were made to the Managing Affiliate.
61
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
Financial Statements, schedules and exhibits not listed have been omitted
where the required information is included in the consolidated financial
statements or notes thereto, or is not applicable or required.
(a) (1) A listing of the consolidated financial statements, notes and
independent auditors' report required by Item 8 are listed in the Index in
Item 8 of this Annual Report on Form 10-K.
(2) Financial Statement Schedules:
The following are included in this Report:
Schedule I--Condensed Financial Information of the Registrant
Schedule II--Valuation and Qualifying Accounts
(3) Exhibits
<TABLE>
<CAPTION>
Exhibit
No.
-------
<C> <S>
2.1 Purchase Agreement dated as of February 22, 1999 among FrontierVision
Partners, L.P., FVP GP, L.P., the General Partner and Certain Direct
and Indirect Limited Partners of FrontierVision Partners, L.P. and
Adelphia Communications Corporation. (6)
3.1 Amended and Restated Agreement of Limited Partnership of
FrontierVision Operating Partners, L.P. (1)
3.2 Certificate of Limited Partnership of FrontierVision Operating
Partners, L.P. (2)
3.3 Amended and Restated Agreement of Limited Partnership of
FrontierVision Partners, L.P. (9)
3.9 Certificate of Incorporation of FrontierVision Capital Corporation.
(2)
3.10 Bylaws of FrontierVision Capital Corporation. (2)
3.16 Agreement of Limited Partnership of FrontierVision Holdings, L.P. (1)
3.17 Certificate of Limited Partnership of FrontierVision Holdings, L.P.
(1)
3.18 Certificate of Incorporation of FrontierVision Holdings Capital
Corporation. (1)
3.19 Bylaws of FrontierVision Holdings Capital Corporation. (1)
3.20 Certificate of Incorporation of FrontierVision Holdings Capital II
Corporation. (7)
3.21 Bylaws of FrontierVision Holdings Capital II Corporation. (7)
4.1 Indenture dated as of October 7, 1996, among FrontierVision Operating
Partners, L.P., FrontierVision Capital Corporation and Colorado
National Bank, as Trustee. (3)
4.2 Indenture dated as of September 19, 1997, among FrontierVision
Holdings, L.P., FrontierVision Holdings Capital Corporation and U.S.
Bank National Association d/b/a Colorado National Bank, as Trustee.
(1)
4.3 Purchase Agreement, dated as of September 16, 1997, by and among
FrontierVision Holdings, L.P., FrontierVision Holdings Capital
Corporation, and J.P. Morgan Securities Inc., Chase Securities Inc.,
CIBC Wood Gundy Corp. and First Union Capital Markets Corp., as
Initial Purchasers. (1)
4.4 Registration Rights Agreement, dated as of September 19, 1997, by and
among FrontierVision Holdings, L.P., FrontierVision Holdings Capital
Corporation, and J.P. Morgan Securities Inc., Chase Securities Inc.,
CIBC Wood Gundy Corp. and First Union Capital Markets Corp., as
Initial Purchasers. (1)
4.5 Indenture dated as of December 9, 1998, among FrontierVision Holdings,
L.P., FrontierVision Holdings Capital II Corporation and U.S. Bank
National Association, as Trustee. (7)
4.6 Purchase Agreement dated as of December 2, 1998, by and among
FrontierVision Holdings, L.P., FrontierVision Holdings Capital II
Corporation and J.P. Morgan Securities, Inc. and Chase Securities
Inc., as Initial Purchasers. (7)
4.7 Registration Rights Agreement dated as of December 9, 1998, by and
among Frontier Vision Holdings, L.P., FrontierVision Holdings Capital
II Corporation and J.P. Morgan Securities Inc., and Chase Securities,
Inc., as Initial Purchasers. (7)
</TABLE>
62
<PAGE>
<TABLE>
<C> <S>
10.1 Amended Bank Credit Facility. (2)
10.2 Employment Agreement of James C. Vaughn. (2)
10.3 Asset Purchase Agreement dated July 20, 1995 between United Video
Cablevision, Inc. and FrontierVision Operating Partners, L.P. (2)
10.4 Asset Acquisition Agreement (July 27, 1995 Auction Sale) dated as of
July 27, 1995 among Stephen S. Gray in his capacity as Receiver of
Longfellow Cable Company, Inc., Carrabassett Electronics and
Carrabassett Cable Company, Inc. and FrontierVision Operating
Partners, L.P. (2)
10.5 Asset Purchase Agreement dated October 27, 1995 among C4 Media Cable
Southeast, Limited Partnership, County Cable Company, L.P. and
FrontierVision Operating Partners, L.P. (2)
10.6 Asset Purchase Agreement dated November 17, 1995 among Cox
Communications Ohio, Inc., Times Mirror Cable Television of Defiance,
Inc., Chillicothe Cablevision, Inc., Cox Communications Eastern
Kentucky, Inc. and FrontierVision Operating Partners, L.P. (2)
10.7 Asset Purchase Agreement dated February 27, 1996 between Americable
International Maine, Inc. and FrontierVision Operating Partners, L.P.
(2)
10.8 Asset Purchase Agreement dated May 16, 1996 among Triax Southeast
Associates, L.P., Triax Southeast General Partner, L.P. and
FrontierVision Operating Partners, L.P. (2)
10.9 Asset Purchase and Sale Agreement dated June 21, 1996 between HPI
Acquisition Co. LLC (assignee of Helicon Partners I, LP) and
FrontierVision Operating Partners, L.P. (2)
10.10 Asset Purchase Agreement dated July 15, 1996 between American Cable
Entertainment of Kentucky-Indiana, Inc. and FrontierVision Operating
Partners, L.P. (2)
10.11 Asset Purchase Agreement dated as of July 30, 1996 between Shenandoah
Cable Television Company and FrontierVision Operating Partners, L.P.
(2)
10.12 Purchase Agreement dated as of August 6, 1996 between Penn/Ohio
Cablevision, L.P. and FrontierVision Operating Partners, L.P. (2)
10.13 Asset Purchase Agreement dated July 19, 1996 between Phoenix
Grassroots Cable Systems, L.L.C. and FrontierVision Operating
Partners, L.P. (2)
10.14 Amendment No. 1 to Amended Bank Credit Facility. (2)
10.15 Consent and Amendment No. 2 to Amended Bank Credit Facility. (3)
10.16 Asset Purchase Agreement dated May 8, 1997 between A-R Cable
Services--ME, Inc. and FrontierVision Operating Partners, L.P. (1)
10.17 Asset Purchase Agreement dated as of May 12, 1997 between TCI
Cablevision of Vermont, Inc., Westmarc Development Joint Venture and
FrontierVision Operating Partners, L.P. (1)
10.18 Amended Credit Facility. (4)
10.19 Asset Purchase Agreement dated as of October 15, 1997 between Coxcom,
Inc. And FrontierVision Operating Partners, L.P. (1)
10.20 Asset Purchase Agreement dated as of June 24, 1998 between State Cable
TV Corporation, Better Cable TV Company and FrontierVision Operating
Partners, L.P. (5)
10.21 Amendment No. 2 to Amended Credit Facility of FrontierVision Operating
Partners, L.P., dated as of July 15, 1999. (9)
16.1 Report of change in accountants. (8)
</TABLE>
63
<PAGE>
<TABLE>
<C> <S>
21.1 Subsidiaries of the Registrant. (9)
27.1 Financial Data Schedule as of and for the period ended December 31,
1999 (supplied for the information of the Commission). (9)
</TABLE>
- --------
(1) Incorporated by reference to the exhibits to FrontierVision Holdings,
L.P.'s and FrontierVision Holdings Capital Corporation's Registration
Statement on Form S-4, Registration No. 333-36519.
(2) Incorporated by reference to the exhibits to FrontierVision Operating
Partners, L.P.'s and FrontierVision Capital Corporation's Registration
Statement on Form S-1, Registration No. 333-9535.
(3) Incorporated by reference to the exhibits to FrontierVision Operating
Partners, L.P.'s and FrontierVision Capital Corporation's Quarterly
Report on Form 10-Q, File No. 333-9535 for the quarter ended
September 30, 1996.
(4) Incorporated by reference to the exhibits to FrontierVision Holdings,
L.P.'s and FrontierVision Holdings Capital Corporation's Annual Report on
Form 10-K, File No. 333-36519 for the year ended December 31, 1997.
(5) Incorporated by reference to the exhibit to FrontierVision Holdings,
L.P.'s Current Report on Form 8-K filed November 6, 1998, File No. 333-
36519.
(6) Incorporated by reference to the exhibits to FrontierVision Holdings,
L.P.'s and FrontierVision Holdings Capital Corporation's Annual Report on
Form 10-K, File No. 333-36519 for the year ended December 31, 1998.
(7) Incorporated by reference to the exhibits to FrontierVision Holdings,
L.P.'s and FrontierVision Holdings Capital II Corporation's Registration
Statement on Form S-4, Registration No. 333-75567.
(8) Incorporated by reference to the exhibits to FrontierVision Holdings,
L.P.'s Current Report on Form 8-K filed February 11, 2000, File No. 333-
36519.
(9) Filed herewith.
The Registrants will furnish to the Commission upon request copies of
instruments not filed herewith which authorize the issuance of long-term
obligations of Registrants not in excess of 10% of the Registrants' total
assets on a consolidated basis.
(b) The Registrants filed an Form 8-K on October 15, 1999 which reported
information under Item 1 thereof. No financial statements were filed with such
Form 8-K report.
(c) The Registrants hereby file as exhibits to this Annual Report on Form
10-K the exhibits set forth in Item 14(a)(3) hereof which are not incorporated
by reference.
(d) The Registrants hereby file as financial statement schedules to this
Annual Report on Form 10-K the financial statement schedules set forth in Item
14(a)(2) hereof.
64
<PAGE>
Supplemental Information To Be Furnished
With Reports Filed Pursuant To Section 15(D) Of
The Exchange Act By Registrant's Which Have Not
Registered Securities Pursuant To Section 12 Of
The Exchange Act
Other than a copy of this Form 10-K, no annual report or proxy material has
been or will be sent to security holders of FrontierVision Holdings, L.P.,
FrontierVision Holdings Capital Corporation or FrontierVision Holdings Capital
II Corporation.
65
<PAGE>
SCHEDULE I (Page 1 of 4)
FRONTIERVISION HOLDINGS, L.P. AND SUBSIDIARIES
CONDENSED INFORMATION AS TO THE FINANCIAL
POSITION OF THE REGISTRANT
(Dollars in thousands)
<TABLE>
<CAPTION>
Old Holdings New Holdings
------------ ------------
December 31, December 31,
1998 1999
------------ ------------
<S> <C> <C>
ASSETS:
Intangible assets--net................................ $ -- $ 67,609
Cash and cash equivalents............................. 200 --
Intercompany receivable............................... 924 --
Prepaid expenses and other assets--net................ 277,570 1,191,691
-------- ----------
Total............................................... $278,694 $1,259,300
======== ==========
LIABILITIES AND PARTNERS' EQUITY:
Debt.................................................. $249,532 $ 284,501
Partners' equity:
FrontierVision Partners, L.P......................... 29,133 973,824
FrontierVision Holdings, LLC......................... 29 975
-------- ----------
Total partners' equity.............................. 29,162 974,799
-------- ----------
$278,694 $1,259,300
======== ==========
</TABLE>
See note to the condensed information.
66
<PAGE>
SCHEDULE I (Page 2 of 4)
FRONTIERVISION HOLDINGS, L.P. AND SUBSIDIARIES
CONDENSED INFORMATION AS TO THE
OPERATIONS OF THE REGISTRANT
(Dollars in thousands)
<TABLE>
<CAPTION>
Old Holdings New Holdings
--------------------------------- ------------
Nine Months Three Months
Year Ended Ended Ended
December 31, September 30, December 31,
1997 1998 1999 1999
-------- -------- ------------- ------------
<S> <C> <C> <C> <C>
Operating expenses............. $ -- $ (39) $ -- $ (8)
Amortization expense........... (333) (586) (743) (1,961)
Interest expense--net.......... (5,020) (19,457) (19,390) (6,777)
Equity in losses of
subsidiaries.................. (46,863) (66,196) (79,569) (5,312)
-------- -------- -------- --------
Net loss..................... $(52,216) $(86,278) $(99,702) $(14,058)
======== ======== ======== ========
</TABLE>
See note to the condensed information.
67
<PAGE>
SCHEDULE I (Page 3 of 4)
FRONTIERVISION HOLDINGS, L.P. AND SUBSIDIARIES
CONDENSED INFORMATION AS TO THE CASH
FLOWS OF THE REGISTRANT
(Dollars in Thousands)
<TABLE>
<CAPTION>
Old Holdings New Holdings
--------------------------------- ------------
Nine Months Three Months
Year Ended Ended Ended
December 31, September 30, December 31,
1997 1998 1999 1999
-------- -------- ------------- ------------
<S> <C> <C> <C> <C>
Cash flows from operating
activities:
Net loss...................... $(52,216) $(86,278) $(99,702) $(14,058)
Adjustments to reconcile net
loss to net cash provided by
(used for) operating
activities:
Amortization................ 333 586 743 1,961
Non cash interest expense... 5,047 19,485 19,388 6,777
Share of losses of
subsidiary................. 46,863 66,196 79,569 5,312
Changes in operating assets
and liabilities:
Intercompany receivable... -- (924) -- --
Prepaid expenses and other
assets................... (179,903) (72,649) -- (48,226)
Accounts payable and
accrued liabilities...... 123 (123) 474 --
-------- -------- -------- --------
Total adjustments......... (127,537) 12,571 100,174 (34,176)
-------- -------- -------- --------
Net cash provided by (used
for) operating
activities............... (179,753) (73,707) 472 (48,234)
-------- -------- -------- --------
Cash flows used for investing
activities:
Proceeds from disposition of
assets....................... -- -- (12,000) --
-------- -------- -------- --------
Net cash flows used for
investing activities..... -- -- (12,000) --
-------- -------- -------- --------
Cash flows from financing
activities:
Issuance of Senior Discount
Notes........................ 150,000 75,000 -- --
Repayments of debt............ -- -- -- (237)
Costs associated with
financings................... (6,585) (2,408) (472) --
Partner capital
contributions................ 37,653 -- 12,000 48,271
-------- -------- -------- --------
Net cash provided by
financing activities..... 181,068 72,592 11,528 48,034
-------- -------- -------- --------
Increase (decrease) in cash and
cash equivalents............... 1,315 (1,115) -- (200)
Cash and cash equivalents,
beginning of period............ -- 1,315 200 200
-------- -------- -------- --------
Cash and cash equivalents, end
of period...................... $ 1,315 $ 200 $ 200 $ --
======== ======== ======== ========
</TABLE>
See note to the condensed information.
68
<PAGE>
SCHEDULE I (Page 4 of 4)
FRONTIERVISION HOLDINGS, L.P. AND SUBSIDIARIES
NOTE TO THE CONDENSED INFORMATION OF THE REGISTRANT
(Dollars in Thousands)
(1) Debt
On September 19, 1997, FrontierVision Holdings, L.P. ("Holdings") issued,
pursuant to a private offering, the Discount Notes. The Discount Notes were
sold at approximately 63.1% of the stated principal amount at maturity and
provided net proceeds of $144,750, after underwriting fees of approximately
$5,250.
On December 2, 1998, Holdings issued, pursuant to a private offering, the
Discount Notes, Series B. The Discount Notes were sold at approximately
82.149% of the stated principal amount at maturity and provided net proceeds
of $72,750, after underwriting fees of approximately $2,250.
The Discount Notes are unsecured obligations of Holdings, Holdings Capital
and Holdings Capital II (collectively, the "Issuers"), ranking pari passu in
right of payment to all existing and future unsecured indebtedness of the
Issuers and will mature on September 15, 2007. The discount on the Discount
Notes is being accreted using the interest method until September 15, 2001,
the date at which cash interest begins to accrue. Cash interest will accrue at
a rate of 11 7/8% per annum and will be payable each March 15 and September
15, commencing March 15, 2002.
The Discount Notes are redeemable at the option of the Issuers, in whole or
in part, at any time on or after September 15, 2001, at redemption prices set
forth in the Indenture for the Discount Notes (the "Discount Notes
Indenture"), plus any unpaid interest, if any, at the date of the redemption.
The Issuers may redeem, prior to September 15, 2001, up to 35% of the
principal amount at maturity of the Discount Notes with the net cash proceeds
received from one or more public equity offerings or strategic equity
investments at a redemption prices set forth in the Discount Notes Indenture,
plus any unpaid interest, if any, at the date of the redemption.
The Discount Notes Indenture has certain restrictions on incurrence of
indebtedness, distributions, mergers, asset sales and changes in control of
Holdings.
The debt of Holdings, excluding future accretion, matures as follows:
<TABLE>
<S> <C>
Year Ended December 31--
2000........................................................... $ --
2001........................................................... --
2002........................................................... --
2003........................................................... --
2004........................................................... --
Thereafter..................................................... 328,658
--------
$328,658
========
</TABLE>
69
<PAGE>
SCHEDULE II
FRONTIERVISION HOLDINGS, L.P. AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
(Dollars in Thousands)
<TABLE>
<CAPTION>
Balance at Charged to
Beginning Costs and Deductions/ Balance at
of Period Expenses Write-offs End of Period
---------- ---------- ----------- -------------
<S> <C> <C> <C> <C>
Allowance for uncollectible
trade receivables:
Old Holdings
Year ended December 31,
1997....................... $767 $1,761 $(1,888) $640
Year ended December 31,
1998....................... $640 $3,076 $(3,050) $666
Nine Months Ended September
30, 1999................... $666 $4,254 $(4,307) $613
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New Holdings
Three Months Ended December
31, 1999................... $613 $1,707 $(1,469) $851
</TABLE>
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<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrants have duly caused this report to be signed on their behalf by the
undersigned thereunto duly authorized.
FRONTIERVISION HOLDINGS, L.P.
By: FrontierVision Partners, L.P., its general
partner
By Adelphia GP Holdings, L.L.C., its general
partners
By: ACC Operations, Inc., its sole member
Date: March 30, 2000 /s/ Timothy J. Rigas
By: _____________________________________________
Timothy J. Rigas
Executive Vice President, Chief Financial
Officer,
Chief Accounting Officer, and Treasurer
FRONTIERVISION HOLDINGS CAPITAL CORPORATION
Date: March 30, 2000 /s/ Timothy J. Rigas
By: _____________________________________________
Timothy J. Rigas
Executive Vice President, Chief Financial
Officer,
Chief Accounting Officer, and Treasurer
FRONTIERVISION HOLDINGS CAPITAL II CORPORATION
Date: March 30, 2000 /s/ Timothy J. Rigas
By: _____________________________________________
Timothy J. Rigas
Executive Vice President, Chief Financial
Officer,
Chief Accounting Officer, and Treasurer
Date: March 30, 2000 /s/ John J. Rigas
By: _____________________________________________
John J. Rigas
Director ACC Operations, Inc.,
FrontierVision
Holdings, L.P., FrontierVision Holdings
Capital Corporation, and FrontierVision
Holdings
Capital II Corporation
Date: March 30, 2000 /s/ Michael J. Rigas
By: _____________________________________________
Michael J. Rigas
Director ACC Operations, Inc.,
FrontierVision
Holdings, L.P., FrontierVision Holdings
Capital Corporation, and FrontierVision
Holdings
Capital II Corporation
Date: March 30, 2000 /s/ Timothy J. Rigas
By: _____________________________________________
Timothy J. Rigas
Director ACC Operations, Inc.,
FrontierVision
Holdings, L.P., FrontierVision Holdings
Capital Corporation, and FrontierVision
Holdings
Capital II Corporation
Date: March 30, 2000 /s/ James P. Rigas
By: _____________________________________________
James P. Rigas
Director ACC Operations, Inc.,
FrontierVision
Holdings, L.P., FrontierVision Holdings
Capital Corporation, and FrontierVision
Holdings
Capital II Corporation
71
<PAGE>
EXHIBIT INDEX
EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a)(3) Exhibits
<TABLE>
<C> <S>
2.1 Purchase Agreement dated as of February 22, 1999 among FrontierVision
Partners, L.P., FVP GP, L.P., the General Partner and Certain Direct
and Indirect Limited Partners of FrontierVision Partners, L.P. and
Adelphia Communications Corporation. (6)
3.1 Amended and Restated Agreement of Limited Partnership of
FrontierVision Operating Partners, L.P. (1)
3.2 Certificate of Limited Partnership of FrontierVision Operating
Partners, L.P. (2)
3.3 Amended and Restated Agreement of Limited Partnership of
FrontierVision Partners, L.P. (9)
3.9 Certificate of Incorporation of FrontierVision Capital Corporation.
(2)
3.10 Bylaws of FrontierVision Capital Corporation. (2)
3.16 Agreement of Limited Partnership of FrontierVision Holdings, L.P. (1)
3.17 Certificate of Limited Partnership of FrontierVision Holdings, L.P.
(1)
3.18 Certificate of Incorporation of FrontierVision Holdings Capital
Corporation. (1)
3.19 Bylaws of FrontierVision Holdings Capital Corporation. (1)
3.20 Certificate of Incorporation of FrontierVision Holdings Capital II
Corporation. (7)
3.21 Bylaws of FrontierVision Holdings Capital II Corporation. (7)
4.1 Indenture dated as of October 7, 1996, among FrontierVision Operating
Partners, L.P., FrontierVision Capital Corporation and Colorado
National Bank, as Trustee. (3)
4.2 Indenture dated as of September 19, 1997, among FrontierVision
Holdings, L.P., FrontierVision Holdings Capital Corporation and U.S.
Bank National Association d/b/a Colorado National Bank, as Trustee.
(1)
4.3 Purchase Agreement, dated as of September 16, 1997, by and among
FrontierVision Holdings, L.P., FrontierVision Holdings Capital
Corporation, and J.P. Morgan Securities Inc., Chase Securities Inc.,
CIBC Wood Gundy Corp. and First Union Capital Markets Corp., as
Initial Purchasers. (1)
4.4 Registration Rights Agreement, dated as of September 19, 1997, by and
among FrontierVision Holdings, L.P., FrontierVision Holdings Capital
Corporation, and J.P. Morgan Securities Inc., Chase Securities Inc.,
CIBC Wood Gundy Corp. and First Union Capital Markets Corp., as
Initial Purchasers. (1)
4.5 Indenture dated as of December 9, 1998, among FrontierVision Holdings,
L.P., FrontierVision Holdings Capital II Corporation and U.S. Bank
National Association, as Trustee. (7)
4.6 Purchase Agreement dated as of December 2, 1998, by and among
FrontierVision Holdings, L.P., FrontierVision Holdings Capital II
Corporation and J.P. Morgan Securities, Inc. and Chase Securities
Inc., as Initial Purchasers. (7)
4.7 Registration Rights Agreement dated as of December 9, 1998, by and
among Frontier Vision Holdings, L.P., FrontierVision Holdings Capital
II Corporation and J.P. Morgan Securities Inc., and Chase Securities,
Inc., as Initial Purchasers. (7)
</TABLE>
1
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<TABLE>
<C> <S>
10.1 Amended Bank Credit Facility. (2)
10.2 Employment Agreement of James C. Vaughn. (2)
10.3 Asset Purchase Agreement dated July 20, 1995 between United Video
Cablevision, Inc. and FrontierVision Operating Partners, L.P. (2)
10.4 Asset Acquisition Agreement (July 27, 1995 Auction Sale) dated as of
July 27, 1995 among Stephen S. Gray in his capacity as Receiver of
Longfellow Cable Company, Inc., Carrabassett Electronics and
Carrabassett Cable Company, Inc. and FrontierVision Operating
Partners, L.P. (2)
10.5 Asset Purchase Agreement dated October 27, 1995 among C4 Media Cable
Southeast, Limited Partnership, County Cable Company, L.P. and
FrontierVision Operating Partners, L.P. (2)
10.6 Asset Purchase Agreement dated November 17, 1995 among Cox
Communications Ohio, Inc., Times Mirror Cable Television of Defiance,
Inc., Chillicothe Cablevision, Inc., Cox Communications Eastern
Kentucky, Inc. and FrontierVision Operating Partners, L.P. (2)
10.7 Asset Purchase Agreement dated February 27, 1996 between Americable
International Maine, Inc. and FrontierVision Operating Partners, L.P.
(2)
10.8 Asset Purchase Agreement dated May 16, 1996 among Triax Southeast
Associates, L.P., Triax Southeast General Partner, L.P. and
FrontierVision Operating Partners, L.P. (2)
10.9 Asset Purchase and Sale Agreement dated June 21, 1996 between HPI
Acquisition Co. LLC (assignee of Helicon Partners I, LP) and
FrontierVision Operating Partners, L.P. (2)
10.10 Asset Purchase Agreement dated July 15, 1996 between American Cable
Entertainment of Kentucky-Indiana, Inc. and FrontierVision Operating
Partners, L.P. (2)
10.11 Asset Purchase Agreement dated as of July 30, 1996 between Shenandoah
Cable Television Company and FrontierVision Operating Partners, L.P.
(2)
10.12 Purchase Agreement dated as of August 6, 1996 between Penn/Ohio
Cablevision, L.P. and FrontierVision Operating Partners, L.P. (2)
10.13 Asset Purchase Agreement dated July 19, 1996 between Phoenix
Grassroots Cable Systems, L.L.C. and FrontierVision Operating
Partners, L.P. (2)
10.14 Amendment No. 1 to Amended Bank Credit Facility. (2)
10.15 Consent and Amendment No. 2 to Amended Bank Credit Facility. (3)
10.16 Asset Purchase Agreement dated May 8, 1997 between A-R Cable
Services--ME, Inc. and FrontierVision Operating Partners, L.P. (1)
10.17 Asset Purchase Agreement dated as of May 12, 1997 between TCI
Cablevision of Vermont, Inc., Westmarc Development Joint Venture and
FrontierVision Operating Partners, L.P. (1)
10.18 Amended Credit Facility. (4)
10.19 Asset Purchase Agreement dated as of October 15, 1997 between Coxcom,
Inc. And FrontierVision Operating Partners, L.P. (1)
10.20 Asset Purchase Agreement dated as of June 24, 1998 between State Cable
TV Corporation, Better Cable TV Company and FrontierVision Operating
Partners, L.P. (5)
10.21 Amendment No. 2 to Amended Credit Facility of FrontierVision Operating
Partners, L.P., dated as of July 15, 1999. (9)
16.1 Report of change in accountants. (8)
</TABLE>
2
<PAGE>
<TABLE>
<C> <S>
21.1 Subsidiaries of the Registrant. (9)
27.1 Financial Data Schedule as of and for the period ended December 31,
1999 (supplied for the information of the Commission). (9)
</TABLE>
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(1) Incorporated by reference to the exhibits to FrontierVision Holdings,
L.P.'s and FrontierVision Holdings Capital Corporation's Registration
Statement on Form S-4, Registration No. 333-36519.
(2) Incorporated by reference to the exhibits to FrontierVision Operating
Partners, L.P.'s and FrontierVision Capital Corporation's Registration
Statement on Form S-1, Registration No. 333-9535.
(3) Incorporated by reference to the exhibits to FrontierVision Operating
Partners, L.P.'s and FrontierVision Capital Corporation's Quarterly
Report on Form 10-Q, File No. 333-9535 for the quarter ended
September 30, 1996.
(4) Incorporated by reference to the exhibits to FrontierVision Holdings,
L.P.'s and FrontierVision Holdings Capital Corporation's Annual Report on
Form 10-K, File No. 333-36519 for the year ended December 31, 1997.
(5) Incorporated by reference to the exhibit to FrontierVision Holdings,
L.P.'s Current Report on Form 8-K filed November 6, 1998, File No. 333-
36519.
(6) Incorporated by reference to the exhibits to FrontierVision Holdings,
L.P.'s and FrontierVision Holdings Capital Corporation's Annual Report on
Form 10-K, File No. 333-36519 for the year ended December 31, 1998.
(7) Incorporated by reference to the exhibits to FrontierVision Holdings,
L.P.'s and FrontierVision Holdings Capital II Corporation's Registration
Statement on Form S-4, Registration No. 333-75567.
(8) Incorporated by reference to the exhibits to FrontierVision Holdings,
L.P.'s Current Report on Form 8-K filed February 11, 2000, File No. 333-
36519.
(9) Filed herewith.
The Registrants will furnish to the Commission upon request copies of
instruments not filed herewith which authorize the issuance of long-term
obligations of Registrants not in excess of 10% of the Registrants' total
assets on a consolidated basis.
(b) The Registrants filed an Form 8-K on October 15, 1999 which reported
information under Item 1 thereof. No financial statements were filed with such
Form 8-K report.
(c) The Registrants hereby file as exhibits to this Annual Report on Form
10-K the exhibits set forth in Item 14(a)(3) hereof which are not incorporated
by reference.
(d) The Registrants hereby file as financial statement schedules to this
Annual Report on Form 10-K the financial statement schedules set forth in Item
14(a)(2) hereof.
3
<PAGE>
EXHIBIT 3.3
SECOND AMENDED AND RESTATED
LIMITED PARTNERSHIP AGREEMENT
FRONTIERVISION PARTNERS, L.P.
THIS AGREEMENT MADE as of the 1st day of October, 1999, by and among
ADELPHIA GP HOLDINGS, LLC, a Delaware limited liability company, as the general
partner (the "General Partner" or "Holdings") and ACC OPERATIONS, INC., a
Delaware corporation, as the limited partner (the "Limited Partner" or
"Operations"). The General Partner and the Limited Partner are sometimes
collectively referred to as the "Partners".
WITNESSETH:
----------
WHEREAS, the Partnership was formed on April 17, 1995; and
WHEREAS, on the date hereof, Holdings became the sole general partner
of the Partnership and Operations became the sole limited partner of the
Partnership through the completion of a series of transactions pursuant to, and
in connection with, the Purchase Agreement dated as of February 22, 1999, as
amended, by and among the Partnership, FVP GP, L.P. and certain direct and
indirect limited partners of the Partnership and Adelphia Communications
Corporation; and
WHEREAS, the parties desire to amend and restate the First Amended and
Restated Limited Partnership Agreement dated as of August 11, 1995 in order to
reflect such direct and indirect transfers of partner interests in the
Partnership.
NOW, THEREFORE, in consideration of the mutual covenants contained
herein, the parties hereto, intending to be legally bound hereby, do covenant
and agree to be bound by the terms of this Agreement.
1. DEFINITIONS
-----------
1.1 Definitions: As used herein the following terms shall have the
following meanings:
Affiliate(s) means any person who is in the Immediate Family of any
------------
Partner, any person who is an officer, director and/or holder of 10%
or more of the outstanding equity of any Partner or any person who,
directly or indirectly, controls, is controlled by or is under common
control with any Partner. Adelphia is an Affiliate of each of the
Partners.
<PAGE>
Agreement means this Second Amended and Restated Limited Partnership
---------
Agreement, as hereafter amended from time to time.
Capital Account(s) means the individual account(s) maintained by the
------------------
Partnership with respect to each Partner.
Capital Contribution(s) means the amount of cash or the agreed value
-----------------------
of the property or services contributed by each Partner to the
Partnership.
CATV means community antenna television.
----
CATV System means the CATV systems owned and operated by the
-----------
Partnership from time to time, including any expansions or extensions
thereof.
Certificate means the Limited Partnership Certificate filed by the
-----------
Partnership with the Department of State of the State of Delaware on
April 17, 1995, as amended from time to time.
Code means the Internal Revenue Code of 1986, as amended.
----
General Partner(s) means Holdings and any person or entity who becomes
------------------
an additional or successor General Partner pursuant to the terms of
this Agreement.
Holdings means Adelphia GP Holdings, LLC, a Delaware limited liability
--------
company.
Immediate Family means the spouse, child, mother, father, sister,
----------------
brother, niece or nephew (whether natural or adopted) of a specified
person.
Limited Partner means Operations and any other person who may become a
---------------
Limited Partner pursuant to the terms hereof.
Net Cash Flow means for any fiscal period the gross cash receipts of
-------------
the Partnership in connection with the operation and management of the
business of the Partnership, including without limitation, cash
receipts from (i) the operations of the CATV System; (ii) any
refinancing of any indebtedness secured by Partnership assets, a sale
of a portion but less than all or substantially all of the CATV
System, or any similar transaction which in accordance with generally
accepted accounting principles is treated as a capital transaction but
which does not result in the dissolution of the Partnership pursuant
to Article 9 hereof; and (iii) other sources and amounts which the
General Partner determines are no longer reasonably necessary or
appropriate to be maintained in reserves created pursuant to Section
4.3(N) hereof (but excluding Capital Contributions of Partners and
proceeds of loans) less (1) the operating expenses of the Partnership
in connection with the operation and management of the business
(including but not limited to management fees and expenses, payments
of interest on debt service,
-2-
<PAGE>
Partnership accounting, audit and legal expenses, but excluding
expenses which are paid from Capital Contributions, borrowings and
Partnership reserves); (2) such amounts as may reasonably be deemed
necessary or appropriate by the General Partner to be maintained in
reserves created pursuant to Section 4.3(N) hereof, or any other
reserves, and sums that are contributed to such reserves by the
Partnership; and (3) sums expended for acquisitions, repairs,
replacements, maintenance and/or improvements or refinancing costs.
Operations means ACC Operations, Inc., a Delaware corporation.
----------
Partners means the General Partner and the Limited Partner
--------
collectively, and Partner shall mean any one of the Partners.
-------
Partnership means FRONTIERVISION PARTNERS, L.P., the Delaware limited
-----------
partnership organized pursuant to this Agreement.
Partnership Act means the Delaware Revised Uniform Limited Partnership
---------------
Act, as amended from time to time.
Partnership's Accountant means the firm of independent certified
------------------------
public accountants retained by the Partnership pursuant to Section 8.3
hereof.
Securities Act means the Securities Act of 1933, as amended.
--------------
2. THE PARTNERSHIP
---------------
2.1 Name. The name of the Partnership shall be FRONTIERVISION PARTNERS,
----
L.P., provided, however, that the business of the Partnership may be
-------- -------
conducted under any other name designated by the General Partner. The
General Partner shall have the authority to change the name of the
Partnership from time to time.
2.2 Offices. The executive office of the Partnership shall be located at
-------
One North Main Street, Coudersport, Pennsylvania 16915. The
Partnership shall maintain such other offices, including one or more
business offices for the CATV System, as the General Partner shall
determine.
2.3 Purposes. The purpose of the Partnership shall be to engage in the
--------
business of acquiring, owning, operating, developing, maintaining,
promoting, selling and disposing of the CATV System and any other
activity necessary, appropriate, desirable or incidental thereto.
2.4 Authority of the Partnership. In order to carry out its purposes, and
----------------------------
not in limitation thereof, and as part of its business, the
Partnership is empowered and authorized to do any and all acts
necessary, appropriate, proper, advisable,
-3-
<PAGE>
incidental to or convenient for the furtherance and accomplishment of
its purposes, including, but not limited to, the following:
(A) Acquire, operate, maintain, improve, extend, buy, own, sell,
convey, assign, mortgage, pledge, hypothecate or otherwise
encumber, refinance, rent or lease all or any portion of the CATV
System, other real or tangible or intangible personal property or
any interest therein;
(B) Engage in any kind of activity, and engage in, perform and carry
out contracts and agreements of any kind necessary to, in
connection with, or incidental to, accomplishing the purposes of
the Partnership.
(C) Borrow money and issue evidences of indebtedness in furtherance
of the Partnership business and secure any such indebtedness by
mortgage, guaranty, security interest, hypothecation or other
lien;
(D) Maintain and operate the Partnership's assets;
(E) Negotiate for and conclude agreements for the sale, exchange or
other disposition of all or any part of the assets of the
Partnership;
(F) Hire and compensate employees, agents, independent contractors,
attorneys and accountants; and
(G) Bring and defend actions in law or in equity.
2.5 Prohibited Activities. The Partnership shall not:
---------------------
(A) Commingle Partnership funds with the separate funds of the
General Partner or its Affiliates or any other person,
partnership or entity; or
(B) Underwrite securities of any other person, other than securities
of other persons controlled directly or indirectly by the
Partnership.
2.6 Execution and Filing of the Amendment to the Certificate. To the
--------------------------------------------------------
extent required by law, whenever any additional parties are admitted
as Partners, the General Partner shall, as soon as practicable, amend
and record such changes in the Certificate, and the General Partner
shall do, and continue to do, all other things as may be required or
advisable to maintain the Partnership as a limited partnership
existing pursuant to the laws of the State of Delaware and as provided
herein.
2.7 Other Qualifications. The Partners agree that the Partnership shall
--------------------
exist under the laws of the State of Delaware and, to the extent that
the business of the Partnership is conducted in any jurisdiction other
than Delaware, under the laws of such other jurisdiction to the extent
necessary or desirable to do business in such jurisdiction and/or
promote the limitation of liability for the Limited Partners
-4-
<PAGE>
in such jurisdiction. Each Partner hereby authorizes the General
Partner to execute on its behalf any document and to take any other
action which may be necessary or desirable in order to permit the
Partnership to do business (or facilitate the doing of business) in
any such jurisdiction and secure the limitation of liability for the
Limited Partners therein.
3. CAPITAL CONTRIBUTIONS
---------------------
3.1 Capital Accounts.
----------------
(A) A separate Capital Account shall be maintained for each Partner
and each Partner's Capital Account shall be credited with (1) the
cash, the adjusted basis of property contributed by him to the
Partnership (net of liabilities assumed by the Partnership and
liabilities to which such contributed property is subject) and
the amount of any loans made by him to the Partnership which he
has forgiven and (2) his distributive share of Partnership income
(including income exempt from tax) and gain (or item thereof),
and shall be debited with (a) the cash and the Partnership's
adjusted basis of property distributed to him (net of liabilities
assumed by such Partner and liabilities to which such distributed
property is subject), (b) his distributive share of Partnership
loss and deduction (or item thereof) and (c) his distributive
share of expenditures of the Partnership described in section
705(a)(2)(B) of the Code.
(B) Except as otherwise specifically provided in this Agreement, a
Partner's Capital Account shall be determined after giving effect
to all allocations of items of income, gain, loss and deduction
for transactions effected prior to the time as of which such
determination is made, and to all distributions theretofore made
for such year under Article 7 hereof. Any transferee of a
Partnership interest shall have the same Capital Account as the
Capital Account of the transferor immediately preceding such
transfer except as such Capital Account may be adjusted pursuant
to an election made by the General Partner under Section 8.6
hereof.
3.2 No Return of or Interest on Capital; No Partition. All Capital
-------------------------------------------------
Contributions shall be expended by the General Partner in furtherance
of the business of the Partnership. Except as specifically provided in
this Agreement, no Partner shall be entitled to withdraw any amount
from his Capital Account, demand a return of any amount of his Capital
Contribution or be paid interest on his Capital Contribution or his
Capital Account. Each Partner waives his right to partition
Partnership property.
-5-
<PAGE>
3.3 Partnership Interests. Each Partner shall have and own an undivided
---------------------
interest in the Partnership equal to its percentage interest in the
Partnership. The percentage interests ("Percentage Interests") of the
Partners in the Partnership are as follows:
Holdings 1%
Operations 99%
4. MANAGEMENT OF THE PARTNERSHIP
------------------------------
4.1 Rights and duties of Partners; Management Authority. The Limited
---------------------------------------------------
Partner shall take no part in the control, management, direction or
operation of the affairs of the Partnership and shall have no power to
act for or bind the Partnership. At all times the sole control and
management of the Partnership shall rest exclusively with the General
Partner. No prior consent or approval of the Limited Partner shall be
required in respect of any act or transaction to be taken by the
General Partner or the Partnership unless otherwise provided in this
Agreement.
4.2 Fiduciary Duties of General Partner. The General Partner shall have
-----------------------------------
fiduciary responsibility for the safekeeping and use of all funds and
assets of the Partnership, whether or not in its immediate possession
or control, and the General Partner shall not employ, or permit
another to employ, such funds or assets in any manner except for the
exclusive benefit of the Partnership.
4.3 Power of the General Partner. The General Partner shall have the
----------------------------
complete and exclusive right, power and authority to manage and
control all of the business, affairs, assets and properties of the
Partnership and is authorized and empowered to carry out and implement
any and all of the purposes of the Partnership, subject to the terms
of this Agreement. The General Partner shall be required to devote to
the conduct of the business of the Partnership only such time and
attention as it may from time to time deem necessary or desirable.
Subject to any and all limitations expressly set forth in this
Agreement, the General Partner is expressly authorized and directed on
behalf of the Partnership to:
(A) Expend the capital and revenues of the Partnership in furtherance
of Partnership business;
(B) Acquire and convey real property and tangible and intangible
personal property and interests therein including, without
limitation, leases, easements and rights of way and the sale and
resultant leasing back of any such real and personal property;
(C) Open, maintain and close bank accounts and to draw checks and
other orders for the deposit and payment of money;
-6-
<PAGE>
(D) Incur indebtedness as may be necessary or appropriate in
connection with the business of the Partnership, and to make,
issue, accept, endorse and execute promissory notes, guaranty
agreements, drafts, bills of exchange, loan agreements and other
instruments and evidences of indebtedness, and to secure the
payment thereof by mortgage, hypothecation, pledge or other
assignment, or granting of security interests in all or any part
of the properties then owned or thereafter acquired by the
Partnership;
(E) Grant replacements of any mortgage, encumbrance, pledge,
hypothecation or other security device, obtain secondary or
other financing, and prepay, in whole or in part, refinance,
increase, modify, consolidate, or extend any loan or any
mortgage, encumbrance, pledge, hypothecation or other
security device given as security therefor;
(F) Execute and deliver deeds, deeds of trust, notes, leases,
subleases, mortgages, bills of sale, financing statements,
security agreements and any and all other instruments
necessary or incidental to the conduct of the business of the
Partnership, including, without limitation, such instruments
and documents as may be requested by any lending institution;
(G) Make investments in interest-bearing and noninterest bearing
bank deposits, money market funds, short-term commercial
paper pending disbursement of the Partnership's funds, or
make such investments in order to provide a source from which
to meet Partnership contingencies;
(H) Subject to Section 4.7 hereof, enter into agreements and
contracts with third parties, terminate such agreements and
institute, defend and settle litigation arising therefrom and
give receipts, releases and discharges with respect to all of
the foregoing and any matters incident thereto;
(I) Maintain, at the expense of the Partnership, adequate records
and accounts of all operations and expenditures;
(J) Purchase, at the expense of the Partnership, liability,
casualty, fire and such other insurance and bonds to protect
the Partnership's properties and business and to protect the
Partners as would normally be carried by an experienced and
prudent entity in the business in which the Partnership is
engaged;
(K) Sell, lease, trade, exchange or otherwise dispose of all or
any portion of the assets of the partnership;
(L) Employ, at the expense of the Partnership, consultants,
accountants, attorneys, brokers, engineers, escrow agents and
other agents or employees and terminate such employment;
-7-
<PAGE>
(M) Determine the accounting methods and conventions to be used in
the preparation of all tax returns and make such elections as it
deems appropriate under the Code and tax laws of the states and
other jurisdictions as to the treatment of items of income, gain,
loss, deduction and credit of the Partnership, or any other
method or procedure related to the preparation of tax returns;
(N) To the extent funds of the Partnership are sufficient therefor,
the General Partner may maintain a reserve for operating expenses
in such amount or amounts as may reasonably be deemed necessary
by the General Partner for the proper conduct of the ongoing
operation and business of the Partnership. In addition, to the
extent of available funds, the General Partner may maintain a
replacement reserve account in an amount deemed reasonable by the
General Partner for the purpose of improvement and replacement of
and additions to fixtures and equipment as well as capital
improvements to the CATV System. To the extent it may deem
necessary or advisable, the General Partner shall be entitled to
spend funds deposited in the replacement reserve account, as well
as any other funds of the Partnership, for the acquisition,
repair, replacement, maintenance and/or improvement of the CATV
System.
(O) Prepare or cause to be prepared in conformity with good business
practice all reports that are to be furnished to the Partners or
that are required by taxing bodies or other governmental
agencies, including the financial statements and reports referred
to in Article 8 hereof; and
(P) To enter into, make and perform such contracts, agreements and
other undertakings as may be deemed necessary or advisable for
the conduct of the business of the Partnership, and to do any act
or to execute any document on behalf of the Partnership as the
General partner, in its sole discretion, deems necessary,
convenient, incidental or appropriate to the furtherance of the
business of the Partnership.
4.4 Costs and Expenses. The Partnership shall pay all reasonable costs
------------------
and expenses of the Partnership and shall reimburse the General
Partner or anyone acting on behalf of the General Partner, including
any Affiliate of the General Partner, for all reasonable out-of-pocket
costs incurred in furtherance of the business of the Partnership.
4.5 Permitted Transactions. Any of the Partners and their Affiliates
----------------------
may engage in or possess an interest in other business ventures of any
nature and description, independently or with others, including
limited partnerships or other business entities engaged in any and all
aspects of the CATV industry, including, but not limited to, the
acquisition, construction, ownership, operation and management of CATV
systems, including businesses which are competitive with the
-8-
<PAGE>
Partnership's business. Neither the Partnership nor the Partners
shall, by virtue of their interest in the Partnership, have any right
in or to such other ventures including any opportunities developed by,
or the income or profits derived from, such other ventures.
4.6 Partners and their Affiliates Dealing with Partnership. The fact
------------------------------------------------------
that any Partner, including a General Partner or any Affiliate of a
General Partner, or any officer or director of any of the foregoing,
is employed by, or is directly or indirectly interested in or
affiliated or connected with, an enterprise engaged by the Partnership
to sell goods, render or perform services, including construction
materials and services for the CATV System, or make loans to the
Partnership shall not prohibit the General Partner from employing such
enterprise or from otherwise dealing with it on behalf of the
Partnership; provided, however, the General Partner or any of its
-----------------
Affiliates may contract or otherwise deal with the Partnership for the
provision of goods, services, loans or leases of real or personal
property to the Partnership, only if the General Partner reasonably
determines that the compensation paid or promised for such goods,
services or loans is on terms at least as favorable to the Partnership
as those available from unrelated parties for comparable goods,
services or loans. The Partnership and any Partners as such shall not
have any right in or to any income or profits derived from any such
employment or other dealing by any such enterprise.
4.7 General Partner may be Limited Partners. The General Partner and
---------------------------------------
its Affiliates may participate as a Limited Partner on the same terms
and conditions as any other Limited Partner.
4.8 Holding of Property. Property owned by the Partnership shall
-------------------
beheld in the name of the Partnership or in nominee name.
5. EXCULPATION AND INDEMNIFICATION
-------------------------------
5.1 Exculpation. No Partner, including the General Partner, shall be
-----------
liable to the Partnership or to any other Partner (other than the
liability of the General Partner to Partners who are holding debt
instruments of the Partnership) for losses or liabilities arising
from any act performed or failure to act in the conduct of the
affairs of the Partnership including the conduct of the affairs
of the Partnership including the conduct of any employee or agent
of the Partnership except in the event that such losses or
liabilities arise from the willful misconduct, gross negligence
or material breach of this Agreement by such Partner, employee or
agent.
-9-
<PAGE>
5.2 Indemnification of the General Partner.
--------------------------------------
(A) The Partnership shall indemnify and hold harmless the General
Partner and each Partnership employee or agent, against any and
all damages, losses, fines, costs and expenses (including
attorney's fees and disbursements), resulting from or relating in
any way to any claim or demand made or threatened, or any action,
proceeding or investigation commenced or threatened, arising out
of or in any way relating to any action taken or omitted to have
been taken (or alleged to have been taken or omitted to have been
taken) by such person in connection with the organization,
business or other affairs of the Partnership (including any
amounts paid or property transferred, and all costs and expenses,
including attorney's fees and disbursements, incurred in
connection with any settlement of any such claim, action,
proceeding or investigation); provided, however that any
-----------------
such action of such person is not determined to constitute
willful misconduct, gross negligence or a material breach of this
Agreement with respect to the matter or matters as to which
indemnity is sought.
(B) For the purposes of section 5.2(A) hereof, the determination that
the action or omission of any person constitutes willful
misconduct, gross negligence or material breach of this Agreement
shall be made by the court of competent jurisdiction or other
body before which the relevant action, proceeding or
investigation is pending. In the absence of a determination shall
be made by independent legal counsel in a written legal opinion
to the Partnership.
(C) Costs and expenses incurred in defending or responding to any
pending or threatened civil or criminal action, proceeding or
investigation may be advanced by the Partnership to the person
who is the subject thereof in advance of the final disposition of
such action, proceeding or investigation, upon receipt of an
undertaking by the person seeking such advance to repay such
amount if it shall ultimately be determined that he is not
entitled to be indemnified pursuant to this Section 5.2.
5.3 Limited Liability of the Limited Partners. Except as
-----------------------------------------
otherwise provided in the Act and except as and to the extent
expressly assumed by a Partner, a Limited Partner shall be
bound by or personally liable for the liabilities or
obligations of the Partnership beyond the amount of its
Capital Contribution.
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<PAGE>
6. RIGHTS, OBLIGATIONS AND REPRESENTATIONS OF LIMITED PARTNERS
-----------------------------------------------------------
6.1 Liability of Limited Partners. Except in the case of a Limited
-----------------------------
Partner who is also a General Partner:
(A) No Limited Partner shall have any personal liability with
respect to the liabilities or obligations of the Partnership
except to the extent that he expressly and voluntarily assumes
in writing any obligations of the Partnership; and
(B) No Limited Partner shall be personally liable or obligated,
except as otherwise required by law, either (1) to pay to the
Partnership, any other Partner or any creditor of the Partnership
any deficiency in his Capital Account, or (2) to return to the
Partnership or to pay any creditor or any other Partner the
amount of any return of his Capital Contribution to him or other
distribution made to him.
7. ALLOCATIONS OF INCOME AND LOSS FROM OPERATIONS;
-----------------------------------------------
CASH FLOW DISTRIBUTIONS
-----------------------
7.1 Allocation of Profits, Losses and Credits. All losses, profits
-----------------------------------------
and credits shall be allocated for purposes of Federal, state
and municipal income taxes to the Partners in accordance with
their Percentage Interests. The term "profits" and "losses" as
used in this Article 7 shall mean taxable income and losses as
determined for Federal income tax purposes using the accounting
methods followed by the Partnership.
7.2 Distributions of Net Cash Flow. For all periods prior to
------------------------------
dissolution and liquidation of the Partnership in accordance
with Article 9 hereof, all Net Cash Flow shall be distributed
according to the Percentage Interests of the Partners.
7.3 Timing and Amounts of Distributions from Net Cash Flow. Net Cash
------------------------------------------------------
Flow for any fiscal year shall be distributed by the General
Partner at such times and in such amounts as it shall determine
in its sole discretion.
8. ACCOUNTING AND TAX MATTERS
--------------------------
8.1 Books and Records. The General Partner shall keep, or cause to
-----------------
be kept, complete and accurate books of account of the
Partnership's affairs. The books of account shall be kept on the
cash receipts and disbursements method or the accrual method as
the General Partner may elect. Said books of account, together
with all correspondence, papers and other documents, shall be
open for examination by any Partner at the executive office of
the Partnership during reasonable business hours.
-11-
<PAGE>
8.2 Fiscal Year. The fiscal year and the taxable year of the
-----------
Partnership shall end as of December 31 of each year; subject to
the right of the General Partner to change the fiscal year and
taxable year of the Partnership.
8.3 Partnership's Accountant. The Partnership's accountant and
------------------------
regular independent auditors (the "Partnership Accountant")
shall be selected or changed by the General Partners from time
to time.
8.4 Tax Matters Partner. Holdings is hereby designated as the "Tax
-------------------
Matters Partner" in accordance with Section 6231(a)(7) of the
Code and, in connection therewith and in addition to all other
powers given thereunder, shall have all other powers needed to
fully perform hereunder, including, without limitation, the
power to retain all attorneys and accountants of his choice.
Such General Partner shall give notice to each other Partner of
a Partnership audit. The designation made in this paragraph is
hereby expressly consented to by each Partner as an express
condition to becoming a Partner.
8.5 Federal Income Tax Elections. In the event of a distribution of
----------------------------
property to a Partner or the transfer of an interest in the
Partnership by sale, exchange or upon the death of a Partner,
the General Partner may, in its discretion, cause the Partnership to
file an election under Section 754 of the Code in accordance with the
Regulations promulgated thereunder to adjust the basis of Partnership
property in the manner provided in Sections 734 and 743 of the Code.
All other elections required or permitted to be made by the
Partnership under the Code shall be made by the General Partner in
such manner as in its reasonable judgment will be most advantageous to
the Partners. The General Partner may, in its discretion, make an
election under Section 754 of the Code and the General Partner shall
be absolved from all liability for any and all consequences to any
previously admitted or subsequently admitted Partners resulting from
its making or failing to make such election. Upon request each of the
Partners will supply the information necessary to give proper effect
to any such election.
8.6 Deposit of Partnership Funds. All revenues, assessments, bank
----------------------------
loan proceeds and other receipts will be deposited and maintained in
such account or accounts and all expenses, costs and the like will be
paid from such account or accounts by the General Partner for
Partnership purposes. Partnership revenue and proceeds of borrowings
by the Partnership will be maintained on deposit (including time
deposits) in such account or accounts, with or without interest, or
invested in short-term governmental securities, certificates of
deposit, or commercial paper as the General Partner, in its reasonable
discretion, deems advisable. Partnership funds on deposit shall be
withdrawn on the signature or oral authorization of the General
Partner or such other person or persons as the General Partner shall
authorize. Any interest or other income generated by such deposits or
investments will be for the Partnership's account. Partnership funds
from any of the various sources mentioned above may not be commingled
with the separate
-12-
<PAGE>
funds of the General Partner or its Affiliates or any other person,
partnership or entity, and may be withdrawn, expended and distributed
only as authorized by the terms and provisions of this Agreement.
9. TERM AND DISSOLUTION
--------------------
9.1 Term. The term of the Partnership commenced on the date of the
----
filing of the Certificate and shall continue until terminated
pursuant to the provisions of this Agreement.
9.2 Dissolution. The Partnership shall be dissolved and shall
-----------
terminate and wind-up its affairs upon the first to occur of the
following:
(A) The determination by the General Partner that the
Partnership should be dissolved;
(B) The entry of a final judgment, order or decree of a court
of competent jurisdiction adjudicating the Partnership to
be a bankrupt, and the expiration of the period, if any,
allowed by applicable law in which to appeal therefrom;
(C) The resignation, removal, dissolution, adjudication of
bankruptcy or incompetence or the death of a General
Partner if (1) there is no remaining General Partner or
(2) if a successor General Partner is not timely
designated in accordance with Article 11 hereof;
(D) The sale of the CATV System or otherwise of all or
substantially all Partnership assets; or
(E) Any other event which under applicable law results in the
dissolution of the Partnership, unless the intent to dissolve
upon the occurrence of such event is expressly negated by the
provisions of this Agreement.
9.3 Obligation to Repay Negative Capital Accounts. Upon the dissolution of
---------------------------------------------
the Partnership and liquidation of its assets pursuant to Section
9.4(A)(2), any General Partner who has a negative balance in his
Capital Account shall be obligated to pay to the Partnership, in cash,
an amount equal to such negative balance, which amount shall be
applied and distributed as provided in Section 9.4 hereof; provided,
--------
however, that in no event shall the obligation of the General Partner
-------
under this Section 9.3 exceed the aggregate amount of $50,000.
Notwithstanding the foregoing, upon the dissolution and liquidation of
the Partnership, the General Partner will in all events contribute to
the Partnership an amount equal to the lesser of (I) the deficit
balance in their Capital Accounts; or (ii) the excess of 1.01 percent
of the total Capital Contributions of the Limited
-13-
<PAGE>
Partners over the Capital Contributions previously contributed by
the General Partner.
9.4 Gain, Loss, and Distribution on Liquidation. Upon the dissolution
-------------------------------------------
of the Partnership pursuant to Section 9.2, each of the following
shall occur:
(A) The General Partner, or in the event of the resignation,
death, adjudication of insanity or bankruptcy of the last
remaining General Partner such liquidating agents as may be
appointed by a majority of the Partners, shall:
(1) Cause to be prepared a statement setting forth the assets
and liabilities of the Partnership as of the date of the
termination or dissolution, and such statement shall be
furnished to all Partners;
(2) Liquidate the Partnership assets as promptly as possible in
an orderly and businesslike manner so as not to involve
undue detriment;
(3) Proceed to collect from the Partners the amounts , if any,
required to be paid pursuant to Section 9.3 hereof in
respect of negative balances, if any, in their respective
Capital Accounts; and
(4) Distribute the assets of the Partnership in accordance with
Section 9.4(D).
(B) Any income or gain as determined for Federal income tax purposes
realized by the Partnership upon the sale of the CATV System or
all or substantially all of the Partnership assets (after
crediting or charging thereto the appropriate portion of all net
income, net losses and other items for the then current year, and
all depreciation for such year), and after giving effect to all
amounts distributed or to be distributed for such year from
operations prior to the time of liquidation, shall be allocated
to the Capital Accounts of the Partners in accordance with the
allocation provisions of Section 7.1 hereof.
(C) Any net loss incurred by the Partnership upon the sale or other
disposition of assets upon termination or dissolution pursuant to
this Section 9.4 shall be charged to the Capital Accounts of the
Partners (after crediting or charging thereto the appropriate
portion of all net income, net losses and other items and all
depreciation for such year, and after giving effect to all
distributions for such year) in accordance with the allocation
provisions of Section 7.1 hereof.
(D) In the case of the liquidation and dissolution of the
Partnership, the proceeds from the sale or other disposition of
the assets of the Partnership
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<PAGE>
shall be applied and distributed as follows and in the following
order of priority:
(1) To the payment of the debt and liabilities of the
Partnership; and
(2) The remaining balance, if any, in accordance with the
positive balances in the Partners' Capital Accounts.
10. TRANSFERS OF PARTNERSHIP INTERESTS
----------------------------------
10.1 Binding Effect and Benefit of this Agreement. This Agreement
--------------------------------------------
shall be binding upon, and shall inure to the benefit of, the parties
hereto and their respective heirs, executors, administrators,
successors and assigns.
10.2 Transfer of Partner's Interests in the Partnership. Except as
--------------------------------------------------
otherwise provided in this Agreement, the Partners shall have the
right to transfer their interests in the Partnership as provided in
the Act. No sale or other disposition of the interest of a Limited
Partner shall be made except in accordance with the Securities Act and
the rules and regulations promulgated thereunder and any applicable
state securities laws and regulations, as the same may be amended from
time to time, and upon request of the General Partner, an opinion of
counsel satisfactory to the General Partner to the effect that the
transfer as proposed to be made will comply in all respects with the
Securities Act, the rules and regulations promulgated thereunder, and
any applicable state securities laws and regulations. A Limited
Partner who proposes to transfer any or all of its limited partnership
interest in the Partnership shall be required to pay to the
Partnership a sum sufficient to cover all reasonable expenses
(including legal and accounting fees) in connection with the General
Partner's consideration and processing of such proposed transfer. No
transfer or assignment of a Limited Partner's interest in the
Partnership may be made without the prior written consent of the
General Partner, which consent, may be given or withheld in the sole
discretion of the General Partner.
10.3 Substitution of a Limited Partner.
---------------------------------
(A) No assignee (including, without limitation, any transferee, heir,
legatee or purchaser) of all or any part of a Partnership
interest of a Limited Partner shall be substituted as a Limited
Partner without the prior written consent of he General Partner.
The consent of the General Partner within its sole discretion and
in no event shall such consent be given unless the assignee shall
have:
(1) Accepted and assumed, in form satisfactory to the General
Partner, all the terms and provisions of this Agreement;
-15-
<PAGE>
(2) Provided, if requested by the General Partner, an opinion of
counsel, in form and substance satisfactory to counsel for
the Partnership, that neither the offering nor the
assignment of the Partnership interest violates any
registration provision of any Federal or State securities or
comparable law;
(3) Executed such other documents or instruments, or provided
such other opinions of counsel, as the General Partner may
require to effect the admission of such assignee as a
substituted Limited Partner; and
(4) Paid all legal, accounting, recording and other expenses as
the Partnership may incur in connection with such
substitution.
(B) The term "Limited Partner" as used in this Agreement shall
include the assignee of the whole or part of a Partnership
interest of a Limited Partner only if such assignee shall have
become a substituted Limited Partner in accordance with this
Agreement.
(C) The General Partner is authorized without requesting the consent
of the Limited Partners in each case, to amend this Agreement and
the Certificate to reflect the admission of any person complying
with the aforesaid provisions of Section 10.3(A) and each Partner
agrees to execute such amendment or authorizes the General
Partner to executes such amendment on its/his behalf.
10.4 Amendment of Certificate. After a person has become an additional
------------------------
or substituted Partner, the General Partner shall cause an amendment
to the Certificate to be prepared and recorded promptly, and each
Limited Partner agrees that his attorney-in-fact (appointed in
accordance with Section 12.2 hereof) may execute such amendment on his
behalf and each General Partner who may hereafter withdraw from the
Partnership appoints any remaining or successor General Partner his
attorney-in-fact and agrees that said attorney-in-fact may execute
such amendment on his behalf. However, the Partnership shall recognize
the substituted Partner by no later than ten days after the date on
which such assignee satisfies the conditions of this Article 10, even
if the amendment to the Certificate is filed subsequently.
11. WITHDRAWAL OF GENERAL PARTNER, SUCCESSOR GENERAL PARTNER
--------------------------------------------------------
11.1 Removal or Bankruptcy of a General Partner. A General Partner may be
------------------------------------------
removed by the action of two-thirds of the Percentage Interest of the
other Partners in the Partnership only for specified conduct
constituting gross negligence, willful misconduct and material breach
of this Agreement and such action shall effectuate
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<PAGE>
the removal of such General Partner until such time as a court of
competent jurisdiction shall determine that such specified conduct did
not constitute gross negligence, willful misconduct or material breach
of this Agreement. A General Partner shall be automatically removed
without action by the Partners in the event of his filing of a
voluntary petition in bankruptcy, the filing of an involuntary
petition in bankruptcy against him which is not withdrawn within 30
days of such filing or a final adjudication of bankruptcy against him.
Notwithstanding the foregoing, no General Partner shall be removed
until such General Partner shall have been indemnified by the
Partnership regarding Partnership obligations arising after the
effective date of his or its removal. However, the foregoing sentence
of this Section shall not reduce the General Partner's liability for
his willful misconduct, gross negligence or material breach of this
Agreement.
11.2 Removal or Bankruptcy of Last Remaining General Partner. The
-------------------------------------------------------
removal, filing of a voluntary petition in bankruptcy, filing of an
involuntary petition in bankruptcy which is not withdrawn within 30
days of such filing or a final adjudication of bankruptcy of the last
remaining General Partner will cause the dissolution of the
Partnership unless within 60 days of such event Adelphia
Communications Corporation, or its designated Affiliate acceptable to
a majority of the Limited Partners, agrees to become the successor
General Partner. If Adelphia refuses to become or to designate an
Affiliate to become the successor General Partner or, if at the time
of the removal or final adjudication of bankruptcy of such General
Partner, Adelphia is no longer an Affiliate of the General Partner,
then a majority of the Limited Partners may elect a successor General
Partner not later than 90 days after the expiration of the
aforementioned 60 day period. A person or entity who becomes a
successor General Partner pursuant to this Section 11.2, shall
immediately upon such succession receive a one percent interest in all
allocations and distributions of the Partnership otherwise allocable
to the former General Partner and the Partnership interest of the
former General Partner shall be reduced by said one percent interest
transferred to the successor General Partner.
11.3 Purchase of Former General Partner's Interest. In the event of the
---------------------------------------------
removal or withdrawal of a General Partner pursuant to Section 11.1
and the continuation of the Partnership under either the successor
General Partner or any remaining General Partner and unless the former
General partner and successor or remaining General Partner agree on
the terms of a purchase of the former General Partner's interest by
the successor or remaining General Partner, such successor or
remaining General Partner, at his sole election, may request that a
valuation of the former General Partner's interest at the time of
withdrawal (which shall exclude the one percent interest transferred
to the successor General Partner under Section 11.2) be made by two
independent appraisers, one selected by the former General Partner (or
his legal representative) and one selected by the successor General
Partner. In the event such two appraisers are unable to agree on the
valuation, they shall jointly appoint a third independent appraiser
whose determination shall
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<PAGE>
be final and binding. The former General Partner and the successor or
remaining General Partner shall each forfeit their respective right to
have an appraisal made by an appraiser selected by him if his
appraiser shall fail to render such appraisal within 60 days after the
successor General Partner is designated or, if a General Partner is
remaining, within 60 days after the removal or final adjudication of
bankruptcy of the former General Partner. The former General Partner
and the successor or remaining General Partner shall each bear the
fees of the appraiser he selects and they shall share equally the fees
of the third appraiser, if any. The successor or remaining General
Partner shall be entitled, at his sole election, to purchase all or
any portion of the former General Partner's interest at 90% of the
appraised valuation either agreed to by the first two appraisers or
determined by the third appraiser, as the case may be. Unless the
former General Partner and the successor or remaining General Partner
otherwise agree, the purchase price shall be payable by the delivery
of a nonrecourse promissory note (secured only by the Partnership
interest so acquired) payable in five equal annual installments,
subject to acceleration upon the liquidation of the Partnership, and
bearing simple interest at the rate of 9% per annum. In the event that
all of the former General Partner's interest is not sold or otherwise
transferred to the successor or remaining General Partner, the former
General Partner shall be treated as provided in Section 11.5 hereof.
Notwithstanding the foregoing, any successor or last remaining General
Partner must at all times maintain at least a 1% interest in all items
of Partnership income, gain, loss, deduction and credit.
11.4 Continuation of the Partnership After Death, Incompetence or
------------------------------------------------------------
Resignation of Last Remaining General Partner. Within 120 days
---------------------------------------------
after the withdrawal by the last remaining General Partner because of
his death, final adjudication of incompetence or resignation, the
former General Partner (or his executor, administrator, conservator or
other personal representative) shall designate as successor General
Partner either Adelphia or an Affiliate of Adelphia (if at that time
Adelphia is an Affiliate of the General Partner) or other person or
entity who is approved by a majority of the Limited Partners. A person
or entity who becomes a successor General Partner pursuant to this
Section 11.4 shall immediately upon such succession receive a one
percent interest in all allocations and distributions of the
Partnership otherwise allocable to the former General Partner and the
Partnership interest of the former General Partner shall be reduced by
said one percent interest transferred to the successor General
Partner. All or any portion of the remainder of the former General
Partner's interest may be transferred to the successor General Partner
on such terms as they shall agree and, if they fail to agree, then the
interest of such former General Partner, at the sole election of the
successor General Partner, may be appraised and sold to the successor
General Partner in the manner described in Section 11.3. Any portion
of such former General Partner's interest which is not transferred to
the successor General Partner shall be treated as provided in Section
11.5. The last remaining General Partner may resign from the
Partnership only by designating as successor
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<PAGE>
General Partner either Adelphia, an Affiliate of Adelphia or a person
or entity who is approved by a majority of the Limited Partners prior
to his resignation.
11.5 Status of Former General Partner. If any General Partner is
--------------------------------
removed pursuant to Section 11.1, or withdraws pursuant to Section
11.4, and does not sell or otherwise transfer all his Partnership
interest to the successor or remaining General Partner, such former
General Partner's interest shall be converted to a special class of
limited partner interest with respect to that portion of Partnership
interest retained by him and, as such, shall not have any right to
participate in the management of the business of the Partnership,
shall not be deemed a Limited Partner for purposes of any action
requiring the approval of Limited Partners, shall not be entitled to
vote on any Partnership matter and shall not be entitled to any amount
or distribution allocable or payable to or among the Limited Partners.
Such special limited partner shall be entitled to all allocations and
distributions which would have been allocable or payable if such
special limited partner had remained a General Partner, with respect
to that portion of his Partnership interest not transferred to the
successor General Partner pursuant to Section 11.2 or Section 11.4, as
the case may be, or not sold pursuant to Section 11.3 or Section 11.4,
as the case may be.
11.6 Additional General Partners. An additional General Partner may be
---------------------------
designated by the General Partners at any time upon the consent of a
majority of the Limited Partners upon and subject to execution of this
Agreement as a party hereto and such other documents and instruments
as may be necessary or appropriate to affect the admission of such
person as a General Partner. Any such additional General Partner shall
have all the rights and obligations of a General Partner, provided
that the amount of his interest in the allocations and distributions
of the Partnership shall be as agreed to among the General Partners
and such additional General Partner.
12. GENERAL PROVISIONS
------------------
12.1 Certificates, etc. At the expense of the Partnership, the General
-----------------
Partner shall promptly have prepared and executed all legally required
fictitious name or other applications, registrations, publications,
certificates and affidavits for filing with the proper governmental
authorities and have arranged for the proper advertisement,
publication and filing of record thereof.
12.2 Partners' Relationships Inter Se. Nothing herein contained shall
--------------------------------
be construed to constitute any Partner the agent of any other Partner,
except as expressly provided herein, or in any manner to limit the
Partners in the carrying on of their own respective business or
activities.
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<PAGE>
12.3 Notices, etc. Except as otherwise expressly provided herein, all
------------
notices which are required or contemplated by this Agreement shall be
in writing. Delivery of such notices shall be deemed to be made when
the same are either personally served upon the person entitled thereto
or deposited in the mails, by certified or registered mail, with
postage prepaid or delivered to the telegraph company, addressed to
such person at his last known mailing address.
12.4 Integration and Amendments. This Agreement represents the entire
--------------------------
understanding of the parties with respect to the subject matter
hereof. No termination, revocation, waiver, modification or amendment
of this Agreement shall be binding unless in writing and approved by
the General Partners and a majority of the Limited Partners; provided,
--------
however, that approval of the Limited Partners shall not be required
-------
in the case of any amendment or supplement made to this Agreement by
the General Partners pursuant to this Section 12.4 of any other
provision of this Agreement specifically authorizing such amendment or
supplement to be made without the approval of such Partners; and,
provided, further, that no amendment or supplement shall be made to
-----------------
this Agreement if such amendment or supplement would: (a) result in
the loss of any Limited Partner's limited liability; (b) amend this
Section 12.4, or (c) amend Articles 3, 7 and/or 9 of this Agreement,
in each such case, in a manner which would have a materially adverse
effect upon the Limited Partners, without the unanimous consent of
such Partners. A Partner shall be deemed to have consented to any
amendment or supplement hereto if he does not respond in writing to a
written request for such approval, accompanied by the text of the
proposed amendment or supplement, within 30 days after the date of
mailing of the same to him by a General Partner. Notice of any
amendment or supplement made to this Agreement shall be sent to all of
the Partners. Notwithstanding the foregoing, the General Partner is
specifically authorized, without being required to obtain the approval
of the Limited Partners to enter into any amendment to this Agreement
which it shall deem necessary or desirable in order to satisfy any
requirements, conditions, guidelines or options contained in any
opinion, directive, order, ruling or regulation of the Securities and
Exchange Commission, the Internal Revenue Service or any other
Federal, state or local governmental authority or agency, or to comply
with any Federal, state or local law, rule or regulation of any
judgment, decree, writ, injunction or order of any court,
administrative agency , arbitrator or governmental authority or
agency.
12.5 Interpretation. This Agreement shall be interpreted and construed
--------------
in accordance with the laws of the State of Delaware. As used in this
Agreement, the masculine gender shall include the feminine or neuter
gender, and the plural shall include the singular wherever
appropriate. The titles of the Articles and Sections herein have been
inserted as a matter of convenience of reference only and shall not
control or affect the meaning or construction of any of the terms or
provisions hereof.
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<PAGE>
12.6 Counterparts. The parties hereto may execute this Agreement in any
------------
number of counterparts, each of which, when executed and delivered,
shall be an original; but all such counterparts shall constitute one
and the same instrument.
[REMAINDER OF PAGE INTENTIONALLY BLANK]
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this Limited
Partnership Agreement on the date and year first above written.
GENERAL PARTNER:
ADELPHIA GP HOLDINGS, LLC
By: ACC Operations, Inc., Sole Member
By:/s/ Michael J. Rigas
--------------------
Name: Michael J. Rigas
Title: Vice President
LIMITED PARTNER:
ACC OPERATIONS, INC.
By: /s/Michael J. Rigas
-------------------
Name: Michael J. Rigas
Title: Vice President
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<PAGE>
EXHIBIT 10.21
AMENDMENT NO. 2
AMENDMENT NO. 2 dated as of July 15, 1999, between FRONTIERVISION OPERATING
PARTNERS, L.P., a limited partnership duly organized and validly existing under
the laws of the State of Delaware (the "Company"); each of the Subsidiaries of
-------
the Company identified under the caption "SUBSIDIARY GUARANTORS" on the
signature pages hereto (individually, a "Subsidiary Guarantor" and, collectively
--------------------
the "Subsidiary Guarantors" and, together with the Company, the "Obligors"); and
--------------------- --------
THE CHASE MANHATTAN BANK, in its capacity as Administrative Agent pursuant to
authority granted by the Majority Lenders pursuant to Section 11.04 of the
Credit Agreement (as defined below).
The Company, certain lenders, The Chase Manhattan Bank, as Administrative
Agent, J.P. Morgan Securities Inc., as Syndication Agent, and CIBC Inc., as
Documentation Agent, are parties to a Second Amended and Restated Credit
Agreement dated as of December 19, 1997 (as heretofore amended, the "Credit
------
Agreement"). The Obligors and the Administrative Agent (pursuant to the
- ---------
authority granted by, and having obtained all necessary consents of, the
Majority Lenders) wish to amend the Credit Agreement in certain respects and,
accordingly, the parties hereto hereby agree as follows:
Section 1. Definitions. Except as otherwise defined in this Amendment No. 2,
-----------
terms defined in the Credit Agreement are used herein as defined therein.
Section 2. Amendments. The Credit Agreement shall be amended as follows:
----------
Section 2.01. Certain Defined Terms. Section 1.01 of the Credit Agreement is
---------------------
amended by adding the following new defined terms (to the extent not already
included in said Section 1.01) and inserting the same in the appropriate
alphabetical locations, and amending the following defined terms (to the extent
already included in said Section 1.01) to read in their entirety, as follows:
"1999 Acquisition Transaction" shall mean the acquisition by Adelphia
----------------------------
pursuant to the Purchase Agreement dated as of February 22, 1999 (the
Purchase Agreement") among FrontierVision LP, FVP GP, L.P., the Direct and
------------------
Indirect Limited Partners of FrontierVision LP party thereto and Adelphia
of all the partnership interests in FrontierVision LP.
"Adelphia" shall mean Adelphia Communications Corporation.
--------
"Change of Control" shall mean any event that requires the Company or
-----------------
FrontierVision Capital pursuant to the provisions of the Senior
Subordinated Debt Documents (or any other agreement or instrument relating
to or providing for any other Subordinated Indebtedness), or that requires
FrontierVision Holdings, FrontierVision Holdings Capital Corporation or
FrontierVision Holdings II Capital Corporation pursuant to the Senior
Discount Debt Documents, to redeem or repurchase, or make an offer to
redeem or repurchase, all or any portion of the Subordinated Indebtedness,
or the Senior Discount
Amendment No. 2
---------------
<PAGE>
-2-
Debt, as a result of a change of control (as defined in the Senior
Subordinated Debt Documents or any other agreement or instrument relating
to or providing for any other Subordinated Indebtedness or the Senior
Discount Debt Documents), provided that the term "Change of
--------
Control" shall not include any such event that occurs as a result of the
1999 Acquisition Transaction.
"Debt Ratio" shall mean, as at any date (but subject in any event to
----------
the provisions of Section 8.10(e) hereof), the ratio of:
(a) the sum of the aggregate amount of all Indebtedness (other
than Junior Subordinated Indebtedness) of the Company and its
Restricted Subsidiaries and all letters of credit contemplated by
Section 8.07(e) hereof, but excluding all performance bonds
contemplated by said Section as at such date minus, for purposes of
-----
Section 8.10(b) only (and not for purposes of the definition of
"Applicable Margin"), for any date on or before March 30, 2000,
$20,000,000 to
--
(b) the product of EBITDA for the fiscal quarter ending on, or
most recently ended prior to such date times four.
-----
"Debt Service" shall mean, for any period, the sum, for the Company
------------
and its Restricted Subsidiaries (determined on a consolidated basis without
duplication in accordance with GAAP), of the following: (a) in the case of
Loans under this Agreement, the aggregate amount of payments of principal
of such Loans that, giving effect to Commitment reductions or terminations
scheduled to be made during such period pursuant to Section 2.03 hereof,
were required to be made pursuant to Section 3.01 hereof during such period
plus (b) in the case of all other Indebtedness, all regularly scheduled
----
payments or prepayments of principal of such Indebtedness (including,
without limitation, the principal component of any payments in respect of
Capital Lease Obligations but excluding prepayments of principal in respect
of Junior Subordinated Indebtedness) made or payable during such period
plus (c) all Interest Expense for such period (excluding, however, non-cash
----
amortization of loan facility fees and other deferred debt costs, in each
case to the extent included in determining Interest Expense for such
period).
"Initial Equityholders" shall mean, collectively, (i) J.P. Morgan
---------------------
Investment Corp., (ii) 1818 II Cable Corp., (iii) Olympus Cable Corp., (iv)
First Union Capital Partners, Inc., (v) any Control Affiliate of any of the
foregoing entities, (vi) any limited partnership of which any Control
Affiliate of any of the foregoing entities is the sole general partner (so
long as the aggregate equity interests of FrontierVision LP that shall have
been transferred to all such limited partnerships by any such entity shall
not exceed 25% of the aggregate equity interests held by such entity in
FrontierVision LP) and (vii) following consummation of the 1999 Acquisition
Transaction, Adelphia.
"Interest Expense" shall mean, for any period, the sum, for the
----------------
Company and its Restricted Subsidiaries (determined on a consolidated basis
without duplication in
Amendment No. 2
---------------
<PAGE>
-3-
accordance with GAAP), of the following: (a) all interest in respect of
Indebtedness (including, without limitation, the interest component of any
payments in respect of Capital Lease Obligations but excluding all interest
in respect of Junior Subordinated Indebtedness) accrued or capitalized
during such period (whether or not actually paid during such period) plus
----
(b) the net amount payable (or minus the net amount receivable) under
-----
Interest Rate Protection Agreements during such period (whether or not
actually paid or received during such period).
"Junior Subordinated Indebtedness" shall mean the Indebtedness of the
--------------------------------
Company in respect of junior subordinated notes, in the form attached
hereto as Exhibit J, issued from time to time to Adelphia.
"Subordinated Indebtedness" shall mean, collectively, (i) the
-------------------------
Indebtedness of the Company and FrontierVision Capital in respect of the
senior subordinated notes of the Company and FrontierVision Capital due
2006 issued pursuant to the Senior Subordinated Debt Indenture and (ii) the
Junior Subordinated Indebtedness."
Section 2.02. EBITDA. Paragraph (b) of the definition EBITDA in
------
Section 1.01 of the Credit Agreement is hereby amended to read in its entirety
as follows:
"(b) all operating expenses for such period, including, without
limitation, technical, programming, selling and general administration
expenses incurred by the Company and its Restricted Subsidiaries during
such period, but excluding (to the extent included in operating expenses)
depreciation, amortization, Interest Expense, interest in respect of Junior
Subordinated Indebtedness, any non-cash charges (including, without
limitation, non-cash pension expenses and any Tax Payment Amount for the
relevant period), any non-recurring expenses incurred in connection with
the 1999 Acquisition Transaction, including but not limited to employee
severance expenses (provided that such expenses are recognized in
accordance with GAAP prior to the fiscal year ending December 31, 1999)
plus"
-----
Section 2.03. Financial Statements Etc. Section 8.01 (a), (b) and (f)
------------------------
of the Credit Agreement are hereby amended to read their entirety as follows:
"(a) as soon as available and in any event within 90 days after the
end of each of the first three quarterly fiscal periods of each fiscal year
of the Company, consolidated statements of income, changes in partners'
capital and cash flows of the Company and its Subsidiaries (and, separately
stated, for the Company and its Restricted Subsidiaries) for such period
and for the period from the beginning of the respective fiscal year to the
end of such period, and the related consolidated balance sheets of the
Company and its Subsidiaries (and, separately stated, for the Company and
its Restricted Subsidiaries) as at the end of such period, setting forth in
each case in comparative form the corresponding consolidated figures for
the corresponding periods in the preceding fiscal year (except that, in the
case of balance sheets, such comparison shall be to the last day of the
prior fiscal year), accompanied by a certificate of a Senior Officer, which
certificate shall state that said
Amendment No. 2
---------------
<PAGE>
-4-
consolidated financial statements fairly present the consolidated financial
condition and results of operations of the Company and its Subsidiaries (or
the Company and its Restricted Subsidiaries, as the case may be), in each
case in accordance with generally accepted accounting principles,
consistently applied, as at the end of, and for, such period (subject to
normal year-end audit adjustments), provided that the requirements of this
--------
Section 8.01(a) with respect to financial statements of the Company and its
Subsidiaries may be satisfied by delivery by the Company (in accordance
with this Section 8.01(a)) of the Company's quarterly report filed on Form
10-Q with the Securities and Exchange Commission;
(b) as soon as available and in any event within 120 days after the
end of each fiscal year of the Company, consolidated statements of income,
changes in partners' capital and cash flows of the Company and its
Subsidiaries (and, separately stated, for the Company and its Restricted
Subsidiaries) for such fiscal year and the related consolidated balance
sheets of the Company and its Subsidiaries (and, separately stated, for the
Company and its Restricted Subsidiaries) as at the end of such fiscal year,
setting forth in each case in comparative form the corresponding
consolidated figures for the preceding fiscal year, accompanied by an
opinion thereon of independent certified public accountants of recognized
national standing, which opinion shall state that said consolidated
financial statements fairly present the consolidated financial condition
and results of operations of the Company and its Subsidiaries (or the
Company and its Restricted Subsidiaries, as the case may be) as at the end
of, and for, such fiscal year in accordance with generally accepted
accounting principles, and a statement of such accountants to the effect
that, in making the examination necessary for their opinion, nothing came
to their attention that caused them to believe that the Company was not in
compliance with Sections 8.07, 8.08, 8.09 or 8.10 hereof as at the end of
such fiscal year, insofar as such Sections relate to accounting matters in
accordance with generally accepted accounting principles, consistently
applied, as at the end of, and for, such fiscal year, provided that the
--------
requirements of this Section 8.01(b) with respect to financial statements
of the Company and its Subsidiaries may be satisfied by delivery by the
Company (in accordance with this Section 8.01(b)) of the Company's annual
report filed on Form 10-K with the Securities and Exchange Commission;
(f) concurrently with the delivery of financial statements referred
to in paragraphs (a) and (b) above, a Quarterly Officer's Report as at the
end of such periods;"
Section 2.04. Indebtedness. Section 8.07 of the Credit Agreement is
------------
hereby amended by deleting the word "and" at the end of paragraph (e) thereof,
adding the word "and" at the end of paragraph (f) thereof and by adding new
paragraph (g) at the end thereof to read in its entirety as follows:
"(g) Junior Subordinated Indebtedness."
Section 2.05. Subordinated Indebtedness; Other Equity Interests.
-------------------------------------------------
Section 8.13(b) of the Credit Agreement is hereby amended by adding the
following paragraph at the end thereof to read in its entirety as follows:
Amendment No. 2
---------------
<PAGE>
-5-
"Notwithstanding the foregoing, the Company may make payments in
respect of principal and interest on Junior Subordinated Indebtedness if at
the time of such payments and after giving effect thereto (i) the Debt
Ratio shall not exceed 5.00 to 1, and (ii) at the time of such payments and
after giving effect thereto no Default shall have occurred and be
continuing."
Section 2.06. Events of Default. Sections 9(m)(ii) and (iii) of the
-----------------
Credit Agreement shall be amended to read in their entirety as follows:
"(ii) at any time prior to the consummation of the 1999 Acquisition
Transaction, either James Vaughn or John S. Koo shall, for any reason,
cease to be actively involved in the day to day management and operation of
the Company and its Subsidiaries (and Persons with equivalent knowledge and
experience in the cable television industry reasonably acceptable to the
Majority Lenders are not appointed to replace one or both of the them
within 90 days thereof); or
"(iii) prior to a Qualified Public Offering, either (x) the Initial
Equityholders shall cease to own, collectively, on a fully-diluted basis
(in other words, giving effect to the exercise of any warrants, options and
conversion and other rights), equity interests representing at least 51% of
the aggregate fair market value (or, if greater, the aggregate liquidation
value) of the equity interests of all classes of FrontierVision LP or (y)
James Vaughn or John S. Koo shall sell, transfer, hypothecate or otherwise
dispose of more than 50% of their direct or indirect economic interest in
FrontierVision LP (other than any transfer to the spouse of either of such
individuals, to his immediate family members, to trusts for the benefit of
such spouse or immediate family members or pursuant to the 1999 Acquisition
Transaction); or"
Section 2.07. Exhibits. The Credit Agreement shall be amended by
--------
adding Exhibit J thereto to read in its entirety as Exhibit J hereto.
Section 3. Miscellaneous. Except as herein provided, the Credit
-------------
Agreement shall remain unchanged and in full force and effect. This Amendment
No. 2 may be executed in any number of counterparts, all of which taken together
shall constitute one and the same amendatory instrument and any of the parties
hereto may execute this Amendment No. 2 by signing any such counterpart. This
Amendment No. 2 shall be governed by, and construed in accordance with, the law
of the State of New York.
Amendment No. 2
---------------
<PAGE>
-6-
IN WITNESS WHEREOF, the parties hereto have caused this Amendment No. 2 to be
duly executed and delivered as of the day and year first above written.
FRONTIERVISION OPERATING
PARTNERS, L.P.
By: FrontierVision Holdings, L.P., as general partner
of FrontierVision Operating Partners, L.P.
By: FrontierVision Partners, L.P., as
general partner of FrontierVision Holdings,
L.P.
By: FVP GP, L.P., as general partner of
FrontierVision Partners, L.P.
By: FrontierVision Inc., as
general partner of FVP GP, L.P.
By____________________________
Title:
SUBSIDIARY GUARANTORS
---------------------
By its signature below each Subsidiary Guarantor (i) consents to the
foregoing Amendment No. 2 and confirms that the obligations of the Company under
the Credit Agreement as herein amended and under the Notes (if any) and in
respect of Pari Passu Obligations are entitled to the benefits of the Subsidiary
Guarantee Agreement executed by each Subsidiary Guarantor, respectively, (and
shall constitute "Guaranteed Obligations" (as defined in such Subsidiary
Guarantee Agreement) under and for all purposes of such Subsidiary Guarantee
Agreement) and (ii) together with the Administrative Agent (acting with the
consent of the Majority Lenders under the Credit Agreement) agrees that
references in such Subsidiary Guarantee Agreement to the "Credit Agreement"
shall be deemed to be references to the Credit Agreement as amended herein.
FRONTIERVISION CAPITAL FRONTIERVISION CABLE NEW ENGLAND, INC.
CORPORATION
By____________________________ By____________________________
Title: Title:
Amendment No. 2
---------------
<PAGE>
-7-
ADMINISTRATIVE AGENT
--------------------
THE CHASE MANHATTAN BANK,
as Administrative Agent
By____________________________
Title:
Amendment No. 2
---------------
<PAGE>
EXHIBIT J
[Form of Junior Subordinated Note]
Junior Subordinated Note of
FrontierVision Operating Partners, L.P.
due ___________, _____
$____________ ____________, ____
New York, New York
FrontierVision Operating Partners, L.P., a limited partnership duly organized
and validly existing under the laws of the State of Delaware (the "Maker"), for
-----
value received, hereby promises to pay to [________] (the "Payee") the principal
-----
sum of [AMOUNT IN WORDS] ($___________) on ___________, ____ [not to be earlier
than one year after the latest maturity of all Loans under the Credit
Agreement], subject to the terms and conditions hereinafter set forth.
Section 1. Payment. The Maker shall pay the principal of this Junior
-------
Subordinated Note in immediately available funds at the offices of the Payee at
________________________ or at such other place as the Payee shall designate in
writing.
If any principal of this Junior Subordinated Note shall become due and
payable on any date other than a business day at the place of payment, the time
for the payment thereof shall be extended to the immediately succeeding business
day.
Notwithstanding anything to the contrary herein contained, the Maker
may make payments of principal hereunder only at such times and to the extent
permitted under the Credit Agreement. As used herein, the term "Credit
------
Agreement" shall mean, collectively, (i) the Second Amended and Restated Credit
- ---------
Agreement dated as of December 19, 1997, between the Maker, certain lenders, The
Chase Manhattan Bank as Administrative Agent, J.P. Morgan Securities Inc. as
syndication agent and CIBC Inc. as documentation agent, and (ii) any extension,
renewal, increase, modification or restatement thereof, or any agreement
refinancing any of the indebtedness thereunder, in each case as the same shall
from time to time be successively extended, renewed, increased, modified,
restated or refinanced.
Section 2. Interest. This Junior Subordinated Note shall bear interest
--------
at the rate of [a market interest rate, subject to approval of the
Administrative Agent], which interest shall be payable only at such times and to
the extent permitted by the Credit Agreement.
<PAGE>
-2-
Section 3. Prepayment. The Maker may prepay this Junior Subordinated
----------
Note, at any time in whole or in part without penalty or premium, provided that
no such prepayment shall be made to the extent not expressly permitted under the
Credit Agreement.
Section 4. Subordination. Anything in this Junior Subordinated Note to
-------------
the contrary notwithstanding, the indebtedness evidenced by this Junior
Subordinated Note shall be subordinate and junior in right of payment, to the
extent and in the manner hereinafter set forth, to all indebtedness or other
liabilities of the Maker outstanding from time to time including, without
limitation, (x) the Maker's obligation to principal, interest and other amounts
under the Credit Agreement, and (y) any interest accruing after the commencement
of any proceedings referred to in clause (ii) below, whether or not such
interest is an allowed claim in such proceeding (all such indebtedness or other
liabilities and interest being herein called "Senior Indebtedness"):
-------------------
(i) The holders of Senior Indebtedness shall be entitled to
receive payment in full in cash of all amounts constituting Senior
Indebtedness before the Payee is entitled to receive any payment on account
of this Junior Subordinated Note, provided that the Maker may make, and the
Payee shall be entitled to receive and retain from time to time, payments
and prepayments in respect of the principal and interest of this Junior
Subordinated Note to the extent permitted under Sections 1, 2 or 3 above.
(ii) In the event of any insolvency or bankruptcy proceedings,
and any receivership, liquidation, reorganization or other similar
proceedings in connection therewith, relative to the Maker or to its
creditors, as such, or to its property, and in the event of any proceedings
for voluntary liquidation, dissolution or other winding up of the Maker,
whether or not involving insolvency or bankruptcy, then the holders of
Senior Indebtedness shall be entitled to receive payment in full of all
amounts constituting Senior Indebtedness before the Payee is entitled to
receive, or make any demand for, any payment on account of this Junior
Subordinated Note, and to that end the holders of Senior Indebtedness shall
be entitled to receive for application in payment thereof any payment or
distribution of any kind or character, whether in cash or property or
securities.
(iii) If any payment or distribution of any character, whether
in cash, securities or other property, in respect of this Junior
Subordinated Note shall (despite these subordination provisions) be
received by the Payee before all Senior Indebtedness shall have been paid
in full in cash, such payment or distribution shall be held in trust for
the benefit of, and shall be paid over or delivered to, the holders of
Senior Indebtedness (or their representatives), ratably according to the
respective aggregate amounts remaining unpaid thereon, to the extent
necessary to pay all Senior Indebtedness in full.
No present or future holder of Senior Indebtedness shall be prejudiced
in its right to enforce subordination of this Junior Subordinated Note by any
act or failure to act on the part of the Maker or by any act or failure to act,
in good faith on the part of such holder or any trustee or agent for such
holder. The foregoing provisions are solely for the purpose of defining the
relative rights of the holders of Senior Indebtedness on the one hand, and the
Payee on the other
<PAGE>
-3-
hand, and nothing herein shall impair, as between the Maker and the Payee, the
obligation of the Maker, which is unconditional and absolute, to pay to the
Payee the principal hereof in accordance with the terms hereof, nor shall
anything herein prevent the Payee from exercising all remedies otherwise
permitted by applicable law in respect hereof, subject to the rights, if any,
under this Junior Subordinated Note of holders of Senior Indebtedness to receive
cash, property or securities otherwise payable or deliverable to the Payee.
Section 5. Subrogation. The Payee shall be subrogated to the rights of
-----------
the holders of such Senior Indebtedness to receive payments and distributions of
cash, property and securities applicable to the Senior Indebtedness until the
principal of, interest on, and other amounts owing pursuant to, the Senior
Indebtedness shall be paid in full in cash. For purposes of such subrogation, no
payments or distributions to the holders of Senior Indebtedness of any cash,
property or securities to which the Payee would be entitled except for the
provisions of Section 4, and no payments over pursuant to the provisions of
Section 4 to the holders of Senior Indebtedness by the Payee, shall, as between
the Maker, its creditors other than holders of Senior Indebtedness, and the
Payee, be deemed to be a payment or distribution by the Maker to or on account
of the Senior Indebtedness.
Section 6. Defaults. If after payment in full in cash of the Senior
--------
Indebtedness, any payment is not made when due hereunder, the Payee may declare
all amounts owing under this Junior Subordinated Note due and payable, provided
that if after repayment in full of the Senior Indebtedness, any payments of
Senior Indebtedness shall at any time be rescinded or otherwise must be returned
by the holder of any Senior Indebtedness, such demand, if made, shall be
automatically rescinded.
THIS JUNIOR SUBORDINATED NOTE SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAW OF THE STATE OF NEW YORK.
By: FrontierVision Partners, L.P., as
general partner of FrontierVision Holdings,
L.P.
By: FVP GP, L.P., as general partner of
FrontierVision Partners, L.P.
By: FrontierVision Inc., as general
partner of FVP GP, L.P.
By______________________
Title:
<PAGE>
Exhibit 21.1
Subsidiaries of the Registrant
<TABLE>
<C> <S>
Subsidiaries of the Registrant. (9)
FrontierVision Holdings, L.P. (a Delaware limited partnership)
FrontierVision Holdings Capital Corporation (a Delaware corporation)
FrontierVision Holdings Capital II Corporation (a Delaware corporation)
FrontierVision Operating Partners, L.P. (a Delaware corporation)
FrontierVision Operating Partners, Inc. (a Delaware corporation)
FrontierVision Capital Corporation (a Delaware corporation)
FrontierVision Access Partners, L.L.C. (a Delaware limited liability
company)
FrontierVision Cable New England, Inc. (a Delaware corporation)
New England Cablevision of Massachusetts, Inc. (a Maine corporation)
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION AS OF AND FOR THE NINE
MONTHS ENDED SEPT. 30, 1999 AND SUMMARY FINANCIAL INFORMATION AS OF AND FOR THE
THREE MONTHS ENDED DEC. 30, 1999, EXTRACTED FROM BALANCE SHEETS AND STATEMENTS
OF OPERATIONS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS CONTAINED IN THIS FORM 10K.
</LEGEND>
<CIK> 0001045710
<NAME> FRONTIERVISION HOLDINGS, LP
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 9-MOS 3-MOS
<FISCAL-YEAR-END> DEC-31-1999 DEC-31-1999
<PERIOD-END> SEP-30-1999 DEC-31-1999
<CASH> 95 7,412
<SECURITIES> 0 0
<RECEIVABLES> 11,068 13,800
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 0 0
<PP&E> 370,666 407,554
<DEPRECIATION> 0 0
<TOTAL-ASSETS> 1,187,399 2,221,105
<CURRENT-LIABILITIES> 0 0
<BONDS> 1,136,420 1,159,023
0 0
0 0
<COMMON> 0 0
<OTHER-SE> (58,540) 974,799
<TOTAL-LIABILITY-AND-EQUITY> 1,187,399 2,221,105
<SALES> 0 0
<TOTAL-REVENUES> 221,032 75,375
<CGS> 0 0
<TOTAL-COSTS> 256,226 63,763
<OTHER-EXPENSES> (8,961) 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 75,551 25,399
<INCOME-PRETAX> (101,784) (13,787)
<INCOME-TAX> (2,082) 271
<INCOME-CONTINUING> (99,702) (14,058)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 0 0
<EPS-BASIC> 0 0
<EPS-DILUTED> 0 0
</TABLE>
