UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the Fiscal Year Ended December 31, 1993
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from to
Commission File Numbers 33-59806 and 33-65798
CONTINENTAL CABLEVISION, INC.
(Exact name of registrant as specified in its charter)
Delaware 04-2370836
(State or other jurisdiction (I.R.S. Employer
of incorporation) Identification No.)
The Pilot House
Lewis Wharf
Boston, MA 02110
(Address of principal executive offices) (Zip Code)
617-742-9500
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of each class which registered
None None
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No
Indicate 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 registrant's 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. N/A
The aggregate market value of the voting stock of the registrant held by
non-affiliates is not applicable as no public market for the voting stock of
the registrant exists.
The number of shares outstanding of the registrant's Common Stock as of March
21, 1994 was 4,560,455.
<PAGE>
CONTINENTAL CABLEVISION, INC.
1993 FORM 10-K ANNUAL REPORT
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Table of Contents
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Page
PART I
Item 1. Business 1
Item 2. Properties 11
Item 3. Legal Proceedings 12
Item 4. Submission of Matters to a Vote of Security Holders 12
PART II
Item 5. Market for the Registrant's Common Stock and Related Stockholder Matters 12
Item 6. Selected Financial Data 13
Item 7. Management's Discussion and Analysis of Financial Condition and Results of
Operations 14
Item 8. Financial Statements and Supplementary Data 19
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 34
PART III
Item 10. Directors and Executive Officers of the Registrant 34
Item 11. Executive Compensation 36
Item 12. Security Ownership of Certain Beneficial Owners and Management 38
Item 13. Certain Relationships and Related Transactions 41
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K 41
</TABLE>
<PAGE>
PART I
Item 1. Business.
(a) General Development of Business.
Continental Cablevision, Inc. (the "Company," which term, as used herein,
includes its consolidated subsidiaries unless the context indicates
otherwise) is the third largest cable television system operator in the
United States based on its number of basic subscribers and that of its
affiliates on December 31, 1993. The Company was organized in 1963 and,
through its subsidiaries, has been providing basic and pay cable television
services since its inception.
Developments in the Cable Television Business. During the year ended December
31, 1993, the Company's basic subscribers increased due to marketing of its
basic and premium services and to line extensions within its existing
franchise areas. The Company's revenues increased due to subscriber growth
and an increase in monthly revenue per average basic subscriber, which
included growth in ancillary revenue sources such as advertising and
pay-per-view movies and events. (See "Description of Business--Service
Charges; Alternate Sources of Revenues" and "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Liquidity and
Capital Resources".)
Through its continuous deployment of advanced technology, the Company
believes that it maintains technical standards among the highest in the cable
television industry. As of December 31, 1993, the Company provided at least
54-channel capacity and addressable technology in Systems serving
approximately 75% and 79% of its basic subscribers, respectively. Addressable
technology enables the Company to electronically determine the services to be
delivered to each subscriber. (See "Description of Business--Technological
Developments".)
During the fiscal year ended December 31, 1993, the Company adjusted rates
charged to customers for regulated services, realigned some channels and
reconfigured its service offerings in order to comply with the Cable
Television Consumer Protection and Competition Act of 1992 (the "1992 Cable
Act") and the regulations adopted by the Federal Communications Commission
(the "FCC") to implement the 1992 Cable Act. The 1992 Cable Act significantly
changed the regulatory framework under which cable television systems
operate, including the oversight of certain rates charged to subscribers and
carriage rules for certain broadcast stations.
The FCC's original rate regulations under the 1992 Cable Act were adopted on
April 1, 1993 and went into effect on September 1, 1993. On February 22,
1994, after reconsideration, the FCC adopted a revised regulatory scheme with
the purpose of further reducing the rates charged by cable television systems
for regulated tiers of service. The final text of such rules has not yet been
issued. In general, the regulations require that charges for cable television
services (other than programming on a per-channel or per-program basis) be
reduced to rates established either by application of FCC "benchmarks" or
based upon a "cost-of-service" showing. The Company made permitted rate
adjustments according to the original April 1, 1993 FCC benchmarks for
Systems representing a majority of the Company's subscribers. (See
"Description of Business--The Systems" for a definition of "System".)
Substantially all of the remaining Systems have chosen cost-of-service to
justify current rates. (See "Management's Discussion and Analysis of
Financial Condition and Results Of Operations--Liquidity and Capital
Resources" and "Description of Business--Legislation and Regulation".)
Development of New Services; Alternate Access. In May 1993, the Company
purchased a 20% interest in Teleport Communications Group Inc. and a 20%
interest in TCG Partners, a related partnership (together, "TCG"). (See
"Management's Discussion and Analysis of Financial Position and Results of
Operations--Liquidity and Capital Resources--Investments".) TCG is currently
owned by four cable operators (including the Company) and has entered into an
agreement in principle to add Time Warner Entertainment Company as a fifth
owner.
TCG is an alternate access company which provides a variety of
non-residential, local telecommunications services over high-capacity fiber
optic networks to meet the voice, data and video transmission needs of its
customers in major metropolitan areas. TCG and other alternate access
providers offer telecommunications services as an alternative to the Bell
Operating Companies and local exchange carriers. Alternate access providers
such as TCG provide both dedicated services (digital private line circuits
that carry voice, data and video transmissions from one point to another
fixed point) and switched services (digital switches that interconnect
circuits).
The Company is currently providing directly or through joint ventures
(primarily joint ventures with TCG and its owners), alternate access local
telecommunications services over a portion of its fiber optic networks in a
variety of locations. (See "Description of Business--Legislation and
Regulation--Regulation of Telecommunications Activities".)
In 1993 the Company entered into an agreement in principle with other cable
operators to form a joint venture for the development of certain other
telecommunications services, including personal communications services
("PCS"), which is the provision of wireless voice circuits for individual and
business customers; video telephony services ("VT"); and utility
communications services ("UCS"), which is the provision of two-way
communications services between utility companies and their customers.
Although the Company believes that alternate access, PCS, VT, UCS and other
new telecommunications services could
<PAGE>
provide potential sources of revenues in time, there can be no
assurances in this regard or that the joint venture described above for the
development of PCS, VT and UCS will be formed.
(b) Description of Business.
Cable Television Service. Cable television service delivers a wide variety of
channels of television programming, consisting primarily of video
entertainment, sports and news, as well as informational services, locally
originated programming and digital radio programming to the homes of
subscribers who pay a monthly fee for the service. Television and radio
signals are received by off-air antennas, microwave relay systems and
satellite earth stations and then are modulated, amplified and distributed to
subscribers' homes over networks of coaxial and fiber optic cables. Cable
television systems typically are constructed and operated under nonexclusive
franchises awarded by local governmental authorities for defined periods of
time.
The Company's Systems offer subscribers choices of packages, any of which may
include television signals available off-air in any locality, television
signals from distant cities (so called "superstations"), non-broadcast
channels (such as Entertainment and Sports Programming Network ("ESPN"),
Cable News Network ("CNN"), Cable Satellite Public Affairs Network ("C-SPAN")
and Music Television ("MTV")), displays of information such as time, news,
weather and stock market reports and public, governmental and educational
access channels. The Company's Systems also provide premium television
services to basic subscribers for an extra monthly charge (including Home Box
Office, Cinemax, Showtime, The Movie Channel, The Disney Channel and certain
regional sports channels). Certain of the Company's Systems also carry
"multiplexed" premium services which are available on a limited basis from
certain premium service suppliers. A premium service supplier, such as Home
Box Office or Cinemax, uses multiplexing to offer its programming on two or
more channels simultaneously but scheduled differently so as to provide the
subscriber with a choice of programs at any given time.
Although services vary from System to System because of differences in
channel capacity and viewer interest, each of the Company's Systems offers as
the lowest-priced tier a "basic" service package (consisting generally of
broadcast television signals available off-air locally, local origination and
public, educational and governmental access channels), one or more "cable
programming service" packages (including satellite-delivered cable
programming services), and several premium or pay-per-view services, all of
which are paid for on a monthly basis. Subscribers may choose various
combinations of such services. (See "Legislation and Regulation" for a
description of recent legislation and pending regulation which limits the
Company's ability to price and tier its programming services.)
Service Charges; Alternate Sources of Revenues. The Company's revenues are
derived principally from monthly subscription fees for basic and premium
services. Rates charged to subscribers vary from market to market. In
addition, the Company generally charges a one-time installation fee to new
subscribers. Subscribers are free to terminate services at any time without
additional charge, but are charged a reconnection fee to resume service.
In recent years the Company has begun to receive revenues from additional
sources. The Company derives revenues from the sale of advertising time on
advertising-supported, satellite-delivered networks such as ESPN, MTV and
CNN, as well as on locally originated programming. The Company's advertising
revenues increased from $18,000,000 for the year ended December 31, 1989 to
$53,000,000 for the year ended December 31, 1993 (representing a 31% compound
annual growth rate in advertising revenues), and accounted for over 4% of
total Company revenues during the year ended December 31, 1993. Another
source of revenues is the sale of pay-per-view programming, which generally
consists of recently released movies and special events (such as boxing
matches, other sporting events or concerts), offered to subscribers on an
individual event basis. The Company realized 19% compound annual growth in
pay-per-view revenues during the period from January 1, 1990 to December 31,
1993; for the year ended December 31, 1993, pay-per-view revenues accounted
for over 2% of total Company revenues. As of December 31, 1993, 79% of the
Company's subscribers were served by Systems with addressable technology (see
"Technological Developments"), which the Company believes positions it well
to realize continued growth in such revenues. In addition, with future
increased channel capacity and the further deployment of addressable
technology in its Systems, the Company will be able to offer subscribers
additional pay-per-view movies and events. The Company also receives a
percentage of the proceeds from subscribers' purchases of merchandise offered
on home shopping programs such as QVC and Home Shopping Network. Although the
Company believes that these and other services could become substantial
sources of revenue over time, there can be no assurance in this regard.
<PAGE>
Subscriber Data. The following table summarizes selected operating statistics
of the Company and its affiliates since December 31, 1989.
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December 31
1989 1990 1991 1992 1993
<S> <C> <C> <C> <C> <C>
Homes Passed by Cable (1) 4,554,000 4,761,000 4,880,000 4,981,000 5,192,000
Number of Basic Subscribers (2) 2,570,000 2,710,000 2,804,000 2,876,000 2,915,000
Basic Penetration (3) 56.4% 56.9% 57.5% 57.7% 56.1%
Number of Premium Subscriptions 2,707,000 2,702,000 2,603,000 2,545,000 2,454,000
Pay-to-Basic Percentage (4) 105.3% 99.7% 92.8% 88.5% 84.2%
Monthly Revenue per Average Basic Subscriber
(5) $ 29.41 $ 31.29 $ 32.98 $ 34.46 $ 35.76
<FN>
(1) Dwelling units located sufficiently close to the Company's cable plant to be practicably connected.
(2) See "The Systems" for the Company's method of reporting subscribers.
(3) Basic subscribers as a percentage of homes passed by cable. The Company's
basic penetration for 1993 reflects the FCC's rate regulation rules adopted
on April 1, 1993, which for the first time provided a standardized definition
of "households".
(4) Premium subscriptions as a percentage of basic subscribers.
(5) Revenue divided by the weighted average number of basic subscribers for
the Company's consolidated subsidiaries during the twelve month period ending
December 31 for each year presented.
</TABLE>
The Systems. The Company currently operates 143 Systems, located principally
in suburban areas, in 16 states. A "System" is defined to include all areas
served from a single "headend". (See "Properties".) Thus, a System may
include one or more communities or franchise areas. The Company's Systems and
those of its affiliates provided basic service to approximately 2,915,000
subscribers and passed approximately 5,192,000 occupied dwelling units
("Homes") on December 31, 1993. The following table sets forth certain
information related to the Systems of the Company and of certain Affiliated
Companies, as of December 31, 1993.
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Basic Service Premium Service
Homes
Number Passed Number of Number of
of By Basic Basic Premium Pay-to-
Management Region Systems Cable Subscribers Penetration Subscription Basic
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Chicago/Minnesota Region 7 547,193 296,257 54.1% 310,216 104.7%
Connecticut/New York/Western
Massachusetts Region 8 293,534 201,889 68.8 160,496 79.5
Florida/Georgia/Virginia Region 19 815,904 513,166 62.9 376,992 73.5
Illinois/Iowa/Missouri Region 14 252,032 150,855 59.9 106,682 70.7
Michigan Region 9 296,483 198,469 66.9 152,592 76.9
New England Region 38 788,969 540,539 68.5 429,218 79.4
Northern California Region 12 442,223 251,246 56.8 225,765 89.9
Ohio Region 25 477,259 318,303 66.7 187,265 58.8
Southern California Region 11 1,028,832 312,294 30.4 411,348 131.7
Affiliated Companies (all Regions) (1) 37 249,842 131,771 52.7 92,974 70.6
Total 180 5,192,271 2,914,789 56.1% 2,453,548 84.2%
<FN>
(1) Affiliated Companies are those companies not majority-owned or controlled by the Company. Systems held by
Affiliated Companies consist of Systems held by five limited partnerships. The Company owns less than 50% of the
outstanding limited partnership interests of each such partnership. None of the Systems owned by Affiliated
Companies are managed by the Company. In reporting subscriber and other data for Systems not controlled or
managed by the Company, only that portion of data corresponding to the Company's percentage ownership is
included.
</TABLE>
<PAGE>
Franchises. The Company's franchises establish the terms and conditions under
which the Systems are operated. Typically, they establish certain performance
and safety standards related to the Company's construction and maintenance of
facilities in, under and over public streets and rights of way in the
franchise areas. Some, but not all, of these franchises specify the services
to be offered. Nearly all of the Company's franchises provide for the payment
of fees to the issuing authority, which currently average approximately 3% of
gross revenues. The Company's franchises are usually issued for fixed terms
ranging from 10 to 15 years and must periodically be renewed. Most of such
franchises can be terminated prior to their stated expirations for breach of
material provisions.
Franchises representing approximately 1,266,000 basic subscribers
(approximately 43% of total basic subscribers of the Company and its
affiliates as of December 31, 1993) are scheduled to expire over the next 5
years (1994-1998). To date, all of the Company's franchises have been renewed
or extended at or prior to their stated expirations, frequently on modified
but satisfactory terms. The Cable Communications Policy Act of 1984 (the
"1984 Cable Act") establishes comprehensive renewal procedures which require
that an incumbent franchisee's renewal application be assessed on its own
merit and not as part of a comparative process with competing applications.
(See "Legislation and Regulation--Cable Communications Policy Act of 1984".)
Programming. The Company provides programming to its subscribers pursuant to
contracts with programming suppliers. The Company generally pays either a
monthly fee per subscriber or a percentage of the Company's gross receipts
for programming on its basic and premium services. Some programming suppliers
provide volume discount pricing structures and/or offer marketing support to
the Company. The Company's programming contracts are generally for fixed
periods of time ranging from 3 to 10 years and are subject to negotiated
renewal. The costs to the Company to provide cable programming have increased
in recent years and are expected to continue to increase due to additional
programming being provided to basic subscribers, increased costs to produce
or purchase cable programming, inflationary increases and other factors. In
Systems where the Company has elected to base its rates on the FCC's
benchmark methodology, it will be allowed to increase the rates for its
regulated services in response to certain increases in programming costs.
(See "Legislation and Regulation".)
Under the 1992 Cable Act, local broadcasting stations may require cable
television operators to pay a fee for the right to carry their local
television signals. Alternatively, a local broadcaster may demand carriage
under the 1992 Cable Act's "must-carry" provisions, although in such event
the cable television operator is not required to compensate the local
broadcaster for carriage. Historically, the Company has not paid fees for
retransmission of local broadcast signals, other than mandatory copyright
fees (see "Legislation and Regulation--Copyright"). A substantial number of
local broadcast stations carried by the Company's Systems elected to require
their consent to the carriage of their local television signals. Some local
broadcast stations requested compensation from the Company for the right to
carry local television signals; however, the Company's policy regarding
retransmission arrangements is that it will not pay cash compensation to
carry signals which are otherwise available over the air at no charge to
viewers. The Company has been successful at reaching agreements, for terms
ranging from 3 to 7 years, with virtually all the local broadcast stations
that elected retransmission consent without payment of cash compensation. In
some instances the Company has agreed to carry new programming networks
created by broadcasters, such as ESPN 2, a national sports programming
network owned by Capital Cities/ABC and Hearst. The Company has only in a
very few instances been forced to drop a local broadcast signal from its
programming. At this time, the Company cannot predict the outcome of any
future retransmission consent negotiations with local broadcasters.
The Company is an investor in various national cable programming suppliers,
including Turner Broadcasting System, Inc. (the supplier of CNN and other
cable programming services), QVC Network, Inc. (a home shopping channel),
Viewers Choice, Inc. (a pay-per-view movie service), The Food Channel (a
24-hour channel offering programs on cooking and food preparation) and E! (a
24-hour channel following an entertainment/news format covering feature
films, television, music and theater). The Company is also a joint owner of a
regional news channel, New England Cable News.
Technological Developments. Through its continuous deployment of advanced
technology, the Company believes that it maintains technical standards among
the highest in the cable television industry. As of December 31, 1993, the
Company provided at least 54-channel capacity and addressable technology in
Systems serving approximately 75% and 79% of its basic subscribers,
respectively. Addressable technology enables the Company to electronically
determine the services to be delivered to each subscriber, and, as a result,
the Company can modify subscriber services without dispatching a technician
to the home. Such technology also reduces service theft and is an effective
enforcement tool in collecting delinquent payments. In addition, through the
use of addressable technology, the Company is able to offer pay-per-view
services and tiered services more effectively than would otherwise be
possible. The Company expects to increase channel capacity and to deploy
addressable technology further through the ongoing rebuilding and upgrading
of its plant and anticipates that substantially all of its basic subscribers
will be served by Systems with addressable technology and at least 54-channel
capacity by the end of 1995.
The use of fiber optic cable, which is capable of carrying hundreds of video,
data and voice channels, as an alterna-
<PAGE>
tive to coaxial cable is playing a major role in expanding channel
capacity and improving signal quality and transmission reliability of the
Company's plant. The Company finds it cost-effective to deploy fiber optic
cable when building new cable plant or rebuilding existing cable plant.
The Company has been closely monitoring developments in the area of digital
compression, a technology which is expected to enable cable television
operators to increase the channel capacity of cable television systems by
permitting a significantly increased number of video signals to be
transmitted over a cable television system's existing bandwidth. Although
this technology is still in the developmental stage and has not yet been
widely implemented by cable television operators, the Company believes that
it may be a cost-effective method of increasing channel capacity in some of
its Systems. The use of digital compression in these Systems also could
expand the number and types of services they offer and enhance the
development of current and future revenue sources of these Systems. At this
time, it is not possible to predict the impact that this technology will have
on the Company's operations.
The Company was one of the founders of Cable Television Laboratories, Inc.,
the cable industry's technological research consortium which is presently
involved in, among other things, the development of digital compression,
high-definition television and interactive television applications.
Management Regions; Employees. The Company's Systems are clustered in nine
management regions to maximize marketing and operating effectiveness. Each
area is managed by a Senior Vice President, to whom the Company has delegated
broad operating authority. Engineering, hiring and training, purchasing and
accounting are all performed at the regional level. The Boston office, with
approximately 80 people, provides staff support in the areas of corporate
planning, finance, financial reporting, marketing, program acquisition,
training and benefit administration and government relations.
The Company currently has approximately 7,000 full-time employees. None of
the Company's employees is represented by a union or is covered by a
collective bargaining agreement. The Company believes that its relations with
its employees are good.
Competition. The Company's Systems compete with other communications and
entertainment media, including conventional off-air television broadcasting
service. Cable television service was first offered as a means of improving
television reception in markets where terrain factors or remoteness from
major cities limited the availability of off-air television. In some of the
areas served by the Systems, a substantial variety of broadcast television
programming can be received off-air. The extent to which cable television
service is competitive with broadcast stations depends in significant part
upon the cable television system's ability to provide an even greater variety
of programming than that available off-air. Cable television systems also are
susceptible to competition from other video programming delivery systems,
from other forms of home entertainment such as video cassette recorders, and,
in varying degrees, from sources of entertainment in the community, including
motion picture theaters, live theater and sporting events.
Reasonably priced earth stations designed for private home use now enable
individual households to receive many of the satellite-delivered programming
services formerly available only to cable television subscribers. Many
satellite programmers now encode their signals in order to allow reception
only by means of authorized decoding equipment.
Cable television systems also may compete with wireless program distribution
services such as multichannel, multipoint distribution service ("MMDS"). MMDS
uses low power microwave frequencies to transmit television programming over
the air to its subscribers. The ability of MMDS to compete with cable
television systems has been limited in the past by its limited amount of
channel capacity. In 1991, the FCC amended its regulations to enable MMDS
systems to compete more effectively with cable television systems by making
available additional channel capacity to the MMDS industry under certain
conditions. (See "Legislation and Regulation--1992 Cable Act".) The Company
currently competes with MMDS systems in some of its markets, but to date such
competition has not had a material adverse effect on the Company's
operations.
Additional competition exists from private cable television systems serving
condominiums, apartment complexes and other private residential developments.
The operators of these private systems, known as Master Antenna Television
("MATV") and Satellite Master Antenna Television ("SMATV"), often enter into
exclusive agreements with apartment building owners or homeowners'
associations that preclude operators of franchised cable television systems
from serving residents of such private complexes. Due to the widespread
availability of reasonably priced earth stations, such private cable
television systems now can offer both improved reception of local television
stations and many of the same satellite-delivered programming services that
are offered by franchised cable television systems. In February 1991, the FCC
adopted regulations that would permit SMATV operators to use point-to-point
microwave service to distribute video entertainment programming. Moreover, a
private cable television system normally is free of the regulatory burdens
imposed on franchised cable television systems. Although a number of states
and some municipalities have enacted laws and ordinances to afford operators
of franchised cable television systems access to private complexes, the
United States Supreme Court has held that cable companies cannot have such
access without compensating the property owner. The access statutes of
several states and the ordinance of one municipality in which the Company
operates have been challenged successfully in the courts, and other such laws
are
<PAGE>
under attack. Since the Company has generally been able to enter
into access agreements with owners of private complexes, in the opinion of
management, successful challenges to these access statutes and municipal
ordinances would not have a material effect on the Company's operations.
Since the Company's Systems operate under nonexclusive franchises, other
operators (including municipal franchising authorities themselves) may obtain
permission to build cable television systems in competition with the Systems
in areas in which they presently operate. To date, the extent of actual
overbuilding in the Company's franchise areas has been negligible. The
Company is unaware of any pending applications for franchises which would
result in overbuilding in communities served by the Systems. The 1992 Cable
Act may facilitate the franchising of second cable television systems and
municipally owned cable television systems. Although the Company is unable to
predict the extent to which it would be adversely affected as a result of
overbuilds, management sees little likelihood at this time that, in the
aggregate, overbuilds will have a material adverse effect on the Company's
operations. (See "Legislation and Regulation--1992 Cable Act".)
In recent years, the FCC has adopted policies for authorizing new
technologies and providing a more favorable operating environment for certain
existing technologies. Such policies have the potential to create substantial
additional competition to cable television systems. These technologies
include, among others, direct broadcast satellite to home services ("DBS")
whereby signals are transmitted by satellite to receiving facilities located
on the premises of the subscribers. Although programming is currently
available to the owners of backyard earth stations through conventional and
medium-powered satellites, in the very near future programming will be
delivered by high-powered direct-to-home satellites and will be available to
individuals on a wide-scale basis.
The Company is a partner in Primestar Partners, L.P. ("Primestar"), a limited
partnership formed to operate a DBS system which began operations with a
medium-powered satellite in 1990 and plans to launch two high-powered
replacement satellites in 1996. Several other companies are preparing to have
high-powered DBS systems in place by the middle of this decade. Hughes
Communications launched a satellite in December 1993 and plans to have its
system operational by April 1994. It is expected that these DBS operators
(including Primestar, which expects to offer up to 70 channels in 1994) will
use digital compression technology to increase the channel capacity of their
systems to provide a package of movies and other programming services
competitive with those of cable television systems. High-powered DBS service
will be able to be received virtually anywhere in the United States using a
compact rooftop or wall-mounted receiving dish. DBS companies may be able to
offer new and highly specialized services using a national base of
subscribers that are not available to the cable television industry, but as
channel capacity and addressability increases, the cable industry will have
the ability to offer additional services as well. Because DBS systems will
deliver their services using satellite technology, they may not be able to
provide services that are of local interest to their subscribers, and may not
be able to maintain a local presence, which is an advantage in developing and
maintaining subscriber support. The extent to which DBS systems will be
competitive with the service provided by cable television systems will
depend, among other things, on the ability of DBS operators to convince
subscribers to purchase or lease the more expensive equipment (relative to
cable) necessary to receive their signals and to offer a comparable level of
programming, customer service and marketing. The 1992 Cable Act requires
cable programmers under certain circumstances to offer their programming to
operators of DBS, MMDS and other multichannel video systems at not
unreasonably discriminatory prices. (See "Legislation and Regulation--1992
Cable Act".)
Advances in communications technology and changes in the marketplace are
constantly occurring. Therefore, it is not possible to predict the effect
which ongoing or future developments might have on the Company's Systems or
operations.
Telephone Company Competition. The 1984 Cable Act, FCC regulations and the
1982 federal court consent decree (the "Modified Final Judgment") that
settled the 1974 antitrust suit against AT&T all limit in various ways the
provision of video programming and other information services by telephone
companies. The 1984 Cable Act codified FCC cross-ownership regulations which,
among other things, prohibit local telephone exchange companies, including
the seven Bell Operating Companies ("BOCs"), from providing video programming
directly to subscribers within their local exchange service areas, except in
rural areas or by specific waiver of FCC rules. These statutory provisions
and corresponding FCC regulations are of particular competitive importance
because these telephone companies already own much of the plant necessary for
cable television operations, such as poles, underground conduits, associated
rights-of-way and connections to the home.
In July 1991, the federal district court responsible for the Modified Final
Judgment issued an opinion lifting the Modified Final Judgment prohibition on
the provision of information services, including broadband video services, by
the BOCs. This decision was sustained on appeal. As a result, the BOCs may
now acquire or construct cable television systems outside of their own
service areas subject to appropriate waivers from such federal district
court. Several BOCs have purchased or made investments in cable television
systems outside their service areas in reliance on this decision. The Company
does not expect such purchases of existing cable television systems by BOCs
outside their service areas to have a material adverse impact on the
Company's operations.
<PAGE>
In July 1992, the FCC voted to authorize additional competition to cable
television systems by video programmers using broadband common carrier
facilities constructed by telephone companies. The FCC allowed telephone
companies to take ownership interests of up to 5% in such programmers.
Several telephone companies have sought approval from the FCC to build such
"video dialtone" systems in various communities in their service areas,
including communities in which the Company currently holds cable franchises.
The FCC also has concluded that under the 1984 Cable Act neither a local
exchange carrier providing such a video dialtone service nor its programming
suppliers who lease the dialtone service are required to obtain a cable
television franchise. This ruling is now on appeal. Cable television systems
could be placed at a competitive disadvantage if this ruling is sustained and
video dialtone services become widespread in the future since cable
television systems are required to obtain local franchises to provide cable
television service and must comply with a variety of obligations under such
franchises including the payment of franchise fees.
One telephone company has successfully challenged the constitutionality of
the statutory ban in the 1984 Cable Act on unrestricted telephone company
ownership of cable television systems within their own service areas. A
federal district court in Virginia, a state in which the Company owns
Systems, struck down the ban on grounds that it violated the First Amendment
rights of the telephone company. This decision is currently pending before an
intermediate federal appeals court. Other telephone companies have filed
similar suits in other states where the Company also operates. With respect
to petitions for waivers from the current cross-ownership prohibitions under
FCC regulations and the 1984 Cable Act, the FCC in one instance has
tentatively concluded that construction and operation of technologically
advanced, integrated broadband networks by local exchange carriers for the
purpose of providing video programming and other services would constitute
good cause for waiver. In July 1989, the FCC granted a California telephone
company a waiver of the cross-ownership restrictions based on a showing of
"good cause", but the FCC's decision was reversed on appeal. As a result of
this decision, however, the affected telephone company has now challenged the
cross-ownership ban on constitutional grounds before an intermediate federal
appeals court.
Legislation has been introduced before both the United States House of
Representatives and the United States Senate that would alter the
relationships between telephone companies and cable television operators in
various ways. Provisions in these pending bills, and in legislative
initiatives that have been proposed by the Clinton administration, would: (1)
set ground rules for BOC provision of information services, including video
services, outside of their regional service areas; (2) repeal the 1984 Cable
Act ban on the provision of video programming by telephone companies within
their service areas under certain conditions (under some versions of this
legislation, telephone companies would still be prohibited from purchasing,
or entering into joint ventures with, existing cable television companies
within their service areas); (3) require local telephone companies to provide
potential competitors, including cable television companies and alternate
access providers such as TCG, with interconnection to local telephone
networks; and (4) reduce and/or eliminate state barriers to entry by TCG, the
Company and other similar providers of alternative voice and data services.
If the current restrictions on telephone company ownership of cable
television systems are removed or relaxed further by the courts or Congress,
the Company is likely to face increased competition from telephone companies,
which have greater financial resources than the Company.
Legislation and Regulation. The cable television industry is subject to
extensive governmental regulation at the federal, state and local level. In
addition, various legislative and regulatory proposals, such as tax reform
proposals and proposals to revise the Copyright Act of 1976, may materially
affect the cable television industry. The following is a summary of federal
laws and regulations that currently materially affect the growth and
operation of the cable television industry, and a description of certain
state and local laws.
Cable Communications Policy Act of 1984. The 1984 Cable Act created uniform
national standards and guidelines for the regulation of cable television
systems. 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 post-1984 Cable Act 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 specify requirements
for video programming or information services other than in broad categories.
The 1984 Cable Act preempted local control over rates for premium channels
and optional program tiers, and deregulated rates for basic cable services in
areas where the cable operator was subject to "effective competition" as then
defined by the FCC. This scheme was altered significantly by the 1992 Cable
Act, discussed below.
Although franchising authorities may impose franchise fees under the 1984
Cable Act, such payments cannot exceed 5% of a cable television system's
annual gross revenues. In those communities in which franchise fees are
required, the Company currently pays franchise fees ranging from flat annual
fees equal to less than 1% of gross revenues to fees
<PAGE>
of 5% of gross revenues. Franchising authorities are also empowered
to require cable operators to provide cable-related facilities, equipment
and, in the case of pre-1984 Cable Act franchises, services to the public and
to enforce compliance with such franchise requirements and voluntary
commitments. When changed circumstances render such compliance commercially
impracticable, however, the 1984 Cable Act requires franchising authorities
to renegotiate franchise requirements and, under certain circumstances,
permits the cable operator to make changes in programming without local
approval.
The 1984 Cable Act established renewal procedures designed to protect
incumbent franchisees against arbitrary denials of renewal. This statute
requires that franchising authorities consider a franchisee's past
performance and renewal proposal on their own merits in light of community
needs and without comparison to competing applicants. Nevertheless, renewal
is by no means assured, as the franchisee must meet certain statutory
standards. Moreover, even if a franchise is renewed, a franchising authority
may impose new and more onerous requirements such as upgrading of facilities
and equipment, although the municipality must take into account the cost of
meeting such requirements. Also, the franchising authority may require higher
franchise fees, up to the 5% of annual gross revenues cap established by the
1984 Cable Act, as a condition of renewal.
The 1984 Cable Act permits local franchising authorities to require cable
television operators to set aside certain channels for public, educational,
and governmental access programming. The 1984 Cable Act further requires
cable television systems with 36 or more channels to designate a portion of
their channel capacity for commercially leased access by third parties.
Although there has been little activity in this area nationally, it is
possible that such leased access will result in competition to services
offered over the cable system, particularly since the 1992 Cable Act,
discussed below, empowers the FCC to set the rates and conditions for such
licensed access channels.
Questions concerning the right of a municipality to award de facto exclusive
cable television franchises and to restrict cable television operations have
been at issue in Preferred Communications, Inc. v. City of Los Angeles,
involving a proposed applicant for a franchise in one of the Company's
service areas, in which the United States Supreme Court declared that cable
television operators have First Amendment rights which cannot be abridged in
the absence of overriding governmental interests. In this case, an
intermediate federal appeals court recently reaffirmed that a municipality
may not constitutionally restrict the award of a cable franchise to a single
entity, but did not rule on the constitutionality of other franchise
provisions.
1992 Cable Act. On October 5, 1992, Congress enacted the 1992 Cable Act,
which represented a significant change in the regulatory framework under
which cable television systems operate. Since the effectiveness of the 1984
Cable Act, and prior to the enactment of the 1992 Cable Act, rates for cable
television service were unregulated for substantially all of the Company's
Systems. The 1992 Cable Act reintroduced rate regulation for certain services
and equipment provided by most cable television systems in the United States,
including substantially all of the Company's Systems.
The 1992 Cable Act requires each cable television system to establish a basic
service tier (the "Basic Service Tier") consisting, at a minimum, of all
broadcast signals carried by such system (except those signals imported by
satellite from another market (i.e., superstations)) and all public,
educational and governmental access programming. On April 1, 1993, the FCC
adopted regulations governing the rates for the Basic Service Tier. Under the
FCC's regulations, municipalities were originally authorized to reduce the
rates for the Basic Service Tier by up to 10% from rates in effect on
September 30, 1992 if those rates exceeded a per-channel benchmark
established by the FCC. On February 22, 1994, after reconsideration, the FCC
significantly revised the regulatory framework it adopted on April 1, 1993
and established a new benchmark formula. The final text of the rules
implementing this revised regulatory framework has not yet been issued. In
creating the new benchmark formula, the FCC authorized a further reduction in
the rates for the Basic Service Tier in effect on September 30, 1992. As a
result, such rates may be reduced by up to 17% if they exceed the new
per-channel benchmark. If a cable television system's rates for the Basic
Service Tier do not need to be reduced by 17% in order to reach the new
benchmark, such rates may nonetheless be subject to further reduction, up to
a maximum reduction of 17% from the rates in effect on September 30, 1992,
based upon the results of a pending FCC study of the operating costs of such
cable television systems. Pending resolution of the FCC's cost study, such
systems will be required to calculate the extent to which their rate
reduction falls short of 17%. This reduction "differential" will then be
offset against any inflation adjustment pending completion of the cost study.
Municipalities are also empowered to regulate the rates charged for
installation and lease of the equipment used by subscribers to receive the
Basic Service Tier (including a converter unit, a remote control unit and, if
requested by a subscriber, an addressable converter unit or other equipment
required to access programming offered on a per-channel or per-program basis)
and the installation and monthly use of connections for additional television
sets. The FCC's regulations require municipalities to regulate these rates on
the basis of actual cost standards developed by the FCC.
Under the regulations adopted by the FCC on April 1, 1993, the FCC may, in
response to complaints by a subscriber, municipality or other governmental
entity, reduce the rate
<PAGE>
for tiers of service other than the Basic Service Tier. This
authority does not extend to any services offered on a per-channel or
per-program basis. The original maximum reduction was set at 10% from the
rates in effect on September 30, 1992, if those rates exceeded a per-channel
benchmark established by the FCC. On February 22, 1994, the FCC determined on
reconsideration to authorize a reduction of up to 17% from rates in effect on
September 30, 1992 for regulated tiers of service other than the Basic
Service Tier if those rates exceed a new per-channel benchmark established by
the FCC. As with the potential reduction in rates for the Basic Service Tier,
if a cable television operator's rates for these higher regulated service
tiers do not need to be reduced by 17% in order to reach the new benchmark,
such rates may nonetheless be subject to further reduction, up to a maximum
reduction of 17% from the rates in effect on September 30, 1992, based upon
the results of the FCC's cost study. Pending resolution of this study, these
systems will be required to calculate the extent to which their rate
reduction falls short of 17%. This reduction "differential" will then be
offset against any inflation adjustment pending completion of the cost study.
In response to complaints, the FCC will also regulate, on the basis of actual
cost, the rates for equipment used only to receive these higher regulated
service tiers of service.
The regulations adopted by the FCC on April 1, 1993, including the original
rate benchmarks, became effective on September 1, 1993. The final rules
reflecting the new rate regulations adopted by the FCC on February 22, 1994
are expected to be issued before March 31, 1994 and become effective in May
1994. Until the new rate regulations become effective, rates will continue to
be governed by the April 1, 1993 FCC rules.
In connection with the adoption of the original regulations on April 1, 1993,
the FCC announced its intention to investigate cable television systems whose
rates for regulated services are substantially above the per-channel
benchmarks. These cable television systems could be subject to rate
reductions in excess of the maximum percentage reduction of 10% established
in the original regulations. It is unclear what effect, if any, the actions
of the FCC on February 22, 1994 will have on the FCC's previously announced
intention to investigate such cable systems.
Under the FCC's rules, as indicated above, municipalities and the FCC will
use rates in effect on September 30, 1992 as the basis for any required
reductions in the rates for the Basic Service Tier and other regulated
service tiers. Accordingly, cable television systems that implemented rate
increases subsequent to September 30, 1992, including certain of the
Company's Systems, are subject to effective rate reductions in excess of 10%,
and may be subject to effective rate reductions in excess of 17%. The
regulations provide that future increases in service rates may not exceed an
inflation-indexed amount, which may include a "productivity offset feature"
(see discussion below), plus increases in certain costs beyond the cable
operator's control, such as taxes, copyright fees, franchise fees and
increased programming costs imposed by non-affiliated programmers that exceed
an inflation index. The FCC will not allow amounts paid prior to October 6,
1994 to broadcast stations for retransmission of their signals to be passed
through to customers in the form of increased rates, but will allow the
pass-through of subsequent increases in such amounts. As part of the
implementation of the new regulations, the FCC has frozen all rates in effect
on April 5, 1993 until May 15, 1994 except rates for premium and pay-per-view
program services and equipment or for any entirely new tier of services
offered to customers. On February 22, 1994, the FCC also adopted criteria to
assess whether certain discounted packages of "a la carte" or per-channel
offerings should be regulated as a tier of services by the FCC, or treated as
unregulated per-channel offerings. The final text of such rules has not yet
been issued.
In connection with the rate regulations adopted on April 1, 1993, the FCC
suggested that cable television operators follow general ratemaking
principles for cost-of-service showings. On February 22, 1994, the FCC
adopted interim cost-of-service standards that establish a regulatory
framework pursuant to which a cable television operator may attempt to
justify rates in excess of the new benchmarks. Such justification would be
based upon (i) the operator's costs in operating a cable television system
(including certain operating expenses, depreciation and taxes) and (ii) a
return on the investment the operator has made to provide regulated cable
television services in such system (such investment being referred to as its
"rate base"). The interim standards (1) create a rebuttable presumption that
excludes from a cable television operator's rate base any "excess acquisition
costs" (equal to the excess of the purchase price for a cable television
system over the original construction cost of such system or its book value
at the time of acquisition), (2) include in the rate base the costs
associated with certain intangibles such as franchise rights and customer
lists, (3) set a uniform rate of return for regulated cable television
service of 11.25%, presumably after taxes, and (4) include a "productivity
offset feature" that could reduce otherwise justifiable rate increases based
on a claimed increase in a cable television system's operational
efficiencies. The FCC has not yet issued the final text of its interim
standards for cost-of-service proceedings or for any of the other actions
taken on February 22, 1994. Thus, the Company is unable at this time to
assess the impact of these actions on the Company's operations.
On June 17, 1993, local commercial broadcast stations were required to make
an election between the guarantee of mandatory carriage on cable television
systems, without compensation, and requesting payment from cable television
systems for "retransmission consent", which election is binding for three
years. Since October 6, 1993, a cable television system has not been allowed
to carry a local broadcast station that has elected to require retransmission
consent without the station's express authorization. (See "Programming".)
<PAGE>
Under the 1992 Cable Act, cable television systems may not require
subscribers to purchase any service tier other than the Basic Service Tier as
a condition of access to video programming offered on a per-channel or
per-program basis. Cable television systems are allowed up to ten years, to
the extent necessary, to implement the technology to facilitate this access.
In addition, the 1992 Cable Act (i) requires cable television programmers
under certain circumstances to offer their programming to present and future
competitors of cable television such as MMDS, SMATV and DBS operators at not
unreasonably discriminatory prices, (ii) directs the FCC to set standards for
limiting the number of channels that a cable television system operator could
program with programming services controlled by such operator and prohibits
new exclusive contracts with program suppliers without FCC approval, (iii)
bars municipalities from unreasonably refusing to grant additional
competitive franchises, and (iv) regulates the ownership by cable television
operators of other media such as MMDS and SMATV.
The FCC has imposed or will impose new regulations under the 1992 Cable Act
in the areas of customer service, technical standards, compatibility with
other consumer electronic equipment such as "cable ready" television sets and
video cassette recorders, equal employment opportunity, privacy, obscenity
and indecency, rates for leased access channels, and disposition of a
customer's home wiring.
The FCC adopted a 40% limit on the number of channels that may be occupied by
programming services in which a particular cable television operator has an
attributable interest, and a national limit of 30% on the number of homes
passed that any one entity can reach through its cable television systems.
The latter rule was stayed by the FCC pending the outcome of an appeal from a
federal district court decision holding such limits unconstitutional.
The extent and materiality of the effects of the 1992 Cable Act on the
Company's operations are described elsewhere in this report. (See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources--Recent Legislation" and
"Programming".) A number of lawsuits have been filed challenging the
constitutionality of various provisions of the 1992 Cable Act. Challenges to
the rate regulations, leased access, program access and other sections of the
1992 Cable Act were rejected by a federal district court. This decision is
currently on appeal to the D.C. Circuit Court of Appeals. Other challenges to
the current rate freeze and other portions of the FCC's rate regulation
scheme have been separately brought directly to the D.C. Circuit Court of
Appeals. In another proceeding, such court has invalidated the leased access
channel and public, educational and governmental access channel "indecency"
restrictions in the 1992 Cable Act. A challenge to the constitutionality of
the 1992 Cable Act's must-carry rules was denied by a federal district court
in April 1993. A stay of the rules was denied by the United States Supreme
Court pending the appeal which has been argued before that Court. The Company
cannot predict the outcome of this appeal or of the remaining suits.
Other Federal Regulation. The FCC, the principal federal regulatory agency
with jurisdiction over cable television, is responsible for implementing
federal policies such as cable television system relations with other
communications media, cross-ownership, signal carriage, equal employment
opportunity and technical performance.
In 1989, the FCC issued new syndicated exclusivity and network
non-duplication rules which enable local television broadcasters to compel
cable television operators to delete certain programming on distant broadcast
signals. Those rules took effect January 1, 1990. Under the rules, all
television broadcasters, including independent stations, can compel cable
television operators to delete syndicated programming from distant signals if
the local broadcaster negotiated exclusive rights to such programming. Local
network affiliates may insist that a cable television operator delete a
network broadcast on a distant signal. The rules make certain distant signals
a less attractive source of programming for the Company's Systems, since much
of such distant signals' programming may have to be deleted.
The FCC currently regulates the rates and conditions imposed by 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 the cable television pole attachment rates (as is true in certain
states in which the Company does business). In the absence of state
regulation, the FCC administers pole attachment rates through the use of a
formula which it has devised. The validity of this FCC function was upheld by
the United States Supreme Court.
Copyright. Cable television systems are subject to federal copyright
licensing, covering carriage of television broadcast signals. In exchange for
contributing a percentage of their revenues to a federal copyright royalty
pool, cable television operators obtain a compulsory license to retransmit
copyrighted materials from broadcast signals. Existing Copyright Office
regulations require that compulsory copyright payments be calculated on the
basis of revenue derived from any service tier containing broadcast
retransmissions. Although the FCC has no formal jurisdiction over this area,
it has recommended to Congress to eliminate the compulsory copyright scheme
altogether. The United States Copyright Office has similarly recommended such
a repeal. Without the compulsory license, cable television operators would
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 television operators of carrying broadcast
signals. Thus, given the uncertain but possible
<PAGE>
adoption of this type of copyright legislation in the future, the
nature or amount of the Company's future payments for broadcast signal
carriage cannot be predicted at this time.
Cable Television Cross-Ownership Limitations. The 1984 Cable Act prohibits
any person or entity from owning broadcast television and cable properties in
the same market. The 1984 Cable Act also bars telephone companies' ownership
of cable television systems operating in their service areas, with limited
exceptions for rural areas. The FCC has discretionary authority to expand the
rural area exception for telephone companies offering cable television
service within their service areas and is currently considering increasing
such authority. As discussed above under "Telephone Company Competition", the
cable-telephone company cross-ownership ban contained in the 1984 Cable Act
has been struck down as unconstitutional by one federal district court, and
similar suits are pending in many other jurisdictions in which the Company
operates. The FCC has modified its rule that formerly barred the commercial
broadcasting networks (NBC, CBS and ABC) from owning cable television
systems. The new FCC rule does not allow the network to acquire cable
television systems in markets in which they already own a broadcast station,
and sets limitations on the percentage of homes that can be passed, both
nationally and locally, by network-owned cable television systems. The 1992
Cable Act bars future common ownership of cable television systems and MMDS
or SMATV systems in the same franchise area, but grandfathered existing
combinations. There is no Federal prohibition of newspaper ownership of cable
television systems, or cable television system ownership of radio stations.
The Company does not have any prohibited cross-ownership interests.
State and Local Regulation. Cable television systems are generally operated
pursuant to franchises, permits or licenses issued by a municipality or other
local governmental entity. Franchises are usually issued for fixed terms and
must periodically be renewed. Most of the franchises for the Company's
Systems were granted on a nonexclusive basis. Each franchise generally
contains some provisions governing subscriber charges for basic cable
television services, fees to be paid to the franchising authority, length of
the franchise term, renewal and 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 television services
provided. (See "Franchises".) Though the 1984 Cable Act provides for certain
procedural protections, there can be no assurance that renewals will be
granted or that renewals will be made on similar terms and conditions. (See
"Cable Communications Policy Act of 1984".)
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 systems to the jurisdiction of
state governmental agencies. States where the Company operates Systems,
including California, Connecticut, Massachusetts, Minnesota and New York,
have enacted legislation with respect to the regulation of cable television
systems.
Regulation of Telecommunications Activities. As noted above, under "General
Development of Business-Development of New Services; Alternate Access", the
Company provides in certain of its Systems alternate access local
telecommunications services over a portion of its fiber optic cable
facilities, either directly or through joint ventures (primarily joint
ventures with TCG and its owners). Local telecommunications activities are
regulated by either the FCC or state public utility commissions, or both. In
some instances, the Company or TCG may be required to obtain regulatory
permission to offer such services, and may be required to file tariffs for
its service offerings, depending on whether particular alternative access
activities of the Company or TCG are classified as common carriage or private
carriage.
* * * *
The foregoing does not purport to be a summary of 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 industry or the
Company can be predicted at this time.
Item 2. Properties.
The Company's principal physical assets consist of cable television systems,
including signal receiving, encoding and decoding apparatus, headends,
distribution systems, and subscriber house drop equipment for each of its
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 systems consist of coaxial
and fiber optic cables and related electronic equipment. Subscriber equipment
consists of taps, house drops and converters. The Company owns its
distribution system, various office and studio fixtures, test equipment and
service vehicles. The physical components of the Systems require maintenance
and periodic upgrading to keep pace with technological advances. The Company
considers all of its properties to be in excellent condition.
The Company's coaxial and fiber optic cables are generally attached to
utility poles under pole rental agreements with
<PAGE>
local public utilities, although in some areas the distribution
cable is buried in underground ducts or trenches. The FCC regulates pole
attachment rates under the Federal Pole Attachments Act. (See "Descriptions
of Business--Legislation and Regulation--Other Federal Regulation".)
The Company owns or leases parcels of real property for signal reception
sites (antenna towers and headends), microwave facilities and business
offices. The Company owns the building which houses its offices in Boston,
Massachusetts.
Item 3. Legal Proceedings.
There are no material pending legal proceedings against the Company. The
Company is subject to legal proceedings and claims which arise in the
ordinary course of business, none of which is material in the opinion of
management.
Item 4. Submission of Matters to a Vote of Security Holders.
There were no matters submitted to a vote of security holders of the Company
during the fourth quarter of the fiscal year ended December 31, 1993.
PART II
Item 5. Market for the Registrant's Common Stock and Related Stockholder
Matters.
No established public trading market exists for the Company's Class A Common
Stock, $.01 par value per share (the "Class A Common Stock"), or Class B
Common Stock, $.01 par value per share (the "Class B Common Stock"; together
with the Class A Common Stock, the "Common Stock"), and accordingly no high
and low bid information or quotations are available with respect to the
Company's Common Stock.
As of March 21, 1994 there were 388 holders of record of its Common Stock.
The Company has not paid dividends on its Common Stock and has no present
intention of so doing. Certain agreements, pursuant to which the Company has
borrowed funds, contain provisions that limit the amount of dividends and
stock repurchases that the Company may make. (See Note 7 to the Company's
Consolidated Financial Statements.)
<PAGE>
Item 6. Selected Financial Data.
The following tables present selected information relating to the financial
condition and results of operations of the Company over the past five years,
and should be read in conjunction with the Consolidated Financial Statements
of the Company for the year ended December 31, 1993 set forth in Item 8
hereof.
(In Thousands, Except Ratios and Subscriber Amounts)
<TABLE>
<CAPTION>
Year Ended December 31
1989 (1) 1990 1991 1992 1993
<S> <C> <C> <C> <C> <C>
Statement of Operations Data:
Revenues $ 780,610 $ 938,032 $1,039,163 $1,113,475 $1,177,163
EBITDA (2) 323,754 390,495 444,708 488,330 527,592
Depreciation and Amortization 235,266 264,139 269,363 279,403 284,563
Non-Cash Stock Compensation (3) 4,354 6,903 10,067 9,683 11,004
Operating Income 84,134 119,453 165,278 199,244 232,025
Interest Expense 268,089 312,422 323,123 289,479 276,698
Income (Loss) from Continuing Operations
Before Cumulative Effect of Change In
Accounting for Income Taxes (174,637) (195,451) (161,642) (102,960) (25,774)
Earnings (Loss) Per Common Share from
Continuing Operations Before Cumulative
Effect of Change In Accounting for Income
Taxes (44.88) (54.80) (35.61) (25.06) (13.13)
</TABLE>
<TABLE>
<CAPTION>
Year Ended December 31
1989 (1) 1990 1991 1992 1993
<S> <C> <C> <C> <C> <C>
Balance Sheet Data:
Cash and Cash Equivalents $ 11,760 $ 10,377 $ 14,265 $ 27,352 $ 122,640
Total Assets 2,200,636 2,175,120 2,082,182 2,003,196 2,091,853
Total Debt 2,518,662 3,127,347 3,338,281 3,011,669 3,177,178
Redeemable Preferred Stock 548,801 157,835 -- -- --
Redeemable Common Stock 427,748 436,700 445,463 223,716 213,548
Shareholders' Equity (Deficiency) (1,500,869) (1,759,535) (1,919,525) (1,486,231) (1,667,088)
Financial Ratios and Other Data:
EBITDA to Revenues 41.5% 41.6% 42.8% 43.9% 44.8%
Total Debt to EBITDA (4) 7.78 8.01 7.51 6.17 6.02
Net Total Debt to EBITDA (4) (5) 7.74 7.98 7.47 6.11 5.79
EBITDA to Total Interest Expense 1.21 1.25 1.38 1.69 1.91
Capital Expenditures $ 182,688 $ 166,938 $ 145,846 $ 145,189 $ 185,691
Subscriber Data (6):
Homes Passed by Cable 4,554,000 4,761,000 4,880,000 4,981,000 5,192,000
Number of Basic Subscribers 2,570,000 2,710,000 2,804,000 2,876,000 2,915,000
Number of Premium Subscriptions (7) 2,707,000 2,702,000 2,603,000 2,545,000 2,454,000
Monthly Revenue per Average Basic
Subscriber (8) $ 29.41 $ 31.29 $ 32.98 $ 34.46 $ 35.76
<FN>
(1) On July 5, 1989, the Company acquired all of the outstanding limited partnership interests in four
partnerships managed by American Cablesystems Corporation, a subsidiary of the Company acquired in 1988 (the
"American Partnerships"), the results of which were previously unconsolidated.
(2) Operating income before depreciation and amortization and non-cash stock compensation. (See
"Management's Discussion and Analysis of Financial Condition and Results of Operations".)
(3) Equals the difference between the consideration paid by employees for shares of Common Stock of the
Company under the Company's Restricted Stock Purchase Program and the fair market value of such shares at
the date of issuance (as determined by the Company's Board of Directors), amortized over such shares'
vesting schedule. See Note 11 to the Company's Consolidated Financial Statements.
(4) The ratios for fiscal 1989 reflect less than a full year of EBITDA of the American Partnerships. Giving
pro forma effect to the acquisition of the American Partnerships on January 1, 1989, the ratios of Total
Debt to EBITDA and of Net Total Debt to EBITDA would have been approximately 7.45 and 7.41, respectively,
for fiscal 1989.
(5) Net Total Debt represents Total Debt minus Cash and Cash Equivalents held by the Company.
(6) See "Description of Business" for definitions of terms used in this table.
(7) Equals the number of premium services subscribed to by basic subscribers for a monthly fee per service.
A basic subscriber may subscribe to more than one premium service, each of which is counted as a separate
premium subscription.
(8) Revenues during the relevant period divided by the weighted average number of basic subscribers for the
Company's consolidated subsidiaries.
</TABLE>
<PAGE>
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
The following table sets forth for the years indicated (i) certain items in
the Selected Financial Data as a percentage of total revenues from continuing
operations and (ii) the percentage changes in the amount of such items
compared to the comparable prior year.
<TABLE>
<CAPTION>
Percentage of Revenues For Percentage Change From
Year Ended December 31 Comparable Prior Year
1991 1992 1993 1991 1992 1993
<S> <C> <C> <C> <C> <C> <C>
Revenues 100.0% 100.0% 100.0% 10.8% 7.2% 5.7%
Operating, Selling, General and Administrative 57.2 56.1 55.2 8.6 5.2 3.9
EBITDA (1) 42.8 43.9 44.8 13.9 9.8 8.0
Depreciation and Amortization 25.9 25.1 24.2 2.0 3.7 1.8
Non-Cash Stock Compensation (2) 1.0 0.9 0.9 45.8 (3.8) 13.6
Operating Income 15.9 17.9 19.7 38.4 20.6 16.5
Interest 31.1 26.0 23.5 3.4 (10.4) (4.4)
Income (Loss) from Continuing Operations
Before Cumulative Effect of Change in
Accounting For Income Taxes (15.6) (9.2) (2.2) (17.3) (36.3) (75.0)
<FN>
(1) Operating income before depreciation and amortization and non-cash stock compensation. Management
believes EBITDA is a meaningful measure of performance as substantially all of the Company's financing
agreements contain financial covenants based on EBITDA. However, EBITDA is not intended to be a performance
measure that should be regarded as an improvement or alternative to net income (loss). The Company has
substantial non-cash charges to earnings from depreciation and amortization and non-cash stock compensation,
which totalled $279,430,000, $289,086,000 and $295,567,000 for the years ended December 31, 1991, 1992 and
1993, respectively.
(2) Equals the difference between the consideration paid by employees for purchases of shares of Common
Stock of the Company under the Company's Restricted Stock Purchase Program and the fair market value of such
shares at the date of issuance (as determined by the Company's Board of Directors), amortized over the
vesting schedule relating to such shares. See Note 11 to the Company's Consolidated Financial Statements.
</TABLE>
Results of Operations. The Company has generated increases in revenues and
EBITDA in each of the past three fiscal years primarily through basic
subscriber growth and increases in monthly revenue per average basic
subscriber. During the period from January 1, 1991 through December 31, 1993,
revenues and EBITDA increased at annual compound growth rates of 8% and 11%,
respectively. The high level of depreciation and amortization associated with
the Company's acquisitions and capital expenditures related to continued
System construction and routine replacements and interest costs related to
its financing activities have caused the Company to report net losses. The
Company believes that such net losses are common for cable television
companies.
1991--Revenues increased 11% to $1,039,163,000 and EBITDA increased 14% to
$444,708,000. The increase in revenues resulted from a 3% increase in basic
subscribers to 2,804,000 and an increase in monthly revenue per average basic
subscriber from $31.29 to $32.98. The $1.69 increase reflected primarily (i)
an increase of $1.81 due to basic rate increases and revenue growth from
other services, (ii) an increase of $.43 in advertising and pay-per-view
revenue and (iii) a decrease of $.55 in premium subscription revenue, which
was due to the decrease in the pay-to-basic percentage from 99.7% to 92.9%,
reflecting industry-wide trends. The total number of premium subscriptions
decreased from 2,702,000 to 2,603,000 in 1991.
Operating, selling and general and administrative expenses increased 9% to
$594,455,000, a rate of growth less than that of revenues reflecting
operating efficiencies. Such efficiencies contributed to the 14% growth in
EBITDA to $444,708,000. Depreciation and amortization expenses increased 2%
to $269,363,000 as a result of reduced levels of acquisitions and capital
expenditures as compared to prior years. Non-cash stock compensation
increased 46% to $10,067,000 due to the vesting of a greater percentage of
shares issued under the Company's Restricted Stock Purchase Program as
compared to 1990. Operating income increased 38% to $165,278,000. Interest
expense increased 3% to $323,123,000 in 1991 principally due to the increased
debt incurred to finance the redemption of the remaining outstanding shares
of the Company's redeemable Preferred Stock, offset in part by lower
effective interest rates during 1991. As a result of such factors, 1991 net
loss decreased by $33,809,000 to $161,642,000.
1992--Revenues increased 7% to $1,113,475,000 and EBITDA increased 10% to
$488,330,000. The increase in revenues resulted from a 3% increase in basic
subscribers to 2,876,000 and an increase in monthly revenue per average basic
subscriber from $32.98 to $34.46. The $1.48 increase reflected primarily (i)
an increase of $1.79 due to basic rate increases and revenue growth from
other services, (ii) an increase of $.34 in advertising revenue, (iii) a
decrease of $.08 in pay-per-view revenue due to the lack
<PAGE>
of availability of high-profile sporting events which could be
offered as compared to 1991, a condition that prevailed industry-wide in
1992, and (iv) a decrease of $.57 in premium subscription revenue due to the
decrease in the pay-to-basic percentage from 92.9% to 88.5%, again reflecting
industry-wide trends. The total number of premium subscriptions decreased
from 2,603,000 to 2,545,000 in 1992.
Operating, selling and general and administrative expenses increased 5% to
$625,145,000, a rate of growth less than that of revenues, reflecting
continued operating efficiencies. Such efficiencies contributed to the 10%
growth in EBITDA. Depreciation and amortization expenses increased 4% to
$279,403,000 primarily as a result of the write-off of previously deferred
financing costs in connection with the refinancing in 1992 of certain
indebtedness. Non-cash stock compensation decreased 4% to $9,683,000 due to
the vesting of a reduced percentage of shares issued under the Company's
Restricted Stock Purchase Program as compared to 1991. Operating income
increased 21% to $199,244,000. Interest expense decreased 10% to $289,479,000
due to a reduction in debt of $326,612,000 and lower effective interest
rates. Other (income) expenses included a preliminary gain on the sale of the
Company's interest in North Central Cable Communications Corporation of
$10,253,000, before post-closing adjustments. Also included was a charge of
$10,280,000 due to litigation arising from the redemption of the limited
partnership interests in the American Partnerships. As a result of such
factors, 1992 net loss decreased $58,682,000 to $102,960,000.
1993--Revenues increased 6% to $1,177,163,000 and EBITDA increased 8% to
$527,592,000. The increase in revenues resulted from a 1% increase in basic
subscribers to 2,915,000 and an increase in monthly revenue per average basic
subscriber from $34.46 to $35.76. The $1.30 increase reflected primarily (i)
an increase of $1.34 due to basic rate increases made prior to the imposition
of the FCC's rate regulation and revenue growth from other services, (ii) an
increase of $.29 in advertising and pay-per-view revenue, and (iii) a
decrease of $.33 in premium subscription revenue, which was due to the
decrease in the pay-to-basic percentage from 88.5% to 84.2%, again reflecting
industry-wide trends. The total number of premium subscriptions decreased
from 2,545,000 to 2,454,000 in 1993.
Operating, selling and general and administrative expenses increased 4% to
$649,571,000, a rate of growth less than that of revenues, reflecting
continued operating efficiencies. Such efficiencies contributed to the 8%
growth in EBITDA. Depreciation and amortization expenses increased 2% to
$284,563,000. Non-cash stock compensation increased 14% to $11,004,000 due to
the vesting of a greater percentage of shares issued under the Company's
Restricted Stock Purchase Program as compared to 1992. Operating income
increased 16% to $232,025,000. Interest expense decreased 4% to $276,698,000
due to a reduction in the average debt outstanding and lower effective
interest rates.
Other (income) expense included a gain of $4,322,000 on the sale of
marketable equity securities and a gain of $17,067,000 on the sale of
investments, which consisted of a gain of $15,919,000 due to the exchange of
the Company's equity interest in Insight Communications Company U.K., L.P.
for stock representing a minority interest in International CableTel,
Incorporated and a gain of $1,148,000 due to a post-closing adjustment in
connection with the sale of the Company's interest in North Central Cable
Communications Corporation. Also included in other (income) expense was a
gain of $2,325,000 relating to the reversal of previously accrued liabilities
recorded in connection with the American Partnerships litigation, which was
settled in 1993. Equity in net loss of affiliates increased to $12,827,000
primarily due to the Company recording its proportionate share of losses from
TCG and its affiliates.
Financial Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS
109"), which the Company implemented as of January 1, 1993, required a change
from the deferred to the liability method for computing deferred income
taxes. The cumulative effect of this change, which was made as of January 1,
1993, was a non-recurring increase in net loss of $184,996,000. The
cumulative change resulted from net deferred tax liabilities recognized for
the difference between the financial reporting and tax bases of assets and
liabilities. Income tax expense (benefit) changed from an expense of
$1,654,000 in 1992 to a benefit of $7,921,000 in 1993 due to deferred tax
benefits recognized under SFAS 109. The income tax benefit for 1993 was
decreased by $4,182,000 as a result of applying the newly enacted federal tax
rates to deferred tax balances as of January 1, 1993.
As a result of such factors, net loss before cumulative effect of change in
accounting for income taxes for the year ended December 31, 1993 decreased by
$77,186,000 to $25,774,000.
* * * * *
The Company expects that advertising and home shopping revenues (which
currently represent approximately 5% of the Company's total revenues) may
become a larger percentage of total revenues. These sources of revenues tend
to be cyclical and seasonal in nature and could introduce cyclicality and
seasonality to the Company's total revenues and EBITDA.
Inflation. Certain of the Company's expenses, such as those for wages and
benefits, for equipment repair and replacement, and for billing and
marketing, increase with general inflation. However, the Company does not
believe that its financial results have been, or will be, adversely affected
by inflation, provided that it is able to increase its service rates
periodically. (See "Business--Description of Business--Legislation and
Regulation" for a description of recent legislation and pending regulation
that may limit the Company's ability to raise its rates.)
Recent Accounting Pronouncements. In May 1993, the Financial Accounting
Standards Board ("FASB") issued
<PAGE>
Statement of Financial Accounting Standards No. 115, "Accounting
for Certain Investments in Debt and Equity Securities" ("SFAS 115"), which is
effective for fiscal years beginning after December 15, 1993. SFAS 115
establishes standards for the accounting and reporting for investments in
equity securities that have readily determinable fair values and for all
investments in debt securities. The Company plans to implement SFAS 115 as of
January 1, 1994. Upon such implementation, the Company believes it will
recognize an additional asset of approximately $140,920,000 and a deferred
tax liability of $56,367,000, which will increase shareholders' equity.
In May 1993, the FASB issued Statement of Financial Accounting Standards No.
114, "Accounting by Creditors for Impairment of a Loan" ("SFAS 114"), which
is effective for fiscal years beginning after December 15, 1994. SFAS 114
addresses the accounting for certain loans made by the Company to affiliates
and certain employees if such loans are deemed impaired. The effect of
implementing this statement will be immaterial to the Company's financial
position and results of operations.
In November 1992, the FASB issued Financial Accounting Standards No. 112,
"Employer's Accounting for Postemployment Benefits" ("SFAS 112"), which is
effective for fiscal years beginning after December 15, 1993. SFAS 112
establishes standards for accounting for benefits provided to former or
inactive employees and their dependents and beneficiaries before retirement.
The effect of implementing this statement will not be significant on the
Company's financial position and results of operations.
Liquidity and Capital Resources. The cable television business requires
substantial financing for construction, expansion and maintenance of plant
and for acquisitions. The Company has historically financed its capital needs
and acquisitions through long-term debt and, to a lesser extent, through
private issuances of equity and cash provided from operating activities. The
Company's ability to generate cash adequate to meet its needs depends
generally on its results of operations and on the availability of external
financing.
The following table sets forth for the years indicated certain items from the
Statements of Consolidated Cash Flows.
Year Ended December 31,
1991 1992 1993
(In Thousands)
NET CASH PROVIDED FROM
OPERATING ACTIVITIES $ 123,543 $ 215,045 $ 250,504
NET CASH PROVIDED FROM
(USED FOR) FINANCING
ACTIVITIES:
Net Borrowings
(Repayments) $ 210,934 $(374,712) 165,509
Stock Repurchased and
Dividends Paid (163,888) (233,984) (31,232)
Issuance of Stock -- 548,189 46,500
Other (1,765) 389 (2,580)
Total $ 45,281 $ (60,118) $ 178,197
NET CASH PROVIDED FROM
(USED FOR) INVESTING
ACTIVITIES:
Acquisitions, Net of
Liabilities Assumed $ (5,490) $ -- $ --
Property, Plant and
Equipment (145,846) (145,189) (185,691)
Investments (9,077) (17,908) (106,819)
Other Assets (4,523) (12,996) (39,728)
Purchase of Marketable
Equity Securities -- -- (8,042)
Proceeds from Sale of
Marketable Equity
Securities -- -- 5,719
Proceeds from Sale of
Investments -- 34,253 1,148
Total $(164,936) $(141,840) $(333,413)
1993 Transactions. On June 3, 1993, the Company publicly issued (the "June
1993 Offering") $100,000,000 in aggregate principal amount of 8-5/8% Senior
Notes Due 2003 and $300,000,000 in aggregate principal amount of 9% Senior
Debentures Due 2008. On August 16, 1993, the Company publicly issued (the
"August 1993 Offering"; together with the June 1993 Offering, the "1993
Offerings") $200,000,000 in aggregate principal amount of 8-1/2% Senior Notes
Due 2001, $275,000,000 in aggregate principal amount of 8-7/8% Senior
Debentures Due 2005 and $525,000,000 in aggregate principal amount of 9-1/2%
Senior Debentures Due 2013 (all of the foregoing securities are sometimes
collectively referred to as the "Senior Unsecured Debt Securities").
The Company used the net proceeds from the issuance of the Senior Unsecured
Debt Securities, which totalled approximately $1,372,617,000, primarily to:
(i) prepay in its entirety $184,500,000 of outstanding senior indebtedness,
plus accrued interest thereon, of American Cablesystems of California, Inc.,
an indirectly wholly owned subsidiary of the Company; (ii) repay the entire
$149,950,000 then outstanding under the Company's reducing revolving credit
facility (the "Reducing Revolver"); (iii) prepay $770,000,000 of the term
loans (the "Term Loans") outstanding under the Company's Credit Agreement
(the "Credit Agreement"), plus accrued interest thereon; (iv) prepay in its
entirety the $100,000,000 term loan outstanding under the Company's 1992
Credit Agreement (the "1992 Credit Facility"), plus accrued interest thereon;
and (v) prepay in their entirety the $31,208,000 of the Company's outstanding
Series A/B Senior Secured Notes due January 15, 1999, plus accrued interest
thereon. The Company used the remainder of the net proceeds for general
corporate purposes. As a result of the application of the net proceeds
described above, the Company extended the average life of its total
indebtedness by approximately 4 years to over 11 years. The Company also
increased its borrowing
<PAGE>
availability under the Reducing Revolver from $400,000,000 to
$500,000,000, none of which was outstanding as of December 31, 1993.
During the period from January 1, 1991 through December 31, 1993, the Company
committed substantial capital resources for (i) construction and expansion of
existing Systems, (ii) routine replacement of cable television plant, (iii)
an increase in the channel capacity of certain Systems, (iv) construction of
new Systems, and (v) an increase in the percentage of Systems which are
equipped with addressable technology. In 1991, 1992 and 1993, capital
expenditures totaled $145,846,000, $145,189,000 and $185,691,000,
respectively. The Company has budgeted approximately $355,000,000 for capital
expenditures for the Systems during 1994 which includes $257,000,000 for the
cost to rebuild and expand channel capacity of, and to further deploy
addressable technology in, several of its Systems, $60,000,000 for line
extensions and customer connections and $38,000,000 primarily for routine
replacement of its equipment. The Company's 1994 budget is not yet final due
to uncertainty caused by the FCC's proposed rulemakings released on February
22, 1994, and will not become final until the Company can assess the impact
of such regulations on the Company's business. (See "Business--Description of
Business--Legislation and Regulation--1992 Cable Act".) The anticipated
increase in capital expenditures during 1994 as compared to 1993 is due
principally to the Company's intention to further expand channel capacity and
to deploy addressable technology more extensively in its Systems. (See
"Business--Description of Business--Technological Developments".)
During the year ended December 31, 1993, the Company made investments in an
aggregate amount of $106,819,000, which related primarily to its ownership
interests in TCG and Primestar. (See "Investments" and "Business--Description
of Business--Competition".) The Company engaged in several other transactions
reflected in Net Cash Provided From (Used For) Investing Activities in 1993.
The Company exercised options for shares of common stock of Home Shopping
Network, Inc. at a price of $8,042,000 and then sold a portion of the shares
for $5,719,000. In addition, the Company received a post-closing adjustment
of $1,148,000 from the disposition in 1992 of its interest in North Central
Cable Communications Corporation. Finally, other assets increased by
$39,728,000 primarily due to underwriting fees and expenses relating to the
issuance of the Senior Unsecured Debt Securities and the capitalization of a
termination fee of an interest rate protection agreement.
In November 1993, the Company issued and sold to a group of private investors
95,876 shares of Class A Common Stock for $46,500,000. The Company invested
such net proceeds in cash equivalents which were later used in part to fund a
repurchase of shares of Class A Common Stock from the partners of an
investment limited partnership managed by Burr, Egan, Deleage & Co. (the "BED
Partnership"). A condition to such repurchase by the Company was the release
by the BED Partnership of all rights under the Stock Liquidation Agreement,
described below, as to any shares not sold by such partnership and its
partners. On December 21, 1993, the Company repurchased 64,176 shares from
such partners for an aggregate purchase price of approximately $31,125,000,
or $485 per share, which was the same per share price that investors paid in
the November private placement. In March 1994, the Company repurchased 3,316
shares of Class B Common Stock from two other investment limited partnerships
managed by Burr, Egan, Deleage & Co. for $485 per share. As a result of such
repurchases and the release by the BED Partnership, the Company reduced its
future obligations to repurchase shares pursuant to the 1998-1999 Share
Repurchase Program, described below, by 83,939 shares.
1998-1999 Share Repurchase Program. In 1989, following various discussions
with shareholders concerning the lack of a public trading market for the
Company's Common Stock, the Company entered into a liquidity agreement (the
"Stock Liquidation Agreement") with certain major shareholders, including H.
Irving Grousbeck, MD Co. and Burr, Egan, Deleage & Co. (collectively, the
"Subject Shareholders"), who together held 1,684,116 shares of Common Stock
(or approximately 26% of the then outstanding shares of Common Stock).
Shortly thereafter, the Company extended to its other shareholders the
opportunity to participate in such program.
The Stock Liquidation Agreement provided for various liquidity arrangements,
of which the only remaining one is the Company's obligation to repurchase the
remaining shares of Common Stock held by the Subject Shareholders (other than
MD Co., a large portion of whose shares were purchased in 1992), as well as
by other shareholders who elected to participate in this aspect of the
liquidity program (collectively, the "Selling Shareholders"), on December 15,
1998 (or January 15, 1999, at each Selling Shareholder's election) at the
purchase price equal to the greater of (i) the dollar amount that a holder of
Common Stock would receive per share of Common Stock upon a sale of the
Company as a whole pursuant to a merger or a sale of stock or, if greater,
the dollar amount a holder of Common Stock would then receive per share of
Common Stock derived from the sale of the Company's assets and subsequent
distribution of the proceeds therefrom (net of corporate taxes, including
sales and capital gains taxes in connection with such sale of assets), in
either case less a discount of 22.5% or (ii) the dollar amount equal to the
net proceeds which would be expected to be received by a shareholder of the
Company from the sale of a share of the Company's Common Stock in an
underwritten public offering after, under certain circumstances, being
reduced by pro forma expenses and underwriting discounts. None of the
Officers or Directors of the Company elected to participate in the 1998-1999
Share Repurchase Program. The Selling Shareholders have agreed not to acquire
any additional shares of
<PAGE>
the Company's Common Stock (or securities convertible into or
granting the right to purchase shares of Common Stock). The maximum number of
shares of Common Stock that the Company will be required to repurchase is
667,366 (currently representing approximately 11.70% of its outstanding
shares of Common Stock, on a fully diluted basis assuming conversion of the
Company's outstanding Convertible Preferred Stock into shares of Common Stock
on a share-for-share basis).
The obligations of the Company to repurchase shares of Common Stock pursuant
to the 1998-1999 Share Repurchase Program are subject to applicable
requirements of law, including the relevant Delaware corporate statutes
relating to impairment of capital. Section 160 of the Delaware General
Corporation Law provides that, for the purpose of redeeming or otherwise
acquiring outstanding shares of its capital stock, a corporation may use only
those surplus funds which represent the amount by which the value of its net
assets exceeds the aggregate amount represented by all the shares of its
capital stock; to the extent funds used for redemption purposes exceed this
amount, a corporation is deemed to have impaired its capital in violation of
Section 160. If the Company's financial position is such that it is unable to
fulfill its obligations under the Stock Liquidation Agreement in compliance
with this statutory requirement, the Company will be prohibited from
consummating such transactions. The Company's obligations under the 1998-1999
Share Repurchase Program are also subject to existing and future agreements
of the Company, including all existing and future financing agreements.
Provisions in such agreements restricting the Company's ability to incur
indebtedness or to make distributions to, or redeem or repurchase shares of
capital stock from, its shareholders may prevent the Company from
consummating the 1998-1999 Share Repurchase Program. (See Note 7 to the
Company's Consolidated Financial Statements.) To the extent such program is
thus prohibited, the Stock Liquidation Agreement provides that the Company's
obligation to consummate the relevant repurchase or portion thereof will be
deferred until such time as the consummation of such repurchase or portion
thereof would be in compliance with such requirements of law and agreements.
In the event the Company is unable to perform its obligations to complete the
1998-1999 Share Repurchase Program within six months of the payment date
therefor, the Company is obligated, at the request made within such six month
period of any one or more Subject Shareholders (other than MD Co.) or
transferees holding an aggregate of at least 100,000 shares of such
transferred shares of Common Stock, to use its best efforts (subject to
compliance with applicable laws and regulations) to cause the sale of all or
substantially all of the assets of the Company and, following the
consummation of such sale, to liquidate the Company.
Credit Arrangements of the Company. On December 31, 1993, the Company had
cash on hand of $122,640,000 and the following credit arrangements: (i) the
Credit Agreement, which provided for term loans in the aggregate principal
amount of $754,550,000 as of such date; (ii) the 1992 Credit Facility, which
provided for the Reducing Revolver in an amount of up to $500,000,000 (all of
which was available as of such date); (iii) $171,500,000 of 10.12% Senior
Notes Due 1999 to The Prudential Life Insurance Company; (iv) the Senior
Unsecured Debt Securities (see "1993 Transactions" above); (v) $100,000,000
of 10-5/8% Senior Subordinated Notes Due 2002; (vi) $325,000,000 of 12-7/8%
Senior Subordinated Debentures Due 2004; (vii) $100,000,000 of Senior
Subordinated Floating Rate Debentures Due 2004; and (viii) $300,000,000 of
11% Senior Subordinated Debentures Due 2007. Other miscellaneous debt was
$26,128,000 on December 31, 1993.
The annual maturities of the Company's indebtedness for the years ending
December 31, 1994, 1995, 1996, 1997 and 1998 will be $65,626,000,
$92,550,000, $99,350,000, $145,250,000 and $175,350,000, respectively.
The Company's subsidiaries are divided into Restricted Subsidiaries and
Unrestricted Subsidiaries for purposes of its credit arrangements. Restricted
Subsidiaries are the operating subsidiaries which own and operate the
Company's Systems and which as a group are bound, to the same extent as the
Company, by the covenants and obligations of substantially all of the
Company's credit agreements. All subsidiaries of the Company that currently
own and operate Systems have been designated Restricted Subsidiaries.
An Unrestricted Subsidiary currently guarantees up to $34,375,000 of
Primestar's indebtedness. Primestar is incurring such indebtedness in
connection with the construction of a successor satellite system. (See
"Business--Description of Business--Competition".) The Company anticipates
that the obligations under such guarantee will increase over the next three
years up to a maximum of $70,625,000. This guarantee is currently secured by
a pledge of certain marketable securities held by such Unrestricted
Subsidiary, including shares of Common Stock of Turner Broadcasting System,
Inc. In addition, the Company loaned approximately $9,000,000 to Primestar in
1993 to assist Primestar in its financing of its successor satellite system,
which loans (plus accrued interest thereon) were repaid in the first quarter
of 1994.
Investments. In 1993, the Company purchased 20% of TCG for a purchase price
of $66,020,000. (See "Business-- Description of Business--Development of New
Services; Alternate Access".) In addition, the Company has committed to loan
up to $17,300,000 to TCG through 1997, of which $5,000,000 was advanced as of
December 31, 1993. The Company anticipates that its funding commitments to
TCG will increase over time. The Company has also invested $19,640,000 in
joint ventures involving TCG and other cable operators and expects in the
future to make additional investments in TCG and joint ventures involving
<PAGE>
TCG. Such future possible investments cannot be quantified at this
time and will be evaluated by the Company on a project-by-project basis. The
Company funded its investment in TCG and joint ventures involving TCG through
borrowings under the Reducing Revolver and cash from operating activities.
As of the date hereof, the Company has committed to spend approximately
$135,000,000 for acquisitions of and investments in cable television systems
in 1994. Of such amount, an Unrestricted Subsidiary of the Company advanced
$80,000,000 in the first quarter of 1994 as a loan which is convertible into
a 50% equity interest in a company which owns and operates cable television
systems. The Company funded such investment with cash and cash equivalents.
In addition, the Company anticipates that in the second quarter of 1994 it
will close the acquisition of another cable television system for
approximately $55,000,000. The Company expects to fund the purchase price for
such system from borrowings under the Reducing Revolver.
Capital Resources. The Company's ability to generate cash adequate to meet
its needs depends generally on its results of operations and on the
availability of external financing. The Company believes that cash from
operating activities, future borrowings under existing and new credit
facilities and future equity issuances will be sufficient to fund its debt
service obligations as well as anticipated capital expenditures, investments
and its obligations under the 1998-1999 Share Repurchase Program. Although in
the past the Company has been successful in refinancing its indebtedness and
obtaining new financing, there can be no assurance that the Company will
continue to be able to do so in the future or that the terms available will
be favorable to the Company.
Recent Legislation. On October 5, 1992, Congress passed the 1992 Cable Act,
which, among other things, authorizes the FCC to set standards for
governmental authorities to regulate the rates for certain cable television
services and equipment, and gives local broadcast stations the option to
elect mandatory carriage or require retransmission consent. (See
"Business--Description of Business--Legislation and Regulation--1992 Cable
Act".)
Pursuant to authority granted under the 1992 Cable Act, the FCC in April 1993
promulgated rate regulations that establish maximum allowable rates for cable
television services, except for services offered on a per-channel or
per-program basis. On February 22, 1994 the FCC adopted a revised regulatory
scheme which included, among other things, interim cost-of-service standards
and a new benchmark formula. In creating the new benchmark formula, the FCC
authorized a further reduction in rates for certain regulated services. As a
result, rates for certain regulated services in effect on September 30, 1992
may now be reduced by up to 17% if they exceed the new per-channel benchmark.
The old benchmark formula called for a reduction of up to 10%. As part of the
implementation of the regulations, the FCC has frozen rates for regulated
services from April 1, 1993 through May 15, 1994.
The FCC's regulations require rates for equipment to be cost-based, and
require reasonable rates for regulated cable television services to be
established based on, at the election of the cable television operator,
either application of the FCC's benchmarks or a cost-of-service showing
pursuant to standards adopted by the FCC.
To the extent that a cable television system's rates are found to exceed the
reasonable rate determined by the methodology selected by the cable
television operator, the rates will be subject to "rollbacks" and, in some
cases, refunds. In addition, if a cable television system's rates for
regulated services do not need to be reduced by 17% in order to reach the new
benchmark adopted on February 22, 1994, such rates may nonetheless be subject
to further reduction, up to a maximum reduction of 17% from the rates in
effect on September 30, 1992, based upon the results of a pending FCC study
of the operating costs of such cable television systems. The timing and
amount of such rollbacks, refunds and further reductions, if any, for any
system will depend on a number of factors, including the method of rate
determination selected by the cable television operator, further
clarification of the benchmark and cost-of-service methodologies adopted on
February 22, 1994, the capacity of the FCC to efficiently process
cost-of-service showings submitted by cable television operators, the success
on the merits of such cost-of-service showings and the outcome of pending
litigation challenging various aspects of the 1992 Cable Act.
In complying with the original FCC rate regulations promulgated on April 1,
1993 (which remain in effect until the new regulations become effective), the
Company made permitted rate adjustments according to the original FCC
benchmarks for regulated services in Systems serving a majority of the
Company's basic subscribers. Substantially all of the remaining Systems have
chosen a cost-of-service methodology to justify current rates. The Company
believes that resolution of pending rate cases filed pursuant to the FCC's
regulations will not have a material adverse effect upon the Company's
operations for the year ended December 31, 1993.
The final text of the rules adopted by the FCC on February 22, 1994 has not
yet been released. In addition, such rules relating to cost-of-service
showings may be subject to further revisions. As a result, it is impossible
to predict the exact impact of the rate regulations upon existing and future
rates charged by the Company for its regulated tiers of service. It is,
however, possible that such rate regulation could have a material adverse
impact upon the future results of operations of the Company.
Item 8. Financial Statements and Supplementary Data.
The financial statements of the Company and related notes thereto, together
with the Independent Auditors' Report of Deloitte & Touche, independent
certified public accountants, follows beginning on page 20.
<PAGE>
INDEPENDENT AUDITORS' REPORT
Continental Cablevision, Inc.:
We have audited the accompanying consolidated balance sheets of Continental
Cablevision, Inc. and its subsidiaries as of December 31, 1992 and 1993 and
the related statements of consolidated operations, consolidated shareholders'
equity (deficiency) and consolidated cash flows for each of the three years
in the period ended December 31, 1993. These financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements 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, such consolidated financial statements of Continental
Cablevision, Inc. and its subsidiaries present fairly, in all material
respects, the financial position of the companies at December 31, 1992 and
1993 and the results of their operations and their cash flows for each of the
three years in the period ended December 31, 1993 in conformity with
generally accepted accounting principles.
As discussed in Note 12 to the financial statements, the Company changed its
method of accounting for income taxes in 1993.
DELOITTE & TOUCHE
Boston, Massachusetts
February 10, 1994
(March 9, 1994 as to
Notes 5 and 15 to the consolidated
financial statements)
<PAGE>
Continental Cablevision, Inc. and Subsidiaries
Consolidated Balance Sheets
<TABLE>
<CAPTION>
December 31,
1992 1993
(In Thousands)
<S> <C> <C>
ASSETS
Cash and Cash Equivalents $ 27,352 $ 122,640
Accounts Receivable--net 36,085 44,530
Prepaid Expenses and Other 5,172 4,800
Supplies 26,598 31,638
Marketable Equity Securities 35,517 58,676
Investments 35,275 136,186
Property, Plant and Equipment--net 1,213,848 1,211,507
Franchise Costs--net 510,973 365,887
Other Assets--net 112,376 115,989
Total $ 2,003,196 $ 2,091,853
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIENCY)
Accounts Payable $ 40,851 $ 43,342
Accrued Interest 56,637 72,424
Accrued and Other Liabilities 151,315 145,191
Debt 3,011,669 3,177,178
Deferred Income Taxes 626 105,041
Minority Interest in Subsidiaries 4,613 2,217
Redeemable Common Stock, $.01 par value;
751,305 and 670,682 shares outstanding 223,716 213,548
Commitments and Contingencies (Notes 5, 8, 14, and 15) - -
Shareholders' Equity (Deficiency):
Preferred Stock, $.01 par value; 1,557,142 shares authorized;
none outstanding - -
Series A Convertible Preferred Stock, $.01 par value;
1,142,858 shares authorized and outstanding;
liquidation preference $416,861,000 and $450,976,000 11 11
Class A Common Stock, $.01 par value; 7,500,000 shares
authorized;
137,373 and 248,060 shares outstanding 1 2
Class B Common Stock, $.01 par value; 7,500,000 shares
authorized;
3,665,820 and 3,652,420 shares outstanding 37 37
Additional Paid-In Capital 558,679 577,249
Unearned Compensation (34,919) (23,577)
Deficit (2,010,040) (2,220,810)
Shareholders' Equity (Deficiency) (1,486,231) (1,667,088)
Total $ 2,003,196 $ 2,091,853
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE>
Continental Cablevision, Inc. and Subsidiaries
Statements of Consolidated Operations
<TABLE>
<CAPTION>
Year Ended December 31,
1991 1992 1993
(In Thousands, Except Per Share
Amounts)
<S> <C> <C> <C>
Revenues $1,039,163 $1,113,475 $1,177,163
Costs and Expenses:
Operating 347,469 365,513 382,195
Selling, General and Administrative 246,986 259,632 267,376
Restricted Stock Purchase Program 10,067 9,683 11,004
Depreciation and Amortization 269,363 279,403 284,563
Total 873,885 914,231 945,138
Operating Income 165,278 199,244 232,025
Other (Income) Expense:
Interest 323,123 289,479 276,698
Equity in Net Loss of Affiliates 3,380 9,402 12,827
Gain on Sale of Marketable Equity Securities - - (4,322)
Gain on Sale of Investments - (10,253) (17,067)
Partnership Litigation 1,827 10,280 (2,325)
Minority Interest in Net Income of Subsidiaries 47 136 184
Dividend Income (2,281) (330) (650)
Other (1,037) 1,836 375
Total 325,059 300,550 265,720
Loss From Operations Before Income Taxes and Cumulative
Effect of Change in Accounting for Income Taxes (159,781) (101,306) (33,695)
Income Tax Expense (Benefit) 1,861 1,654 (7,921)
Loss Before Cumulative Effect of Change in Accounting
for Income Taxes (161,642) (102,960) (25,774)
Cumulative Effect of Change in Accounting for Income
Taxes - - (184,996)
Net Loss (161,642) (102,960) (210,770)
Preferred Stock Preferences (5,771) (16,861) (34,115)
Loss Applicable to Common Shareholders $ (167,413) $ (119,821) $ (244,885)
Loss Per Common Share:
Loss Before Cumulative Effect of Change in Accounting
for Income Taxes $ (35.61) $ (25.06) $ (13.13)
Cumulative Effect of Change in Accounting for
Income Taxes - - (40.55)
Net Loss $ (35.61) $ (25.06) $ (53.68)
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE>
Continental Cablevision, Inc. and Subsidiaries
Statements of Consolidated Shareholders' Equity (Deficiency)
<TABLE>
<CAPTION>
Common Stock
Series A
Convertible Additional Retained
Preferred Class Class Paid-In Unearned Earnings
Stock A B Capital Compensation (Deficit)
(In Thousands)
<S> <C> <C> <C> <C> <C> <C>
Balance, January 1, 1991 $- $ 32 $- $- $(22,685) $(1,736,882)
Net Loss - - - - - (161,642)
Preferred Stock Dividends - - - (5,771) - -
Accretion of Redeemable
Common Stock - - - (207) - (8,556)
Common Stock Issued for Acquisition - - - 6,401 - -
Restricted Stock Purchase Program:
Stock Issued - - - 360 (360) -
Stock Vested - - - - 10,067 -
Stock Forfeited - - - (783) 501 -
Balance, December 31, 1991 - 32 - - (12,477) (1,907,080)
Net Loss - - - - - (102,960)
Accretion of Redeemable
Common Stock - - - (13,806) - -
Reclassification of Redeemable
Common Stock - 3 1 141,958 - -
Issuance of Series A Convertible
Preferred Stock 11 - - 394,338 - -
Conversion of Class A to Class B
Common Stock - (33) 33 - - -
Issuance of Class B Common Stock - - 5 153,834 - -
Restricted Stock Purchase Program:
Stock Issued - 1 - 32,779 (32,779) -
Stock Vested - - - - 9,683 -
Stock Forfeited - - - (654) 654 -
Stock Exchanged for Loans - - - (3,513) - -
Stock Repurchased - (2) (2) (146,257) - -
Balance, December 31, 1992 11 1 37 558,679 (34,919) (2,010,040)
Net Loss - - - - - (210,770)
Accretion of Redeemable
Common Stock - - - (14,766) - -
Issuance of Class A Common Stock - 1 - 46,499 - -
Reclassification of Redeemable
Common Stock to Class A Common
Stock - - - 5,085 - -
Restricted Stock Purchase Program:
Stock Issued (Class B) - - - 544 (544) -
Stock Vested - - - - 11,004 -
Stock Forfeited - - - (882) 882 -
Stock Exchanged for Loans - - - (6,526) - -
Stock Repurchased - - - (11,384) - -
Balance, December 31, 1993 $11 $ 2 $37 $ 577,249 $(23,577) $(2,220,810)
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE>
Continental Cablevision, Inc. and Subsidiaries
Statements of Consolidated Cash Flows
<TABLE>
<CAPTION>
Year Ended December 31,
1991 1992 1993
(In Thousands)
<S> <C> <C> <C>
Operating Activities:
Net Loss $(161,642) $ (102,960) $ (210,770)
Adjustments to Reconcile Net Loss to Net Cash
Provided from Operating Activities:
Cumulative Effect of Change in Accounting for
Income Taxes - - 184,996
Depreciation and Amortization 269,363 279,403 284,563
Restricted Stock Purchase Program 10,067 9,683 11,004
Equity in Net Loss of Affiliates 3,380 9,402 12,827
Gain on Sale of Marketable Equity Securities - - (4,322)
Gain on Sale of Investments - (10,253) (17,067)
Minority Interest in Net Income of Subsidiaries 47 136 184
Deferred Income Taxes - - (9,788)
Accrued Interest (11,086) (10,965) 15,787
Accounts Payable, Accrued and Other Liabilities 17,838 40,649 (3,633)
Other Working Capital Changes (4,424) (50) (13,277)
Net Cash Provided From Operating Activities 123,543 215,045 250,504
Financing Activities:
Proceeds from Borrowings--net 616,950 918,000 1,534,850
Repayment of Borrowings (406,016) (1,292,712) (1,369,341)
Redemption of Preferred Stock and Dividends Paid (163,606) - -
Increase (Decrease) in Minority Interests (1,765) 389 (2,580)
Issuance of Series A Convertible Preferred Stock - 394,349 -
Issuance of Common Stock - 153,840 46,500
Repurchase of Common Stock and Redeemable
Common Stock (282) (233,984) (31,232)
Net Cash Provided From (Used For)
Financing Activities 45,281 (60,118) 178,197
Investing Activities:
Acquisitions, Net of Liabilities Assumed (5,490) - -
Property, Plant and Equipment (145,846) (145,189) (185,691)
Investments (9,077) (17,908) (106,819)
Other Assets (4,523) (12,996) (39,728)
Purchase of Marketable Equity Securities - - (8,042)
Proceeds from Sale of Marketable Equity Securities - - 5,719
Proceeds from Sale of Investment--net - 34,253 1,148
Net Cash Used For Investing Activities (164,936) (141,840) (333,413)
Net Increase in Cash and Cash Equivalents 3,888 13,087 95,288
Balance at Beginning of Year 10,377 14,265 27,352
Balance at End of Year $ 14,265 $ 27,352 $ 122,640
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE>
Continental Cablevision, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
1. Summary of Significant Accounting Policies
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of
Continental Cablevision, Inc. (the Company) and its subsidiaries. All
significant intercompany accounts and transactions have been eliminated.
Cash and Cash Equivalents
The Company considers all highly liquid investments purchased with a maturity
of three months or less to be cash equivalents. The carrying amount of cash
and cash equivalents approximates fair value due to the short maturity of
these investments.
Supplies and Property, Plant and Equipment
Supplies are stated at the lower of cost (first-in, first-out method) or
market. Property, plant and equipment are stated at cost and include
capitalized interest of $396,000, $766,000 and $908,000 in 1991, 1992 and
1993, respectively. Depreciation is provided using the straight-line group
method over estimated useful lives as follows: buildings, 25 to 40 years;
reception and distribution facilities, 3 to 15 years; and equipment and
fixtures, 4 to 12-1/2 years. (See Note 6)
Franchise Costs
Franchise costs represent amounts allocated to franchises in various
acquisitions and costs deferred in connection with successful franchise
applications. Such amounts are amortized over the lives of the related
franchises, generally 10 to 15 years. Accumulated amortization aggregated
$466,456,000 and $561,244,000 at December 31, 1992 and 1993, respectively.
Other Assets
Other assets are principally composed of goodwill, deferred financing costs
and loans to employees (see Note 11). Goodwill represents the excess of the
Company's purchase price over the fair value of identifiable assets acquired
in various transactions, and is amortized over 40 years. Accumulated
amortization aggregated $54,625,000 and $61,209,000 at December 31, 1992 and
1993, respectively.
Investments
Investments in 20-50% owned affiliates are generally accounted for using the
equity method. Investments in less than 20% owned companies are generally
accounted for using the cost method. (See Note 5)
Allowance for Doubtful Accounts
The allowance for doubtful accounts at December 31, 1992 and 1993 is
$9,072,000 and $9,435,000, respectively.
Income Taxes
The Company implemented Statement of Financial Accounting Standards No. 109,
Accounting for Income Taxes (SFAS 109) as of January 1, 1993. SFAS 109
requires the recognition of deferred tax liabilities and assets for the
future tax consequences of temporary differences between the financial
reporting and tax bases of existing assets and liabilities. In addition,
future tax benefits, such as net operating loss and investment tax credit
carryforwards are recognized to the extent realization of such benefits is
more likely than not. (See Note 12)
Fair Value of Financial Instruments
The estimated fair value of financial instruments has been determined by the
Company using available market information and appropriate valuation
methodologies. However, considerable judgment is required in interpreting
data to develop the estimates of fair value. Accordingly, the estimates
presented herein are not necessarily indicative of the amounts that the
Company could realize in a current market exchange. The use of different
market assumptions and/or estimation methodologies may have a material effect
on the estimated fair value amounts. The fair value estimates presented
herein are based on pertinent information available to management as of
December 31, 1992 and 1993. Although management is not aware of any factors
that would significantly affect the estimated fair value amounts, such
amounts have not been comprehensively revalued for purposes of these
financial statements since that date, and current estimates of fair value may
differ significantly from the amounts presented herein. (See Notes 4, 5, 7
and 9)
Loss per Common Share
Loss per common share is calculated by dividing the loss available to common
shareholders by the weighted average number of common shares outstanding of
4,701,000, 4,782,000 and 4,562,000 for the years ended December 31, 1991,
1992 and 1993, respectively. Shares of Convertible Preferred Stock were not
assumed to be converted into shares of common stock since the result would be
anti-dilutive by decreasing the loss per share for the years ended December
31, 1992 and 1993.
Recent Accounting Pronouncements
In May 1993, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 115, Accounting for Certain Investments in
Debt and Equity
<PAGE>
Continental Cablevision, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
Securities (SFAS 115), which, is effective for fiscal years
beginning after December 15, 1993. SFAS 115 establishes standards for the
accounting and reporting for investments in equity securities that have
readily determinable fair values and for all investments in debt securities.
The Company plans to implement SFAS 115 as of January 1, 1994. Upon such
implementation, the Company believes it will recognize an additional asset of
approximately $140,920,000 and a deferred tax liability of $56,367,000, which
will increase shareholders' equity.
In May 1993, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 114, Accounting by Creditors for
Impairment of a Loan (SFAS 114), which is effective for fiscal years
beginning after December 15, 1994. SFAS 114 addresses the accounting for
certain loans made by the Company to affiliates and certain employees, if
such loans are deemed impaired. The effect of implementing this statement
will not be significant to the Company's financial position and results of
operations.
In November 1992, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 112, Employers' Accounting for
Post-Employment Benefits (SFAS 112). SFAS 112 establishes standards for
accounting for benefits provided to former or inactive employees and their
dependents and beneficiaries before retirement. SFAS 112 is effective for
fiscal years beginning after December 15, 1993. The effect of implementing
this statement will not be significant to the Company's financial position
and results of operations.
Reclassifications
Certain amounts have been reclassified from previous presentation in the
accompanying consolidated financial statements.
2. Supplemental Disclosure of Cash Flows
The following represents non-cash investing and financing activities and cash
paid for interest and income taxes during the years ended December 31, 1991,
1992 and 1993.
December 31,
1991 1992 1993
(In Thousands)
Acquisition:
Fair Value of Assets Acquired $ 6,401 $ - $ -
Common Stock Issued for
Acquisition (6,401) - -
Total $ - $ - $ -
Dispositions:
Gain on Sale of Investment
(See Note 5) $ - $ 10,253 $ 15,919
Deferred Gain on Sale of
Investment - - 165
Bases of Assets Sold - - 429
Gain on Sale of Marketable
Equity Securities - - 3,471
Bases of Properties Received - - (19,984)
Promissory Note Issued
to Buyer - 24,000 -
Proceeds Received from
Disposition $ - $ 34,253 $ -
Accretion of Redeemable Common
Stock $ 8,763 $ 13,806 $ 14,766
Accretion of Series A Convertible
Preferred Stock $ - $ 16,861 $ 34,115
Cash Paid During the Year
for Interest $334,209 $301,210 $261,846
Cash Paid During the Year
for Income Taxes $ 1,801 $ 1,259 $ 2,370
3. Acquisitions
During 1991, the Company purchased cable television systems for approximately
$5,490,000 and also purchased for stock the non-owned interest in a
partnership managed by the Company for approximately $6,401,000. This
investment was previously accounted for using the equity method. The effect
of these acquisitions on the Company's results of operations was not
material.
The accompanying financial statements reflect the results of operations
commencing on the acquisition dates.
4. Marketable Equity Securities
Marketable equity securities are carried at cost and have an aggregate market
value of $142,538,000 and $199,596,000 at December 31, 1992 and 1993,
respectively.
5. Investments
In October 1993, the Company exchanged its equity interest in Insight
Communications Company U.K., L.P. for stock representing less than a 5%
interest in International CableTel, Incorporated (CableTel), a
telecommunications company operating in the United Kingdom. The Company has
accounted for the investment in CableTel as a marketable equity security and
recorded a gain of $15,919,000.
<PAGE>
Continental Cablevision, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
In May 1993, the Company purchased a 20% interest in Teleport Communications
Group Inc. (TCG) for $60,020,000 and has contributed $6,000,000 for a 20%
interest in TCG Partners, a related partnership. In addition, the Company has
made commitments to TCG to loan up to $17,300,000 through 1997, of which
$5,000,000 was borrowed as of December 31, 1993. The Company also has
invested $19,640,000 in various partnerships with TCG Partners. TCG and its
affiliates are telecommunications companies which operate fiber optic
networks in the United States.
In September 1992, the Company completed the disposition of its 50% interest
in North Central Cable Communications Corporation (NCCC) to Meredith/New
Heritage Strategic Partners, L.P. (Meredith) and simultaneously purchased an
ownership interest in Meredith. The Company sold a portion of its interest in
NCCC for $48,253,000 in cash and simultaneously invested $14,000,000 of the
proceeds in Meredith. In addition, the Company exchanged its remaining
interest in NCCC and issued a $24,000,000 promissory note to Meredith and, as
a result, currently has approximately a one-third ownership interest in
Meredith. The $10,253,000 preliminary gain represented the proceeds received
less the basis in NCCC, the cash investment in Meredith and the promissory
note. In April 1993, an additional gain of $1,148,000 was recorded due to the
receipt of previously escrowed funds. The Company also received $14,000,000
from Meredith as a prepayment for services provided by the Company which was
recorded in accrued and other liabilities on the balance sheet. Meredith
operates several cable systems in Minnesota and North Dakota.
In January 1992, the Company purchased an ownership interest in N-Com Limited
Partnership II (N-Com) for approximately $4,465,000. N-Com operates several
cable systems located in Michigan.
The Company also has various investments in cable television companies which
are not individually material to the Company. The Company has approximately a
one-third ownership interest in these companies and therefore accounts for
these investments using the equity method.
The major components of these companies' combined financial position as of
the balance sheet dates and the results of operations for the years then
ended were as follows (reflects the Company's proportionate share for the
periods which the investments were owned):
December 31,
1992 1993
(In Thousands)
Property, Plant and
Equipment $ 49,000 $106,000
Total Assets 165,000 253,000
Total Liabilities 165,000 196,000
Equity - 57,000
December 31,
1991 1992 1993
(In Thousands)
Revenues $ 39,000 $ 49,000 $ 63,000
Depreciation and
Amortization 20,000 20,000 22,000
Operating Loss (4,000) (4,000) (5,000)
Net Loss (15,000) (21,000) (19,000)
At December 31, 1993, the Company has $10,626,000 of investments and
$8,895,000 of advances in Primestar Partners, L.P. (Primestar), a limited
partnership that provides direct broadcast satellite services. This
investment represents approximately a 10% interest, is carried at cost and
quoted market prices are not available. Due to the excessive cost involved in
performing alternative valuation methodologies it was not practicable to
estimate the fair value of the investment as of December 31, 1993. As of
December 31, 1992, it was estimated that the carrying value of the investment
in Primestar of $6,986,000 approximated fair value. Subsequent to December
31, 1993, Primestar repaid the outstanding advances and a wholly owned
subsidiary of the Company issued a standby letter of credit of $34,375,000 on
behalf of Primestar, which guaranteed a portion of the financing received for
the construction of a successor satellite system. The letter of credit is
secured by certain marketable equity securities with a market value of
$89,709,000 as of December 31, 1993.
Other investments, none of which were individually material to the Company,
were carried at an aggregate cost of $22,629,000 and $27,741,000 at December
31, 1992 and 1993, respectively. These other investments are valued by
management at $36,634,000 and $40,543,000 as of December 31, 1992 and 1993,
respectively, primarily based on recent private transactions or other
valuation methods.
Subsequent to December 31, 1993, the Company advanced $80,000,000 as a loan,
convertible into a 50% equity interest in a company which owns and operates
cable systems.
<PAGE>
Continental Cablevision, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
6. Property, Plant and Equipment
The components of property, plant and equipment are as follows:
December 31,
1992 1993
(In Thousands)
Land and Buildings $ 48,806 $ 50,040
Reception and Distribution Facilities 1,834,816 1,893,925
Equipment and Fixtures 223,345 249,192
Total 2,106,967 2,193,157
Less--Accumulated Depreciation 893,119 981,650
Property, Plant and Equipment--net $1,213,848 $1,211,507
7. Debt
Total debt outstanding is as follows:
December 31,
1992 1993
(In Thousands)
Bank Indebtedness:
The Company $1,717,425 $ 754,550
Unrestricted Subsidiary 195,875 -
Total Bank Indebtedness 1,913,300 754,550
Insurance Company Notes 191,000 171,500
Senior Secured Notes 31,231 -
Senior Notes and Debentures - 1,400,000
Subordinated Debt 850,000 825,000
Other 26,138 26,128
Total $3,011,669 $3,177,178
At December 31, 1993, the Company's Bank Indebtedness includes the Term Loan
and the Credit Agreement. The Term Loan of $754,550,000 bears interest at a
rate between the agent bank's prime rate (6% at December 31, 1993) and prime
plus l%, depending on certain financial tests. The Term Loan requires
increasing quarterly installments through 2000. Prepayments are required if
the Restricted Group sells assets, incurs certain indebtedness, or has excess
cash flow, as defined in the Term Loan. At December 31, 1993, the Credit
Agreement consists of a $500,000,000 revolving credit facility, of which none
is outstanding. Credit availability under the revolving credit facility will
decrease quarterly commencing April 1994, with a final maturity in December
2000. Borrowings under the Credit Agreement bear interest at a rate between
the agent bank's prime rate (6% at December 31, 1993) plus 1/2% and prime
plus 1-1/4%, depending on certain financial tests. At the Company's option,
the interest rates under the Term Loan and Credit Agreement may be fixed at a
spread over certain money market rates for various terms up to five years.
The Insurance Company Notes bear interest at 10.12%, require increasing
semi-annual repayments through July 1, 1999 and rank pari passu in right of
payment with the Company's Bank Indebtedness (collectively, Senior Secured
Debt). The stock of the Company's Restricted Subsidiaries is pledged as
collateral for the Senior Secured Debt.
The Company's unsecured Senior Notes and Debentures (Senior Unsecured Debt)
rank pari passu in right of payment with the Senior Secured Debt and are
non-redeemable prior to maturity, except for the 9-1/2% Senior Debentures.
The 9-1/2% Senior Debentures are redeemable at the Company's option at par
plus declining premiums beginning in 2005. In addition, at any time prior to
August 1996, the Company may redeem a portion of the 9-1/2% Senior Debentures
at a premium with the proceeds from any offering by the Company of its
capital stock. No sinking fund is required for any of the Senior Unsecured
Debt. The Senior Unsecured Debt consists of the following:
December 31,
1993
(In Thousands)
8-1/2% Senior Notes, Due September 15, 2001 $ 200,000
8-5/8% Senior Notes, Due August 15, 2003 100,000
8-7/8% Senior Debentures, Due September 15, 2005 275,000
9% Senior Debentures, Due September 1, 2008 300,000
9-1/2% Senior Debentures, Due August 1, 2013 525,000
Total $1,400,000
The Company's Senior Unsecured Debt and Senior Secured Debt (collectively,
Senior Debt) limit the Restricted Group with respect to, among other things,
(i) dividends and repurchases of capital stock and subordinated debt in an
aggregate amount in excess of $864,000,000, (ii) the creation of liens and
additional indebtedness, (iii) property dispositions, and (iv) investments
and leases, and require certain minimum ratios of cash flow to debt and to
related fixed charges.
The Company's Subordinated Debt is redeemable at the Company's option at par
plus declining premiums at various dates, and is subordinated to the
Company's Senior Debt. Subordinated Debt consists of the following:
December 31,
1992 1993
(In Thousands)
10-5/8% Senior Subordinated Notes,
Due June 15, 2002 $100,000 $100,000
12-7/8% Senior Subordinated Debentures,
Due November 1, 2004 350,000 325,000
Senior Subordinated Floating Rate
Debentures, Due November 1, 2004 100,000 100,000
11% Senior Subordinated Debentures, Due
June 1, 2007 300,000 300,000
Total $850,000 $825,000
<PAGE>
Continental Cablevision, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
The 12-7/8% Senior Subordinated Debentures have mandatory annual sinking fund
payments on November 1, 2002 and 2003 which will retire 50% of such
debentures prior to maturity. In December 1993, the Company repurchased
$25,000,000 of these debentures at a premium of $3,075,000, which was
recorded as interest expense.
The Senior Subordinated Floating Rate Debentures bear interest at LIBOR plus
3% through November 1996, increasing to LIBOR plus 6.5% through maturity.
The Company currently has Interest Rate Exchange Agreements (Swaps) pursuant
to which it pays fixed interest rates averaging 8.1% on notional amounts of
$1,100,000,000 (expiring 1994 through 2000) and variable interest rates on
notional amounts of $1,775,000,000 (expiring 1994 through 2003). The variable
interest rates currently range from 3.4% to 3.5%. In addition, the Company
has $300,000,000 of Interest Rate Cap Agreements (Caps) which limit six month
LIBOR to 8% and expire in 1995. The Company's exposure, if the other parties
fail to perform under the agreements, would be limited to the impact of
variable interest rate fluctuations and the periodic settlement of amounts
due under these agreements. Subsequent to December 31, 1993, the Company
entered into additional Caps of $100,000,000 and $200,000,000 which limit six
month LIBOR to 8% and 5.15%, respectively, and expire in 1996 and 1995,
respectively.
The fair value of total debt is estimated to be $3,137,955,000 and
$3,510,020,000 as of December 31, 1992 and 1993, respectively. The fair value
is based on recent trades and dealer quotes, adjusted for an unrealized loss
of $101,178,000 and $94,547,000, respectively, which represents the fair
value of interest rate exchange agreements based on estimates obtained from
dealers.
Annual maturities of debt for the five years subsequent to December 31, 1993,
are as follows:
(In Thousands)
1994 $ 65,626
1995 92,550
1996 99,350
1997 145,250
1998 175,350
Thereafter 2,599,052
$3,177,178
8. Commitments
The Company and its subsidiaries have entered into various operating lease
agreements, with total commitments of $37,463,000 as of December 31, 1993.
Commitments under such agreements for the years 1994-1998 approximate
$8,191,000, $7,403,000, $6,538,000, $4,315,000 and $3,519,000, respectively.
The Company and its subsidiaries also rent pole space from various companies
under agreements which are generally terminable on short notice. Lease and
rental costs charged to operations for the years ended December 31, 1991,
1992, and 1993 were $16,500,000 $17,876,000 and $18,378,000, respectively.
The Company has entered into a purchase and sale agreement to purchase a
cable television system for approximately $55,000,000. This transaction is
expected to close in the second quarter of 1994.
9. Redeemable Stock
Pursuant to a Stock Liquidation Agreement with certain shareholders (the
Selling Shareholders), the Company committed to repurchase 1,228,193 shares
of its common stock in December 1998 or January 1999 at a defined purchase
price (Purchase Price). The Purchase Price is the greater of the estimated
amount of net proceeds per share from an underwritten public offering of the
Company's common stock or, the net proceeds per share from the liquidation of
the Company less a 22.5% discount. The Stock Liquidation Agreement also
required the Company to offer to repurchase up to 300,000 shares from all
shareholders by October 15, 1993 (the Mandatory Tender Offer).
The initial estimated repurchase cost for the entire 1,528,193 shares of
Redeemable Common Stock has been adjusted by periodic accretions through the
repurchase dates, based on the interest method, of the difference between the
initial estimate and the subsequent estimates of the Purchase Price. The fair
value of the Redeemable Common Stock is estimated at $286,721,000 and
$339,365,000 as of December 31, 1992 and 1993, respectively, based on the
estimate of the Purchase Price at these dates of $382 and $506 per share,
respectively, as determined by the Company's investment banker.
In the event the Company is unable to meet its commitments under the Stock
Liquidation Agreement, the Selling Shareholders may cause the sale of all or
substantially all of the assets of the Company.
Pursuant to the Company's August 1992 Tender Offer, the Company repurchased
319,022 Redeemable Common shares, 159,437 Class A shares, and 237,302 Class B
shares in October 1992 for approximately $239,852,000, of which $5,868,000
was paid in January 1993. This transaction satisfied the Mandatory Tender
Offer and, together with agreements with certain shareholders to withdraw
<PAGE>
Continental Cablevision, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
from the 1998-1999 Share Repurchase, reduced the number of
Redeemable Common shares to 751,305 shares.
In December 1993, the Company repurchased 64,176 Redeemable Common shares for
approximately $31,125,000. This transaction, together with an agreement with
a certain shareholder to withdraw from the 1998-1999 Share Repurchase,
reduced the number of Redeemable Common shares to 670,682 shares. The effect
of these transactions on certain accounts is as follows:
Redeemable Additional
Common Common Paid-In
Stock Stock Capital
(In Thousands)
Repurchase of 715,761 Shares
(319,022 were Redeemable
Shares) $ (93,591) $ (4) $(146,257)
Reclassification of 457,866
Shares to Common Stock (141,962) 4 141,958
Total for the Year Ended
December 31, 1992 $(235,553) $ - $ (4,299)
Repurchase of 64,176
Redeemable Shares $ (19,848) $ - $ (11,277)
Reclassification of 16,447
Shares to Common Stock (5,085) - 5,085
Total for the Year Ended
December 31, 1993 $ (24,933) $ - $ (6,192)
During 1991, the Company redeemed the remaining outstanding shares of
Redeemable Preferred Stock for approximately $163,606,000.
10. Shareholders' Equity (Deficiency)
In May 1992, the Company adopted amendments to its Certificate of
Incorporation and By-laws which reclassified the Company's outstanding common
stock, which has one vote per share, as Class A Common Stock, and created a
new class of common stock, Class B Common Stock, which has ten votes per
share. At December 31, 1993, there were 250,244 and 4,320,918 Class A and
Class B shares of common stock outstanding, respectively. Shareholders'
Equity (Deficiency) reflects only 248,060 and 3,652,420 Class A and Class B
shares of common stock outstanding, respectively, due to the classification
of 670,682 shares as Redeemable Common Stock.
In November 1993, the Company sold 95,876 shares of Class A Common Stock for
approximately $46,500,000. During 1992, the Company sold 469,275 shares of
Class B Common Stock for approximately $153,839,000 after $1,161,000 of
expenses related to the offerings.
In June 1992, the Company sold 1,142,858 shares of Series A Convertible
Preferred Stock (Convertible Preferred), $.01 par value, for $350 per share.
Net proceeds were approximately $394,349,000 after expenses related to the
offering. Each Convertible Preferred share is entitled to ten votes per
share, shares equally with each common share in all dividends and
distributions, and is convertible into one share of common stock, at any
time, at the option of the holder. The Convertible Preferred stockholders
have the right, at any time after the third anniversary of the purchase date,
to sell their shares in a public offering by causing the Company to register
such shares under the Securities Act of 1933. Certain other shareholders of
the Company have similar registration rights.
The Convertible Preferred has a liquidation preference equal to the greater
of its Accreted Value or the amount which would be distributed to common
stockholders assuming conversion of the Convertible Preferred. The Accreted
Value assumes a yield of 8% per annum, compounded semi-annually in arrears on
the $350 purchase price per share. The carrying value of the Convertible
Preferred has been increased by $34,115,000 to reflect the Accreted Value of
$450,976,000 as of December 31, 1993.
After the fifth anniversary of the purchase date, if the value of the common
stock is greater than 137.5% of the then Accreted Value, the Company will
have the right to convert each outstanding share of Convertible Preferred
into one share of common stock.
On the tenth anniversary of the purchase date, each outstanding share of
Convertible Preferred may be converted at the option of the holder or the
Company into a number of common shares which will have a value equal to the
Accreted Value. The Company may, at its sole option, purchase for cash at the
Accreted Value all or part of the Convertible Preferred instead of accepting
or requiring conversion.
In connection with the above-referenced sale of shares of Convertible
Preferred Stock and Class B Common Stock, the issuance of subordinated debt,
senior notes, and debentures, and certain other investment banking services,
the Company paid aggregate fees and underwriting discounts to Lazard Freres &
Company (Lazard) of approximately $9,000,000 and $7,700,000 in 1992 and 1993,
respectively. Two directors of the Company are general partners of Lazard and
are managing directors of Corporate Partners, L.P., which purchased 728,953
shares of Convertible Preferred on the same terms as all other purchasers of
Convertible Preferred.
11. Restricted Stock Purchase Program
The Company maintains a Restricted Stock Purchase Program under which certain
employees of the Company, selected by the Board of Directors, are permitted
to buy
<PAGE>
Continental Cablevision, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
shares of the Company's common stock at the par value of one cent
per share. The shares remain wholly or partly subject to forfeiture for five
years, during which a pro rata portion of the shares becomes "vested" at
six-month intervals. Upon termination of employment with the Company, an
employee must resell to the Company, for the price paid by the employee, the
employee's shares which are not then vested. For financial statement
presentation, the difference between the purchase price and the fair market
value at the date of issuance (as determined by the Board of Directors) is
recorded as additional paid-in capital and unearned compensation, and charged
to operations through 1996 as the shares vest. Shares of common stock issued
under the program for the years ended December 31, 1991, 1992, and 1993 were
1,200 and 108,450 and 1,600, respectively. At December 31, 1992 and 1993,
119,728 and 78,327 shares, respectively, were not yet vested. In connection
with the Restricted Stock Purchase Program, a wholly-owned subsidiary of the
Company has loaned approximately $20,580,000 and $14,035,000 at December 31,
1992 and 1993, respectively, to the participating employees to fund their
individual tax liabilities. These loans are due through 1996, bear interest
at a range from 5% to 8% , and are included in Other Assets in the
accompanying financial statements.
12. Income Taxes
At December 31, 1993, the Company and its subsidiaries have net operating
loss carryforwards of approximately $959,000,000 for federal income tax
purposes expiring through 2008, and investment tax credit carryforwards of
approximately $60,000,000 expiring through 2005.
Effective January 1, 1993, the Company implemented the provisions of SFAS 109
and recognized an additional charge of $184,996,000 for deferred income
taxes. Such amount has been reflected in the consolidated financial
statements as the cumulative effect of change in accounting for income taxes.
During 1993, the Company revised its estimated annual effective tax rate to
reflect a change in the federal statutory rate from 34% to 35%. The income
tax benefit for the year decreased approximately $4,182,000 as a result of
applying the newly enacted federal tax rates to deferred tax balances as of
January 1, 1993.
The provision (benefit) for income taxes is comprised of:
Year Ended December 31,
1991 1992 1993
(In Thousands)
Current:
Federal $ - $ - $ 647
State 1,861 1,654 1,220
Deferred:
Federal - - (7,968)
State - - (1,820)
Total $1,861 $1,654 $(7,921)
Differences between the effective income tax rate and the federal statutory
rates are summarized as follows:
Year Ended December 31,
1991 1992 1993
Federal Statutory Rate (34.0)% (34.0)% (35.0)%
Enacted Tax Rate Change - - 12.4
Net Operating Losses without
Current Income Tax Benefit 16.8 14.8 -
Depreciation and Amortization
Not Deductible for
Tax Purposes 11.1 17.4 -
Gain on Sale of Investment 6.9 - -
State Income Tax, Net of
Federal Income Tax Benefit .8 1.1 (1.2)
Other (.4) 2.3 .3
Total 1.2% 1.6% (23.5)%
Deferred income taxes prior to the implementation of SFAS 109 resulted
primarily from timing differences in the recognition of certain expense items
for tax and financial reporting purposes. The tax effect of each major
component is as follows:
Year Ended December
31,
1991 1992
(In Thousands)
Accelerated Depreciation and
Amortization $13,051 $ 7,811
Restricted Stock Purchase Program (3,301) 7,469
Gain on Sale of Investment (4,080) 3,486
Deferred Income - (4,555)
Utilization of Accounting Net
Operating Losses (1,561) (7,669)
Other (4,109) (6,542)
Total $ - $ -
<PAGE>
Continental Cablevision, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
The tax effects of temporary differences and carryforwards that give rise to
significant portions of deferred tax assets and liabilities consist of the
following:
December 31,
1993
(In Thousands)
Deferred Tax Liabilities:
Depreciation and Amortization $(533,242)
Other (14,989)
Deferred Tax Assets:
Net Operating Loss
Carryforwards 490,499
Tax Credit Carryforwards 60,304
Other 49,858
Valuation Allowance (157,471)
Net Deferred Tax Liability $(105,041)
Valuation allowances have been established for uncertainties in realizing
transitional investment tax credit carryforwards and the tax benefit of
certain limited use net operating losses for federal and state income tax
purposes. If in future periods the realization of tax credit and net
operating loss carryforwards acquired as a result of business combinations
becomes more likely than not, $27,000,000 of the valuation allowance will be
allocated to reduce goodwill and other intangible assets. The net change of
the valuation allowance from the beginning of the year was an increase of
$34,971,000 relating to current state net operating loss carryforwards that
are not expected to be realized.
A recently affirmed tax court decision affecting the cable television
industry ratified the deductibility of certain franchise cost amortization.
As a result, the Company revised the estimated tax bases of certain
intangible assets. This resulted in the Company adjusting the carrying values
of goodwill, franchise costs and deferred tax relating to specific
acquisitions by $16,287,000, $54,506,000 and $70,793,000, respectively.
13. Retirement and Matched Savings Plans
The Company has a non-contributory defined benefit plan covering
substantially all employees. Benefits under the plan are determined based on
formulas which reflect employees' years of service and the average of the
five consecutive years of highest compensation. The Company's policy is to
make contributions sufficient to meet the minimum funding requirements of
ERISA.
The components of net periodic pension expense are as follows:
Year Ended December 31,
1991 1992 1993
(In Thousands)
Service Cost--Benefits Earned
During the Year $ 2,241 $2,479 $2,584
Interest Cost on Projected
Benefit Obligations 856 1,118 1,336
Actual Return on Plan Assets (1,231) (179) (136)
Other Items 802 (422) (615)
Total $ 2,668 $2,996 $3,169
The following table sets forth the funded status and amounts recognized in
the Company's balance sheet:
December 31,
1992 1993
(In Thousands)
Actuarial Present Value of:
Vested Benefit Obligation
$ (5,757) $ (8,384)
Non-Vested Benefit Obligation (1,390) (1,647)
Accumulated Benefit Obligation (7,147) (10,031)
Effect of Projected Salary
Increases (9,285) (10,553)
Projected Benefit Obligation (16,432) (20,584)
Plan Assets at Market Value 8,735 11,350
Funded Status (7,697) (9,234)
Deferred Transition Loss 1,335 1,264
Unrecognized Prior Service Cost (95) (89)
Unrecognized Net Loss 790 1,884
Accrued Pension Cost $ (5,667) $ (6,175)
The actuarial assumptions as of the year-end measurement date are as follows:
December 31,
1992 1993
Discount Rate 8.5% 7.75%
Expected Long-Term Rate of Return 9.0% 9.0 %
Rate of Increase in Future Salary Levels 5.5% 4.75%
At December 31, 1993, plan assets consist of equity and debt securities, U.S.
Government obligations and cash equivalents.
The Company sponsors a defined contribution Matched Savings Plan covering
substantially all of its employees. The Company's contribution for this plan
is based on a percentage of each participant's salary. Total costs for the
years ended December 31, 1991, 1992 and 1993 were $1,961,000, $2,418,000 and
$2,550,000, respectively.
<PAGE>
Continental Cablevision, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
14. Contingencies
On March 18, 1993, the Company received a favorable jury verdict in federal
district court in Massachusetts determining that the Company properly
discharged its fiduciary duties in connection with the redemption of the
limited partnership interests in the four limited partnerships acquired in
1989 for an aggregate purchase price of approximately $380,000,000. The
plaintiff limited partners had alleged that the Company had acquired the
partnership interests at unfairly low prices. The jury also found that the
Company had not misrepresented any fact or opinion in making the offers to
acquire the partnership interests. An unspecified fact, however, was found to
have been omitted. The Company entered into a settlement agreement on May 14,
1993, settling all claims and counterclaims in the suit, which was
subsequently approved by the court. Pursuant to the settlement agreement, the
Company has contributed to a settlement fund of $6,158,554.
The Company is subject to legal proceedings and claims which arise in the
ordinary course of business. In the opinion of management, the ultimate
resolution of such legal proceedings and claims will not have a material
effect on the consolidated financial position and results of operations of
the Company.
15. Legislation and Regulation
Pursuant to the Cable Television Consumer Protection and Competition Act of
1992, the FCC promulgated rate regulations on April 1, 1993 that establish
maximum permitted rates for cable television services, except for services
offered on a per-channel or per-program basis. Such regulations took effect
on September 1, 1993. On February 22, 1994, after reconsideration, the FCC
significantly revised the regulatory framework it adopted on April 1, 1993.
The final rules reflecting the new rate regulations are expected to be issued
before March 31, 1994 and to become effective in May 1994. See page 19
(Liquidity and Capital Resources--Recent Legislation) of the Company's
December 31, 1993 Annual Report on Form 10-K for a discussion of the effect
of rate regulation on the Company.
16. Quarterly Financial Information (Unaudited)
Quarterly results of operations for 1992 and 1993 are summarized below:
First Second Third Fourth
Quarter Quarter Quarter Quarter
(In Thousands, Except Per Share Amounts)
1992
Revenues $ 267,840 $277,887 $280,877 $286,871
Depreciation and
Amortization 67,124 70,208 69,965 72,106
Restricted Stock Purchase
Program 2,441 2,427 2,405 2,410
Operating Income 47,008 49,573 52,171 50,492
Net Loss (30,802) (27,597) (15,139) (29,422)
Loss Applicable to Common
Shareholders (30,802) (28,298) (23,205) (37,516)
Loss Per Common Share (6.43) (5.90) (4.58) (8.38)
1993
Revenues $ 287,542 $297,238 $295,458 $296,925
Depreciation and
Amortization 69,024 69,882 72,044 73,613
Restricted Stock Purchase
Program 2,690 2,689 2,690 2,935
Operating Income 57,766 62,648 55,512 56,099
Loss Before Cumulative
Effect of Change in
Accounting for
Income Taxes (5,397) (1,491) (13,487) (5,399)
Cumulative Effect of Change
in Accounting for Income
Taxes (184,996) - - -
Net Loss (190,393) (1,491) (13,487) (5,399)
Loss Applicable to Common
Shareholders (198,602) (9,819) (22,305) (14,159)
Loss Per Common Share:
Loss Before Cumulative
Effect of Change in
Accounting for
Income Taxes (2.99) (2.16) (4.90) (3.08)
Cumulative Effect of
Change in Accounting for
Income Taxes (40.61) - - -
Net Loss (43.60) (2.16) (4.90) (3.08)
<PAGE>
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
None.
PART III
Item 10. Directors and Executive Officers of the Registrant.
The positions held by each Director and Officer of the Company are shown
below. There are no family relationships among the following persons.
Name of Director or
Executive Officer Position with the Company
Amos B. Hostetter, Jr. (1) Chairman of the Board, Chief
Executive Officer and Director
Timothy P. Neher Vice Chairman of the Board and
Director
Michael J. Ritter President, Chief Operating
Officer and Director
Roy F. Coppedge III Director
C. Alexander Howard Director
Jonathan H. Kagan (1) Director
Robert B. Luick Director and Secretary
Henry F. McCance Director
Lester Pollack Director
Vincent J. Ryan (1) Director
William T. Schleyer Executive Vice President
Jeffrey T. DeLorme Executive Vice President
Nancy Hawthorne Chief Financial Officer and
Senior Vice President
Name of Other Officers Position with the Company
Andrew L. Dixon, Jr Senior Vice President-Human
Resources
David M. Fellows Senior Vice
President-Engineering and
Technology
Richard A. Hoffstein Senior Vice President and
Corporate Controller
Frederick C. Livingston Senior Vice President-Marketing
Robert J. Sachs Senior Vice President-Corporate
and Legal Affairs
Robert A. Stengel Senior Vice
President-Programming
P. Eric Krauss Treasurer
Nancy B. Larkin Vice President-Community
Relations
Jon W. Lunsford Director of Corporate Finance
W. Lee H. Dunham Assistant Secretary
Patrick K. Miehe Assistant Secretary
(1) Members of the Executive Committee.
The Company has a classified Board composed of three classes. Each class
serves for three years, with one class being elected each year. The term of
the Class B Directors, Messrs. Neher, Ryan and Kagan, will expire at the 1994
annual meeting of shareholders; the term of the Class C Directors, Messrs.
Hostetter, McCance, Pollack and Coppedge, will expire at the 1995 annual
meeting of shareholders; and the term of the Class A Directors, Messrs.
Ritter, Howard and Luick, will expire at the 1996 annual meeting of
shareholders. Under the terms of stock purchase agreements with the Company,
Corporate Advisors, L.P., on behalf of the investors (the "Preferred Stock
Investors") who purchased Series A Convertible Preferred Stock, $.01 par
value of the Company (the "Convertible Preferred Stock"), has the right to
designate two persons, and Boston Ventures Limited Partnership III, on behalf
of itself and Boston Ventures Limited Partnership IIIA, Boston Ventures
Limited Partnership IV and Boston Ventures Limited Partnership IVA
(collectively, the "Boston Ventures Investors"), has the right to designate
one person, to be nominated as members of the Board of Directors. Lester
Pollack and Jonathan H. Kagan are the designees of the Preferred Stock
Investors, and Roy F. Coppedge III is the designee of the Boston Ventures
Investors.
The Executive Officers and other Officers were elected by the Board of
Directors on May 20, 1993, except that P. Eric Krauss was elected Treasurer
effective December 31, 1993. All Executive Officers and other Officers hold
office until the first meeting of the Board following the next annual meeting
of shareholders and until their successors are chosen and qualified.
The following is a description of the business experience during the past
five years of each Director and Officer and includes, as to Directors, other
directorships held in companies required to file periodic reports with the
Securities and Exchange Commission (the "Commission") and registered
investment companies.
Directors and Executive Officers.
Amos B. Hostetter, Jr. (57), a cofounder of the Company, is the Chairman of
the Board and Chief Executive Officer of the Company. He has been a Director
since 1963. Mr. Hostetter is a past Chairman of the National Cable Television
Association (NCTA) and currently serves on NCTA's Board and Executive
Committee. He is past Chairman and serves on the Executive Committee of the
Board of Directors of both Cable in the Classroom and the Cable Satellite
Public Affairs Network (C-SPAN) and currently serves on the Board of
Directors of Children's Television Workshop.
Timothy P. Neher (46) is the Vice Chairman of the Board of the Company. He
has been a Director since 1982 and has been employed by the Company since
1974. Prior to 1991 he was President and Chief Operating Officer of the
Company, prior to 1986 he was an Executive Vice President of the Company, and
prior to 1982 he was Vice President and Treasurer of the Company. He
currently is on the Board of Directors of Turner Broadcasting System, Inc.
Michael J. Ritter (53) is the President and Chief Operating Officer of the
Company. He has been a Director since 1991
<PAGE>
and has been employed by the Company since 1980. Prior to 1991 he
was an Executive Vice President, and prior to 1988 he was the Senior Vice
President and General Manager of the Company's Michigan management region.
Roy F. Coppedge III (45) has been a director of Boston Ventures Management,
Inc. since 1983. He currently is on the Board of Directors of Enquirer/Star
Group Inc. and Dial Page, Inc. He was elected to serve as a Director of the
Company in 1992.
C. Alexander Howard (61) was until 1989 an officer and Director of R.C.
Crisler & Co., Inc., brokers of communications properties. He is currently
engaged in private investment activities. He had been affiliated with the
Crisler organization since 1962. Mr. Howard has been a Director of the
Company since 1964.
Jonathan H. Kagan (37) is Managing Director of Corporate Advisors, L.P. and,
since 1987, has been a General Partner of Lazard Freres & Co. He has been
associated with Lazard Freres & Co. since 1980. He was elected to serve as a
Director of the Company in 1992.
Robert B. Luick (82) is of counsel to the law firm of Sullivan & Worcester,
which firm has acted as counsel to the Company since its inception. Mr. Luick
has been with Sullivan & Worcester since 1943. He is a member of the Board of
Directors of Ionics, Incorporated, a diversified water treatment company. He
has been Secretary and a Director of the Company since 1963.
Henry F. McCance (51) has been general partner of the following venture
capital partnerships since their formation: Greylock Ventures Limited
Partnership (1983), Greylock Investments Limited Partnership (1985), Greylock
Capital Limited Partnership (1987) and Greylock Limited Partnership (1990).
He is also President and Treasurer of Greylock Management Corporation, an
investment services organization, and a Director of Immulogic Pharmaceutical
Corporation, Brookstone and Manugistics. Prior to 1990, Mr. McCance was a
Vice President and Treasurer of Greylock Management Corporation. Mr. McCance
has been a Director of the Company since 1972.
Lester Pollack (60) is Senior Managing Director of Corporate Advisors, L.P.
and Chief Executive Officer of Centre Partners, L.P., investment partnerships
affiliated with Lazard Freres & Co., as well as a General Partner of Lazard
Freres & Co. He currently is on the Board of Directors of SunAmerica Inc.,
CNA Financial Corporation, Kaufman & Broad Home Corporation, Tidewater, Inc.,
Loews Corporation, Parlex Corporation and Polaroid Corporation. He was
elected to serve as a Director of the Company in June 1992.
Vincent J. Ryan (58) has been Chairman of the Board and a Director of
Schooner Capital Corporation, a venture capital organization, since 1971. Mr.
Ryan is also Chairman of the Board of Iron Mountain Information Management
Company, Inc., an information management company. He has been a Director of
the Company since 1980.
William T. Schleyer (42) is an Executive Vice President of the Company. Prior
to 1989 he was the Senior Vice President and General Manager of the Company's
New England management region. He is a member of the Boards of Directors of
Cable Television Laboratories, Inc., the research and development arm of the
cable industry, and TCG. He has been employed by the Company since 1978.
Jeffrey T. DeLorme (41) is an Executive Vice President of the Company. Prior
to March 1993, he was the Senior Vice President and General Manager of the
Company's Florida/Georgia management region. He was formerly the Director of
Corporate Services in the Company's Michigan management region. He has been
employed by the Company since 1980.
Nancy Hawthorne (42) is the Chief Financial Officer and a Senior Vice
President of the Company. Prior to December 1993, she was also the Treasurer
of the Company, in addition to being Chief Financial Officer and a Senior
Vice President. Prior to December 1992, she was a Senior Vice President and
the Treasurer of the Company. Prior to 1988, she was a Vice President and the
Treasurer of the Company. She is a member of the Boards of Directors of
Perini Corporation, a construction company, and TCG. She has been employed by
the Company since 1982.
Other Officers
Andrew L. Dixon Jr. (51) is a Senior Vice President of the Company. From 1985
to 1991, he was the Vice President of Human Resources of the Company. He has
been employed by the Company since 1982.
David M. Fellows (41) is a Senior Vice President of the Company. Prior to
December 1992, he was the Vice President of Strategic Operations and then the
President of Scientific Atlanta's Transmissions Systems Business Division,
where he was responsible for the company's head end, fiber and digital
compression products.
Richard A. Hoffstein (46) is a Senior Vice President and the Corporate
Controller of the Company. Prior to 1986, he was the Corporate Controller,
Assistant Treasurer and Assistant Secretary of the Company. He has been
employed by the Company since 1976.
Frederick C. Livingston (48) is a Senior Vice President of the Company. Prior
to 1988, he was a Vice President of the Company, and prior to 1984 he was the
Director of Marketing for the Company. He has been employed by the Company
since 1979.
Robert J. Sachs (45) is a Senior Vice President of the Company. Prior to
1988, he was a Vice President of the Com-
<PAGE>
pany, and prior to 1983 he was the Company's Director of Corporate
Development. He has been employed by the Company since 1979.
Robert A. Stengel (51) is a Senior Vice President of the Company. Prior to
1988, he was a Vice President of Programming of the Company. He has been
employed by the Company since 1980.
P. Eric Krauss (30) is the Treasurer of the Company. Prior to December 1993,
he was the Assistant Treasurer of the Company. He has been employed by the
Company since January 1, 1990. He was formerly employed by The First National
Bank of Boston since 1986, most recently as an Assistant Vice President.
Nancy B. Larkin (43) is a Vice President of the Company. She has been
employed by the Company since February 1988. She was formerly employed by
American Cablesystems Corporation, most recently as Vice President of
Corporate Communications and Training.
Jon W. Lunsford (34) is the Director of Corporate Finance for the Company. He
has been employed by the Company since January 1, 1991. He was formerly
employed by Crestar Bank since 1982, most recently as a Vice President.
W. Lee. H. Dunham (52) is an Assistant Secretary of the Company. He has been
a partner of the law firm of Sullivan & Worcester since 1974.
Patrick K. Miehe (46) is an Assistant Secretary of the Company. He has been a
partner of the law firm of Sullivan & Worcester since 1990.
Biographical information concerning the Directors, Executive Officers and
other Officers is as of March 21, 1994.
Item 11. Executive Compensation.
The following table (the "Summary Compensation Table") discloses compensation
received by the Company's Chief Executive Officer and the four most highly
compensated other Executive Officers for the three fiscal years ended
December 31, 1991, 1992 and 1993.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Annual Compensation Long Term Compensation
Name and Other Annual Restricted All Other
Principal Compensation Stock Awards Compensation
Position Year # Salary ($) Bonus ($)(1) ($) ($)(2)(3) ($)(4)
<S> <C> <C> <C> <C> <C> <C>
Amos B. Hostetter, Jr. 1993 $624,961 $238,653 $ -- $ -- $4,273
Chairman and Chief 1992 615,154 203,470 -- 4,499,850 4,404
Executive Officer 1991 575,954 213,083 -- -- *
Michael J. Ritter 1993 439,845 146,691 -- -- 3,868
President and Chief 1992 400,250 123,235 -- 2,999,900 3,910
Operating Officer 1991 335,769 78,482 -- -- *
William T. Schleyer 1993 291,923 61,418 -- -- 3,403
Executive Vice 1992 272,084 52,131 -- 1,499,950 3,360
President 1991 250,385 41,344 -- 360,000 *
Jeffrey T. DeLorme 1993 268,484 56,871 111,608 (5) -- 3,403
Executive Vice 1992 197,890 21,846 -- 1,437,317 3,361
President 1991 185,211 24,146 -- -- *
Nancy Hawthorne
Chief Financial
Officer 1993 224,896 46,590 -- -- 3,403
and Senior Vice 1992 198,000 86,454 -- 979,823 3,361
President 1991 185,000 34,969 -- -- *
<FN>
*In accordance with the transitional provisions applicable to the revised rules on executive compensation
disclosure adopted by the Commission, effective on October 21, 1992, amounts of All Other Compensation are
excluded for fiscal year 1991.
(1) See Note 11 to Consolidated Financial Statements. An Unrestricted Subsidiary of the Company has made
loans to these and other persons in amounts equal to the income taxes incurred by them as a result of their
restricted stock purchases. Such loans were financed through cash provided from operating activities and
long-term borrowings. The Company charges interest on these loans generally at rates ranging from 5% to 8%
per annum and declares bonuses to each of these persons in the amount of the interest due each year. The
Company declared no other bonus to any Executive Officer during the years presented (other than a $50,000
bonus to Nancy Hawthorne in 1992 which is reflected in the Summary Compensation Table). As of March 21,
1994, the amounts of the loans outstanding to certain Executive Officers were as follows: William T.
Schleyer ($466,508), Jeffrey T. DeLorme ($452,679) and Nancy Hawthorne ($362,055). (See "Compensation
Committee Interlocks and Insider Participation" for loan amounts to certain other Executive Officers.) The
outstanding principal balance of each such loan is generally payable upon the earlier to occur of (i) the
fifth anniversary of such loan or (ii) the termination of such person's employment with the Company. Mr.
DeLorme has an additional loan
<PAGE>
from an Unrestricted Subsidiary of the Company of which the current amount outstanding is
$400,000. During the fiscal year ended December 31, 1993, the largest aggregate amounts of indebtedness of
the following Executive Officers was as follows: William T. Schleyer ($898,571), Jeffrey T. DeLorme
($1,007,679) and Nancy Hawthorne ($636,519).
(2) Shares of restricted stock are entitled to dividends at the same rate as all other shares of Common
Stock.
(3) Shown below are (i) the total number of restricted shares and current market value of such shares as of
December 31, 1993 and (ii) the vesting schedule as of March 31, 1994 over the next three years for each of
the Executive Officers named in the Summary Compensation Table:
</TABLE>
<TABLE>
<CAPTION>
Vesting Over Three Years From 3/31/94
Total Restricted
Shares Held as Shares Shares
of 12/31/93 Vesting Vesting Shares Vesting
Name Shares Value in 1994 in 1995 in 1996
<S> <C> <C> <C> <C> <C>
Amos B. Hostetter,
Jr. 10,050 $4,874,250 5,100 3,300 1,650
Michael J. Ritter 8,700 4,219,500 4,400 3,200 1,100
William T. Schleyer 3,350 1,624,750 1,700 1,100 550
Jeffrey T. DeLorme 3,191 1,547,635 1,332 1,056 803
Nancy Hawthorne 2,184 1,059,240 1,043 719 422
(4) Includes payment by the Company in the fiscal years ended December 31, 1992 and 1993, respectively, of
premiums for term life insurance on behalf of the following Executive Officers: Amos B. Hostetter, Jr.
($1,350 and $1,125), Michael J. Ritter ($856 and $720), William T. Schleyer ($306 and $255), Jeffrey T.
DeLorme ($307 and $255) and Nancy Hawthorne ($307 and $255). The remaining amounts of $3,054 and $3,148,
respectively, for each Executive Officer shown in the Summary Compensation Table represents the employer
matching contribution under the Company's matched savings plan for each of the named Executive Officers in
the respective year.
(5) Represents a one-time reimbursement of moving and related expenses incurred by Mr. DeLorme in connection
with his relocation to the Company's Boston, Massachusetts office (grossed up for income taxes incurred by
Mr. DeLorme).
</TABLE>
Compensation Committee Interlocks and Insider Participation. Base annual
compensation for Executive Officers was determined during the last fiscal
year by the Chairman, the Vice Chairman and the President of the Company.
Pursuant to authority delegated by the Board of Directors, the Chairman also
awarded grants of restricted stock during the last fiscal year to key
employees designated by the Board in accordance with the Company's Restricted
Stock Purchase Program. Amos B. Hostetter, Jr., Timothy P. Neher and Michael
J. Ritter--the Chairman, Vice Chairman and President of the Company,
respectively--are Directors and participate in deliberations concerning
Executive Officer compensation.
An Unrestricted Subsidiary of the Company has made loans to these three
Executive Officers and other persons in amounts equal to the income taxes
incurred by them as a result of their restricted stock purchases. Such loans
were financed through cash provided from operating activities and long-term
borrowings. The Company charges interest on these loans generally at rates
ranging from 5% to 8% per annum and declares bonuses to each of these persons
in the amount of the interest due each year. As of March 21, 1994, the
amounts of the loans outstanding to the three Executive Officers named above
were as follows: Amos B. Hostetter, Jr. ($1,662,750), Timothy P. Neher
($2,669,856) and Michael J. Ritter ($1,689,612). During the fiscal year ended
December 31, 1993, the largest aggregate amounts of indebtedness of such
Executive Officers were as follows: Amos B. Hostetter, Jr. ($3,134,686),
Timothy P. Neher ($4,057,356) and Michael J. Ritter ($2,020,797). The
outstanding principal balance of each such loan is generally payable upon the
earlier to occur of (i) the fifth anniversary of such loan or (ii) the
termination of such person's employment with the Company. (For information
regarding loans to other Executive Officers, see footnote (1) to the Summary
Compensation Table.)
On December 31, 1993, the Company accepted payment for loans incurred in
connection with restricted stock purchases pursuant to the Company's 1989
Restricted Stock Purchase Agreement III ("RSPA III") which became due on such
date by (i) transfer to the Company and cancellation of shares of Common
Stock with a value equal to the loan outstanding, valued at $485 per share
(the "Stock-for-Loan Exchange"), (ii) payment in cash or (iii) a combination
of the two. The Company also made an offer (the "Offer") in January 1994 to
purchase shares of Common Stock up to a maximum of 53,399 shares at a
purchase price of $485 per share. The persons who were eligible to
participate in the Stock-for-Loan Exchange and to accept the Offer were
persons who held shares of Common Stock issued pursuant to RSPA III (current
or former employees and family members of employees and former employees).
The valuation of the shares at $485 was equal to the price last paid in a
private placement of shares of Common Stock, which was consummated in
November 1993. (See "Management's Discussion and Analysis of Financial
Position and Results of Operations--Liquidity and Capital Resources".) The
three Executive Officers named above repaid the following loan amounts in
shares of Common Stock in the Stock-for-Loan Exchange: Amos B. Hostetter, Jr.
($1,471,936), Timothy P. Neher ($1,387,500) and Michael J. Ritter ($331,185),
and sold the following numbers of shares to the Company pursuant to the
Offer: Amos B. Hostetter, Jr. (0), Timothy P. Neher (1,192) and Michael J.
Ritter (397). (For information regarding other Executive Officers, see
"Certain Relationships and Related Transactions".) In addition,
<PAGE>
the Hostetter Foundation, an entity controlled by Mr. Hostetter,
sold 1,184 shares of Class B Common Stock to the Company in January 1994 for
a purchase price of $485 per share.
Retirement Plan. The following table sets forth, as to the Company's
Retirement Plan, the estimated annual benefits payable upon retirement to all
employees of the Company and its subsidiaries in the following compensation
and years-of-service classifications. Such benefits are offset in recognition
of the employer contribution toward social security benefits.
<TABLE>
<CAPTION>
Years of Service
Remuneration 10 15 20 25 30 or more
<S> <C> <C> <C> <C> <C>
$125,000 $11,875 $17,812 $23,750 $29,688 $35,625
$150,000 14,250 21,375 28,500 35,625 42,750
$175,000 16,625 24,938 33,250 41,563 49,875
$200,000 19,000 28,500 38,000 47,500 57,000
$235,840 20,826 31,239 41,652 52,065 62,478
</TABLE>
The compensation covered by the Retirement Plan includes salary and cash
bonuses and is limited by section 401 of the Internal Revenue Code of 1986,
as amended. The covered compensation for each Executive Officer named in the
Summary Compensation Table is based upon the amounts shown in the "Salary"
column of the Summary Compensation Table. For each Executive Officer, the
current compensation covered by the Retirement Plan does not differ
substantially (by more than 10%) from the aggregate compensation set forth in
the Summary Compensation Table. As of January 1, 1994, covered compensation
is limited to $150,000.
The Executive Officers named in the Summary Compensation Table have been
credited with the following years of service: Mr. Hostetter, 31 years; Mr.
Ritter, 13 years; Mr. Schleyer, 16 years; Mr. DeLorme, 14 years; and Ms.
Hawthorne, 12 years.
Benefits are computed on the basis of (1) .95% of the employee's average
annual compensation less .37% of average annual compensation (limited to
social security covered compensation) multiplied by (2) the number of years
of service (not to exceed thirty years). Average annual compensation is the
average of a participant's compensation for the five consecutive years in
which compensation was the highest.
Compensation of Directors. The members of the Board of Directors who are not
Officers of the Company currently receive an annual retainer of $10,000 and a
fee of $2,500 for each meeting attended. In addition, Directors who reside
outside the Greater Boston Area are reimbursed for their travel expenses
incurred in connection with attendance at meetings of the Board of Directors.
Item 12. Security Ownership of Certain Beneficial Owners and Management.
The following table provides information as of March 21, 1994 with respect to
the shares of Common Stock and the Convertible Preferred Stock beneficially
owned by each person known by the Company to own more than 5% of the
outstanding Common Stock or Convertible Preferred Stock, each Director of the
Company, each Executive Officer named in the Summary Compensation Table and
by all Directors and Executive Officers of the Company as a group. The number
of shares beneficially owned by each Director or Executive Officer is
determined according to rules of the Commission, and the information is not
necessarily indicative of beneficial ownership for any other purpose. Under
such rules, beneficial ownership includes any shares as to which the
individual or entity has sole or shared voting power or investment power and
also any shares which the individual or entity has the right to acquire
within 60 days of March 21, 1994 through the exercise of an option,
conversion feature or similar right. Except as noted below, each holder has
sole voting and investment power with respect to all shares of Common Stock
or Convertible Preferred Stock listed as owned by such person or entity.
<PAGE>
<TABLE>
<CAPTION>
Percentage
Number of Percentage of Number of Shares of
Shares of Outstanding of Preferred Outstanding
Common Stock (1) Shares Stock (2) Shares of
Beneficially of Common Beneficially Preferred
Name Owned Stock Owned Stock
<S> <C> <C> <C> <C>
Amos B. Hostetter, Jr. (3) 1,800,897 39.49% -- --
Timothy P. Neher (4) 66,869 1.47 -- --
Michael J. Ritter 23,596 * -- --
Roy F. Coppedge III (5) 300,563 6.59 -- --
C. Alexander Howard 17,931 * -- --
Jonathan H. Kagan (6) 1,142,858 20.04 1,142,858 100.00%
Robert B. Luick (7) 9,345 * -- --
Henry F. McCance (8) 10,325 * -- --
Lester Pollack (6) 1,142,858 20.04 1,142,858 100.00
Vincent J. Ryan (9) 228,998 5.02 -- --
William T. Schleyer 21,648 * -- --
Jeffrey T. DeLorme 10,661 * -- --
Nancy Hawthorne 4,083 * -- --
Directors and Executive
Officers as a Group
(13 persons) (6) 3,637,774 63.78 1,142,858 100.00
H. Irving Grousbeck (10) 401,320 8.80 -- --
Boston Ventures Company
Limited Partnership III
Boston Ventures Limited
Partnership III (11) 121,381 2.66 -- --
Boston Ventures Limited
Partnersip IIIA (11) 31,993 * -- --
Boston Ventures Company
Limited Partnership IV
Boston Ventures Limited
Partnership IV (11) 76,934 1.69 -- --
Boston Ventures Limited
Partnership IVA (11) 70,255 1.54 -- --
Total as a Group 300,563 6.59 -- --
LFCP Corp. and Corporate
Advisors, L.P. (12)
Corporate Partners, L.P. (12) 728,953 13.78 728,953 63.78
First Plaza Group Trust (12)(13) 171,429 3.62 171,429 15.00
The State Board of Administration
of Florida (12) 76,084 1.64 76,084 6.66
Vencap Holdings (1992) Pte
Ltd (12) 71,428 1.54 71,428 6.25
Corporate Offshore Partners,
L.P. (12) 52,107 1.13 52,107 4.56
ContCable Co-Investors, L.P. (12) 42,857 * 42,857 3.75
Total as a Group 1,142,858 20.04%<F14> 1,142,858 100.00%
<FN>
*Less than 1% of class.
(1) The Common Stock includes Class A Common Stock, which has one vote per share, and Class B Common Stock,
which has ten votes per share. As the number of shares of Class A Common Stock represents 5.67% of the
Common Stock and less than 1% of the voting power of the Common Stock, the Class A Common Stock has not been
shown as a separate class of stock. None of the Directors, Executive Officers and 5% beneficial owners of
the Common Stock owns any Class A Common Stock.
(2) Under the rules for determining beneficial ownership promulgated by the Commission, each holder of
Convertible Preferred Stock is deemed to own currently that number of shares of Common Stock into which the
Convertible Preferred Stock is convertible. The Convertible Preferred Stock is presently convertible into
Common Stock on a one-for-one basis. The table therefore shows the number of shares of Convertible Preferred
Stock owned by each holder in the column for the Convertible Preferred Stock and includes that number of
shares in the column for Common Stock.
<PAGE>
(3) Mr. Hostetter has shared voting and investment power as to 1,713,742 shares of Common Stock
held by the Amos B. Hostetter, Jr. 1989 Trust of which Messrs. Hostetter and Neher are the sole trustees.
Mr. Hostetter has shared voting and investment power as to a further 17,856 shares of Common Stock; as to
8,928 of such shares he disclaims beneficial ownership. Additionally, Mr. Hostetter disclaims beneficial
ownership of 22,000 shares of Common Stock with respect to which his wife acts as a trustee with Mr. Neher
and 1,458 shares of Common Stock held by him as custodian for four minor children. The shares listed in the
table as being beneficially owned by Mr. Hostetter include those as to which Mr. Hostetter has shared voting
and/or investment power and those as to which Mr. Hostetter disclaims beneficial ownership. Mr. Hostetter's
address is The Pilot House, Lewis Wharf, Boston, Massachusetts 02110.
(4) Mr. Neher has shared voting and investment power as to 22,000 shares of Common Stock with respect to
which he acts as a trustee with Mrs. Hostetter, and as to 1,713,742 shares of Common Stock with respect to
which he acts as a trustee with Mr. Hostetter. Mr. Neher disclaims beneficial ownership as to such shares,
and the table does not indicate such shares as being beneficially owned by Mr. Neher. See footnote (3)
above. Additionally, Mr. Neher disclaims beneficial ownership as to 6,600 shares with respect to which he
acts as trustee and 2,200 shares held by his wife as custodian for their minor children, which are included
in the table as being beneficially owned by Mr. Neher.
(5) All the shares listed in the table as beneficially owned by Mr. Coppedge are held by the four limited
partnerships described in Footnote (11) below. Mr. Coppedge, a partner of each of the general partners of
the limited partnerships and a Director of Boston Ventures Management, Inc., which manages the investments
of the four limited partnerships, has shared voting and investment power as to these shares. Mr. Coppedge is
entitled to beneficial ownership of an indeterminate number of these shares and disclaims beneficial
ownership as to the balance. Mr. Coppedge's address is c/o Boston Ventures Management, Inc., 21 Custom House
Street, Boston, Massachusetts 02110.
(6) All shares listed in the table as being beneficially owned by Mr. Pollack and Mr. Kagan are beneficially
owned by Corporate Advisors, L.P. ("Corporate Advisors"). See footnote (12) below. Mr. Pollack may be deemed
to have shared voting and investment power over such shares as the Chairman and Treasurer and as a Director
of LFCP Corp., and Mr. Kagan may be deemed to have shared voting and investment power over such shares as
the President of LFCP Corp. LFCP Corp. is the sole general partner of Corporate Advisors and a wholly owned
subsidiary of Lazard Freres & Co. Mr. Pollack and Mr. Kagan are both general partners of Lazard Freres & Co.
Mr. Pollack's and Mr. Kagan's address is c/o Corporate Advisors, L.P., One Rockefeller Plaza, New York, New
York 10020. Mr. Pollack and Mr. Kagan disclaim beneficial ownership of all such shares.
(7) The shares listed in the table as being beneficially owned by Mr. Luick include 2,934 shares owned by
Mr. Luick's daughter and 1,500 shares with respect to which she acts as trustee for Mr. Luick's
grandchildren. Mr. Luick disclaims beneficial ownership of these shares.
(8) The shares listed in the table as being beneficially owned by Mr. McCance include 9,000 shares held by
Greylock Limited Partnership, of which Mr. McCance is a general partner. Mr. McCance has shared voting and
investment power as to these shares, is entitled to beneficial ownership of an indeterminate number of these
shares and disclaims beneficial ownership as to the balance. Of the remaining shares, Mr. McCance disclaims
beneficial ownership as to 500 shares with respect to which his wife acts as trustee for his daughter and
500 shares held by his daughter.
(9) Mr. Ryan holds 5,450 shares of Common Stock. The remaining shares of Common Stock listed in the table as
being beneficially owned by Mr. Ryan are held by Schooner Capital Corporation (and its subsidiaries), over
which Mr. Ryan has shared voting and investment power as the Chairman and principal shareholder.
(10) All of these shares are subject to the Stock Liquidation Agreement pursuant to which Mr. Grousbeck must
sell such shares to the Company in either 1998 or 1999. (See "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Liquidity and Capital Resources--1998-1999 Share Repurchase
Program".) Mr. Grousbeck's address is Room 382, Graduate School of Business, Stanford University, Stanford,
California 94305.
(11) These four limited partnerships may be deemed to be a "group" of persons acting together for the
purpose of acquiring, holding, voting or disposing of shares of Common Stock. Boston Ventures Company
Limited Partnership III ("BV Co. III"), as the sole general partner of each of Boston Ventures Limited
Partnership III and Boston Ventures Limited Partnership IIIA, is deemed to be the beneficial owner of the
shares held by such limited partnerships and to have shared voting and investment power with respect to such
shares. Boston Ventures Company Limited Partnership IV ("BV Co. IV"), as the sole general partner of each of
Boston Ventures Limited Partnership IV and Boston Ventures Limited Partnership IVA, is deemed to be the
beneficial owner of the shares held by such limited partnerships and to have shared voting and investment
power with respect to such shares. BV Co. III disclaims beneficial ownership of the shares beneficially
owned by BV Co. IV; and BV Co. IV disclaims beneficial ownership of the shares beneficially owned by BV Co.
III. Mr. Coppedge may be deemed to beneficially own all such shares. See footnote (5) above.
(12) These stockholders may be deemed to be a "group" of persons acting together for the purpose of
acquiring, holding, voting or disposing of shares of Convertible Preferred Stock. Corporate Advisors is the
general partner of Corporate Partners, L.P. ("Corporate Partners") and Corporate Offshore Partners, L.P.
("Corporate Offshore Partners") and has sole voting and investment power as to the shares held by them.
Corporate Advisors serves as investment manager over a certain investment management account for The State
Board of Administration of Florida ("SBA") and has sole voting and dispositive power with respect to the
shares of Convertible Preferred Stock held by SBA. Pursuant to a Co-Investment Agreement dated as of April
27, 1992 (the "Co-Investment Agreement") by and among Corporate Advisors, Corporate Partners, Corporate
Offshore Partners, First Plaza Group Trust ("FPGT"), Vencap Holdings (1992) Pte Ltd ("Vencap") and ContCable
Co-Investors, L.P. ("ContCable"), Corporate Advisors has sole voting and dispositive power with respect to
the shares held by Vencap and ContCable.
<PAGE>
The address of Corporate Advisors, Corporate Partners, Corporate Offshore Partners, FPGT, SBA,
ContCable and Vencap is: c/o Corporate Advisors, L.P., One Rockefeller Plaza, New York, New York 10020. See
footnote (6) above.
(13) FPGT is a trustee for certain pension plans and has sole voting and dispositive power with respect to
the shares held by it. Pursuant to the Co-Investment Agreement, FPGT has agreed, subject to its fiduciary
duties under the Employee Retirement Income Security Act of 1974, as amended, (i) to transfer shares held by
it only in a transaction in which the other parties to the Co-Investment Agreement participate on a pro rata
basis and (ii) to exercise all voting and other rights with respect to such shares in the same manner as is
done by Corporate Advisors on behalf of Corporate Partners and Corporate Offshore Partners.
(14) The percentage ownership for the group assumes the conversion of shares of Convertible Preferred Stock
into Common Stock by all members of the group. The percentage ownership for each individual member of the
group assumes conversion by only that shareholder.
</TABLE>
Item 13. Certain Relationships and Related Transactions.
Lazard Freres & Co. ("Lazard") received fees and underwriting discounts from
the Company in an aggregate amount of $7,748,400 for its services as an
underwriter of the 1993 Offerings.
A wholly owned subsidiary of Lazard is the sole general partner of Corporate
Advisors, which in turn is the sole general partner of Corporate Partners and
Corporate Offshore Partners. Corporate Advisors is also an investment manager
for The State Board of Administration of Florida ("SBA"). Corporate Partners,
Corporate Offshore Partners and SBA collectively own 857,144 shares of
Convertible Preferred Stock. Certain entities controlled by Lazard also own
limited partnership interests in Corporate Partners and Corporate Advisors.
Lester Pollack, a Director of the Company, is Senior Managing Director of
Corporate Partners and a General Partner of Lazard. Jonathan H. Kagan, a
Director of the Company, is Managing Director of Corporate Partners and a
General Partner of Lazard.
Robert B. Luick, a Director and the Secretary of the Company, is of counsel
to the law firm of Sullivan & Worcester, counsel to the Company. The Company
paid legal fees in the amount of approximately $1,450,000 to Sullivan &
Worcester in the year ended December 31, 1993.
For a discussion of loans made to Executive Officers of the Company in
connection with the Company's Restricted Stock Purchase Program, see footnote
(1) to the Summary Compensation Table and "Compensation Committee Interlocks
and Insider Participation" under the caption "Executive Compensation". For a
description of the Company's Stock-for-Loan Exchange and an Offer to
repurchase shares of Common Stock, and information regarding certain
Executive Officers participating therein, see "Compensation Committee
Interlocks and Insider Participation" under the caption "Executive
Compensation". The following Executive Officers participated in the
Stock-for-Loan Exchange in the following amounts: William T. Schleyer
($291,000), Jeffrey T. DeLorme ($155,000) and Nancy Hawthorne ($274,464). In
addition, William T. Schleyer paid the remaining $141,063 of his outstanding
loan incurred in connection with restricted stock purchases pursuant to RSPA
III in cash and Jeffrey T. DeLorme sold 218 shares to the Company pursuant to
the Offer.
PART IV
Item 14. Exhibits, Financial Statements, Schedules and Reports on Form 8-K.
(a)(1) Financial Statements.
The following consolidated financial statements of the Company and the
Independent Auditors' Report relating thereto are filed under Item 8 in Part
II of this report:
Independent Auditors' Report
Consolidated Balance Sheets as of December 31, 1992 and 1993
Statements of Consolidated Operations for the years ended December 31, 1991,
1992 and 1993
Statements of Consolidated Shareholders' Equity (Deficiency) for the years
ended December 31, 1991, 1992 and 1993
Statements of Consolidated Cash Flows for the years ended December 31, 1991,
1992 and 1993
Notes to Consolidated Financial Statements
(a)(2) Financial Statement Schedules.
The following financial statement schedules of the Company and the
Independent Auditors' Report relating thereto are filed as part of this
report:
Schedule I --Marketable Securities-Other
Investments
Schedule II --Accounts Receivable from Related
Parties
Schedule V --Property, Plant and Equipment
Schedule VI --Accumulated Depreciation of
Property, Plant and Equipment
Schedule VIII --Valuation and Qualifying Accounts
and Reserves
Schedule X --Supplementary Income Statement
Information
Schedule I presents financial information as of December 31, 1993. All other
Schedules present financial information for the years ended December 31,
1991, 1992 and 1993. Financial Statement Schedules not included are omitted
due to the lack of conditions under which they are required.
<PAGE>
(a)(3) Exhibits
Listed below are the exhibits which are filed as part of this report
(according to the number assigned to them in Item 601 of Regulation S-K).
Each exhibit marked by an asterisk (*) is incorporated by reference to the
Company's Registration Statement No. 33-46510 (as amended), declared
effective by the Securities and Exchange Commission on June 15, 1992, each
exhibit marked by two asterisks (**) is incorporated by reference to the
Company's Registration Statement No. 33-59806, declared effective by the
Securities and Exchange Commission on May 27, 1993, and each exhibit marked
by three asterisks (***) is incorporated by reference to the Company's
Registration Statement No. 33-65798, declared effective by the Securities and
Exchange Commission on August 6, 1993. Exhibit numbers in parentheses refer
to the exhibit numbers in Registration Statements. Each exhibit marked by a
pound sign (#) is a management contract or compensatory plan.
3.1A Restated Certificate of Incorporation of the Company.* (3.1)
3.1B Form of Certificate of Designation of the Company relating to the
Convertible Preferred Stock.* (3.1A)
3.2 By-Laws of the Company.* (3.2)
4.1 Indenture dated as of June 22, 1992 between the Company and Morgan
Guaranty Trust Company of New York as Trustee, pertaining to the
Company's 10-5/8% Senior Subordinated Notes due 2002.* (4.1)
4.2 Indenture, dated as of June 22, 1992 between the Company and Morgan
Guaranty Trust Company of New York as Trustee, pertaining to the
Company's 11% Senior Subordinated Debentures due 2007.* (4.2)
4.3 Indenture dated as of November 1, 1989 between the Company and The
Connecticut National Bank as successor trustee, pertaining to the
Company's 12-7/8% Senior Subordinated Debentures due November 1, 2004.*
(4.5)
4.4 Indenture dated as of November 1, 1989 between the Company and The
Connecticut National Bank as successor trustee, pertaining to the
Company's Senior Subordinated Floating Rate Debentures due November 1,
2004.* (4.6)
4.5 Credit Agreement dated as of May 1, 1989, as amended and restated as of
July 30, 1990, among the Company and certain of its direct and indirect
Subsidiaries as Guarantors and The First National Bank of Boston, for
itself and as Agent, and certain financial institutions named therein.*
(4.7)
4.5A Amendment to Credit Agreement dated as of May 15, 1992 among the
Company and certain of its direct and indirect Subsidiaries as
Guarantors and The First National Bank of Boston, for itself and as
Agent, and certain financial institutions named therein.* (4.7A)
4.5B Amendment No. 2 to Credit Agreement dated as of March 1, 1993 among the
Company and certain of its direct and indirect Subsidiaries as
Guarantors, The First National Bank of Boston, for itself and as Agent,
and certain financial institutions named therein.** (4.5B)
4.5C Amendment No. 3 to Credit Agreement dated as of July 1, 1993 among the
Company, certain of its direct and indirect Subsidiaries as Guarantors,
and The First National Bank of Boston, for itself and as Agent.***
(4.5C)
4.5D Amendment No. 4 to Credit Agreement dated as of August 30, 1993 among
the Company, certain of its direct and indirect Subsidiaries as
Guarantors, and The First National Bank of Boston, for itself and as
Agent.
4.6 Note Agreement dated as of September 20, 1989, as amended as of
February 15, 1991, by and among the Company and certain of its direct
and indirect Subsidiaries as Guarantors and The Prudential Insurance
Company of America.* (4.8)
4.6A Amendment to Note Agreement dated as of April 30, 1992 by and among the
Company and certain of its direct and indirect Subsidiaries as
Guarantors and The Prudential Insurance Company of America.* (4.8A)
4.7 Credit Agreement dated as of May 15, 1992 among the Company and certain
of its direct and indirect subsidiaries, The First National Bank of
Boston, for itself and as Agent, The Bank of New York, for itself and
as Arranging Agent, and certain financial institutions named therein.*
(4.11)
4.7A Amendment No. 1 to 1992 Credit Agreement dated as of March 1, 1993
among the Company and certain of its direct and indirect Subsidiaries
as Guarantors, The First National Bank of Boston, for itself and as
Agent, and certain financial institutions named therein.** (4.9A)
4.7B Amendment No. 2 to 1992 Credit Agreement dated as of July 1, 1993 among
the Company, certain of its direct and indirect Subsidiaries as
Guarantors, The First National Bank of Boston, for itself and as Agent,
and The Bank of New York, for itself and as Arranging Agent.*** (4.8B)
4.7C Amendment No. 3 to 1992 Credit Agreement dated as of August 30, 1993
among the Company and certain of its direct and indirect Subsidiaries
as Guarantors, The FirstNational Bank of Boston, for itself and as
Agent, and certain financial institutions named therein.
<PAGE>
4.7D Amendment No. 4 to 1992 Credit Agreement dated as of August 30, 1993
among the Company, certain of its direct and indirect Subsidiaries as
Guarantors, The First National Bank of Boston, for itself and as Agent,
and The Bank of New York, for itself and as Arranging Agent.
4.8 Indenture dated as of June 1, 1993 between the Company and The First
National Bank of Chicago, as Trustee, pertaining to the Company's
8-5/8% Senior Notes due 2003.** (4.10)
4.9 Indenture dated as of June 1, 1993 between the Company and The First
National Bank of Chicago, as Trustee, pertaining to the Company's 9%
Senior Debentures due 2008.** (4.11)
4.10 Indenture dated as of August 1, 1993 between the Company and the Bank
of New York, as Trustee, pertaining to the Company's 8-7/8% Senior
Debentures due 2005.*** (4.11)
4.11 Indenture dated as of August 1, 1993 between the Company and the Bank
of New York, as Trustee, pertaining to the Company's 9-1/2% Senior
Debentures due 2013.*** (4.12)
4.13 Indenture dated as of August 1, 1993 between the Company and the Bank
of New York, as Trustee, pertaining to the Company's 8-1/2% Senior
Notes due 2001.*** (4.13)
10.1 Stock Liquidation Agreement dated as of March 6, 1989, as amended as of
September 28, 1990, replacing and restating the Stock Acquisition
Agreement made as of December 19, 1988 by and among the Company, H.
Irving Grousbeck, MD Co., Burr, Egan, Deleage & Co., Roderick A.
MacLeod and Amos B. Hostetter, Jr.* (10.2)
10.2 Second Amendment to Stock Liquidation Agreement dated as of July 7,
1992 by and among the Company, Amos B. Hostetter, Jr., H. Irving
Grousbeck, MD Co., Burr, Egan, Deleage & Co. and Roderick A. MacLeod.**
(10.2)
10.3 Form of Restricted Stock Purchase Agreement.*# (10.3)
10.4 Stock Purchase Agreement dated April 27, 1992 among the Company,
Corporate Partners, L.P., Corporate Offshore Partners, L.P., The State
Board of Administration of Florida, Chemical Equity Associates, Mellon
Bank, N.A. as Trustee for First Plaza Group Trust, Vencap Holdings
(1992) Pte Ltd and Corporate Advisors, L.P.* (10.4)
10.5 Registration Rights Agreement dated June 22, 1992 among the Company,
Corporate Partners, L.P., Corporate Offshore Partners, L.P., The State
Board of Administration of Florida, Chemical Equity Associates, Mellon
Bank, N.A. as Trustee for First Plaza Group Trust, Vencap Holdings
(1992) Pte Ltd and Corporate Advisors, L.P.* (10.5)
10.6 Amendment to Registration Rights Agreement dated July 15, 1992 among
the Company and Corporate Advisors, L.P. on behalf of Corporate
Partners, L.P., Corporate Offshore Partners, L.P., The State Board of
Administration of Florida, ContCable Co-Investors, L.P., Mellon Bank,
N.A., as Trustee for First Plaza Group Trust, and Vencap Holdings
(1992) PTE Ltd.** (10.6)
10.7 Stock Purchase Agreement dated July 15, 1992, as amended on November
17, 1992, among the Company, Boston Ventures Limited Partnership III,
Boston Ventures Limited Partnership IIIA, Boston Ventures Limited
Partnership IV and Boston Ventures Limited Partnership IVA.** (10.7)
10.8 Stock Purchase Agreement dated July 15, 1992 among the Company, Thomas
H. Lee Equity Partners, L.P., THL-CCI Investors Limited Partnership,
Providence Media Partners L.P., Alta V Limited Partnership, Customs
House Partners and Ontario Teachers' Pension Plan Board.** (10.8)
10.9 Registration Rights Agreement dated July 15, 1992 among the Company,
Boston Ventures Limited Partnership III, Boston Ventures Limited
Partnership IIIA, Boston Ventures Limited Partnership IV, Boston
Ventures Limited Partnership IVA, Thomas H. Lee Equity Partners, L.P.,
THL-CCI Investors Limited Partnership, Providence Media Partners L.P.,
Alta V Limited Partnership, Customs House Partners and Ontario
Teachers' Pension Plan Board.** (10.9)
10.10 Liquidation Rights Agreement dated as of July 7, 1992 by and between
the Company and MD Co.** (10.10)
10.11 Stock Purchase Agreement dated as of December 17, 1992 by and among
Teleport Communications Group Inc., Comcast Corporation, Comcast
Teleport, Inc., the Company and Continental Teleport, Inc.** (10.11)
11.1 Schedule of computation of earnings per share.
12.1 Computation of ratio of earnings to fixed charges.
21 Subsidiaries of the Company.
(b) Reports on Form 8-K.
No reports on Form 8-K were filed during the quarter ended December 31, 1993.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
CONTINENTAL CABLEVISION, INC.
By: /s/ Amos B. Hostetter, Jr.
Amos B. Hostetter, Jr.
Chairman of the Board
Dated: March 23, 1994
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
<S> <C> <C>
/s/ Amos B. Hostetter, Jr. Director and March 23, 1994
Amos B. Hostetter, Jr. Chairman of the Board
(principal executive officer)
/s/ Timothy P. Neher Director and Vice March 23, 1994
Timothy P. Neher Chairman of the Board
/s/ Michael J. Ritter Director and President March 23, 1994
Michael J. Ritter
/s/ Nancy Hawthorne Chief Financial Officer March 23, 1994
Nancy Hawthorne and Senior Vice President (principal
financial officer)
/s/ Richard A. Hoffstein Senior Vice President March 23, 1994
Richard A. Hoffstein and Controller (principal accounting officer)
/s/ Roy F. Coppedge III Director
Roy F. Coppedge III March 23, 1994
/s/ C. Alexander Howard Director
C. Alexander Howard March 23, 1994
/s/ Jonathan H. Kagan Director
Jonathan H. Kagan March 23, 1994
/s/ Robert B. Luick Director
Robert B. Luick March 23, 1994
Director
Henry F. McCance March , 1994
/s/ Lester Pollack Director
Lester Pollack March 23, 1994
Director
Vincent J. Ryan March , 1994
</TABLE>
<PAGE>
Supplemental Information to be Furnished With Reports Filed Pursuant to
Section 15(d) to the Act by Registrants Which Have Not Registered Securities
Pursuant to Section 12 of the Act.
As of the date hereof, the Company has not sent proxy materials or its annual
report for the fiscal year ending December 31, 1993 to security holders. At
such time as the Company sends such proxy materials and annual report to its
security holders, it will furnish four copies thereof to the Securities and
Exchange Commission for its information.
_________________________
Requests for copies of exhibits filed with this Annual Report on Form 10-K
may be directed to Mr. P. Eric Krauss, Treasurer, Continental Cablevision,
Inc., The Pilot House, Lewis Wharf, Boston, Massachusetts 02110.
<PAGE>
INDEX TO
FINANCIAL STATEMENT SCHEDULES
Financial Statement Schedules
Listed below are Financial Statement Schedules of the Company which are filed
as part of this report
<TABLE>
<CAPTION>
Schedule No. Page
<S> <S> <C>
Schedule I --Marketable Securities--Other Investments S-3
Schedule II --Accounts Receivable from Related Parties S-4
Schedule V --Property, Plant and Equipment S-7
Schedule VI --Accumulated Depreciation of Property, Plant and Equipment S-8
Schedule VIII --Valuation and Qualifying Accounts and Reserves S-9
Schedule X --Supplementary Income Statement Information S-10
</TABLE>
<PAGE>
INDEPENDENT AUDITOR'S REPORT
Continental Cablevision, Inc.:
We have audited the consolidated financial statements of Continental
Cablevision, Inc. and its subsidiaries as of December 31, 1992 and 1993, and
for each of the three years in the period ended December 31, 1993, and have
issued our report thereon dual dated February 10, 1994 and March 9, 1994;
such consolidated financial statements and report are included elsewhere in
this Form 10-K. Our audits also included the financial statement schedules of
Continental Cablevision, Inc. and its subsidiaries, listed in Item 14. These
financial statement schedules are the responsibility of the Company's
management. Our responsibility is to express an opinion based on our audits.
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
Boston, Massachusetts
February 10, 1994
(March 9, 1994 as
to Notes 5 and 15 to
the consolidated
financial statements)
<PAGE>
SCHEDULE I
CONTINENTAL CABLEVISION, INC. AND SUBSIDIARIES
MARKETABLE SECURITIES--OTHER INVESTMENTS
December 31, 1993
<TABLE>
<CAPTION>
Market Carrying
Number Cost of Value of Amount at
Name of Issuer of Each Each Issue at December 31,
and Title of Each Issue Shares Issue December 31, 1993 1993
(In Thousands)
<S> <C> <C> <C> <C>
Marketable Securities
Turner Broadcasting System, Inc.:
Class B Common Stock 2,189 $ 23,955 $ 59,092 $ 23,955
Class C Convertible Preferred Stock (A) 577 10,709 93,537 10,709
Other - 24,012 46,967 24,012
Total Marketable Securities - $ 58,676 $199,596 $ 58,676
Investments
Teleport Communication Group Inc. - $ 62,631 $ 62,631 $ 62,631
TCG Chicago - 16,073 16,073 16,073
Primestar Partners, L.P. - 19,521 - (B) 19,521
Entertainment Television, Inc. - 11,197 19,590 11,197
Other - 26,764 31,175 26,764
Total Investments - $136,186 $129,469 $136,186
<FN>
(A) Each share of Class C Convertible Preferred Stock is convertible at the Company's option into six shares
of Turner Broadcasting System, Inc. Class B Common Stock.
(B) Market value as of December 31, 1993 for Investments--Other, does not include a fair value for Primestar
Partners, L.P. (Primestar). As discussed in Note 5 of the financial statements, it was not practicable to
estimate the fair value of the Company's investment and advances of $19,521,000 in Primestar.
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE>
SCHEDULE II
CONTINENTAL CABLEVISION, INC. AND SUBSIDIARIES
ACCOUNTS RECEIVABLE FROM RELATED PARTIES
Year Ended December 31, 1991
<TABLE>
<CAPTION>
Balance
at Balance at
Beginning End of
Name of Debtor of Period Additions Deductions Period
<S> <C> <C> <C> <C>
Anthony, Franklin H. $ 148,584 $ -- $-- $ 148,584
Cooper, Ronald 159,497 850,000 -- 1,009,497
DeLorme, Jeffrey T. 295,563 -- -- 295,563
Dixon, Andrew L. 163,786 -- -- 163,786
Goodall, H.W. 288,023 -- -- 288,023
Hawthorne, Nancy 479,562 -- -- 479,562
Hoffstein, Richard A. 221,344 -- -- 221,344
Hostetter, Amos B. 2,123,654 -- -- 2,123,654
Kneeskern, Lyle H. 310,740 -- -- 310,740*
Livingston, Frederick
C. 187,998 -- -- 187,998
Mast, Terrance 111,165 -- -- 111,165
Moore, Harold J. 126,750 -- -- 126,750
Neher, Timothy P. 3,304,356 -- -- 3,304,356
Ramseyer, J.C. 102,715 -- -- 102,715*
Ritter, Michael J. 873,855 131,112 -- 1,004,967
Sachs, Robert J. 215,785 -- -- 215,785
Schleyer, William T. 452,977 72,000 -- 524,977
Stengel, Robert A. 232,830 -- -- 232,830
Stevens, Russell H. 144,121 -- -- 144,121
Wand, James A. 267,284 -- -- 267,284
Weigand, Richard S. 134,745 -- -- 134,745
White, Emmett E. 281,583 -- -- 281,583
Younger, Charles J. 560,327 -- -- 560,327
TOTAL $11,187,244 $1,053,112 $ 0 $12,240,356
<FN>
*Lyle H. Kneeskern and J.C. Ramseyer retired from the Company as of 12/31/91.
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE>
SCHEDULE II
(continued)
CONTINENTAL CABLEVISION, INC. AND SUBSIDIARIES
ACCOUNTS RECEIVABLE FROM RELATED PARTIES (CONTINUED)
Year Ended December 31, 1992
<TABLE>
<CAPTION>
Balance
at Balance at
Beginning End of
Name of Debtor of Period Additions Deductions Period
<S> <C> <C> <C> <C>
Anthony, Franklin H. $ 148,584 $ 212,000 $-- $ 360,584
Bouchard, Steven 61,689 97,369 -- 159,058
Boylan, Roy 94,503 65,806 39,070 121,239
Coleman, Randall 45,291 68,788 -- 114,079
Cooper, Ronald 1,009,497 261,500 -- 1,270,997
DeLorme, Jeffrey T. 295,563 287,468 140,563 442,468
Dixon, Andrew L. 163,786 162,167 163,786 162,167
Fellows, David -- 158,674 -- 158,674
Filipiak, Ellen 62,642 56,305 -- 118,947
Gloddy, Vincent 92,006 98,966 24,890 166,082
Goodall, H.W. 288,023 154,350 148,700 293,673
Hawthorne, Nancy 479,562 362,055 205,098 636,519
Heffernan, Roy 44,157 62,861 -- 107,018
Hoffstein, Richard A. 221,344 177,360 88,870 309,834
Holleran, Edward 75,900 112,416 -- 188,316
Hostetter, Amos B. 2,123,654 1,662,750 651,718 3,134,686
Hutchinson, Richard 86,486 117,315 -- 203,801
Jackson, Nancy 51,507 68,633 -- 120,140
Johnson, Raymond 64,697 84,100 -- 148,797
King, John 77,625 89,300 -- 166,925
Koulos, Almis J. 48,386 117,300 -- 165,686
Lee, David 55,439 66,803 -- 122,242
Little, W.G. 80,605 62,584 -- 143,189
Livingston, Frederick C. 187,998 177,360 50,474 314,884
Lunsford, Jon 92,298 39,769 3,641 128,426
Lytle, Harry E. 80,877 100,420 -- 181,297
Martin, Steven 61,518 168,000 -- 229,518
Mast, Terrance 111,165 36,643 42,700 105,108
Mueller, Paul J. 63,625 47,104 -- 110,729
Neher, Timothy P. 3,304,356 1,108,500 355,500 4,057,356
O'Brien, William 53,000 146,314 -- 199,314
Prosen, Frank 58,535 45,706 -- 104,241
Reimer, Steven 72,750 92,360 -- 165,110
Ridall, John 55,882 108,090 55,882 108,090
Ritter, Michael J. 1,004,967 1,108,500 92,670 2,020,797
Sachs, Robert J. 215,785 221,700 78,700 358,785
Schleyer, William T. 524,977 342,600 135,514 732,063
Smith, Carl 63,409 46,358 -- 109,767
Sofio, Margaret 50,478 65,214 -- 115,692
Stengel, Robert A. 232,830 580,489 95,270 718,049
Stevens, Russell H. 144,121 132,300 -- 276,421
Wand, James A. 267,284 149,300 138,272 278,312
Weigand, Richard S. 134,745 103,320 -- 238,065
Westerman, Scott 58,853 44,026 -- 102,879
White, Emmett E. 281,583 217,800 140,083 359,300
Younger, Charles J. 560,327 28,938 248,625 340,640
TOTAL $13,352,309 $9,717,681 $2,900,026 $20,169,964
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE>
SCHEDULE II
(Continued)
CONTINENTAL CABLEVISION, INC. AND SUBSIDIARIES
ACCOUNTS RECEIVABLE FROM RELATED PARTIES
Year Ended December 31, 1993
<TABLE>
<CAPTION>
Balance
at Balance at
Beginning End
Name of Debtor of Period Additions Deductions of Period
<S> <C> <C> <C> <C>
Anthony, Franklin H. $ 360,584 $ 148,584 $ 212,000
Bouchard, Steven 159,058 61,689 97,369
Boylan, Roy 121,239 55,433 65,806
Coleman, Randall 114,079 25,251 45,291 94,039
Cooper, Ronald 1,270,997 159,497 1,111,500
DeLorme, Jeffrey T. 442,468 565,211 155,000 852,679
Dixon, Andrew L. 162,167 162,167
Fellows, David 158,674 263,502 422,176
Filipiak, Ellen 118,947 4,399 62,642 60,704
Gloddy, Vincent 166,082 166,082
Goodall, H.W. 293,673 82,974 139,323 237,324
Hawthorne, Nancy 636,519 274,464 362,055
Heffernan, Roy 107,018 28,000 135,018 0
Hoffstein, Richard A. 309,834 132,474 177,360
Holleran, Edward 188,316 75,900 112,416
Hostetter, Amos B. 3,134,686 1,471,936 1,662,750
Hutchinson, Richard 203,801 86,486 117,315
Jackson, Nancy 120,140 51,507 68,633
Johnson, Raymond 148,797 64,697 84,100
King, John 166,925 166,925
Koulos, Almis J. 165,686 48,386 117,300
Lee, David 122,242 2,046 55,439 68,849
Little, W.G. 143,189 28,270 80,605 90,854
Livingston, Frederick, C. 314,884 137,524 177,360
Lunsford, Jon 128,426 17,955 146,381
Lytle, Harry E. 181,297 80,877 100,420
Martin, Steven 229,518 4,507 61,518 172,507
Mast, Terrance 105,108 12,927 68,465 49,570
Mueller, Paul J. 110,729 21,000 63,625 68,104
Neher, Timothy P. 4,057,356 1,387,500 2,669,856
O'Brien, William 199,314 18,861 68,000 150,175
Parks, Perry 94,893 6,728 101,621
Prosen, Frank 104,241 58,535 45,706
Reimer, Steven 165,110 72,750 92,360
Ridall, John 108,090 70,972 179,062
Ritter, Michael J. 2,020,797 331,185 1,689,612
Sachs, Robert J. 358,785 137,085 221,700
Schleyer, William T. 732,063 166,508 432,063 466,508
Smith, Carl 109,767 63,409 46,358
Sofio, Margaret 115,692 50,478 65,214
Stengel, Robert A. 718,049 155,547 137,560 736,036
Stevens, Russell H. 276,421 59,450 144,121 191,750
Wand, James A. 278,312 278,312
Weigand, Richard S. 238,065 50,800 134,745 154,120
Westerman, Scott 102,879 102,879
White, Emmett E. 359,300 141,500 217,800
Younger, Charles J. 340,640 49,935 390,575 0
Total $20,264,857 $1,634,843 $7,265,886 $14,633,814
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE>
SCHEDULE V
CONTINENTAL CABLEVISION, INC. AND SUBSIDIARIES
PROPERTY, PLANT AND EQUIPMENT
Years Ended December 31, 1991, 1992 and 1993
<TABLE>
<CAPTION>
Balance
Beginning Additions Other at End
Description of Year at Cost Retirements Changes of Year
(In Thousands)
<S> <C> <C> <C> <C> <C>
Operating Facilities
1991 $1,871,971 $145,846 $20,330 $ 7,420 (A) $2,004,907
1992 $2,004,907 $145,189 $43,129 $ - $2,106,967
1993 $2,106,967 $185,691 $92,149 $(7,352)(B) $2,193,157
<FN>
(A) Other changes represent property, plant and equipment from acquisitions in 1991.
(B) Other changes represent property, plant and equipment contributed to the capital of an affiliate.
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE>
SCHEDULE VI
CONTINENTAL CABLEVISION, INC. AND SUBSIDIARIES
ACCUMULATED DEPRECIATION OF PROPERTY, PLANT AND EQUIPMENT
Years Ended December 31, 1991, 1992 and 1993
<TABLE>
<CAPTION>
Additions
Balance at Charged to Balance
Beginning Costs and At End
Classification of Year Expenses Retirement of Year
(In Thousands)
<S> <C> <C> <C> <C>
Operating Facilities
1991 $619,110 $164,668 $20,330 $763,448
1992 $763,448 $172,800 $43,129 $893,119
1993 $893,119 $180,680 $92,149 $981,650
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE>
SCHEDULE VIII
CONTINENTAL CABLEVISION, INC. AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
Years Ended December 31, 1991, 1992 and 1993
<TABLE>
<CAPTION>
Additions
Balance at Charged to Balance
Beginning Cost and at End
Descriptions of Period Expenses Deductions (A) Other (B) of Period
(In Thousands)
<S> <C> <C> <C> <C> <C>
Allowance for Doubtful Accounts
Year Ended December 31, 1991 $8,545 $13,440 $(13,179) $19 $8,825
Year Ended December 31, 1992 $8,825 $11,947 $(11,700) $ - $9,072
Year Ended December 31, 1993 $9,072 $12,793 $(12,430) $ - $9,435
<FN>
(A) Amounts written off, net of recoveries.
(B) Other represents acquisitions in 1991.
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE>
SCHEDULE X
CONTINENTAL CABLEVISION, INC. AND SUBSIDIARIES
SUPPLEMENTARY INCOME STATEMENT INFORMATION
Years Ended December 31, 1991, 1992 and 1993
<TABLE>
<CAPTION>
Charged to Costs and Expenses
Year Ended December 31,
1991 1992 1993
(In Thousands)
<S> <C> <C> <C>
Maintenance and Repairs $ 22,803 $ 23,310 $ 24,629
Amortization of Intangibles 104,695 106,603 103,883
Taxes, other than Payroll and Income Taxes:
Personal Property Taxes 10,217 14,401 11,199
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE>
INDEX TO EXHIBITS
Listed below are the exhibits which are filed as part of this report
(according to the number assigned to them in Item 601 of Regulation S-K).
Each exhibit marked by an asterisk (*) is incorporated by reference to the
Company's Registration Statement No. 33-46510 (as amended), declared
effective by the Securities and Exchange Commission on June 15, 1992, each
exhibit marked by two asterisks (**) is incorporated by reference to the
Company's Registration Statement No. 33-59806, declared effective by the
Securities and Exchange Commission on May 27, 1993, and each exhibit marked
by three asterisks (***) is incorporated by reference to the Company's
Registration Statement No. 33-65798, declared effective by the Securities and
Exchange Commission on August 6, 1993. Exhibit numbers in parentheses refer
to the exhibit numbers in Registration Statements. Each exhibit marked by a
pound sign (#) is a management contract or compensatory plan.
<TABLE>
<CAPTION>
Exhibit
No. Page No.
<S> <C> <C>
3.1A Restated Certificate of Incorporation of the Company.* (3.1)
3.1B Form of Certificate of Designation of the Company relating to the Convertible
Preferred Stock.* (3.1A)
3.2 By-Laws of the Company.* (3.2)
4.1 Indenture dated as of June 22, 1992 between the Company and Morgan Guaranty Trust
Company of New York as Trustee, pertaining to the Company's 10-5/8% Senior
Subordinated Notes due 2002.* (4.1)
4.2 Indenture, dated as of June 22, 1992 between the Company and Morgan Guaranty Trust
Company of New York as Trustee, pertaining to the Company's 11% Senior Subordinated
Debentures due 2007.* (4.2)
4.3 Indenture dated as of November 1, 1989 between the Company and The Connecticut
National Bank as successor trustee, pertaining to the Company's 12-7/8% Senior
Subordinated Debentures due November 1, 2004.* (4.5)
4.4 Indenture dated as of November 1, 1989 between the Company and The Connecticut
National Bank as successor trustee, pertaining to the Company's Senior Subordinated
Floating Rate Debentures due November 1, 2004.* (4.6)
4.5 Credit Agreement dated as of May 1, 1989, as amended and restated as of July 30,
1990, among the Company and certain of its direct and indirect Subsidiaries as
Guarantors and The First National Bank of Boston, for itself and as Agent, and
certain financial institutions named therein.* (4.7)
4.5A Amendment to Credit Agreement dated as of May 15, 1992 among the Company and certain
of its direct and indirect Subsidiaries as Guarantors and The First National Bank of
Boston, for itself and as Agent, and certain financial institutions named therein.*
(4.7A)
4.5B Amendment No. 2 to Credit Agreement dated as of March 1, 1993 among the Company and
certain of its direct and indirect Subsidiaries as Guarantors, The First National
Bank of Boston, for itself and as Agent, and certain financial institutions named
therein.** (4.5B)
4.5C Amendment No. 3 to Credit Agreement dated as of July 1, 1993 among the Company,
certain of its direct and indirect Subsidiaries as Guarantors, and The First National
Bank of Boston, for itself and as Agent.*** (4.5C)
4.5D Amendment No. 4 to Credit Agreement dated as of August 30, 1993 among the Company,
certain of its direct and indirect Subsidiaries as Guarantors, and The First National
Bank of Boston, for itself and as Agent.
4.6 Note Agreement dated as of September 20, 1989, as amended as of February 15, 1991, by
and among the Company and certain of its direct and indirect Subsidiaries as
Guarantors and The Prudential Insurance Company of America.* (4.8)
4.6A Amendment to Note Agreement dated as of April 30, 1992 by and among the Company and
certain of its direct and indirect Subsidiaries as Guarantors and The Prudential
Insurance Company of America.* (4.8A)
4.7 Credit Agreement dated as of May 15, 1992 among the Company and certain of its direct
and indirect subsidiaries, The First National Bank of Boston, for itself and as
Agent, The Bank of New York, for itself and as Arranging Agent, and certain financial
institutions named therein.* (4.11)
4.7A Amendment No. 1 to 1992 Credit Agreement dated as of March 1, 1993 among the Company
and certain of its direct and indirect Subsidiaries as Guarantors, The First National
Bank of Boston, for itself and as Agent, and certain financial institutions named
therein.** (4.9A)
<PAGE>
4.7B Amendment No. 2 to 1992 Credit Agreement dated as of July 1, 1993 among the Company,
certain of its direct and indirect Subsidiaries as Guarantors, The First National
Bank of Boston, for itself and as Agent, and The Bank of New York, for itself and as
Arranging Agent.*** (4.8B)
4.7C Amendment No. 3 to 1992 Credit Agreement dated as of August 30, 1993 among the
Company and certain of its direct and indirect Subsidiaries as Guarantors, The First
National Bank of Boston, for itself and as Agent, and certain financial institutions
named therein.
4.7D Amendment No. 4 to 1992 Credit Agreement dated as of August 30, 1993 among the
Company, certain of its direct and indirect Subsidiaries as Guarantors, The First
National Bank of Boston, for itself and as Agent, and The Bank of New York, for
itself and as Arranging Agent.
4.8 Indenture dated as of June 1, 1993 between the Company and The First National Bank of
Chicago, as Trustee, pertaining to the Company's 8-5/8% Senior Notes due 2003.**
(4.10)
4.9 Indenture dated as of June 1, 1993 between the Company and The First National Bank of
Chicago, as Trustee, pertaining to the Company's 9% Senior Debentures due 2008.**
(4.11)
4.10 Indenture dated as of August 1, 1993 between the Company and the Bank of New York, as
Trustee, pertaining to the Company's 8-7/8% Senior Debentures due 2005.*** (4.11)
4.11 Indenture dated as of August 1, 1993 between the Company and the Bank of New York, as
Trustee, pertaining to the Company's 9-1/2% Senior Debentures due 2013.*** (4.12)
4.13 Indenture dated as of August 1, 1993 between the Company and the Bank of New York, as
Trustee, pertaining to the Company's 8-1/2% Senior Notes due 2001.*** (4.13)
10.1 Stock Liquidation Agreement dated as of March 6, 1989, as amended as of September 28,
1990, replacing and restating the Stock Acquisition Agreement made as of December 19,
1988 by and among the Company, H. Irving Grousbeck, MD Co., Burr, Egan, Deleage &
Co., Roderick A. MacLeod and Amos B. Hostetter, Jr.* (10.2)
10.2 Second Amendment to Stock Liquidation Agreement dated as of July 7, 1992 by and among
the Company, Amos B. Hostetter, Jr., H. Irving Grousbeck, MD Co., Burr, Egan, Deleage
& Co. and Roderick A. MacLeod.** (10.2)
10.3 Form of Restricted Stock Purchase Agreement.*# (10.3)
10.4 Stock Purchase Agreement dated April 27, 1992 among the Company, Corporate Partners,
L.P., Corporate Offshore Partners, L.P., The State Board of Administration of
Florida, Chemical Equity Associates, Mellon Bank, N.A. as Trustee for First Plaza
Group Trust, Vencap Holdings (1992) Pte Ltd and Corporate Advisors, L.P.* (10.4)
10.5 Registration Rights Agreement dated June 22, 1992 among the Company, Corporate
Partners, L.P., Corporate Offshore Partners, L.P., The State Board of Administration
of Florida, Chemical Equity Associates, Mellon Bank, N.A. as Trustee for First Plaza
Group Trust, Vencap Holdings (1992) Pte Ltd and Corporate Advisors, L.P.* (10.5)
10.6 Amendment to Registration Rights Agreement dated July 15, 1992 among the Company and
Corporate Advisors, L.P. on behalf of Corporate Partners, L.P., Corporate Offshore
Partners, L.P., The State Board of Administration of Florida, ContCable Co-Investors,
L.P., Mellon Bank, N.A., as Trustee for First Plaza Group Trust, and Vencap Holdings
(1992) PTE Ltd.** (10.6)
10.7 Stock Purchase Agreement dated July 15, 1992, as amended on November 17, 1992, among
the Company, Boston Ventures Limited Partnership III, Boston Ventures Limited
Partnership IIIA, Boston Ventures Limited Partnership IV and Boston Ventures Limited
Partnership IVA.** (10.7)
<PAGE>
10.8 Stock Purchase Agreement dated July 15, 1992 among the Company, Thomas H. Lee Equity
Partners, L.P., THL-CCI Investors Limited Partnership, Providence Media Partners
L.P., Alta V Limited Partnership, Customs House Partners and Ontario Teachers'
Pension Plan Board.** (10.8)
10.9 Registration Rights Agreement dated July 15, 1992 among the Company, Boston Ventures
Limited Partnership III, Boston Ventures Limited Partnership IIIA, Boston Ventures
Limited Partnership IV, Boston Ventures Limited Partnership IVA, Thomas H. Lee Equity
Partners, L.P., THL-CCI Investors Limited Partnership, Providence Media Partners
L.P., Alta V Limited Partnership, Customs House Partners and Ontario Teachers'
Pension Plan Board.** (10.9)
10.10 Liquidation Rights Agreement dated as of July 7, 1992 by and between the Company and
MD Co.** (10.10)
10.11 Stock Purchase Agreement dated as of December 17, 1992 by and among Teleport
Communications Group Inc., Comcast Corporation, Comcast Teleport, Inc., the Company
and Continental Teleport, Inc.** (10.11)
11.1 Schedule of computation of earnings per share.
12.1 Computation of ratio of earnings to fixed charges.
21 Subsidiaries of the Company.
</TABLE>
Exhibit 4.5D
Executed Original
CONTINENTAL CABLEVISION, INC.
1990 RESTATED CREDIT AGREEMENT
Amendment No. 4
This Agreement, dated as of August 30, 1993, is among
Continental Cablevision, Inc., a Delaware corporation (the
"Company"), certain of its subsidiaries party hereto and The
First National Bank of Boston, as agent (the "Agent") for itself
and the other Lenders (as defined in the Credit Agreement
referred to below). The parties agree as follows:
1. Reference to Credit Agreement; Definitions. Reference is
made to the Credit Agreement dated as of May 1, 1989, as amended
and restated as of July 30, 1990 and as in effect on the date
hereof prior to giving effect to this Agreement (the "Credit
Agreement"), among the Company, its subsidiaries party thereto,
the Lenders and the Agent. Terms defined in the Credit Agreement
as amended hereby (the "Amended Credit Agreement") and not
otherwise defined herein are used herein with the meanings so
defined. References in this Agreement to "Sections" and
"Exhibits", except as the context otherwise dictates, are
references to sections hereof and exhibits hereto.
2. Amendments to Credit Agreement. Subject to all of the terms
and conditions hereof, and in reliance upon the representations
and warranties set forth or incorporated by reference in
Section 3, the Credit Agreement is amended as follows, effective
upon the date (the "Amendment Date") that the conditions
specified in Section 4 are satisfied, which conditions must be
satisfied no later than September 30, 1993 or this Agreement
shall be of no force or effect.
2.1. Amendment to Section 5.4.2A. Paragraph (b) of
Section 5.4.2A of the Credit Agreement is amended to read in its
entirety as follows:
"(b) To the extent that the Company incurs
Indebtedness permitted by Section 8.1.10 exceeding
$950,000,000 in aggregate principal amount on a cumulative
basis, each Term Borrower shall as a mandatory prepayment on
account of the principal amount of its Term Notes (and in
addition to any payment otherwise required to be made
pursuant to this Section 5), pay to the Agent for the Term
Lenders' several accounts in accordance with their Term
Percentage Interests an amount equal to the lesser of (i)
such Term Borrower's Term Prepayment Percentage of one-half
of the aggregate net proceeds received by the Company (after
deducting underwriting discounts and other expenses of the
Company specifically related to the incurrence of such
Indebtedness) from the amount by which such Indebtedness
exceeds $950,000,000 but does not exceed $1,900,000,000 in
aggregate principal amount on a cumulative basis or (ii)
such aggregate principal amount of its Term Notes as may
then be outstanding."
2.2. Amendment to Section 5.5.2A. Paragraph (b) of
Section 5.5.2A of the Credit Agreement is amended to read in its
entirety as follows:
"(b) To the extent that the Company incurs
Indebtedness permitted by Section 8.1.10 exceeding
$950,000,000 in aggregate principal amount on a cumulative
basis, each Conversion Borrower shall as a mandatory
prepayment on account of the principal amount of its
Conversion Notes (and in addition to any payment otherwise
required to be made pursuant to this Section 5), pay to the
Agent for the Conversion Lenders' several accounts in
accordance with their Conversion Percentage Interests an
amount equal to the lesser of (i) such Conversion Borrower's
Conversion Prepayment Percentage of one-half of the
aggregate net proceeds received by the Company (after
deducting underwriting discounts and other expenses of the
Company specifically related to the incurrence of such
Indebtedness) from the amount by which such Indebtedness
exceeds $950,000,000 but does not exceed $1,900,000,000 in
aggregate principal amount on a cumulative basis or (ii)
such aggregate principal amount of its Conversion Notes as
may then be outstanding."
2.3. Amendment to Section 8.1.10. Section 8.1.10 of the
Credit Agreement is amended so that the first paragraph thereof
(prior to clause (i) thereof) reads in its entirety as follows:
"8.1.10. Indebtedness of the Company incurred on or
after March 1, 1993 not exceeding $2,400,000,000 in
aggregate principal amount on a cumulative basis, which
Indebtedness:"
3. Representations and Warranties. In order to induce the Agent
to enter into this Agreement, each Borrower and each other
Guarantor jointly and severally represents and warrants to the
Agent as follows:
3.1. Legal Existence, Organization. Each Borrower and each
other Guarantor is a duly organized and validly existing entity,
in good standing under the laws of the jurisdiction in which it
is organized, with all power and authority, corporate,
partnership or otherwise, necessary to (a) enter into and perform
this Agreement and the Amended Credit Agreement and (b) own its
properties and carry on the business now conducted or proposed to
be conducted by it. Each Borrower and each other Guarantor has
taken all action necessary to make the provisions of this
Agreement, the Amended Credit Agreement, all other Lender
Agreements and the Credit Obligations the valid and enforceable
obligations they purport to be.
3.2. Enforceability. Each Borrower and each other
Guarantor has duly executed and delivered this Agreement. Each
of this Agreement and the Amended Credit Agreement is the legal,
valid and binding obligation of each Borrower and each other
Guarantor to the extent each of them is a party hereto or thereto
and is enforceable in accordance with its terms.
3.3. No Legal Obstacle to Agreements. Neither the
execution, delivery or performance of this Agreement, nor the
performance of the Amended Credit Agreement nor the consummation
of any other transaction contemplated by this Agreement, has
constituted or resulted in or will constitute or result in:
(a) any breach or termination of the provisions of
any agreement, instrument, deed or lease to which any
Borrower or other Guarantor is a party or by which any
Borrower or other Guarantor is bound, or of the charter, by-
laws or partnership agreement of any Borrower or other
Guarantor;
(b) the violation of any presently existing law,
judgment, decree or governmental order, rule or regulation
applicable to any Borrower or other Guarantor;
(c) the creation under any agreement, instrument,
deed or lease of any encumbrance, mortgage, lien, pledge,
charge or other security interest of any kind upon any of
the assets of any Borrower or other Guarantor; or
(d) any redemption, retirement or other repurchase
obligation of any Borrower or other Guarantor under its
charter or by-laws or any agreement, instrument, deed or
lease.
No consent, approval, authorization or other action by, or
declaration to or filing with, any governmental or administrative
authority or any other Person is required to be obtained or made
by any Borrower or other Guarantor in connection with the
execution, delivery and performance of this Agreement or the
performance of the Amended Credit Agreement or the consummation
of the transactions contemplated hereby or thereby.
3.4. Defaults. After giving effect to this Agreement, no
Default or Event of Default will exist.
3.5. Incorporation of Representations and Warranties. The
representations and warranties set forth in Sections 6.3 and 9 of
the Amended Credit Agreement are true and correct on the date
hereof as if originally made as of the date hereof.
4. Conditions. The effectiveness of this Agreement shall be
subject to the satisfaction, on or before the Amendment Date, of
the following conditions:
4.1. Officer's Certificate. The representations and
warranties of each Borrower and each other Guarantor set forth or
incorporated by reference herein shall be true and correct as of
the Amendment Date as though originally made on and as of the
Amendment Date, and the Company shall have furnished to the
Lenders a certificate to this effect executed by the Chairman,
the Vice Chairman, the President, any Senior Vice President, the
Treasurer or the Assistant Treasurer of the Company.
4.2. Amendments to Other Financing Agreements. The Company
shall have entered into an amendment to the 1992 Credit Facility,
which amendment shall amend the 1992 Credit Facility in a
substantially similar manner, to the extent applicable, as the
Credit Agreement is amended hereby. The Company shall have
delivered to the Agent an executed copy of such amendment, the
terms and provisions of which shall be reasonably satisfactory to
the Agent.
5. Consent of Lenders. The Agent represents that it has
obtained the consent of the holders of the requisite Percentage
Interests in the Credit Obligations to its execution of this
Agreement as Agent.
6. General. The Amended Credit Agreement and all of the Lender
Agreements are each confirmed as being in full force and effect.
This Agreement, the Amended Credit Agreement and the other Lender
Agreements referred to herein or therein constitute the entire
understanding of the parties with respect to the subject matter
hereof and thereof and supersede all prior and current
understandings and agreements, whether written or oral. The
invalidity or unenforceability of any provision hereof shall not
affect the validity or enforceability of any other term or
provision hereof. The headings in this Agreement are for
convenience of reference only and shall not alter, limit or
otherwise affect the meaning hereof. Each of the Amended Credit
Agreement and this Agreement is a Lender Agreement and may be
executed in any number of counterparts, which together shall
constitute one instrument, and shall bind and inure to the
benefit of the parties and their respective successors and
assigns, including as such successors and assigns all holders of
any Note. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS (OTHER THAN THE CONFLICT OF LAWS RULES)
OF THE COMMONWEALTH OF MASSACHUSETTS.
<PAGE>
Each of the undersigned has executed this Agreement under
seal by a duly authorized officer as of the date first set forth
above.
CONTINENTAL CABLEVISION, INC.
By /s/ P. Eric Krauss
Assistant Treasurer
AMERICAN CABLESYSTEMS CORPORATION
AMERICAN CABLESYSTEMS NORTHEAST, INC.
AMERICAN CABLESYSTEMS OF CALIFORNIA, INC.
AMERICAN CABLESYSTEMS OF FLORIDA, INC.
AMERICAN CABLESYSTEMS OF MASSACHUSETTS, INC.
AMERICAN CABLESYSTEMS OF NEW YORK, INC.
CONTINENTAL CABLEVISION FLORIDA LIMITED, INC.
CONTINENTAL CABLEVISION NORTHEAST
LIMITED, INC.
CONTINENTAL CABLEVISION NORTHERN COOK
COUNTY LIMITED, INC.
CONTINENTAL CABLEVISION OF BROCKTON, INC.
CONTINENTAL CABLEVISION OF CALIFORNIA, INC.
CONTINENTAL CABLEVISION OF COOK COUNTY, INC.
CONTINENTAL CABLEVISION OF ILLINOIS, INC.
CONTINENTAL CABLEVISION OF JACKSONVILLE, INC.
CONTINENTAL CABLEVISION OF
MASSACHUSETTS, INC.
CONTINENTAL CABLEVISION OF MICHIGAN, INC.
CONTINENTAL CABLEVISION OF MORTON GROVE, INC.
CONTINENTAL CABLEVISION OF NEW ENGLAND, INC.
CONTINENTAL CABLEVISION OF NORTHERN COOK
COUNTY, INC.
CONTINENTAL CABLEVISION OF NORTHERN
DAKOTA COUNTY, INC.
CONTINENTAL CABLEVISION OF OHIO, INC.
CONTINENTAL CABLEVISION OF ST. LOUIS
COUNTY, INC.
CONTINENTAL CABLEVISION OF ST. PAUL, INC.
CONTINENTAL CABLEVISION OF SIERRA
VALLEYS, INC.
CONTINENTAL CABLEVISION OF SOUTHERN
MASSACHUSETTS, INC.
CONTINENTAL CABLEVISION OF VIRGINIA, INC.
CONTINENTAL CABLEVISION OF WESTERN
NEW ENGLAND, INC.
CONTINENTAL CABLEVISION OF WILL COUNTY, INC.
CONTINENTAL CABLEVISION SERVICES, INC.
CONTINENTAL CABLEVISION WILL COUNTY
LIMITED, INC.
FRESNO CABLE TV LIMITED
HUDSON VALLEY CABLESYSTEMS CORPORATION
<PAGE>
NOR CAL CABLEVISION, INC.
POMPANO TELECABLE CORPORATION
SAN JOAQUIN TV SERVICES, INC.
TELCAB COMMUNICATIONS, INC.
By /s/ P. Eric Krauss
Assistant Treasurer
AMERICAN CABLESYSTEMS OF FLORIDA,
A LIMITED PARTNERSHIP
By AMERICAN CABLESYSTEMS OF FLORIDA, INC.,
General Partner
By /s/ P. Eric Krauss
Assistant Treasurer
AMERICAN CABLESYSTEMS NORTHEAST,
A LIMITED PARTNERSHIP
By AMERICAN CABLESYSTEMS NORTHEAST, INC.,
General Partner
By /s/ P. Eric Krauss
Assistant Treasurer
CONTINENTAL CABLEVISION OF WILL COUNTY,
A LIMITED PARTNERSHIP
By CONTINENTAL CABLEVISION OF WILL
COUNTY, INC., General Partner
By /s/ P. Eric Krauss
Assistant Treasurer
CONTINENTAL CABLEVISION OF NORTHERN
COOK COUNTY, A LIMITED PARTNERSHIP
By CONTINENTAL CABLEVISION OF NORTHERN
COOK COUNTY, INC., General Partner
By /s/ P. Eric Krauss
Assistant Treasurer
CONTINENTAL CABLEVISION OF NORTHERN
DAKOTA COUNTY
By CONTINENTAL CABLEVISION OF NORTHERN
DAKOTA COUNTY, INC., General Partner
By /s/ P. Eric Krauss
Assistant Treasurer
By CONTINENTAL CABLEVISION, INC.,
General Partner
By /s/ P. Eric Krauss
Assistant Treasurer
The foregoing is hereby accepted:
THE FIRST NATIONAL BANK
OF BOSTON, as Agent for the
Lenders under the Credit Agreement
By /s/ David B. Herter
Title: Director
Exhibit 4.7C
Executed Original
CONTINENTAL CABLEVISION, INC.
1992 CREDIT AGREEMENT
Amendment No. 3
This Agreement, dated as of August 30, 1993, is among
Continental Cablevision, Inc., a Delaware corporation (the
"Company"), certain of its subsidiaries party hereto, The First
National Bank of Boston, as agent ("FNBB") for itself and the
other Lenders (as defined in the Credit Agreement referred to
below), and The Bank of New York, as arranging agent ("BNY") for
itself and the other Lenders. FNBB and BNY are collectively
referred to herein as the "Agent". The parties agree as follows:
1. Reference to Credit Agreement; Definitions. Reference is
made to the Credit Agreement dated as of May 15, 1992 and as in
effect on the date hereof prior to giving effect to this
Agreement (the "Credit Agreement"), among the Company, its
subsidiaries party thereto, the Lenders and the Agent. Terms
defined in the Credit Agreement as amended hereby (the "Amended
Credit Agreement") and not otherwise defined herein are used
herein with the meanings so defined. References in this
Agreement to "Sections" and "Exhibits", except as the context
otherwise dictates, are references to sections hereof and
exhibits hereto.
2. Amendments to Credit Agreement. Subject to all of the terms
and conditions hereof, and in reliance upon the representations
and warranties set forth or incorporated by reference in
Section 3, the Credit Agreement is amended as follows, effective
upon the date (the "Amendment Date") that the conditions
specified in Section 4 are satisfied, which conditions must be
satisfied no later than September 30, 1993 or this Agreement
shall be of no force or effect.
2.1. Amendment to Section 2.5. Section 2.5 of the Credit
Agreement is amended to read in its entirety as follows:
"2.5. Maximum Amount of Revolving Credit. The
combined aggregate principal amount of all loans at any one
time outstanding under Sections 2.1, 2.3 and 2.4 shall not
at any time exceed an amount (the "Maximum Amount of
Revolving Credit") equal to:
(i) (a) the least of (I) $500,000,000, (II) the amount
(being an integral multiple of $10,000,000) irrevocably
specified from time to time by at least three Banking Days
prior written notice from the Company to the Agent or
(III) during each period specified in the table below, the
amount specified in such table:
Period Maximum Amount
Prior to April 1, 1994 $500,000,000
April 1, 1994 through
June 30, 1994 $499,250,000
July 1, 1994 through
October 2, 1994 $498,500,000
October 3, 1994 through
January 2, 1995 $497,750,000
January 3, 1995 through
April 2, 1995 $485,000,000
April 3, 1995 through
July 2, 1995 $483,500,000
July 3, 1995 through
October 1, 1995 $482,000,000
October 2, 1995 through
January 1, 1996 $480,500,000
January 2, 1996 through
March 31, 1996 $455,000,000
April 1, 1996 through
June 30, 1996 $452,000,000
July 1, 1996 through
September 30, 1996 $449,000,000
October 1, 1996 through
January 1, 1997 $446,000,000
January 2, 1997 through
March 31, 1997 $395,000,000
April 1, 1997 through
June 30, 1997 $391,000,000
July 1, 1997 through
September 30, 1997 $387,000,000
October 1, 1997 through
January 1, 1998 $383,000,000
January 2, 1998 through
March 31, 1998 $315,000,000
April 1, 1998 through
June 30, 1998 $311,000,000
July 1, 1998 through
September 30, 1998 $307,000,000
October 1, 1998 through
January 3, 1999 $303,000,000
January 4, 1999 through
March 31, 1999 $235,000,000
<PAGE>
Period Maximum Amount
April 1, 1999 through
June 30, 1999 $229,250,000
July 1, 1999 through
September 30, 1999 $223,500,000
October 1, 1999 through
January 3, 2000 $217,750,000
January 4, 2000 through
April 2, 2000 $120,000,000
April 3, 2000 through
July 2, 2000 $114,000,000
July 3, 2000 through
October 1, 2000 $108,000,000
October 2, 2000 through
December 31, 2000 $102,000,000
minus (b) the aggregate principal amount of all mandatory
contingent prepayments of the Revolving Loan which are
required to be made pursuant to Sections 5.5.1 or 5.5.3 (the
amount determined pursuant to this clause (i) is referred to
herein as the "Stated Revolving Maximum"), minus
(ii) all unborrowed amounts for which designations are
in effect pursuant to Section 2.6."
2.2. Deletion of Sections and Exhibit. The Credit
Agreement is amended so that:
(a) the text and headings of Sections 2.2, 4.1.2, 5.2,
5.4, 5.7 and 5.11 thereof are deleted in their entirety and
the legend "Intentionally omitted." is inserted after the
Section number thereof,
(b) Exhibit 2.2 thereto is deleted in its entirety and
(c) all references throughout the Credit Agreement to
the Sections and Exhibit referred to in clauses (a) and (b)
above are deleted.
2.3. Deletion of Defined Terms; Conforming Changes. The
Credit Agreement is amended:
(a) to delete the references to "Term Loan" and "Term
Notes" and the corresponding Section references in Section
11.1,
(b) to delete the definitions of "Term Lender" and
"Term Percentage Interest" in Sections 11.54 and 11.55,
respectively, and to substitute therefor the legend
"Intentionally omitted.",
(c) to delete all references throughout the Credit
Agreement to the defined terms referred to in the foregoing
clauses (a) and (b) and the specific provisions relating
exclusively thereto,
(d) to delete the definition of "Revolving Lender" in
Section 11.48, to substitute therefor the legend
"Intentionally omitted." and to substitute "Lender" for
"Revolving Lender" throughout the Credit Agreement,
(e) to amend the definition of "Percentage Interest" in
Section 11.38 to read the same as the definition of
"Revolving Percentage Interest" in Section 11.49, to delete
the definition of "Revolving Percentage Interest" in
Section 11.49, to substitute therefor the legend
"Intentionally omitted." and to substitute "Percentage
Interest" for "Revolving Percentage Interest" throughout the
Credit Agreement, and
(f) to make other necessary conforming changes to carry
out the intent of the foregoing clauses (a) through (e) and
the other provisions of this Agreement.
2.4. Amendment to Exhibit 14.1. Exhibit 14.1 to the Credit
Agreement is amended to read in its entirety as set forth in
Exhibit 14.1 hereto.
3. Representations and Warranties. In order to induce the
Lenders to enter into this Agreement, each Borrower and each
other Guarantor jointly and severally represents and warrants to
the Agent as follows:
3.1. Legal Existence, Organization. Each Borrower and each
other Guarantor is a duly organized and validly existing entity,
in good standing under the laws of the jurisdiction in which it
is organized, with all power and authority, corporate,
partnership or otherwise, necessary to (a) enter into and perform
this Agreement and the Amended Credit Agreement and (b) own its
properties and carry on the business now conducted or proposed to
be conducted by it. Each Borrower and each other Guarantor has
taken all action necessary to make the provisions of this
Agreement, the Amended Credit Agreement, all other Lender
Agreements and the Credit Obligations the valid and enforceable
obligations they purport to be.
3.2. Enforceability. Each Borrower and each other
Guarantor has duly executed and delivered this Agreement. Each
of this Agreement and the Amended Credit Agreement is the legal,
valid and binding obligation of each Borrower and each other
Guarantor to the extent each of them is a party hereto or thereto
and is enforceable in accordance with its terms.
3.3. No Legal Obstacle to Agreements. Neither the
execution, delivery or performance of this Agreement, nor the
performance of the Amended Credit Agreement nor the consummation
of any other transaction contemplated by this Agreement, has
constituted or resulted in or will constitute or result in:
(a) any breach or termination of the provisions of any
agreement, instrument, deed or lease to which any Borrower
or other Guarantor is a party or by which any Borrower or
other Guarantor is bound, or of the charter, by-laws or
partnership agreement of any Borrower or other Guarantor;
(b) the violation of any presently existing law,
judgment, decree or governmental order, rule or regulation
applicable to any Borrower or other Guarantor;
(c) the creation under any agreement, instrument, deed
or lease of any encumbrance, mortgage, lien, pledge, charge
or other security interest of any kind upon any of the
assets of any Borrower or other Guarantor; or
(d) any redemption, retirement or other repurchase
obligation of any Borrower or other Guarantor under its
charter or by-laws or any agreement, instrument, deed or
lease.
No consent, approval, authorization or other action by, or
declaration to or filing with, any governmental or administrative
authority or any other Person is required to be obtained or made
by any Borrower or other Guarantor in connection with the
execution, delivery and performance of this Agreement or the
performance of the Amended Credit Agreement or the consummation
of the transactions contemplated hereby or thereby.
3.4. Defaults. After giving effect to this Agreement, no
Default or Event of Default will exist.
3.5. Incorporation of Representations and Warranties. The
representations and warranties set forth in Sections 6.3 and 9 of
the Amended Credit Agreement are true and correct on the date
hereof as if originally made as of the date hereof.
4. Conditions. The effectiveness of this Agreement shall be
subject to the satisfaction, on or before the Amendment Date, of
the following conditions:
4.1. Officer's Certificate. The representations and
warranties of each Borrower and each other Guarantor set forth or
incorporated by reference herein shall be true and correct as of
the Amendment Date as though originally made on and as of the
Amendment Date, and the Company shall have furnished to the
Lenders a certificate to this effect executed by the Chairman,
the Vice Chairman, the President, any Senior Vice President, the
Treasurer or the Assistant Treasurer of the Company.
4.2. Prepayment of Term Loan. The Company shall have
prepaid the Term Loan (as defined in the Credit Agreement) in
full.
4.3. Payment of Fees. The Company shall have paid to each
Lender an amendment fee of $5,000.
5. Cancellation of Term Notes. Upon the effectiveness of this
Agreement, all Term Notes (as defined in the Credit Agreement)
then outstanding shall be deemed automatically canceled and of no
force or effect, and each Lender shall deliver its Term Note to
the Agent, who shall forward it to the Company for cancellation.
6. General. The Amended Credit Agreement and all of the Lender
Agreements are each confirmed as being in full force and effect.
This Agreement, the Amended Credit Agreement and the other Lender
Agreements referred to herein or therein constitute the entire
understanding of the parties with respect to the subject matter
hereof and thereof and supersede all prior and current
understandings and agreements, whether written or oral. The
invalidity or unenforceability of any provision hereof shall not
affect the validity or enforceability of any other term or
provision hereof. The headings in this Agreement are for
convenience of reference only and shall not alter, limit or
otherwise affect the meaning hereof. Each of the Amended Credit
Agreement and this Agreement is a Lender Agreement and may be
executed in any number of counterparts, which together shall
constitute one instrument, and shall bind and inure to the
benefit of the parties and their respective successors and
assigns, including as such successors and assigns all holders of
any Credit Obligation. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS (OTHER THAN THE CONFLICT OF
LAWS RULES) OF THE COMMONWEALTH OF MASSACHUSETTS.
<PAGE>
Each of the undersigned has executed this Agreement under
seal by a duly authorized officer as of the date first set forth
above.
CONTINENTAL CABLEVISION, INC.
By /s/ P. Eric Krauss
Assistant Treasurer
AMERICAN CABLESYSTEMS CORPORATION
AMERICAN CABLESYSTEMS NORTHEAST, INC.
AMERICAN CABLESYSTEMS OF CALIFORNIA, INC.
AMERICAN CABLESYSTEMS OF FLORIDA, INC.
AMERICAN CABLESYSTEMS OF MASSACHUSETTS, INC.
AMERICAN CABLESYSTEMS OF NEW YORK, INC.
CONTINENTAL CABLEVISION FLORIDA LIMITED, INC.
CONTINENTAL CABLEVISION NORTHEAST
LIMITED, INC.
CONTINENTAL CABLEVISION NORTHERN COOK
COUNTY LIMITED, INC.
CONTINENTAL CABLEVISION OF CALIFORNIA, INC.
CONTINENTAL CABLEVISION OF COOK COUNTY, INC.
CONTINENTAL CABLEVISION OF ILLINOIS, INC.
CONTINENTAL CABLEVISION OF JACKSONVILLE, INC.
CONTINENTAL CABLEVISION OF
MASSACHUSETTS, INC.
CONTINENTAL CABLEVISION OF MICHIGAN, INC.
CONTINENTAL CABLEVISION OF MORTON GROVE, INC.
CONTINENTAL CABLEVISION OF NEW ENGLAND, INC.
CONTINENTAL CABLEVISION OF NORTHERN COOK
COUNTY, INC.
CONTINENTAL CABLEVISION OF NORTHERN
DAKOTA COUNTY, INC.
CONTINENTAL CABLEVISION OF OHIO, INC.
CONTINENTAL CABLEVISION OF ST. LOUIS
COUNTY, INC.
CONTINENTAL CABLEVISION OF ST. PAUL, INC.
CONTINENTAL CABLEVISION OF SIERRA
VALLEYS, INC.
CONTINENTAL CABLEVISION OF SOUTHERN
MASSACHUSETTS, INC.
CONTINENTAL CABLEVISION OF VIRGINIA, INC.
CONTINENTAL CABLEVISION OF WESTERN
NEW ENGLAND, INC.
CONTINENTAL CABLEVISION OF WILL COUNTY, INC.
CONTINENTAL CABLEVISION SERVICES, INC.
CONTINENTAL CABLEVISION WILL COUNTY
LIMITED, INC.
FRESNO CABLE TV LIMITED
HUDSON VALLEY CABLESYSTEMS CORPORATION
<PAGE>
NOR CAL CABLEVISION, INC.
POMPANO TELECABLE CORPORATION
SAN JOAQUIN TV SERVICES, INC.
TELCAB COMMUNICATIONS, INC.
By /s/ P. Eric Krauss
Assistant Treasurer
AMERICAN CABLESYSTEMS OF FLORIDA,
A LIMITED PARTNERSHIP
By AMERICAN CABLESYSTEMS OF FLORIDA, INC.,
General Partner
By /s/ P. Eric Krauss
Assistant Treasurer
AMERICAN CABLESYSTEMS NORTHEAST,
A LIMITED PARTNERSHIP
By AMERICAN CABLESYSTEMS NORTHEAST, INC.,
General Partner
By /s/ P. Eric Krauss
Assistant Treasurer
CONTINENTAL CABLEVISION OF WILL COUNTY,
A LIMITED PARTNERSHIP
By CONTINENTAL CABLEVISION OF WILL
COUNTY, INC., General Partner
By /s/ P. Eric Krauss
Assistant Treasurer
CONTINENTAL CABLEVISION OF NORTHERN
COOK COUNTY, A LIMITED PARTNERSHIP
By CONTINENTAL CABLEVISION OF NORTHERN
COOK COUNTY, INC., General Partner
By /s/ P. Eric Krauss
Assistant Treasurer
CONTINENTAL CABLEVISION OF NORTHERN
DAKOTA COUNTY
By CONTINENTAL CABLEVISION OF NORTHERN
DAKOTA COUNTY, INC., General Partner
By /s/ P. Eric Krauss
Assistant Treasurer
By CONTINENTAL CABLEVISION, INC.,
General Partner
By /s/ P. Eric Krauss
Assistant Treasurer
<PAGE>
LEAD MANAGERS:
THE FIRST NATIONAL BANK THE BANK OF NEW YORK
OF BOSTON
By /s/ Maureen H. Forrester By /s/ Geoffrey C. Brooks
Title: Assistant Vice Title: Assistant Vice
President President
THE BANK OF NOVA SCOTIA CANADIAN IMPERIAL BANK
OF COMMERCE
By /s/ D.B. Crawford By /s/ Martin Friedman
Title: Authorized Signatory Title: Authorized Signatory
CREDIT LYONNAIS CAYMAN MELLON BANK, N.A.
ISLAND BRANCH
By /s/ Signature Illegible By /s/ Maribeth Donnelly
Title: Authorized Signatory Title: Vice President
MORGAN GUARANTY TRUST NATIONAL WESTMINSTER
COMPANY OF NEW YORK BANK USA
By /s/ Deborah M. Broadheim By /s/ Leonard Maddox
Title: Vice President Title: Vice President
NATIONSBANK OF TEXAS, N.A. THE TORONTO-DOMINION BANK
By /s/ Brian O. Corum By /s/ Karen Hennessey
Title: Senior Vice President Title: Director
<PAGE>
OTHER LENDERS:
BANK BRUSSELS LAMBERT, BANK OF HAWAII
NEW YORK BRANCH
By /s/ Eric Hollanders By /s/ Curtis W. Chinn
Title: Vice President Title: Vice President
By /s/ Eileen Stekeur
Title: Assistant Vice
President
BANK OF IRELAND BANK OF MONTREAL
By /s/ Augustine Okwu By /s/ Yvonne Bos
Title: Assistant Vice Title: Vice President
President
BANQUE INDOSUEZ, NEW YORK BANQUE NATIONALE DE PARIS
By /s/ Signature Illegible By /s/ Signature Illegible
Title: First Vice President Title: Vice President
By /s/ Daniel Goldhagen By /s/ Janice Ho
Title: Vice President Title: Vice President
BANQUE PARIBAS THE CHASE MANHATTAN BANK, N.A.
By /s/ John Acker By /s/ Signature Illegible
Title: Vice President Title: Managing Director
By /s/ Signature Illegible
Title:
COMPAGNIE FINANCIERE DE CIC CORESTATES BANK, N.A.
ET DE L'UNION EUROPEENNE
By /s/ Marcus Edwards By /s/ Edward J. Kilhell
Title: Vice President Title: Vice President
By /s/ Alain Merle
Title:
CRESTAR BANK FIRST BANK NATIONAL
ASSOCIATION
By /s/ Signature Illegible By /s/ Steven Flack
Title: Vice President Title: Assistant Vice President
THE FIRST NATIONAL BANK THE FUJI BANK, LIMITED
OF MARYLAND
By /s/ Mark L. Cooh By /s/ Signature Illegible
Title: Vice President Title: Vice President &
Manager
FUYO GENERAL LEASE INDUSTRIAL BANK OF JAPAN
(U.S.A.), INC.
By /s/ Atushi Ishii By Signature Illegible
Title: Executive Vice Title: Senior Vice President
President and Senior Manager
KLEINWORT BENSON LIMITED THE LONG-TERM CREDIT BANK
OF JAPAN, LIMITED,
NEW YORK BRANCH
By /s/ Signature Illegible By /s/ A. Sasaki
Title: Title: Deputy General
Manager
THE MITSUBISHI TRUST AND PNC BANK, N.A.
BANKING CORPORATION
By /s/ Signature Illegible By /s/ Stephen R. Bitner
Title: Senior Vice Title: Assistant Vice
President President
ROYAL BANK OF CANADA SHAWMUT BANK CONNECTICUT, N.A.
By /s/ Signature Illegible By /s/ Anne Dorsey
Title: Senior Manager Title: Vice President
SOCIETE GENERALE THE SUMITOMO BANK, LIMITED,
CHICAGO BRANCH
By /s/ W.A. Sinsigalli By /s/ Takaya Jida
Title: Vice President and Title: Joint General Manager
Manager
SWISS BANK CORPORATION, UNION BANK
NEW YORK BRANCH
By /s/ Jane Majeski By /s/ Michael K. McShane
Title: Director Title: Vice President
By /s/ Domenic J. Soresso
Title: Associate Director
Merchant Banking
Exhibit 4.7D
Executed Original
CONTINENTAL CABLEVISION, INC.
1992 CREDIT AGREEMENT
Amendment No. 4
This Agreement, dated as of August 30, 1993, is among
Continental Cablevision, Inc., a Delaware corporation (the
"Company"), certain of its subsidiaries party hereto, The First
National Bank of Boston, as agent ("FNBB") for itself and the
other Lenders (as defined in the Credit Agreement referred to
below), and The Bank of New York, as arranging agent ("BNY") for
itself and the other Lenders. FNBB and BNY are collectively
referred to herein as the "Agent". The parties agree as follows:
1. Reference to Credit Agreement; Definitions. Reference is
made to the Credit Agreement dated as of May 15, 1992 and as in
effect on the date hereof prior to giving effect to this
Agreement (the "Credit Agreement"), among the Company, its
subsidiaries party thereto, the Lenders and the Agent. Terms
defined in the Credit Agreement as amended hereby (the "Amended
Credit Agreement") and not otherwise defined herein are used
herein with the meanings so defined. References in this
Agreement to "Sections" and "Exhibits", except as the context
otherwise dictates, are references to sections hereof and
exhibits hereto.
2. Amendments to Credit Agreement. Subject to all of the terms
and conditions hereof, and in reliance upon the representations
and warranties set forth or incorporated by reference in
Section 3, the Credit Agreement is amended as follows, effective
upon the date (the "Amendment Date") that the conditions
specified in Section 4 are satisfied, which conditions must be
satisfied no later than September 30, 1993 or this Agreement
shall be of no force or effect.
2.1. Amendment to Section 8.1.10. Section 8.1.10 of the
Credit Agreement is amended so that the first paragraph thereof
(prior to clause (i) thereof) reads in its entirety as follows:
"8.1.10. Indebtedness of the Company incurred on or
after March 1, 1993 not exceeding $2,400,000,000 in
aggregate principal amount on a cumulative basis, which
Indebtedness:"
3. Representations and Warranties. In order to induce the Agent
to enter into this Agreement, each Borrower and each other
Guarantor jointly and severally represents and warrants to the
Agent as follows:
3.1. Legal Existence, Organization. Each Borrower and each
other Guarantor is a duly organized and validly existing entity,
in good standing under the laws of the jurisdiction in which it
is organized, with all power and authority, corporate,
partnership or otherwise, necessary to (a) enter into and perform
this Agreement and the Amended Credit Agreement and (b) own its
properties and carry on the business now conducted or proposed to
be conducted by it. Each Borrower and each other Guarantor has
taken all action necessary to make the provisions of this
Agreement, the Amended Credit Agreement, all other Lender
Agreements and the Credit Obligations the valid and enforceable
obligations they purport to be.
3.2. Enforceability. Each Borrower and each other
Guarantor has duly executed and delivered this Agreement. Each
of this Agreement and the Amended Credit Agreement is the legal,
valid and binding obligation of each Borrower and each other
Guarantor to the extent each of them is a party hereto or thereto
and is enforceable in accordance with its terms.
3.3. No Legal Obstacle to Agreements. Neither the
execution, delivery or performance of this Agreement, nor the
performance of the Amended Credit Agreement nor the consummation
of any other transaction contemplated by this Agreement, has
constituted or resulted in or will constitute or result in:
(a) any breach or termination of the provisions of
any agreement, instrument, deed or lease to which any
Borrower or other Guarantor is a party or by which any
Borrower or other Guarantor is bound, or of the charter, by-
laws or partnership agreement of any Borrower or other
Guarantor;
(b) the violation of any presently existing law,
judgment, decree or governmental order, rule or regulation
applicable to any Borrower or other Guarantor;
(c) the creation under any agreement, instrument,
deed or lease of any encumbrance, mortgage, lien, pledge,
charge or other security interest of any kind upon any of
the assets of any Borrower or other Guarantor; or
(d) any redemption, retirement or other repurchase
obligation of any Borrower or other Guarantor under its
charter or by-laws or any agreement, instrument, deed or
lease.
No consent, approval, authorization or other action by, or
declaration to or filing with, any governmental or administrative
authority or any other Person is required to be obtained or made
by any Borrower or other Guarantor in connection with the
execution, delivery and performance of this Agreement or the
performance of the Amended Credit Agreement or the consummation
of the transactions contemplated hereby or thereby.
3.4. Defaults. After giving effect to this Agreement, no
Default or Event of Default will exist.
3.5. Incorporation of Representations and Warranties. The
representations and warranties set forth in Sections 6.3 and 9 of
the Amended Credit Agreement are true and correct on the date
hereof as if originally made as of the date hereof.
4. Conditions. The effectiveness of this Agreement shall be
subject to the satisfaction, on or before the Amendment Date, of
the following conditions:
4.1. Officer's Certificate. The representations and
warranties of each Borrower and each other Guarantor set forth or
incorporated by reference herein shall be true and correct as of
the Amendment Date as though originally made on and as of the
Amendment Date, and the Company shall have furnished to the
Lenders a certificate to this effect executed by the Chairman,
the Vice Chairman, the President, any Senior Vice President, the
Treasurer or the Assistant Treasurer of the Company.
4.2. Amendments to Other Financing Agreements. The Company
shall have entered into an amendment to the 1990 Credit
Agreement, which amendment shall amend the 1990 Credit Agreement
in a substantially similar manner, to the extent applicable, as
the Credit Agreement is amended hereby. The Company shall have
delivered to the Agent an executed copy of such amendment, the
terms and provisions of which shall be reasonably satisfactory to
the Agent.
5. Consent of Lenders. The Agent represents that it has
obtained the consent of the holders of the requisite Percentage
Interests in the Credit Obligations to its execution of this
Agreement as Agent.
6. General. The Amended Credit Agreement and all of the Lender
Agreements are each confirmed as being in full force and effect.
This Agreement, the Amended Credit Agreement and the other Lender
Agreements referred to herein or therein constitute the entire
understanding of the parties with respect to the subject matter
hereof and thereof and supersede all prior and current
understandings and agreements, whether written or oral. The
invalidity or unenforceability of any provision hereof shall not
affect the validity or enforceability of any other term or
provision hereof. The headings in this Agreement are for
convenience of reference only and shall not alter, limit or
otherwise affect the meaning hereof. Each of the Amended Credit
Agreement and this Agreement is a Lender Agreement and may be
executed in any number of counterparts, which together shall
constitute one instrument, and shall bind and inure to the
benefit of the parties and their respective successors and
assigns, including as such successors and assigns all holders of
any Credit Obligation. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS (OTHER THAN THE CONFLICT OF
LAWS RULES) OF THE COMMONWEALTH OF MASSACHUSETTS.
<PAGE>
Each of the undersigned has executed this Agreement under
seal by a duly authorized officer as of the date first set forth
above.
CONTINENTAL CABLEVISION, INC.
By /s/ P. Eric Krauss
Assistant Treasurer
AMERICAN CABLESYSTEMS CORPORATION
AMERICAN CABLESYSTEMS NORTHEAST, INC.
AMERICAN CABLESYSTEMS OF CALIFORNIA, INC.
AMERICAN CABLESYSTEMS OF FLORIDA, INC.
AMERICAN CABLESYSTEMS OF MASSACHUSETTS, INC.
AMERICAN CABLESYSTEMS OF NEW YORK, INC.
CONTINENTAL CABLEVISION FLORIDA LIMITED, INC.
CONTINENTAL CABLEVISION NORTHEAST
LIMITED, INC.
CONTINENTAL CABLEVISION NORTHERN COOK
COUNTY LIMITED, INC.
CONTINENTAL CABLEVISION OF CALIFORNIA, INC.
CONTINENTAL CABLEVISION OF COOK COUNTY, INC.
CONTINENTAL CABLEVISION OF ILLINOIS, INC.
CONTINENTAL CABLEVISION OF JACKSONVILLE, INC.
CONTINENTAL CABLEVISION OF
MASSACHUSETTS, INC.
CONTINENTAL CABLEVISION OF MICHIGAN, INC.
CONTINENTAL CABLEVISION OF MORTON GROVE, INC.
CONTINENTAL CABLEVISION OF NEW ENGLAND, INC.
CONTINENTAL CABLEVISION OF NORTHERN COOK
COUNTY, INC.
CONTINENTAL CABLEVISION OF NORTHERN
DAKOTA COUNTY, INC.
CONTINENTAL CABLEVISION OF OHIO, INC.
CONTINENTAL CABLEVISION OF ST. LOUIS
COUNTY, INC.
CONTINENTAL CABLEVISION OF ST. PAUL, INC.
CONTINENTAL CABLEVISION OF SIERRA
VALLEYS, INC.
CONTINENTAL CABLEVISION OF SOUTHERN
MASSACHUSETTS, INC.
CONTINENTAL CABLEVISION OF VIRGINIA, INC.
CONTINENTAL CABLEVISION OF WESTERN
NEW ENGLAND, INC.
CONTINENTAL CABLEVISION OF WILL COUNTY, INC.
CONTINENTAL CABLEVISION SERVICES, INC.
CONTINENTAL CABLEVISION WILL COUNTY
LIMITED, INC.
FRESNO CABLE TV LIMITED
HUDSON VALLEY CABLESYSTEMS CORPORATION
<PAGE>
NOR CAL CABLEVISION, INC.
POMPANO TELECABLE CORPORATION
SAN JOAQUIN TV SERVICES, INC.
TELCAB COMMUNICATIONS, INC.
By /s/ P. Eric Krauss
Assistant Treasurer
AMERICAN CABLESYSTEMS OF FLORIDA,
A LIMITED PARTNERSHIP
By AMERICAN CABLESYSTEMS OF FLORIDA, INC.,
General Partner
By /s/ P. Eric Krauss
Assistant Treasurer
AMERICAN CABLESYSTEMS NORTHEAST,
A LIMITED PARTNERSHIP
By AMERICAN CABLESYSTEMS NORTHEAST, INC.,
General Partner
By /s/ P. Eric Krauss
Assistant Treasurer
CONTINENTAL CABLEVISION OF WILL COUNTY,
A LIMITED PARTNERSHIP
By CONTINENTAL CABLEVISION OF WILL
COUNTY, INC., General Partner
By /s/ P. Eric Krauss
Assistant Treasurer
CONTINENTAL CABLEVISION OF NORTHERN
COOK COUNTY, A LIMITED PARTNERSHIP
By CONTINENTAL CABLEVISION OF NORTHERN
COOK COUNTY, INC., General Partner
By /s/ P. Eric Krauss
Assistant Treasurer
CONTINENTAL CABLEVISION OF NORTHERN
DAKOTA COUNTY
By CONTINENTAL CABLEVISION OF NORTHERN
DAKOTA COUNTY, INC., General Partner
By /s/ P. Eric Krauss
Assistant Treasurer
By CONTINENTAL CABLEVISION, INC.,
General Partner
By /s/ P. Eric Krauss
Assistant Treasurer
The foregoing is hereby accepted:
THE FIRST NATIONAL BANK
OF BOSTON, as Agent for the
Lenders under the Credit Agreement
By /s/ David B. Herter
Title: Director
THE BANK OF NEW YORK, as
Arranging Agent for the
Lenders under the Credit Agreement
By /s/ Geoffrey C. Brooks
Title: Assistant Vice
President
EXHIBIT 11.1
CONTINENTAL CABLEVISION, INC. AND SUBSIDIARIES
SCHEDULE OF COMPUTATION OF EARNINGS PER SHARE
(In Thousands, Except Per Share Amounts)
<TABLE>
<CAPTION>
Year Ended December 31
1989 1990 1991 1992(1) 1993(1)
<S> <C> <C> <C> <C> <C>
Loss Before Cumulative Effect of Change in
Accounting for Income Taxes $(174,637) $(195,451) $(161,642) $(102,960) $ (25,774)
Cumulative Effect of Change in Accounting for
Income Taxes - - - - (184,996)
Loss Before Extraordinary Item (174,637) (195,451) (161,642) (102,960) (210,770)
Extraordinary Item (18,169) - - - -
Net Loss (192,806) (195,451) (161,642) (102,960) (210,770)
Preferred Stock Preferences (55,496) (61,102) (5,771) (16,861) (34,115)
Loss Applicable to Common Shareholders $(248,302) $(256,553) $(167,413) $(119,821) $(244,885)
Loss Per Common Share Before Cumulative Effect
of Change in Accounting for Income Taxes $ (44.88) $ (54.80) $ (35.61) $ (25.06) $ (13.13)
Loss Per Common Share from Cumulative Effect
of Change in Accounting for Income Taxes - - - - (40.55)
Extraordinary Item Per Common Share (3.54) - - - -
Loss Per Common Share $ (48.42) $ (54.80) $ (35.61) $ (25.06) $ (53.68)
Weighted Average Number of Shares Outstanding
During the Year 5,128 4,682 4,701 4,782 4,562
<FN>
(1) For purposes of calculating loss per common share for the year ended
December 31, 1992 and 1993, shares of the Series A Convertible Preferred
Stock were not assumed to be converted into shares of Common Stock since the
result would be anti-dilutive.
</TABLE>
EXHIBIT 12.1
CONTINENTAL CABLEVISION, INC. AND SUBSIDIARIES
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(In Thousands, Except Ratio Amounts)
The following table reflects the computation of the ratio of earnings to
fixed charges for the years indicated.
<TABLE>
<CAPTION>
Year Ended December 31
1989 1990 1991 1992 1993
<S> <C> <C> <C> <C> <C>
Computation of Earnings:
Income (Loss) from Continuing Operations
Before Income Taxes and Cumulative Effect
of Change in Accounting for Income
Taxes $(178,621) $(193,969) $(159,781) $(101,306) $(33,695)
Add:
Interest Expense 268,089 312,422 323,123 289,479 276,698
Interest Portion of Rent Expense 4,642 5,235 5,445 5,899 6,065
Amortization of Capitalized Interest 1,972 2,030 2,067 2,106 2,162
Amortization of Deferred Financing Costs 1,139 1,423 1,841 6,549 5,551
Equity in Net Loss of Affiliates 10,941 24 3,380 9,402 12,827
Earnings as Adjusted $ 108,162 $ 127,165 $ 176,075 $ 212,129 $269,608
Computation of Fixed Charges:
Interest Expense $ 268,089 $ 312,422 $ 323,123 $ 289,479 $276,698
Interest Portion of Rent Expense 4,642 5,235 5,445 5,899 6,065
Capitalized Interest 1,005 718 396 766 908
Amortization of Deferred Financing Costs 1,139 1,423 1,841 6,549 5,551
Fixed Charges $ 274,875 $ 319,798 $ 330,805 $ 302,693 $289,222
Ratio of Earnings to Fixed Charges .39 .40 .53 .70 .93
Deficiency in Earnings Required to Cover
Fixed Charges $ 166,713 $ 192,633 $ 154,730 $ 90,564 $ 19,614
</TABLE>
EXHIBIT 21
SUBSIDIARIES
<TABLE>
<CAPTION>
Jurisdiction
of
Name Incorporation
<S> <C>
Alrif Co., Inc. Massachusetts
Alternet of Virginia Virginia
American Cablesystems Corporation Delaware
American Cablesystems of California, Inc. California
American Cablesystems of Florida, Inc. Massachusetts
American Cablesystems of Florida, a Limited Partnership Massachusetts
American Cablesystems of New York, Inc. New York
American Cablesystems Northeast, Inc. Massachusetts
American Cablesystems Northeast, a Limited Partnership Massachusetts
American Cablesystems of South Central Los Angeles, Inc. Delaware
CCI Cable News, Inc. Massachusetts
CCMP, Inc. Massachusetts
Continental Cablevision Asset Management Corp. Massachusetts
Continental Cablevision Digital Radio, Inc. Massachusetts
Continental Cablevision Florida Limited, Inc. Delaware
Continental Cablevision Investments, Inc. Delaware
Continental Cablevision Northeast Limited, Inc. Delaware
Continental Cablevision Northern Cook County Limited, Inc. Delaware
Continental Cablevision of Australia, Inc. Massachusetts
Continental Cablevision of Brockton, Inc. Delaware
Continental Cablevision of California, Inc. California
Continental Cablevision of Cook County, Inc. Delaware
Continental Cablevision of Illinois, Inc. Delaware
Continental Cablevision of Jacksonville, Inc. Florida
Continental Cablevision of Massachusetts, Inc. Massachusetts
Continental Cablevision of Michigan, Inc. Michigan
Continental Cablevision of Minnesota, Inc. Minnesota
Continental Cablevision of Needham, Inc. Delaware
Continental Cablevision of New England, Inc. New Hampshire
Continental Cablevision of Northern Cook County, Inc. Massachusetts
Continental Cablevision of Northern Cook County, a Limited Partnership Massachusetts
Continental Cablevision of Ohio, Inc. Ohio
Continental Cablevision of Richmond, Inc. Virginia
Continental Cablevision of St. Louis County, Inc. Delaware
Continental Cablevision of St. Paul, Inc. Minnesota
Continental Cablevision of Sierra Valleys, Inc. California
Continental Cablevision of Southern Massachusetts, Inc. Delaware
Continental Cablevision of Virginia, Inc. Virginia
Continental Cablevision of Western New England, Inc. Delaware
Continental Cablevision of Will County, Inc. Massachusetts
Continental Cablevision of Will County, a Limited Partnership Massachusetts
Continental Cablevision Satellite Company of Northern California, Inc. California
Continental Cablevision Services, Inc. New Hampshire
Continental Cablevision Will County Limited, Inc. Delaware
Continental Fiberphone, Inc. Massachusetts
Continental Fiber Technologies, Inc. Florida
Continental Internet, Inc. Massachusetts
Continental Programming Partners I, Inc. Massachusetts
Continental Satellite Company, Inc. Massachusetts
Continental Satellite Company of Chicago, Inc. Chicago
Continental Satellite Company of Florida, Inc. Florida
Continental Satellite Company of Illinois, Inc. Illinois
<PAGE>
Continental Satellite Company of Michigan, Inc. Michigan
Continental Satellite Company of New England, Inc. New Hampshire
Continental Satellite Company of Ohio, Inc. Ohio
Continental Satellite Company of Virginia, Inc. Virginia
Continental Telecommunications Corp. Massachusetts
Continental Telecommunications Corp. of Chicago Illinois
Continental Telecommunications Corp. of Los Angeles California
Continental Telecommunications Corp. of Michigan Michigan
Continental Telecommunications Corp. of Minnesota Minnesota
Continental Telecommunications Corp. of New England Massachusetts
Continental Telecommunications Corp. of Ohio Ohio
Continental Telecommunications Corp. of St. Louis County Illinois
Continental Telecommunications Corp. of Virginia Virginia
Continental Teleport, Inc. Massachusetts
Continental Teleport Corp. of Florida Florida
Continental Teleport Partners, Inc. Massachusetts
Fresno Cable TV Limited California
Greater Boston Cable Advertising Massachusetts
Hudson Valley Cablesystems Corporation New York
Milton Cablesystems Corporation Massachusetts
Minnesota Cable Communications Holding Co., Inc. Delaware
Nor Cal Cablevision, Inc. California
Pompano Telecable Company (Corporation) Florida
S.A. Ventures, Inc. Massachusetts
San Joaquin TV Services, Inc. California
Telcab Communications, Inc. Nevada
Telefiber Networks of Illinois, Inc. Illinois
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