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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(MARK ONE)
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED APRIL 30, 1996
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ________ TO ________
COMMISSION FILE NO: 0-11478
TCA CABLE TV, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
TEXAS 75-1798185
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification Number)
3015 S. E. LOOP 323, TYLER, TEXAS 75701
(Address of principal executive offices) (Zip Code)
</TABLE>
Registrant's telephone number, including area code: 903/595-3701
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 ____
The number of shares outstanding of each of the registrant's classes of
common stock as of June 10, 1996 was:
24,859,605 SHARES OF COMMON STOCK
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TCA CABLE TV, INC. AND SUBSIDIARIES
TABLE OF CONTENTS
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PAGE NO.
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PART I -- FINANCIAL INFORMATION
Consolidated Balance Sheets -- April 30, 1996 and October 31, 1995............... 3
Consolidated Statements of Operations -- Three and Six months ended April 30,
1996 and 1995................................................................. 4
Consolidated Statement of Shareholders' Equity -- Six months ended April 30,
1996.......................................................................... 5
Consolidated Statements of Cash Flows -- Six months ended April 30, 1996 and
1995.......................................................................... 6
Notes to Consolidated Financial Statements....................................... 7
Management's Discussion and Analysis of Financial Condition and Results of
Operations.................................................................... 8
PART II -- OTHER INFORMATION....................................................... 8
SIGNATURES....................................................................... 9
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TCA CABLE TV, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
OCTOBER 31,
1995
APRIL 30, ------------
1996
------------
(UNAUDITED)
<S> <C> <C>
Cash............................................................ $ 1,819,215 $ 1,260,274
Accounts receivable, subscribers................................ 7,269,026 7,973,959
Accounts receivable, other...................................... 1,732,812 879,268
Income tax receivable........................................... 1,787,380 932,306
Notes receivable, affiliates.................................... 3,000,000 2,500,000
Investments, at cost............................................ 1,992,530 1,680,163
Property, plant and equipment, at cost:
Land.......................................................... 2,939,416 2,888,678
Distribution systems.......................................... 319,446,434 293,134,397
Transportation equipment...................................... 8,782,870 7,800,092
Other......................................................... 28,483,817 26,668,443
------------ ------------
359,652,537 330,491,610
Less accumulated depreciation................................. (190,802,951) (178,722,319)
------------ ------------
168,849,586 151,769,291
Other assets:
Intangibles, net of accumulated amortization of $77,565,573
and $72,601,115, respectively.............................. 333,379,745 285,521,922
Prepaid expenses.............................................. 2,014,888 1,571,753
------------ ------------
335,394,633 287,093,675
------------ ------------
$521,845,182 $454,088,936
=========== ===========
LIABILITIES
Accounts payable................................................ $ 9,283,530 $ 6,496,407
Accrued expenses................................................ 12,932,023 15,195,324
Subscriber advance payments..................................... 3,188,936 3,856,362
Deferred income taxes........................................... 53,580,000 48,180,000
Term debt....................................................... 313,888,068 262,213,055
------------ ------------
392,872,557 335,941,148
------------ ------------
Contingencies and commitments
SHAREHOLDERS' EQUITY
Preferred stock, $1.00 par value, 5,000,000 shares authorized;
none issued
Common stock, $.10 par value, 60,000,000 shares authorized;
24,794,431 and 24,782,121 shares issued, respectively......... 2,479,443 2,478,212
Additional paid-in capital...................................... 43,962,419 43,704,988
Retained earnings............................................... 86,334,517 75,768,342
------------ ------------
132,776,379 121,951,542
Less treasury stock, at cost, 209,828 shares, respectively...... (3,803,754) (3,803,754)
------------ ------------
128,972,625 118,147,788
------------ ------------
$521,845,182 $454,088,936
=========== ===========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
3
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CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
APRIL 30, APRIL 30,
-------------------------- ---------------------------
1996 1995 1996 1995
----------- ----------- ------------ -----------
<S> <C> <C> <C> <C>
CATV revenues........................... $57,577,680 $43,953,790 $112,577,913 $87,258,079
----------- ----------- ------------ -----------
Operating expenses:
Salaries, wages and benefits.......... 9,841,432 7,704,939 19,035,576 15,260,652
Programming costs..................... 13,964,412 10,013,357 26,738,944 19,892,817
Other operating expenses.............. 1,769,140 1,540,326 3,582,052 3,024,025
Selling, general and administrative... 3,781,563 2,854,916 7,372,568 5,429,821
Depreciation and amortization......... 8,781,333 6,517,159 17,045,090 12,843,753
----------- ----------- ------------ -----------
38,137,880 28,630,697 73,774,230 56,451,068
----------- ----------- ------------ -----------
Operating income...................... 19,439,800 15,323,093 38,803,683 30,807,011
Other income............................ 655,047 229,500 747,579 302,304
Interest expense........................ (5,534,548) (2,414,635) (10,902,588) (4,884,193)
----------- ----------- ------------ -----------
Income before income taxes............ 14,560,299 13,137,958 28,648,674 26,225,122
----------- ----------- ------------ -----------
Provision for income taxes:
Current............................... 2,600,000 3,970,000 5,800,000 7,870,000
Deferred.............................. 3,000,000 1,450,000 5,400,000 2,900,000
----------- ----------- ------------ -----------
5,600,000 5,420,000 11,200,000 10,770,000
----------- ----------- ------------ -----------
Net Income......................... $ 8,960,299 $ 7,717,958 $ 17,448,674 $15,455,122
========== ========== =========== ==========
Earnings per common share............... $ 0.36 $ 0.31 $ 0.70 $ 0.62
========== ========== =========== ==========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
4
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TCA CABLE TV, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(UNAUDITED)
<TABLE>
<CAPTION>
COMMON STOCK ISSUED ADDITIONAL
------------------------ PAID-IN RETAINED TREASURY
SHARES AMOUNT CAPITAL EARNINGS STOCK
---------- ---------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Balance, October 31, 1995..... 24,782,121 $2,478,212 $43,704,988 $75,768,342 (3,803,754)
Net income for the six
months ended April 30,
1996..................... 17,448,674
Issuance of common stock.... 6,493 649 196,223
Stock options exercised..... 5,817 582 61,208
Cash dividends at $.28 a
share.................... (6,882,499)
---------- ---------- ----------- ----------- -----------
Balance, April 30, 1996....... 24,794,431 $2,479,443 $43,962,419 $86,334,517 $(3,803,754)
========= ========= ========== ========== ==========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
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CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
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<CAPTION>
SIX MONTHS ENDED
APRIL 30,
-----------------------------
1996 1995
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Cash received from customers.................................. $111,761,876 $ 86,323,355
Cash paid to suppliers and employees.......................... (56,635,867) (42,806,216)
Other revenue received........................................ 435,211 347,036
Interest paid................................................. (10,718,301) (4,836,359)
Income taxes paid............................................. (6,655,074) (7,574,896)
------------ ------------
Net cash provided by operating activities.................. 38,187,845 31,452,920
------------ ------------
Cash flows from investing activities:
Payments for purchases of companies and CATV systems.......... (60,759,941) (3,704,876)
Capital expenditures.......................................... (21,223,267) (17,884,211)
Loan to affiliate............................................. (500,000)
------------ ------------
Net cash used in investing activities...................... (82,483,208) (21,589,087)
------------ ------------
Cash flows from financing activities:
Borrowings of term debt....................................... 100,650,000 36,499,990
Repayments of term debt....................................... (48,974,987) (40,203,240)
Treasury stock purchased...................................... (1,100,000)
Proceeds from sale of assets.................................. 785,331
Proceeds from stock options exercised......................... 61,790 53,995
Dividends paid................................................ (6,882,499) (5,900,068)
------------ ------------
Net cash provided by (used in) financing activities........ 44,854,304 (9,863,992)
------------ ------------
Net increase (decrease) in cash................................. 558,941 (159)
Cash at beginning of period..................................... 1,260,274 2,445,112
------------ ------------
Cash at end of period........................................... $ 1,819,215 $ 2,444,953
=========== ===========
Reconciliation of net income to net cash provided by operating
activities:
Net income.................................................... $ 17,448,674 $ 15,455,122
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation expense....................................... 12,080,632 9,818,189
Amortization expense....................................... 4,964,458 3,025,564
Deferred income taxes...................................... 5,400,000 2,900,000
(Gain) loss on sale of assets.............................. (164,225)
Share of (earnings) losses of affiliates................... (312,368) 208,957
Contribution of common stock to retirement plan............ 196,872 216,409
(Increase) decrease in accounts receivable, subscribers.... 704,933 (896,121)
(Increase) decrease in accounts receivable, other.......... (853,544) (25,778)
(Increase) decrease in other assets........................ (443,135) (182,264)
(Increase) decrease in income tax receivable............... (855,074)
Increase (decrease) in accounts payable.................... 2,787,124 1,491,138
Increase (decrease) in subscriber advance payments......... (667,426) (12,825)
Increase (decrease) in accrued expenses.................... (2,263,301) (676,350)
Increase (decrease) in income taxes payable................ 295,104
------------ ------------
Net cash provided by operating activities....................... $ 38,187,845 $ 31,452,920
=========== ===========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
6
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TCA CABLE TV, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
A. Pursuant to the rules and regulations of the Securities and Exchange
Commission, certain financial information has been condensed and certain
footnote disclosures have been omitted. Such information and disclosures
are normally included in financial statements prepared in accordance with
generally accepted accounting principles.
These condensed financial statements should be read in conjunction with the
financial statements and notes thereto in the Company's latest report on
Form 10-K.
The financial statements as of April 30, 1996 and for the six month period
then ended are unaudited; however, in the opinion of management, such
statements include all adjustments (consisting solely of normal and
recurring adjustments) necessary to present fairly the financial
information included therein.
B. The consolidated statements of operations for the six months ended April 30,
1996, are not necessarily indicative of the operating results to be
expected for the full year.
C. Earnings per common share are computed based upon the weighted average
common shares outstanding during the period, including common stock
equivalents, of 24,630,144 shares and 24,559,659 shares for 1996 and 1995,
respectively.
D. On April 9, 1996, the Company entered into an agreement to acquire the cable
television system serving approximately 8,100 subscribers in and around
Alma, Barling and Van Buren, Arkansas. The purchase price of $12.7 million
will be financed from the Company's bank lines of credit. The anticipated
closing date is late summer 1996.
E. On May 1, 1996, the Company assumed operations in five additional cable
television markets through a partnership with Donrey Media Group
("Donrey"), a division of Stephens Group, Inc. of Little Rock, Arkansas.
The partnership, TCA Cable Partners, is comprised of 22 of the Company's
systems in Arkansas and Mississippi, and five Donrey systems in Arkansas,
Oklahoma and California. The partnership is owned 75 percent by the Company
and 25 percent by Donrey. The partnership serves approximately 224,000
subscribers.
F. On May 1, 1996, the Company acquired Cable One Corporation, a cable
television advertising company based in Williamsport, Pennsylvania. Cable
One sells advertising in cable markets serving approximately 1.2 million
subscribers. The acquisition was financed by the issuance of 266,666 shares
of the Company's stock and $2 million in cash obtained from operations.
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TCA CABLE TV, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results Of Operations -- Comparison of the three-month period ended April
30, 1996, with the same three-month period of the prior year reveals increases
in revenues, operating income, and net income. Revenues, operating income, and
net income increased by approximately 31%, 27%, and 16%, respectively.
Approximately 31% of the revenue increase was from internal growth and 69%
from acquisitions. The Company's basic accounts increased from 471,991 at April
30, 1995 to 581,252 at April 30, 1996 or approximately 23%. Approximately
100,000 basic accounts, or 90% of the increase was the result of acquisitions.
Average revenue per account increased from $31.04 to $33.03 or approximately 6%.
Operating expenses increased approximately 33% during the second quarter of
fiscal 1996 as compared to the second quarter of fiscal 1995. Salaries, wages
and benefits increased 28%. Programming costs and other operating expenses
increased 39% and 15%, respectively. Selling, general and administrative
expenses increased 32%. Depreciation and amortization increased 24%.
Interest expense increased by $3.1 million or approximately 129% as a
result of borrowings made to finance approximately $200 million of acquisitions
since April 30, 1995. The Company's weighted average interest rate was 6.94% and
8.05% at April 30, 1996 and 1995, respectively.
Liquidity and Capital Resources -- The Company's capital expenditures have
been primarily for cable system construction, upgrading and rebuilding,
acquisition of other cable systems and purchases of converters to be furnished
to subscribers.
Expenditures for rebuilding, upgrading and maintaining the Company's cable
systems and for converter purchases have been financed principally with cash
flow from operations. Acquisitions of cable systems have generally been financed
with cash flow from operations and through bank borrowings.
PART II -- OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
A. Exhibit A -- none
B. Report on Form 8-K/A was filed March 25, 1996, subsequent to the Alexandria
acquisition.
C. Exhibit 27 -- Financial Data Schedule
8
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereto duly authorized.
TCA CABLE TV, INC.
Date: June 12, 1996 /s/ ROBERT M. ROGERS
------------------------------------
Robert M. Rogers,
Chairman and Chief Executive Officer
Date: June 12, 1996 /s/ JIMMIE F. TAYLOR
------------------------------------
Jimmie F. Taylor,
Vice President, CFO and Treasurer
9
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EXHIBIT INDEX
A. Exhibit A -- none
B. Report on Form 8-K/A was filed March 25, 1996, subsequent to the Alexandria
acquisition.
C. Exhibit 27 -- Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> OCT-31-1996
<PERIOD-START> NOV-01-1995
<PERIOD-END> APR-30-1996
<CASH> 1,819,215
<SECURITIES> 0
<RECEIVABLES> 7,269,026
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 359,652,537
<DEPRECIATION> (190,802,951)
<TOTAL-ASSETS> 521,845,182
<CURRENT-LIABILITIES> 0
<BONDS> 313,888,068
<COMMON> 2,479,443
0
0
<OTHER-SE> 126,493,182
<TOTAL-LIABILITY-AND-EQUITY> 521,845,182
<SALES> 0
<TOTAL-REVENUES> 57,577,680
<CGS> 0
<TOTAL-COSTS> 13,964,412
<OTHER-EXPENSES> 24,173,468
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5,534,548
<INCOME-PRETAX> 14,560,299
<INCOME-TAX> 5,600,000
<INCOME-CONTINUING> 8,960,299
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 8,960,299
<EPS-PRIMARY> .36
<EPS-DILUTED> .36
</TABLE>
