<PAGE> 1
================================================================================
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, 1997
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 Identification Number)
incorporation or organization)
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 6, 1997 was:
24,841,706 shares of common stock
================================================================================
<PAGE> 2
TCA CABLE TV, INC. AND SUBSIDIARIES
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE NO.
--------
<S> <C>
PART I -- FINANCIAL INFORMATION
Consolidated Balance Sheets -- April 30, 1997 and October 3
31, 1996...............................................
Consolidated Statements of Operations -- Three and Six 4
months ended April 30, 1997 and 1996...................
Consolidated Statement of Changes in Shareholders' 5
Equity -- Six months ended April 30, 1997..............
Consolidated Statements of Cash Flows -- Six months ended 6
April 30, 1997 and 1996................................
Notes to Consolidated Financial Statements................ 7
Management's Discussion and Analysis of Financial 9
Condition and Results of Operations....................
PART II -- OTHER INFORMATION................................ 12
SIGNATURES................................................ 13
</TABLE>
2
<PAGE> 3
TCA CABLE TV, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
APRIL 30, OCTOBER 31,
1997 1996
------------- -------------
(UNAUDITED)
<S> <C> <C>
Cash........................................................ $ 2,392,599 $ 3,473,443
------------- -------------
Accounts receivable, subscribers............................ 14,793,988 12,408,291
------------- -------------
Accounts receivable, other.................................. 457,073 666,957
------------- -------------
Income tax receivable....................................... 1,744,078 1,001,709
------------- -------------
Notes receivable, affiliates................................ 80,000 80,000
------------- -------------
Investments, at cost........................................ 625,709 4,714,629
------------- -------------
Property, plant and equipment, at cost:
Land...................................................... 4,111,347 3,313,883
Distribution systems...................................... 367,153,641 340,766,176
Transportation equipment.................................. 10,742,630 9,686,330
Other..................................................... 36,540,282 32,386,113
------------- -------------
418,547,900 386,152,502
Less accumulated depreciation............................. (202,383,233) (186,892,042)
------------- -------------
216,164,667 199,260,460
------------- -------------
Other assets:
Intangibles, net of accumulated amortization of
$91,511,826 and $84,660,150, respectively.............. 471,557,636 441,189,861
Prepaid expenses.......................................... 2,211,157 1,201,281
------------- -------------
473,768,793 442,391,142
------------- -------------
$ 710,026,907 $ 663,996,631
============= =============
LIABILITIES
Accounts payable............................................ $ 14,508,641 $ 12,137,215
Accrued expenses............................................ 16,769,639 14,671,323
Subscriber advance payments................................. 4,668,663 4,909,936
Deferred income taxes....................................... 65,780,000 59,580,000
Term debt................................................... 328,258,249 314,492,583
------------- -------------
429,985,192 405,791,057
------------- -------------
Redeemable minority interest................................ 122,283,863 111,873,245
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;
24,949,162 and 24,931,931 shares issued, respectively..... 2,494,916 2,493,193
Additional paid-in capital.................................. 50,459,029 49,984,093
Retained earnings........................................... 107,810,282 96,861,418
------------- -------------
160,764,227 149,338,704
Less treasury stock, at cost, 123,000 shares................ (3,006,375) (3,006,375)
------------- -------------
157,757,852 146,332,329
------------- -------------
$ 710,026,907 $ 663,996,631
============= =============
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
3
<PAGE> 4
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
APRIL 30, APRIL 30,
-------------------------- ---------------------------
1997 1996 1997 1996
----------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
Revenues.................................. $74,983,934 $ 57,577,680 $148,473,222 $112,577,913
----------- ------------ ------------ ------------
Operating expenses:
Salaries, wages and benefits............ 14,262,737 9,841,432 27,411,267 19,035,576
Programming costs....................... 19,976,561 13,964,412 38,330,364 26,738,944
Other operating expenses................ 2,598,909 1,769,140 4,709,990 3,582,052
Selling, general and administrative..... 5,261,069 3,781,563 11,650,931 7,372,568
Depreciation and amortization........... 10,969,665 8,781,333 21,642,303 17,045,090
----------- ------------ ------------ ------------
53,068,941 38,137,880 103,744,855 73,774,230
----------- ------------ ------------ ------------
Operating income.......................... 21,914,993 19,439,800 44,728,367 38,803,683
Other income.............................. 184,925 655,047 446,736 747,579
Interest expense.......................... (5,332,655) (5,534,548) (10,776,148) (10,902,588)
Minority interest......................... (1,691,699) (3,435,618)
----------- ------------ ------------ ------------
Income before income taxes.............. 15,075,564 14,560,299 30,963,337 28,648,674
----------- ------------ ------------ ------------
Provision for income taxes:
Current................................. 2,875,000 2,600,000 5,876,005 5,800,000
Deferred................................ 3,000,000 3,000,000 6,200,000 5,400,000
----------- ------------ ------------ ------------
5,875,000 5,600,000 12,076,005 11,200,000
----------- ------------ ------------ ------------
Net Income.............................. $ 9,200,564 $ 8,960,299 $ 18,887,332 $ 17,448,674
=========== ============ ============ ============
Earnings per common share................. $ 0.37 $ 0.36 $ 0.76 $ 0.70
=========== ============ ============ ============
</TABLE>
The accompanying notes are an integral part
of the consolidated financial statements.
4
<PAGE> 5
TCA CABLE TV, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT 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, 1996........ 24,931,931 $2,493,193 $49,984,093 $ 96,861,418 $(3,006,375)
Net income for the six months
ended April 30, 1997........ 18,887,332
Issuance of common stock....... 11,948 1,195 355,152
Stock options exercised........ 5,283 528 25,883
Cash dividends at $.32 per
share....................... (7,938,468)
Amortization of warrants....... 93,900
---------- ---------- ----------- ------------ -----------
Balance, April 30, 1997.......... 24,949,162 $2,494,916 $50,459,029 $107,810,282 $(3,006,375)
========== ========== =========== ============ ===========
</TABLE>
The accompanying notes are an integral
part of the consolidated financial statements.
5
<PAGE> 6
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
APRIL 30,
----------------------------
1997 1996
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Net income................................................ $ 18,887,332 $ 17,448,674
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation expense................................... 14,790,627 12,080,632
Amortization expense................................... 6,851,676 4,964,458
Deferred income taxes.................................. 6,200,000 5,400,000
Share of earnings of affiliates........................ (15,893) (312,368)
Minority interest in earnings.......................... 3,435,618
Stock warrant amortization............................. 93,900
Contribution of common stock to retirement plan........ 356,347 196,872
Change in accounts receivable, subscribers............. (2,385,697) 704,933
Change in accounts receivable, other................... 209,884 (853,544)
Change in other assets................................. (1,009,876) (443,135)
Change in income tax receivable........................ (742,369) (855,074)
Change in accounts payable............................. 2,371,426 2,787,124
Change in subscriber advance payments.................. (241,273) (667,426)
Change in accrued expenses............................. 2,098,316 (2,263,301)
------------ ------------
Net cash provided by operating activities......... 50,900,018 38,187,845
------------ ------------
Cash flows from investing activities:
Cash paid for acquisitions................................ (41,850,000) (60,759,941)
Capital expenditures...................................... (23,931,384) (21,223,267)
Loan to affiliate......................................... (500,000)
Distribution from affiliate............................... 971,912
------------ ------------
Net cash used in investing activities............. (64,809,472) (82,483,208)
------------ ------------
Cash flows from financing activities:
Borrowings of term debt................................... 61,699,990 100,650,000
Repayments of term debt................................... (47,934,324) (48,974,987)
Proceeds from stock options exercised..................... 26,412 61,790
Partnership capital contributions......................... 10,275,000
Partnership distributions................................. (3,300,000)
Dividends paid............................................ (7,938,468) (6,882,499)
------------ ------------
Net cash provided by financing activities......... 12,828,610 44,854,304
------------ ------------
Net increase (decrease) in cash............................. (1,080,844) 558,941
Cash at beginning of period................................. 3,473,443 1,260,274
------------ ------------
Cash at end of period....................................... $ 2,392,599 $ 1,819,215
============ ============
</TABLE>
The accompanying notes are an integral
part of the consolidated financial statements.
6
<PAGE> 7
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, 1997 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, 1997, 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 24,863,635 shares and 24,630,144 shares for 1997 and 1996, respectively.
D. In February 1997, the FASB issued SFAS No. 128, "Earnings Per Share."
SFAS No. 128 is designed to improve the earnings per share information provided
in financial statements by simplifying the existing computation guidelines
provided for in APB Opinion No. 15 Earnings Per Share. SFAS 128 is effective for
financial statements for periods ending after December 15, 1997. Management does
not anticipate that SFAS No. 128 will have any effect on the Company's
consolidated financial statements.
In February 1997, the FASB issued SFAS No. 129, "Disclosure of Information
about Capital Structure." SFAS 129 is applicable to all entities and requires
that disclosure about an entity's capital structure include a brief discussion
of rights and privileges for securities outstanding. SFAS No. 129 is effective
for financial statements for periods ending after December 15, 1997.
E. On April 2, 1997, the Company acquired the assets of the cable
television system serving approximately 21,000 subscribers in Jonesboro,
Arkansas and surrounding areas. The acquisition was made through TCA Cable
Partners, the TCA managed partnership with Donrey Media ("Donrey"). The system
was acquired from East Arkansas Cablevision, Inc. The cost of the acquisition
was approximately $42 million, $35 million of which related to acquired
intangibles. The acquisition was funded by the Company's bank line of credit and
a capital contribution of 10.3 million by Donrey.
F. During the third quarter of fiscal 1997, the Company purchased the
interest of its partners in Intermedia Technologies, Ltd., a cable television
distribution system construction company, for approximately $932,000.
7
<PAGE> 8
TCA CABLE TV, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The Company operates primarily in the cable television industry. A
wholly-owned subsidiary of the Company, VPI Communications, Inc. provides cable
advertising sales.
<TABLE>
<CAPTION>
THREE MONTHS ENDED APRIL 30, 1997 CABLE ADVERTISING TOTAL
--------------------------------- ------------ ----------- ------------
<S> <C> <C> <C>
Revenues.................................. $ 62,926,453 $12,057,481 $ 74,983,934
Operating Income.......................... 31,709,960 1,174,698 32,884,658
Depreciation and amortization............. 10,521,919 447,746 10,969,665
</TABLE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED APRIL 30, 1996 CABLE ADVERTISING TOTAL
--------------------------------- ------------ ----------- ------------
<S> <C> <C> <C>
Revenues.................................. $ 51,689,301 $ 5,888,379 $ 57,577,680
Operating Income.......................... 26,928,072 1,293,061 28,221,133
Depreciation and amortization............. 8,584,291 197,042 8,781,333
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED APRIL 30, 1997 CABLE ADVERTISING TOTAL
------------------------------- ------------ ----------- ------------
<S> <C> <C> <C>
Revenues.................................. $123,558,040 $24,915,182 $148,473,222
Operating Income.......................... 63,087,062 3,283,608 66,370,670
Depreciation and amortization............. 20,742,670 899,633 21,642,303
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED APRIL 30, 1996 CABLE ADVERTISING TOTAL
------------------------------- ------------ ----------- ------------
<S> <C> <C> <C>
Revenues.................................. $101,472,632 $11,105,281 $112,577,913
Operating Income.......................... 52,863,855 2,984,918 55,848,773
Depreciation and amortization............. 16,651,504 393,586 17,045,090
</TABLE>
8
<PAGE> 9
TCA CABLE TV, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
THREE MONTHS ENDED APRIL 30, 1997 COMPARED TO THREE MONTHS ENDED APRIL 30, 1996.
REVENUES. Revenues from basic and expanded basic subscriptions increased
$8.2 million, or 20.8%, during the three months ended April 30, 1997 as compared
to the three months ended April 30, 1996. As a percentage of revenues, revenues
from basic and expanded basic subscriptions fell to 63.9% of revenues for the
three months ended April 30, 1997, compared to 68.9% of revenues for the three
months ended April 30, 1996. Revenues from premium subscriptions and
pay-per-view increased $0.5 million, or 5.1%, during three months ended April
30, 1997 compared to the three months ended April 30, 1996. As a percentage of
revenues, revenues from premium subscriptions and pay-per-view fell to 13.2% of
total revenues during the three months ended April 30, 1997, compared to 16.4%
of revenues for the three months ended April 30, 1996. The reduced percentages
of revenues attributable to basic, expanded basic, premium subscriptions and
pay-per-view reflect the increased significance of cable advertising revenues to
the Company. Cable advertising revenues increased by approximately $6.7 million,
or 116.2%, during the three months ended April 30, 1997 as compared to the three
months ended April 30, 1996, to $12.4 million for the three months ended April
30, 1997 from $5.7 million for the three months ended April 30, 1996. As a
percentage of revenues, cable advertising revenue increased to 16.6% for the
three months ended April 30, 1997 compared to 10.0% for the three months ended
April 30, 1996. Other revenues increased $2.0 million, or 73.4%, during the
three months ended April 30, 1997 as compared to the three months ended April
30, 1996 primarily as a result of long distance revenues. As a percentage of
revenues, revenues from other sources increased to 6.3% for the three months
ended April 30, 1997, compared to 4.7% for the three months ended April 30,
1996.
EXPENSES. Operating expenses increased $14.9 million or 39.2%, during the
three months ended April 30, 1997 as compared to the three months ended April
30, 1996. As a percentage of revenues, operating expenses increased to 70.8% for
the three months ended April 30, 1997 compared to 66.2% for the three months
ended April 30, 1996, reflecting the increased significance of the Company's
cable advertising insertion business, which experiences lower margins than the
Company's cable systems operations.
Salaries, wages and benefits increased $4.4 million or 44.9%, during the
three months ended April 30, 1997 as compared to three months ended April 30,
1996. As a percentage of revenues, salaries, wages and benefits increased to
19.0% for the three months ended April 30, 1997 compared to 17.1% for the three
months ended April 30, 1996. Programming costs and other operating expenses
increased $6.0 million or 43.1%, and $0.8 million, or 46.9%, respectively,
during the three months ended April 30, 1997 as compared to the three months
ended April 30, 1996. As a percentage of revenues, programming costs were 26.6%
for the three months ended April 30, 1997 compared to 24.3% for the three months
ended April 30, 1996 and other operating expenses were 3.5% of revenues for the
three months ended April 30, 1997 and compared to 3.1% for the three months
ended April 30, 1996. Selling, general and administrative expense increased $1.5
million or 39.1%, during the three months ended April 30, 1997 as compared to
the second quarter fiscal 1996. The significant increase in selling, general and
administrative expenses is attributable to the increased size of the Company's
wholly-owned cable advertising insertion business, VPI Communications, Inc.,
("VPI") following VPI's acquisition of Cable One, with the largest portion of
the increase being attributable to commissions paid to advertising agencies.
Sales commissions paid in connection with advertising sales are reported as
selling, general and administrative expenses. As a percentage of revenues,
selling, general and administrative expenses were 7.0% for the three months
ended April 30, 1997 compared to 6.6% for the three months ended April 30, 1996.
Depreciation and amortization increased $2.2 million or 24.9%, during the three
months ended April 30, 1997 as compared to the three months ended April 30,
1996. As a percentage of revenues, depreciation and amortization expense was
14.6% for the second quarter of 1997 and compared to 15.3% for the second
quarter of 1996.
Interest expense decreased by $0.2 million, or 3.7%, during the three
months ended April 30, 1997 compared to the three months ended April 30, 1996 as
a result of the repayment of debt. The Company's weighted average interest rate
was 6.9% and 6.9% at April 30, 1997 and 1996 respectively.
9
<PAGE> 10
INCOME TAXES. The Company's provision for income tax was $5.9 million and
$5.6 million in the three months ended April 30, 1997 and 1996, respectively.
The Company's effective tax rate remained relatively consistent at 39.0% and
38.5% for the three month periods ended April 30, 1997 and 1996, respectively.
MINORITY INTEREST. Minority interest represents the portion of income
before taxes due the 25% minority partner of TCA Cable Partners. Minority
interest was approximately $1.7 million or 2.3% of revenues for the three months
ended April 30, 1997. There was no minority interest in the three months ended
April 30, 1996 because TCA Cable Partners did not commence operations until the
beginning of the third quarter of 1996.
INCOME. Operating income increased by $2.5 million or 12.7%, for the three
months ended April 30, 1997 compared to the three months ended April 30, 1996.
Operating income as a percent of revenues decreased to 29.2% from 33.8% during
the three months ended April 30, 1997 compared to the three months ended April
30, 1996, as a result of the lower margins in the cable advertising insertion
business compared to cable operations and the increase in VPI's advertising
business as a percentage of the Company's revenue. The Company's net income
increased $0.2 million, or 2.7%, during the three months ended April 30, 1997
compared to the three months ended April 30, 1996. As a percentage of revenues,
net income was 12.3% for the three months ended April 30, 1997 and 15.6% for the
three months ended April 30, 1996. Earnings per share were $0.37 per share
during the three months ended April 30, 1997 and $0.36 per share during the
three months ended April 30, 1996.
SIX MONTHS ENDED APRIL 30, 1997 COMPARED TO SIX MONTHS ENDED APRIL 30, 1996.
REVENUES. Revenues increased by $35.9 million, or 31.9%, during the six
months ended April 30, 1997 compared to the six months ended April 30, 1996.
Management attributes approximately $5.7 million, or 15.9%, of the revenue
increase to internal growth, $14.9 million, or 41.7%, to cable system
acquisitions and $13.9 million, or 38.5%, to an increase in the cable
advertising business.
Revenues from basic and expanded basic cable television subscriptions
increased $17.3 million, or 22.5%, during the six months ended April 30, 1997 as
compared to the six months ended April 30, 1996. As a percentage of revenues,
revenues from basic and expanded basic subscriptions fell to 63.6% of revenues
for the six months ended April 30, 1997, compared to 68.4% of revenues for the
six months ended April 30, 1996. Revenues from premium subscriptions and
pay-per-view increased $1.5 million, or 8.2%, during the six months ended April
30, 1997 compared to the six months ended April 30, 1996. As a percentage of
revenues, revenues from premium subscriptions and pay-per-view fell to 13.3% of
total revenues during the six months ended April 30, 1997, compared to 16.3% of
revenues for the six months ended April 30, 1996. The reduced percentages of
revenues attributable to basic, expanded basic and premium subscriptions and
pay-per-view reflect the increased significance of cable advertising revenues to
the Company. Cable advertising revenues increased by approximately $13.8
million, or 115.5%, during the six months ended April 30, 1997 as compared to
the six months ended April 30, 1996, to $25.8 million for the six months ended
April 30, 1997 from $12.0 million for the six months ended April 30, 1996. As a
percentage of revenues, cable advertising revenues increased to 17.4% for the
six months ended April 30, 1997 compared to 10.7% for the six months ended April
30, 1996. Other revenues increased $3.2 million, or 61.5%, during the six months
ended April 30, 1997 as compared to the six months ended April 30, 1996
primarily due to an increase in long distance revenue. As a percentage of
revenues, revenues from other sources increased to 5.7% for the six months ended
April 30, 1997, compared to 4.7% for the six months ended April 30, 1996.
EXPENSES. Operating expenses increased $30.0 million or 40.6%, during the
six months ended April 30, 1997 as compared to the six months ended April 30,
1996. As a percentage of revenues, operating expenses increased to 69.9% for the
six months ended April 30, 1997 compared to 65.5% for the six months ended April
30, 1996, reflecting the increased significance of the Company's cable
advertising insertion business, which experiences lower margins than the
Company's cable systems operations. The increase in operating expenses during
the six months ended April 30, 1997 is primarily due to the acquisitions of
cable systems and the increase in the cable advertising insertion business
relative to the cable business.
10
<PAGE> 11
Salaries, wages and benefits increased $8.4 million, or 44.0%, during the
six months ended April 30, 1997 as compared to the six months ended April 30,
1996 due primarily to the acquisitions of cable systems and the expansion of the
cable advertising business. As a percentage of revenues, salaries, wages and
benefits increased to 18.5% for the six months ended April 30, 1997 compared to
16.9% for the six months ended April 30, 1996. Programming costs and other
operating expenses increased $11.6 million, or 43.4%, and $1.1 million or 31.5%,
respectively, during the six months ended April 30, 1997 as compared to the six
months ended April 30, 1996 as a result of the addition of programming services,
increases in programming rates and VPI's percentage of advertising sales paid to
other cable operators, in the case of programming costs.
As a percentage of revenues, programming costs were 25.8% for the six
months ended April 30, 1997 compared to the 23.8% in the six months ended April
30, 1996, and other operating expenses were 3.2% of revenues for the six months
ended April 30, 1997 and 1996. Selling, general and administrative expenses
increased $4.3 million, or 58.0%, during the six months ended April 30, 1997 as
compared to the six months ended April 30, 1996. The significant increase in
selling, general and administrative expenses is attributable to the increased
size of the Company's cable advertising insertion business following VPI's
acquisition of Cable One, with the largest portion of the increase being
attributable to commissions paid to advertising agencies. Sales commissions paid
in connection with advertising sales are reported as selling, general and
administrative expenses. As a percentage of revenues, selling, general and
administrative expenses increased to 7.9% for the six months ended April 30,
1997 compared to 6.6% for the six months ended April 30, 1996. Depreciation and
amortization increased $4.6 million, or 27.0%, during the six months ended April
30, 1997 as compared to the six months ended April 30, 1996. As a percentage of
revenues, depreciation and amortization expense was 14.6% for the six months
ended April 30, 1997 compared to 15.1% for the six months ended April 30, 1996.
Interest expense decreased by $0.1 million, or approximately 1.2%, during
the six months ended April 30, 1997 as compared to the six months ended April
30, 1996 as a result of repayment of debt. The Company's weighted average
interest rate was 6.9% at April 30, 1997 and 1996.
INCOME TAXES. The Company's provision for income taxes was $12.1 million
and $11.2 million in the six months ended April 30, 1997 and 1996, respectively.
The Company's effective tax rate remained relatively consistent at 39.0% and
39.1% for the six month periods ended April 30, 1997 and 1996, respectively.
MINORITY INTEREST. Minority interest represents the portion of income
before taxes due to the 25% minority partner of TCA Cable Partners. Minority
interest was approximately $3.4 million or 2.3% of the revenues for the six
months ended April 30, 1997. There was no minority interest in the six months
ended April 30, 1996 because TCA Cable Partners did not commence operations
until the beginning of the third quarter of 1996.
INCOME. Operating income increased by $5.9 million, or 15.3%, for the six
months ended April 30, 1997 compared to the six months ended April 30, 1996.
Operating income as a percentage of revenues decreased to 30.1% from 34.5%
during the six months ended April 30, 1997 compared to the six months ended
April 30, 1996, respectively, as a result of the lower margins in the cable
advertising insertion business compared to cable operations and the increase in
VPI's advertising business as a percentage of the Company's revenue. The
Company's net income increased $1.4 million, or 8.3%, during the six months
ended April 30, 1997 compared to six months ended April 30, 1996. As a
percentage of revenues, net income was 12.7% for the six months ended April 30,
1997 and 15.5% for the six months ended April 30, 1996. Earnings per share
increased to $0.76 from $0.70 per share during the six months ended April 30,
1997 compared to the six months ended April 30, 1996, an increase of 8.6%.
LIQUIDITY AND CAPITAL RESOURCES
The Company's capital expenditures, other than for acquisitions, during the
six months ended April 30, 1997 totalled $23.9 million and were primarily used
for cable system construction, upgrading and rebuilding, and purchases of
converters to be furnished to subscribers. The Company anticipates no increase
in the amount of capital expenditures needed for system upgrading and expansion
during 1997 compared to 1996. Approximately $41.9 million was spent on
acquisitions during the first six months of fiscal 1997. All of the
11
<PAGE> 12
funds were obtained from bank lines of credit and capital contributions from DR
Partners, the Company's partner in TCA Cable Partners related to its 25%
ownership of TCA Cable Partners.
The Company does not anticipate a material negative effect on liquidity due
to the payment of interest or dividends during 1997.
The Company's net cash provided by operating activities during the six
months ended April 30, 1997 increased to $50.9 million, up from $38.2 million
during the six months ended April 30, 1996. The increase is primarily a result
of increased earnings as adjusted for non-cash charges.
At April 30, 1997, the Company had $196 million borrowed under its Bank
Credit Facilities with eleven banks which provide for total credit up to $229
million. The Bank Credit Facilities provide for interest at prime or LIBOR.
During the first six months of fiscal 1997, the Company borrowed
approximately $61.7 million and repaid approximately $47.9 million. At April 30,
1997, the Company had total outstanding term debt of approximately $328 million,
bearing interest at a weighted average rate of approximately 6.9%.
Under terms of the Company's Bank Credit Facilities and Private Placement
Debt the Company will have scheduled debt maturities of approximately $32.8
million, $12.2 million, $61.5 million, $54.3 million and $56.8 million in fiscal
1997, 1998, 1999, 2000 and 2001, respectively. The Company believes that cash
flow from operations and its ability to obtain financing will be adequate to
fund these debt maturities.
Two measures of liquidity are debt to EBITDA and interest coverage ratios.
Debt to EBITDA is the ratio of total debt to earnings before interest, taxes,
depreciation and amortization. The Company's debt to EBITDA ratio was 2.6 to 1
at April 30, 1997. Interest coverage is the ratio of operating income before
depreciation and amortization to interest expense. The Company's interest
coverage ratio was 5.9 to 1 at April 30, 1997.
Expenditures for rebuilding, upgrading and maintaining the Company's cable
systems and for converter purchases have been financed principally with cash
flow from operations.
The Company believes that net cash provided by operating activities and the
Company's ability to obtain additional financing will provide adequate sources
of short-term and long-term liquidity in the future.
In February 1997, the FASB issued SFAS No. 128, "Earnings Per Share." SFAS
No. 128 is designed to improve the earnings per share information provided in
financial statements by simplifying the existing computation guidelines provided
for in APB Opinion No. 15 Earnings Per Share. SFAS 128 is effective for
financial statements for periods ending after December 15, 1997. Management does
not anticipate that SFAS No. 128 will have any effect on the Company's
consolidated financial statements.
In February 1997, the FASB issued SFAS No. 129, "Disclosure of Information
about Capital Structure." SFAS 129 is applicable to all entities and requires
that disclosure about an entity's capital structure include a brief discussion
of rights and privileges for securities outstanding. SFAS No. 129 is effective
for financial statements for periods ending after December 15, 1997.
PART II -- OTHER INFORMATION
ITEM 5. OTHER INFORMATION
A. Exhibit 27 -- Financial Data Schedule
The Financial Data Schedule contains selected financial data from this
filing which must be submitted electronically under the "EDGAR"
reporting system. Printed copies of this filing will not include this
exhibit.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
A. Exhibit A -- none
B. No reports on Form 8-K have been filed during the quarter for which this
report is filed.
12
<PAGE> 13
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 16, 1997 By: /s/ ROBERT M. ROGERS
----------------------------------
Robert M. Rogers
Chairman and Chief Executive
Officer
Date: June 16, 1997 By: /s/ JIMMIE F. TAYLOR
----------------------------------
Jimmie F. Taylor
Vice President, CFO and Treasurer
13
<PAGE> 14
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<S> <C>
27 -- Financial Data Schedule
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-START> NOV-01-1996
<PERIOD-END> APR-30-1997
<CASH> 2,392,599
<SECURITIES> 0
<RECEIVABLES> 14,793,988
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 418,547,900
<DEPRECIATION> (202,383,233)
<TOTAL-ASSETS> 710,026,907
<CURRENT-LIABILITIES> 0
<BONDS> 328,258,249
0
0
<COMMON> 2,494,916
<OTHER-SE> 155,262,936
<TOTAL-LIABILITY-AND-EQUITY> 710,026,907
<SALES> 0
<TOTAL-REVENUES> 148,473,222
<CGS> 0
<TOTAL-COSTS> 38,330,364
<OTHER-EXPENSES> 65,414,491
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 10,776,148
<INCOME-PRETAX> 30,963,337
<INCOME-TAX> 12,076,005
<INCOME-CONTINUING> 18,887,332
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 18,887,332
<EPS-PRIMARY> 0.76
<EPS-DILUTED> 0.76
</TABLE>
