<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 JULY 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
FOR THE TRANSITION PERIOD FROM TO
COMMISSION FILE NUMBER 1-11478
TCA CABLE TV, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
TEXAS 75-1798185
(State or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
3015 SSE LOOP 323, TYLER, TEXAS 75701
(Address of principal executive office) (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 September 10, 1997 was:
24,864,688 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 -- July 31, 1997 and
October 31, 1996...................................... 3
Consolidated Statements of Operations -- Three and nine
months ended July 31, 1997 and 1996................... 4
Consolidated Statement of Shareholders' Equity -- Nine
months ended July 31, 1997............................ 5
Consolidated Statements of Cash Flows -- Nine months
ended July 31, 1997 and 1996.......................... 6
Notes to Consolidated Financial Statements............. 7-8
Management's Discussion and Analysis of Financial
Condition and Results of Operations................... 9-12
PART II -- OTHER INFORMATION................................ 13
SIGNATURES............................................. 14
</TABLE>
2
<PAGE> 3
TCA CABLE TV, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
ASSETS
JULY 31, OCTOBER 31,
1997 1996
------------- -------------
(UNAUDITED)
<S> <C> <C>
Cash........................................................ $ 2,579,124 $ 3,473,443
------------- -------------
Accounts receivable, subscribers............................ 17,080,607 12,408,291
------------- -------------
Accounts receivable, other.................................. 992,719 666,957
------------- -------------
Income tax receivable....................................... 1,573,533 1,001,709
------------- -------------
Notes receivable, affiliates................................ 80,000
------------- -------------
Investments, at cost........................................ 1,677,838 4,714,629
------------- -------------
Property, plant and equipment, at cost:
Land...................................................... 4,111,347 3,313,883
Distribution systems...................................... 378,142,360 340,766,176
Transportation equipment.................................. 10,936,904 9,686,330
Other..................................................... 38,067,606 32,386,113
------------- -------------
431,258,217 386,152,502
Less accumulated depreciation............................. (210,198,412) (186,892,042)
------------- -------------
221,059,805 199,260,460
------------- -------------
Other assets:
Intangibles, net of accumulated amortization of
$95,092,451 and $84,660,150, respectively.............. 467,756,477 441,189,861
Prepaid expenses.......................................... 2,396,776 1,201,281
------------- -------------
470,153,253 442,391,142
------------- -------------
$ 715,116,879 $ 663,996,631
============= =============
LIABILITIES
Accounts payable............................................ $ 11,170,341 $ 12,137,215
Accrued expenses............................................ 18,975,020 14,671,323
Subscriber advance payments................................. 4,061,795 4,909,936
Deferred income taxes....................................... 68,880,000 59,580,000
Term debt................................................... 325,527,290 314,492,583
------------- -------------
428,614,446 405,791,057
------------- -------------
Redeemable minority interest.............................. 122,596,222 111,873,245
------------- -------------
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;
24,974,164 and 24,931,931 shares issued, respectively..... 2,497,416 2,493,193
Additional paid-in capital.................................. 51,095,751 49,984,093
Retained earnings........................................... 113,319,419 96,861,418
------------- -------------
166,912,586 149,338,704
Less treasury stock, at cost, 123,000 shares................ (3,006,375) (3,006,375)
------------- -------------
163,906,211 146,332,329
------------- -------------
$ 715,116,879 $ 663,996,631
============= =============
</TABLE>
3
<PAGE> 4
TCA CABLE TV, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
JULY 31, JULY 31,
------------------------- ---------------------------
1997 1996 1997 1996
----------- ----------- ------------ ------------
<S> <C> <C> <C> <C>
CATV revenues......................... $79,181,508 $69,399,627 $227,654,730 $181,977,540
----------- ----------- ------------ ------------
Operating expenses:
Salaries, wages and benefits........ 14,674,592 11,844,494 42,085,859 30,880,070
Programming costs................... 21,458,545 17,195,454 59,788,909 43,934,398
Other operating expenses............ 2,295,064 2,166,123 7,005,054 5,748,175
Selling, general and
administrative................... 5,831,614 6,592,252 17,482,545 13,964,820
Depreciation and amortization....... 11,442,015 9,845,417 33,084,318 26,890,507
----------- ----------- ------------ ------------
55,701,830 47,643,740 159,446,685 121,417,970
----------- ----------- ------------ ------------
Operating income.................... 23,479,678 21,755,887 68,208,045 60,559,570
Other income.......................... 38,036 (550,903) 484,772 196,676
Interest expense...................... (5,746,538) (5,528,025) (16,522,686) (16,430,613)
Minority interest..................... (1,962,359) (1,567,646) (5,397,977) (1,567,646)
----------- ----------- ------------ ------------
Income before income taxes.......... 15,808,817 14,109,313 46,772,154 42,757,987
----------- ----------- ------------ ------------
Provision for income taxes:
Current............................. 3,223,995 2,800,000 9,100,000 8,600,000
Deferred............................ 3,100,000 2,700,000 9,300,000 8,100,000
----------- ----------- ------------ ------------
6,323,995 5,500,000 18,400,000 16,700,000
----------- ----------- ------------ ------------
Net income.......................... $ 9,484,822 $ 8,609,313 $ 28,372,154 $ 26,057,987
=========== =========== ============ ============
Earnings per common share............. $ 0.38 $ 0.35 $ 1.14 $ 1.05
=========== =========== ============ ============
</TABLE>
The accompanying notes are an integral part
of the consolidated financial statements.
4
<PAGE> 5
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, 1996.... 24,931,931 $2,493,193 $49,984,093 $ 96,861,418 $(3,006,375)
Net income for the nine
months ended July 31,
1997....................... 28,372,154
Issuance of common stock..... 25,111 2,511 802,618
Stock options exercised...... 17,122 1,712 168,190
Amortization of warrants..... 140,850
Cash dividends at $.48 per
share...................... (11,914,153)
---------- ---------- ----------- ------------ -----------
Balance, July 31, 1997....... 24,974,164 $2,497,416 $51,095,751 $113,319,419 $(3,006,375)
========== ========== =========== ============ ===========
</TABLE>
The accompanying notes are an integral part
of the consolidated financial statements.
5
<PAGE> 6
TCA CABLE TV, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
JULY 31,
----------------------------
1997 1996
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Net income................................................ $ 28,372,154 $ 26,057,987
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation expense................................... 22,605,807 18,601,029
Amortization expense................................... 10,478,511 8,289,478
Deferred income taxes.................................. 9,300,000 8,100,000
Contribution of common stock to retirement plan........ 642,005 363,307
Employee stock bonus................................... 163,125 138,750
Stock warrant amortization............................. 140,850 46,950
Loss on sale of assets................................. 7,788
Share of (earnings) losses of affiliates............... (46,235) 354,292
Minority interest in earnings.......................... 5,397,977 1,567,646
Change in other assets................................. (1,195,495) (281,318)
Change in accounts receivable, subscribers............. (4,672,316) (691,268)
Change in accounts receivable, other................... (325,762) 835,188
Change in income taxes receivable...................... (571,824) (1,537,810)
Change in subscriber advance payments.................. (848,141) (1,108,506)
Change in accrued expenses............................. 4,303,697 1,049,662
Change in accounts payable............................. (966,874) 1,060,369
------------ ------------
Net cash provided by operating activities......... $ 72,777,479 $ 62,853,544
------------ ------------
Cash flows from investing activities:
Payments for purchases of companies and CATV systems...... (41,850,000) (66,287,996)
Capital expenditures...................................... (36,641,701) (31,583,924)
Loan to affiliate......................................... (1,000,000)
Investments in affiliates................................. (895,578)
Distribution from affiliate............................... 1,100,025
------------ ------------
Net cash used in investing activities............. (78,287,254) (98,871,920)
------------ ------------
Cash flows from financing activities:
Borrowings of term debt................................... 84,299,990 120,650,000
Repayments of term debt................................... (73,265,283) (72,038,670)
Proceeds from stock options exercised..................... 169,903 108,366
Partnership capital contributions......................... 10,275,000
Partnership distributions................................. (4,950,000) (1,650,000)
Dividends paid............................................ (11,914,154) (10,363,287)
------------ ------------
Net cash provided by financing activities......... 4,615,456 36,706,409
------------ ------------
Net increase (decrease) in cash............................. (894,319) 688,033
Cash at beginning of period................................. 3,473,443 1,260,274
------------ ------------
Cash at end of period....................................... $ 2,579,124 $ 1,948,307
============ ============
</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 July 31, 1997 and for the nine-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 nine months ended July
31, 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 24,948,622 shares and 24,886,753 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 August 15, 1997, the Company signed a letter of intent to establish a
partnership in which the Company will contribute selected systems in Texas and
New Mexico, serving approximately 155,000 customers, and approximately $45
million in debt. Tele-Communications, Inc. (TCIC) will contribute its cable
systems in mid-Texas and Western Louisiana, serving approximately 150,000
customers, and approximately $250 million in debt. Upon closing of the
transaction, TCIC will hold a 20 percent interest in the partnership. TCA will
hold an 80 percent interest in the partnership and will be the managing partner
for the venture. TCA will consolidate the partnership for financial statement
purposes.
G. 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>
CABLE ADVERTISING TOTAL
----------- ----------- -----------
<S> <C> <C> <C>
THREE MONTHS ENDED JULY 31, 1997
Revenues..................................... 65,306,775 13,874,733 79,181,508
Operating Income............................. 21,116,317 2,363,361 23,479,678
Depreciation and amortization................ 10,984,526 457,489 11,442,015
THREE MONTHS ENDED JULY 31, 1996
Revenues..................................... 57,847,531 11,552,096 69,399,627
Operating Income............................. 19,921,132 1,834,755 21,755,887
Depreciation and amortization................ 9,631,671 213,746 9,845,417
NINE MONTHS ENDED JULY 31, 1997
Revenues..................................... 188,864,815 38,789,915 227,654,730
Operating Income............................. 63,460,709 4,747,336 68,208,045
Depreciation and amortization................ 31,727,196 1,357,122 33,084,318
NINE MONTHS ENDED JULY 31, 1996
Revenues..................................... 159,320,163 22,657,377 181,977,540
Operating Income............................. 56,133,483 4,426,087 60,559,570
Depreciation and amortization................ 26,283,175 607,332 26,890,507
</TABLE>
7
<PAGE> 8
TCA CABLE TV, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
THREE MONTHS ENDED JULY 31, 1997 COMPARED TO THREE MONTHS ENDED JULY 31, 1996.
Revenues. Revenues from basic and expanded basic subscriptions increased
$5.2 million, or 11.7%, during the three months ended July 31, 1997 as compared
to the three months ended July 31, 1996. As a percentage of revenues, revenues
from basic and expanded basic subscriptions fell to 62.5% of revenues for the
three months ended July 31, 1997, compared to 63.9% of revenues for the three
months ended July 31, 1996. Revenues from premium subscriptions and pay-per-view
increased $0.8 million, or 8.2%, during three months ended July 31, 1997
compared to the three months ended July 31, 1996. As a percentage of revenues,
revenues from premium subscriptions and pay-per-view fell to 13.4% of total
revenues during the three months ended July 31, 1997, compared to 14.1% of
revenues for the three months ended July 31, 1996. The reduced percentages of
revenues attributable to basic, expanded basic, premium subscriptions and
pay-per-view reflect the increased significance of cable advertising insertion
revenues to the Company from the Company's wholly-owned subsidiary, VPI
Communications, Inc. ("VPI"). Cable advertising revenues which includes revenues
from the Company's cable advertising business and net cable advertising revenues
from third parties, revenues increased by approximately $2.5 million, or 20.9%,
during the three months ended July 31, 1997 as compared to the three months
ended July 31, 1996, to $14.5 million for the three months ended July 31, 1997
from $12.0 million for the three months ended July 31, 1996. As a percentage of
revenues, cable advertising insertion revenue increased to 18.3% for the three
months ended July 31, 1997 compared to 17.3% for the three months ended July 31,
1996. Other revenues increased $1.3 million, or 39.6%, during the three months
ended July 31, 1997 as compared to the three months ended July 31, 1996
primarily as a result of long distance revenues. As a percentage of revenues,
revenues from other sources increased to 5.8% for the three months ended July
31, 1997, compared to 4.8% for the three months ended July 31, 1996.
Expenses. Operating expenses increased $8.1 million, or 16.9%, during the
three months ended July 31, 1997 as compared to the three months ended July 31,
1996. As a percentage of revenues, operating expenses increased to 70.3% for the
three months ended July 31, 1997 compared to 68.7% for the three months ended
July 31, 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 $2.8 million, or 23.9%, during the
three months ended July 31, 1997 as compared to the three months ended July 31,
1996. As a percentage of revenues, salaries, wages and benefits increased to
18.5% for the three months ended July 31, 1997 compared to 17.1% for the three
months ended July 31, 1996. Programming costs and other operating expenses
increased $4.3 million, or 24.8%, and $0.1 million, or 6.0%, respectively,
during the three months ended July 31, 1997 as compared to the three months
ended July 31, 1996. As a percentage of revenues, programming costs were 27.1%
for the three months ended July 31, 1997 compared to 24.8% for the three months
ended July 31, 1996 and other operating expenses were 2.9% of revenues for the
three months ended July 31, 1997 compared to 3.1% for the three months ended
July 31, 1996. Selling, general and administrative expense decreased $0.8
million or 11.5%, during the three months ended July 31, 1997 as compared to the
three months ended July 31, 1996. As a percentage of revenues, selling, general
and administrative expenses were 7.4% for the three months ended July 31, 1997
compared to 9.5% for the three months ended July 31, 1996. Depreciation and
amortization increased $1.6 million, or 16.2%, during the three months ended
July 31, 1997 as compared to the three months ended July 31, 1996. As a
percentage of revenues, depreciation and amortization expense was 14.5% for the
three months ended July 31, 1997 compared to 14.2% for the three months ended
July 31, 1996.
Interest expense increased by $0.2 million, or 4.0%, during the three
months ended July 31, 1997 compared to the three months ended July 31, 1996 as a
result of the additional debt incurred to acquire a cable television system in
April 1997. The Company's weighted average interest rate was 6.9% and 7.0% at
July 31, 1997 and 1996, respectively.
8
<PAGE> 9
Income Taxes. The Company's provision for income tax was $6.3 million and
$5.5 million in the three months ended July 31, 1997 and 1996, respectively. The
Company's effective tax rate remained relatively consistent at 40.0% and 39.0%
for the three month periods ended July 31, 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 $2.0 million for the three months ended July 31, 1997
compared to $1.6 million for the three months ended July 31, 1996.
Income. Operating income increased by $1.7 million, or 7.9%, for the three
months ended July 31, 1997 compared to the three months ended July 31, 1996.
Operating income as a percentage of revenues decreased to 29.7% from 31.3%
during the three months ended July 31, 1997 compared to the three months ended
July 31, 1996, as a result of the lower margins in the cable advertising
insertion business compared to cable operations and the increase in VPI's cable
advertising insertion business as a percentage of the Company's revenue. The
Company's net income increased $0.9 million, or 10.2%, during the three months
ended July 31, 1997 compared to the three months ended July 31, 1996. As a
percentage of revenues, net income was 12.0% for the three months ended July 31,
1997 and 12.4% for the three months ended July 31, 1996. Earnings per share were
$0.38 per share during the three months ended July 31, 1997 and $0.35 per share
during the three months ended July 31, 1996.
NINE MONTHS ENDED JULY 31, 1997 COMPARED TO NINE MONTHS ENDED JULY 31, 1996.
Revenues. Revenues increased by $45.7 million, or 25.1%, during the nine
months ended July 31, 1997 compared to the nine months ended July 31, 1996.
Management attributes approximately $12.9 million, or 28.3%, of the revenue
increase to internal growth in cable systems, $14.1 million, or 30.9%, to cable
system acquisitions, $16.1 million, or 35.2%, to an increase in the Company's
cable advertising insertion business, and $2.6 million, or 5.6%, to long
distance and internet access.
Revenues from basic and expanded basic cable television subscriptions
increased $22.5 million, or 18.5%, during the nine months ended July 31, 1997 as
compared to the nine months ended July 31, 1996. As a percentage of revenues,
revenues from basic and expanded basic subscriptions fell to 63.2% of revenues
for the nine months ended July 31, 1997, compared to 66.7% of revenues for the
nine months ended July 31, 1996. Revenues from premium subscriptions and
pay-per-view increased $2.3 million, or 8.2%, during the nine months ended July
31, 1997 compared to the nine months ended July 31, 1996. As a percentage of
revenues, revenues from premium subscriptions and pay-per-view fell to 13.4% of
total revenues during the nine months ended July 31, 1997, compared to 15.5% of
revenues for the nine months ended July 31, 1996. The reduced percentages of
revenues attributable to basic, expanded basic, premium subscriptions and
pay-per-view reflect the increased significance of cable advertising insertion
revenues to the Company. Cable advertising insertion revenues, which includes
revenues from the Company's cable advertising business and net cable advertising
revenues from third parties, increased by approximately $16.3 million, or 68.2%,
during the nine months ended July 31, 1997 as compared to the nine months ended
July 31, 1996, to $40.3 million for the nine months ended July 31, 1997 from
$24.0 million for the nine months ended July 31, 1996. As a percentage of
revenues, cable advertising revenues increased to 17.7% for the nine months
ended July 31, 1997 compared to 13.2% for the nine months ended July 31, 1996.
Other revenues increased $4.5 million, or 53.0%, during the nine months ended
July 31, 1997 as compared to the nine months ended July 31, 1996 primarily due
to an increase in long distance revenue. As a percentage of revenues, revenues
from other sources increased to 5.8% for the nine months ended July 31, 1997,
compared to 4.7% for the nine months ended July 31, 1996.
Expenses. Operating expenses increased $38.0 million, or 31.3%, during the
nine months ended July 31, 1997 as compared to the nine months ended July 31,
1996. As a percentage of revenues, operating expenses increased to 70.0% for the
nine months ended July 31, 1997 compared to 66.7% for the nine months ended July
31, 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 nine months ended July 31, 1997 is primarily due to the acquisitions of
cable systems and the increase in the cable advertising insertion business
relative to the cable business.
9
<PAGE> 10
Salaries, wages and benefits increased $11.2 million, or 36.3%, during the
nine months ended July 31, 1997 as compared to the nine months ended July 31,
1996 due primarily to the acquisitions of cable systems and the expansion of the
cable advertising insertion business. As a percentage of revenues, salaries,
wages and benefits increased to 18.5% for the nine months ended July 31, 1997
compared to 17.0% for the nine months ended July 31, 1996. Programming costs and
other operating expenses increased $15.9 million, or 36.1%, and $1.3 million, or
21.9%, respectively, during the nine months ended July 31, 1997 as compared to
the nine months ended July 31, 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 26.3% for the nine months ended
July 31, 1997 compared to the 24.1% in the nine months ended July 31, 1996, and
other operating expenses were 3.1% and 3.2% of revenues for the nine months
ended July 31, 1997 and 1996, respectively. Selling, general and administrative
expense increased $3.5 million, or 25.2%, during the nine months ended July 31,
1997 as compared to the nine months ended July 31, 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 Corporation, 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 expense was 7.7% for the nine months ended July 31,
1997 and 1996. Depreciation and amortization increased $6.2 million, or 23.0%,
during the nine months ended July 31, 1997 as compared to the nine months ended
July 31, 1996. As a percentage of revenues, depreciation and amortization
expense was 14.5% for the nine months ended July 31, 1997 compared to 14.8% for
the nine months ended July 31, 1996.
Interest expense decreased by $0.1 million, or approximately 0.6%, during
the nine months ended July 31, 1997 as compared to the nine months ended July
31, 1996 as a result of repayment of debt. The Company's weighted average
interest rate was 6.9% and 7.0% at July 31, 1997 and 1996, respectively.
Income Taxes. The Company's provision for income taxes was $18.4 million
and $16.7 million in the nine months ended July 31, 1997 and 1996, respectively.
Income taxes increased 10.2% for the nine months ended July 31, 1997 compared to
the nine months ended July 31, 1996. The Company's effective tax rate remained
relatively consistent of 39.3 and 39.1 for the nine month period ended July 31,
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 $5.4 million for the nine months ended July 31, 1997.
Minority interest was $1.6 million for the nine months ended July 31, 1996
because TCA Cable Partners did not commence operations until the beginning of
the third quarter of 1996.
Income. Operating income increased by $7.6 million, or 12.6%, for the nine
months ended July 31, 1997 compared to the nine months ended July 31, 1996.
Operating income as a percentage of revenues decreased to 30.0% from 33.3%
during the nine months ended July 31, 1997 compared to the nine months ended
July 31, 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 $2.3 million, or 8.9%, during the nine months
ended July 31, 1997 compared to nine months ended July 31, 1996. As a percentage
of revenues, net income was 12.5% for the nine months ended July 31, 1997 and
14.3% for the nine months ended July 31, 1996. Earnings per share increased to
$1.14 from $1.05 per share during the nine months ended July 31, 1997 compared
to the nine months ended July 31, 1996, an increase of 8.6%.
LIQUIDITY AND CAPITAL RESOURCES
The Company's capital expenditures, other than for acquisitions, during
fiscal 1997 were primarily used for cable system construction, upgrading and
rebuilding, and purchases of converters to be furnished to subscribers.
Approximately $36.6 million of internally generated funds was spent for system
upgrading and expansion during the nine months ended July 31, 1997.
Approximately $41.9 million was spent on acquisitions during the first nine
months of fiscal 1997. All of the 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.
10
<PAGE> 11
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 nine
months ended July 31, 1997 increased to $72.8 million, up from $62.9 million
during the nine months ended July 31, 1996. The increase is primarily a result
of increased revenue per subscriber, increased advertising revenue and
acquisitions.
At July 31, 1997, the Company had $195.5 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 nine months of fiscal 1997, the Company borrowed
approximately $84.3 million and repaid approximately $73.3 million. At July 31,
1997, the Company had total outstanding term debt of approximately $325.5
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 $47.5
million, $66.3 million, $54.3 million, $56.8 million and $51.8 million in fiscal
1998, 1999, 2000, 2001 and 2002, 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 2.5 to 1
at July 31, 1997. Interest coverage is the ratio of operating income before
depreciation and amortization to interest expense. The Company's interest
coverage ratio was 6.0 to 1 for July 31, 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.
On August 15, 1997, the Company signed a letter of intent to establish a
partnership in which the Company will contribute selected systems in Texas and
New Mexico, serving approximately 155,000 customers, and approximately $45
million in debt. Tele-Communications, Inc. (TCIC) will contribute its cable
systems in mid-Texas and Western Louisiana, serving approximately 150,000
customers, and approximately $250 million in debt. Upon closing of the
transaction, TCIC will hold a 20 percent interest in the partnership. TCA will
hold an 80 percent interest in the partnership and will be the managing partner
for the venture. TCA will consolidate the partnership for financial reporting
purposes.
The Company plans to issue $300 million in public debt in January 1998. In
connection with this contemplated offering, the Company entered into treasury
lock transactions with a notional amount totaling $100 million in August 1997.
These transactions are designed to serve as a hedge against future interest rate
changes prior to the anticipated closing of this public debt offering.
11
<PAGE> 12
FORWARD LOOKING INFORMATION
The statements contained in this Quarterly Report on Form 10-Q ("Quarterly
Report") which are not historical facts, including, but not limited to,
statements found under the captions "Financial Condition and Results of
Operations", and "Liquidity and Capital Resources" above, are forward-looking
statements that involve a number of risks and uncertainties. The actual results
of the future events described in such forward-looking statements in this
Quarterly Report could differ materially from those contemplated by such
forward-looking statements. Among the factors that could cause actual results to
differ materially are the risks and uncertainties discussed in this Quarterly
Report, including without limitation the portions of such statements under the
captions referenced above, and the uncertainties set forth from time to time in
the Company's other public reports and filings and public statements.
12
<PAGE> 13
PART II -- OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a)
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION OF EXHIBIT
------- ----------------------
<S> <C>
3(a) -- Articles of Incorporation and Bylaws(1)
3(b) -- Articles of Amendment to Articles of Incorporation(2)
3(c) -- Articles of Amendment to Articles of Incorporation(2)
3(d) -- Articles of Amendment to Articles of Incorporation(3)
4 -- Form or Stock Certificate(1)
27 -- Financial Data Schedule
</TABLE>
- ---------------
(1) Previously filed as an Exhibit to the Registrant's Registration Statement on
Form S-1, File No. 2-75516, and incorporated herein by references.
(2) Previously filed as an Exhibit to the Registrant's Registration Statement in
Form S-8, File No. 33-21901, and incorporated herein by reference.
(3) Previously filed as an Exhibit to Registrant's Form 10-K for the fiscal year
ended October 31, 1995, and incorporated herein by reference.
(b) Reports on Form 8-K.
The Company filed on Current Report in Form 8-K dated June 20, 1997. Under
Item 2 to repeat a press release reporting the promotion within the Company of
Randell K. Rogers.
13
<PAGE> 14
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 September 12, 1997 /s/ ROBERT M. ROGERS
------------------------------------
Robert M. Rogers,
Chairman and Chief Executive Officer
Date: September 12, 1997 /s/ JIMMIE F. TAYLOR
------------------------------------
Jimmie F. Taylor,
Vice President, CFO and Treasurer
14
<PAGE> 15
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT NUMBER DESCRIPTION
-------------- -----------
<C> <S> <C>
3(a) -- Articles of Incorporation and Bylaws(1)
3(b) -- Articles of Amendment to Articles of Incorporation(2)
3(c) -- Articles of Amendment to Articles of Incorporation(2)
3(d) -- Articles of Amendment to Articles of Incorporation(3)
4 -- Form or Stock Certificate(1)
27 -- Financial Data Schedule
</TABLE>
- ---------------
(1) Previously filed as an Exhibit to the Registrant's Registration Statement on
Form S-1, File No. 2-75516, and incorporated herein by reference.
(2) Previously filed as an Exhibit to the Registrant's Registration Statement on
Form S-8, File No. 33-21901, and incorporated herein by reference.
(3) Previously filed as an Exhibit to Registrant's Form 10-K for the fiscal year
ended October 31, 1995, and incorporated herein by reference.
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-START> NOV-01-1996
<PERIOD-END> JUL-31-1997
<CASH> 2,579,124
<SECURITIES> 0
<RECEIVABLES> 17,080,607
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 431,258,217
<DEPRECIATION> (210,198,412)
<TOTAL-ASSETS> 715,116,879
<CURRENT-LIABILITIES> 0
<BONDS> 325,527,290
0
0
<COMMON> 2,497,416
<OTHER-SE> 161,408,795
<TOTAL-LIABILITY-AND-EQUITY> 715,116,879
<SALES> 0
<TOTAL-REVENUES> 227,654,730
<CGS> 0
<TOTAL-COSTS> 59,788,909
<OTHER-EXPENSES> 99,657,776
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 16,522,686
<INCOME-PRETAX> 46,772,154
<INCOME-TAX> 18,400,000
<INCOME-CONTINUING> 28,372,154
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 28,372,154
<EPS-PRIMARY> 1.14
<EPS-DILUTED> 1.14
</TABLE>
