<PAGE>
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 MARCH 31, 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 number 0-22-093
SCOTT CABLE COMMUNICATIONS, INC.
------------------------------------------------------
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
Texas 75-1766202
- ------------------------------- -------------------
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
Four Landmark Square, Suite 302, Stamford, CT 06901
-------------------------------------------------------------
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE (203)323-1100
-------------
Indicate by checkmark 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
------- -------
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a
plan confirmed by a court.
Yes X No
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Indicate the number of shares outstanding in each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at June 30, 1997
------------- -----------------------------------
Class A common, $0.10 par value 1,000
Class B common, $0.10 par value 24,000
Class C common, $0.10 par value 75,000
<PAGE>
SCOTT CABLE COMMUNICATIONS, INC.
INDEX
MARCH 31, 1997
Pages
-----
PART 1: FINANCIAL INFORMATION
Item I. Financial Statements:
Consolidated Balance Sheets as of March 31, 1997
(unaudited)and December 31, 1996 2
Consolidated Statements of Operations for the
quarters ended March 31, 1997 and 1996 (unaudited) 3
Consolidated Statements of Cash Flows for the quarters
ended March 31, 1997 and 1996 (unaudited) 4
Notes to the Consolidated Financial Statements (unaudited) 5-6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 7-10
PART II: OTHER INFORMATION
Item 6. 11
Signature Page 11
<PAGE>
SCOTT CABLE COMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1997 1996
----------- ------------
(UNAUDITED)
<S> <C> <C>
ASSETS
INVESTMENT IN CABLE TELEVISION SYSTEMS:
Land and land improvements............ $18,523 $18,523
Vehicles.............................. 1,400,872 1,400,872
Buildings and improvements............ 127,326 127,326
Office furniture and equipment........ 405,738 388,513
CATV distribution systems and related
equipment............................. 40,905,192 39,415,762
------------ ------------
Total fixed assets................. 42,857,651 41,350,996
Less accumulated depreciation......... (25,313,462) (24,402,301)
------------ ------------
Total fixed assets--net............ 17,544,189 16,948,695
FRANCHISE COSTS--net................... 3,115,670 3,997,320
GOODWILL--net.......................... 19,707,327 19,877,946
DEFERRED FINANCING COSTS--net.......... 2,615,423 2,760,110
DEFERRED FEDERAL INCOME TAXES.......... 961,846 961,846
CASH AND CASH EQUIVALENTS.............. 2,672,396 838,232
ACCOUNTS RECEIVABLE less allowance for
doubtful accounts of $116,598 in 1997
and $105,881 in 1996.................. 420,612 483,319
PREPAID AND OTHER ASSETS............... 758,416 1,525,334
------------ ------------
TOTAL ASSETS........................... $47,795,879 $47,392,802
------------ ------------
------------ ------------
LIABILITIES AND
SHAREHOLDERS' DEFICIENCY
LIABILITIES:
Notes and loans payable............... $155,332,109 $151,918,827
Accounts payable and accrued
expenses............................. 7,659,144 7,087,654
Unearned income....................... 165,403 172,903
Deferred state income taxes........... 603,981 608,443
------------ ------------
Total liabilities................... 163,760,637 159,787,827
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' DEFICIENCY:
Common Stock.......................... 10,000 10,000
Additional paid-in-capital............ 4,229,850 4,229,850
Deficit............................... (120,204,608) (116,634,875)
------------ ------------
Total shareholders' deficiency...... (115,964,758) (112,395,025)
------------ ------------
TOTAL LIABILITIES AND SHAREHOLDERS'
DEFICIENCY............................ $47,795,879 $ 47,392,802
------------ ------------
------------ ------------
</TABLE>
See notes to consolidated financial statements.
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<PAGE>
SCOTT CABLE COMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
UNAUDITED
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
1997 1996
------------ --------------
<S> <C> <C>
Revenues............................... $7,870,116 $7,226,469
------------ --------------
Costs and expenses:
Operating expenses..................... 2,619,678 2,479,094
Selling, general and administrative
expenses.............................. 1,339,656 1,162,272
Management fees........................ 355,328 325,191
Depreciation and amortization.......... 2,106,738 1,842,139
Reorganization items................... 68,185 561,651
------------ --------------
Total costs and expenses............... 6,489,585 6,370,347
------------ --------------
Operating Income....................... 1,380,531 856,122
Interest expense, net of interest
income of $22,757 in 1997 and
$102,717 in 1996...................... (4,954,726) (4,419,645)
------------ --------------
Loss before income taxes............... (3,574,195) (3,563,523)
Income tax benefit..................... 4,462 0
------------ --------------
Net loss................................. ($3,569,733) ($3,563,523)
------------ --------------
------------ --------------
</TABLE>
See notes to consolidated financial statements.
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<PAGE>
SCOTT CABLE COMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
UNAUDITED
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
1997 1996
------------ --------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss............................... ($3,569,733) ($3,563,523)
Adjustments to reconcile net loss
to net cash provided by operating
activities:
Depreciation......................... 911,161 811,191
Amortization......................... 1,179,921 1,025,794
Accretion of notes and loans
payable............................. 3,413,282 1,325,727
Deferred Federal and state
income taxes........................ (4,462) 0
Changes in assets and liabilities:
(Decrease) increase in unearned
income.............................. (7,500) 12,457
Decrease (increase) in accounts
receivable.......................... 62,707 (235,224)
Decrease in prepaid and other
assets.............................. 766,918 984,580
Increase in accounts payable and
accrued expenses.................... 571,490 3,168,688
------------ --------------
Net cash provided by operating
activities............................. 3,323,784 3,529,690
------------ --------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures................... (1,506,655) (404,148)
------------ --------------
Net cash used in investing activities... (1,506,655) (404,148)
------------ --------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Reduction in deferred financing costs.. 17,035 0
------------ --------------
Net cash provided by financing
activities............................. 17,035 0
------------ --------------
Net change in cash and cash
equivalents............................ 1,834,164 3,125,542
Cash and cash equivalents
-Beginning of period................... 838,232 6,964,927
------------ --------------
Cash and cash equivalents
-End of period......................... $2,672,396 $10,090,469
------------ --------------
------------ --------------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Cash paid during the three months
for interest........................... $0 $0
------------ --------------
------------ --------------
Cash paid during the three months
for income taxes....................... $0 $0
------------ --------------
------------ --------------
Reorganization items paid during the
three months
Legal fees............................. $22,114 $449,384
Financial advisory fees................ 0 112,267
Other.................................. 46,071 0
------------ --------------
$68,185 $561,651
------------ --------------
------------ --------------
</TABLE>
See notes to consolidated financial statements.
-4-
<PAGE>
SCOTT CABLE COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
QUARTER ENDED MARCH 31, 1997
(Unaudited)
NOTE 1 - INTERIM FINANCIAL STATEMENTS
The interim financial statements for Scott Cable Communications, Inc. and
consolidated subsidiaries (the "Company") as of March 31, 1997 and for the three
months ended March 31, 1997 and 1996 are unaudited. These interim consolidated
financial statements should be read in conjunction with the Company's audited
consolidated financial statements as of December 31, 1996 and 1995 and for each
of the three years in the period ended December 31, 1996, included within the
Company's Registration of its Class A common stock on Form 10. In the opinion
of management, all adjustments (consisting only of normal recurring adjustments)
necessary to present fairly the consolidated financial position, results of
operations and cash flows as of March 31, 1997 and for the quarters ended March
31, 1997 and 1996 have been made. The results of operations for the three
months ended March 31, 1997 and 1996 are not necessarily indicative of the
results for the entire year.
Certain reclassifications have been made to the prior year consolidated
financial statements to conform to those used in 1997.
NOTE 2 - EMERGENCE FROM BANKRUPTCY
As more fully described in Part I - Item 2, Management's Discussion and
Analysis of Financial Condition and Results of Operations, the Company filed
a voluntary petition for relief under Chapter 11 of the Bankruptcy Code in
February, 1996. The Bankruptcy Court (the "Court") confirmed a Plan of
Reorganization (the "Plan"), and it became effective on December 18, 1996.
Pursuant to the terms of the Plan, the Company entered into an agreement for
a new senior, secured credit facility. Proceeds of this facility were used
to retire the Company's previously outstanding Senior Debt, Senior
Subordinated Notes, and Zero Coupon Subordinated Notes. The Company also
issued Senior PIK Notes and Junior PIK Notes in exchange for its previously
outstanding Subordinated Debentures and Junior Subordinated Debentures,
respectively (see Liquidity and Capital Resources discussion in Item 2 and
Registration on Form 10 for additional information).
NOTE 3 - BASIS OF PRESENTATION
Pursuant to the Plan, the Court required the Company to put in escrow the
aggregate sum of $387,000 pending the resolution of a claim by certain of the
Company's former Senior Secured Noteholders. The claim includes interest
computed at the default rate on the then outstanding Senior Secured Notes.
The Company has objected to the claim. This cash held in escrow is included
in the Balance Sheet caption "Prepaid and Other Assets" at March 31, 1997 and
December 31, 1996.
The Company accounts for income taxes in accordance with Statement of Financial
Accounting Standards No. 109 "Accounting for Income Taxes" ("SFAS No. 109").
The statement requires the use of an asset and liability approach for financial
accounting and reporting for income taxes. Deferred tax assets relate
primarily to net operating losses, investment tax credits and Federal
Alternative Minimum Tax credit carryforwards. Deferred tax liabilities relate
to temporary differences between book and tax depreciation and amortization
expenses, and deferred gain on installment sales.
-5-
<PAGE>
NOTE 4 - TRANSACTIONS WITH RELATED PARTIES
Scott Cable Management Company, Inc. ("Management") acts as manager for the
Company. In accordance with the management agreement, Management was paid a
management fee equal to 4.5% of total revenues (as defined in the agreement)
through December 31, 1996. The Company entered into a new management
agreement with Management which became effective January 1, 1997. Under the
new agreement, Management is to be paid a management fee equal to 4.25% of
total revenues, plus an additional 0.25% of revenues if certain operating
results are met. The management fee, including the potential additional
0.25% in 1997 was $355,328 and $325,191 for the quarters ended March 31, 1997
and 1996, respectively. Additionally, the Company paid Management for
out-of-pocket expenses in the amount of $15,766 and $15,525 for the quarters
ended March 31, 1997 and 1996, respectively.
-6-
<PAGE>
SCOTT CABLE COMMUNICATIONS, INC.
Management's Discussion and Analysis of Financial Condition and Results of
Operations
Introduction
Reference is made to the Registration Statement on Form 10 for Scott Cable
Communications, Inc. (the "Company") for additional information regarding the
Company's background and significant accounting policies. The Company's
historic interim financial results discussed below are not necessarily
indicative of future performance.
Background
In January 1988, Simmons Communications Merger Corp. merged (the "Merger")
with and into the Company pursuant to a merger agreement whereby each share
of common stock of the Company was converted into the right to receive $27.25
in cash or approximately $129.3 million in the aggregate. As a result of the
Merger, the Company became highly-leveraged.
In October 1992, the 1992 Cable Act was enacted and the FCC imposed extensive
regulations on the rates charged by cable television owners and operators.
Beginning in 1993, the Company's revenue and cash flow were adversely impacted
by these regulations as the Company was required to reduce many of its service
rates effective September 1993 and again in August 1994.
In 1993, the Company extended the maturity date of its senior indebtedness to
November 1995 and in conjunction with such extension, agreed to make principal
payments of $15 million in January 1994 and $18 million in March 1995. As part
of the Company's effort to satisfy these mandatory payment obligations and
provide additional working capital, the Company sold cable systems located in
Rancho Cucamonga, California in January 1994 for $23.6 million and Missouri,
Oklahoma, Kansas and northern Texas for $12.4 million in February 1995.
In October 1995, the Company failed to make an interest payment on its
outstanding subordinated debentures and in November 1995, the Company's senior
secured debt aggregating approximately $34.4 million matured and the Company
failed to pay such debt on maturity. The Company entered into 90-day standstill
agreements with holders of its senior bank loans and notes and holders of its
senior subordinated notes in order to seek refinancing alternatives; however,
the Company was unable to refinance its obligations or negotiate a restructuring
on favorable terms prior to the expiration of the standstill agreements.
In February 1996, the Company filed a voluntary petition for relief under
Chapter 11 of the Bankruptcy Code. Subsequently, the Company sought new
financing to replace approximately $62.3 million of debt which had matured and
negotiated new terms for approximately $88.4 million of subordinated and junior
subordinated debt, including the deferral of cash interest payments for several
years. In December 1996, the Bankruptcy Court confirmed the Company's Plan of
Reorganization and it became effective on December 18, 1996 concurrently with
the Company's consummation of a new senior, secured credit facility which
provides for up to $67.5 million in loans and the issuance of Senior and Junior
PIK Notes (as defined below) in the aggregate principal amount of $88.4 million.
See -- "Liquidity and Capital Resources".
Results of Operations
Three Months ended March 31, 1997 and 1996
Revenues. Revenues for the quarter ended March 31, 1997 increased
approximately $644,000, or 8.9%, over the same period of the previous year.
-7-
<PAGE>
Revenue from basic services (the most popular levels of service with
subscribers) increased approximately $570,000 or 10.2% in the first quarter
of 1997. Approximately $77,000, or 14%, of this increase is attributable to
a greater average number of subscribers during 1997 compared to 1996 (75,965
compared with 74,901), while $473,000 is due to higher average basic revenue
per subscriber. The average monthly rate for average subscribers outstanding
during the quarter increased from $24.95 in 1996 to $27.10 in 1997. A
portion of this increase was due to the fact that The Disney Channel was
added to the Company's Satellite Tier, one of its basic services, in most of
its cable systems, whereas formerly it was a sold as a premium service.
Revenue from commercial accounts and multi-dwelling unit complexes billed on
a bulk basis increased approximately $20,000, or 9.1% due to additional
volume and rate increases.
Revenue from Premium Services (single channels offered to the subscribers for an
additional monthly charge) increased approximately $29,000 or 4.2% over 1996 due
principally to a higher average revenue per pay unit. This increase more than
offset the reduction in revenues from 10% fewer average pay units in 1997
compared to 1996. The decline in average pay units was due primarily to the
repositioning of The Disney Channel as a basic service as discussed above, and
the repackaging of Showtime and The Movie Channel services as a single premium
service. Historically these three services were offered individually at retail
rates less than the average of all premium services, so the reduction in these
units resulted in a 14% higher average rate on the currently offered services.
All other revenues increased by approximately $45,000 or 4.9% for the period
ended March 31, 1997 as compared to the same period in the previous year.
Approximately $17,000 of the increase was attributable to an increase in
advertising sales; $13,000 to an increase in installation revenue from
additional connection activity; and $12,000 to an increase in franchise fee
pass through revenue, which is a function of the overall increase in basic
and premium service revenue. Other smaller increases were attributable to
the overall increase in average number of subscribers, offset by a decrease
in revenues from programming guide sales.
Operating Expenses. Operating expenses increased approximately $141,000, or
5.7% from 1996 to 1997. Basic programming costs increased by approximately
$186,000, or 18%. The addition of The Disney Channel to the Satellite Tier
level of service accounted for 70% of this increase in basic programming costs.
The balance of the increase was due to cost increases from program providers,
increased average subscribers, and additional programs being added. These
increases in operating expenses were offset by approximately $46,000 of
increased capitalized labor and overhead in 1997 compared to 1996 due to
increased capital expenditures.
Selling, general and administrative expenses . Selling, general and
administrative expenses for the quarter ended March 31, 1997 increased by
approximately $177,000, or 15.3%, over the same period of the prior year.
Components of the increase were as follows: marketing expenses increased
approximately $52,000 or 50.8%; bad debt expense increased approximately
$52,000, representing an increase from 0.8% of revenues in 1996 to 1.4% in
1997; wages and benefits excluding health insurance increased by
approximately $20,000, or 4.2%, due to inflation; health insurance increased
approximately $27,000, or 32.3% due to increased medical claims; costs
associated with billing of subscribers increased approximately $14,000, or
11.2 % due to the use of more sophisticated billing systems, and; other
selling, general and administrative expenses increased approximately $12,000,
or 3.9% primarily due to inflation.
Reorganization items. Reorganization expenses decreased approximately
$493,000, or 87.9%, from 1996 to 1997 as the bankruptcy filing and refinancing
were largely completed during 1996.
Management Fees. Management fees increased by approximately $30,000 due to
increased revenues.
Depreciation and Amortization. Depreciation and amortization increased by
approximately $265,000 or 14.4% due to ongoing capital additions and deferred
financing costs.
Interest Expense. Interest expense, net of interest income, increased by
approximately $535,000 or 12.1%. Approximately $80,000 of the increase was
due to decreased interest income from lower available cash balances. Average
-8-
<PAGE>
cash balances during the first quarter of 1996 were higher than in 1997 due
to the non-payment of the interest due on the subordinated debentures on
October 15, 1995, and an approximate $2.2 million escrow required under the
terms of the 1993 debt maturity extension agreement. This cash was used to
repay debt and accrued interest December 18, 1996 in accordance with the terms
of the Plan. The remaining increase is due to higher outstanding debt
($155,332,109 as of March 31, 1997 as compared to $151,918,827 as of March
31, 1996), as well as a higher overall effective interest rate as a result of
the refinancing (see - "Liquidity and Capital Resources").
Net Loss. Net loss for the quarter ended March 31, 1997 increased by
approximately $11,000 compared to the first quarter of 1996. This change was
principally the result of the net effect of the changes in revenues and
expenses as discussed above.
Liquidity and Capital Resources
The Company's ongoing need for capital will be for debt service and capital
expenditures to the extent they exceed cash provided from operations. The
Company incurred no additional debt since its restructuring effective December
18, 1996.
Loan Agreement. In December 1996, the Company entered into a loan agreement
with Finova Capital Corporation (the "Loan Agreement") for a senior, secured
credit facility in the aggregate amount of $67.5 million. The credit facility
includes a $57.5 million term loan and up to $10.0 million in revolving
loans. The loans are secured by, among other things, a lien on substantially
all of the Company's real and personal property and a pledge by the Company's
stockholders of all of the issued and outstanding shares of common stock in
the Company. The proceeds of the initial loans ($63.0 million) were used to
refinance existing indebtedness pursuant to the terms and provisions of the
Plan of Reorganinzation and the revolving loans will be used to provide the
Company with additional working capital. The $57,500,000 term loan is
payable in increasing quarterly principal installments commencing in January,
1998 with an aggregate of $1,050,000 payable in 1998, $1,550,000 due in 1999,
$2,200,000 due in 2000, $2,600,000 due in 2001, and a final maturity of
January 2, 2002. In addition, under the Loan Agreement, the Company is
required to use 75% of its annual "excess cash flow," as defined in the Loan
Agreement, to reduce the principal outstanding under the term loan, beginning
with excess cash flow for the year ending December 31, 1997. The Revolving
Facility is for $10,000,000, and matures on January 2, 2002. Unused portions
of the revolving loans may be borrowed and reborrowed at the Company's
discretion subject to the applicable commitment and borrowing base
limitations.
The outstanding Term Loan and Revolving Facility currently bear interest at 1.5%
per annum above the Citibank, N.A. corporate base rate. The margin above the
corporate base rate is subject to change in the event the Company does not meet
a fixed ratio of outstanding loans to operating cash flow, which is measured
each quarter. As of March 31, 1997, the Company had $57.5 million outstanding
pursuant to the Term Loan and $5.5 million outstanding pursuant to Revolving
Facility, and both loans bore interest at the rate of 10.0% per annum.
Subject to certain exceptions, the Loan Agreement prohibits or restricts, among
other things, the incurrence of liens, the incurrences of indebtedness, certain
fundamental corporate changes (including mergers, acquisitions and sales of
assets), dividends, the making of specified investments and certain transactions
with affiliates. In addition, the Loan Agreement contains financial covenants
which prohibit the Company from making capital expenditures in excess of $5.6
million 1997, $4.6 million in 1998, $8.3 million in 1999, $7.3 million in 2000
and $2.7 million in 2001. The Loan Agreement limits the ratio of senior debt to
cash flow (as defined therein) to 5.0 to 1 through June, 1997, which ratio is
reduced to 4.25 to 1 at September 30, 1999 and thereafter. The Loan Agreement
also requires: (1) the ratio of cash flow to fixed charges to be no less than
1.1 to 1 through 1998 and 1.05 to 1 thereafter, and; (2) a ratio of cash flow to
debt service to be no less than 1.85 to 1 except for the four quarters ended
September 30, 1999, during which period it must be no less than 1.8 times.
Senior PIK Notes. On December 18, 1996, the Company executed an indenture
with Fleet National Bank, as Trustee (the "Senior Indenture"), pursuant to
which the Company issued an aggregate of $49,500,000 in 15% Senior
Subordinated Pay-in-Kind Notes due March 18, 2002 (the "Senior PIK Notes").
The Senior PIK Notes have been issued to a depository on behalf of the
holders of certain claims under the Plan of Reorganization. The Senior PIK
Notes are secured by, among other things, a lien on substantially all of the
Company's real and personal property, which liens are subordinate to the
liens created under the Loan Agreement. Interest accrues on the outstanding
balance of the Senior PIK Notes at 15% per annum, however, interest will be
paid through the issuance of additional notes by the Company. The principal
amount and all accrued interest with respect to the Senior PIK Notes will be
due and payable on March 18, 2002.
-9-
<PAGE>
Subject to certain exceptions, the Senior Indenture prohibits or restricts,
among other things, the incurrence of liens, the incurrence of indebtedness,
certain fundamental corporate changes (including mergers, acquisitions and sales
of assets), dividends, the making of specified investments and certain
transactions with affiliates. The Senior Indenture does not require the Company
to maintain any financial ratios.
Junior PIK Notes. On December 18, 1996, the Company executed an indenture with
Fleet National Bank, as Trustee (the "Junior Indenture"), pursuant to which the
Company issued an aggregate of $38,925,797 in 16% Junior Subordinated
Pay-in-Kind Notes due July 18, 2002 (the ("Junior PIK Notes"). The Junior PIK
Notes have been issued directly to the appropriate class of claimants under the
Plan. The Junior PIK Notes are secured by, among other things, a lien on
substantially all of the Company's real and personal property, which liens are
subordinated to the liens created under the Loan Agreement
and the Senior Indenture. Interest accrues on the outstanding balance of the
Junior PIK Notes at 16% per annum, however, interest will be paid through the
issuance of additional notes by the Company. The principal amount and all
accrued interest with respect to the Junior PIK Notes will be due and payable on
July 18, 2002.
Subject to certain exceptions, the Junior Indenture prohibits or restricts,
among other things, the incurrence of liens, the incurrence of indebtedness,
certain fundamental corporate changes (including mergers, acquisitions and sales
of assets), dividends, the making of specified investments and certain
transactions with affiliates. The Junior Indenture does not require the Company
to maintain any financial ratios.
System Upgrades and Rebuilds. The Company anticipates that over the next four
years it will spend approximately $12.2 million to upgrade and rebuild its
systems and approximately $3.6 million for additional plant construction
(enabling it to pass approximately 11,600 additional homes). The Company
anticipates it will spend approximately $2.7 million and $1.0 million for
upgrades and rebuilds and approximately $.8 million and $.8 million for plant
construction during 1997 and 1998, respectively. (These amounts are included in
the figures set forth immediately above). The Company's policy has been to
utilize fiber optics technology in its rebuild projects, when it is appropriate.
The Company believes that the addition of fiber optics in plant construction
will extend system reach, improve picture quality, allow for increased channel
capacity and improve system reliability.
The cable television business requires substantial financing for construction,
maintenance, and expansion of cable plant. The Company has historically
financed its capital needs through long term debt and, to a lesser extent,
cash provided from operating activities.
Based on the Company's current plan of operations, it is anticipated that the
Company's projected cash flow from operations and current debt facilities will
provide sufficient working capital for operations, debt service requirements and
planned capital expenditures for the next several years. However, there can be
no assurance that the Company will not require additional financing prior to
that time. The Company's capital requirements depend on, among other things,
whether the Company is successful in generating increased revenues and cash
flow, governmental regulations affecting the cable television industry generally
and the Company's systems in particular, the ability of the Company to
successfully renew its franchise agreements and competing technological market
developments.
The Company's cash and cash equivalents increased by approximately $1.8
million for the quarter ended March 31, 1997. Interest on the Company's
senior loans is payable quarterly in arrears on the first business day of the
subsequent quarter. Consequently, cash and cash equivalents as of March 31,
1997 do not reflect the interest payment of approximately $1.6 million made
on April 1, 1997. Accounts payable and accrued expenses decreased
approximately $571,000 during the quarter ended March 31, 1997 due to normal
annual payments of certain expenses, and also due to the payment of some of
the Company's pre-petition liabilities, in accordance with the Company's
Plan of Reorganization, as approved by the United States Bankruptcy Court
for the District of Delaware on December 6, 1996.
-10-
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
27. Financial Data Schedule
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, thereunto duly authorized.
SCOTT CABLE COMMUNICATIONS, INC.
--------------------------------
(Registrant)
Date: June 30, 1997 By: /s/ John M. Flanagan, Jr.
---------------------------
John M. Flanagan, Jr.
Senior Vice President
& Chief Financial Officer
(Principal Financial
Officer and Officer
Duly Authorized to Sign
on Behalf of the
Registrant)
-11-
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
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