<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_______________________
FORM 10-Q/A
(Amendment Number 1)
(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 NO
--- -------
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by checkmark 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
--- -------
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 March 31, 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
FORM 10Q/A
(Amendment Number 1)
MARCH 31, 1997
Item 1 and Item 2 of Part 1 are hereby amended and restated in this Form
10Q/A filed for the quarter ended March 31, 1997 in order to restate the
interest expense, and the consolidated statement of cash flows for the for
the quarter ended March 31, 1996. See explanatory note on page 1a for
additional information.
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 7-11
PART II: OTHER INFORMATION
None
Signature Page 12
<PAGE>
SCOTT CABLE COMMUNICATIONS, INC.
FORM 10Q/A
(Amendment Number 1)
MARCH 31, 1997
EXPLANATORY NOTE
Upon filing for bankruptcy in February, 1996 (see Background section of
Management's Discussion and Analysis of Financial Condition and Results of
Operations), interest expense on the Company's Subordinated Debentures and its
Junior Subordinated Debentures ceased accruing. The Consolidated Statement of
Operations for the quarter ended March 31, 1996 included in the Company's Form
10Q for the quarter ended March 31, 1997 incorrectly reflected the continued
accrual of that interest expense. The adjustment reflected in this Amendment to
correct the error is a reduction of interest expense for the quarter ended March
31, 1996 in the amount of $1,460,235, with a corresponding adjustment to the
Consolidated Statement of Cash Flow.
A reclassification of restricted cash was made from the line entitled "cash and
cash equivalents" to the line entitled "prepaid and other assets" in the amounts
of $2,632,183 and $2,662,574 at December 31, 1995 and March 31, 1996,
respectively, which impacted the Consolidated Statement of Cash Flow for the
quarter ended March 31, 1996. This represents cash held in a cash collateral
account which was unavailable to the Company without permission of its senior
lenders. This restriction was removed on December 18, 1996 as a result of the
refinancing of the Company's debt.
-1a-
<PAGE>
SCOTT CABLE COMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
ASSETS 1997 1996
- ------ -------------- --------------
(UNAUDITED)
<S> <C> <C>
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.
2
<PAGE>
SCOTT CABLE COMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
UNAUDITED
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
----------------------------
1997 1996
------------- -------------
(RESTATED)
<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 $102,717 in 1996.... (4,954,726) (2,959,410)
------------- -------------
Loss before income taxes............................................................ (3,574,195) (2,103,288)
Income tax benefit.................................................................. 4,462 0
------------- -------------
Net loss............................................................................ ($ 3,569,733) ($ 2,103,288)
------------- -------------
------------- -------------
</TABLE>
See notes to consolidated financial statements.
-3-
<PAGE>
SCOTT CABLE COMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
UNAUDITED
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
1997 1996
------------- -------------
(RESTATED)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss................................................. ($3,569,733) ($2,103,288)
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................... 3,413,282 648,135
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................... 766,918 954,189
Increase in accounts payable
and accrued expenses.................................. 571,490 2,386,045
----------- -----------
Net cash provided by operating activities................. 3,323,784 3,499,299
----------- -----------
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 3,095,151
Cash and cash equivalents--Beginning of period............ 838,232 4,332,744
----------- -----------
Cash and cash equivalents--End of period.................. $ 2,672,396 $ 7,427,895
----------- -----------
----------- -----------
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 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 Form 10 for Scott Cable Communications,
Inc. (the "Company") for additional information regarding
the Company's background and significant accounting
policies. Due to a changing competitive and regulatory
environment, 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
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 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 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" below.
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%. Approximately $77,000, or 14% of this increase is
attributable to the greater average number of subscribers
during 1997 compared to 1996, 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. 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%. 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 is 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 $1,995,000 or 67%. Approximately
$1,460,000 of the increase was attributable to the cessation
of interest accrual on
-8-
<PAGE>
the Company's Subordinated Debentures and its Junior
Subordinated Debentures in February, 1996 due to the filing
for bankruptcy. Approximately $80,000 of the increase was
due to decreased interest income from lower available cash
balances. Average 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 on
December 18, 1996 in accordance with terms of the Plan. The
remaining increase in interest expense 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" below).
Net Loss. Net loss for the quarter ended March 31, 1997
increased by approximately $1,466,000 compared to the first
quarter of 1996. This change was 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. The Company's Senior credit facility consists of a Term Loan
and a Revolving Facility. 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.
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 Reorganization and the revolving loans will be used to provide the
Company with additional working capital. 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
annually beginning September 30, 1997 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.
-9-
<PAGE>
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.
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.
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 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 Second Amended Joint Plan of
Reorganization, as approved by the United States Bankruptcy
Court for the District of Delaware on December 6, 1996.
-10-
<PAGE>
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: AUGUST 14, 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
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 2,672,396
<SECURITIES> 0
<RECEIVABLES> 537,210
<ALLOWANCES> (116,598)
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 42,857,651
<DEPRECIATION> (25,313,462)
<TOTAL-ASSETS> 47,795,879
<CURRENT-LIABILITIES> 0
<BONDS> 155,332,109
0
0
<COMMON> 10,000
<OTHER-SE> (115,974,758)
<TOTAL-LIABILITY-AND-EQUITY> 47,795,879
<SALES> 0
<TOTAL-REVENUES> 7,870,116
<CGS> 2,619,678
<TOTAL-COSTS> 6,489,585
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,954,726
<INCOME-PRETAX> (3,574,195)
<INCOME-TAX> (4,462)
<INCOME-CONTINUING> (3,569,733)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,569,733)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
