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, 1998
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 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, 1998
----- -----------------------------
Class A Common Stock, $0.10 par value 1,000
Class B Common Stock, $0.10 par value 24,000
Class C Common Stock, $0.10 par value 75,000
<PAGE>
SCOTT CABLE COMMUNICATIONS, INC.
INDEX
FORM 10-Q
March 31, 1998
Pages
-----
PART I: FINANCIAL INFORMATION
Item I. Financial Statements:
Consolidated Balance Sheets as of March 31, 1998 (unaudited)
and December 31, 1997 2
Consolidated Statements of Operations for the three months
ended March 31, 1998 and 1997 (unaudited) 3
Consolidated Statements of Cash Flows for the three months ended
March 31, 1998 and 1997 (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. Exhibits and Reports on Form 8-K 11
Signature Page 12
<PAGE>
SCOTT CABLE COMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
MARCH 31,
1998 DECEMBER 31,
(UNAUDITED) 1997
-------------- -------------
ASSETS
INVESTMENT IN CABLE TELEVISION SYSTEMS:
Land and land improvements $28,508 $28,508
Vehicles 1,685,611 1,652,141
Buildings and improvements 127,326 127,326
Office furniture and equipment 457,330 450,732
CATV distribution systems and related equipment 38,913,498 38,307,414
----------- -----------
Total fixed assets 41,212,273 40,566,121
Less accumulated depreciation (24,152,609) (23,084,031)
----------- -----------
Total fixed assets - net 17,059,664 17,482,090
FRANCHISE COSTS - net 504,042
GOODWILL - net 19,036,909 19,207,528
DEFERRED FINANCING COSTS - net 2,076,478 2,204,128
DEFERRED FEDERAL INCOME TAXES 18,031,460 16,529,105
CASH AND CASH EQUIVALENTS 2,949,118 2,821,365
ACCOUNTS RECEIVABLE less allowance for
doubtful accounts of $138,489
and $152,301, respectively 404,493 379,073
PREPAID AND OTHER ASSETS 417,703 480,414
------------- -------------
TOTAL ASSETS $59,975,825 $59,607,745
============= =============
LIABILITIES AND
SHAREHOLDERS' DEFICIENCY
LIABILITIES:
Notes and loans payable $167,327,419 $164,428,668
Accounts payable and accrued expenses 5,858,798 6,334,770
Unearned income 211,493 183,879
Deferred state income taxes 6,398,186 5,838,148
------------- -------------
Total liabilities 179,795,896 176,785,465
------------- -------------
SHAREHOLDERS' DEFICIENCY:
Common stock 10,000 10,000
Additional paid-in-capital 4,229,850 4,229,850
Deficit (124,059,921) (121,417,570)
------------- -------------
Total shareholders' deficiency (119,820,071) (117,177,720)
------------- -------------
TOTAL LIABILITIES AND SHAREHOLDERS' DEFICIENCY $59,975,825 $59,607,745
============= =============
See notes to consolidated financial statements.
-2-
<PAGE>
SCOTT CABLE COMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
UNAUDITED
Three Months Ended March 31,
1998 1997
----------- -----------
Revenues $ 8,572,705 $ 7,870,116
----------- -----------
Costs and expenses:
Operating expenses 3,069,335 2,619,678
Selling, general and administrative
expenses 1,345,912 1,407,841
Management fees 385,772 355,328
Depreciation and amortization 1,886,592 2,106,738
----------- -----------
Total costs and expenses 6,687,611 6,489,585
----------- -----------
Operating income 1,885,094 1,380,531
Interest expense, net of interest income
of $23,821 in 1998 and $22,757 in 1997 (5,469,762) (4,954,726)
----------- -----------
Loss before income taxes (3,584,668) (3,574,195)
Income tax benefit 942,317 4,462
----------- -----------
Net loss ($2,642,351) ($3,569,733)
=========== ===========
See notes to consolidated financial statements.
-3-
<PAGE>
SCOTT CABLE COMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
UNAUDITED
Three Months Ended March 31,
1998 1997
------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss ($2,642,351) ($3,569,733)
Adjustments to reconcile net loss to net
cash provided by operating activities:
Depreciation 1,084,281 926,817
Amortization 802,311 1,179,921
Disposition of Assets 15,703 15,656
Accretion of notes and loans payable 3,961,251 3,413,282
Deferred federal and state income taxes (942,317) (4,462)
Changes in assets and liabilities:
Increase (decrease) in unearned income 27,614 (7,500)
(Increase) decrease in accounts receivable (25,420) 62,707
Decrease in prepaid and other assets 62,711 766,918
(Decrease) increase in accounts payable
and accrued expenses (475,972) 571,490
----------- -----------
Net cash provided by operating activities 1,867,811 3,355,096
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (677,558) (1,537,967)
----------- -----------
Net cash used in investing activities (677,558) (1,537,967)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on senior bank credit facility (1,062,500)
Reduction in deferred financing costs 17,035
----------- -----------
Net cash (used in) provided by financing activities (1,062,500) 17,035
----------- -----------
Net change in cash and cash equivalents 127,753 1,834,164
Cash and cash equivalents - Beginning of period 2,821,365 838,232
----------- -----------
Cash and cash equivalents - End of period $ 2,949,118 $ 2,672,396
=========== ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Cash paid during the three months for interest $ 1,582,830 $ 0
=========== ===========
Cash paid during the three months for income taxes $ 250 $ 0
=========== ===========
Reorganization items paid during the three months
Legal fees $ 22,114
Other 46,071
----------- -----------
Total reorganization items paid $ 0 $ 68,185
=========== ===========
See notes to consolidated financial statements.
-4-
<PAGE>
SCOTT CABLE COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
QUARTER ENDED MARCH 31, 1998
(Unaudited)
NOTE 1 - INTERIM FINANCIAL STATEMENTS
The interim financial statements for Scott Cable Communications, Inc. and
consolidated subsidiaries (the "Company") as of March 31, 1998 and for the three
months ended March 31, 1998 and 1997 are unaudited. These interim consolidated
financial statements should be read in conjunction with the Company's audited
consolidated financial statements as of December 31, 1997 and 1996 and for each
of the three years in the period ended December 31, 1997, included within the
Company's Annual Report on Form 10-K. 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, 1998 and for the three months ended March 31, 1998
and 1997 have been made. The results of operations for the three months ended
March 31, 1998 and 1997 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 1998.
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 Annual Report on Form 10-K 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 included interest
computed at the default rate on a portion of the then outstanding Senior Secured
Notes. The Company objected to the claim. This cash held in escrow is included
in the Balance Sheet caption "Prepaid and Other Assets" at March 31, 1998 and
December 31, 1997. Such amounts were substantially accrued in 1996 and 1997. On
March 17, 1998 the court ruled in favor of the Company's former Senior Secured
Noteholders with respect to their claim for the difference between interest
computed at the non-default rate and interest at the default rate for the period
the company was in bankruptcy. As a result of such ruling, the Company released,
in April 1998, approximately $315,000 to those former Noteholders, with the
balance of the escrow being returned to the Company.
NOTE 4 - TRANSACTIONS WITH RELATED PARTIES
Scott Cable Management Company, Inc. ("Management") acts as manager for the
Company. Under the 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%, was $385,772 and $355,328 for the three months ended March 31,
1998 and 1997, respectively. Additionally, the Company reimbursed Management for
out-of-pocket expenses in the amounts of $13,865 and $15,766 for the three
months ended March 31, 1998 and 1997, respectively.
-5-
<PAGE>
NOTE 5 - ADOPTION OF SFAS 130
The Company adopted Statement of Financial Accounting Standards No. 130 ("SFAS
130"), "Reporting Comprehensive Income" during the first quarter of 1998, as
required. SFAS 130 establishes standards for reporting and displaying
comprehensive income and its components in a set of financial statements.
Comprehensive income is defined as the change in equity of a business enterprise
during a period from transactions and other events and circumstances from
non-owner sources, of which the Company had none.
-6-
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Introduction
Reference is made to the Company's Annual Report on Form 10-K for additional
information regarding the Company's background and significant accounting
policies. The Company's interim financial results discussed below are not
necessarily indicative of future performance.
Recent Developments
As previously reported in the Annual Report on Form 10-K for the year ended
December 31, 1997, the Company received an unsolicited offer from a third party
to buy substantially all of its assets for cash. The Company is continuing to
evaluate the offer. There can be no assurance that the parties will enter into
an agreement or, if such agreement is entered into, that the transaction will be
consummated. The anticipated sale proceeds from any such transaction would not
be adequate to pay all of the Company's indebtedness in full.
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 United States Bankruptcy Code. Subsequently, the Company
obtained 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
provided 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.
-7-
<PAGE>
Results of Operations
Three Months ended March 31, 1998 and 1997
Revenues. Revenues for the quarter ended March 31, 1998 increased approximately
$703,000, or 8.9% over the same period of the previous year. Average subscribers
for the quarter were 77,671 in 1998 compared with 75,946 in 1997.
Revenue from basic services increased approximately $593,000 or 9.6%.
Approximately $140,000 of this increase is attributable to the higher average
number of subscribers during 1998 compared to 1997, while $453,000 is due to
higher average basic revenue per subscriber. The average monthly rate for the
quarter increased from $27.11 in 1997 to $29.05 in 1998. 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 premium services decreased approximately $7,000 or 1.0% over 1997
due principally to the drop in pay units, offset by an increase in the average
pay rate per unit. This net decrease of 7.5% average pay units in 1998 compared
to 1997 was due 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 had been offered individually
at retail rates less than the average of all premium services, so the
repositioning of these services resulted in a 6.3% higher average rate on the
currently offered services.
All other revenues increased by approximately $117,000 or 12.0%. Approximately
$62,000 of the increase was attributable to an increase in revenue from pay per
view events.
Operating Expenses. Operating expenses increased approximately $450,000, or
17.2% from the quarter ended March 31, 1997 to the same period in 1998. Basic
programming costs increased by approximately $335,000, or 27.4%. The increase is
due to cost increases from program providers, increased average subscribers, the
repositioning of Disney as a basic service, and additional programs being added.
Programming costs related to pay per view revenue increased by $25,000 as a
function of the increase in pay per view revenues. All other direct operating
costs increased by $90,000 from 1997 to 1998.
Selling, general and administrative expenses. Selling, general and
administrative expenses for the quarter ended March 31, 1998 decreased by
approximately $62,000, or 4.4% from the same period of the prior year.
Components of the decrease were as follows: bad debt expense decreased
approximately $11,000, representing a decrease from 1.4% of revenues in 1997 to
1.2% in 1998; marketing costs dropped approximately $34,000 or 22.1% mostly due
to reduced contract marketing costs; wages and fringes decreased by $27,000 or
5.5% mostly due to the staffing vacancies, and other selling, general and
administrative expenses increased approximately $10,000.
Management Fees. Management fees increased by approximately $30,000 due to
increased revenues.
Depreciation and Amortization. Depreciation and amortization for the quarter
ended March 31, 1998 decreased by approximately $220,000 or 10.4% due to
franchise costs being fully amortized. This decrease was offset in part by an
increase in depreciation from ongoing capital additions.
Interest Expense. Interest expense, net of interest income increased by
approximately $515,000 or 10.4%. This increase was mostly due to the accretion
and accrual of interest on the Senior and Junior PIK Notes. This increase was
partially offset due to payments on the Term Loan and Revolving Facility.
Income Tax Benefit. Income tax benefit increased by approximately $938,000 over
the first quarter 1997. This is primarily attributable to the recognition of the
deferred tax benefits arising from the current period's net operating loss.
These benefits were previously offset by a valuation allowance which was no
longer deemed necessary.
-8-
<PAGE>
Net Loss. Net loss for the quarter ended March 31,1998 was approximately
$2,642,000 as compared to approximately $3,569,000 for the prior year. 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 has not incurred 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 which commenced 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. This latter requirement was waived
for excess cash flow for 1997. The $10,000,000 Revolving Facility 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, 1998, the Company had $57.2 million outstanding
pursuant to the term loan and $2.9 million outstanding pursuant to the 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 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. In addition, the Loan
Agreement contains financial covenants which prohibit the Company from making
capital expenditures in excess of $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 in steps to 4.25 to 1 at September 30, 1999 and
thereafter. At March 31, 1998 the maximum permitted ratio was 4.75 to 1. 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 (the
"Senior Indenture") with Fleet National Bank, as Trustee (subsequently assigned
to State Street Bank and Trust), 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 is 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
without unanimous consent of the Company's Board of Directors, 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 (the
"Junior Indenture"), with Fleet National Bank, as Trustee (subsequently assigned
to State Street Bank and Trust) 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; if
requested, interest is paid through the issuance of additional notes by the
Company ; otherwise the original notes represent the original principal and
accrued interest. 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 $9.9 million to upgrade and rebuild its
systems and approximately $3.9 million for additional plant construction
(enabling it to pass approximately 12,800 additional homes). The Company
anticipates it will spend approximately $1.0 million and $5.2 million for
upgrades and rebuilds and approximately $.8 million and $.9 million for plant
construction during 1998 and 1999, 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 approximately $128,000 for the
three months ended March 31, 1998. 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 31,1998 do not
reflect the interest payment of approximately $1.5 million made on April 1,
1998. In addition, a mandatory principal payment of $262,500 was made on April
1,1998 on the Term Loan.
Forward-Looking Statements
Certain statements contained in this Form 10-Q including, without limitation,
statements containing the words "believes", "anticipates", "may", "intends",
expects" and words of similar import, constitutes "forward-looking statements"
within the meaning of the Private Securities Litigation Reform Act of 1995. Such
forward-looking statements involve known and unknown risks, uncertainties and
other factors that may cause the actual results, performance or achievements of
the Company (or industry results, performance or achievements) expressed or
implied by such forward-looking statements to be substantially different from
those predicted. Such factors include, among others, the following: general
economic and business conditions, both nationally and in the regions in which
the Company operates; competition; changes in business strategy or development
plans; and the Company's inability to obtain sufficient financing to continue
operations, if necessary. Certain of these factors are discussed in more detail
elsewhere in this Form 10-Q.
-10-
<PAGE>
Part II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
27. Financial Data Schedule
(b) Reports on Form 8-K
No reports on Form 8-K were filed by the Company during the quarter
ended March 31, 1998
-11-
<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: May 14, 1998 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)
-12-
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 2,949,118
<SECURITIES> 0
<RECEIVABLES> 542,982
<ALLOWANCES> (138,489)
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 41,212,273
<DEPRECIATION> (24,152,607)
<TOTAL-ASSETS> 52,775,825
<CURRENT-LIABILITIES> 0
<BONDS> 167,327,419
0
0
<COMMON> 10,000
<OTHER-SE> (119,830,071)
<TOTAL-LIABILITY-AND-EQUITY> 59,975,825
<SALES> 0
<TOTAL-REVENUES> 8,572,705
<CGS> 0
<TOTAL-COSTS> 6,687,611
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5,469,762
<INCOME-PRETAX> (3,584,668)
<INCOME-TAX> (942,317)
<INCOME-CONTINUING> 2,642,351
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,642,351)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
