UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
X Quarterly Report under Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the quarterly period ended June 30, 2000
____ 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: 333-19327
OLYMPUS COMMUNICATIONS, L.P.
(Exact name of registrant as specified in its charter)
Delaware 25-1622615
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
OLYMPUS CAPITAL CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 23-2868925
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
---------------------------------------------------------
One North Main Street
Coudersport, PA 16915-1141
(Address of principal (Zip code)
executive offices)
814-274-9830
(Registrants' telephone number including area code)
Indicate by check mark whether the registrants (1) have 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) have been subject to such
filing requirements for the past 90 days.
Yes X No __
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OLYMPUS COMMUNICATIONS, L.P. AND SUBSIDIARIES
INDEX
Page Number
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PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets - December 31, 1999 and June 30, 2000......................3
Condensed Consolidated Statements of Operations - Three and Six Months Ended
June 30, 1999 and 2000..........................................................................4
Condensed Consolidated Statements of Cash Flows - Six Months Ended June 30,
1999 and 2000...................................................................................5
Notes to Condensed Consolidated Financial Statements.............................................6
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.................................................................................. 8
Item 3. Quantitative and Qualitative Disclosures about Market Risk....................................14
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.............................................................................15
Item 2. Changes in Securities.........................................................................15
Item 3. Defaults Upon Senior Securities...............................................................15
Item 4. Submission of Matters to a Vote of Security Holders...........................................15
Item 5. Other Information.............................................................................15
Item 6. Exhibits and Reports on Form 8-K..............................................................15
SIGNATURES.............................................................................................16
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<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
<TABLE>
<CAPTION>
OLYMPUS COMMUNICATIONS, L.P. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
(Dollars in thousands)
December 31, June 30,
1999 2000
---------------- -----------------
<S> <C> <C>
ASSETS:
Cable systems, at cost, net of accumulated depreciation and amortization:
Property, plant and equipment $ 429,426 $ 474,276
Intangible assets 651,580 641,259
---------------- -----------------
Total cable systems 1,081,006 1,115,535
Cash and cash equivalents 4,374 6,027
Subscriber receivables - net 15,829 16,418
Prepaid expenses and other assets - net 15,495 19,976
---------------- -----------------
Total $ 1,116,704 $ 1,157,956
================ =================
LIABILITIES AND PARTNERS' EQUITY (DEFICIENCY):
Subsidiary debt $ 337,250 $ 273,000
Parent debt 203,537 203,278
Other debt 107,540 108,617
Accounts payable 25,008 25,733
Subscriber advance payments and deposits 6,468 10,179
Accrued interest and other liabilities 28,549 39,155
Due to affiliates - net 38,542 155,864
Deferred income taxes 40,417 38,536
---------------- -----------------
Total liabilities 787,311 854,362
---------------- -----------------
Commitments and contingencies (Note 4)
Partners' equity:
Limited partners' interests 407,813 407,813
General partners' deficiency (78,420) (104,219)
---------------- -----------------
Total partners' equity 329,393 303,594
---------------- -----------------
Total $ 1,116,704 $ 1,157,956
================ =================
<FN>
See notes to condensed consolidated financial statements.
</FN>
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OLYMPUS COMMUNICATIONS, L.P. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
(Dollars in thousands)
Three Months Ended Six Months Ended
June 30, June 30,
------------------------------ ------------------------------
1999 2000 1999 2000
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Revenues $ 63,351 $ 67,686 $ 128,217 $ 135,379
-------------- -------------- -------------- --------------
Operating expenses:
Direct operating and programming 21,912 26,948 44,864 52,425
Selling, general and administrative 11,254 12,766 22,997 26,343
Depreciation and amortization 18,141 20,671 36,400 41,367
Management fees to managing affiliate 5,913 5,337 9,456 10,020
-------------- -------------- -------------- --------------
Total 57,220 65,722 113,717 130,155
-------------- -------------- -------------- --------------
Operating income 6,131 1,964 14,500 5,224
-------------- -------------- -------------- --------------
Other expense:
Interest expense (7,521) (13,025) (19,596) (26,114)
Interest expense - affiliates (13,266) (509) (18,535) (822)
Other (120) 666 (120) 58
-------------- -------------- -------------- --------------
Total (20,907) (12,868) (38,251) (26,878)
-------------- -------------- -------------- --------------
Loss before income taxes (14,776) (10,904) (23,751) (21,654)
Income tax (expense) benefit (94) 895 (180) 1,880
-------------- -------------- -------------- --------------
Net loss (14,870) (10,009) (23,931) (19,774)
Priority return on preferred and senior
limited partner interests (25,940) -- (50,566) --
-------------- -------------- -------------- --------------
Net loss of general and limited partners
after priority return $ (40,810) $ (10,009) $ (74,497) $ (19,774)
============== ============== ============== ==============
<FN>
See notes to condensed consolidated financial statements.
</FN>
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OLYMPUS COMMUNICATIONS, L.P. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(Dollars in thousands)
Six Months Ended
June 30,
----------------------------------
1999 2000
---------------- ----------------
Cash flows from operating activities:
<S> <C> <C>
Net loss $ (23,931) $ (19,774)
Adjustments to reconcile net loss to net cash provided
by operating activities:
Depreciation 19,494 23,254
Amortization 16,906 18,113
Non-cash interest -- 1,250
Deferred income taxes 180 (1,881)
Changes in operating assets and liabilities:
Subscriber receivables (141) (589)
Prepaid expenses and other assets 354 (5,301)
Accounts payable (1,121) 725
Subscriber advance payments and deposits 8 3,711
Accrued interest and other liabilities (8,330) 1,725
---------------- ----------------
Net cash provided by operating activities 3,419 21,233
---------------- ----------------
Cash flows from investing activities:
Business acquisitions (1,474) (1,312)
Capital expenditures (44,060) (70,723)
---------------- ----------------
Cash used for investing activities (45,534) (72,035)
---------------- ----------------
Cash flows from financing activities:
Repayments of debt (520,061) (64,923)
Payments of priority returns (30,825) --
Amounts advanced from affiliates 519,506 117,403
Issuance of preferred limited partner interests 34,125 --
Capital distributions (50) (25)
---------------- ----------------
Net cash provided by financing activities 2,695 52,455
---------------- ----------------
(Decrease) increase in cash and cash equivalents (39,420) 1,653
Cash and cash equivalents, beginning of period 44,617 4,374
---------------- ----------------
Cash and cash equivalents, end of period $ 5,197 $ 6,027
================ ================
<FN>
See notes to condensed consolidated financial statements.
</FN>
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<PAGE>
OLYMPUS COMMUNICATIONS, L.P. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
(Dollars in thousands)
The accompanying unaudited condensed consolidated financial statements
of Olympus Communications, L.P. and its substantially wholly-owned subsidiaries
("Olympus" or the "Company") have been prepared in accordance with the rules and
regulations of the Securities and Exchange Commission.
In the opinion of management, all adjustments, consisting of only
normal recurring accruals necessary for a fair presentation of the financial
position of Olympus at June 30, 2000, and the results of operations for the
three and six months ended June 30, 1999 and 2000, have been included. These
condensed consolidated financial statements should be read in conjunction with
Olympus' consolidated financial statements included in its Annual Report on Form
10-K for the year ended December 31, 1999 ("Annual Report"). The results of
operations for the three and six months ended June 30, 2000 are not necessarily
indicative of the results to be expected for the year ending December 31, 2000.
1. The Registrants:
Olympus Communications, L.P. is a limited partnership, formed under
the laws of Delaware, between ACC Operations, Inc. and ACC Holdings II, LLC,
wholly-owned subsidiaries of Adelphia Communications Corporation (together with
its subsidiaries "Adelphia"). Olympus' operations consist primarily of selling
video programming which is distributed to subscribers in Florida for a monthly
fee through a network of fiber optic and coaxial cables. ACP Holdings, Inc.,
formerly the managing general partner of Olympus, distributed its partnership
interests in Olympus to its parent, ACC Operations, Inc. effective January 1,
2000.
Olympus Capital Corporation, a wholly-owned subsidiary of the Company,
was formed solely for the purpose of serving as a co-issuer with Olympus
Communications, L.P. of the 10 5/8% Senior Notes due 2006 (the "Senior Notes").
Olympus Capital Corporation has no substantial assets or liabilities and no
operations of any kind and the Indenture, pursuant to which such Senior Notes
were issued, limits Olympus Capital Corporation's ability to acquire or hold any
significant assets or other properties or engage in any business activities
other than in connection with the issuance of the Senior Notes.
2. Significant Events Subsequent to the Annual Report:
On January 1, 2000, Olympus made a $6,000 non-cash distribution to
Adelphia in connection with a $6,000 investment by Three Rivers Cable
Associates, LP, a majority owned subsidiary of Adelphia, in Starpoint Limited
Partnership, a majority owned subsidiary of Olympus.
On April 14, 2000, certain subsidiaries and affiliates of Adelphia and
Olympus closed on a $2,250,000 credit facility. The credit facility consists of
a $1,500,000, 8 3/4 year reducing revolving credit loan and a $750,000, 9 year
term loan. No amounts related to Olympus were borrowed as of June 30, 2000.
3. Supplemental Financial Information:
Cash payments for interest were $42,454 and $23,684 for the six months
ended June 30, 1999 and 2000, respectively. Accumulated depreciation of
property, plant and equipment amounted to $212,230 and $234,473 at December 31,
1999 and June 30, 2000, respectively. Accumulated amortization of intangible
assets amounted to $174,880 and $191,486 at December 31, 1999 and June 30, 2000,
respectively.
<PAGE>
Due to affiliates - net includes $38,542 of accrued priority return on
preferred limited partner ("PLP") interests which was accrued prior to the
redemption of FPL Group's partnership interests in Olympus on October 1, 1999.
In conjunction with this redemption, the accrual and payment of priority return
on the PLP interests were discontinued.
4. Commitments and Contingencies:
Reference is made to Management's Discussion and Analysis of Financial
Condition and Results of Operations and the Annual Report for a discussion of
material commitments and contingencies.
5. Recent Accounting Pronouncements:
Statement of Financial Accounting Standards ( "SFAS ") No. 133,
"Accounting for Derivative Instruments and Hedging Activities," establishes
accounting and reporting standards for derivative instruments and for hedging
activities. It requires that an entity recognize all derivatives as either
assets or liabilities in the statement of financial position and measure those
instruments at fair value. In June 2000, SFAS No. 138 was issued which amends
the accounting and reporting standards of SFAS No. 133 for certain derivative
instruments and certain hedging activities. Management has not completed its
evaluation of the impact of SFAS No. 133 on the Company's consolidated financial
statements. The Company will be required to adopt SFAS No. 133 effective January
1, 2001.
<PAGE>
OLYMPUS COMMUNICATIONS, L.P. AND SUBSIDIARIES
(Dollars in thousands)
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Results of Operations
The Private Securities Litigation Reform Act of 1995 provides a "safe
harbor" for forward-looking statements. Certain information included in this
Form 10-Q, including Management's Discussion and Analysis of Financial Condition
and Results of Operations, is forward-looking, such as information relating to
the effects of future regulation, future capital commitments and the effects of
competition. Such forward-looking information involves important risks and
uncertainties that could significantly affect expected results in the future
from those expressed in any forward-looking statements made by, or on behalf of,
the Company. These risks and uncertainties include, but are not limited to,
uncertainties relating to economic conditions, acquisitions and divestitures,
the availability and cost of capital, government and regulatory policies, the
pricing and availability of equipment, materials, inventories and programming,
product acceptance, technological developments and changes in the competitive
environment in which the Company operates. Readers are cautioned that such
forward-looking statements are only predictions, that no assurance can be given
that any particular future results will be achieved, and that actual events or
results may differ materially. In evaluating such statements, readers should
specifically consider the various factors which could cause actual events or
results to differ materially from those indicated by such forward-looking
statements. For further information regarding those risks and uncertainties and
their potential impact on the Company, see the Adelphia prospectus and most
recent prospectus supplement filed under Registration Statement No. 333-78027,
under the caption "Risk Factors." The Company does not undertake to update any
forward-looking statements in this report or with respect to matters described
herein.
Olympus Communications, L.P. and subsidiaries ("Olympus" or the
"Company") is a joint venture limited partnership, formed under the laws of
Delaware, between ACC Operations, Inc. and ACC Holdings II, LLC, wholly-owned
subsidiaries of Adelphia Communications Corporation ("Adelphia").
Olympus Capital Corporation, a wholly-owned subsidiary of the Company,
was formed solely for the purpose of serving as a co-issuer with Olympus
Communications, L.P. of the 10 5/8% Senior Notes due 2006 (the "Senior Notes").
Olympus Capital Corporation has no substantial assets or liabilities and no
operations of any kind and the Indenture, pursuant to which such Senior Notes
were issued, limits Olympus Capital Corporation's ability to acquire or hold any
significant assets or other properties or engage in any business activities
other than in connection with the issuance of the Senior Notes.
Olympus earned substantially all of its revenues in the three and six
months ended June 30, 1999 and 2000 from monthly subscriber fees for basic,
satellite, premium and ancillary services (such as installations and equipment
rentals), local and national advertising sales, electronic security monitoring
services, digital cable and high speed data services, and pay-per-view
programming.
The changes in Olympus' operating results for the three and six months
ended June 30, 2000, compared to the same periods of the prior year, were
primarily the result of the continued roll-out of digital cable and high speed
data services, growth in electronic security monitoring revenue and advertising
revenue, vendor price increases for the Company's programming, expanding
existing cable television operations, and the impact of subscriber rate
increases which became effective June 1, 1999.
The high level of depreciation and amortization associated with
acquisitions in recent years, the continuing program of upgrading and expansion
of systems and interest costs associated with financing activities will continue
to have a negative impact on the reported results of operations. Olympus expects
to report net losses for the next several years.
<PAGE>
The following table sets forth certain cable television system data at
the dates indicated.
<TABLE>
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June 30,
--------------------------------- Percent
1999 2000 Increase
--------------- --------------- ------------
<S> <C> <C> <C>
Homes Passed by Cable 965,163 984,851 2.0%
Basic Subscribers 641,228 648,403 1.1%
</TABLE>
The following table is derived from Olympus' condensed consolidated
financial statements that are included in this Form 10-Q and sets forth the
percentage relationship to revenues of the components of operating income
contained in such financial statements for the periods indicated.
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
------------------------------ -----------------------------
1999 2000 1999 2000
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Revenues 100.0% 100.0% 100.0% 100.0%
Operating expenses:
Direct operating and programming 34.6% 39.8% 35.0% 38.8%
Selling, general and administrative 17.8% 18.9% 17.9% 19.5%
Depreciation and amortization 28.7% 30.5% 28.4% 30.5%
Management fees to managing affiliate 9.3% 7.9% 7.4% 7.4%
------------- ------------- ------------- -------------
Operating income 9.6% 2.9% 11.3% 3.8%
============= ============= ============= =============
</TABLE>
Revenues. The primary revenue sources, reflected as a percentage of total
revenues, for the periods indicated were as follows:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1999 2000 1999 2000
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Cable service and equipment 75% 72% 75% 72%
Premium programming services 9% 9% 10% 9%
Advertising sales and other services 16% 19% 15% 19%
</TABLE>
<PAGE>
Total revenues increased approximately 6.8% and 5.6% for the three and
six month periods ended June 30, 2000 compared with the same periods of the
prior year, primarily due to growth in digital cable and high speed data
revenue, basic subscriber growth, growth in electronic security monitoring and
advertising revenues and the impact of rate increases, partially offset by price
reductions on certain services.
The increase in revenues was attributable to the following:
Three Months Six Months
Ended Ended
June 30, 2000 June 30, 2000
--------------- ----------------
New services 40% 44%
Basic subscriber growth 16% 20%
Electronic security monitoring 16% 16%
Advertising 10% 11%
Rate increases 7% 6%
Premium programming fees 8% -
Other services 3% 3%
Direct Operating and Programming Expenses. Direct operating and
programming expenses, which are mainly basic and premium programming costs and
technical expenses, increased 23.0% and 16.9% for the three and six month
periods ended June 30, 2000 compared with the same periods of the prior year.
Such increases were primarily due to increased operating expenses from increased
technical costs associated with providing digital cable and high speed data
services and basic and premium programming costs.
Selling, General and Administrative Expenses. These expenses, which are
mainly comprised of costs related to system offices, customer service
representatives, and sales and administrative employees, increased 13.4% for the
three month period ended June 30, 2000 and increased 14.5% for the six month
period ended June 30, 2000 compared with the same periods of the prior year. The
increases were primarily due to incremental costs associated with providing new
services and subscriber growth, marketing expenses and wages.
Depreciation and Amortization. Depreciation and amortization was higher
for the three and six month periods ended June 30, 2000 compared with the same
periods of the prior year, primarily due to increased capital expenditures and
the impact of the redemption of FPL Group's partnership interests.
Management Fees to Managing Affiliate. Pursuant to the terms of the
Company's Partnership Agreement, the Company pays to Adelphia, on a quarterly
basis, an amount representing an allocation of the corporate overhead of
Adelphia and its subsidiaries (as provided in the management agreement) with
respect to the Company for such period, which allocation is based upon the ratio
of the Company's cable subscribers to the total cable subscribers owned or
managed by Adelphia.
<PAGE>
Interest Expense. Interest expense increased 73.2% and 33.3% for the
three and six month periods ended June 30, 2000, respectively, compared with the
same periods of the prior year. This increase was primarily due to an increase
in the average amount of debt outstanding as compared to the prior year,
primarily due to the note related to the redemption of the FPL Group partnership
interests in Olympus.
Interest Expense-Affiliates. The Company is charged interest on
advances due to Adelphia and other affiliates. Such advances were used by the
Company for capital expenditures, repayment of debt and working capital.
Interest expense-affiliates decreased approximately 96.2% and 95.6% for the
three and six month periods ended June 30, 2000 compared with the same periods
of the prior year primarily due to decreased average affiliate payables.
Priority Return on Preferred and Senior Limited Partner Interests. In
conjunction with the redemption of FPL Group's partnership interests in Olympus,
the accrual of priority return on PLP interests was discontinued.
Liquidity and Capital Resources
The cable television business is capital intensive and typically
requires continual financing for the construction, modernization, maintenance,
expansion, and acquisition of cable systems. The Company historically has
committed significant capital resources for these purposes. These expenditures
were funded through long-term borrowings and advances from affiliates and
internally generated funds. The Company's ability to generate cash to meet its
future needs will depend generally on its results of operations and the
continued availability of external financing.
Capital expenditures for the six month periods ended June 30, 1999 and
2000 were $44,060 and $70,723, respectively. The Company expects capital
expenditures for the remaining six months of the year ending December 31, 2000
to range from $60,000 to $80,000.
The Company generally has funded its working capital requirements,
capital expenditures, and acquisitions through long-term borrowings, primarily
from banks, issuance of public debt, advances from affiliates and internally
generated funds. The Company generally has funded the principal and interest
obligations on its long-term borrowings from banks by refinancing the principal
with new loans and by paying the interest out of internally generated funds.
Olympus has funded the interest obligations on its public borrowings from
internally generated funds.
At June 30, 2000, the Company's total outstanding debt aggregated
approximately $585,000 which included approximately $203,000 of parent debt, and
approximately $382,000 of subsidiary and other debt. In addition, the Company
had an aggregate of approximately $6,000 in cash and cash equivalents, and as of
June 30, 2000, approximately $611,000 in unused credit lines with banks,
$575,000 of which was also available to affiliates, part of which is subject to
achieving certain levels of operating performance.
At June 30, 2000, the Company has unused credit lines under reducing
revolving credit facilities with revolver periods which expire through 2008. The
Company's weighted average interest rate on subsidiary debt was approximately
7.21% at June 30, 2000.
<PAGE>
The following table sets forth the mandatory reductions in principal
under all debt agreements for each of the next four years and six months, based
on amounts outstanding at June 30, 2000:
Six months ending December 31, 2000 $ 2,373
Year ending December 31, 2001 80,873
Year ending December 31, 2002 203,123
Year ending December 31, 2003 95,123
Year ending December 31, 2004 123
The Company plans to continue to explore and consider new commitments,
arrangements or transactions to refinance existing debt, increase the Company's
liquidity or decrease the Company's leverage. These could include, among other
things, the future issuance of debt and the negotiation of new or amended credit
facilities by the Company, or its subsidiaries. These could also include
entering into acquisitions, joint ventures or other investment or financing
activities, although no assurance can be given that any such transactions will
be consummated. The Company's ability to borrow under current credit facilities
and to enter into refinancings and new financings is limited by covenants
contained in its subsidiaries' credit agreements, including covenants under
which the ability to incur indebtedness is in part a function of applicable
ratios of total debt to cash flow.
The Company believes that cash and cash equivalents, internally
generated funds, borrowings under existing credit facilities, and future
financing sources will be sufficient to meet its short-term and long-term
liquidity and capital requirements. Although in the past the Company has been
able to refinance its indebtedness or obtain new financing, there can be no
assurance that the Company will be able to do so in the future or that the terms
of such financings would be favorable.
Management believes that the telecommunications industry, including the
cable television and telephone industries, continues to be in a period of
consolidation characterized by mergers, joint ventures, acquisitions, sales of
all or part of cable or telephone companies or their assets, and other
partnering and investment transactions of various structures and sizes involving
cable or other telecommunications companies. The Company continues to evaluate
new opportunities that allow for the expansion of its business through the
acquisition of additional cable television systems in geographic proximity to
its existing regional markets or in locations that can serve as a basis for new
market areas. The Company, like other cable television companies, has
participated from time to time and is participating in preliminary discussions
with third parties regarding a variety of potential transactions, and the
Company has considered and expects to continue to consider and explore potential
transactions of various types with other cable and telecommunications companies.
However, no assurances can be given as to whether any such transaction may be
consummated or, if so, when, or that additional competition from this industry
consolidation will not have an adverse effect on the Company.
Regulatory and Competitive Matters
The cable television operations of the Company may be adversely
affected by changes and developments in governmental regulation, competitive
forces and technology. The cable television industry and the Company are subject
to extensive regulation at the federal, state and local levels. The 1992 Cable
Act significantly expanded the scope of regulation of certain subscriber rates
and a number of other matters in the cable industry, such as mandatory carriage
of local broadcast stations and retransmission consent, and increased the
administrative costs of complying with such regulations. The FCC has adopted
rate regulations that establish, on a system-by-system basis, maximum allowable
rates for (i) basic and cable programming services (other than programming
offered on a per-channel or per-program basis), based upon a benchmark
methodology, and (ii) associated equipment and installation services based upon
cost plus a reasonable profit. Under the FCC rules, franchising authorities are
authorized to regulate rates for basic services and associated equipment and
installation services, and the FCC will regulate rates for regulated cable
programming services in response to complaints filed with the agency. The
Telecommunications Act of 1996 (the "1996 Act") ended FCC regulation of cable
programming service tier rates on March 31, 1999.
<PAGE>
Rates for basic and certain cable programming services are set pursuant
to a benchmark formula. Alternatively, a cable operator may elect to use a
cost-of-service methodology to show that rates for basic and cable programming
services are reasonable. Refunds with interest will be required to be paid by
cable operators who are required to reduce regulated rates. The FCC has reserved
the right to reduce or increase the benchmarks it has established. The rate
regulations also limit increases in regulated rates to an inflation indexed
amount plus increases in certain costs such as taxes, franchise fees, costs
associated with specific franchise requirements and increased programming costs.
Cost-based adjustments to these capped rates can also be made in the event a
cable operator adds or deletes channels or completes a significant system
rebuild or upgrade. Because of the limitation on rate increases for regulated
services, future revenue growth from cable services will rely to a much greater
extent than has been true in the past on increased revenues from unregulated
services and new subscribers than from increases in previously unregulated
rates.
The FCC has adopted regulations implementing all of the requirements of
the 1992 Cable Act. The FCC is also likely to continue to modify, clarify or
refine the rate regulations. Olympus cannot predict the effect of the 1996 Act
on future rulemaking proceedings or changes to the rate regulations.
Cable television companies operate under franchises granted by local
authorities which are subject to renewal and renegotiation from time to time.
Because such franchises are generally non-exclusive, there is a potential for
competition with the systems from other operators of cable television systems,
including public systems operated by municipal franchising authorities
themselves, and from other distribution systems capable of delivering television
programming to homes. The 1992 Cable Act and the 1996 Act contain provisions
which encourage competition from such other sources. The Company cannot predict
the extent to which competition will materialize from other cable television
operators, local telephone companies, other distribution systems for delivering
television programming to the home, or other potential competitors, or, if such
competition materializes, the extent of its effect on the Company.
The 1996 Act repealed the prohibition on local telephone exchange
companies ("LECs") from providing video programming directly to customers within
their local exchange areas other than in rural areas or by specific waiver of
FCC rules. The 1996 Act also authorized LECs to operate "open video systems"
("OVS") without obtaining a local cable franchise, although LECs operating such
a system can be required to make payments to local governmental bodies in lieu
of cable franchise fees. Where demand exceeds capacity, up to two-thirds of the
channels on an OVS must be available to programmers unaffiliated with the LEC.
The statute states that the OVS scheme supplants the FCC's "video dialtone"
rules. The FCC has promulgated rules to implement the OVS concept in certain
jurisdictions throughout the country.
The Company believes that the provision of video programming or other
services by telephone companies in competition with the Company's existing
operations could have an adverse effect on the Company's financial condition and
results of operations. At this time, the impact of any such effect is not known
or estimable.
<PAGE>
The Company also competes with direct broadcast satellite ("DBS")
service providers. DBS has been available to consumers since 1994. A single DBS
satellite can provide more than 100 channels of programming. DBS service can be
received virtually anywhere in the United States through the installation of a
small outdoor antenna. DBS service is being heavily marketed on a nationwide
basis by competing service providers. Congress passed the Satellite Home Viewer
Act in late 1999 which allows DBS providers to begin offering local broadcast
channels. DBS companies have since added a limited number of local channels in
some regions, a trend that will continue, thus lessening the distinction between
cable television and DBS service. Although the impact to date has not been
material, any future impact of DBS competition on the Company's future results
is not known or estimable.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
No material changes have occurred during the six months ended June 30,
2000 in principal outstanding on fixed rate debt. Principal outstanding on
variable rate debt declined approximately $64,000 and the fair market value of
fixed rate debt declined approximately $12,000 during the six months ended June
30, 2000 compared to December 31, 1999. The Company does not enter into any
derivative instruments for trading purposes.
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<PAGE>
OLYMPUS COMMUNICATIONS, L.P. AND SUBSIDIARIES
PART II - Other Information
Item 1. Legal Proceedings
None
Item 2. Changes in Securities
None
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
Exhibit 27.01 Financial Data Schedule (supplied for the information
of the Commission).
(b) Reports on Form 8-K:
The Company did not file any reports on Form 8-K during the quarter
ended June 30, 2000.
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<PAGE>
OLYMPUS COMMUNICATIONS, L.P. AND SUBSIDIARIES
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrants have duly caused this report to be signed on their behalf by the
undersigned thereunto duly authorized.
OLYMPUS COMMUNICATIONS, L.P.
BY: ACC OPERATIONS, INC.
Managing General Partner
Date: August 14, 2000 By: /s/ Timothy J. Rigas
Timothy J. Rigas
Executive Vice President, Treasurer,
Principal Accounting Officer and Principal
Financial Officer of ACC Operations, Inc.
Date: August 14, 2000 OLYMPUS CAPITAL CORPORATION
By: /s/ Timothy J. Rigas
Timothy J. Rigas
Executive Vice President, Treasurer,
Principal Accounting Officer and
Principal Financial Officer
<PAGE>
INDEX TO EXHIBITS
Exhibit List:
Please refer to Part II, Item 6 for an exhibit list.
