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 September 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 __
-
<PAGE>
<TABLE>
<CAPTION>
OLYMPUS COMMUNICATIONS, L.P. AND SUBSIDIARIES
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION
Page
Item 1. Financial Statements
<S> <C>
Condensed Consolidated Balance Sheets - December 31, 1999 and September 30, 2000.............. 3
Condensed Consolidated Statements of Operations - Three and Nine Months Ended
September 30, 1999 and 2000.................................................................. 4
Condensed Consolidated Statements of Cash Flows - Nine Months Ended September 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 6. Exhibits and Reports on Form 8-K.............................................................. 15
SIGNATURES............................................................................................ 16
Index to Exhibits..................................................................................... 17
</TABLE>
SAFE HARBOR STATEMENT
The Private Securities Litigation Reform Act of 1995 provides a "safe harbor"
for forward-looking statements. Statements included in this Form 10-Q, including
Management's Discussion and Analysis of Financial Condition and Results of
Operations, which are not historical facts are forward-looking statements, such
as information relating to the effect 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 "forward looking
statements" can be identified by the use of forward looking terminology such as
"believes," "expects," "may," "will," "should," "intends," or "anticipates" or
the negative thereof and the variations thereon or comparable terminology, or by
discussions of strategy that involves risks or uncertainties. 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, the
Company's ability to construct, expand and upgrade its networks, reliance on
vendors, 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. 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." 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.
<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, September 30,
1999 2000
---------------- -----------------
ASSETS
Cable systems, at cost, net of accumulated depreciation and amortization:
<S> <C> <C>
Property, plant and equipment $ 429,426 $ 511,454
Intangible assets 651,580 637,526
---------------- ---------------
Total cable systems 1,081,006 1,148,980
Cash and cash equivalents 4,374 6,807
Subscriber receivables - net 15,829 18,742
Prepaid expenses and other assets - net 15,495 19,131
---------------- -----------------
Total $ 1,116,704 $ 1,193,660
================ =================
LIABILITIES AND PARTNERS' EQUITY (DEFICIENCY)
Subsidiary debt $ 337,250 $ 308,750
Parent debt 203,537 203,149
Other debt 107,540 115,116
Accounts payable 25,008 29,672
Subscriber advance payments and deposits 6,468 10,151
Accrued interest and other liabilities 28,549 39,943
Due to affiliates - net 38,542 154,591
Deferred income taxes 40,417 34,445
---------------- -----------------
Total liabilities 787,311 895,817
---------------- -----------------
Commitments and contingencies (Note 5)
Partners' equity:
Limited partners' interests 407,813 407,813
General partners' deficiency (78,420) (109,970)
---------------- -----------------
Total partners' equity 329,393 297,843
---------------- -----------------
Total $ 1,116,704 $ 1,193,660
================ =================
See the accompanying notes to condensed consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
OLYMPUS COMMUNICATIONS, L.P. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
(Dollars in thousands)
Three Months Ended Nine Months Ended
September 30, September 30,
------------------------------ -------------------------------
1999 2000 1999 2000
--------------- -------------- --------------- ---------------
<S> <C> <C> <C> <C>
Revenues $ 64,640 $ 67,042 $ 192,857 $ 202,423
--------------- -------------- --------------- ---------------
Operating expenses:
Direct operating and programming 22,761 25,859 67,625 78,284
Selling, general and administrative 11,412 10,119 34,408 36,462
Depreciation and amortization 17,718 20,467 54,118 61,834
Management fees to managing affiliate 3,868 6,666 13,324 16,686
--------------- -------------- --------------- ---------------
Total 55,759 63,111 169,475 193,266
--------------- -------------- --------------- ---------------
Operating income 8,881 3,931 23,382 9,157
--------------- -------------- --------------- ---------------
Other expense:
Interest expense (5,343) (12,933) (24,939) (39,048)
Interest expense - affiliates (16,566) (1,247) (35,101) (2,069)
Other (273) 406 (393) 463
--------------- -------------- --------------- ---------------
Total (22,182) (13,774) (60,433) (40,654)
--------------- -------------- --------------- ---------------
Loss before income taxes (13,301) (9,843) (37,051) (31,497)
Income tax (expense) benefit (94) 4,091 (274) 5,972
--------------- -------------- --------------- ---------------
Net loss (13,395) (5,752) (37,325) (25,525)
Priority return on preferred and senior
limited partner interests (27,324) -- (77,890) --
--------------- -------------- --------------- ---------------
Net loss of general and limited partners
after priority return $ (40,719) $ (5,752) $ (115,215) $ (25,525)
=============== ============== =============== ===============
See the accompanying notes to condensed consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
OLYMPUS COMMUNICATIONS, L.P. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(Dollars in thousands)
Nine Months Ended
September 30,
----------------- ----------------
1999 2000
----------------- ----------------
Cash flows from operating activities:
<S> <C> <C>
Net loss $ (37,325) $ (25,525)
Adjustments to reconcile net loss to net cash provided by operating
activities:
Depreciation and amortization 54,118 61,834
Non-cash interest -- 5,962
Deferred income taxes 274 (5,972)
Changes in operating assets and liabilities, net of effects of
acquisitions:
Subscriber receivables (1,215) (2,913)
Prepaid expenses and other assets (2,464) (8,352)
Accounts payable 261 4,665
Subscriber advance payments and deposits 1,647 3,683
Accrued interest and other liabilities (3,145) 4,467
----------------- ----------------
Net cash provided by operating activities 12,151 37,849
----------------- ----------------
Cash flows from investing activities:
Acquisitions (2,124) (2,274)
Capital expenditures (70,666) (119,778)
----------------- ----------------
Cash used for investing activities (72,790) (122,052)
----------------- ----------------
Cash flows from financing activities:
Proceeds from debt 175,000 343,749
Repayments of debt (521,401) (373,218)
Payments of priority returns (42,825) --
Amounts advanced from affiliates 364,011 116,130
Issuance of preferred limited partner interests 47,775 --
Capital distributions (50) (25)
----------------- ----------------
Net cash provided by financing activities 22,510 86,636
----------------- ----------------
(Decrease) increase in cash and cash equivalents (38,129) 2,433
Cash and cash equivalents, beginning of period 44,617 4,374
----------------- ----------------
Cash and cash equivalents, end of period $ 6,488 $ 6,807
================= ================
See the accompanying notes to condensed consolidated financial statements.
</TABLE>
<PAGE>
OLYMPUS COMMUNICATIONS, L.P. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
(Dollars in thousands)
1. The Partnership and Basis of Presentation
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.
The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions of Form 10-Q and Rule
10-01 of Regulation S-X. Such principles are applied on a basis consistent with
those reflected in the December 31, 1999 Form 10-K Report of the Company filed
with the Securities and Exchange Commission. The condensed consolidated
financial statements contained herein should be read in conjunction with the
consolidated financial statements and related notes contained in the Company's
1999 Annual Report on Form 10-K. In the opinion of management, the unaudited
condensed consolidated financial statements contained herein include all
adjustments (consisting of only recurring adjustments) necessary for a fair
presentation of the results of operations for the interim periods presented.
These interim results of operations are not necessarily indicative of results
for future periods.
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, Adelphia closed on a $2,250,000 bank credit facility
through certain subsidiaries and affiliates of Adelphia and Olympus. 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. In addition, on September 28, 2000, an incremental
$500,000, 9 1/4 year term loan was closed, which formed an additional part of
the bank credit facility, bringing the total amount of the bank credit facility
to $2,750,000. No amounts related to Olympus were borrowed as of September 30,
2000.
<PAGE>
3. Supplemental Financial Information
Cash payments for interest were $33,302 and $38,935 for the nine months
ended September 30, 1999 and 2000, respectively. Accumulated depreciation of
property, plant and equipment amounted to $212,230 and $246,326 at December 31,
1999 and September 30, 2000, respectively. Accumulated amortization of
intangible assets amounted to $174,880 and $199,414 at December 31, 1999 and
September 30, 2000, respectively.
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. Income taxes
Income tax benefit (expense) for the three and nine months ended September
30, 1999 and 2000 was substantially comprised of deferred taxes.
5. 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.
6. Recent Accounting Pronouncements
Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting
for Derivative Instruments and Hedging Activities," as amended by SFAS 137,
"Accounting for Derivative Instruments and Hedging Activities - Deferral of the
Effective Date of FASB Statement No. 133", and SFAS 138, "Accounting for Certain
Derivative Instruments and Certain Hedging Activities" is effective for the
Company as of January 1, 2001. SFAS No. 133, as amended, establishes accounting
and reporting standards requiring that every derivative instrument be recorded
in the balance sheet as either an asset or liability measured at its fair value
with changes in fair value reflected in the statement of operations.
The Company does not expect adoption of this statement to have a significant
effect on its consolidated results of operations or financial position.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
(Dollars in thousands)
See Safe Harbor Statement following the table of contents, which section is
incorporated by reference herein.
Introduction
Olympus Communications, L.P. and subsidiaries ("Olympus" or the "Company")
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 ("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.
Results of Operations
Three and Nine Months Ended September 30, 2000
Olympus earned substantially all of its revenues in the three and nine
months ended September 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, digital cable and high speed
data services, pay per view programming and electronic security monitoring
services.
The changes in Olympus' operating results for the three and nine months
ended September 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.
<TABLE>
<CAPTION>
The following table sets forth certain cable television system data at the
dates indicated.
September 30,
---------------------------------- Percent
1999 2000 Increase
---------------- ---------------- -----------
<S> <C> <C> <C>
Homes Passed by Cable 970,630 989,362 1.9%
Basic Subscribers 646,759 657,889 1.7%
</TABLE>
<PAGE>
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 Nine Months Ended
September 30, September 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 35.2% 38.6% 35.1% 38.8%
Selling, general and administrative 17.7% 15.1% 17.8% 18.0%
Depreciation and amortization 27.4% 30.5% 28.1% 30.5%
Management fees to managing affiliate 6.0% 9.9% 6.9% 8.2%
------------- ------------- ------------- -------------
Operating income 13.7% 5.9% 12.1% 4.5%
============= ============= ============= =============
</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 Nine Months Ended
September 30, September 30,
1999 2000 1999 2000
------------ ----------- ----------- -----------
<S> <C> <C> <C> <C>
Cable service and equipment 74% 71% 75% 71%
Premium programming services 9% 9% 9% 9%
Advertising sales and other services 17% 20% 16% 20%
</TABLE>
Total revenues increased approximately 3.7% and 5.0% for the three and nine
month periods ended September 30, 2000 respectively, 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.
The increase in revenues was attributable to the following:
<TABLE>
<CAPTION>
Three Months Nine Months
Ended Ended
September 30, 2000 September 30, 2000
--------------------- ---------------------
<S> <C> <C>
New services 58.5% 56.3%
Electronic security monitoring 23.7% 28.7%
Advertising 12.8% 10.5%
Basic subscriber growth 5.0% 4.5%
</TABLE>
<PAGE>
Direct Operating and Programming Expenses
Direct operating and programming expenses, which are mainly basic and
premium programming costs and technical expenses, increased 13.6% and 15.8% for
the three and nine month periods ended September 30, 2000 respectively, 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 as well as increased 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, decreased 11.3% for the three month period ended September 30, 2000
and increased 6.0% for the nine month period ended September 30, 2000 compared
with the same periods of the prior year. The decrease during the three months
ended September 30, 2000 as compared to the same period of the prior year is due
to higher costs associated with prior period marketing efforts. The increase
during the nine months ended September 30, 2000 was primarily due to incremental
costs associated with providing new services, marketing expenses and wages.
Depreciation and Amortization
Depreciation and amortization was higher for the three and nine month
periods ended September 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.
Interest Expense
Interest expense increased 142.1% and 56.6% for the three and nine month
periods ended September 30, 2000, respectively, compared with the same periods
of the prior year. These increases were 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 92.5% and 94.1% for the three and nine month periods ended
September 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.
<PAGE>
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.
On April 14, 2000, Adelphia closed on a $2,250,000 bank credit facility
through certain subsidiaries and affiliates of Adelphia and Olympus. 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. In addition, on September 28, 2000, an incremental
$500,000, 9 1/4 year term loan was closed, which formed an additional part of
the bank credit facility, bringing the total amount of the bank credit facility
to $2,750,000. No amounts related to Olympus were borrowed as of September 30,
2000.
Capital expenditures for the nine months ended September 30, 1999 and 2000
were $70,666 and $119,778, respectively. This increase was primarily due to
acquisitions and cable plant rebuilds and upgrades to expand services. The
Company expects that capital expenditures for the year ending December 31, 2000
will be in a range of approximately $150,000 to $180,000.
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 September 30, 2000, the Company's total outstanding debt aggregated
approximately $627,000, which included approximately $203,000 of parent debt,
and approximately $424,000 of subsidiary and other debt. In addition, the
Company had an aggregate of approximately $6,800 in cash and cash equivalents,
and as of September 30, 2000, approximately $1,440,000 in unused credit lines
with banks, all of which was also available to affiliates, part of which is
subject to achieving certain levels of operating performance.
At September 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
7.42% at September 30, 2000.
The following table sets forth the mandatory reductions in principal under
all debt agreements for each of the next four years and three months, based on
amounts outstanding at September 30, 2000:
<TABLE>
<S> <C>
Three months ending December 31, 2000 $ 38,217
Year ending December 31, 2001 80,967
Year ending December 31, 2002 209,247
Year ending December 31, 2003 95,217
Year ending December 31, 2004 217
</TABLE>
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
<PAGE>
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.
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
<PAGE>
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.
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.
<PAGE>
Item 3. Quantitative and Qualitative Disclosures about Market Risk
No material changes have occurred during the nine months ended September 30,
2000 in principal outstanding on fixed rate debt. Principal outstanding on
variable rate debt declined approximately $28,500 and the fair market value of
fixed rate debt declined approximately $10,250 during the nine months ended
September 30, 2000 compared to December 31, 1999. The Company does not enter
into any derivative instruments for trading purposes.
------------------------------------------------
<PAGE>
PART II - Other Information
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
10.01 Credit Agreement dated as of April 14, 2000, among Century Cable
Holdings, LLC, Ft. Myers Cablevision, LLC, and Highland Prestige
Georgia, Inc., Bank of America, N.A. and the Chase Manhattan Bank,
Co-Administrative Agents and Toronto Dominion (Texas), Inc.,
Syndication Agent. (Incorporated by reference herein is Exhibit 10.01
to the Form 10-Q of Adelphia Communications Corporation for the
quarter ended March 31, 2000 (File No. 0-16014)).
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
September 30, 2000.
<PAGE>
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: November 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: November 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.
