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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
Current Report
Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
Date of Report (date of earliest event reported) April 28, 1994
ADELPHIA COMMUNICATIONS CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 0-16014 23-2417713
(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification No.)
incorporation)
5 West Third Street - P.O. Box 472, Coudersport, PA 16915
(Address of principal executive offices) (ZIP Code)
Registrant's telephone number, including area code (814) 274-9830
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Item 5. Other Events.
(a) On April 28, 1994, Adelphia Communications Corporation (the "Company")
announced that it has extended the Expiration Date of its Exchange Offer with
respect to its $150,000,000 9-1/2% Senior Pay-In-Kind Notes Due 2004. The
Expiration Date was extended to 5:00 p.m., New York City time on May 4, 1994
from the previous date of 5:00 p.m., New York City time on April 29, 1994. The
Company issued a press release, dated April 28, 1994, a copy of which is
attached hereto as Exhibit 99.01 and is incorporated by reference herein.
(b) 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. Many aspects of
such regulation are currently the subject of judicial proceedings and
administrative or legislative proceedings or proposals. On October 5, 1992,
Congress passed the Cable Television Consumer Protection and Competition Act of
1992 (the "1992 Cable Act") which significantly expands 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 which will increase the administrative costs of
complying with such regulations. The Federal Communications Commission (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 original rate regulations became effective on September 1,
1993. Amendments to the rate regulations will become effective May 15, 1994.
The FCC ordered an interim rate freeze effective April 5, 1993 which has been
extended through May 15, 1994.
The original rate regulations required a reduction of existing rates
charged for basic services and regulated cable programming services to the
greater of (i) the applicable benchmark level or (ii) the rates in force as of
September 30, 1992 reduced by 10%, adjusted forward for inflation. The amended
regulations will generally require a reduction of up to 17 percent from the
rates for regulated services in force as of September 30, 1992, adjusted
forward for inflation and certain other factors. Rate reductions are not
required to the extent that a cable operator at its option elects to use an
alternative cost-of-service methodology and shows that rates for basic and cable
programming services are reasonable. The FCC has adopted interim rules to govern
cost-of-service showings by cable operators. Refunds with interest will be
required to be paid by cable operators who are required to reduce regulated
rates after September 1, 1993, calculated retroactively from the date of a local
franchising authority's decision with regard to basic rates, and from the date a
complaint is filed with the FCC with regard to the rates charged for regulated
programming services. The FCC has reserved the right to reduce or increase the
benchmarks it has established. The rate regulations will also limit future
increases in regulated rates to an inflation indexed amount plus increases above
the inflation index 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. 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 most of the requirements of
the 1992 Cable Act and is in the process of completing certain additional
rulemaking proceedings before the 1992 Cable Act can be fully implemented. As
noted above, amendments to the rate regulations were recently announced and the
FCC is also likely to continue to modify, clarify or refine the rate
regulations and benchmark methodology. In addition, litigation has been
instituted challenging various portions of the 1992 Cable Act and the
rulemaking proceedings including the rate regulations. The Company cannot
predict the effect or outcome of the future rulemaking proceedings, changes to
the rate regulations, or litigation. Further, because the FCC
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has only recently issued its interim rules and has not adopted final cost-of-
service rules, the Company has not determined to what extent it will be able to
utilize cost-of-service showings to justify rates.
Effective as of September 1, 1993, in accordance with the 1992 Cable Act,
the Company repackaged certain existing cable services by adjusting rates for
basic service and introducing a new method of offering certain cable services.
The Company adjusted the basic service rates and related equipment and
installation rates in all of its systems in order for such rates to be in
compliance with the applicable benchmark or equipment and installation cost
levels. The amended rules may require further adjustments to the Company's
rates. The Company also implemented a program in all of its systems called
"CableSelect" under which most of the Company's satellite-delivered programming
services are now offered individually on a per channel basis, or as a group at
a price of approximately 15% to 20% below the sum of the per channel prices of
all such services. For subscribers who elect to customize their channel lineup,
the Company will provide, for a monthly rental fee, an electronic device
located on the cable line outside the home, enabling a subscriber's television
to receive only those channels selected by the subscriber. These basic service
rate adjustments and the CableSelect program have also been implemented in all
systems managed by the Company. The Company believes CableSelect provides
increased programming choices to the Company's subscribers while providing
flexibility to the Company to respond to future changes in areas such as
customer demand and programming. Certain programmers have taken the position
that the Company's new method of offering services is inconsistent with their
programming agreements. The Company disagrees and is in discussions with these
programmers. Revenues from regulated programming services and equipment, and
revenues from CableSelect services per subscriber for the quarter ended
December 31, 1993 (the first full quarter reflecting the impact of the
implementation of rate regulations on September 1, 1993) declined 3.0% compared
to the quarter ended June 30, 1993 (the last quarter not impacted by the
implementation of rate regulations on September 1, 1993). The decline in
revenue was partially offset by increases in prices for HBO, Cinemax, TMC,
Disney, Showtime, and Prism; and by increases in the average number of basic
subscribers. A letter of inquiry, one of at least 63 sent by the FCC to
numerous cable operators, was received by an Olympus System regarding the
implementation of this new method of offering services. The Company has
responded in writing to the FCC's inquiry.
As part of its reconsideration of the original rate regulations, the FCC
has established guidelines for evaluating such "a la carte" packages on a case-
by-case basis based on a number of factors. The FCC has indicated that "a la
carte" packages which are determined to be evasions of rate regulations rather
than true enhancements of subscriber choice will be treated as regulated tiers,
and cable operators engaging in such practices may be subject to fines and/or
further rate adjustments. The Company is examining its a la carte packages and
may modify certain packages in light of these guidelines.
The Company is currently unable to predict the effect that the amended
regulations, future FCC treatment of "a la carte" packages or other future FCC
rulemaking proceedings will have on its business and results of operations in
future periods. No assurance can be given at this time that such matters will
not have a material adverse effect on the Company's business and results of
operations in the future. Also, no assurance can be given as to what other
future actions Congress, the FCC or other regulatory authorities may take or
the effects thereof on the Company.
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 contains provisions which
encourage competition from such other sources. Additionally, recent court and
administrative decisions have removed certain of the restrictions that have
limited entry into the cable television business by potential competitors such
as telephone companies, and proposals now under consideration by the FCC, and
which are being and from time to time have been considered by Congress, could
result in the elimination of other such restrictions. The Company cannot
predict the extent to which competition will materialize from other
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cable television operators, 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.
FCC rules permit local telephone companies to offer "video dialtone"
service for video programmers, including channel capacity for the carriage of
video programming and certain non-common carrier activities such as video
processing, billing and collection and joint marketing agreements. On December
15, 1992, New Jersey Bell Telephone Company filed an application with the FCC
to operate a "video dialtone" service in portions of Dover County, New Jersey,
in which the Company serves approximately 20,000 subscribers. The Company
opposed the application. On July 28, 1993, the FCC sent a letter to New Jersey
Bell stating that the application appeared to be inconsistent with the FCC's
video dialtone requirements in that insufficient capacity to serve multiple
programmers was to be made available. New Jersey Bell was given the opportunity
to amend its application which, it subsequently did. The Company then filed a
further opposition to the application. The matter has not yet been decided by
the FCC.
On December 17, 1992, the Chesapeake and Potomac Telephone Company of
Virginia and Bell Atlantic Video Service Company ("Bell Atlantic Video") filed
suit in U.S. District Court in Alexandria, Virginia seeking to declare
unconstitutional the provisions in the Cable Communications Policy Act of 1984
(the "1984 Cable Act") that prohibit telephone companies from owning a cable
television system in their telephone service areas. On August 24, 1993, the
court held that the 1984 Cable Act cross-ownership provision is
unconstitutional, and it issued an order enjoining the FCC from enforcing the
cross-ownership ban. The U.S. Justice Department has appealed this decision to
the U.S. Court of Appeals for the Fourth Circuit. Similar suits have been filed
in other federal district courts. In addition, legislation which would alter or
eliminate the cross-ownership ban is under active consideration in Congress.
The Company cannot predict the outcome of the New Jersey Bell video
dialtone proceeding or the Bell Atlantic Video litigation. However, the Company
believes that the provision of video programming by telephone companies with
considerable financial resources 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 magnitude of any such effect is
not known or estimable.
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Item 7. Financial Statements and Exhibits.
(c) The following exhibit is filed as part of this report on Form 8-K:
Exhibit 99.01 Press Release by Adelphia Communications Corporation
dated April 28, 1994.
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SIGNATURE
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.
Date: April 28, 1994 ADELPHIA COMMUNICATIONS CORPORATION
(Registrant)
/s/ Timothy J. Rigas
Timothy J. Rigas
Senior Vice President
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Exhibit Index
Exhibit No. Description
Exhibit 99.01 Press Release by Adelphia Communications Corporation dated
April 28, 1994.
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Exhibit 99.01
FOR RELEASE: IMMEDIATE
CONTACT: Timothy J. Rigas, Senior Vice President
(814) 274-9830
ADELPHIA COMMUNICATIONS EXTENDS EXCHANGE OFFER TO MAY 4, 1994
Coudersport, PA - April 28, 1994
Adelphia Communications Corporation ("Adelphia") (NASDAQ-NMS: ADLAC) announced
today that it has extended the Expiration Date of its Exchange Offer with
respect to its $150,000,000 aggregate principal amount of 9-1/2% Senior Pay-In-
Kind Notes Due 2004. The Expiration Date for the Exchange Offer has been
extended to 5:00 p.m. New York City time on May 4, 1994, from the previous date
of 5:00 p.m. New York City time on April 29, 1994. In the Exchange Offer,
Adelphia is offering to exchange new 9-1/2% Senior Pay-In-Kind Notes Due 2004,
Series B, which are registered under the Securities Act of 1933 for its
outstanding 9-1/2% Senior Pay-In-Kind Notes Due 2004, Series A, which were
privately placed to qualified institutional investors. To the best of
Adelphia's information and belief, as of April 28, 1994, approximately 85% of
the 9-1/2% Senior Pay-In-Kind Notes Due 2004, Series A, had been tendered for
exchange. The Exchange Agent for the Exchange Offer is Bank of Montreal Trust
Company, New York, New York.
