<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A
Amendment No. 1
[X] Annual Report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
for the fiscal year ended March 31, 1994
[ ] 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: 0-16014
ADELPHIA COMMUNICATIONS CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 23-2417713
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
5 West Third Street
P.O. Box 472
Coudersport, Pennsylvania 16915
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 814-274-9830
Securities registered pursuant to Section 12(b) of the Act: None.
Securities registered pursuant to Section 12(g) of the Act:
Class A Common Stock, $.01 par value.
Indicate by check mark 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
------- ------
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.______
Aggregate market value of outstanding Class A Common Stock $.01 par value, held
by non-affiliates of the Registrant at June 27, 1994 was $84,874,087.50, based
on the closing sale price as computed by the NASDAQ National Market System as of
that date. For purposes of this calculation only, affiliates are deemed to be
directors and executive officers of the Registrant.
Number of outstanding shares of Class A Common Stock, $.01 par value, at June
27, 1993 was 13,507,604.
Number of outstanding shares of Class B Common Stock, $.01 par value, at June
27, 1993 was 10,944,476.
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The undersigned registrant hereby amends the following items, financial
statements, exhibits or other portions of its Annual Report on Form 10-K for the
fiscal year ended March 31, 1994 as set forth in the pages attached hereto:
Item 10 - Directors and Executive Officers of the Registrant
Item 11 - Executive Corporation
Item 12 - Security Ownership of Certain Beneficial Owners and Management
Item 13 - Certain Relationships and Related Transactions
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.
July 29, 1994 ADELPHIA COMMUNICATIONS CORPORATION
By: /s/ Timothy J. Rigas
--------------------------------
Timothy J. Rigas
Senior Vice President, Chief
Financial Officer, Treasurer,
Director and Chief Accounting
Officer
<PAGE>
Item 10. - Directors and Executive Officers of the Registrant.
The information set forth in Part I under the caption "Executive Officers
of the Registrant" is incorporated herein by reference.
Board of Directors
Perry S. Patterson
Age 77
Perry S. Patterson became a director of Adelphia on September 9,
1986. Since 1977, Mr. Patterson has practiced law in Coudersport, Pennsylvania.
From 1975 to 1977, Mr. Patterson served as President Judge of the Court of
Common Pleas of the 55th Judicial District in Potter County, Pennsylvania. He
was a partner of the law firm of Kirkland & Ellis, in Chicago, Illinois and
Washington, D.C. from 1950 to 1973. Mr. Patterson attended Georgetown
University and graduated from Northwestern University Law School in 1941.
John J. Rigas
Age 69
John J. Rigas is the founder, Chairman, President and Chief Executive
Officer of Adelphia and is President of its subsidiaries. Mr. Rigas has served
as President or general partner of most of the constituent entities which became
wholly-owned subsidiaries of Adelphia upon its formation in 1986, as well as the
cable television operating companies acquired by the Company which were wholly
or partially owned by members of the Rigas Family. Mr. Rigas has owned and
operated cable television systems since 1952. Among his business and community
service activities, Mr. Rigas is Chairman of the Board of Directors of Citizens
Bank Corp., Inc., Coudersport, Pennsylvania and a member of the Board of
Directors of the Charles Cole Memorial Hospital. He is a director of the
National Cable Television Association and a past President of the Pennsylvania
Cable Television Association. He is also a member of the board of directors of
C-SPAN and the Cable Advertising Bureau, and is a Trustee of St. Bonaventure
University. He graduated from Rensselaer Polytechnic Institute with a B.S. in
Management Engineering in 1950.
John J. Rigas is the father of Michael J. Rigas, Timothy J. Rigas and
James P. Rigas, each of whom currently serves as a director and executive
officer of the Company.
Michael J. Rigas
Age 40
Michael J. Rigas is Senior Vice President, Operations of Adelphia and
is a Vice President of its subsidiaries. Since 1981, Mr. Rigas has served as a
Vice President, general partner or other officer of the constituent entities
which became wholly-owned subsidiaries of Adelphia upon its formation in 1986,
as well as the cable television operating companies acquired by the Company
which were wholly or partially owned by members of the Rigas Family. From 1979
to 1981, he worked for Webster, Chamberlain & Bean, a Washington, D.C. law firm.
Mr. Rigas graduated from Harvard University (magna cum laude) in 1976 and
received his Juris Doctor degree from Harvard Law School in 1979.
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Timothy J. Rigas
Age 38
Timothy J. Rigas is Senior Vice President, Chief Financial Officer,
Chief Accounting Officer and Treasurer of Adelphia and a Vice President of its
subsidiaries. Since 1979, Mr. Rigas has served as Vice President, general
partner or other officer of the constituent entities which became wholly-owned
subsidiaries of Adelphia upon its formation in 1986, as well as the cable
television operating companies acquired by the Company which were wholly or
partially owned by members of the Rigas Family. Mr. Rigas graduated from the
University of Pennsylvania, Wharton School, with a B.S. degree in Economics (cum
laude) in 1978.
James P. Rigas
Age 36
James P. Rigas is Vice President of Adelphia and a Vice President of
its subsidiaries. Since February 1986, Mr. Rigas has served as a Vice President
or other officer of the constituent entities which became wholly-owned
subsidiaries of Adelphia upon its formation in 1986, as well as the cable
television operating companies acquired by the Company which were wholly or
partially owned by members of the Rigas Family. Mr. Rigas graduated from
Harvard University (magna cum laude) in 1980 and received a Juris Doctor degree
and an M.A. degree in Economics from Stanford University in 1984. From June
1984 to February 1986, he was a consultant with Bain & Co., a management
consulting firm.
Daniel R. Milliard
Age 47
Daniel R. Milliard is Vice President and Secretary of Adelphia and its
subsidiaries, and also serves as President of a subsidiary, Hyperion
Telecommunications, Inc. Since 1982, Mr. Milliard served as Vice President,
Secretary and/or General Counsel of Adelphia and the constituent entities which
became wholly-owned subsidiaries of Adelphia, as well as the cable television
operating companies acquired by the Company which were wholly or partially owned
by members of the Rigas Family. He served as outside general counsel to the
Company's predecessors from 1979 to 1982. Mr. Milliard graduated from American
University in 1970 with a Bachelor of Science degree in Business Administration.
He received an M.A. degree in Business from Central Missouri State University in
1971, where he was an Instructor in the Department of Finance, School of
Business and Economics, from 1971-1973, and received a Juris Doctor degree from
the University of Tulsa School of Law in 1976. He is a director of Citizens
Bank Corp., Inc. in Coudersport, Pennsylvania and is President of the Board of
Directors of the Charles Cole Memorial Hospital.
Pete J. Metros
Age 54
Pete J. Metros became a director of Adelphia on November 4, 1986. Mr.
Metros has been President and a member of the Board of Directors of Rapistan
Demag Corporation, a subsidiary of Mannesmann AG, since December 1991. From
August 1987 to December 1991, he was President of Rapistan Corp., the
predecessor of Rapistan Demag Corporation, and of Truck Products Corp., both of
which were major subsidiaries of Lear Siegler Holdings Corp. From 1980 to
August 1987, Mr. Metros was President of the Steam Turbine, Motor & Generator
Division of Dresser-Rand Company. From 1964 to 1980, he held various positions
at the General Electric Company, the last of which was Manager--Manufacturing
for the Large Gas Turbine Division. Mr. Metros is also on the Board of
Directors of Borroughs Corporation of Kalamazoo, Michigan. Mr. Metros received
a BS degree from the Georgia Institute of Technology in 1962.
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Certain Reports
Section 16(a) of the Securities Exchange Act requires the Company's
directors, executive officers and persons who beneficially own more than ten
percent of a class of the Company's registered equity securities to file with
the Securities and Exchange Commission and deliver to the Company initial
reports of ownership and reports of changes in ownership of such registered
equity securities.
To the Company's knowledge, based solely on a review of the copies of
such reports furnished to the Company or written representations that no other
reports were required, the Company's directors, executive officers and more than
ten percent stockholders filed on a timely basis all reports due under Section
16(a) for the period from April 1, 1993 through March 31, 1994, except that
Perry S. Patterson filed two late reports on Form 4 covering a total of three
transactions in the Company's Class A Common Stock.
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Item 11. - Executive Compensation.
Summary Compensation Table
The following table sets forth certain information regarding
compensation paid by the Company for services rendered during the Company's last
three fiscal years in the period ended March 31, 1994 to the Company's Chief
Executive Officer and the four most highly compensated executive officers whose
compensation exceeded $100,000 in salary and bonus during fiscal 1994:
<TABLE>
<CAPTION>
Annual Compensation
All Other
Name and Fiscal Salary Compensation (a)
Principal Position Year ($) ($)
- - ------------------ ---- ----- ---------
<S> <C> <C> <C>
John J. Rigas 1994 576,153 119,750
Chairman, President and 1993 552,358 200,750
Chief Executive Officer 1992 553,525 200,750
Michael J. Rigas 1994 124,658 10,750
Senior Vice-President - Operations 1993 124,658 10,750
1992 124,921 10,750
Timothy J. Rigas 1994 124,658 10,750
Senior Vice President, Chief 1993 124,658 10,750
Financial Officer, Treasurer 1992 124,921 10,750
and Chief Accounting Officer
James P. Rigas 1994 124,658 10,750
Vice President - Operations 1993 124,658 10,750
1992 124,921 10,750
Daniel R. Milliard 1994 188,849 5,250
Vice President and Secretary 1993 172,527 5,250
1992 168,310 5,250
</TABLE>
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(a) Pursuant to the Securities and Exchange Commission transitional provisions,
explanations of the amounts of All Other Compensation are excluded for
fiscal 1993 and 1992. Fiscal 1994 amounts include (i) life insurance
premiums paid during each respective fiscal year by the Company under
employment agreements with John J. Rigas, Michael J. Rigas, Timothy J.
Rigas, James P. Rigas and Daniel R. Milliard in premium payment amounts of
$119,000, $10,000, $10,000, $10,000 and $4,500, respectively, on policies
owned by the respective named executive officers and (ii) $750 in Company
matching contributions for each executive officer under the Company's
401(k) savings plan. The amounts shown above do not include transactions
between the Company and certain executive officers or certain entities
which are privately owned in whole or in part by the executive officers
named in the table. See "Certain Transactions."
All of the executive officers are eligible to receive bonuses of Class A
Common Stock under the Company's Restricted Stock Bonus Plan, as amended, and
options to purchase Class A Common Stock under the Stock Option Plan of 1986, as
amended, to be awarded or granted at the discretion of the Bonus Committee (as
defined therein) and Option Committee (as defined therein), respectively,
subject to certain limitations on the number of shares that may be awarded to
each executive officer under each of the Plans. No awards were made under
either the Restricted Stock Bonus Plan or the Stock Option Plan of 1986 during
fiscal 1994.
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Employment Contracts and Termination of Employment
Each of the named executive officers has an employment agreement with the
Company which is automatically renewable each year unless one party gives the
other prior notice and which provides among other things for compensation review
by the Compensation Committee, the insurance premium payments noted above, and
benefits. In addition, under such employment agreements, upon termination of
such employment for any reason other than "for cause," each of the executive
officers will be entitled to receive severance pay equal to three months of the
salary plus the amount of insurance premiums payable under such officer's
employment agreement which, as of April 1, 1994, in the aggregate in the case of
John J. Rigas would be approximately $144,000.
Board of Directors Compensation
Directors who are not also employees of the Company each receive
compensation from the Company for services as a director at a rate of $750
plus reimbursement of expenses for each Board and committee meeting attended.
Directors who are employees of the Company do not receive any compensation for
services as a director or as a member of Board committees.
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Item 12. - Security Ownership of Certain Beneficial Owners and Management.
The following table sets forth, based on information available to the
Company as of June 22, 1994, certain information with respect to the beneficial
ownership of Class A Common Stock and Class B Common Stock by each director, all
officers and directors of Adelphia as a group, and each person known to Adelphia
to own beneficially more than 5% of such Common Stock. Unless otherwise noted,
the individuals have sole voting and investment power. The business address of
each such person named below, unless otherwise noted, is 5 West Third Street,
Coudersport, Pennsylvania 16915.
<TABLE>
<CAPTION>
Shares of Percent of Shares of Percent of
Class A Class A Class B Class B
Common Common Common Common
Name and Addresses Stock Stock Stock Stock
- - ------------------ ----- ----- ----- -----
<S> <C> <C> <C> <C>
John J. Rigas (a) (b) 5,883,004 (c) 53.8%
Michael J. Rigas (a) (b) 1,915,970 (c) 17.5%
Timothy J. Rigas (a) (b) 1,915,970 (c) 17.5%
James P. Rigas (a) (b) 1,151,634 (c) 10.5%
Daniel R. Milliard 1,000 (d) (e) 0 ---
Perry S. Patterson 1,700 (f) 0 ---
Pete J. Metros 100 (f) 0 ---
All officers and directors as a group
(twelve persons) 17,359,335 (a)(c) (b) 10,572,731 (c) 96.6%
Syracuse Hilton Head Holdings, L.P. 1,458,151 (g) 10.8% --- ---
5 West Third Street
Coudersport, Pennsylvania 16915
Ionian Communications, L.P. 940,000 (h) 6.9% --- ---
5 West Third Street
Coudersport, Pennsylvania 16915
Highland Holdings 4,374,453 (i) 32.4% --- ---
5 West Third Street
Coudersport, Pennsylvania 16915
Ellen K. Rigas (j) (k) 371,762 (c) 3.4%
5 West Third Street
Coudersport, Pennsylvania 16915
The Capital Group, Inc. 682,500 (l) 5.1% --- ---
333 South Hope Street
Los Angeles, California 90071
</TABLE>
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(a) The holders of Class B Common Stock are deemed to be beneficial owners of
an equal number of shares of Class A Common Stock because Class B Common
Stock is convertible into Class A Common Stock on a one-to-one basis. In
addition, the following persons own or have the power to direct the voting
of shares of Class A Common Stock in the following amounts: John J. Rigas,
369,400 shares--9,300 shares directly and 360,100 shares through Ionian
Communications, L.P. ("Ionian"); Michael J. Rigas, 193,500 shares--200
shares directly and 193,300 shares through Ionian; Timothy J. Rigas,
193,500 shares--200 shares directly and 193,300 shares through Ionian;
James P. Rigas, 193,300 shares indirectly through Ionian. See note (h)
below. John J. Rigas shares voting power with his spouse with respect to
106,300 of such shares held through Ionian. Each of John J. Rigas, Michael
J. Rigas, Timothy J. Rigas and James P. Rigas also shares voting and
dispositive power with respect to 4,374,453 shares of Class A Common Stock
held by Highland Holdings, and 1,458,151 shares of Class A Common Stock
held by Syracuse Hilton Head Holdings, L.P. See notes (g) and (i) below.
(b) After giving effect to the conversion solely by each individual holder of
all of his Class B Common Stock into Class A Common Stock and including all
shares of Class A Common Stock currently held by such individual holder or
over which such individual holder has or shares voting or investment power
as disclosed in note (a) above or note (h) below, the percentage of Class A
Common Stock owned by John J. Rigas, Michael J. Rigas, Timothy J. Rigas and
James P. Rigas, and by all officers and directors as a group (twelve
persons), would be 65.3%, 56.3%, 56.3%, 54.1% and 72.1%, respectively.
Further, after giving effect to an additional 4,966,540 shares of Class A
Common Stock of which John J. Rigas has the right to direct the voting in
the election of directors pursuant to the Class B Stockholders Agreement
discussed in the paragraph following this table (and assuming the parties
to such agreement converted their Class B Common Stock into Class A Common
Stock), as to all of which additional shares John J. Rigas disclaims
beneficial ownership, the percentage of Class A Common Stock owned by John
J. Rigas would be 72.4%.
(c) The amounts shown include 97,949 of the same shares which are owned of
record by Dorellenic, and such shares are only included once for "All
officers and directors as a group." The named Rigas individuals have shared
voting and investment power with respect to these shares.
(d) Daniel R. Milliard shares voting and investment power with his spouse with
respect to these shares. In addition, Daniel R. Milliard is deemed to
share voting and investment power with respect to 4,374,453 shares of Class
A Common Stock held by Highland Holdings. See note (i) below.
(e) Including all shares of Class A Common Stock over which Daniel R. Milliard
has or shares voting or investment power as disclosed in note (d) above,
the percentage of Class A Common Stock owned by Daniel R. Milliard would be
32.4%.
(f) Less than 1%.
(g) Syracuse Hilton Head Holdings, L.P. ("SHHH"), Doris Holdings, L.P.
("Doris"), the general partner of SHHH, and Eleni Acquisition, Inc., the
general partner of Doris, are affiliates of John J. Rigas, Michael J.
Rigas, Timothy J. Rigas and James P. Rigas, each of whom has shared voting
and investment power with respect to the shares held by SHHH.
(h) Ionian and Iliad Holdings, Inc., Ionian's general partner, are affiliates
of John J. Rigas, Michael J. Rigas, Timothy J. Rigas and James P. Rigas.
Through irrevocable proxies, each of the above-named individuals shares
with Ionian the power to vote or direct the vote of such number of shares
of Class A Common Stock held by Ionian as is specified in note (a) above.
In addition, through agreements with Ionian, John J. Rigas (individually
and jointly with his spouse), Michael J. Rigas, Timothy J. Rigas and James
P. Rigas collectively share with Ionian the power to dispose of all 940,000
shares of Class A Common Stock held by Ionian.
(i) Highland Holdings ("Highland") is a general partnership, the general
partners of which include John J. Rigas, Michael J. Rigas, Timothy J.
Rigas, James P. Rigas, Daniel R. Milliard and Ellen K.
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<PAGE>
Rigas, each of whom is deemed to share voting and investment power with
respect to the shares held by Highland.
(j) As a holder of Class B Common Stock, Ellen K. Rigas is deemed to be the
beneficial owner of an equal number of shares of Class A Common Stock
because Class B Common Stock is convertible into Class A Common Stock on a
one-to-one basis. In addition, Ellen K. Rigas owns 1,600 shares of Class A
Common Stock directly and shares voting and investment power with respect
to 4,374,453 shares of Class A Common Stock held by Highland. See note (i)
above. Ellen K. Rigas is the daughter of John J. Rigas.
(k) After giving effect to the conversion of all of Ellen K. Rigas' Class B
Common Stock into shares of Class A Common Stock and including all shares
of Class A Common Stock held by Ellen K. Rigas or over which Ellen K. Rigas
has or shares voting or investment power as discussed in note (j) above,
the percentage of Class A Common Stock owned by Ellen K. Rigas would be
34.2%.
(l) According to a Schedule 13G, the named entity has sole dispositive power
with respect to all of such shares, and sole voting power with respect to
262,500 of such shares. An operating subsidiary of the named entity,
Capital Research and Management Company, excercises investment discretion
with respect to 350,000 of such shares, and another operating subsidiary,
Capital Group Trust Company, exercises investment discretion with respect
to 330,000 of such shares, and exercises sole voting power over 260,000 of
such shares.
John J. Rigas, Michael J. Rigas, Timothy J. Rigas, James P. Rigas, Ellen K.
Rigas, Daniel R. Milliard, Dorellenic and the Company have entered into a Class
B Stockholders Agreement providing that such stockholders shall vote their
shares of Common Stock for the election of directors designated by a majority of
voting power (as defined in the Agreement) of the shares of Common Stock held by
them. The Class B Stockholders Agreement also provides that, in the absence of
the consent of the holders of a majority of the voting power of the shares of
Common Stock owned by the parties to the Agreement, (i) none of the stockholder
parties may sell, assign or transfer all or any part of their shares of Common
Stock in a public sale (as defined in the Agreement) without first offering the
shares to the other parties to the Agreement and (ii) no stockholder party may
accept a bona fide offer from a third party to purchase shares of such
stockholder without first offering the shares to the Company and then to the
other parties to the Class B Stockholders Agreement. In addition, each party
has certain rights to acquire the shares of Common Stock of the others under
certain conditions. John J. Rigas has also entered into a Stock Purchase
Agreement with the other holder of Class B Common Stock who is not a party to
the Class B Stockholders Agreement which gives John J. Rigas certain rights to
acquire the shares of Common Stock of such stockholder under certain conditions.
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Item 13. - Certain Relationships and Related Transactions.
Management Services
During the fiscal year ended March 31, 1994, the Company provided
management services for certain cable television systems not owned by the
Company, including managed partnerships ("Managed Partnerships") in which John
J. Rigas, Michael J. Rigas, Timothy J. Rigas, James P. Rigas, Daniel R. Milliard
and Ellen K. Rigas have varied ownership interests. These services included
supervision of technical and business operations, accounting, marketing,
programming, purchasing, field engineering and other technical and
administrative nonfield services. During these periods, the Managed
Partnerships paid the Company five to six percent of system revenues for such
services. Other fees were charged by the Company to the Managed Partnerships
during these periods for goods and services including mark-ups on the Company's
volume purchases of equipment, pay programming and other goods and services. In
addition, the Managed Partnerships charged the Company for system and corporate
costs during these periods. The net fees and expenses charged by the Company to
Managed Partnerships amounted to $3,728,000 for fiscal 1994. The Company
believes that these fees were no less favorable than the fees which the Company
believes it could obtain in similar transactions with unrelated third parties.
Real Estate
During fiscal 1994, the Company leased from Dorellenic (a partnership owned
principally by the Company's executive officers) the Company's corporate
headquarters located in Coudersport, Pennsylvania and other real estate used in
connection with the operation of the Company Systems including, among others,
the offices of the systems serving suburban Buffalo, New York. The partners of
Dorellenic are John J. Rigas, Michael J. Rigas, Timothy J. Rigas, James P. Rigas
and Ellen K. Rigas. The leases were for varying terms, generally provided for
monthly rental payments equal to fair market value rentals, and were no less
favorable than the terms of leases which the Company believes it could obtain
from unrelated third parties. The Company pays all operating expenses in
connection with the leased property. Real estate rental payments to Dorellenic
totalled $391,000 for fiscal 1994.
During fiscal 1987, Dorellenic purchased the real estate used in connection
with the Company Systems serving suburban Buffalo, New York directly from the
persons who sold such systems to the Company for such sellers' respective net
book value for such properties of $639,000. The financing for Dorellenic's
purchase of this property was obtained from the Company pursuant to demand notes
bearing interest at the Company's cost of funds under a loan agreement, plus
0.25% (10.91% at March 31, 1994). The loan balance for the suburban Buffalo
facility of $639,000 was repaid effective March 31, 1994.
During fiscal 1991, Island Partners, a Pennsylvania general partnership
composed of members of the Rigas Family, purchased real estate from third
parties used in connection with the Company Systems serving suburban
Philadelphia, Pennsylvania. The financing for Island Partners' purchase of this
property was obtained from the Company pursuant to demand notes bearing interest
at the Company's cost of funds under a loan agreement, plus 0.25% (5.125% at
March 31, 1994). The Company leases this property from Island Partners at
amounts equal to the interest on the note (plus operating expenses). The loan
balance for the suburban Philadelphia facility of $2,882,000 was repaid
effective March 31, 1994.
As of March 31, 1994, the Company purchased various parcels of real estate,
including headquarters and office sites, headend sites and other real estate
used in connection with the Company's operations, from Dorellenic and Island
Partners for an aggregate purchase price of $14,312,000, subject to adjustment
based on the completion of fair market appraisals. Also as of March 31, 1994,
the Company acquired from certain Managed Partnerships the rights to provide
alternate access telecommunications services on such partnerships' cable plant
and in such partnerships' respective franchise areas for an aggregate purchase
price of $14,000,000, subject to adjustment based on the completion of fair
market appraisals.
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<PAGE>
Equipment Leases
The Company leases certain vehicles, cable and operating and support
equipment from Dorellenic and a corporation which is wholly owned by members of
the Rigas Family, for which it made aggregate lease payments of $606,000 in
fiscal 1994. Of these leases, $1,415,000 in principal amount is capitalized by
the Company for financial reporting purposes at March 31, 1994. Such lease
payments equal the lessor's borrowing costs or lease payments to unrelated third
parties for such equipment. The Company also pays all operating costs incurred
with respect to such equipment. These lease arrangements are expected to
continue; however, the terms of such leases may be revised in the future to
reflect fair market value rates, but will be no less favorable than the terms of
the leases which the Company believes it could obtain from unrelated third
parties.
Loans to and from Affiliates
Certain loans to and from the Company by or to affiliates (which do not
include Olympus) as of March 31, 1994 are discussed above (see "Certain
Transactions--Real Estate"). Other such loans are summarized below. Interest
is charged on such other loans to affiliates at rates which ranged from 6.75% to
16.50% for the year ended March 31, 1994.
Total interest income on loans to affiliates aggregated $2,883,000 for
fiscal 1994. In addition, net settlement amounts under interest rate swap
agreements with the Managed Partnerships, recorded as adjustments to interest
expense during the period incurred, decreased the Company's interest expense by
$1,263,000 for fiscal 1994.
Net receivables due from the Managed Partnerships for advances made by the
Company, including the loans discussed in the following sentence, for the
construction and acquisition of cable television systems and for working capital
purposes, including accrued interest thereon, were $11,184,000 at March 31,
1994. The Company made loans to Managed Partnerships during fiscal 1994 in the
net amount of $20,000,000, for the purpose of a Managed Partnership acquiring
from unrelated parties cable television systems serving Palm Beach County,
Florida, of which $15,000,000 was outstanding at March 31, 1994.
During fiscal 1994 the Company made net advances of $10,355,000 to
Dorellenic. At March 31, 1994, net receivables from Dorellenic (including
accrued interest) were $15,274,000. Amounts advanced to Dorellenic during
fiscal 1994 were used primarily for working capital purposes.
During fiscal 1990 and 1991, the Company loaned an aggregate $255,000 to
Daniel R. Milliard and an unaffiliated third party, pursuant to several
revolving term and term notes, for capital expenditures and working capital
purposes. As of March 31, 1994, the outstanding amount of these loans, which
mature in 1995, was $205,000.
On an end-of-quarter basis, the largest aggregate amount of net outstanding
loans and advances receivable from affiliates (directors, officers and five-
percent shareholders) or entities they control, including John J. Rigas, Michael
J. Rigas, Timothy J. Rigas, James P. Rigas, Ellen K. Rigas, Daniel R. Milliard,
Dorellenic and/or the Managed Partnerships during fiscal 1994 was $31,579,000 at
December 31, 1993. At March 31, 1994, such aggregate net amount was
$26,663,000.
Business Opportunities
The Company's executive officers have entered into a Business Opportunity
Agreement, dated July 1, 1986 (the "Business Opportunity Agreement"), under
which they have agreed not to acquire an interest (except that such persons may,
individually for their own account, engage in regular portfolio trading of
publicly traded securities of companies in the cable television industry) in any
cable television system except: cable television systems which they or their
affiliates (excluding the Company) owned, in whole or in part, operated or had
agreed to acquire as of July 1, 1986; any expansions of such systems within the
same county or an adjacent county (except for systems which are also contiguous
to Company-owned
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systems); and systems which the Company elects not to acquire under its right of
first refusal described below and any expansions of such systems within the same
county or an adjacent county (except for systems which are also contiguous to
Company-owned systems). Otherwise, the executive officers will first offer to
the Company the opportunity to acquire or invest in any cable television system
or franchise therefor or interest therein that is offered or available to them.
If a majority of the Company's Board of Directors, including a majority of the
independent directors, rejects such offer, the executive officers may acquire or
invest in all of such cable television systems or franchises therefor or
interest therein or with others on terms no more favorable to them than those
offered to the Company.
The Company elected not to exercise its right of first refusal with respect
to the acquisition of cable systems in Palm Beach County, Florida, which were
purchased in June 1993 by a Managed Partnership. The Company did purchase the
14% preferred Class B Limited Partnership Interest in Syracuse Hilton Head
Holdings, L.P., a Managed Partnership, from an unaffiliated third party for
$18,338,000 on October 6, 1993. The Company's executive officers may from time
to time evaluate and, subject to the Company's rights under the Business
Opportunity Agreement and covenants in the Company's loan agreements and
indentures, may acquire cable television systems or interests therein for their
own accounts separately or along with the Company and/or other joint venture
parties.
Except for the limitations on the ownership of cable television systems as
described herein, the executive officers of Adelphia and their affiliates are
not subject to limitations with respect to their other business activities and
may engage in other businesses related to cable television or other
telecommunications media. The executive officers will devote as much of their
time to the business of the Company as is reasonably required to fulfill the
duties of their offices.
In the event that any executive officer (or his affiliate) decides to offer
for sale (other than to another executive officer or his or another executive
officer's family member, trust or family controlled entity) for his account, his
ownership interest in any cable television system or franchise, he or it will
(subject to the rights of third parties existing at such time) first offer such
interests to the Company. Such selling person or entity has a unilateral option
to elect to require that, if the Company accepts such offer, up to one half of
the consideration for his or its interest would consist of shares of Class B
Common Stock, which shares will be valued at the prevailing market price of the
Class A Common Stock, and the remainder would consist of shares of Class A
Common Stock and/or cash. If a majority of the Company's independent directors
rejects such offer, the executive officer (or his affiliate) may sell such
interest to third parties on terms no more favorable to such third parties than
those offered to the Company.
Registration Rights
Pursuant to a Registration Rights Agreement, as amended, between the
Company and the holders of Class B Common Stock, John J. Rigas has the right,
subject to certain limitations, to require the Company to register shares of the
Company's Common Stock owned by him for sale to the public and pay the expenses
(except for Mr. Rigas' counsel fees) of such registration on five occasions
selected by him (subject to certain limitations intended to prevent undue
interference with the Company's ability to distribute its securities) during a
fourteen-year period which began in December 1986. The other holders of Class B
Common Stock have the right to participate, at the option of John J. Rigas, as
selling stockholders in any such registration initiated by John J. Rigas. The
holders of Class B Common Stock also have unlimited rights to participate as
selling stockholders in any registered public offering initiated by the Company
and require the Company to pay their expenses (except counsel fees). Such
rights of participation are subject to limitation at the discretion of the
managing underwriter of such offering.
In January 1994 Adelphia entered into an agreement with the Rigas Family
pursuant to which certain Managed Partnerships controlled by members of the
Rigas Family purchased from Adelphia 5,832,604 shares of Class A Common Stock,
at the price offered to the public less the underwriting discount, or $17.145
per share. In addition, 3,000,000 shares of Class A Common Stock were sold to
the public in the same offering. In connection with the Rigas Family purchase,
Adelphia entered into a Registration Rights Agreement with Salomon Brothers Inc.
as lender to the Rigas Family pursuant to which
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such 5,832,604 shares were registered for sale by Salomon Brothers as pledgee in
the event that the Rigas Family is unable to repay the related margin loan
indebtedness to Salomon Brothers.
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