<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 28, 1998
REGISTRATION NO. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
ADELPHIA COMMUNICATIONS CORPORATION
(Exact name of registrant as specified in its charter)
<TABLE>
<CAPTION>
DELAWARE 4841 23-2417713
<S> <C> <C>
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer Identification No.)
incorporation or organization) Classification Code Number)
</TABLE>
MAIN AT WATER STREET
COUDERSPORT, PENNSYLVANIA 16915
(814) 274-9830
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
COLIN HIGGIN, ESQUIRE
DEPUTY GENERAL COUNSEL
ADELPHIA COMMUNICATIONS CORPORATION
MAIN AT WATER STREET
COUDERSPORT, PENNSYLVANIA 16915
(814) 274-9830
(Name, address, including zip code, and telephone number, including
area code, of agent for service)
PLEASE ADDRESS A COPY OF ALL COMMUNICATIONS TO:
CARL E. ROTHENBERGER, JR., ESQUIRE
BUCHANAN INGERSOLL PROFESSIONAL CORPORATION
21ST FLOOR, 301 GRANT STREET
PITTSBURGH, PENNSYLVANIA 15219
(412) 562-8826
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From time to
time after the effective date of this Registration Statement.
If the only securities being registered on this Form are being offered pursuant
to dividend or interest reinvestment plans, please check the following box. [ ]
If any of the securities being registered on this Form are being offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [ X ]
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
<PAGE>
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
Proposed Proposed
maximum maximum
Title of each class of Amount to offering price aggregate Amount of
securities to be registered be registered per unit offering price registration fee
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A Common Stock (par value $.01 per 10,400,000 $ 37.875(1) $393,900,000(1) $116,200.50
share)
- --------------------------------------------------------------------------------------------------------------------------
8% Series C Cumulative Convertible 100,000 $ 4,466.3912(2) $446,639,120(2) $131,758.50
Preferred Stock(2)
Class A Common Stock (par value $.01 per -- $ -- $ -- $ --
share) issuable upon conversion of 8%
Series C Cumulative Convertible Preferred
Stock (3)
==========================================================================================================================
</TABLE>
(1) Estimated solely for purposes of calculating the registration fee in
accordance with Rule 457(c). Such number represents the average of the high
and low prices for the Class A Common Stock as reported by the NASDAQ
National Market System on July 24, 1998 of $37.875.
(2) Estimated solely for purposes of calculating the registration fee in
accordance with Rule 457(i) based upon the value of the shares of Class A
Common Stock computed in accordance with note 1 above into which the 8 1/2%
Series C Cumulative Convertible Preferred Stock ("Convertible Preferred
Stock") may be converted (presently approximately 117.9245 shares of Class A
Common Stock per share of Convertible Preferred Stock) which exceeds the
liquidation preference of the Convertible Preferred Stock.
(3) Also being registered are the shares (including any additional shares
resulting from anti-dilution provisions) of Class A Common Stock into which
the 8 1/2% Series C Cumulative Convertible Preferred Stock may be converted.
At present the 8 1/2% Series C Cumulative Convertible Preferred Stock is
convertible into 11,792,452 shares of Class A Common Stock. No separate
consideration is received upon the conversion and no additional filing fee
is payable with respect thereto.
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
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<PAGE>
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED JULY 27, 1998
Prospectus
100,000 Shares
8 1/8% Series C Cumulative Convertible Preferred Stock and
11,792,452 Shares
Class A Common Stock ($.01 par value) issuable upon conversion thereof
ADELPHIA COMMUNICATIONS CORPORATION
-----------------------
This Prospectus offers up to 100,000 shares of Series C Cumulative Convertible
Preferred Stock (the "Convertible Preferred Stock") of Adelphia Communications
Corporation ("Adelphia" or the "Company"), and the shares of Class A Common
Stock, par value $.01 per share (the "Class A Common Stock") of Adelphia into
which the Convertible Preferred Stock may be converted (presently 11,792,452
shares, collectively with the Convertible Preferred Stock, the "Shares"). The
Convertible Preferred Stock accrues cumulative dividends at the rate of 8 1/8%
per annum, each share is convertible into approximately 117.9245 shares of Class
A Common Stock (subject to certain adjustments), has a liquidation preference of
$1,000 per share and ranks with respect to dividends and assets pari passu with
Adelphia's 13% Cumulative Exchangeable Preferred Stock and senior to Adelphia's
common stock. The Convertible Preferred Stock relates to a private offering by
Adelphia in July 1997 in connection with a private offering by Adelphia at the
same time of its 10 1/2% Senior Notes due 2004 and 13% Cumulative Exchangeable
Preferred Stock. The Shares have been registered, among other reasons, to permit
the Selling Stockholders named herein to sell all or a portion of the Shares and
to pledge as collateral all or a portion of the Shares with brokerage or lending
institutions for margin loans. See "Selling Stockholders."
The Shares may be sold from time to time to or through brokers and dealers and
underwriters to be selected by the Selling Stockholders from time to time. The
Shares may be offered for sale through the Nasdaq Stock Market, in the over-the-
counter market, through a market maker, in one or more private transactions, or
a combination of such methods of sale, at prices and on terms then prevailing,
at prices related to such prices, or at negotiated prices. The Selling
Stockholders may pledge all or a portion of the Shares as collateral for margin
accounts or in loan transactions, and the Shares may be resold pursuant to the
terms of such pledges, accounts or loan transactions. Upon default by such
Selling Stockholders, the pledgee in such loan transaction would have the same
rights of sale as the Selling Stockholders under this Prospectus. The Selling
Stockholders may also transfer Shares owned in other ways not involving market
makers or established trading markets, including directly by gift, distribution,
or other transfer without consideration, and upon any such transfer the
transferee would have the same rights of sale as such Selling Stockholders under
this Prospectus. See "Plan of Distribution." Finally, the Selling Stockholders
and any brokers and dealers through whom sales of the Offered Shares are made
may be deemed to be "underwriters" within the meaning of the Securities Act of
1933, as amended, and the commissions or discounts and other compensation paid
to such persons may be regarded as underwriters' compensation. See "Plan of
Distribution." Adelphia will not receive any of the proceeds from the sale of
the Shares.
The Class A Common Stock is listed for trading on the NASDAQ Stock Market. On
July 27, 1998, the closing sale price of the Class A Common Stock was
$37 1/4 per share.
The rights of holders of Class A Common Stock and Class B Common Stock, $.01 par
value (the "Class B Common Stock" and together with the Class A Common Stock,
the "Common Stock"), differ with respect to certain aspects of dividend,
liquidation and voting rights. The Class A Common Stock has certain
preferential rights with respect to cash dividends and distributions upon the
liquidation of Adelphia. Holders of Class B Common Stock are entitled to
greater voting rights than the holders of Class A Common Stock; however, the
holders of Class A Common Stock, voting as a separate class, are entitled to
elect one of Adelphia's directors.
PROSPECTIVE PURCHASERS OF CLASS A COMMON STOCK OR CONVERTIBLE PREFERRED STOCK
SHOULD CAREFULLY CONSIDER THE MATTERS SET FORTH UNDER THE CAPTION "RISK FACTORS"
BEGINNING ON PAGE 4.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this Prospectus is _____________, 1998.
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+ INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+ REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+ SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+ OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+ BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+ THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+ SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+ UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
<PAGE>
AVAILABLE INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission") in Washington, D.C. a Registration Statement under the Securities
Act of 1933, as amended, with respect to the securities offered by this
Prospectus. This Prospectus, which is part of the Registration Statement, does
not contain all of the information set forth in the Registration Statement and
the exhibits and schedules thereto. For further information with respect to the
Company, reference is made to such Registration Statement and the exhibits and
schedules filed as part thereof. The Registration Statement and the exhibits and
schedules thereto filed with the Commission may be inspected without charge at
the Public Reference Section of the Commission at Room 1024, Judiciary Plaza,
450 Fifth Street, N.W., Washington, D.C. 20549, and will also be available for
inspection and copying at the regional offices of the Commission located at
Seven World Trade Center, 13th Floor, New York, New York 10048, and the Citicorp
Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of
all or any portion of the Registration Statement may be obtained from the Public
Reference Section of the Commission upon payment of certain prescribed fees.
Electronic registration statements made through the Electronic Data Gathering,
Analysis, and Retrieval system are publicly available through the Commission's
Web site (http://www.sec.gov), which is maintained by the Commission and which
contains reports, proxy and information statements and other information
regarding registrants that file electronically with the Commission.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company with the Commission pursuant
to the Securities Exchange Act of 1934, as amended (the "Exchange Act"), are
incorporated herein by reference: (a) Annual Report on Form 10-K for the fiscal
year ended March 31, 1998 which incorporates, in Items 7 and 8 to such Form 10-
K, portions of the Form 10-K for the fiscal year ended December 31, 1997 of
Olympus Communications, L.P. and Olympus Capital Corporation (the "Form 10-
K"); (b) Adelphia's definitive proxy statement dated September 8, 1997, with
respect to the Annual Meeting of Stockholders held September 29, 1997 (the
"Proxy Statement"); (c) Adelphia's Current Report on Form 8-K for the events
dated June 29, 1998 and July 2, 1998; and (d) the descriptions of the Company's
Common Stock contained in the registration statements filed under Section 12(g)
of the Exchange Act, including any amendments or reports for the purpose of
updating such descriptions.
All documents subsequently filed by the Company pursuant to Section 13(a),
13(c), 14 or 15(d) of the Exchange Act prior to the termination of this offering
shall be deemed to be incorporated by reference in this Prospectus and to be a
part hereof from the respective date of filing of each such document. Any
statement contained in a document incorporated or deemed to be incorporated by
reference herein shall be deemed to be modified or superseded for purposes of
this Prospectus to the extent that a statement contained herein or in any other
subsequently filed document which also is, or is deemed to be, incorporated by
reference herein modifies or supersedes such statement. Any such statement so
modified or superseded shall not be deemed, except as so modified or superseded,
to constitute a part of this Prospectus.
This Prospectus incorporates documents by reference which are not presented
herein or delivered herewith. These documents are available upon request from E.
Hartman, Director of Finance, Adelphia Communications Corporation, Main at Water
Street, Coudersport, PA 16915, telephone number 814-274-9830.
No dealer, salesman or other individual has been authorized to give any
information or to make any representations not contained in this Prospectus, any
accompanying Prospectus Supplement or the documents incorporated or deemed
incorporated by reference herein. If given or made, such information or
representations must not be relied upon as having been authorized by the Company
or any underwriter, dealer or agent. This Prospectus does not constitute an
offer to sell, or a solicitation of an offer to buy, any securities other than
the registered securities to which it relates, or an offer to sell or a
solicitation of an offer to buy those securities to which it relates, in any
jurisdiction where, or to any person to whom, it is unlawful to make such offer
or solicitation. Neither the delivery of this Prospectus or any Prospectus
Supplement nor any sale made hereunder shall, under any circumstances, create
any implication that there has not been any change in the facts set forth in
this Prospectus or in the affairs of the Company since the date hereof.
-2-
<PAGE>
THE COMPANY
Adelphia Communications Corporation ("Adelphia" and, collectively with its
subsidiaries, the "Company") is a leader in the telecommunications industry with
cable television operations and competitive local exchange telephony operations.
John J. Rigas, the Chairman, President, Chief Executive Officer and founder of
Adelphia, has owned and operated cable television systems since 1952.
Cable systems owned by the Company (the "Company Systems") are located in
twelve states and are organized into seven regional clusters: Western New York,
Virginia, Western Pennsylvania, New England, Eastern Pennsylvania, Ohio and
Coastal New Jersey. The Company Systems are located primarily in suburban areas
of large and medium-sized cities within the 50 largest television markets.
The Company also provides, for a fee, management and consulting services to
certain partnerships and certain corporations engaged in the ownership and
operation of cable television systems (the "Managed Partnerships"). John J.
Rigas and certain members of his immediate family, including entities they own
or control (collectively, the "Rigas Family"), have substantial ownership
interests in the Managed Partnerships.
The Company, through its 66% owned subsidiary Hyperion Telecommunications,
Inc. ("Hyperion"), owns and operates one of the largest facilities based
Competitive Local Exchange Carriers ("CLEC") in the United States based on route
miles and buildings connected. Hyperion designs, constructs, operates and
manages state-of-the-art, fiber optic networks and facilities.
The Company also owns a 50% voting interest and nonvoting Preferred Limited
Partnership ("PLP") interests entitling the Company to a 16.5% preferred return
in Olympus Communications, L.P. ("Olympus"). Olympus is a joint venture
limited partnership between the Company and subsidiaries of FPL Group, Inc.
(together with its subsidiaries, "FPL Group"). FPL Group is one of the largest
public utility holding companies in the United States supplying, through its
principal subsidiaries, electric service throughout most of the east and lower
west coasts of Florida.
Adelphia was incorporated in Delaware on July 1, 1986 for the purpose of
reorganizing five cable television companies, then principally owned by the
Rigas Family, into a holding company structure in connection with the initial
public offering of Adelphia's Class A Common Stock. The Company's executive
offices are located at Main at Water Street, Coudersport, Pennsylvania 16915,
and its telephone number is (814) 274-9830.
Recent Developments
Information set forth in the foregoing section of the Prospectus is as of
the date of this Prospectus. For recent developments regarding the Company as
well as other information contained in this Prospectus, reference is made to the
future filings by Adelphia under the Exchange Act and to the Prospectus
Supplement, if any, accompanying this Prospectus.
-3-
<PAGE>
RISK FACTORS
In addition to the other information contained or incorporated by reference in
this Prospectus, the following risk factors should be carefully considered in
evaluating the Company and its business before purchasing the securities offered
hereby.
Substantial Leverage
The Company is highly leveraged and has incurred substantial indebtedness to
finance acquisitions and expansion of its operations and, to a lesser extent,
for investments in and advances to affiliates. At March 31, 1998, the Company's
total indebtedness aggregated approximately $2,909,745,000, which included
approximately $864,258,000 of subsidiary bank, institutional and other debt,
$465,213,000 of Hyperion public debt and $1,580,274,000 of indebtedness of the
parent company. The Company's total debt has varying maturities to 2008,
including an aggregate of approximately $1,078,600,000 maturing on or prior to
March 31, 2003. The Company has maintained its public long-term debt at the
holding company level and at Hyperion while borrowing in the private debt
markets (e.g., bank and insurance company debt) through the Company's wholly-
owned subsidiaries. The Company's subsidiary financings are effected through
separate borrowing groups, and substantially all of the indebtedness in these
borrowing groups is non-recourse to Adelphia. The subsidiary credit arrangements
have varied revolving credit and term loan periods and contain separately
negotiated covenants relating to, among other things, cross-defaults and the
incurrence of additional debt for each borrowing group. In addition, Olympus has
substantial leverage. The high level of the Company's indebtedness will have
important consequences to investors, including: (i) a substantial portion of the
Company's cash flow from operations must be dedicated to debt service and will
not be available for general corporate purposes or for capital improvements;
(ii) the Company's ability to obtain additional debt financing in the future for
working capital, capital expenditures, acquisitions or for capital improvements
may be limited; and (iii) the Company's level of indebtedness could limit its
flexibility in reacting to changes in the industry and economic conditions
generally. In addition, at March 31, 1998, Adelphia had approximately
$148,062,000 and Hyperion had approximately $207,204,000 of redeemable
exchangeable preferred stock. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations" in the Form 10-K.
Net Losses and Convertible Preferred Stock, Common Stock and Other Stockholders'
Equity (Deficiency)
The Total Convertible Preferred Stock, Common Stock and Other Stockholders'
Equity (Deficiency) at March 31, 1998 was approximately ($1,315,865,000). The
stockholders' deficiency generally has resulted from the Company's reported net
losses which have been caused primarily by high levels of depreciation and
amortization and interest expense. The Company reported net losses applicable to
common stockholders of approximately $119,894,000, $130,642,000 and $192,729,000
for the years ended March 31, 1996, 1997 and 1998, respectively. The Company
expects to continue to incur significant net losses for the next several years.
See "Management's Discussion and Analysis of Financial Condition and Results of
Operations" in the Form 10-K.
For the years ended March 31, 1997 and March 31, 1998, respectively, the
Company's earnings were insufficient to cover its combined fixed charges and
preferred stock dividends by approximately $61,848,000 and $113,941,000,
respectively. However, such amounts reflect non-cash charges totaling
approximately $165,426,000 and $182,471,000, respectively, consisting of
depreciation, amortization, and non-cash interest expense on certain
indebtedness of the Company and Hyperion preferred stock dividends.
Historically, the Company's cash generated from operating activities and
borrowings has been sufficient to meet its requirements for debt service,
working capital, capital expenditures, and investments in and advances to
affiliates, and the Company has depended on the availability of additional
borrowings to meet its liquidity requirements. The Company believes that it will
continue to generate cash and obtain financing sufficient to meet such
requirements. However, the Company's ability to incur additional indebtedness is
limited by covenants in its indentures and its subsidiary credit agreements.
Although in the past the Company has been able both to refinance its
indebtedness and to obtain new financing, there can be no assurance that the
Company would be able to do so in the future or that, if the Company were able
to do so, the terms available would be favorable to the Company. In the event
that the Company were unable to refinance its indebtedness or obtain new
financing under these circumstances, the Company would likely have to consider
various options such as the sale of certain assets to meet its required debt
service, negotiation with its lenders to restructure applicable indebtedness or
other options available to it
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<PAGE>
under applicable law. There can be no assurance that any such options would
yield net proceeds sufficient to repay its indebtedness in full. See "Selected
Consolidated Financial Data" and "Management's Discussion and Analysis of
Financial Condition and Results of Operations" in the Form 10-K.
Voting Control and Disparate Voting Rights
As of March 31, 1998, as adjusted for the issuance of Class A Common Stock in
connection with the public offering described in a prospectus supplement of
Adelphia dated July 16, 1998, as supplemented, to Registration Statement No.
333-58749 filed with the Securities and Exchange Commission (the "1998 Adelphia
Public Offering"), the Rigas Family beneficially owned 10,846,544 shares, or
99.1%, of Adelphia's Class B Common Stock and 9,915,164 shares, or 36.5%, of
Adelphia's outstanding Class A Common Stock. On a combined basis, these shares
represented 54.5% of the total number of outstanding shares of both classes of
Common Stock and 86.7% of the total voting power of both classes. Assuming
conversion of the 8 1/8% Series C Cumulative Convertible Preferred Stock
("Convertible Preferred Stock") held by the Rigas Family, family members would
have held on an as adjusted basis as of March 31, 1998 19,349,126 shares, or
52.9%, of Adelphia's Class A Common Stock and would have held 63.5% of the total
number of shares and 87.5% of the total voting power of both classes of Common
Stock. As a result of the stock ownership by the Rigas Family and the Class B
Stockholders' Agreement, John J. Rigas and members of his family have the power
to elect all seven directors subject to election by both classes on a combined
basis, which directors constitute seven of the eight members of the Board of
Directors of Adelphia. (The holders of the Class A Common Stock are entitled, as
a separate class, to elect one of Adelphia's directors.) Moreover, because
holders of Class B Common Stock are entitled to ten votes per share while
holders of Class A Common Stock are entitled to one vote per share, the Rigas
Family may control stockholder decisions on matters in which holders of Class A
Common Stock and Class B Common Stock vote together as a class. These matters
include the amendment of certain provisions of Adelphia's Certificate of
Incorporation and the approval of certain fundamental corporate transactions,
including mergers.
Holding Company Structure; Restrictive Covenants
As a holding company, Adelphia holds no significant assets other than its
investments in and advances to its subsidiaries and other investments.
Adelphia's ability to make interest and principal payments when due to holders
of debt of Adelphia is dependent upon the receipt of sufficient funds from its
subsidiaries or other investments. Under the terms of various debt agreements
between the Adelphia subsidiaries and other investments and their respective
lending institutions, upon the occurrence of an event of default (including
certain cross-defaults resulting from defaults under Adelphia's debt agreements)
or unless certain financial performance tests are met, the Adelphia subsidiaries
and other investments are restricted from distributing funds to Adelphia. The
Indentures governing the 8 1/8% Senior Notes due 2003 (the "8 1/8% Notes"), the
8 3/8% Senior Notes due 2008 (the "8 3/8% Notes"), the 9 1/4% Senior Notes due
2002 (the "9 1/4% Notes"), the 9 7/8% Senior Notes due 2007 (the "9 7/8%
Notes"), the 10 1/2% Senior Notes due 2004 (the "10 1/2% Notes"), the 12 1/2%
Senior Notes due 2002 (the "12 1/2% Notes"), the 10 1/4% Senior Notes due 2000
(the "10 1/4% Notes"), the 9 1/2% Senior Pay-In-Kind Notes due 2004 (the
"9 1/2% Notes"), the 11 7/8% Senior Debentures due 2004 (the "11 7/8%
Debentures") and the 9 7/8% Senior Debentures due 2005 (the "9 7/8% Debentures")
(collectively, "Adelphia's Public Debt") will not restrict the Company's
subsidiaries or other investments from contractually restricting their ability
to pay dividends to Adelphia in the future. In addition, because Adelphia's
subsidiaries and other investments do not guarantee the payment of principal of
and interest on debt of Adelphia, the claims of holders of such debt effectively
will be subordinated to the claim of creditors of such entities. At March 31,
1998, the total amount of long-term debt of such subsidiaries was approximately
$1,329,471,000. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations" in the Form 10-K.
The agreements governing the bank debt of the Company's subsidiaries (the
"Subsidiary Bank Agreements") contain, among other covenants, requirements
that Adelphia's subsidiaries maintain specified financial ratios, including
maximum leverage and minimum interest coverage. The ability of a subsidiary to
comply with such provisions may be affected by events that are beyond Adelphia's
control. The breach of any of these covenants could result in a default by a
subsidiary under its Subsidiary Bank Agreement. In the event of any such
default, lenders party to that Subsidiary Bank Agreement could elect to declare
all amounts borrowed under that Subsidiary Bank Agreement, together with accrued
interest and other fees, to be due and payable. If the indebtedness under a
Subsidiary Bank Agreement were to be accelerated, all indebtedness outstanding
under such Subsidiary Bank Agreement would be required to be paid in full before
such subsidiary would be permitted to
-5-
<PAGE>
distribute any assets or cash to Adelphia. There can be no assurance that the
assets of Adelphia and its subsidiaries would be sufficient to repay all
borrowings under the Subsidiary Bank Agreements and indebtedness owed to the
other creditors of such subsidiaries in full. In addition, as a result of these
covenants, the ability of Adelphia's subsidiaries to respond to changing
business and economic conditions and to secure additional financing, if needed,
may be significantly restricted, and Adelphia may be prevented from engaging in
transactions that might otherwise be considered beneficial to Adelphia. There
are similar restrictions under other institutional debt of the Company's
subsidiaries.
Potential Conflicts of Interest
The Rigas Family holds substantially all of Adelphia's Class B Common Stock
and 89.1% of the combined voting power of both classes of Adelphia's outstanding
Common Stock (89.8% assuming the conversion of the Convertible Preferred Stock
owned by the Rigas Family) and has the power to elect seven of eight members of
Adelphia's Board of Directors. John J. Rigas and the other executive officers of
Adelphia (including other members of the Rigas Family) hold direct and indirect
ownership interests in the Managed Partnerships, which are managed by the
Company for a fee. Subject to the restrictions contained in a business
opportunity agreement regarding future acquisitions, Rigas Family members and
the executive officers are free to continue to own these interests and acquire
additional interests in cable television systems. Such activities could present
a conflict of interest with the Company in the allocation of management time and
resources of the executive officers. In addition, there have been and will
continue to be transactions between the Company and the executive officers or
other entities in which the executive officers have ownership interests or with
which they are affiliated. The indentures under which Adelphia's Public Debt was
issued contain covenants that place certain restrictions on transactions between
the Company and its affiliates. See "Certain Relationships and Related
Transactions" in the Proxy Statement.
Competition
The cable television systems owned by the Company compete with other
communications and entertainment media as well as other means of video
distribution including Direct Broadcast Satellite Systems ("DBS") and
Multichannel Multipoint Distribution Systems ("MMDS"). In addition, some of
the Regional Bell Operating Companies (the "RBOCs") and other local telephone
companies are in the process of entering the video-to-home business and several
have expressed their intention to enter the video-to-home business. In addition,
some RBOCs and local telephone companies have in place facilities which are
capable of delivering cable television service.
In addition, the Telecommunications Act of 1996 (the "1996 Act") has
repealed the cable/telephone cross-ownership plan, and telephone companies will
now be permitted to provide cable television service within their service areas.
Certain of such potential service providers have greater financial resources
than the Company, and in the case of local exchange carriers seeking to provide
cable service within their service areas, have an installed plant and switching
capabilities, any of which could give them competitive advantages with respect
to cable television operators such as the Company. The Company cannot predict
either the extent to which competition will materialize or, if such competition
materializes, the extent of its effect on the Company. See "Business--
Competition" and "Management's Discussion and Analysis of Financial Condition
and Results of Operations" in the Form 10-K.
The Company also faces competition from other communications and entertainment
media, including conventional off-air television broadcasting services,
newspapers, movie theaters, live sporting events and home video products. The
Company cannot predict the extent to which competition may affect the Company.
In each of the markets served by Hyperion's networks, the services offered by
Hyperion compete principally with the services offered by the incumbent local
exchange carrier ("LEC") serving that area. Incumbent LECs have long-standing
relationships with their customers, have the potential to subsidize competitive
services from monopoly service revenues, and benefit from favorable state and
federal regulations. In light of the passage of the 1996 Act, federal and state
regulatory initiatives will provide increased business opportunities to CLECs
such as Hyperion, but regulators are likely to provide incumbent LECs with
increased pricing flexibility for their services as competition increases. If
incumbent LECs are allowed by regulators to lower their rates substantially or
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<PAGE>
selectively engage in excessive volume and term discount pricing practices for
their customers or charge CLECs excessive fees for interconnection to the
incumbent LECs' networks, the net income and cash flow of CLECs, including
Hyperion, could be materially and adversely affected.
The 1996 Act also establishes procedures under which the RBOCs can obtain
authority to provide long distance services if they comply with certain
interconnection requirements. To date, the Federal Communications Commission
(the "FCC") authority to provide in-region interLATA service has been sought by
Ameritech in Michigan, Southwestern Bell in Oklahoma, and BellSouth in Louisiana
and South Carolina. The Department of Justice has opposed each request, and each
request has been denied by the FCC. An approval could result in decreased market
share for the major Inter-Exchange Carriers ("IXCs"), which are among
Hyperion's significant customers. Such a result could have an adverse effect on
Hyperion.
There has been significant merger activity among the RBOCs in anticipation of
entry into the long distance market, including the merger of Bell Atlantic and
NYNEX, whose combined territory covers a substantial portion of Hyperion's
markets. If RBOCs are permitted to provide such services, they will ultimately
be in a position to offer single source service for local and long distance
communications and subsidize the price of their long distance prices with
charges on local service. Other combinations are occurring in the industry,
which may have a material adverse effect on Hyperion. Hyperion also faces, and
will continue to face, competition from other current and potential market
entrants, including other CLECs, incumbent LECs which are not subject to RBOC
restrictions on long distance, AT&T, MCI, Sprint and other IXCs, cable
television companies, electric utilities, microwave carriers, wireless
telecommunications providers and private networks built by large end users. In
addition, all of the major IXCs are expected to enter the market for local
telecommunications services. Both AT&T and MCI have announced that they have
begun to offer local telephone services in some areas of the country, and AT&T
recently announced a new wireless technology for providing local telephone
service. AT&T and TCI also recently announced that they will merge. Although
Hyperion has good relationships with the IXCs, there are no assurances that any
of these IXCs will not build their own facilities, purchase other carriers or
their facilities, or resell the services of other carriers rather than use
Hyperion's services when entering the market for local exchange services.
Many of Hyperion's current and potential competitors, particularly incumbent
LECs, have financial, personnel and other resources substantially greater than
those of Hyperion, as well as other competitive advantages over Hyperion.
See "Business--Competition" and "--Legislation and Regulation" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Regulatory and Competitive Matters" in the Form 10-K.
Need for Additional Financing
The Company's business requires substantial investment on a continuing basis
to finance capital expenditures and related expenses for, among other things,
upgrade of the Company's plant (including the need to make cable system upgrades
mandated by franchise authorities), the offering of new services and the
servicing, repayment or refinancing of its indebtedness. The Company will
require significant additional financing, through debt and/or equity issuances,
to meet its capital expenditure plans and to pay its debt obligations. There can
be no assurance that Adelphia will be able to issue additional debt or obtain
additional equity capital on satisfactory terms, or at all, to meet its future
financing needs. See "Business--Technological Developments" and "Management's
Discussion and Analysis of Financial Condition and Results of Operations" in
the Form 10-K.
Regulation in the Telecommunications Industry
The cable television industry is subject to extensive regulation at the
federal, state and local levels, and many aspects of such regulation are
currently the subject of judicial proceedings and administrative or legislative
proposals. The Cable Television Consumer Protection and Competition Act of 1992
(the "1992 Cable Act") significantly expanded the scope of cable television
regulation. In particular, pursuant to the 1992 Cable Act, the FCC adopted
regulations that limit the Company's ability to set and increase rates for the
Company's basic and
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<PAGE>
cable programming service ("CPS") packages and for the provision of cable
television-related equipment. The 1992 Cable Act permits certified local
franchising authorities to order refunds of rates paid in the previous twelve-
month period determined to be in excess of the permitted reasonable rates. It is
possible that rate reductions or refunds of previously collected fees may be
required in the future.
The 1996 Act, which became law on February 8, 1996, materially alters federal,
state and local laws and regulations pertaining to cable television,
telecommunications and other related services and, in particular, substantially
amends the Communications Act of 1934 (the "Communications Act"). Certain
provisions of the 1996 Act could materially affect the growth and operation of
the cable television industry and the cable services provided by the Company.
Although the new legislation may substantially lessen certain regulatory
burdens, the cable television industry may be subject to additional competition
as a result. See "Business--Competition" in the Form 10-K. There are numerous
rulemakings that have been and continue to be undertaken by the FCC which will
interpret and implement the provisions of the 1996 Act. In addition, certain
provisions of the new legislation (such as the deregulation of rates for CPS
packages) will not immediately be effective. Furthermore, certain provisions of
the 1996 Act have been, and likely will be, subject to judicial challenge. The
Company is unable at this time to predict the outcome of such rulemakings or
litigation or the short and long-term effect (financial or otherwise) of the
1996 Act and FCC rulemakings on the Company.
The cable television industry is subject to state and local regulations and
the Company must comply with rules of the local franchising authorities to
retain and renew its cable franchises, among other matters. There can be no
assurances that the franchising authorities will not impose new and more
restrictive requirements as a condition to franchise renewal.
Although the 1996 Act eliminates many legal barriers to entry (i.e., telephone
companies entering the cable industry and cable companies entering the telephone
industry), the Company cannot assure that rules adopted by the FCC or state
regulators or other legislative or judicial initiatives relating to the
telecommunications industry will not have a material adverse effect on the
Company. In addition, the 1996 Act removes entry barriers for all companies and
could increase substantially the number of competitors offering comparable
services in the Company's potential markets. See "Legislation and Regulation"
and "Management's Discussion and Analysis of Financial Condition and Results of
Operations--Regulatory and Competitive Matters" in the Form 10-K.
No Dividends Paid or to Be Paid
Adelphia has never declared or paid dividends on any of its Common Stock
and has no intention to pay cash dividends on such stock in the foreseeable
future. In addition, the indentures for Adelphia's Public Debt contain covenants
which limit Adelphia's ability to pay such dividends.
Shares Eligible for Future Sale
As adjusted for the issuance of Class A Common Stock in connection with the
1998 Adelphia Public Offering, as of March 31 1998, 27,169,888 shares of Class A
Common Stock, 10,944,476 shares of Class B Common Stock, each share of which is
presently convertible into a share of Class A Common Stock, and 100,000 shares
of Convertible Preferred Stock, each share of which is presently convertible
into approximately 117.9245 shares of Class A Common Stock, were outstanding.
As adjusted for the 1998 Adelphia Public Offering transactions, as of March 31,
1998, the Rigas Family beneficially owned 10,846,544 shares of Class B Common
Stock, 9,915,164 shares of Class A Common Stock and 80,000 shares of Convertible
Preferred Stock. Pursuant to various registration rights agreements, the Rigas
Family has the right, subject to certain limitations, to require Adelphia to
register substantially all of these shares including Class A Common Stock
issuable upon conversion of the Class B Common Stock and the Convertible
Preferred Stock. In addition to the shares of Convertible Preferred Stock and
Class A Common Stock issuable upon conversion thereof which may be offered
hereby, Adelphia has filed a registration statement to register up to 10,400,000
shares of Class A Common Stock for the Rigas Family and a registration statement
for Booth American Company which as of March 24, 1998 owned 3,571,428 shares of
Class A Common Stock. Although members of the Rigas Family are expected to agree
in connection with the 1998 Adelphia Public Offering that they will not,
directly or indirectly, offer, sell, contract to sell or otherwise dispose of
any Common Stock or securities convertible or exchangeable or exerciseable for
Common Stock or grant any options or warrants to purchase shares of Common Stock
without the permission of Smith Barney Inc. for a period of 90 days from the
date of the prospectus supplement for the 1998 Adelphia Public
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Offering, approximately 5,750,000 shares of Class A Common Stock and up to
80,000 shares of Convertible Preferred Stock (including the underlying Class A
Common Stock) may be pledged in connection with margin loans by the Rigas Family
to pledgees who are not subject to any restriction on their sale of any shares
of Class A Common Stock acquired upon a foreclosure or upon conversion of
Convertible Preferred Stock acquired upon a foreclosure. Sales of a substantial
number of shares of Class A Common Stock or Class B Common Stock including sale
by any pledgees of such shares could adversely affect the market price of the
Class A Common Stock and could impair Adelphia's ability in the future to raise
capital through an offering of its equity securities.
Impact of the Year 2000 Issues
The year 2000 issue is the result of computer programs being written using
two digits rather than four to define the applicable year. Any of the Company's
computer programs that have data-sensitive software may recognize a date using
"00" as the year 1900 rather than the year 2000. This could result in a system
failure or miscalculations causing disruptions of operations, including, among
other things, a temporary inability to process transactions, send invoices, or
engage in similar normal business activities. The Company has recently
completed the planning stage of a project that addresses the year 2000 data
processing issues relating to modifications of its mainframe computer
applications. Internal and external resources are being used to make the
required modifications and perform the necessary tests, all of which is expected
to be completed by June 1999. In addition, the Company has begun communicating
with others with whom it does significant business to determine their year 2000
compliance readiness and the extent to which the Company is vulnerable to any
third party year 2000 issues. There can be no assurance that the systems of
other companies on which the Company's systems rely will be timely converted
into systems compatible with the Company systems or that the Company will
prevent the year 2000 issues from having a material adverse effect on the
Company. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations--Year 2000 Issues" in the Form 10-K.
Dilution
Persons purchasing Class A Common Stock or acquiring Class A Common Stock
upon conversion of the Convertible Preferred Stock will incur immediate and
substantial net tangible book value dilution. See "Dilution."
Potential Volatility of Stock Price
The market price of the shares of Class A Common Stock may be significantly
affected by factors such as actual or anticipated fluctuations in the Company's
operating results, new products or services or new contracts by the Company or
its competitors, legislative and regulatory developments, conditions and trends
in the telecommunications industry, general market conditions and other factors
beyond the Company's control. In addition, the stock market has, from time to
time, experienced significant price and volume fluctuations that have
particularly affected the market prices for the common stock of
telecommunications companies and that have often been unrelated to the operating
performance of particular companies. These broad market fluctuations may also
adversely affect the market price of the Company's Class A Common Stock.
Forward Looking Statements
The statements contained or incorporated by reference in this Prospectus
that are not historical facts are "forward looking statements" (as such term is
defined in the Private Securities Litigation Reform Act of 1995) which
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 or other variations thereon or comparable terminology, or
by discussions of strategy that involve risks and uncertainties.
Certain information included or incorporated by reference in this
Prospectus, including "Management's Discussion and Analysis of Financial
Condition and Results of Operations" in the Form 10-K, 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, government and regulatory policies, the pricing
and availability of equipment, materials, inventories and programming,
technological developments and changes in the competitive
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environment in which the Company operates. Persons reading this Prospectus are
cautioned that such statements are only predictions 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.
DILUTION
The net tangible book value of the Company's Common Stock as of March 31,
1998 was a deficit of approximately $(2,010,969,000) or $(64.90) per share. Net
tangible book value per share represents the amount of the Company's convertible
preferred stock, common stock and other stockholders' equity (deficiency), less
intangible assets, divided by 30,988,004 shares of Common Stock outstanding.
Purchasers of Class A Common Stock from the Company will have an immediate
dilution of net tangible book value which due to the Company's having a net
tangible book value deficit, will exceed the purchase price per share. For
example in the 1998 Adelphia Public Offering, assuming a purchase price of
$43.25 per share, the net tangible book value dilution per share was $88.30. Net
tangible book value dilution per share represents the difference between the
amount per share paid by purchasers of shares of Class A Common Stock in an
offering from the Company and the pro forma net tangible book value per share of
the Common Stock immediately after completion of such offering.
RATIO OF EARNINGS TO COMBINED FIXED CHARGES AND PREFERRED STOCK DIVIDENDS
The following table sets forth the ratio of earnings available to cover
combined fixed charges and preferred stock dividends of Adelphia for the periods
indicated. For purposes of calculating the ratio of earnings available to cover
combined fixed charges and preferred stock dividends: (i) earnings consist of
loss before income taxes and extraordinary charges plus fixed charges, excluding
capitalized interest and (ii) fixed charges consist of interest whether expensed
or capitalized, plus amortization of debt issuance costs plus the assumed
interest component of rent expense.
Years Ended March 31,
------------------------------------------------------
1994 1995 1996 1997 1998
---- ---- ---- ---- ----
-- -- -- -- --
For the years ended March 31, 1994, 1995, 1996, 1997 and 1998, the Company's
earnings were insufficient to cover its combined fixed charges and preferred
stock dividends by approximately $65,997,000, $69,146,000, $78,189,000,
$61,848,000, and $113,941,000, respectively.
SELLING STOCKHOLDERS
The Selling Stockholders include Highland Preferred Communications, LLC, a
wholly owned subsidiary of Highland Holdings ("Highland"), and its transferees,
pledgees (which may include NationsBank, N.A. and its affiliates), donees or
successors and Telesat Cablevision Inc. ("Telesat"), an affiliate of FPL Group,
Inc., and its transferees, pledgees (such as banks, brokers, financial
institutions or other lenders), donees or successors. The Shares have been
registered, among other reasons, to permit the Selling Stockholders to sell from
time to time all or a portion of the Shares and to pledge as collateral all or a
portion of the Shares with brokerage or lending institutions for margin loans,
which margin loans may be used among other matters to finance Highland
Communications, LLC purchase of approximately $125 million of Class A Common
Stock in connection with the 1998 Adelphia Public Offering. Additional
information regarding any pledge of the Shares may be set forth in a prospectus
supplement to this Prospectus. The Convertible Preferred Stock was initially
acquired by Highland and Telesat from Adelphia in July 1997 in connection with
Adelphia's offering of its 10 1/2% Senior Notes and 13% Cumulative Exchangeable
Preferred Stock to qualified institutional buyers. The following table sets
forth, based on information available to the Company, as of March 31, 1998,
adjusted for the issuance of Class A Common Stock in the 1998 Adelphia Public
Offering and related transactions, certain information with respect to the
beneficial ownership of Convertible Preferred Stock, Class A Common Stock and
Class B Common Stock by Highland Preferred Communications, LLC, Telesat and by
members of the Rigas Family who may be deemed to have an interest in the Shares
held by Highland and its subsidiaries, based on 100,000 shares of Convertible
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Preferred Stock, 27,169,888 shares of Class A Common Stock and 10,944,476 shares
of Class B Common Stock outstanding, respectively, on a pro forma basis as of
such date and after giving effect to the sale of the shares offered hereby by
the Selling Stockholders of Convertible Preferred Stock and/or of shares of
Class A Common Stock acquired upon conversion of the Convertible Preferred
Stock. The business address of Highland, Highland Preferred Communications,
L.L.C., Highland Communications, L.L.C. and the Rigas Family is Main at Water
Street, Coudersport, Pennsylvania 16915. The business address of Telesat is 700
Universe Boulevard, Juno Beach, Florida 33408. Telesat through its subsidiaries
is the Company's joint venture partner in Olympus and one of the Company's
present directors, Dennis P. Coyle, is a nominee of Telesat and has been a
director since September 1995.
<TABLE>
<CAPTION>
Percent of
Shares of Shares of Convertible
Shares of Convertible Convertible Preferred
Convertible Preferred Stock Preferred Stock Stock After
Name Preferred Stock Offered After Offering Offering
- ---- --------------- ------- -------------- --------
<S> <C> <C> <C> <C>
Highland Preferred
Communications, L.L.C.......... 80,000 80,000 -- --
Telesat............................ 20,000 20,000 -- --
Highland Holdings.................. (a) (a) (a) (a)
John J. Rigas...................... (a) (a) (a) (a)
Michael J. Rigas................... (a) (a) (a) (a)
Timothy J. Rigas................... (a) (a) (a) (a)
James P. Rigas..................... (a) (a) (a) (a)
Ellen K. Rigas..................... (a) (a) (a) (a)
</TABLE>
<TABLE>
<CAPTION>
Shares of
Class A
Common Shares of Percent of
Shares of Percent of Stock Offered Class A Class A
Class A Class A Upon Conversion Common Common
Common Common of Convertible Stock After Stock After
Name Stock Stock Preferred Stock Offering Offering
- ----- ----- ----- --------------- -------- --------
<S> <C> <C> <C> <C> <C>
Highland Preferred
Communications, LLC(a)......... 9,433,962(b) 25.8% 9,433,962(b) -- --
Highland Communications,
LLC(a)......................... 7,442,313 27.0% 7,442,313 27.4%
Telesat............................ 3,449,890(b) 11.7%(a) 2,358,490 1,091,310 3.7%(a)
Highland Holdings.................. (a) (a) (a) (a) (a)
John J. Rigas...................... (c) (d) (c) (c) (d)
Michael J. Rigas................... (c) (d) (c) (c) (d)
Timothy J. Rigas................... (c) (d) (c) (c) (d)
James P. Rigas..................... (c) (d) (c) (c) (d)
Ellen K. Rigas..................... (e) (f) (e) (e) (f)
Syracuse Hilton Head Holdings,
L.P............................ 2,398,151(g) 8.8% -- 2,398,151 8.8%
</TABLE>
<TABLE>
<CAPTION>
Shares of Percent of
Class B Class B
Common Common
Name Stock Stock
- ---- ----- -----
<S> <C> <C>
Highland Preferred
Communications, L.L.C. -- --
Highland Holdings -- --
John J. Rigas...................... 5,883,004(h) 53.8%
Michael J. Rigas................... 1,915,970(h) 17.5%
Timothy J. Rigas................... 1,915,970(h) 17.5%
James P. Rigas..................... 1,151,634(h) 10.5%
Ellen K. Rigas..................... 371,762(h) 3.4%
</TABLE>
(a) Highland, as beneficially owned, is a general partnership, the general
partners of which include John J. Rigas, Michael J. Rigas, Timothy J. Rigas,
James P. Rigas and Ellen K. Rigas, each of whom together with Highland may
be deemed to share voting and investment power with respect to the shares
held by Highland's wholly owned subsidiaries, Highland Communications, LLC
and Highland Preferred Communications, LLC
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The amount shown has been adjusted (and the percentages of Class A Common
Stock beneficially owned, accordingly, adjusted) for the 1998 Adelphia
Public Offering, including the issuance of Class A Common Stock to Highland
Communications, LLC in connection therewith.
(b) The amount shown includes with respect to Highland Preferred Communications,
LLC, and the percentage shown reflects, 9,433,962 shares of Class A Common
Stock into which 80,000 shares of the Company's Series C Cumulative
Convertible Preferred Stock is convertible. The amount shown includes with
respect to Telesat, and the percentage reflects, 2,358,490 shares of Class A
Common Stock into which 20,000 shares of the Company's Series C Cumulative
Convertible Preferred Stock held by Telesat is convertible. A prospectus
has also been filed as part of this registration statement to permit
Highland Communications, LLC and its transferres, pledgees, donees and
successors to sell from time to time all or a portion of the shares of Class
A Common Stock owned by it and to pledge as collateral all or a portion of
such shares with brokerage or lending institutions for margin loans.
(c) 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, 431,800
shares - 71,700 shares directly and 360,100 shares through Syracuse Hilton
Head Holdings, L.P. ("SHHH"); Michael J. Rigas, 193,500 shares-200 shares
directly and 193,300 shares through SHHH; Timothy J. Rigas, 193,500 shares-
200 shares directly and 193,300 shares through SHHH; James P. Rigas, 193,300
shares indirectly through SHHH. John J. Rigas shares voting power with his
spouse with respect to 106,300 of such shares held through SHHH. Each of
John J. Rigas, Michael J. Rigas, Timothy J. Rigas and James P. Rigas also
share voting and dispositive power with respect to 13,849,915 shares
(16,876,275 shares after giving effect to the purchase by Highland
Communications, LLC in connection with the 1998 Adelphia Public Offering) of
Class A Common Stock deemed to be beneficially owned by Highland Holdings,
and 1,458,151 shares of Class A Common Stock held by SHHH. See note (a)
above and note (g) below.
(d) 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, and the conversion into Class A Common Stock
of Series C Cumulative Convertible Preferred Stock, currently held by such
individual holder or over which such individual holder has or shares voting
or investment power as disclosed in notes (a) and (c) above or note (g)
below and without giving effect to the 1998 Adelphia Public Offering and the
purchase of shares by Highland Communications, LLC in connection therewith,
as of March 31, 1998, the percentage of Class A Common Stock owned by John
J. Rigas, Michael J. Rigas, Timothy J. Rigas and James P. Rigas, would be
62.8%, 57.9%, 57.9% and 56.8%, respectively, prior to the sale of the Shares
held by Highland Preferred Communications, LLC offered hereby. 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 67.4%. In addition, as adjusted for the 1998 Adelphia
Public Offering and related transactions, the percentage of Class A Common
Stock owned by John J. Rigas, Michael J. Rigas, Timothy J. Rigas and James
P. Rigas would be 59.4%, 55.0%, 55.0% and 54.1%, respectively, prior to the
sale of Shares offered by Highland Preferred Communications, LLC hereby, and
37.2%, 30.5%, 30.5% and 29.1%, respectively, after the sale of the Shares
offered by Highland Preferred Communications, LLC hereby.
(e) 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
13,849,915 shares (16,876,275 shares after giving effect to the purchase by
Highland Communications, LLC in connection with the 1998 Adelphia Public
Offering) of Class A Common Stock held by Highland. See note (a) above.
Ellen K. Rigas is the daughter of John J. Rigas.
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<PAGE>
(f) 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, and the conversion into Class A Common Stock of Series
C Cumulative Convertible Preferred Stock held by Ellen K. Rigas or over
which Ellen K. Rigas has or shares voting or investment power as discussed
in note (a) above and to the purchase of Class A Common Stock by Highland
Communications, LLC in connection with the 1998 Adelphia Public Offering,
the percentage of Class A Common Stock owned by Ellen K. Rigas would be
46.7% prior to the sale of the Shares held by Highland Preferred
Communications, LLC offered hereby and 21.1% after giving effect to the sale
of the Shares held by Highland Preferred Communications, LLC offered hereby.
(g) 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. In addition, through irrevocable proxies, each of the above-
named individuals shares with SHHH the power to vote or direct the vote of
such number of shares of Class A Common Stock held as is specified in note
(c) above.
(h) The amounts shown include 97,949 of the same shares which are owned of
record by Dorellenic. The named Rigas individuals have shared voting and
investment power with respect to these shares.
As set forth in the foregoing notes, the Rigas Family may be deemed to have
beneficial ownership over the Shares held by SHHH, Highland Communications, LLC
and Highland Preferred Communications, LLC John J. Rigas has been Chief
Executive Officer and Chairman of the Board of Directors of Adelphia for more
than the past three years. Michael J. Rigas, Timothy J. Rigas and James P.
Rigas, each of whom is a son of John J. Rigas, has been an executive officer and
director of Adelphia for more than the past three years.
Each Selling Stockholder will receive any proceeds from the sale of Shares
offered hereby by the respective Selling Stockholder (including any proceeds
received by a pledgee from the sale of any pledged Shares offered hereby in
excess of the relevant loan amount). Any pledged Shares will only become
available for sale by a pledgee upon an event of default under the relevant loan
agreement. Adelphia will advance or contribute the net proceeds from the sale of
Class A Common Stock to Highland Communications, LLC in connection with the 1998
Adelphia Public Offering (estimated to be approximately $125 million) to certain
of Adelphia's subsidiaries which will apply such funds to repay revolving credit
facilities (which as of March 31, 1998 had an average effective interest rate of
approximately 6.44%) that the respective subsidiaries will be able to reborrow,
subject to compliance with the terms and maturity of such facilities.
DESCRIPTION OF CAPITAL STOCK
The following description of the capital stock of Adelphia and certain
provisions of Adelphia's Certificate of Incorporation and Bylaws is a summary
and is qualified in its entirety by Adelphia's Certificate of Incorporation and
Bylaws, which documents are incorporated herein by reference.
Adelphia's authorized capital stock consists of 200,000,000 shares of Class A
Common Stock, par value $.01 per share, 25,000,000 shares of Class B Common
Stock, par value $.01 per share, and 5,000,000 shares of Preferred Stock, par
value $.01 per share.
Common Stock
Dividends. Holders of Class A Common Stock and Class B Common Stock are
entitled to receive such dividends as may be declared by Adelphia's Board of
Directors out of funds legally available for such purpose, but only after
payment of dividends required to be paid on outstanding shares of any other
class or series of stock having preference over Common Stock as to dividends. No
dividend may be declared or paid in cash or property on either class of Common
Stock, however, unless simultaneously a dividend is paid on the other class of
Common Stock as follows. In the event a cash dividend is paid, the holders of
Class A Common Stock will be paid a cash dividend per share equal to 105% of the
amount payable per share of Class B Common Stock. In the event of a property
dividend, holders of each class of Common Stock are entitled to receive the same
value per share of Common Stock outstanding. In the case of any stock dividend,
holders of Class A Common Stock are entitled to receive the same percentage
dividend (payable in Class A Common Stock) as the holders of Class B
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<PAGE>
Common Stock receive (payable in Class B Common Stock). Adelphia is limited in
its ability to pay cash dividends on Common Stock under its outstanding long-
term loan agreements. See Note 4 to the Adelphia Communications Corporation
consolidated financial statements in the Form 10-K.
Voting Rights. Holders of Class A Common Stock and Class B Common Stock vote
as a single class on all matters submitted to a vote of the stockholders, with
each share of Class A Common Stock entitled to one vote and each share of Class
B Common Stock entitled to ten votes, except (i) for the election of directors
and (ii) as otherwise provided by law. In the annual election of directors, the
holders of Class A Common Stock, voting as a separate class, are entitled to
elect one of Adelphia's directors. The holders of Class A Common Stock and Class
B Common Stock, voting as a single class with each share of Class A Common Stock
entitled to one vote and each share of Class B Common Stock entitled to ten
votes, are entitled to elect the remaining directors. Consequently, holders of
Class B Stock have sufficient voting power to elect the remaining six members of
the seven-member Board of Directors. Holders of Class A Common Stock and Class B
Common Stock are not entitled to cumulate votes in the election of directors.
Under Delaware law and Adelphia's Certificate of Incorporation, the affirmative
vote of a majority of the outstanding shares of Class A Common Stock is required
to approve, among other matters, a change in the powers, preferences or special
rights of the shares of Class A Common Stock so as to affect them adversely, but
is not required to approve an increase or decrease in the number of authorized
shares of Class A Common Stock.
Liquidation Rights. Upon liquidation, dissolution or winding up of Adelphia,
any distributions to holders of any class of Common Stock would only be made
after payment in full of creditors and provision for the preference of any other
class or series of stock having a preference over the Common Stock upon
liquidation, dissolution or winding up that may then be outstanding. Thereafter,
the holders of Class A Common Stock are entitled to a preference of $1.00 per
share. After such amount is paid, holders of the Class B are entitled to receive
$1.00 per share. Any remaining amount would then be shared ratably by both
classes.
Other Provisions. Each share of Class B Common Stock is convertible at the
option of its holder into one share of Class A Common Stock at any time. The
holders of Class A Common Stock and Class B Common Stock are not entitled to
preemptive or subscription rights. Neither the Class A Common Stock nor the
Class B Common Stock may be subdivided, consolidated, reclassified or otherwise
changed unless concurrently the other class of Common Stock is subdivided,
consolidated, reclassified or otherwise changed in the same proportion and in
the same manner.
Preferred Stock
The 5,000,000 shares of authorized preferred stock may be issued with such
designations, powers, preferences and other rights and qualifications,
limitations and restrictions thereof as Adelphia's Board of Directors may
authorize without further action by Adelphia's stockholders, including but not
limited to: (i) the distinctive designation of each series and the number of
shares that will constitute such series; (ii) the voting rights, if any, of
shares of such series; (iii) the dividend rate on the shares of such series, any
restriction, limitation or condition upon the payment of such dividends, whether
dividends shall be cumulative and the dates on which dividends are payable; (iv)
the prices at which, and the terms and conditions on which, the shares of such
series may be redeemed, if such shares are redeemable; (v) the purchase or
sinking fund provisions, if any, for the purchase or redemption of shares of
such series; (vi) any preferential amount payable upon shares of such series in
the event of the liquidation, dissolution or winding up of Adelphia or the
distribution of its assets; and (vii) the prices or rates of conversion at
which, and the terms and conditions on which, the shares of such series may be
converted into other securities, if such shares are convertible. Adelphia has
designated and has outstanding two classes of Preferred Stock - 8 1/8% Series C
Convertible Preferred Stock, par value $.01 per share ("Convertible Preferred
Stock") and 13% Cumulative Exchangeable Preferred Stock, par value $.01 per
share ("Exchangeable Preferred Stock"), Series B. In connection with the
foregoing designations, the maximum number of shares authorized of Convertible
Preferred Stock and Exchangeable Preferred Stock is 100,000 shares and 1,500,000
shares, respectively.
Convertible Preferred Stock. The Convertible Preferred Stock accrues
cumulative dividends at the rate of 8 1/4% per annum, or $81 1/4 per share of
the Convertible Preferred Stock per annum. The Convertible Preferred Stock has a
liquidation preference of $1,000 per share. Upon any voluntary or involuntary
liquidation, dissolution or winding-up of the affairs of the Corporation, the
holders of the Convertible Preferred Stock are entitled to
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<PAGE>
receive the liquidation preference for the Convertible Preferred Stock, plus any
accrued but unpaid dividends thereon, and no more. Neither the voluntary sale,
conveyance, exchange or transfer (for cash, shares of stock, securities or other
consideration) of all or substantially all of the property or assets of Adelphia
nor the consolidation or merger of Adelphia with or into one or more
corporations will be deemed to be a voluntary or involuntary liquidation,
dissolution or winding-up of Adelphia, unless such sale, conveyance, exchange or
transfer shall be in connection with a liquidation, dissolution or winding-up of
the business of Adelphia. The Convertible Preferred Stock ranks pari passu with
the Exchangeable Preferred Stock and ranks senior to the Common Stock of the
Company with respect to dividends and liquidation.
Each share of Convertible Preferred Stock is convertible based upon its stated
liquidation preference into shares of the Class A Common Stock of the Company at
any time at the election of the holder thereof at a conversion price of $8.48
per share of Adelphia Class A Common Stock (or approximately 117.9245 shares of
the Class A Common Stock per share of Convertible Preferred Stock). The
conversion price is subject to adjustment if Adelphia pays a dividend in shares
of Class A Common Stock or subdivides, combines or reclassifies the shares of
Class A Common Stock or distributes rights to purchase Common Stock or makes
certain other distributions to holders of Common Stock. The Convertible
Preferred Stock is not be entitled to vote in the election of directors of the
Company or upon any other matter (except as provided by law), unless a Voting
Rights Triggering Event with respect to the Convertible Preferred Stock occurs,
in which case the Board of Directors will be expanded by two seats, which shall
then be elected by the holders of the Convertible Preferred Stock. The
Convertible Preferred Stock is not subject to mandatory redemption.
The Convertible Preferred Stock may be redeemed at the option of Adelphia, in
whole or in part, at any time on or after August 1, 2000 at 104%, 102% and 100%
of the liquidation preference of the Convertible Preferred Stock plus accrued
dividends in the years 2000, 2001, and 2002 and thereafter, respectively.
Cumulative Exchangeable Preferred Stock. The shares of Exchangeable Preferred
Stock are redeemable at the option of the Company, on or after July 15, 2002.
The Company is required, subject to certain conditions, to redeem all of the
Exchangeable Preferred Stock outstanding on July 15, 2009, at a redemption price
equal to 100% of the liquidation preference thereof, plus accumulated and unpaid
dividends to the date of redemption. Dividends on the Exchangeable Preferred
Stock accrue at a rate of 13% of the liquidation preference per annum and are
payable semiannually, commencing on January 15, 1998.
The rights of holders of shares of Common Stock as described above will be
subject to, and may be adversely affected by, the rights of holders of any
additional classes of Preferred Stock that may be designated and issued in the
future.
Transfer Agent
The Transfer Agent and Registrar for the Class A Common Stock and the
Exchangeable Preferred Stock is American Stock Transfer & Trust Company.
PLAN OF DISTRIBUTION
The Shares may be sold by a Selling Stockholder from time to time, in one
or more transactions at fixed prices, at prevailing market prices or at prices
related thereto at the time of sale, at varying prices determined at the time of
sale or at negotiated prices. Such prices will be determined by the Selling
Stockholder. Each Selling Stockholder may pledge all or a portion of the Shares
owned as collateral in loan transactions pursuant to loan agreements or margin
agreements with one or more pledgees. Any such loan or margin agreements may
have various provisions, including a maintenance of collateral value covenant
which, in the event that the value of the pledged Shares were to decline below
an agreed upon percentage of the loans made to such Selling Stockholder,
obligates such Selling Stockholder to pledge cash or other additional collateral
of a type acceptable by the pledgee which has made the loans in an amount that
results in the aggregate value of the pledged Shares and other collateral
exceeding an agreed upon percentage of the loans. Upon default by any such
Selling Stockholder who has entered into one or more loan or pledge agreements,
including without limitation any failure of such Selling Stockholder to provide
satisfactory additional collateral, the pledgee under the loan or margin
agreement would have the right to sell the pledged Shares and apply the proceeds
to the repayment of the loans. Any such pledgee
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<PAGE>
exercising its right to sell Shares pledged to it by a Selling Stockholder will
have the same rights as such Selling Stockholder to offer and sell such Shares
(including in the case of a pledge of Convertible Preferred Stock, the Class A
Common Stock into which it may be converted) under this Prospectus. The sale of
the Shares may be effected (i) in transactions (which may involve crosses or
block transactions) on any national securities exchange or quotation service
(including the NASDAQ National Market) on which the Shares may be listed or
quoted at the time of sale, (ii) in the over-the-counter market, (iii) in
private or negotiated transactions otherwise than on such exchanges or in the
over-the-counter market, (iv) through the writing of options or (v) in
combinations of such methods. In effecting such sales, underwriters, brokers or
dealers engaged by the Selling Stockholders may arrange for other underwriters,
brokers or dealers to participate. Underwriters, brokers or dealers may purchase
Shares as principals for their own accounts and resell such Shares pursuant to
this Prospectus. Underwriters, brokers and dealers may receive commissions or
discounts from such Selling Stockholders in amounts to be negotiated immediately
prior to the sale. The Selling Stockholders, any such underwriters, brokers or
dealers and any other participating brokers or dealers may be deemed to be
"underwriters" within the meaning of the Securities Act of 1933, as amended, in
connection with such sales, and any profits realized or commissions received may
be deemed underwriting compensation.
At the time a particular offering of the Shares is made, if required, a
prospectus supplement will be distributed which will set forth the names of the
Selling Stockholders, the aggregate amount and type of Shares being offered, the
number of such securities owned prior to and after the completion of any such
offering, and, to the extent required, the terms of the offering, including the
name or names of any underwriters, broker/dealers or agents, any discounts,
commissions and other terms constituting compensation from the Selling
Stockholders and any discounts, commissions or concessions allowed or reallowed
or paid to broker/dealers.
To comply with the securities laws of certain jurisdictions, if applicable,
the Shares will be offered or sold in such jurisdictions only through registered
or licensed brokers or dealers. In addition, in certain jurisdictions the
Shares may not be offered or sold unless they have been registered or qualified
for sale in such jurisdictions or any exemption from registration or
qualification is available and is complied with.
Under applicable rules and regulations under the Exchange Act, any person
engaged in a distribution of the Shares may be limited in its ability to engage
in market activities with respect to such Shares. In addition and without
limiting the foregoing, each Selling Stockholder will be subject to applicable
provisions of the Exchange Act and the rules and regulations thereunder, which
provisions may limit the timing of purchases and sales of any of the Shares by
the Selling Stockholders. All of the foregoing may affect the marketability of
the Shares.
All expenses of the registration of the Shares will be paid by the Company,
including, without limitation, Commission filing fees and expenses of compliance
with state securities or "blue sky" laws; provided, however, that the Selling
Stockholders will pay all underwriting discounts and selling commissions, if
any. The Selling Stockholders, including any pledgees, and any underwriters,
brokers or dealers participating in any distribution of the Shares may be
indemnified by the Company against certain civil liabilities, including certain
liabilities under the Securities Act of 1933, as amended, or may be entitled to
contribution in connection therewith. The Company will be indemnified by the
Selling Stockholders against certain civil liabilities, including certain
liabilities under the Securities Act of 1933, as amended, or will be entitled to
contribution in connection therewith.
EXPERTS
The consolidated financial statements and the related financial statement
schedules of Adelphia and its subsidiaries as of March 31, 1997 and 1998, and
for each of the three years in the period ended March 31, 1998, and the
consolidated financial statements and the related financial statement schedules
of Olympus and its subsidiaries as of December 31, 1996 and 1997, and for each
of the three years in the period ended December 31, 1997, all incorporated in
this Prospectus by reference from the Company's Annual Report on Form 10-K for
the year ended March 31, 1998 have been audited by Deloitte & Touche LLP,
independent auditors, as stated in their reports, which are incorporated herein
by reference, and have been so incorporated in reliance upon the reports of such
firm given upon their authority as experts in accounting and auditing.
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<PAGE>
<TABLE>
<S> <C>
No dealer, salesman or any other person has 100,000 Shares
been authorized to give any information or to 8 1/8% Convertible Preferred Stock
make any representations other than those
contained in this Prospectus in connection 11,792,452 Shares
with the offer made by this Prospectus and, if Class A Common Stock
given or made, such information or
representations must not be relied upon as
having been authorized. Neither the delivery
of this Prospectus nor any sale made hereunder
shall under any circumstances create any
implication that there has been no change in
the affairs of Adelphia since the date hereof.
This Prospectus does not constitute an offer
or solicitation by anyone in any jurisdiction
in which such offer or solicitation is not
authorized or in which the person making such
offer or solicitation is not qualified to do
so or to anyone to whom it is unlawful to make
such offer or solicitation.
--------------------
ADELPHIA COMMUNICATIONS
CORPORATION
Table of Contents
Page
-----
Available Information........................... 2
Incorporation of Certain Documents by
Reference.................................... 2
The Company..................................... 3
Risk Factors.................................... 4
Dilution........................................ 10
Ratio of Earnings to Combined Fixed Charges
and Preferred Stock Dividends................ 10
Selling Stockholders............................ 10
Description of Capital Stock.................... 13
Plan of Distribution............................ 15
Experts......................................... 16
Prospectus
Dated July__, 1998
</TABLE>
<PAGE>
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED JULY 27, 1998
Prospectus
10,400,000 Shares
ADELPHIA COMMUNICATIONS CORPORATION
Class A Common Stock
($.01 par value)
- ------------------
This Prospectus offers up to 10,400,000 shares (the "Shares") of Class A Common
Stock, $.01 par value (the "Class A Common Stock") of Adelphia Communications
Corporation ("Adelphia" or the "Company"). The Shares principally relate to
offerings by Adelphia in connection with a January 1994 public offering of
Adelphia and in connection with and as described in a prospectus supplement of
Adelphia dated July 16, 1998, as supplemented, to Registration Statement No.
333-58749 filed with the Securities and Exchange Commission (the "1998 Adelphia
Public Offering"). The Shares have been registered, among other reasons, to
permit the acquisition by certain of the Selling Stockholders named herein of a
portion of the Shares in connection with the 1998 Adelphia Public Offering and
to permit the Selling Stockholders named herein to sell all or a portion of the
Shares and to pledge as collateral all or a portion of the Shares with brokerage
or lending institutions for margin loans. See "Selling Stockholders."
The Shares may be sold from time to time to or through brokers and dealers and
underwriters to be selected by the Selling Stockholders from time to time. The
Shares may be offered for sale through the Nasdaq Stock Market, in the over-the-
counter market, through a market maker, in one or more private transactions, or
a combination of such methods of sale, at prices and on terms then prevailing,
at prices related to such prices, or at negotiated prices. The Selling
Stockholders may pledge all or a portion of the Shares as collateral for margin
accounts or in loan transactions, and the Shares may be resold pursuant to the
terms of such pledges, accounts or loan transactions. Upon default by such
Selling Stockholders, the pledgee in such loan transaction would have the same
rights of sale as the Selling Stockholders under this Prospectus. The Selling
Stockholders may also transfer Shares owned in other ways not involving market
makers or established trading markets, including directly by gift, distribution,
or other transfer without consideration, and upon any such transfer the
transferee would have the same rights of sale or pledge as such Selling
Stockholders under this Prospectus. See "Plan of Distribution." Finally, the
Selling Stockholders and any brokers and dealers through whom sales of the
Offered Shares are made may be deemed to be "underwriters" within the meaning of
the Securities Act of 1933, as amended, and the commissions or discounts and
other compensation paid to such persons may be regarded as underwriters'
compensation. See "Plan of Distribution." Adelphia will not receive any of the
proceeds from these sales.
The Class A Common Stock is listed for trading on the NASDAQ National Stock
Market. On July 27, 1998, the closing sale price of the Class A Common Stock
was $37 1/4 per share.
The rights of holders of Class A Common Stock and Class B Common Stock, $.01 par
value (the "Class B Common Stock" and together with the Class A Common Stock,
the "Common Stock") differ with respect to certain aspects of dividend,
liquidation and voting rights. The Class A Common Stock has certain
preferential rights with respect to cash dividends and distributions upon the
liquidation of Adelphia. Holders of Class B Common Stock are entitled to
greater voting rights than the holders of Class A Common Stock; however, the
holders of Class A Common Stock, voting as a separate class, are entitled to
elect one of Adelphia's directors.
PROSPECTIVE PURCHASERS OF CLASS A COMMON STOCK SHOULD CAREFULLY CONSIDER THE
MATTERS SET FORTH UNDER THE CAPTION "RISK FACTORS" BEGINNING ON PAGE 4.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this Prospectus is _____________, 1998.
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+ INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+ REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+ SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+ OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+ BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+ THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+ SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+ UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
<PAGE>
AVAILABLE INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission") in Washington, D.C. a Registration Statement under the Securities
Act of 1933, as amended with respect to the securities offered by this
Prospectus. This Prospectus, which is part of the Registration Statement, does
not contain all of the information set forth in the Registration Statement and
the exhibits and schedules thereto. For further information with respect to the
Company, reference is made to such Registration Statement and the exhibits and
schedules filed as part thereof. The Registration Statement and the exhibits and
schedules thereto filed with the Commission may be inspected without charge at
the Public Reference Section of the Commission at Room 1024, Judiciary Plaza,
450 Fifth Street, N.W., Washington, D.C. 20549, and will also be available for
inspection and copying at the regional offices of the Commission located at
Seven World Trade Center, 13th Floor, New York, New York 10048, and the Citicorp
Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of
all or any portion of the Registration Statement may be obtained from the Public
Reference Section of the Commission upon payment of certain prescribed fees.
Electronic registration statements made through the Electronic Data Gathering,
Analysis, and Retrieval system are publicly available through the Commission's
Web site (http://www.sec.gov), which is maintained by the Commission and which
contains reports, proxy and information statements and other information
regarding registrants that file electronically with the Commission.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company with the Commission pursuant
to the Securities Exchange Act of 1934, as amended (the "Exchange Act"), are
incorporated herein by reference: (a) Annual Report on Form 10-K for the fiscal
year ended March 31, 1998 which incorporates, in Items 7 and 8 to such Form 10-
K, portions of the Form 10-K for the fiscal year ended December 31, 1997 of
Olympus Communications, L.P. and Olympus Capital Corporation (the "Form 10-
K"); (b) Adelphia's definitive proxy statement dated September 8, 1997, with
respect to the Annual Meeting of Stockholders held September 29, 1997 (the
"Proxy Statement"); (c) Adelphia's Current Report on Form 8-K for the events
dated June 29, 1998 and July 2, 1998; and (d) the descriptions of the Company's
Common Stock contained in the registration statements filed under Section 12(g)
of the Exchange Act, including any amendments or reports for the purpose of
updating such descriptions.
All documents subsequently filed by the Company pursuant to Section 13(a),
13(c), 14 or 15(d) of the Exchange Act prior to the termination of this offering
shall be deemed to be incorporated by reference in this Prospectus and to be a
part hereof from the respective date of filing of each such document. Any
statement contained in a document incorporated or deemed to be incorporated by
reference herein shall be deemed to be modified or superseded for purposes of
this Prospectus to the extent that a statement contained herein or in any other
subsequently filed document which also is, or is deemed to be, incorporated by
reference herein modifies or supersedes such statement. Any such statement so
modified or superseded shall not be deemed, except as so modified or superseded,
to constitute a part of this Prospectus.
This Prospectus incorporates documents by reference which are not presented
herein or delivered herewith. These documents are available upon request from E.
Hartman, Director of Finance, Adelphia Communications Corporation, Main at Water
Street, Coudersport, PA 16915, telephone number 814-274-9830.
No dealer, salesman or other individual has been authorized to give any
information or to make any representations not contained in this Prospectus, any
accompanying Prospectus Supplement or the documents incorporated or deemed
incorporated by reference herein. If given or made, such information or
representations must not be relied upon as having been authorized by the Company
or any underwriter, dealer or agent. This Prospectus does not constitute an
offer to sell, or a solicitation of an offer to buy, any securities other than
the registered securities to which it relates, or an offer to sell or a
solicitation of an offer to buy those securities to which it relates, in any
jurisdiction where, or to any person to whom, it is unlawful to make such offer
or solicitation. Neither the delivery of this Prospectus or any Prospectus
Supplement nor any sale made hereunder shall, under any circumstances, create
any implication that there has not been any change in the facts set forth in
this Prospectus or in the affairs of the Company since the date hereof.
-2-
<PAGE>
THE COMPANY
Adelphia Communications Corporation ("Adelphia" and, collectively with its
subsidiaries, the "Company") is a leader in the telecommunications industry with
cable television operations and competitive local exchange telephony operations.
John J. Rigas, the Chairman, President, Chief Executive Officer and founder of
Adelphia, has owned and operated cable television systems since 1952.
Cable systems owned by the Company (the "Company Systems") are located in
twelve states and are organized into seven regional clusters: Western New York,
Virginia, Western Pennsylvania, New England, Eastern Pennsylvania, Ohio and
Coastal New Jersey. The Company Systems are located primarily in suburban areas
of large and medium-sized cities within the 50 largest television markets.
The Company also provides, for a fee, management and consulting services to
certain partnerships and certain corporations engaged in the ownership and
operation of cable television systems (the "Managed Partnerships"). John J.
Rigas and certain members of his immediate family, including entities they own
or control (collectively, the "Rigas Family"), have substantial ownership
interests in the Managed Partnerships.
The Company, through its 66% owned subsidiary Hyperion Telecommunications,
Inc. ("Hyperion"), owns and operates one of the largest facilities based
Competitive Local Exchange Carriers ("CLEC") in the United States based on route
miles and buildings connected. Hyperion designs, constructs, operates and
manages state-of-the-art, fiber optic networks and facilities.
The Company also owns a 50% voting interest and nonvoting Preferred Limited
Partnership ("PLP") interests entitling the Company to a 16.5% preferred return
in Olympus Communications, L.P. ("Olympus"). Olympus is a joint venture
limited partnership between the Company and subsidiaries of FPL Group, Inc.
(together with its subsidiaries, "FPL Group"). FPL Group is one of the largest
public utility holding companies in the United States supplying, through its
principal subsidiaries, electric service throughout most of the east and lower
west coasts of Florida.
Adelphia was incorporated in Delaware on July 1, 1986 for the purpose of
reorganizing five cable television companies, then principally owned by the
Rigas Family, into a holding company structure in connection with the initial
public offering of Adelphia's Class A Common Stock. The Company's executive
offices are located at Main at Water Street, Coudersport, Pennsylvania 16915,
and its telephone number is (814) 274-9830.
Recent Developments
Information set forth in the foregoing section of the Prospectus is as of
the date of this Prospectus. For recent developments regarding the Company as
well as other information contained in this Prospectus, reference is made to the
future filings by Adelphia under the Exchange Act and to the Prospectus
Supplement, if any, accompanying this Prospectus.
-3-
<PAGE>
RISK FACTORS
In addition to the other information contained or incorporated by reference in
this Prospectus, the following risk factors should be carefully considered in
evaluating the Company and its business before purchasing the securities offered
hereby.
Substantial Leverage
The Company is highly leveraged and has incurred substantial indebtedness to
finance acquisitions and expansion of its operations and, to a lesser extent,
for investments in and advances to affiliates. At March 31, 1998, the Company's
total indebtedness aggregated approximately $2,909,745,000, which included
approximately $864,258,000 of subsidiary bank, institutional and other debt,
$465,213,000 of Hyperion public debt and $1,580,274,000 of indebtedness of the
parent company. The Company's total debt has varying maturities to 2008,
including an aggregate of approximately $1,078,600,000 maturing on or prior to
March 31, 2003. The Company has maintained its public long-term debt at the
holding company level and at Hyperion while borrowing in the private debt
markets (e.g., bank and insurance company debt) through the Company's wholly-
owned subsidiaries. The Company's subsidiary financings are effected through
separate borrowing groups, and substantially all of the indebtedness in these
borrowing groups is non-recourse to Adelphia. The subsidiary credit arrangements
have varied revolving credit and term loan periods and contain separately
negotiated covenants relating to, among other things, cross-defaults and the
incurrence of additional debt for each borrowing group. In addition, Olympus has
substantial leverage. The high level of the Company's indebtedness will have
important consequences to investors, including: (i) a substantial portion of the
Company's cash flow from operations must be dedicated to debt service and will
not be available for general corporate purposes or for capital improvements;
(ii) the Company's ability to obtain additional debt financing in the future for
working capital, capital expenditures, acquisitions or for capital improvements
may be limited; and (iii) the Company's level of indebtedness could limit its
flexibility in reacting to changes in the industry and economic conditions
generally. In addition, at March 31, 1998, Adelphia had approximately
$148,062,000 and Hyperion had approximately $207,204,000 of redeemable
exchangeable preferred stock. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations" in the Form 10-K.
Net Losses and Convertible Preferred Stock, Common Stock and Other Stockholders'
Equity (Deficiency)
The Total Convertible Preferred Stock, Common Stock and Other Stockholders'
Equity (Deficiency) at March 31, 1998 was approximately ($1,315,865,000). The
stockholders' deficiency generally has resulted from the Company's reported net
losses which have been caused primarily by high levels of depreciation and
amortization and interest expense. The Company reported net losses applicable to
common stockholders of approximately $119,894,000, $130,642,000 and $192,729,000
for the years ended March 31, 1996, 1997 and 1998, respectively. The Company
expects to continue to incur significant net losses for the next several years.
See "Management's Discussion and Analysis of Financial Condition and Results of
Operations" in the Form 10-K.
For the years ended March 31, 1997 and March 31, 1998, respectively, the
Company's earnings were insufficient to cover its combined fixed charges and
preferred stock dividends by approximately $61,848,000 and $113,941,000,
respectively. However, such amounts reflect non-cash charges totaling
approximately $165,426,000 and $182,471,000, respectively, consisting of
depreciation, amortization, and non-cash interest expense on certain
indebtedness of the Company and Hyperion preferred stock dividends.
Historically, the Company's cash generated from operating activities and
borrowings has been sufficient to meet its requirements for debt service,
working capital, capital expenditures, and investments in and advances to
affiliates, and the Company has depended on the availability of additional
borrowings to meet its liquidity requirements. The Company believes that it will
continue to generate cash and obtain financing sufficient to meet such
requirements. However, the Company's ability to incur additional indebtedness is
limited by covenants in its indentures and its subsidiary credit agreements.
Although in the past the Company has been able both to refinance its
indebtedness and to obtain new financing, there can be no assurance that the
Company would be able to do so in the future or that, if the Company were able
to do so, the terms available would be favorable to the Company. In the event
that the Company were unable to refinance its indebtedness or obtain new
financing under these circumstances, the Company would likely have to consider
various options such as the sale of certain assets to meet its required debt
service, negotiation with its lenders to restructure applicable indebtedness or
other options available to it under
-4-
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applicable law. There can be no assurance that any such options would yield net
proceeds sufficient to repay its indebtedness in full. See "Selected
Consolidated Financial Data" and "Management's Discussion and Analysis of
Financial Condition and Results of Operations" in the Form 10-K.
Voting Control and Disparate Voting Rights
As of March 31, 1998, as adjusted for the issuance of Class A Common Stock in
connection with the public offering described in a prospectus supplement of
Adelphia dated July 16, 1998, as supplemented, to Registration Statement No.
333-58749 filed with the Securities and Exchange Commission (the "1998 Adelphia
Public Offering"), the Rigas Family beneficially owned 10,846,544 shares, or
99.1%, of Adelphia's Class B Common Stock and 9,915,164 shares, or 36.5%, of
Adelphia's outstanding Class A Common Stock. On a combined basis, these shares
represented 54.5% of the total number of outstanding shares of both classes of
Common Stock and 86.7% of the total voting power of both classes. Assuming
conversion of the 8 1/8% Series C Cumulative Convertible Preferred Stock
("Convertible Preferred Stock") held by the Rigas Family, family members would
have held on an as adjusted basis as of March 31, 1998 19,349,126 shares, or
52.9%, of Adelphia's Class A Common Stock and would have held 63.5% of the total
number of shares and 87.5% of the total voting power of both classes of Common
Stock. As a result of the stock ownership by the Rigas Family and the Class B
Stockholders' Agreement, John J. Rigas and members of his family have the power
to elect all seven directors subject to election by both classes on a combined
basis, which directors constitute seven of the eight members of the Board of
Directors of Adelphia. (The holders of the Class A Common Stock are entitled, as
a separate class, to elect one of Adelphia's directors.) Moreover, because
holders of Class B Common Stock are entitled to ten votes per share while
holders of Class A Common Stock are entitled to one vote per share, the Rigas
Family may control stockholder decisions on matters in which holders of Class A
Common Stock and Class B Common Stock vote together as a class. These matters
include the amendment of certain provisions of Adelphia's Certificate of
Incorporation and the approval of certain fundamental corporate transactions,
including mergers.
Holding Company Structure; Restrictive Covenants
As a holding company, Adelphia holds no significant assets other than its
investments in and advances to its subsidiaries and other investments.
Adelphia's ability to make interest and principal payments when due to holders
of debt of Adelphia is dependent upon the receipt of sufficient funds from its
subsidiaries or other investments. Under the terms of various debt agreements
between the Adelphia subsidiaries and other investments and their respective
lending institutions, upon the occurrence of an event of default (including
certain cross-defaults resulting from defaults under Adelphia's debt agreements)
or unless certain financial performance tests are met, the Adelphia subsidiaries
and other investments are restricted from distributing funds to Adelphia. The
Indentures governing the 8 1/8% Senior Notes due 2003 (the "8 1/8% Notes"), the
8 3/8% Senior Notes due 2008 (the "8 3/8% Notes"), the 9 1/4% Senior Notes due
2002 (the "9 1/4% Notes"), the 9 7/8% Senior Notes due 2007 (the "9 7/8%
Notes"), the 10 1/2% Senior Notes due 2004 (the "10 1/2% Notes"), the 12 1/2%
Senior Notes due 2002 (the "12 1/2% Notes"), the 10 1/4% Senior Notes due 2000
(the "10 1/4% Notes"), the 9 1/2% Senior Pay-In-Kind Notes due 2004 (the "9 1/2%
Notes"), the 11 7/8% Senior Debentures due 2004 (the "11 7/8% Debentures") and
the 9 7/8% Senior Debentures due 2005 (the "9 7/8% Debentures") (collectively,
"Adelphia's Public Debt") will not restrict the Company's subsidiaries or other
investments from contractually restricting their ability to pay dividends to
Adelphia in the future. In addition, because Adelphia's subsidiaries and other
investments do not guarantee the payment of principal of and interest on debt of
Adelphia, the claims of holders of such debt effectively will be subordinated to
the claim of creditors of such entities. At March 31, 1998, the total amount of
long-term debt of such subsidiaries was approximately $1,329,471,000. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" in the Form 10-K.
The agreements governing the bank debt of the Company's subsidiaries (the
"Subsidiary Bank Agreements") contain, among other covenants, requirements
that Adelphia's subsidiaries maintain specified financial ratios, including
maximum leverage and minimum interest coverage. The ability of a subsidiary to
comply with such provisions may be affected by events that are beyond Adelphia's
control. The breach of any of these covenants could result in a default by a
subsidiary under its Subsidiary Bank Agreement. In the event of any such
default, lenders party to that Subsidiary Bank Agreement could elect to declare
all amounts borrowed under that Subsidiary Bank Agreement, together with accrued
interest and other fees, to be due and payable. If the indebtedness under a
Subsidiary Bank Agreement were to be accelerated, all indebtedness outstanding
under such Subsidiary Bank Agreement would be required to be paid in full before
such subsidiary would be permitted to
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distribute any assets or cash to Adelphia. There can be no assurance that the
assets of Adelphia and its subsidiaries would be sufficient to repay all
borrowings under the Subsidiary Bank Agreements and indebtedness owed to the
other creditors of such subsidiaries in full. In addition, as a result of these
covenants, the ability of Adelphia's subsidiaries to respond to changing
business and economic conditions and to secure additional financing, if needed,
may be significantly restricted, and Adelphia may be prevented from engaging in
transactions that might otherwise be considered beneficial to Adelphia. There
are similar restrictions under other institutional debt of the Company's
subsidiaries.
Potential Conflicts of Interest
The Rigas Family holds substantially all of Adelphia's Class B Common Stock
and 89.1% of the combined voting power of both classes of Adelphia's outstanding
Common Stock (89.8% assuming the conversion of the Convertible Preferred Stock
owned by the Rigas Family) and has the power to elect seven of eight members of
Adelphia's Board of Directors. John J. Rigas and the other executive officers of
Adelphia (including other members of the Rigas Family) hold direct and indirect
ownership interests in the Managed Partnerships, which are managed by the
Company for a fee. Subject to the restrictions contained in a business
opportunity agreement regarding future acquisitions, Rigas Family members and
the executive officers are free to continue to own these interests and acquire
additional interests in cable television systems. Such activities could present
a conflict of interest with the Company in the allocation of management time and
resources of the executive officers. In addition, there have been and will
continue to be transactions between the Company and the executive officers or
other entities in which the executive officers have ownership interests or with
which they are affiliated. The indentures under which Adelphia's Public Debt was
issued contain covenants that place certain restrictions on transactions between
the Company and its affiliates. See "Certain Relationships and Related
Transactions" in the Proxy Statement.
Competition
The cable television systems owned by the Company compete with other
communications and entertainment media as well as other means of video
distribution including Direct Broadcast Satellite Systems ("DBS") and
Multichannel Multipoint Distribution Systems ("MMDS"). In addition, some of
the Regional Bell Operating Companies (the "RBOCs") and other local telephone
companies are in the process of entering the video-to-home business and several
have expressed their intention to enter the video-to-home business. In addition,
some RBOCs and local telephone companies have in place facilities which are
capable of delivering cable television service.
In addition, the Telecommunications Act of 1996 (the "1996 Act") has
repealed the cable/telephone cross-ownership plan, and telephone companies will
now be permitted to provide cable television service within their service areas.
Certain of such potential service providers have greater financial resources
than the Company, and in the case of local exchange carriers seeking to provide
cable service within their service areas, have an installed plant and switching
capabilities, any of which could give them competitive advantages with respect
to cable television operators such as the Company. The Company cannot predict
either the extent to which competition will materialize or, if such competition
materializes, the extent of its effect on the Company. See "Business--
Competition" and "Management's Discussion and Analysis of Financial Condition
and Results of Operations" in the Form 10-K.
The Company also faces competition from other communications and entertainment
media, including conventional off-air television broadcasting services,
newspapers, movie theaters, live sporting events and home video products. The
Company cannot predict the extent to which competition may affect the Company.
In each of the markets served by Hyperion's networks, the services offered by
Hyperion compete principally with the services offered by the incumbent local
exchange carrier ("LEC") serving that area. Incumbent LECs have long-standing
relationships with their customers, have the potential to subsidize competitive
services from monopoly service revenues, and benefit from favorable state and
federal regulations. In light of the passage of the 1996 Act, federal and state
regulatory initiatives will provide increased business opportunities to CLECs
such as Hyperion, but regulators are likely to provide incumbent LECs with
increased pricing flexibility for their services as competition increases. If
incumbent LECs are allowed by regulators to lower their rates substantially or
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selectively engage in excessive volume and term discount pricing practices for
their customers or charge CLECs excessive fees for interconnection to the
incumbent LECs' networks, the net income and cash flow of CLECs, including
Hyperion, could be materially and adversely affected.
The 1996 Act also establishes procedures under which the RBOCs can obtain
authority to provide long distance services if they comply with certain
interconnection requirements. To date, the Federal Communications Commission
(the "FCC") authority to provide in-region interLATA service has been sought by
Ameritech in Michigan, Southwestern Bell in Oklahoma, and BellSouth in Louisiana
and South Carolina. The Department of Justice has opposed each request, and each
request has been denied by the FCC. An approval could result in decreased market
share for the major Inter-Exchange Carriers ("IXCs"), which are among
Hyperion's significant customers. Such a result could have an adverse effect on
Hyperion.
There has been significant merger activity among the RBOCs in anticipation of
entry into the long distance market, including the merger of Bell Atlantic and
NYNEX, whose combined territory covers a substantial portion of Hyperion's
markets. If RBOCs are permitted to provide such services, they will ultimately
be in a position to offer single source service for local and long distance
communications and subsidize the price of their long distance prices with
charges on local service. Other combinations are occurring in the industry,
which may have a material adverse effect on Hyperion. Hyperion also faces, and
will continue to face, competition from other current and potential market
entrants, including other CLECs, incumbent LECs which are not subject to RBOC
restrictions on long distance, AT&T, MCI, Sprint and other IXCs, cable
television companies, electric utilities, microwave carriers, wireless
telecommunications providers and private networks built by large end users. In
addition, all of the major IXCs are expected to enter the market for local
telecommunications services. Both AT&T and MCI have announced that they have
begun to offer local telephone services in some areas of the country, and AT&T
recently announced a new wireless technology for providing local telephone
service. AT&T and TCI also recently announced that they will merge. Although
Hyperion has good relationships with the IXCs, there are no assurances that any
of these IXCs will not build their own facilities, purchase other carriers or
their facilities, or resell the services of other carriers rather than use
Hyperion's services when entering the market for local exchange services.
Many of Hyperion's current and potential competitors, particularly incumbent
LECs, have financial, personnel and other resources substantially greater than
those of Hyperion, as well as other competitive advantages over Hyperion.
See "Business--Competition" and "--Legislation and Regulation" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Regulatory and Competitive Matters" in the Form 10-K.
Need for Additional Financing
The Company's business requires substantial investment on a continuing basis
to finance capital expenditures and related expenses for, among other things,
upgrade of the Company's plant (including the need to make cable system upgrades
mandated by franchise authorities), the offering of new services and the
servicing, repayment or refinancing of its indebtedness. The Company will
require significant additional financing, through debt and/or equity issuances,
to meet its capital expenditure plans and to pay its debt obligations. There can
be no assurance that Adelphia will be able to issue additional debt or obtain
additional equity capital on satisfactory terms, or at all, to meet its future
financing needs. See "Business--Technological Developments" and "Management's
Discussion and Analysis of Financial Condition and Results of Operations" in
the Form 10-K.
Regulation in the Telecommunications Industry
The cable television industry is subject to extensive regulation at the
federal, state and local levels, and many aspects of such regulation are
currently the subject of judicial proceedings and administrative or legislative
proposals. The Cable Television Consumer Protection and Competition Act of 1992
(the "1992 Cable Act") significantly expanded the scope of cable television
regulation. In particular, pursuant to the 1992 Cable Act, the FCC adopted
regulations that limit the Company's ability to set and increase rates for the
Company's basic and
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cable programming service ("CPS") packages and for the provision of cable
television-related equipment. The 1992 Cable Act permits certified local
franchising authorities to order refunds of rates paid in the previous twelve-
month period determined to be in excess of the permitted reasonable rates. It is
possible that rate reductions or refunds of previously collected fees may be
required in the future.
The 1996 Act, which became law on February 8, 1996, materially alters federal,
state and local laws and regulations pertaining to cable television,
telecommunications and other related services and, in particular, substantially
amends the Communications Act of 1934 (the "Communications Act"). Certain
provisions of the 1996 Act could materially affect the growth and operation of
the cable television industry and the cable services provided by the Company.
Although the new legislation may substantially lessen certain regulatory
burdens, the cable television industry may be subject to additional competition
as a result. See "Business--Competition" in the Form 10-K. There are numerous
rulemakings that have been and continue to be undertaken by the FCC which will
interpret and implement the provisions of the 1996 Act. In addition, certain
provisions of the new legislation (such as the deregulation of rates for CPS
packages) will not immediately be effective. Furthermore, certain provisions of
the 1996 Act have been, and likely will be, subject to judicial challenge. The
Company is unable at this time to predict the outcome of such rulemakings or
litigation or the short and long-term effect (financial or otherwise) of the
1996 Act and FCC rulemakings on the Company.
The cable television industry is subject to state and local regulations and
the Company must comply with rules of the local franchising authorities to
retain and renew its cable franchises, among other matters. There can be no
assurances that the franchising authorities will not impose new and more
restrictive requirements as a condition to franchise renewal.
Although the 1996 Act eliminates many legal barriers to entry (i.e., telephone
companies entering the cable industry and cable companies entering the telephone
industry), the Company cannot assure that rules adopted by the FCC or state
regulators or other legislative or judicial initiatives relating to the
telecommunications industry will not have a material adverse effect on the
Company. In addition, the 1996 Act removes entry barriers for all companies and
could increase substantially the number of competitors offering comparable
services in the Company's potential markets. See "Legislation and Regulation"
and "Management's Discussion and Analysis of Financial Condition and Results of
Operations--Regulatory and Competitive Matters" in the Form 10-K.
No Dividends Paid or to Be Paid
Adelphia has never declared or paid dividends on any of its Common Stock
and has no intention to pay cash dividends on such stock in the foreseeable
future. In addition, the indentures for Adelphia's Public Debt contain covenants
which limit Adelphia's ability to pay such dividends.
Shares Eligible for Future Sale
As adjusted for the issuance of Class A Common Stock in connection with the
1998 Adelphia Public Offering, as of March 31 1998, 27,169,888 shares of Class A
Common Stock, 10,944,476 shares of Class B Common Stock, each share of which is
presently convertible into a share of Class A Common Stock, and 100,000 shares
of Convertible Preferred Stock, each share of which is presently convertible
into approximately 117.9245 shares of Class A Common Stock, were outstanding.
Pro forma for the 1998 Adelphia Public Offering transactions, as of March 31,
1998, the Rigas Family beneficially owned 10,846,544 shares of Class B Common
Stock, 9,915,164 shares of Class A Common Stock and 80,000 shares of Convertible
Preferred Stock. Pursuant to various registration rights agreements, the Rigas
Family has the right, subject to certain limitations, to require Adelphia to
register substantially all of these shares including Class A Common Stock
issuable upon conversion of the Class B Common Stock and the Convertible
Preferred Stock. In addition to the shares of Class A Common Stock which may be
offered hereby, Adelphia has filed a registration statement to register 100,000
shares of Convertible Preferred Stock (including the approximately 11,792,452
shares of Class A Common Stock into which they may be converted) beneficially
owned by the Rigas Family and Telesat Cablevision, Inc., an affiliate of FPL
Group, Inc. and a registration statement for Booth American Company which as of
March 24, 1998 owned 3,571,428 shares of Class A Common Stock. Although members
of the Rigas Family are expected to agree in connection with the 1998 Adelphia
Public Offering that they will not, directly or indirectly, offer, sell,
contract to sell or otherwise dispose of any Common Stock or securities
convertible or exchangeable or exerciseable for Common Stock or grant any
options or warrants to purchase shares of Common Stock without the permission of
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Smith Barney Inc. for a period of 90 days from the date of the prospectus
supplement for the 1998 Adelphia Public Offering, approximately 5,750,000 shares
of Class A Common Stock and up to 80,000 shares of Convertible Preferred Stock
(including the underlying Class A Common Stock) may be pledged in connection
with margin loans by the Rigas Family to pledgees who are not subject to any
restriction on their sale of any shares of Class A Common Stock acquired upon a
foreclosure or upon conversion of Convertible Preferred Stock acquired upon a
foreclosure. Sales of a substantial number of shares of Class A Common Stock or
Class B Common Stock including sale by any pledgees of such shares could
adversely affect the market price of the Class A Common Stock and could impair
Adelphia's ability in the future to raise capital through an offering of its
equity securities.
Impact of the Year 2000 Issues
The year 2000 issue is the result of computer programs being written using
two digits rather than four to define the applicable year. Any of the Company's
computer programs that have data-sensitive software may recognize a date using
"00" as the year 1900 rather than the year 2000. This could result in a system
failure or miscalculations causing disruptions of operations, including, among
other things, a temporary inability to process transactions, send invoices, or
engage in similar normal business activities. The Company has recently
completed the planning stage of a project that addresses the year 2000 data
processing issues relating to modifications of its mainframe computer
applications. Internal and external resources are being used to make the
required modifications and perform the necessary tests, all of which is expected
to be completed by June 1999. In addition, the Company has begun communicating
with others with whom it does significant business to determine their year 2000
compliance readiness and the extent to which the Company is vulnerable to any
third party year 2000 issues. There can be no assurance that the systems of
other companies on which the Company's systems rely will be timely converted
into systems compatible with the Company systems or that the Company will
prevent the year 2000 issues from having a material adverse effect on the
Company. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations--Year 2000 Issues" in the Form 10-K.
Dilution
Persons purchasing Class A Common Stock will incur immediate and
substantial net tangible book value dilution. See "Dilution."
Potential Volatility of Stock Price
The market price of the shares of Class A Common Stock may be significantly
affected by factors such as actual or anticipated fluctuations in the Company's
operating results, new products or services or new contracts by the Company or
its competitors, legislative and regulatory developments, conditions and trends
in the telecommunications industry, general market conditions and other factors
beyond the Company's control. In addition, the stock market has, from time to
time, experienced significant price and volume fluctuations that have
particularly affected the market prices for the common stock of
telecommunications companies and that have often been unrelated to the operating
performance of particular companies. These broad market fluctuations may also
adversely affect the market price of the Company's Class A Common Stock.
Forward Looking Statements
The statements contained or incorporated by reference in this Prospectus
that are not historical facts are "forward looking statements" (as such term is
defined in the Private Securities Litigation Reform Act of 1995) which
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 or other variations thereon or comparable terminology, or
by discussions of strategy that involve risks and uncertainties.
Certain information included or incorporated by reference in this
Prospectus, including "Management's Discussion and Analysis of Financial
Condition and Results of Operations" in the Form 10-K, 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, government and regulatory policies, the pricing
and availability of
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equipment, materials, inventories and programming, technological developments
and changes in the competitive environment in which the Company operates.
Persons reading this Prospectus are cautioned that such statements are only
predictions 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.
DILUTION
The net tangible book value of the Company's Common Stock as of March 31,
1998 was a deficit of approximately $(2,010,969,000) or $(64.90) per share. Net
tangible book value per share represents the amount of the Company's convertible
preferred stock, common stock and other stockholders' equity (deficiency), less
intangible assets, divided by 30,988,004 shares of Common Stock outstanding.
Purchasers of Class A Common Stock from the Company will have an immediate
dilution of net tangible book value which due to the Company's having a net
tangible book value deficit, will exceed the purchase price per share. For
example in the 1998 Adelphia Public Offering, assuming a purchase price of
$43.25 per share, the net tangible book value dilution per share was $88.30. Net
tangible book value dilution per share represents the difference between the
amount per share paid by purchasers of shares of Class A Common Stock in an
offering from the Company and the pro forma net tangible book value per share of
the Common Stock immediately after completion of such offering.
SELLING STOCKHOLDERS
The Selling Stockholders include Syracuse Hilton Head Holdings, L.P.
("SHHH") and Highland Communications, LLC, a wholly owned subsidiary of Highland
Holdings ("Highland"), and their transferees, pledgees such as banks, brokers,
financial institutions or other lenders (which may include Salomon Smith Barney
Holdings, Inc. or Salomon Smith Barney, Inc. or their affiliates), donees or
successors. The Shares principally relate to offerings by Adelphia in
connection with a January 1994 public offering of Adelphia and in connection
with the 1998 Adelphia Public Offering. The Shares have been registered, among
other reasons, to permit Highland Communications, LLC to purchase approximately
$125 million of Shares from Adelphia at a price equal to the public offering
price less the underwriting discount in the 1998 Adelphia Public Offering and
to permit the Selling Stockholders named herein to sell all or a portion of the
Shares and to pledge as collateral all or a portion of the Shares with brokerage
or lending institutions for margin loans, which margin loans may be used among
other matters to finance Highland Communications, LLC purchase of approximately
$125 million of Class A Common Stock in connection with the 1998 Adelphia Public
Offering. Additional information regarding any pledge of the Shares may be set
forth in a prospectus supplement to this Prospectus. The following table sets
forth, based on information available to the Company, as of March 31, 1998
adjusted for the 1998 Adelphia Public Offering and related transactions, certain
information with respect to the beneficial ownership of Class A Common Stock and
Class B Common Stock by SHHH and Highland and its subsidiaries and members of
the Rigas Family who may be deemed to have an interest in the Shares, based on
27,169,888 shares of Class A Common Stock and 10,944,476 shares of Class B
Common Stock outstanding on a pro forma basis, respectively, as of such date,
and after giving effect to the sale of the Shares of Class A Common Stock
offered hereby by the Selling Stockholders. The business address of SHHH,
Highland, Highland Communications, LLC, Highland Preferred Communications, LLC
and the Rigas Family is Main at Water Street, Coudersport, Pennsylvania 16915.
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<TABLE>
<CAPTION>
Shares of Percent of Shares of Percent of Shares of
Class A Class A Class B Class B Class A
Common Common Common Common Common
Name Stock Stock Stock Stock Stock Offered
- ----- ------------ -------------- ------------ ----------- ----------------
<S> <C> <C> <C> <C> <C>
Syracuse Hilton Head Holdings,
L.P............................. 2,398,151(a) 8.8% -- -- 2,398,151(a)
Highland Communications,
LLC............................. 7,442,313(b) 27.4%(b) -- -- 7,442,313(b)
Highland Preferrred
Communications, LLC............. 9,433,962(b) 25.8% -- -- --
Highland Holdings................... (b) (b) -- -- (b)
John J. Rigas....................... (c) (d) 5,883,004(e) 53.8% (c)
Michael J. Rigas.................... (c) (d) 1,915,970(e) 17.5% (c)
Timothy J. Rigas.................... (c) (d) 1,915,970(e) 17.5% (c)
James P. Rigas...................... (c) (d) 1,151,634(e) 10.5% (c)
Ellen K. Rigas...................... (f) (g) 371,762(e) 3.4% (f)
</TABLE>
<TABLE>
<CAPTION>
Shares of Percent of
Class A Class A
Common Common
Stock After Stock After
Name Offering Offering
- ----- -------- --------
<S> <C> <C>
Syracuse Hilton Head Holdings, -- --
L.P.............................
Highland Communications,
LLC............................. -- --
Highland Preferrred
Communications, LLC............. 9,433,962(b) 25.8%
Highland Holdings................... (b) (b)
John J. Rigas....................... (c) (d)
Michael J. Rigas.................... (c) (d)
Timothy J. Rigas.................... (c) (d)
James P. Rigas...................... (c) (d)
Ellen K. Rigas...................... (f) (g)
</TABLE>
(a) 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. In addition, through irrevocable proxies, each of the above-
named individuals shares with SHHH the power to vote or direct the vote of
such number of shares of Class A Common Stock held as is specified in note
(c) below.
(b) Highland, as beneficially owned, is a general partnership, the general
partners of which include John J. Rigas, Michael J. Rigas, Timothy J. Rigas,
James P. Rigas and Ellen K. Rigas, each of whom together with Highland
may be deemed to share voting and investment power with respect to the
shares held by Highland's wholly owned subsidiaries, Highland
Communications, LLC and Highland Preferred Communications, LLC The amount
shown includes, and the percentage shown reflects, 9,433,962 shares of Class
A Common Stock into which 80,000 shares of the Company's Series C Cumulative
Convertible Preferred Stock held by Highland Preferred Communications, LLC
is convertible. A prospectus has also been filed as part of this
registration statement to permit Highland Preferred Communications, LLC and
its transferres, pledgees, donees and successors to sell from time to time
all or a portion of the shares of Convertible Preferred Stock, including the
shares of Class A Common Stock which may be acquired upon the coversion
thereof, owned by it and to pledge as collateral all or a portion of such
shares with brokerage or lending institutions for margin loans. The amount
shown has been adjusted (and the percentages of Class A Common Stock
beneficially owned, accordingly, adjusted) for the issuance of Shares to
Highland Communications, LLC in connection with the 1998 Adelphia Public
Offering.
(c) 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, 431,800
shares - 1,700 shares directly and 360,100 shares through SHHH; Michael J.
Rigas, 193,500 shares - 200 shares directly and 193,300 shares through SHHH;
Timothy J. Rigas, 193,500 shares - 200 shares directly and 193,300 shares
through SHHH; James P. Rigas, 193,300 shares indirectly through SHHH. John
J. Rigas shares voting power with his spouse with respect to 106,300 of such
shares held through SHHH. Each of John J. Rigas, Michael J. Rigas, Timothy
J. Rigas and James P. Rigas also share voting and dispositive power with
respect to 13,849,915 shares (16,876,275 shares after giving effect to the
purchase by Highland Communications, LLC in connection with the 1998
Adelphia Public Offering) of Class A Common Stock deemed to be beneficially
owned by Highland Holdings, and 1,458,151 shares of Class A Common Stock
held by SHHH. See notes (a) and (b) above.
(d) 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, and the conversion into Class A Common Stock
of Series C Cumulative Convertible Preferred Stock, currently held by such
individual holder or over which such individual holder has or shares voting
or investment power as disclosed in notes (a), (b) or (c) above and without
giving effect to the 1998 Adelphia Public Offering and the purchase
-11-
<PAGE>
of shares by Highland Communications, LLC in connection therewith, as of
March 31, 1998, the percentage of Class A Common Stock owned by John J.
Rigas, Michael J. Rigas, Timothy J. Rigas and James P. Rigas, would be
62.8%, 57.9%, 57.9% and 56.8%, respectively, prior to the sale of Shares
offered hereby. 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 67.4%. In addition, as adjusted for the 1998
Adelphia Public Offering and related transactions, the percentage of Class A
Common Stock owned by John J. Rigas, Michael J. Rigas, Timothy J. Rigas and
James P. Rigas would be 59.4%, 55.0%, 55.0% and 54.1%, respectively, prior
to the sale of Shares offered by the Selling Stockholders hereby, and 36.2%,
29.5%, 29.5% and 28.0%, respectively, after the sale of the Shares offered
by the Selling Stockholders hereby.
(e) The amounts shown include 97,949 of the same shares which are owned of
record by Dorellenic. The named Rigas individuals have shared voting and
investment power with respect to these shares.
(f) 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
13,849,915 shares (16,876,275 shares after giving effect to the purchase by
Highland Communications, LLC in connection with the 1998 Adelphia Public
Offering) of Class A Common Stock held by Highland prior to the sale of the
Shares offered by the Selling Stockholders hereby. See note (b) above. Ellen
K. Rigas is the daughter of John J. Rigas.
(g) 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, and the conversion into Class A Common Stock of Series
C Cumulative Convertible Preferred Stock held by Ellen K. Rigas or over
which Ellen K. Rigas has or shares voting or investment power as discussed
in note (b) above and prior to the purchase of Class A Common Stock by
Highland Communications, LLC in connection with the 1998 Adelphia Public
Offering, the percentage of Class A Common Stock owned by Ellen K. Rigas
would be 26.6% prior to the sale of these Shares offered hereby by the
Selling Stockholders and 46.7% after giving effect to the sale of the Shares
offered hereby by the Selling Stockholders. In addition, pro forma for the
1998 Adelphia Public Offering and related transactions, the percentage of
Class A Common Stock owned by Ellen K. Rigas would be 46.7% prior to the
sale of these Shares offered by the Selling Stockholders and 26.6% after
giving effect to the sale of the Shares offered by the Selling Stockholders.
As set forth in the foregoing notes, the Rigas Family may be deemed to have
beneficial ownership over the Shares held by SHHH, Highland Communications, LLC
and Highland Preferred Communications, LLC John J. Rigas has been Chief
Executive Officer and Chairman of the Board of Directors of Adelphia for more
than the past three years. Michael J. Rigas, Timothy J. Rigas and James P.
Rigas, each of whom is a son of John J. Rigas, have each been an executive
officer and director of Adelphia for more than the past three years.
Each Selling Stockholder will receive any proceeds from the sale of Shares
offered hereby by the respective Selling Stockholder (including any proceeds
received by a pledgee from the sale of any pledged Shares offered hereby in
excess of the relevant loan amount). Any pledged Shares will only become
available for sale by a pledgee upon an event of default under the relevant loan
agreement. Adelphia will advance or contribute the net proceeds from the sale
of Shares offered hereby to Highland Communications, LLC in connection with the
1998 Adelphia Public Offering (estimated to be approximately $125 million) to
certain of Adelphia's subsidiaries which will apply such funds to repay
revolving credit facilities (which as of March 31, 1998 had an average effective
interest rate of approximately 6.44%) that the respective subsidiaries will be
able to reborrow, subject to compliance with the terms and maturity of such
facilities.
DESCRIPTION OF CAPITAL STOCK
The following description of the capital stock of Adelphia and certain
provisions of Adelphia's Certificate of Incorporation and Bylaws is a summary
and is qualified in its entirety by Adelphia's Certificate of Incorporation and
Bylaws, which documents are incorporated herein by reference.
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<PAGE>
Adelphia's authorized capital stock consists of 200,000,000 shares of Class A
Common Stock, par value $.01 per share, 25,000,000 shares of Class B Common
Stock, par value $.01 per share, and 5,000,000 shares of Preferred Stock, par
value $.01 per share.
Common Stock
Dividends. Holders of Class A Common Stock and Class B Common Stock are
entitled to receive such dividends as may be declared by Adelphia's Board of
Directors out of funds legally available for such purpose, but only after
payment of dividends required to be paid on outstanding shares of any other
class or series of stock having preference over Common Stock as to dividends. No
dividend may be declared or paid in cash or property on either class of Common
Stock, however, unless simultaneously a dividend is paid on the other class of
Common Stock as follows. In the event a cash dividend is paid, the holders of
Class A Common Stock will be paid a cash dividend per share equal to 105% of the
amount payable per share of Class B Common Stock. In the event of a property
dividend, holders of each class of Common Stock are entitled to receive the same
value per share of Common Stock outstanding. In the case of any stock dividend,
holders of Class A Common Stock are entitled to receive the same percentage
dividend (payable in Class A Common Stock) as the holders of Class B Common
Stock receive (payable in Class B Common Stock). Adelphia is limited in its
ability to pay cash dividends on Common Stock under its outstanding long-term
loan agreements. See Note 4 to the Adelphia Communications Corporation
consolidated financial statements in the Form 10-K.
Voting Rights. Holders of Class A Common Stock and Class B Common Stock vote
as a single class on all matters submitted to a vote of the stockholders, with
each share of Class A Common Stock entitled to one vote and each share of Class
B Common Stock entitled to ten votes, except (i) for the election of directors
and (ii) as otherwise provided by law. In the annual election of directors, the
holders of Class A Common Stock, voting as a separate class, are entitled to
elect one of Adelphia's directors. The holders of Class A Common Stock and Class
B Common Stock, voting as a single class with each share of Class A Common Stock
entitled to one vote and each share of Class B Common Stock entitled to ten
votes, are entitled to elect the remaining directors. Consequently, holders of
Class B Stock have sufficient voting power to elect the remaining six members of
the seven-member Board of Directors. Holders of Class A Common Stock and Class B
Common Stock are not entitled to cumulate votes in the election of directors.
Under Delaware law and Adelphia's Certificate of Incorporation, the affirmative
vote of a majority of the outstanding shares of Class A Common Stock is required
to approve, among other matters, a change in the powers, preferences or special
rights of the shares of Class A Common Stock so as to affect them adversely, but
is not required to approve an increase or decrease in the number of authorized
shares of Class A Common Stock.
Liquidation Rights. Upon liquidation, dissolution or winding up of Adelphia,
any distributions to holders of any class of Common Stock would only be made
after payment in full of creditors and provision for the preference of any other
class or series of stock having a preference over the Common Stock upon
liquidation, dissolution or winding up that may then be outstanding. Thereafter,
the holders of Class A Common Stock are entitled to a preference of $1.00 per
share. After such amount is paid, holders of the Class B are entitled to receive
$1.00 per share. Any remaining amount would then be shared ratably by both
classes.
Other Provisions. Each share of Class B Common Stock is convertible at the
option of its holder into one share of Class A Common Stock at any time. The
holders of Class A Common Stock and Class B Common Stock are not entitled to
preemptive or subscription rights. Neither the Class A Common Stock nor the
Class B Common Stock may be subdivided, consolidated, reclassified or otherwise
changed unless concurrently the other class of Common Stock is subdivided,
consolidated, reclassified or otherwise changed in the same proportion and in
the same manner.
Preferred Stock
The 5,000,000 shares of authorized preferred stock may be issued with such
designations, powers, preferences and other rights and qualifications,
limitations and restrictions thereof as Adelphia's Board of Directors may
authorize without further action by Adelphia's stockholders, including but not
limited to: (i) the distinctive designation of each series and the number of
shares that will constitute such series; (ii) the voting rights, if any, of
shares of such series; (iii) the dividend rate on the shares of such series, any
restriction,
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<PAGE>
limitation or condition upon the payment of such dividends, whether dividends
shall be cumulative and the dates on which dividends are payable; (iv) the
prices at which, and the terms and conditions on which, the shares of such
series may be redeemed, if such shares are redeemable; (v) the purchase or
sinking fund provisions, if any, for the purchase or redemption of shares of
such series; (vi) any preferential amount payable upon shares of such series in
the event of the liquidation, dissolution or winding up of Adelphia or the
distribution of its assets; and (vii) the prices or rates of conversion at
which, and the terms and conditions on which, the shares of such series may be
converted into other securities, if such shares are convertible. Adelphia has
designated and has outstanding two classes of Preferred Stock - 8 1/8% Series C
Convertible Preferred Stock, par value $.01 per share ("Convertible Preferred
Stock") and 13% Cumulative Exchangeable Preferred Stock, par value $.01 per
share ("Exchangeable Preferred Stock"), Series B. In connection with the
foregoing designations, the maximum number of shares authorized of Convertible
Preferred Stock and Exchangeable Preferred Stock is 100,000 shares and 1,500,000
shares, respectively.
Convertible Preferred Stock. The Convertible Preferred Stock accrues
cumulative dividends at the rate of 8 1/8% per annum, or $81 1/4 per share of
the Convertible Preferred Stock per annum. The Convertible Preferred Stock has a
liquidation preference of $1,000 per share. Upon any voluntary or involuntary
liquidation, dissolution or winding-up of the affairs of the Corporation, the
holders of the Convertible Preferred Stock are entitled to receive the
liquidation preference for the Convertible Preferred Stock, plus any accrued but
unpaid dividends thereon, and no more. Neither the voluntary sale, conveyance,
exchange or transfer (for cash, shares of stock, securities or other
consideration) of all or substantially all of the property or assets of Adelphia
nor the consolidation or merger of Adelphia with or into one or more
corporations will be deemed to be a voluntary or involuntary liquidation,
dissolution or winding-up of Adelphia, unless such sale, conveyance, exchange or
transfer shall be in connection with a liquidation, dissolution or winding-up of
the business of Adelphia. The Convertible Preferred Stock ranks pari passu with
the Exchangeable Preferred Stock and ranks senior to the Common Stock of the
Company with respect to dividends and liquidation.
Each share of Convertible Preferred Stock is convertible based upon its stated
liquidation preference into shares of the Class A Common Stock of the Company at
any time at the election of the holder thereof at a conversion price of $8.48
per share of Adelphia Class A Common Stock (or approximately 117.9245 shares of
the Class A Common Stock per share of Convertible Preferred Stock). The
conversion price is subject to adjustment if Adelphia pays a dividend in shares
of Class A Common Stock or subdivides, combines or reclassifies the shares of
Class A Common Stock or distributes rights to purchase Common Stock or makes
certain other distributions to holders of Common Stock. The Convertible
Preferred Stock is not be entitled to vote in the election of directors of the
Company or upon any other matter (except as provided by law), unless a Voting
Rights Triggering Event with respect to the Convertible Preferred Stock occurs,
in which case the Board of Directors will be expanded by two seats, which shall
then be elected by the holders of the Convertible Preferred Stock. The
Convertible Preferred Stock is not subject to mandatory redemption.
The Convertible Preferred Stock may be redeemed at the option of Adelphia, in
whole or in part, at any time on or after August 1, 2000 at 104%, 102% and 100%
of the liquidation preference of the Convertible Preferred Stock plus accrued
dividends in the years 2000, 2001, and 2002 and thereafter, respectively.
Cumulative Exchangeable Preferred Stock. The shares of Exchangeable Preferred
Stock are redeemable at the option of the Company, on or after July 15, 2002.
The Company is required, subject to certain conditions, to redeem all of the
Exchangeable Preferred Stock outstanding on July 15, 2009, at a redemption price
equal to 100% of the liquidation preference thereof, plus accumulated and unpaid
dividends to the date of redemption. Dividends on the Exchangeable Preferred
Stock accrue at a rate of 13% of the liquidation preference per annum and are
payable semiannually, commencing on January 15, 1998.
The rights of holders of shares of Common Stock as described above will be
subject to, and may be adversely affected by, the rights of holders of any
additional classes of Preferred Stock that may be designated and issued in the
future.
Transfer Agent
The Transfer Agent and Registrar for the Class A Common Stock and the
Exchangeable Preferred Stock is American Stock Transfer & Trust Company.
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<PAGE>
PLAN OF DISTRIBUTION
The Shares owned by a Selling Stockholder may be sold by a Selling
Stockholder from time to time, in one or more transactions at fixed prices, at
prevailing market prices or at prices related thereto at the time of sale, at
varying prices determined at the time of sale or at negotiated prices. Such
prices will be determined by the Selling Stockholder. The purchase price offered
by Adelphia to the Selling Stockholders in connection with the January 1994
public offering was and the purchase price for the Shares offered hereby to
Highland Communications, LLC in connection with the 1998 Adelphia Public
Offering is equal to the respective price to the public in such offerings less
the applicable underwriting discount. Each Selling Stockholder may pledge all or
a portion of the Shares owned as collateral in loan transactions pursuant to
loan agreements or margin agreements with one or more pledgees. Any such loan or
margin agreements may have various provisions, including a maintenance of
collateral value covenant which, in the event that the value of the pledged
Shares were to decline below an agreed upon percentage of the loans made to such
Selling Stockholder, obligates such Selling Stockholder to pledge cash or other
additional collateral of a type acceptable by the pledgee which has made the
loans in an amount that results in the aggregate value of the pledged Shares and
other collateral exceeding an agreed upon percentage of the loans. Upon default
by any such Selling Stockholder who has entered into one or more loan or pledge
agreements, including without limitation any failure of such Selling Stockholder
to provide satisfactory additional collateral, the pledgee under the loan or
margin agreement would have the right to sell the pledged Shares and apply the
proceeds to the repayment of the loans. Any such pledgee exercising its right to
sell Shares pledged to it by a Selling Stockholder will have the same rights as
such Selling Stockholder to offer and sell such Shares under this Prospectus.
The sale of the Shares may be effected (i) in transactions (which may involve
crosses or block transactions) on any national securities exchange or quotation
service (including the NASDAQ National Market) on which the Shares may be listed
or quoted at the time of sale, (ii) in the over-the-counter market, (iii) in
private or negotiated transactions otherwise than on such exchanges or in the
over-the-counter market, (iv) through the writing of options or (v) in
combinations of such methods. In effecting such sales, underwriters, brokers or
dealers engaged by the Selling Stockholders may arrange for other underwriters,
brokers or dealers to participate. Underwriters, brokers or dealers may purchase
Shares as principals for their own accounts and resell such Shares pursuant to
this Prospectus. Underwriters, brokers and dealers may receive commissions or
discounts from such Selling Stockholders in amounts to be negotiated immediately
prior to the sale. The Selling Stockholders, any such underwriters, brokers or
dealers and any other participating brokers or dealers may be deemed to be
"underwriters" within the meaning of the Securities Act of 1933, as amended, in
connection with such sales, and any profits realized or commissions received may
be deemed underwriting compensation.
At the time a particular offering of the Shares is made, if required, a
prospectus supplement will be distributed which will set forth the names of the
Selling Stockholders, the aggregate amount and type of Shares being offered, the
number of such securities owned prior to and after the completion of any such
offering, and, to the extent required, the terms of the offering, including the
name or names of any underwriters, broker/dealers or agents, any discounts,
commissions and other terms constituting compensation from the Selling
Stockholders and any discounts, commissions or concessions allowed or reallowed
or paid to broker/dealers.
To comply with the securities laws of certain jurisdictions, if applicable,
the Shares will be offered or sold in such jurisdictions only through registered
or licensed brokers or dealers. In addition, in certain jurisdictions the
Shares may not be offered or sold unless they have been registered or qualified
for sale in such jurisdictions or any exemption from registration or
qualification is available and is complied with.
Under applicable rules and regulations under the Exchange Act, any person
engaged in a distribution of the Shares may be limited in its ability to engage
in market activities with respect to such Shares. In addition and without
limiting the foregoing, each Selling Stockholder will be subject to applicable
provisions of the Exchange Act and the rules and regulations thereunder, which
provisions may limit the timing of purchases and sales of any of the Shares by
the Selling Stockholders. All of the foregoing may affect the marketability of
the Shares.
All expenses of the registration of the Shares will be paid by the Company,
including, without limitation, Commission filing fees and expenses of compliance
with state securities or "blue sky" laws; provided, however, that the Selling
Stockholders will pay all underwriting discounts and selling commissions, if
any. The Selling Stockholders, including any pledgees, and any underwriters,
brokers or dealers participating in any distribution of the Shares may be
indemnified by the Company against certain civil liabilities, including certain
liabilities under
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<PAGE>
the Securities Act of 1933, as amended, or may be entitled to contribution in
connection therewith. The Company will be indemnified by the Selling
Stockholders against certain civil liabilities, including certain liabilities
under the Securities Act of 1933, as amended, or will be entitled to
contribution in connection therewith.
EXPERTS
The consolidated financial statements and the related financial statement
schedules of Adelphia and its subsidiaries as of March 31, 1997 and 1998, and
for each of the three years in the period ended March 31, 1998, and the
consolidated financial statements and the related financial statement schedules
of Olympus and its subsidiaries as of December 31, 1996 and 1997, and for each
of the three years in the period ended December 31, 1997, all incorporated in
this Prospectus by reference from the Company's Annual Report on Form 10-K for
the year ended March 31, 1998 have been audited by Deloitte & Touche LLP,
independent auditors, as stated in their reports, which are incorporated herein
by reference, and have been so incorporated in reliance upon the reports of such
firm given upon their authority as experts in accounting and auditing.
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<PAGE>
<TABLE>
<S> <C>
No dealer, salesman or any other person has 10,400,000 Shares
been authorized to give any information or to Class A Common Stock
make any representations other than those ($.01 par value)
contained in this Prospectus in connection
with the offer made by this Prospectus and, if
given or made, such information or
representations must not be relied upon as
having been authorized. Neither the delivery
of this Prospectus nor any sale made hereunder
shall under any circumstances create any
implication that there has been no change in
the affairs of Adelphia since the date hereof.
This Prospectus does not constitute an offer
or solicitation by anyone in any jurisdiction
in which such offer or solicitation is not
authorized or in which the person making such
offer or solicitation is not qualified to do
so or to anyone to whom it is unlawful to make
such offer or solicitation.
--------------------
ADELPHIA COMMUNICATIONS
CORPORATION
Table of Contents
Page
-----
Available Information........................... 2
Incorporation of Certain Documents by
Reference.................................... 2
The Company..................................... 3
Risk Factors.................................... 4
Dilution........................................ 10
Selling Stockholders............................ 10
Description of Capital Stock.................... 12
Plan of Distribution............................ 15
Experts......................................... 16
Prospectus
Dated July__, 1998
</TABLE>
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following is an estimate of the expenses which will be incurred by the
Company in connection with the issuance and distribution of the securities being
registered.
<TABLE>
<CAPTION>
AMOUNT
<S> <C>
SEC filing fee................ $263,102
Legal fees and expenses....... 50,000
Accounting fees and expenses.. 7,500
Miscellaneous expenses........ 10,000
Total......................... $330,602
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the Delaware General Corporation Law provides in general
that a corporation may indemnify its directors, officers, employees or agents
against expenditures (including judgments, fines, amounts paid in settlement and
attorneys' fees) made by them in connection with certain lawsuits to which they
may be made parties by reason of their being directors, officers, employees or
agents and shall so indemnify such persons against expenses (including
attorneys' fees) if they have been successful on the merits or otherwise. The
bylaws of Adelphia provide for indemnification of the officers and directors of
Adelphia to the full extent permissible under Delaware law.
Adelphia's Certificate of Incorporation also provides, pursuant to Section
102(b)(7) of the Delaware General Corporation Law, that directors of Adelphia
shall not be personally liable to Adelphia or its stockholders for monetary
damages for breach of fiduciary duty as a director for acts or omissions after
July 1, 1986, provided that directors shall nonetheless be liable for breaches
of the duty of loyalty, bad faith, intentional misconduct, knowing violations of
law, unlawful distributions to stockholders, or transactions from which a
director derived an improper personal benefit.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) The following is a complete list of Exhibits filed as part of this
Registration Statement, which are incorporated herein:
Exhibit No. Reference
- ----------- ---------
<TABLE>
<C> <S> <C>
4.01 The Certificate of Incorporation of Adelphia Communications Incorporated herein by reference
Corporation is Exhibit 3.01 to Registrant's
Current Report on Form 8-K dated
July 24, 1997 (File No. 0-16014).
12.01 Computation of Ratio of Earnings to Combined Fixed Charges and Filed herewith.
Preferred Stock Dividends
23.01 Consent of Deloitte & Touche LLP Filed herewith.
24.01 Power of Attorney (included on the signature page of the Filed herewith.
Registration Statement)
</TABLE>
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<PAGE>
ITEM 17. UNDERTAKINGS
(a) Rule 415 Offering.
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a post-
effective amendment to this Registration Statement:
(i) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the Registration Statement (or the most recent post-
effective amendment thereof) which, individually or in the aggregate, represent
a fundamental change in the information set forth in the Registration Statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the Registration Statement or any
material change to such information in the Registration Statement;
Provided, however, that paragraphs (1)(i) and (1)(ii) above do not apply if the
Registration Statement is on Form S-3 or Form S-8, and the information required
to be included in a post-effective amendment by those paragraphs is contained in
periodic reports filed by the registrant pursuant to section 13 or section 15(d)
of the Securities Exchange Act of 1934 that are incorporated by reference in the
Registration Statement.
(2) That, for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.
(b) Filings Incorporating Subsequent Exchange Act Documents by Reference.
The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
Registration Statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(c) Request for Acceleration of Effective Date.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been informed that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant of
expenses incurred or paid by a director, officer or controlling person of the
registrant in the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in connection with the
securities being registered, the registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a court
of appropriate jurisdiction the question of whether such indemnification by it
is against public policy as expressed in the Act and will be governed by the
final adjudication of such issue.
II-2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing this registration statement on Form S-3 and has duly
caused Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Coudersport, Commonwealth of
Pennsylvania, on the 27th day of July, 1998.
ADELPHIA COMMUNICATIONS CORPORATION
By /s/ Timothy J. Rigas
---------------------------------------
Timothy J. Rigas, Executive Vice President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
Known All Men By These Presents that each person whose signature appears
below constitutes and appoints John J. Rigas, Timothy J. Rigas and Daniel R.
Milliard, and each of them, such person's true and lawful attorneys-in-fact and
agents, with full power of substitution and revocation, for such person and in
such person's name, place and stead, in any and all amendments (including post-
effective amendments to this Registration Statement) and to file the same with
all exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Committee, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done, as fully to all intents
and purposes as such person might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents or any of them, or their
or his substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
<S> <C> <C>
/s/ John J. Rigas Chairman, President and Chief Executive July 27, 1998
- ------------------------------- Officer
JOHN J. RIGAS
/s/ Michael J. Rigas Executive Vice President and Director July 27, 1998
- -------------------------------
MICHAEL J. RIGAS
/s/ Timothy J. Rigas Executive Vice President, Chief July 27, 1998
- ------------------------------- Financial Officer, Chief Accounting
TIMOTHY J. RIGAS Officer, Treasurer and Director
/s/ James P. Rigas Executive Vice President and Director July 27, 1998
- -------------------------------
JAMES P. RIGAS
/s/ Daniel R. Milliard Senior Vice President, Secretary and July 27, 1998
- ------------------------------- Director
DANIEL R. MILLIARD
- ----------------------------- Director July __, 1998
PETE J. METROS
- ----------------------------- Director July __, 1998
DENNIS P. COYLE
- ----------------------------- Director July __, 1998
PERRY S. PATTERSON
</TABLE>
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Reference
- ------------- ---------
<C> <S> <C>
4.01 The Certificate of Incorporation of Adelphia Communications Incorporated herein by reference is
Corporation Exhibit 3.01 to Registrant's Current
Report on Form 8-K dated July 24,
1997 (File No. 0-16014).
12.01 Computation of Ratio of Earnings to Combined Fixed Charges Filed herewith.
and Preferred Stock Dividends
23.01 Consent of Deloitte & Touche LLP Filed herewith.
24.01 Power of Attorney (included on the signature page of the Filed herewith.
Registration Statement)
</TABLE>
<PAGE>
Exhibit 12.01
ADELPHIA COMMUNICATIONS CORPORATION AND SUBSIDIARIES
COMPUTATION OF RATIO OF EARNINGS TO COMBINED FIXED CHARGES AND
PREFERRED STOCK DIVIDENDS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
---------------------------------------------------------
1994 1995 1996 1997 1998
--------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Loss before Income Taxes,
Extraordinary Loss and
Cumulative Effect of
Change in
Accounting Principle...... $(94,706) $(111,759) $(122,680) $(119,290) $(168,161)
Add: Fixed Charges,
Excluding Capitalized
interest.................. 187,439 200,927 217,170 249,113 280,670
Equity in loss of joint
ventures.................. 30,054 44,349 46,257 59,169 79,055
Preferred stock dividends
of Subsidiary............. -- -- -- -- 12,682
-------- --------- --------- --------- ---------
Net Earnings Available for
Combined Fixed Charges and
Preferred Stock Dividends. 122,787 133,517 140,747 188,992 204,246
-------- --------- --------- --------- ---------
Combined Fixed Charges and
Preferred stock dividends:
Interest................. 182,136 195,698 210,691 240,692 271,056
Capitalized interest..... 1,345 1,736 1,766 1,727 5,985
Amortization of debt
issuance costs.......... 3,987 3,792 4,917 6,344 7,141
Interest portion of rent
expense................. 1,316 1,437 1,562 2,077 2,473
Preferred stock dividends
of subsidiary........... -- -- -- -- 12,682
Preferred stock
dividends............... -- -- -- -- 18,850
-------- --------- --------- --------- --------
Total Combined Fixed
Charges and Preferred
Stock Dividends......... 188,784 202,663 218,936 250,840 318,187
-------- --------- --------- --------- --------
Ratio of Earnings to Com-
bined Fixed Charges
and Preferred Stock
Dividends................ -- -- -- -- --
Deficiency in Earnings
Required to Cover
Combined Fixed Charges
and Preferred Stock
Dividends............... $ 65,997 $ 69,146 $ 78,189 $ 61,848 $ 113,941
======== ========= ========= ========= ========
</TABLE>
<PAGE>
Exhibit 23.01
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Registration Statement of
Adelphia Communications Corporation on Form S-3 of our report dated June 10,
1998 and our report dated March 6, 1998 on our audits of the financial
statements and financial statement schedules of Adelphia Communications
Corporation and subsidiaries and the financial statements and financial
statement schedules of Olympus Communications, L.P. and subsidiaries,
respectively, appearing in and incorporated by reference in the Annual Report on
Form 10-K of Adelphia Communications Corporation for the year ended March 31,
1998, and to the reference to us under the heading "Experts" in the accompanying
Prospectus regarding 100,000 shares of 8 1/8% Series C Cumulative Convertible
Preferred Stock and 11,792,452 shares of Class A Common Stock ($.01 par value)
issuable upon conversion thereof, of Adelphia Communications Corporation, and in
the accompanying Prospectus regarding 10,400,000 shares of Adelphia
Communications Corporation Class A Common Stock ($.01 par value), which are part
of this Registration Statement.
/s/ DELOITTE & TOUCHE LLP
Pittsburgh, Pennsylvania
July 27, 1998
