<PAGE>
Filed pursuant to Rule 424b(B)(5)
Registration No. 333-74219
PROSPECTUS SUPPLEMENT
(To Prospectus Dated April 20, 1999)
[LOGO OF ADELPHIA]
2,500,000 Shares
Adelphia Communications Corporation
5 1/2% Series D Convertible Preferred Stock
(liquidation preference $200 per share)
------------
We are selling 2,500,000 shares of our convertible preferred stock. The
convertible preferred stock is convertible at the option of the holder into
shares of Adelphia Class A common stock at a conversion price of $81.45 per
share of Class A common stock for each share of convertible preferred stock,
equivalent to a conversion rate of 2.45549 shares of Class A common stock for
each share of convertible preferred stock, subject to adjustments in certain
circumstances. The underwriters named in this prospectus supplement may
purchase up to 375,000 additional shares of our convertible preferred stock
under certain circumstances.
Our convertible preferred stock is redeemable at our option, in whole or in
part at any time on and after May 1, 2002, for shares of our Class A common
stock at a redemption price of $206 per share, or for cash at a redemption
price of $200 per share, of convertible preferred stock, in each case plus
accrued and unpaid dividends. Dividends on the convertible preferred stock will
accrue and are cumulative from the date of issuance and are payable quarterly
in cash commencing August 1, 1999.
Adelphia has applied to list the convertible preferred stock on the Nasdaq
National Market under the symbol "ADLAP."
------------
Investing in the convertible preferred stock involves risks. See "Risk
Factors" beginning on page S-8.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved these securities or determined if this
prospectus supplement is truthful or complete. Any representation to the
contrary is a criminal offense.
------------
<TABLE>
<CAPTION>
Per Share Total
--------- ------------
<S> <C> <C>
Public Offering Price................................... $200.00 $500,000,000
Underwriting Discount................................... $ 6.02 $ 15,050,000
Proceeds to Adelphia (before expenses).................. $193.98 $484,950,000
</TABLE>
The underwriters are offering the shares subject to various conditions. The
underwriters expect to deliver the shares to purchasers on or about April 30,
1999.
------------
Joint Lead Manager & Sole Book Runner
Salomon Smith Barney
Joint Lead Manager Joint Lead Manager
Credit Suisse First Boston Goldman, Sachs & Co.
CIBC World Markets
Donaldson, Lufkin & Jenrette
Lehman Brothers
Merrill Lynch & Co.
Morgan Stanley Dean Witter
NationsBanc Montgomery Securities LLC
April 26, 1999
<PAGE>
You should rely only on the information contained in or incorporated by
reference in this prospectus supplement and the accompanying prospectus. We
have not authorized anyone to provide you with different information. We are
not making an offer of these securities in any state where the offer is not
permitted. You should not assume that the information contained in or
incorporated by reference in this prospectus supplement or the accompanying
prospectus is accurate as of any date other than the date on the front of this
prospectus supplement.
TABLE OF CONTENTS
Prospectus Supplement
<TABLE>
<S> <C>
Prospectus Supplement Summary............................................ S-2
Risk Factors............................................................. S-8
Use of Proceeds.......................................................... S-21
Capitalization........................................................... S-22
Price Range of Adelphia's Common Equity and Dividend Policy.............. S-23
Dilution................................................................. S-24
Underwriting............................................................. S-25
Description of Convertible Preferred Stock............................... S-28
Certain Federal Income Tax Considerations................................ S-33
Class A Common Stock Offering............................................ S-41
Where You Can Find More Information...................................... S-41
Legal Matters............................................................ S-42
Experts.................................................................. S-43
Prospectus
Adelphia................................................................. 2
Risk Factors............................................................. 4
Ratio of Earnings to Combined Fixed Charges and Preferred Stock
Dividends............................................................... 16
Dilution................................................................. 17
Use of Proceeds.......................................................... 17
Description of Debt Securities........................................... 18
Description of Capital Stock............................................. 31
Book Entry Issuance...................................................... 35
Plan of Distribution..................................................... 37
Where You Can Find More Information...................................... 39
Legal Matters............................................................ 40
Experts.................................................................. 41
</TABLE>
<PAGE>
PROSPECTUS SUPPLEMENT SUMMARY
This summary may not contain all the information that may be important to
you. You should read this entire prospectus supplement and the entire attached
prospectus and those documents incorporated by reference into this document,
including the risk factors, financial data and related notes, before making an
investment decision. When we use the term Adelphia Parent Company in this
prospectus supplement, we are referring only to the parent holding company
entity, Adelphia Communications Corporation, and not to its subsidiaries.
Adelphia
Adelphia is a leader in the telecommunications industry with cable
television and local telephone operations. We are the fourth largest cable
television operator in the United States, after giving effect to the recent and
pending acquisitions described in "Recent Developments." Through our subsidiary
Hyperion Telecommunications, Inc., we own and operate a super regional provider
of integrated communications services in the eastern half of the United States.
John J. Rigas, the Chairman, President and Chief Executive Officer and founder
of Adelphia, has owned and operated cable television systems since 1952.
Our operations consist of providing telecommunications services primarily
over our networks, which are commonly referred to as broadband networks because
they can transmit large quantities of voice, video and data by way of digital
or analog signals. We owned cable television systems with broadband networks
that passed in front of 7,458,803 homes and served 4,815,161 basic subscribers
as of December 31, 1998, after giving effect to the recent and pending
acquisitions described in "Recent Developments." After giving effect to these
acquisitions, the cable systems are organized into eleven regional clusters:
Los Angeles, Florida, New England, Ohio/Kentucky/West Virginia, Western New
York, Virginia, Western Pennsylvania, Eastern Pennsylvania, Puerto Rico,
Colorado Springs and New Jersey. Our systems are located primarily in suburban
areas of large and medium-sized cities within the 50 largest television
markets.
Hyperion provides its customers with alternatives to the incumbent local
telephone company for local telephone and telecommunications services.
Hyperion's telephone operations are referred to as being facilities based,
which means it generally owns the local telecommunications networks and
facilities it uses to deliver these services, rather than leasing or renting
the use of another party's networks to do so. Hyperion managed and operated 22
telecommunications networks, including two under construction, serving 46
cities as of December 31, 1998. Hyperion's Class A common stock is quoted on
the Nasdaq National Market under the symbol "HYPT."
Recent Developments
On April 23, 1999, Adelphia entered into an agreement to sell, and on April
28, 1999, Adelphia expects to consummate its offering of, 8.0 million shares of
Class A common stock (the "Common Stock Offering"). Net proceeds of the Common
Stock Offering, after deducting offering expenses, are estimated to be
approximately $485.5 million. Adelphia initially will use the net proceeds to
repay borrowings under subsidiary credit agreements, all of which, subject to
compliance with the terms of and maturities of the revolving credit facilities,
Adelphia plans to reborrow and use to fund one or more of the recently
announced acquisitions.
S-2
<PAGE>
On April 23, 1999, Adelphia entered into an agreement to sell, and on April
28, 1999 Adelphia expects to consummate its offering of, $350 million of 7 7/8%
Senior Notes due 2009. Net proceeds from this offering, after deducting
offering expenses, are estimated to be approximately $345.5 million. The net
proceeds are expected to be used to repay borrowings under subsidiary credit
agreements, all of which, subject to compliance with the terms of and
maturities of the revolving credit facilities, may be reborrowed and used for
general corporate purposes, including acquisitions, capital expenditures and
investments.
On April 12, 1999, Adelphia announced that it had entered into a definitive
agreement to purchase the cable television systems owned by Harron
Communications Corp. for $1.2 billion in cash. This transaction is subject to
customary closing conditions. As of December 31, 1998, Harron had approximately
294,000 basic subscribers after giving effect to recent and pending
acquisitions involving approximately 9,000 basic subscribers.
On April 9, 1999, Adelphia entered into a stock purchase agreement with
Highland Holdings, a general partnership controlled by members of the family of
John J. Rigas, in which Adelphia agreed to sell to Highland Holdings, and
Highland Holdings agreed to purchase, from $250 million to $375 million of
Adelphia's Class B common stock (the "Rigas Direct Placement"). The purchase
price per share for the Class B common stock will be equal to the public
offering price from the sale of Class A common stock in the Common Stock
Offering described above less the underwriting discount, plus an interest
factor. The net proceeds from the Rigas Direct Placement are expected to be
used to fund one or more of the recently announced acquisitions or for general
corporate purposes, although they may initially be advanced to Adelphia's
subsidiaries to repay revolving credit facilities of such subsidiaries or
temporarily invested in short term investments. Closing under this stock
purchase agreement is to occur within 270 days following closing of the Common
Stock Offering.
On March 5, 1999, Adelphia announced that it had entered into a definitive
merger agreement to acquire Century Communications Corp. Under the agreement,
Adelphia would acquire the outstanding common stock of Century for an aggregate
of approximately $826 million in cash, 48.7 million shares of Class A common
stock and the assumption of approximately $1.6 billion of debt. This
transaction is subject to shareholder approval by Century and Adelphia and
other customary closing conditions. As of December 31, 1998, Century had
approximately 1,593,000 basic subscribers after giving effect to Century's
pending joint venture with AT&T.
On March 2, 1999, Hyperion issued $300 million of 12% Senior Subordinated
Notes due 2007. An entity controlled by members of the Rigas family purchased
$100 million of the $300 million of Senior Subordinated Notes directly from
Hyperion at a price equal to the aggregate principal amount less the discount
to the initial purchasers. The net proceeds of approximately $292 million will
be used to fund Hyperion's acquisition of interests held by local partners in
certain of its networks, for capital expenditures and investments in its
networks, for working capital purposes and for general corporate purposes.
On February 23, 1999, Adelphia announced that it had entered into a
definitive agreement to acquire FrontierVision Partners, L.P. for approximately
$2.1 billion. Under the agreement Adelphia would acquire FrontierVision in
exchange for approximately $550 million in cash, 7 million shares of Class A
common stock and the assumption of approximately $1.1 billion of debt. The
transaction is subject to customary closing conditions. As of December 31,
1998, FrontierVision had approximately 702,000 basic subscribers.
S-3
<PAGE>
On January 29, 1999, Adelphia purchased from Telesat Cablevision, Inc., a
subsidiary of FPL Group, Inc., shares of Adelphia's stock owned by Telesat.
Adelphia purchased 1,091,524 shares of Class A common stock and 20,000 shares
of Series C cumulative convertible preferred stock which are convertible into
an additional 2,358,490 shares of Class A common stock. These shares represent
3,450,014 shares of common stock on a fully converted basis. Adelphia and
Telesat also agreed to a redemption of Telesat's interests in Olympus
Communications, L.P. by July 11, 1999. The redemption is subject to applicable
third party approvals. The aggregate purchase price for these transactions will
be approximately $257.2 million.
On January 21, 1999, Adelphia acquired Verto Communications, Inc. In
connection with the Verto acquisition, Adelphia issued 2,561,024 shares of its
Class A common stock to the former owners of Verto. Verto provided cable
television services to approximately 56,000 basic subscribers in the greater
Scranton, Pennsylvania area at the date of acquisition.
On January 14, 1999, Adelphia completed offerings totaling 8.6 million
shares of its Class A common stock. Adelphia used the net proceeds of
approximately $372 million from these offerings to repay subsidiary bank debt.
On January 13, 1999, Adelphia completed offerings of $100 million of 7 1/2%
Senior Notes due 2004 and $300 million of 7 3/4% Senior Notes due 2009. Net
proceeds from these offerings, after deducting offering expenses, were
approximately $393.7 million. Of this amount, Adelphia used approximately $160
million to redeem a portion of its 9 1/2% Senior Pay-In-Kind Notes due 2004.
Adelphia used the remainder to repay borrowings under revolving credit
facilities of its subsidiaries. The terms of the notes are similar to those of
Adelphia's existing publicly held senior debt.
For other recent developments regarding Adelphia, we refer you to our most
recent and future filings under the Exchange Act.
----------------
Our executive offices are located at Main at Water Street, Coudersport,
Pennsylvania 16915, and our telephone number is (814) 274-9830.
S-4
<PAGE>
The Offering
Convertible Preferred Stock 2,500,000 shares
Offered............................
Dividends...........................
Annual cumulative dividends of
$11.00 per share of the convertible
preferred stock accruing from the
date of original issuance will be
payable in cash quarterly on each
May 1, August 1, November 1, and
February 1, commencing August 1,
1999, with respect to the period
commencing on the date of issuance
of the convertible preferred stock.
Conversion into Common Stock........ The convertible preferred stock
will be convertible at the option
of the holder at any time, unless
previously redeemed, into shares of
Class A common stock at a
conversion price of $81.45 per
share of Class A common stock for
each share of convertible preferred
stock, equivalent to a 20%
conversion premium per share of
common stock, subject to adjustment
in certain events.
Liquidation Rights.................. $200 per share of convertible
preferred stock, plus an amount
equal to any accumulated and unpaid
dividends.
Redemption.......................... The convertible preferred stock may
not be redeemed prior to May 1,
2002. At any time on or after such
date, the convertible preferred
stock may be redeemed at the option
of Adelphia in shares of Class A
common stock at a redemption price
of $206 per share plus accrued and
unpaid dividends, if any, to the
redemption date or for cash at a
redemption price of $200 per share
plus accrued and unpaid dividends.
Voting Rights....................... The holders of the convertible
preferred stock will not have any
voting rights, except as required
by applicable law and except that
among other things, whenever
accrued and unpaid dividends on the
convertible preferred stock are
equal to or exceed the equivalent
of six quarterly dividends payable
on the convertible preferred stock,
such holders voting separately as a
class with the holders of shares of
any other series of parity stock
upon which like voting rights have
been conferred and are
S-5
<PAGE>
exercisable, will be entitled to
elect two directors to the board
until the dividend arrearage has
been paid or amounts have been set
apart for such payment. In
addition, certain changes that
would be materially adverse to the
rights of holders of the
convertible preferred stock cannot
be made without the vote of holders
of two-thirds of the outstanding
convertible preferred stock.
Listing.............................
We have applied to list the
convertible preferred stock on the
Nasdaq National Market under the
symbol "ADLAP." The Class A common
stock is quoted on the Nasdaq
National Market under the symbol
"ADLAC."
Ranking............................. The convertible preferred stock
will be senior to the common stock
and similar to the existing 13%
Series B cumulative exchangeable
preferred stock and 8 1/8% Series C
cumulative convertible preferred
stock with respect to dividends and
upon liquidation, dissolution or
winding up.
Common Stock Issued and
Outstanding:
Class A common stock............. 42,328,343 shares (1)
Class B common stock............. 10,834,476 shares (2)
Total......................... 53,162,819 shares
Common Stock Issuable Upon
Conversion of Convertible
Preferred Stock at Initial
Conversion Price...................
6,138,735 shares
Use of Proceeds..................... The net proceeds from the
convertible preferred stock
offering will be used to fund
recently announced acquisitions.
See "Use of Proceeds."
- --------
(1) Does not include 9,433,962 shares of Class A common stock into which Series
C cumulative convertible preferred stock can be converted. See "Description
of Capital Stock--Description of Convertible Preferred Stock" in the
attached prospectus. Also does not include 8,000,000 shares of Class A
common stock which Adelphia, on April 23, 1999, agreed to sell in the
Common Stock Offering described in "Recent Developments." See "Class A
Common Stock Offering" in this prospectus supplement.
(2) Does not include any shares to be sold in the Rigas Direct Placement under
the Highland Holdings stock purchase agreement dated April 9, 1999.
S-6
<PAGE>
Rights of Holders of Class A Common
Stock and Class B Common Stock..... The rights of holders of Class A
common stock and Class B 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 10 votes per share
while the holders of Class A common
stock are entitled to 1 vote per
share on all matters presented to
stockholders; however, the holders
of Class A common stock, voting as
a separate class, are entitled to
elect one of Adelphia's directors.
See "Description of Capital Stock"
in the attached prospectus.
S-7
<PAGE>
RISK FACTORS
Before you invest in our convertible preferred stock, you should be aware
that there are various risks associated with investing in Adelphia, including
those described below. You should carefully consider these risk factors
together with all of the other information included or incorporated by
reference in this prospectus supplement before you decide to purchase shares of
Adelphia's convertible preferred stock.
High Level Of Indebtedness Adelphia has a substantial amount of debt. We
borrowed this money to purchase and to expand our
cable systems and other operations and, to a lesser
extent, for investments and loans to our
affiliates. At December 31, 1998, our indebtedness
totaled approximately $3.5 billion. This included
approximately:
As of December 31,
1998, we owed
approximately $3.5
billion and as of that
date we would have owed
approximately $5.6
billion after the
acquisition of Century,
$6.8 billion after the
acquisition of Century
and FrontierVision
and $8.6 billion after
such transactions and
the Harron and Olympus
acquisitions. Our high
level of indebtedness
can have important
adverse consequences to
us and to you.
. $1.8 billion of Adelphia Parent Company public
debt;
. $1.2 billion of debt owed by our subsidiaries to
banks, other financial institutions and other
persons; and
. $471 million of public debt owed by Hyperion,
Adelphia's competitive local exchange carrier
subsidiary.
Olympus, a non-consolidated joint venture, also has
approximately $727 million of debt. Olympus will be
consolidated with Adelphia upon completion of
Adelphia's proposed acquisition of interests in
Olympus. That acquisition is expected to close in
July 1999.
We may need to Century and its subsidiaries have substantial
refinance significant indebtedness. At February 28, 1999, Century and its
Century indebtedness subsidiaries had long-term debt of approximately
that we will be $2.0 billion (exclusive of current maturities of
assuming. $20.1 million), including approximately $1.9
billion principal amount of public indebtedness
under nine indentures, $97 million of indebtedness
under four credit agreements entered into by
subsidiaries of Century and various banks and $80
million of indebtedness under a note agreement
entered into by a subsidiary of Century.
Without a consent from the lenders to Century's
subsidiaries, the Century merger will violate
certain covenants contained in the Century credit
agreements. As a result, we will either secure a
waiver from the lenders under these credit
agreements or will refinance such credit agreements
with new or existing credit facilities. Although we
currently have sufficient liquidity under our
existing credit facilities to refinance the
borrowings under Century's credit agreements,
Adelphia is seeking consents to keep some or all of
such credit agreements in place. In the event that
these consents cannot be obtained upon reasonable
terms, we could seek to refinance some or all of
them under one or more
S-8
<PAGE>
new facilities in order to preserve our existing
liquidity. There can be no assurance, however, that
we will be able to obtain these consents or
refinance these credit agreements under any terms
or on terms acceptable to Adelphia. As a result,
the failure to obtain the required consents or to
refinance these credit agreements could materially
decrease Adelphia's liquidity.
Under the indentures for Century's public notes,
the merger will require Century to make an offer to
purchase the public notes if the merger results in
the public notes being downgraded to a specified
level by certain national rating agencies. Upon
announcement of the merger, certain rating agencies
announced that the Century notes were under review
with a view to a downgrade to a level which would
not require Century to make an offer to repurchase
public notes. In the event that the public notes
were to be downgraded to a level beyond that
announced by the rating agencies upon disclosure of
the merger, Century would be required to make an
offer to repurchase the public notes at 101% of the
amount of the notes. In the event that a
significant amount of notes were tendered to
Century for repurchase, this could materially
decrease Adelphia's liquidity.
We may need to On February 23, 1999, we announced our proposed
refinance significant acquisition of FrontierVision. FrontierVision and
FrontierVision its subsidiaries have substantial indebtedness. At
indebtedness that we December 31, 1998, FrontierVision and its
will be assuming. subsidiaries had nonaffiliate long-term debt of
approximately $1.1 billion, including approximately
$672 million owed to banks under a credit agreement
and approximately $450 million owed under three
indentures for public notes. We are attempting to
secure consents and waivers from the lenders to
permit the credit agreement to remain outstanding.
As a result of the acquisition by Adelphia, the
indentures for the public debt will require
FrontierVision to make an offer to repurchase the
public notes at 101% of the amount of the public
notes. In the event that the lenders do not consent
to permitting the credit agreement to remain
outstanding or a significant amount of the public
notes are tendered to FrontierVision for
repurchase, this could materially decrease our
liquidity.
We will need to raise Adelphia will need to raise significant funds to
significant financing pay for the $1.2 billion acquisition of Harron.
for the Harron
acquisition.
The Century, FrontierVision, Olympus and Harron
acquisitions are reflected in Adelphia's unaudited
condensed consolidated pro forma financial
statements incorporated by reference in this
prospectus supplement.
S-9
<PAGE>
Debt service consumes
a substantial portion of Our high level of indebtedness can have important
the cash we generate. adverse consequences to us and to you. It requires
This could affect our that we spend a substantial portion of the cash we
ability to invest in our get from our business to repay the principal and
business in the future interest on these debts. Otherwise, we could use
as well as to react to these funds for general corporate purposes or for
changes in our industry capital improvements. Our ability to obtain new
or economic downturns. loans for working capital, capital expenditures,
acquisitions or capital improvements may be limited
by our current level of debt. In addition, having
such a high level of debt could limit our ability
to react to changes in our industry and to economic
conditions generally. In addition to our debt, at
December 31, 1998, the Adelphia Parent Company had
approximately $148 million and Hyperion had
approximately $229 million of redeemable
exchangeable preferred stock which contain payment
obligations that are similar to Adelphia's debt
obligations.
Approximately 32% of Our debt comes due at various times up to the year
our debt outstanding at 2009, including an aggregate of approximately $1.1
December 31, 1998 must billion as of December 31, 1998, which we must pay
be paid by April 1, 2003 by April 1, 2003.
and all of it must be
paid by 2009.
As discussed above, Century, FrontierVision and
Olympus also have a substantial amount of debt.
Under its current terms, this debt comes due at
various times up to the year 2017, including an
aggregate of approximately $1.6 billion as of
December 31, 1998 (May 31, 1998 as to Century),
which must be paid over the next five years.
Our Business Requires Our business requires substantial additional
Substantial Additional financing on a continuing basis for capital
Financing And If We Do expenditures and other purposes including:
Not Obtain That
Financing We May Not Be
Able To Upgrade Our
Plant, Offer Services,
Make Payments When Due
Or Refinance Existing
Debt
. constructing and upgrading our plant and
networks--some of these upgrades we must make to
comply with the requirements of local cable
franchise authorities;
. offering new services;
. scheduled principal and interest payments;
. refinancing existing debt; and
. acquisitions and investments.
There can be no guarantee that we will be able to
issue additional debt or sell stock or other
additional equity on satisfactory terms, or at all,
to meet our future financing needs.
S-10
<PAGE>
We Have Had Large Losses
And Negative The Total Convertible Preferred Stock, Common Stock
Stockholders' Equity And and Other Stockholders' Equity (Deficiency) at
We Expect This To December 31, 1998 was a deficit of approximately
Continue $1.0 billion.
Our continuing net losses, which are mainly due to
our high levels of depreciation and amortization
and interest expense, have created this deficiency.
Our recent net losses applicable to our common
stockholders were approximately as follows for the
periods specified:
. fiscal year ended March 31, 1996--$119.9
million;
. fiscal year ended March 31, 1997--$130.6
million;
. fiscal year ended March 31, 1998--$192.7
million; and
. nine months ended December 31, 1998--$135.8
million.
We expect to continue to incur large net losses for
the next several years.
Our earnings have Our earnings could not pay for our combined fixed
been insufficient to pay charges and preferred stock dividends during these
for our fixed charges periods by the amounts set forth in the table
and preferred stock below, although combined fixed charges and
dividends. preferred stock dividends included substantial non-
cash charges for depreciation, amortization and
non-cash interest expense on some of our debts and
the non-cash expense of Hyperion's preferred stock
dividends:
<TABLE>
<CAPTION>
Earnings Non-Cash
Deficiency Charges
---------- --------
(in thousands)
<S> <C> <C>
. fiscal year ended March 31, 1996 $ 78,189 $127,319
. fiscal year ended March 31, 1997 $ 61,848 $165,426
. fiscal year ended March 31, 1998 $113,941 $195,153
. nine months ended December 31,
1998 $116,899 $186,022
</TABLE>
Pro forma for the sale of the convertible preferred
stock being offered under this prospectus
supplement and the sales of stock and debt
described in "Recent Developments," and the
Century, FrontierVision, Harron and Olympus
acquisitions, our earnings were insufficient to
cover our combined fixed charges and preferred
stock dividends by approximately $609.6 million and
approximately $466.4 million for the year ended
March 31, 1998 and the nine months ended December
31, 1998, respectively.
S-11
<PAGE>
If we cannot
refinance our debt Historically, the cash we generate from our
including debt incurred operating activities and borrowings has been
in connection with the sufficient to meet our requirements for debt
acquisitions of service, working capital, capital expenditures and
FrontierVision and investments in and advances to our affiliates, and
Century or obtain new we have depended on additional borrowings to meet
loans, we would likely our liquidity requirements. Although in the past we
have to consider various have been able both to refinance our debt and to
options such as the sale obtain new debt, there can be no guarantee that we
of additional equity or will be able to continue to do so in the future or
some of our assets to that the cost to us or the other terms which would
meet the principal and affect us would be as favorable to us as current
interest payments we loans and credit agreements. We believe that our
owe, negotiate with our business will continue to generate cash and that we
lenders to restructure will be able to obtain new loans to meet our cash
existing loans or needs. However, the covenants in the indentures and
explore other options credit agreements for our current debt provide some
available under limitations on our ability to borrow more money.
applicable laws
including those under
reorganization or
bankruptcy laws. We
cannot guarantee that
any options available to
us would enable us to
repay our debt in full.
The telecommunications services provided by
Competition Adelphia are subject to strong competition and
potential competition from various sources.
Our cable television Our cable television systems compete with other
business is subject to means of distributing video to home televisions
strong competition from such as Direct Broadcast Satellite systems,
several sources which commonly known as DBS systems, and Multichannel
could adversely affect Multipoint Distribution systems. Some of the
revenue or revenue regional Bell telephone operating companies and
growth. 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 regional Bell
operating companies and local telephone companies
have facilities which are capable of delivering
cable television service. The equipment which
telephone companies use in providing local exchange
service may give them competitive advantages over
Adelphia in distributing video to home televisions.
The regional Bell operating companies and other
potential competitors have much greater resources
than Adelphia and would constitute formidable
competition for our cable television business. We
cannot predict either the extent to which
competition will continue to materialize or, if
such competition materializes, the extent of its
effect on our cable television business.
We also face competition from other communications
and entertainment media, including conventional
off-air television broadcasting services,
newspapers, movie theaters, live sporting
S-12
<PAGE>
events and home video products. We cannot predict
the extent to which competition may affect us.
Hyperion's operations In each of the markets served by Hyperion's
are also subject to risk networks, the competitive local exchange carrier
because Hyperion services offered by Hyperion compete principally
competes principally with the services offered by the incumbent local
with established local telephone exchange carrier company serving that
telephone carriers that area. Local telephone companies have long-standing
have long-standing relationships with their customers, have the
utility relationships potential to subsidize competitive services from
with their customers and monopoly service revenues, and benefit from
pricing flexibility for favorable state and federal regulations. The merger
local telephone of Bell Atlantic and NYNEX created a very large
services. company whose combined territory covers a
substantial portion of Hyperion's markets. Other
combinations are occurring in the industry, which
may have a material adverse effect on Hyperion and
us.
We believe that local telephone companies will gain
increased pricing flexibility from regulators as
competition increases. Hyperion's operating results
and cash flow could be materially and adversely
affected by actions by regulators, including
permitting the incumbent local telephone companies
in Hyperion's markets to do the following:
. lower their rates substantially;
. engage in aggressive volume and term discount
pricing practices for their customers; or
. charge excessive fees to Hyperion for
interconnection to the incumbent local telephone
company's networks.
If the regional Bell The regional Bell operating companies can now
telephone companies obtain regulatory approval to offer long distance
could get regulatory services if they comply with the interconnection
approval to offer long requirements of the federal Telecommunications Act
distance service in of 1996. To date, the FCC has denied the requests
competition with for approval filed by regional Bell operating
Hyperion's significant companies in Hyperion's operating areas. However,
customers, some of approval of such a request could result in
Hyperion's major decreased market share for the major long distance
customers could lose carriers which are among Hyperion's significant
market share. customers. This could have a material adverse
effect on Hyperion.
The regional Bell Some of the regional Bell operating companies have
telephone companies also recently filed petitions with the FCC
continue to seek other requesting waivers of other obligations under the
regulatory approvals federal Telecommunications Act of 1996. These
that could significantly involve services Hyperion also provides such as
enhance their high speed data, long distance, and services to
competitive position Internet Service Providers. If the FCC grants the
against Hyperion. regional Bell operating companies' petitions, this
could have a material adverse effect on Hyperion.
S-13
<PAGE>
Potential competitors
to Hyperion's Potential competitors for Hyperion include other
telecommunications competitive local exchange carriers, incumbent
services include the local telephone companies which are not subject to
regional Bell telephone regional Bell operating companies' restrictions on
companies, AT&T, offering long distance service, AT&T, MCIWorldCom,
MCIWorldCom and Sprint, Sprint and other long distance carriers, cable
electric utilities and television companies, electric utilities, microwave
other companies that carriers, wireless telecommunications providers and
have advantages over private networks built by large end users. Both
Hyperion. AT&T and MCIWorldCom 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. In addition, the long distance
carriers could 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 local telephone
companies, have financial, personnel and other
resources substantially greater than those of
Hyperion, as well as other competitive advantages
over Hyperion.
We Are Subject To The cable television industry and the provision of
Extensive Regulation local telephone exchange services are 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. In
particular, the FCC adopted regulations that limit
our ability to set and increase rates for our basic
service package and for the provision of cable
television-related equipment. The law permits
certified local franchising authorities to order
refunds of rates paid in the previous 12-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.
Our cable television
and telecommunications
businesses are heavily
regulated as to rates we
can charge and other
matters. This regulation
could limit our ability
to increase rates, cause
us to decrease then
current rates or require
us to refund previously
collected fees.
The cable television industry is subject to state
and local regulations, and we must comply with
rules of the local franchising authorities to
retain and renew our 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.
The federal The federal Telecommunications Act of 1996
Telecommunications Act substantially changed federal, state and local laws
of 1996 may have a and regulations governing our cable television and
significant impact on telecommunications businesses. This law could
our cable television and materially affect the growth and operation of the
telephone businesses. cable television industry and the cable services we
provide. Although this legislation may lessen
regulatory burdens, the cable television industry
may be subject to new competition as a result.
There are
S-14
<PAGE>
numerous rulemakings that have been and continue to
be undertaken by the FCC which will interpret and
implement the provisions of this law. Furthermore,
portions of this law have been, and likely other
portions will be, challenged in the courts. We
cannot predict the outcome of such rulemakings or
lawsuits or the short- and long-term effect,
financial or otherwise, of this law and FCC
rulemakings on us.
Similarly, the federal Telecommunications Act of
1996 removes entry barriers for all companies and
could increase substantially the number of
competitors offering comparable services in
Hyperion's markets or potential markets.
Furthermore, we cannot guarantee 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 Hyperion.
Unequal Voting Rights Adelphia has two classes of common stock--Class A
Of Stockholders which carries one vote per share and Class B which
carries ten votes per share. Under Adelphia's
Certificate of Incorporation, the Class A shares
elect only one of our eight directors.
Control Of Voting Power As of April 1, 1999, the Rigas family beneficially
By The Rigas Family owned shares representing about 48% of the total
number of outstanding shares of both classes of
Adelphia's common stock and about 81% of the total
voting power of Adelphia's shares. The public holds
a majority of the outstanding shares of Class A
common stock, although the Rigas family also owns
about 36% of those shares as of April 1, 1999. The
Rigas family owns about 99% of Adelphia's shares of
Class B common stock. The Rigas family also owns
shares of Adelphia's 8 1/8% Series C cumulative
convertible preferred stock which, if converted,
would increase its voting power and beneficial
ownership. As a result of the Rigas family's stock
ownership and an agreement among the Class B
stockholders, members of the Rigas family have the
power to elect seven of eight Adelphia directors,
and if they converted their convertible preferred
stock might be able to elect all eight directors.
In addition, the Rigas family could control
stockholder decisions on other matters such as
amendments to Adelphia's Certificate of
Incorporation and Bylaws, and mergers or other
fundamental corporate transactions. Sales of Class
B common stock to the Rigas family under the
Highland Holdings stock purchase agreement dated
April 9, 1999 will increase the voting power of the
Rigas family.
The Rigas family can
control stockholder
decisions on very
important matters.
S-15
<PAGE>
There Are Potential
Conflicts Of Interest John J. Rigas and the other executive officers of
Between Adelphia And The Adelphia, including other members of the Rigas
Rigas Family family, own other corporations and partnerships,
which are managed by us 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.
These activities could present a conflict of
interest with Adelphia, such as how much time our
executive officers devote to our business. In
addition, there have been and will continue to be
transactions between us and the executive officers
or the other entities they own or have affiliations
with. Our public debt indentures contain covenants
that place some restrictions on transactions
between us and our affiliates.
Holding Company The Adelphia Parent Company directly owns no
Structure And Potential significant assets other than stock, partnership
Impact Of Restrictive interests and equity and other interests in our
Covenants In Subsidiary subsidiaries and in other companies. This creates
Debt Agreements risks regarding our ability to provide cash to the
Adelphia Parent Company to repay the interest and
principal which it owes, our ability to pay cash
dividends to our common stockholders in the future,
and the ability of our subsidiaries and other
companies to respond to changing business and
economic conditions and to get new loans.
The Adelphia Parent The public indentures and the credit agreements for
Company depends on its bank and other financial institution loans of our
subsidiaries and other subsidiaries and other companies in which we have
companies in which it invested, restrict their ability and the ability of
has investments to fund the companies they own to make payments to the
its cash needs. Adelphia Parent Company. These agreements also
place other restrictions on the borrower's ability
to borrow new funds and include requirements for
the borrowers to remain in compliance with the
credit agreements. The ability of a subsidiary or a
company in which we have invested to comply with
debt restrictions may be affected by events that
are beyond our control. The breach of any of these
covenants could result in a default which could
result in all loans and other amounts owed to its
lenders becoming due and payable. Our subsidiaries
and companies in which we have invested might not
be able to repay in full the accelerated loans.
It Is Unlikely You Will
Receive A Return On Our Adelphia has never declared or paid cash dividends
Class A Common Stock on any of its common stock and has no intention of
Through The Payment Of doing so in the foreseeable future. As a result, it
Cash Dividends is unlikely that you will receive a return on
shares of our Class A common stock through the
payment of cash dividends.
S-16
<PAGE>
Future Sales Of Adelphia
Common Stock Could Sales, or availability for sale, of a substantial
Adversely Affect Its number of shares of our common stock, including
Market Price sales by any pledgees of such shares, could
adversely affect the market price of Class A common
stock and could impair our ability in the future to
raise capital through stock offerings.
Under various registration rights agreements or
arrangements, as of January 26, 1999, the Rigas
family has the right, subject to some limitations,
to require Adelphia to register substantially all
of the shares which it owns of Class A common
stock, consisting of 15,029,119 shares, Class B
common stock, consisting of 10,736,544 shares and
the equivalent number of shares of Class A common
stock into which they may be converted, and Series
C cumulative convertible preferred stock,
consisting of 80,000 shares and the 9,433,962
shares of Class A common stock into which they may
be converted. Among others, Adelphia has registered
or agreed to register for public sale the following
shares:
. for the Rigas family--up to 11,000,000 shares of
Class A common stock, 80,000 shares of Series C
cumulative convertible preferred stock and the
Class A common stock issuable upon conversion of
the Series C cumulative convertible preferred
stock;
. for Booth American Company--3,571,428 shares of
Class A common stock owned as of March 24, 1998;
. for the selling stockholders receiving shares in
the Verto acquisition--2,561,024 shares of Class
A common stock;
. for a Rigas family partnership--4,000,000 shares
of Class A common stock purchased by it in
connection with the January 14, 1999 equity
offerings;
. for the owners of FrontierVision--7,000,000
shares of Class A common stock in connection
with the pending FrontierVision acquisition, and
for the benefit of FrontierVision in certain
circumstances if the transaction does not close,
1,000,000 shares of Class A common stock; and
. for the owners of Century--approximately
48,700,000 shares of Class A common stock to be
issued in connection with the pending Century
acquisition.
Approximately 14,904,000 shares of Class A common
stock and up to 80,000 shares of Series C
cumulative convertible preferred stock, including
the underlying Class A common stock, have been
pledged by members of the Rigas family in
connection with margin loans made to members of the
Rigas family. These pledgees could freely sell any
shares acquired upon a foreclosure.
S-17
<PAGE>
The Century Merger May
Not Be Completed If The The Century merger requires approvals from
Required Approval Of Century's stockholders and our stockholders.
Century's Class A Although the Class B stockholders of Century and
Stockholders Is Not the controlling stockholders of Adelphia have
Obtained agreed to vote in favor of the merger, the
companies cannot be certain of the ultimate outcome
of the required vote of the Class A stockholders of
Century. If that vote is not obtained, the
companies will not be able to complete the proposed
transaction as currently structured or in a timely
manner, if at all.
The failure to Even if Century's stockholders approve the Century
satisfy conditions to merger, one or more of the pending acquisitions may
completion of the not close unless several other conditions are met.
acquisitions could These include:
jeopardize the
acquisitions.
. Receipt of all required consents of governmental
authorities have been received, except where the
failure to obtain any such required consent
would not have a material adverse effect;
. Clearance under antitrust laws;
. Neither Adelphia nor the selling parties have
breached any of their respective
representations, warranties or covenants made in
the applicable agreement; and
. There is no law or court order prohibiting the
applicable acquisition.
Our Acquisitions And Because we are experiencing a period of rapid
Expansion Could Involve expansion through acquisition, the operating
Operational And Other complexity of Adelphia, as well as the
Risks responsibilities of management personnel, have
increased. Our ability to manage such expansion
effectively will require us to continue to expand
and improve our operational and financial systems
and to expand, train and manage our employee base.
The Century, FrontierVision and Harron transactions
and some of our other recent acquisitions involve
the acquisition of companies that have previously
operated independently. We may not be able to
integrate the operations of these companies without
some level of difficulty, such as the loss of key
personnel. There is no guarantee that we will be
able to realize the benefits expected from the
integration of operations from these transactions.
Because the cable systems to be acquired in the
Century, FrontierVision and Harron acquisitions are
in the same industry as those of Adelphia, the
acquired systems will generally be subject to the
same risks as those of Adelphia, such as those
relating to competition, regulation, year 2000
issues and technological developments.
S-18
<PAGE>
Purchasers Of Our
Convertible Preferred Persons purchasing convertible preferred stock who
Stock Who Convert Their convert their shares into Class A common stock will
Shares To Common Stock incur immediate and substantial net tangible book
Will Incur Immediate value dilution.
Dilution
The year 2000 issue refers to the potential
Year 2000 Issues Present inability of computerized systems and technologies
Risks To Our Business to properly recognize and process dates beyond
Operations In Several December 31, 1999. This could present risks to the
Ways operation of our business in several ways. Our
computerized business applications that could be
adversely affected by the year 2000 issue include:
. information processing and financial reporting
systems;
. customer billing systems;
. customer service systems;
. telecommunication transmission and reception
systems; and
. facility systems.
System failure or miscalculation could result in an
inability to process transactions, send invoices,
accept customer orders or provide customers with
products and services. Although we are evaluating
the impact of the year 2000 issue on our business
and are seeking to implement necessary solutions,
this process has not been completed.
There can be no assurance that the systems of other
companies on which our systems rely will be year
2000 ready or compatible with our systems. Our
failure or a third-party's failure to become year
2000 ready, or our inability to become compatible
with third parties with which we have a material
relationship, including parties acquired by us, may
have a material adverse effect on Adelphia,
including significant service interruption or
outages; however, we cannot currently estimate the
extent of any such adverse effects.
Forward-Looking The statements contained or incorporated by
Statements In This reference in this prospectus supplement that are
Prospectus Supplement not historical facts are "forward-looking
Are Subject To Risks And statements" and can be identified by the use of
Uncertainties 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 set forth or incorporated by
reference in this prospectus supplement, including
"Management's Discussion and Analysis of Financial
Condition and Results of Operations" in Adelphia's
1998 Annual Report on Form 10-K and in Adelphia's
S-19
<PAGE>
Form 10-Qs, is forward-looking, such as information
related 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, us. These risks and
uncertainties include, but are not limited to,
uncertainties relating to economic conditions, the
availability and cost of capital, acquisitions and
divestitures, government and regulatory policies,
the pricing and availability of equipment,
materials, inventories and programming,
technological developments, year 2000 issues and
changes in the competitive environment in which we
operate. Persons reading this prospectus supplement
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.
Our Convertible Prior to this offering there has been no public
Preferred Stock Has market for the convertible preferred stock being
Never Publicly Traded offered. We have applied to list the convertible
preferred stock on the Nasdaq National Market under
the symbol "ADLAP." Our application is pending.
There can be no assurance, however, that an active
trading market will develop, or, if developed, that
an active trading market will be maintained.
S-20
<PAGE>
USE OF PROCEEDS
The net proceeds to Adelphia from the Series D convertible preferred stock
offering described on the cover page of this prospectus supplement (the
"Convertible Preferred Stock Offering") will be approximately $484.5 million,
after deducting estimated underwriting discounts and commissions and offering
expenses. The net proceeds from the Convertible Preferred Stock Offering
initially will be invested in cash equivalents or advanced or contributed to
Adelphia's subsidiaries which will apply such funds to repay revolving credit
facilities of such subsidiaries. As of December 31, 1998, the average effective
interest rate on such credit facilities was approximately 6.48%. Subject to
compliance with the terms of and to the maturity of the revolving credit
facilities, Adelphia expects that these subsidiaries will reborrow these
amounts and distribute them to Adelphia which, together with any cash
equivalents into which the net proceeds of the offering were invested, Adelphia
intends to use to fund one or more of the recently announced acquisitions.
S-21
<PAGE>
CAPITALIZATION
(dollars in thousands except par value amounts)
The following table sets forth the cash and cash equivalents and
capitalization of Adelphia as of December 31, 1998, on an actual and as
adjusted basis to reflect the Common Stock Offering, the Convertible Preferred
Stock Offering, the Rigas Direct Placement, the sale of stock and debt
described in "Recent Developments" of this prospectus supplement and the
application of the net proceeds therefrom and the Century, FrontierVision,
Harron and Olympus acquisitions. This table does not reflect the sale of the 7
7/8% Senior Notes due 2009 described in "Recent Developments." This table
should be read in conjunction with Adelphia's consolidated financial statements
and related notes thereto and other financial data contained elsewhere or
incorporated by reference in this prospectus supplement.
<TABLE>
<CAPTION>
December 31, 1998
----------------------------
Actual As Adjusted (b)
----------- ---------------
<S> <C> <C>
Cash and cash equivalents......................... $ 398,644 $ 1,060,873
U.S. government securities--pledged............... 58,054 58,054
----------- -----------
Total cash, cash equivalents and U.S. government
securities--pledged............................ $ 456,698 $ 1,118,927
=========== ===========
Long-term debt including current maturities (a):
Subsidiary debt................................. $ 1,717,240 $ 6,560,566
Parent debt..................................... 1,810,212 2,062,512
----------- -----------
Total long-term debt including current
maturities................................... 3,527,452 8,623,078
----------- -----------
Hyperion redeemable exchangeable preferred stock.. 228,674 228,674
----------- -----------
Redeemable exchangeable preferred stock........... 148,191 148,191
----------- -----------
Convertible preferred stock, common stock and other
stockholders' equity (deficiency):
8 1/8% Series C cumulative convertible preferred
stock ($100,000 liquidation preference)........ 1 1
5 1/2% Series D convertible preferred stock
($500,000 liquidation preference).............. -- 25
Class A common stock, $.01 par value,
200,000,000 shares authorized; 31,258,843
shares outstanding on an Actual basis and
103,536,814(c) shares outstanding on an As
Adjusted basis................................. 313 1,035
Class B common stock, $.01 par value, 25,000,000
shares authorized; 10,834,476 shares
outstanding on an Actual basis and 14,948,856
shares outstanding on an As Adjusted basis..... 108 149
Additional paid-in capital........................ 738,102 5,476,220
Accumulated deficit............................... (1,760,270) (1,740,829)
Treasury stock, at cost, 0 shares on an Actual
basis and 1,091,524 shares of Class A common
stock and 20,000 shares of 8 1/8% Series C
cumulative convertible preferred stock on an As
Adjusted basis................................... -- (149,213)
----------- -----------
Total convertible preferred stock, common
stock and other stockholders' equity
(deficiency)................................. (1,021,746) 3,587,388
----------- -----------
Total capitalization........................ $ 2,882,571 $12,587,331
=========== ===========
</TABLE>
- --------
(a) See Note 3 to Adelphia's consolidated financial statements in the Form 10-K
for a description of long-term debt of Adelphia and its subsidiaries. See
"The Company--Management's Discussion and Analysis of Financial Condition
and Results of Operations--Liquidity and Capital Resources" in the Form 10-
K and the Form 10-Qs.
(b) Gives effect to (i) the application of the net proceeds of approximately
$970 million from the Common Stock Offering and the Convertible Preferred
Stock Offering and approximately $250 million from the Rigas Direct
Placement, as described in "Recent Developments" and "Use of Proceeds,"
(ii) the Century, FrontierVision and Harron acquisitions, the Class A
common stock, Series C cumulative convertible preferred stock and Olympus
partnership interests repurchased from Telesat, and (iii) the application
of the net proceeds of the January 1999 sale of Class A common stock, the 7
1/2% Senior Notes and the 7 3/4% Senior Notes, and the March 1999 sale of
Hyperion's 12% Senior Subordinated Notes, as described in "Recent
Developments." The above table does not otherwise give effect to any other
transactions after December 31, 1998 that are described in "Recent
Developments."
(c) Does not give effect to the Verto acquisition described in "Recent
Developments." After giving effect to the Verto acquisition, Class A common
stock outstanding on an As Adjusted basis would be 106,097,838 shares.
S-22
<PAGE>
PRICE RANGE OF ADELPHIA'S COMMON EQUITY AND DIVIDEND POLICY
Our Class A common stock is quoted on the Nasdaq National Market under the
symbol "ADLAC."
The following table sets forth the range of high and low closing sale prices
of the Class A common stock for the fiscal periods indicated, as reported by
the Nasdaq National Market.
Class A common stock
<TABLE>
<CAPTION>
High Low
------- --------
1997
<S> <C> <C>
First Quarter Ended 3/31/97............................ $ 7 1/8 $ 5 3/8
Second Quarter Ended 6/30/97........................... $ 7 3/4 $ 5
Third Quarter Ended 9/30/97............................ $12 1/8 $ 6 3/4
Fourth Quarter Ended 12/31/97.......................... $18 3/4 $12
<CAPTION>
1998
<S> <C> <C>
First Quarter Ended 3/31/98............................ $30 3/8 $16 3/8
Second Quarter Ended 6/30/98........................... $37 1/8 $21 1/2
Third Quarter Ended 9/30/98............................ $44 $30 7/16
Fourth Quarter Ended 12/31/98.......................... $48 1/8 $29 1/8
<CAPTION>
1999
<S> <C> <C>
First Quarter Ended 3/31/99............................ $64 3/8 $44 7/8
Second Quarter (through 4/26/99)....................... $72 3/8 $58 3/4
</TABLE>
As of April 19, 1999, approximately 158 holders of record held our Class A
common stock. As of that date, five record holders were registered clearing
agencies holding Class A common stock on behalf of participants in such
clearing agencies.
No established public trading market exists for our Class B common stock. As
of the date hereof, the Class B common stock was held of record by seven
persons, principally members of the Rigas family, including a Pennsylvania
general partnership all of whose partners are members of the Rigas family. The
Class B common stock is convertible into shares of Class A common stock on a
one-to-one basis. As of the date of this prospectus supplement, the Rigas
family owned 99.1% of the outstanding Class B common stock.
Dividend Policy
We have never paid a cash dividend on our common stock and anticipate that
for the foreseeable future any earnings will be retained for use in our
business. Our ability to pay cash dividends on our common stock is limited by
the provisions of our indentures.
S-23
<PAGE>
DILUTION
The net tangible book value of Adelphia's common stock as of December 31,
1998 was a deficit of approximately $2,050,905,000 or negative $48.72 a share.
Net tangible book value per share represents the amount of Adelphia's
convertible preferred stock, common stock and other stockholders' equity
(deficiency), less intangible assets, divided by shares of Adelphia's common
stock outstanding. Purchasers of convertible preferred stock who convert their
shares into Class A common stock will have an immediate dilution of net
tangible book value which, due to our having a net tangible book value deficit,
will exceed the conversion price per share.
Net tangible book value dilution per share represents the difference between
the amount per share of Class A common stock which would be paid by purchasers
of convertible preferred stock, assuming they immediately converted all of
their shares into shares of Class A common stock, in the Convertible Preferred
Stock Offering and the pro forma net tangible book value per share of the
common stock immediately after such conversion. Prior to the Convertible
Preferred Stock Offering, but after giving effect to the January 1999 sale of
Class A common stock, the Class A common stock and 8 1/8% Series C cumulative
convertible preferred stock repurchased from Telesat, the Verto acquisition,
and the issuance of 1,000,000 shares of Class A common stock placed in escrow
associated with the FrontierVision acquisition, the pro forma net tangible book
value of Adelphia as of December 31, 1998 was a deficit of approximately
$1,748,345,000 or negative $32.89 per share of common stock.
After giving effect to the assumed conversion into 6,138,735 shares of Class
A common stock of all the convertible preferred stock issued in the Convertible
Preferred Stock Offering, the pro forma net tangible book value of Adelphia as
of December 31, 1998 was a deficit of approximately $1,263,845,000, or negative
$21.31 per share of common stock. The conversion into Class A common stock is
based on an assumed conversion price of $81.45 representing a 20% premium
over the last reported sale price of our Class A common stock on the Nasdaq
National Market on April 26, 1999 of $67.88 per share. This calculation
excludes the proceeds from 8,000,000 shares expected to be issued on April 28,
1999 in the Common Stock Offering and 4,114,549 shares assumed to be issued in
the Rigas Direct Placement which would have reduced the net tangible book value
dilution per share attributable to the Convertible Preferred Stock Offering.
This conversion into Class A common stock represents an immediate increase in
net tangible book value of $11.58 per share to existing stockholders and an
immediate dilution of net tangible book value of $102.76 per share to
purchasers of convertible preferred stock assuming they immediately converted
all of their shares into Class A common stock, as illustrated in the following
table:
<TABLE>
<S> <C> <C>
Price per share of Class A common stock acquired upon
conversion................................................. $ 81.45
Net tangible book value per share of common stock before
the Convertible Preferred Stock Offering................. $(32.89)
Increase per share of common stock attributable to the
Convertible Preferred Stock Offering..................... 11.58
-------
Pro forma net tangible book value per share of common stock
after the Convertible Preferred Stock Offering............. (21.31)
--------
Net tangible book value dilution per share.................. $(102.76)
========
</TABLE>
S-24
<PAGE>
UNDERWRITING
Subject to the terms and conditions stated in the underwriting agreement,
each underwriter named below has severally agreed to purchase, and we have
agreed to sell to such underwriter, the number of shares of our convertible
preferred stock set forth opposite its name:
<TABLE>
<CAPTION>
Number
Underwriters of Shares
------------ ---------
<S> <C>
Salomon Smith Barney Inc. ......................................... 999,760
Credit Suisse First Boston Corporation............................. 749,820
Goldman, Sachs & Co. .............................................. 749,820
CIBC Oppenheimer Corp. ............................................ 100
Donaldson, Lufkin & Jenrette Securities Corporation................ 100
Lehman Brothers Inc. .............................................. 100
Merrill Lynch, Pierce, Fenner & Smith Incorporated................. 100
Morgan Stanley & Co. Incorporated.................................. 100
NationsBanc Montgomery Securities LLC.............................. 100
---------
Total............................................................ 2,500,000
=========
</TABLE>
The underwriting agreement provides that the obligations of the several
underwriters to purchase the shares included in this offering are subject to
approval of certain legal matters by counsel and to certain other conditions.
The underwriters are obligated to purchase all the shares (other than those
covered by the over-allotment option described below) if they purchase any of
the shares.
The underwriters, for whom Salomon Smith Barney Inc. is acting as
representative, propose to offer some of the shares directly to the public at
the public offering price set forth on the cover page of this prospectus
supplement and some of the shares to certain dealers at the public offering
price less a concession not in excess of $3.61 per share. The underwriters may
allow, and such dealers may reallow, a concession not in excess of $0.10 per
share on sales to certain other dealers. After the initial offering of the
shares to the public, the public offering price and such concessions may be
changed by the representative.
We have granted to the underwriters an option, exercisable for 30 days from
the date of this prospectus, to purchase up to 375,000 additional shares of our
convertible preferred stock at the public offering price less the underwriting
discount. The underwriters may exercise such option solely for the purpose of
covering over-allotments, if any, in connection with this offering. To the
extent such option is exercised, each underwriter will be obligated, subject to
certain conditions, to purchase a number of additional shares approximately
proportionate to such underwriter's initial purchase commitment.
The Rigas family has agreed, subject to certain exceptions, not to sell any
of their shares of our Class B common stock without the prior written consent
of a majority of the independent members of our board of directors for a period
of six months from the closing of the Rigas Direct Placement, but not to exceed
a year from the closing of the Common Stock Offering.
Until the distribution of our convertible preferred stock is completed,
rules of the Securities and Exchange Commission may limit the ability of the
underwriters to bid for and purchase our
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convertible preferred stock or our Class A common stock. As an exception to
these rules, the representative is permitted to engage in certain transactions
that stabilize the price of our convertible preferred stock or our Class A
common stock. Such transactions consist of bids or purchases for the purpose of
pegging, fixing or maintaining the price of our convertible preferred stock or
our Class A common stock.
If the underwriters create short positions in our convertible preferred
stock in connection with the offering by selling more shares of our convertible
preferred stock than are set forth on the cover page of this prospectus
supplement, the representative may reduce that short position by purchasing our
convertible preferred stock in the open market. The representative may also
elect to reduce any short position by exercising all or part of the over-
allotment option described above.
The representative may also impose a penalty bid on certain underwriters.
This means that if the representative purchases shares of our convertible
preferred stock in the open market to reduce the underwriters' short position
or to stabilize the price of shares of our convertible preferred stock, it may
reclaim the amount of selling concession from the underwriters who sold those
shares as part of the offering. In general, purchases of a security for the
purpose of stabilization or to reduce a short position could cause the price of
the security to be higher than it might be in the absence of such purchases.
The imposition of a penalty bid might also have an effect on the price of a
security to the extent that it were to discourage resales of the security.
Neither we nor any of the underwriters make any representation or prediction
as to the direction or magnitude of any effect that the transactions described
above may have on the price of shares of our convertible preferred stock or our
Class A common stock. In addition, neither we nor any of the underwriters make
any representation that the representative will engage in such transactions or
that such transactions, once commenced, will not be discontinued without
notice.
There is no established trading market for our convertible preferred stock.
The underwriters have informed us that they intend to make a market in our
convertible preferred stock, as permitted by applicable laws and regulations;
however, the underwriters are not obligated to do so and may discontinue market
making activities at any time without notice. Accordingly, there can be no
assurance that a trading market for our convertible preferred stock will
develop. Moreover, if a market for our convertible preferred stock does
develop, our convertible preferred stock could trade below the initial public
offering price. The initial public offering price has been determined by
agreement among us and the underwriters and may not be indicative of the market
price for our convertible preferred stock after the offering. If a market for
our convertible preferred stock does not develop, purchasers may be unable to
resell our convertible preferred stock for an extended period of time, if at
all. Future trading prices of our convertible preferred stock will depend upon
many factors, including among other things, our consolidated operating results
and the market for our Class A common stock, which market is subject to various
pressures, including, but not limited to, issuance of additional preferred
stock, common stock or securities convertible or exchangeable into common
stock. See "Description of Convertible Preferred Stock."
The representative has performed certain investment banking and advisory
services for us from time to time for which they have received customary fees
and expenses. The representative may, from time to time, engage in transactions
with and perform services for us in the ordinary course of
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its business. In addition, Salomon Smith Barney Inc. and Goldman, Sachs & Co.
are joint lead managers in our Common Stock Offering, and Credit Suisse First
Boston Corporation, Donaldson, Lufkin & Jenrette Securities Corporation,
Merrill Lynch, Pierce, Fenner & Smith Incorporated, Morgan Stanley & Co.
Incorporated and NationsBanc Montgomery Securities LLC are co-managers in our
Common Stock Offering. Salomon Smith Barney Inc. is also a joint book-running
manager in our offering of 7 7/8% Senior Notes due 2009.
We have agreed to indemnify the underwriters against certain liabilities,
including liabilities under the Securities Act, or to contribute to payments
the underwriters may be required to make in respect of any of those
liabilities.
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DESCRIPTION OF CONVERTIBLE PREFERRED STOCK
The following summary description of the 5 1/2% Series D convertible
preferred stock of Adelphia is qualified in its entirety by reference to
Adelphia's Restated Certificate of Incorporation and the Certificate of
Designation governing the convertible preferred stock referred to below. The
Certificate of Incorporation is filed as an exhibit to Adelphia's filings
incorporated by reference in the Registration Statement of which this
prospectus supplement is a part and the Certificate of Designation will be
filed as an exhibit to a Current Report on Form 8-K after the date of this
prospectus supplement.
Ranking with Existing Preferred Stocks
The convertible preferred stock will rank equal in right of payment with
Adelphia's 13% Series B cumulative exchangeable preferred stock and 8 1/8%
Series C cumulative convertible preferred stock as to dividends and upon
liquidation, dissolution or winding up of Adelphia, except that no cash
dividends nor any distributions may be declared or paid on, nor any redemptions
made with respect to the 13% Series B cumulative exchangeable preferred stock
or the convertible preferred stock unless full cumulative dividends have been
paid on all outstanding shares of 8 1/8% Series C cumulative convertible
preferred stock for all prior dividend periods.
Dividends
Subject to the prior rights of holders of any preferred stock senior in
right of payment of dividends to the convertible preferred stock, holders of
shares of the convertible preferred stock are entitled to receive, when, as and
if declared by Adelphia's board of directors out of funds legally available
therefor, an annual cash dividend of $11.00 per share, or 5 1/2% of the
liquidation preference of $200.00 per share, payable in equal quarterly
installments on May 1, August 1, November 1 and February 1, commencing August
1, 1999, except that if such date is not a business day, (i.e., is a Saturday,
Sunday or legal holiday), then such dividend will be payable on the next
succeeding day that is not a Saturday, Sunday or legal holiday. Dividends on
the convertible preferred stock will accrue without interest and be cumulative
from the date of initial issuance. Dividends will be payable to holders of
record as they appear on the stock transfer books of Adelphia on such record
dates as are fixed by the board of directors. For a discussion of certain
federal income tax considerations relevant to the payment of dividends on the
convertible preferred stock, see "Certain Federal Income Tax Considerations."
If dividends are not paid in full, or declared in full and sums set apart
for the payment thereof, upon the convertible preferred stock and any other
preferred stock ranking on a parity as to dividends with the convertible
preferred stock, subject to the prior rights of holders of any preferred stock
senior in right of payment of dividends to the convertible preferred stock, all
dividends declared upon shares of convertible preferred stock and such other
parity preferred stock will when, as and if declared, be declared pro rata so
that in all cases the amount of dividends declared and paid per share on the
convertible preferred stock and such other parity preferred stock will bear to
each other the same ratio that accumulated dividends per share on the shares of
convertible preferred stock and such other preferred stock bear to each other.
Except as set forth above, unless full cumulative dividends on the convertible
preferred stock have been paid, or declared and sums set aside for the payment
thereof, dividends (other than in common stock or any other stock of Adelphia
ranking junior to the convertible preferred stock as to dividends and as to
liquidation rights) may not be paid, or declared and sums set aside for payment
thereof, and other distributions may not be made upon the common
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stock or any other Adelphia security ranking junior to the convertible
preferred stock as to dividends; and neither the common stock nor any other
Adelphia security ranking junior to the convertible preferred stock as to
dividends may be redeemed, purchased or other otherwise acquired for any
consideration (except by conversion into or exchange for other Adelphia capital
stock ranking junior to the convertible preferred stock as to dividends and
except for capital stock acquired by us in connection with the payment of any
amounts upon the exercise of our stock options).
Conversion Rights
Each share of convertible preferred stock will be convertible into shares of
Class A common stock at any time at the initial conversion price and equivalent
conversion rate set forth on the cover page of this prospectus supplement,
adjusted as described in the following paragraphs, except that if shares of
convertible preferred stock are earlier called for redemption, the conversion
right with respect thereto will terminate at the close of business on the date
immediately prior to the date fixed for redemption and will be lost if not
exercised prior to that time, unless Adelphia shall default in payment of the
redemption obligation. Fractional shares of common stock will not be delivered
upon conversion, but a cash adjustment will be paid in respect of such
fractional interest based on the then current market price of the common stock.
The conversion price is subject to adjustment upon certain events, including
(i) the issuance of Class A common stock as a dividend or distribution on the
common stock; (ii) a combination, subdivision or reclassification of Class A
common stock, (iii) the issuance to all holders of Class A common stock of
rights or warrants (expiring within 45 days after the record date for
determining stockholders entitled to receive them) entitling them to subscribe
for or purchase common stock at less than the then current market price; and
(iv) the distribution to all holders of Class A common stock of capital stock
(other than common stock), evidences of indebtedness of Adelphia, assets or
rights or warrants to subscribe for or purchase securities of Adelphia
(excluding the dividends, distributions, rights and warrants mentioned above
and dividends and distributions paid in cash out of the retained earnings of
Adelphia and distributions upon mergers or consolidations to which the next
succeeding paragraph applies). No adjustment of the conversion price will be
required to be made in any case until cumulative adjustments amount to one
percent of such price. No adjustment to the conversion price will be made with
respect to rights or warrants issued pursuant to certain employee benefit
plans. Adelphia from time to time may decrease the conversion price by any
amount for any period of at least 20 days, so long as the decrease is
irrevocable during such period, in which case Adelphia shall give at least 15
days' notice of such decrease. In addition to the foregoing adjustments,
Adelphia will be permitted to make such reductions in the conversion price as
it determines to be advisable in order that any stock dividend, subdivision of
shares, distribution of rights to purchase stock or securities or distribution
of securities convertible into or exchangeable for stock made by Adelphia to
its stockholders will not be taxable to the recipients. See "Certain Federal
Income Tax Considerations."
Except as stated above, the conversion price will not be adjusted for the
issuance of common stock, or any securities convertible into or exchangeable
for common stock or carrying the right to purchase any of the foregoing, in
exchange for cash, property or services.
In case of any merger or consolidation to which Adelphia is a party (other
than a merger or consolidation in which Adelphia is the continuing corporation
and in which the Class A common stock outstanding immediately prior to the
merger or consolidation is not exchanged for cash, securities or other property
of another corporation), or in case of any sale or transfer to another
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corporation of the property of Adelphia as an entirety or substantially as an
entirety, or in the case of any statutory exchange of securities with another
corporation (other than in connection with a merger or acquisition), there will
be no adjustment of the conversion price, and each share of the then
outstanding convertible preferred stock will, without the consent of the holder
of any convertible preferred stock, become convertible only into the kind and
amount of securities, cash or other property receivable upon such merger,
consolidation, sale, transfer or statutory exchange by a holder of the number
of shares of Class A common stock into which such convertible preferred stock
was convertible immediately prior to such merger, consolidation, sale, transfer
or statutory exchange (assuming such holder of Class A common stock failed to
exercise his rights of election, if any, as to the kind or amount of
securities, cash or other property receivable upon such merger, consolidation,
sale, transfer or statutory exchange). In the case of a cash merger of Adelphia
into another corporation or any other cash transaction of the type mentioned
above, the effect of these provisions would be that thereafter each share of
convertible preferred stock would be convertible at the conversion price in
effect at such time into the same amount of cash per share into which each
share of convertible preferred stock would have been convertible had such share
been converted into Class A common stock immediately prior to the effective
date of such cash merger or transaction. Depending upon the terms of such cash
merger or transaction, the aggregate amount of cash into which such shares of
convertible preferred stock would be converted could be more or less than the
liquidation preference with respect to such convertible preferred stock.
Holders of convertible preferred stock at the close of business on a
dividend record date will be entitled to receive the dividend payable on such
shares on the corresponding dividend payment date notwithstanding the
conversion of such shares following such dividend record date and prior to such
dividend payment date. However, convertible preferred stock surrendered for
conversion during the period between the close of business on any dividend
record date and the opening of business on the corresponding dividend payment
date (except shares converted after the issuance of a notice of redemption with
respect to a redemption date during such period or coinciding with such
dividend payment date, which will be entitled to such dividend) must be
accompanied by payment of an amount equal to the dividend payable on such
shares on such dividend payment date. A holder of convertible preferred stock
on a dividend record date who (or whose transferee) tenders any such shares for
conversion into shares of Class A common stock on such dividend payment date
will receive the dividend payable by Adelphia on such shares of convertible
preferred stock on such date, and the converting holder need not include
payment of the amount of such dividend upon surrender of convertible preferred
stock for conversion. Except as provided above, Adelphia will make no payment
or allowance for unpaid dividends, whether or not in arrears, on converted
shares or for dividends on the common stock issued upon such conversion.
Liquidation Rights
In the event of any liquidation, dissolution or winding up of Adelphia and
subject to the rights of creditors of Adelphia and holders of any preferred
stock senior in right of payment in the event of a liquidation of Adelphia, the
holders of shares of convertible preferred stock are entitled to receive a
liquidation preference of $200.00 per share, plus an amount equal to any
accrued and unpaid dividends to the date of payment before any distribution of
assets is made to holders of common stock or any other stock that ranks junior
to the convertible preferred stock as to liquidation rights. The holders of
convertible preferred stock along with Adelphia's 13% Series B cumulative
exchangeable preferred stock and 8 1/8% Series C cumulative convertible
preferred stock and all series or classes of Adelphia's stock hereafter issued
that rank on a parity as to liquidation rights with the convertible preferred
stock are entitled to share ratably, in accordance with the respective
preferential
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amounts payable on such stock, in any distribution which is not sufficient to
pay in full the aggregate of the amounts payable thereon. After payment in full
of the liquidation preference of the shares of the convertible preferred stock,
the holders of such shares will not be entitled to any further participation in
any distribution of assets by Adelphia. A merger, consolidation, or other
business combination of Adelphia with or into another corporation or other
entity, a statutory exchange of securities with another corporation and a sale
or transfer of all or part of Adelphia's assets for cash, securities or other
property will not be considered a liquidation, dissolution or winding up of
Adelphia unless such merger, consolidation, combination, exchange, sale or
transfer shall be in connection with a liquidation, dissolution or winding up
of Adelphia.
Redemption At Option Of Adelphia
The convertible preferred stock may not be redeemed prior to May 1, 2002.
Thereafter, the convertible preferred stock is redeemable, at the option of
Adelphia, in whole or in part at any time, for shares of Class A common stock
at a redemption price of $206.00 per share, or for cash at a redemption price
of $200.00 per share, plus in all cases accrued and unpaid dividends to the
redemption date.
In the event Adelphia redeems with Class A common stock, Adelphia will issue
in payment of the redemption price for each share of convertible preferred
stock to be redeemed such number of shares of common stock as equals (x) the
then-current redemption price of the convertible preferred stock, divided by
(y) the market price (the "Market Price") of the Class A common stock, subject
to adjustment in certain circumstances. The Market Price will be equal to the
lower of (i) the average of the daily closing prices of the Class A common
stock on the Nasdaq National Market for the 20 consecutive trading days
immediately preceding the first business day immediately preceding the date of
the applicable redemption notice and (ii) the closing price of the Class A
common stock on the Nasdaq National Market on the trading day immediately
preceding the first business day immediately preceding the date of the
applicable redemption notice. Fractional shares of Class A common stock will
not be issued upon any redemption of convertible preferred stock, but, in lieu
thereof, Adelphia will pay a cash adjustment based on the market price.
If fewer than all the outstanding shares of convertible preferred stock are
to be redeemed, Adelphia will select those shares to be redeemed pro rata or by
lot or in such other manner as the board of directors may determine. There is
no mandatory redemption or sinking fund obligation with respect to the
convertible preferred stock. In the event that Adelphia has failed to pay
accrued and unpaid dividends on the convertible preferred stock for the current
or any past dividend period, it may not redeem less than all of the then-
outstanding shares of the convertible preferred stock until all such accrued
and unpaid dividends have been paid in full.
Notice of redemption will be mailed at least 30 days but not more than 60
days before the redemption date to each holder of record of shares of
convertible preferred stock to be redeemed at the address shown on the stock
transfer books. After the redemption date, dividends will cease to accrue on
the shares of convertible preferred stock called for redemption and all rights
of the holders of such shares will terminate, except the right to receive
shares of Class A common stock, or cash, as the case may be, equal to the
redemption price as described above without interest or adjustment resulting
from changes in the market value of the Class A common stock. At the close of
business on the redemption date, each holder of convertible preferred stock
redeemed with Class A common stock (unless Adelphia defaults on its obligations
to deliver shares of Class A common stock or cash for fractional shares) will
be, without any further action, deemed a holder of the number of shares of
Class A common stock for which such convertible preferred stock is redeemable.
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Voting Rights
The holders of the convertible preferred stock will have no voting rights
except as described below or as required by law. In exercising any such vote,
each outstanding share of convertible preferred stock will be entitled to one
vote, excluding shares held by Adelphia or any entity controlled by Adelphia,
which shares will have no voting rights.
Whenever dividends on the convertible preferred stock have not been paid in
an aggregate amount equal to at least six quarterly dividends on such shares
(whether or not consecutive), the number of directors of Adelphia will be
increased by two, and the holders of the convertible preferred stock (voting
separately as a class with the holders of any outstanding shares of stock on a
parity as to dividends with the convertible preferred stock on which like
voting rights have been conferred and are exercisable) will be entitled to
elect such two additional directors to the board of directors at any meeting of
stockholders of Adelphia at which directors are to be elected until all such
dividends accrued and in default have been paid in full or sums set aside for
payment thereof. The term of office of all directors so elected will terminate
immediately upon such payment or setting aside for payment.
In addition, so long as any convertible preferred stock is outstanding,
Adelphia will not, without the affirmative vote or consent of the holders of at
least 66 2/3% of all outstanding shares of convertible preferred stock, voting
separately as a class, amend, alter or repeal any provision of the Certificate
of Incorporation or the Bylaws of Adelphia so as to affect materially and
adversely the relative rights, preferences, qualifications, limitations or
restrictions of the convertible preferred stock. The Certificate of Designation
will also provide that, except as set forth above, (i) the creation,
authorization or issuance of any shares or series of preferred stock or (ii)
the increase or decrease in the amount of authorized capital stock of any
class, including any preferred stock, shall not require the consent of the
holders of convertible preferred stock and shall not be deemed to affect
adversely the rights, preferences, privileges or voting rights of the
convertible preferred stock.
The foregoing voting provisions will not apply if, at or prior to the time
when the act with respect to which such vote would otherwise be required shall
be effected, all outstanding shares of convertible preferred stock shall have
been redeemed or called for redemption upon proper notice and sufficient shares
of Class A common stock shall have been reserved by Adelphia to effect such
redemption.
Other Provisions
The shares of convertible preferred stock, when issued, will be duly and
validly issued, fully paid and nonassessable.
The holders of shares of convertible preferred stock have no preemptive
rights with respect to any securities of Adelphia.
The registrar, transfer agent, conversion agent, and dividend disbursing
agent for the convertible preferred stock and the transfer agent and registrar
for the common stock issuable upon conversion thereof will be American Stock
Transfer & Trust Company.
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CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following discussion summarizes the material federal income tax
considerations generally applicable to holders acquiring convertible preferred
stock upon its issuance by Adelphia. This discussion deals only with
convertible preferred stock held as capital assets by Holders (within the
meaning of section 1221 of the Internal Revenue Code of 1986, as amended) and
does not deal with special situations, such as those of dealers in securities
or currencies, financial institutions, tax-exempt entities, life insurance
companies, persons holding the convertible preferred stock as a part of a
hedging, short sale or conversion transaction or a straddle or Holders whose
"functional currency" is not the United States dollar. Furthermore, the
discussion below is based upon the provisions of the Code, Treasury
regulations, Internal Revenue Service ("IRS") rulings and judicial decisions
thereunder as of the date hereof, and such authorities may be repealed, revoked
or modified so as to result in federal income tax consequences different from
those discussed below. The consequences set forth in this discussion are not
binding on the IRS or the courts. Adelphia has not sought and will not seek any
rulings from the IRS with respect to the positions of Adelphia discussed
herein, and there can be no assurance that the IRS will not take a different
position concerning the tax consequences of the purchase, ownership or
disposition of the convertible preferred stock. ALL PROSPECTIVE PURCHASERS ARE
ADVISED TO CONSULT THEIR TAX ADVISORS REGARDING THE FEDERAL, STATE, LOCAL AND
FOREIGN TAX CONSEQUENCES OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF THE
CONVERTIBLE PREFERRED STOCK.
As used herein, the term "United States Holder" means a person or entity
that, for United States federal income tax purposes, is a citizen or resident
of the United States, a corporation or partnership created or organized in the
United States or under the laws of the United States or of any political
subdivision thereof, an estate whose income is includible in gross income for
United States federal income tax purposes regardless of its source or a trust
which is subject to the supervision of a court within the United States and the
control of a United States person as described in Section 7701(a)(30) of the
Code. A "Non-United States Holder" is a holder of convertible preferred stock
or Class A common stock that is not a United States Holder.
United States Holders
Distributions
Distributions on the convertible preferred stock will be treated as
dividends to United States Holders to the extent of Adelphia's current or
accumulated earnings and profits as determined under federal income tax
principles. The amount of Adelphia's earnings and profits at any time will
depend upon our future actions and financial performance. To the extent that
the amount of a distribution on the convertible preferred stock exceeds
Adelphia's current and accumulated earnings and profits, such distributions
will be treated as a nontaxable return of capital and will be applied against
and reduce the adjusted tax basis of the convertible preferred stock in the
hands of each United States Holder (but not below zero), thus increasing the
amount of any gain (or reducing the amount of any loss) which would otherwise
be realized by such United States Holder upon the sale or other taxable
disposition of such convertible preferred stock. The amount of any such
distribution that exceeds the adjusted tax basis of the convertible preferred
stock in the hands of the United States Holder will be treated as capital gain
and will be either long-term or short-term capital gain depending on the United
States Holder's holding period for the convertible preferred stock.
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Under Section 243 of the Code, corporate United States Holders generally
will be able to deduct 70% of the amount of any distribution qualifying as a
dividend (although as described above distributions on the convertible
preferred stock may not qualify as dividends). There are, however, many
exceptions and restrictions relating to the availability of such dividends-
received deduction.
Section 246A of the Code reduces the dividends-received deduction allowed to
a corporate United States Holder that has incurred indebtedness "directly
attributable" to its investment in portfolio stock. Section 246(c) of the Code
requires that, in order to be eligible for the dividends-received deduction, a
corporate United States Holder must generally hold the shares of convertible
preferred stock for a 46 day minimum holding period (91 days in the case of
certain dividends) during the 90 day period beginning on the date which is 45
days before the date on which such shares become ex-dividend with respect to
such dividend (during the 180 day period beginning 90 days before such date in
the case of certain dividends). A taxpayer's holding period for these purposes
is suspended during any period in which a United States Holder has certain
options or contractual obligations with respect to substantially identical
stock or holds one or more other positions with respect to substantially
identical stock that diminishes the risk of loss from holding the convertible
preferred stock.
Under Section 1059 of the Code, a corporate United States Holder is required
to reduce its tax basis (but not below zero) in the convertible preferred stock
by the non-taxed portion of any "extraordinary dividend" if such stock has not
been held for more than two years before the earliest of the date such dividend
is declared, announced, or agreed to. Generally, the non-taxed portion of an
extraordinary dividend is the amount excluded from income by operation of the
dividends-received deduction provisions of Section 243 of the Code. An
extraordinary dividend on the convertible preferred stock generally would be a
dividend that (i) equals or exceeds 5% of the corporate United States Holder's
adjusted tax basis in the convertible preferred stock, treating all dividends
having ex-dividend dates within an 85-day period as one dividend or (ii)
exceeds 20% of the corporate United States Holder's adjusted tax basis in such
stock, treating all dividends having ex-dividend dates within a 365-day period
as one dividend. In determining whether a dividend paid on the convertible
preferred stock is an extraordinary dividend, a corporate United States Holder
may elect to substitute the fair market value of the stock for such United
States Holder's tax basis for purposes of applying these tests, provided such
fair market value is established to the satisfaction of the Secretary of
Treasury as of the day before the ex-dividend date. An extraordinary dividend
also includes any amount treated as a dividend in the case of a redemption that
is non-pro rata as to all stockholders or in partial liquidation of Adelphia or
treated as a dividend because the holding of options was deemed to be stock
ownership under the constructive stock ownership rules of Section 318(a)(4) of
the Code, regardless of the stockholder's holding period and regardless of the
size of the dividend. If any part of the non-taxed portion of an extraordinary
dividend is not applied to reduce the United States Holder's tax basis as a
result of the limitation on reducing such basis below zero, such part will be
treated as gain from the sale or exchange of the stock and will be recognized
at the time when the extraordinary dividend is paid.
Special rules exist with respect to extraordinary dividends for "qualified
preferred dividends." A qualified preferred dividend is any fixed dividend
payable with respect to any share of stock which (i) provides for fixed
preferred dividends payable not less frequently than annually and (ii) is not
in arrears as to dividends at the time the Holder acquired such stock. A
qualified preferred dividend does not include any dividend payable with respect
to any share of stock if the actual rate of return of such stock exceeds 15%.
Section 1059 of the Code does not apply to qualified preferred dividends
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if the corporate United States Holder holds such stock for more than five
years. If the United States Holder disposes of such stock before it has been
held for more than five years, the amount subject to extraordinary dividend
treatment with respect to qualified preferred dividends is limited to the
excess of the actual rate of return over the stated rate of return. Actual or
stated rates of return are the actual or stated dividends expressed as a
percentage of the lesser of (1) the stockholders' tax basis in such stock or
(2) the liquidation preference of such stock. CORPORATE UNITED STATES HOLDERS
ARE URGED TO CONSULT THEIR TAX ADVISORS WITH RESPECT TO THE POSSIBLE
APPLICATION OF SECTION 1059 OF THE CODE TO THEIR OWNERSHIP AND DISPOSITION OF
THE CONVERTIBLE PREFERRED STOCK.
A corporate United States Holder's liability for alternative minimum tax may
be affected by the portion of the dividends received which such corporate
United States Holder deducts in computing taxable income. This results from the
fact that corporate United States Holders are required to increase alternative
minimum taxable income by 75% of the excess of the adjusted current earnings of
the corporation (as defined in Section 56 of the Code) over the alternative
minimum taxable income (determined without regard to the adjustments for
determining adjusted current earnings or the alternative tax net operating loss
deduction).
Optional Redemption For Class A Common Stock Or Cash
The redemption of convertible preferred stock for shares of Class A common
stock at the option of Adelphia should constitute a recapitalization within the
meaning of Section 368(a)(1)(E) of the Code. Accordingly, United States Holders
generally will not recognize gain or loss upon the exchange of convertible
preferred stock for Class A common stock. If, however, Class A common stock
were received by United States Holders pursuant to a redemption in discharge of
dividend arrearages on the convertible preferred stock, the redemption would be
treated as a distribution on the convertible preferred stock to the extent of
the dividends in arrears. Such a distribution would be taxed as a dividend to
the extent of Adelphia's current or accumulated earnings and profits at the
time (in accordance with the treatment described above for distributions). A
United States Holders' tax basis in Class A common stock received pursuant to
the redemption generally will equal the United States Holders' tax basis in the
convertible preferred stock surrendered in exchange therefor. Similarly, the
holding period for Class A common stock received pursuant to the redemption
generally will include the period for which the convertible preferred stock
surrendered in exchange therefor was held. The basis of Class A common stock
received in discharge of dividend arrearages on the convertible preferred stock
will be its fair market value on the date received and the holding period of
such Class A common stock will commence on the day after its receipt.
A redemption of convertible preferred stock for cash will be a taxable
event. Such a redemption will generally be treated as a sale or exchange if the
holder does not own, actually or constructively within the meaning of section
318 of the Code, any stock of Adelphia other than the redeemed convertible
preferred stock. If a holder does own, actually or constructively, other stock
of Adelphia, a redemption of convertible preferred stock may be treated as a
dividend to the extent of Adelphia's current and accumulated earnings and
profits (as determined for federal income tax purposes). Such dividend
treatment will not apply if the redemption (i) is "substantially
disproportionate" with respect to the holder under section 302(b)(2) of the
Code, or (ii) is "not essentially equivalent to a dividend" with respect to the
holder under section 302(b)(1) of the Code. A distribution to a holder
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will be "not essentially equivalent to a dividend" if it results in a
"meaningful reduction" in the holder's stock interest in Adelphia. For this
purpose, a redemption of convertible preferred stock that results in a
reduction in the proportionate interest in Adelphia (taking into account any
actual ownership of common stock of Adelphia and any stock constructively
owned) of a holder whose relative stock interest in Adelphia is minimal should
be regarded as a meaningful reduction in the holder's stock interest in
Adelphia.
If a redemption of convertible preferred stock for cash is not treated as a
distribution taxable as a dividend, the redemption will result in capital gain
or loss equal to the difference between the amount of cash received and the
holder's adjusted tax basis in the convertible preferred stock redeemed, except
to the extent that the redemption price includes dividends that have been
declared by Adelphia prior to the redemption. The capital gain or loss will be
long term if the convertible preferred stock were held longer than 12 months.
If any amount of cash were received by United States Holders in discharge of
dividend arrearages on the convertible preferred stock, the redemption would be
treated as a distribution on the convertible preferred stock to the extent of
the dividends in arrears. Such a distribution would be taxed as a dividend to
the extent of Adelphia's current and accumulated earnings and profits at the
time (in accordance with the treatment described above for distributions).
If a redemption of convertible preferred stock is treated as a distribution
that is taxable as a dividend, the amount of the distribution will be measured
by the amount of cash received by the holder. The holder's adjusted tax basis
in the redeemed convertible preferred stock will be transferred to any
remaining stock holdings in Adelphia, subject to reduction or possible gain
recognition under section 1059 of the Code in an amount equal to the nontaxed
portion of such dividend. If the holder does not retain any actual stock
ownership in Adelphia (having a stock interest only constructively), the holder
may lose the benefit of such holder's adjusted tax basis in the convertible
preferred stock.
Under Section 305(c) of the Code and the applicable regulations thereunder,
if the redemption price of convertible preferred stock exceeds its issue price,
the difference ("redemption premium") may be taxable as a constructive
distribution of additional convertible preferred stock to the United States
Holder (treated as a dividend to the extent of Adelphia's current and
accumulated earnings and profits and otherwise subject to the treatment
described above for distributions) over a certain period. Because the terms of
the convertible preferred stock provide for optional rights of redemption by
Adelphia at prices in excess of the issue price, stockholders could be required
to recognize such redemption premium under an economic accrual method if, based
on all of the facts and circumstances, the optional redemptions are more likely
than not to occur. If the convertible preferred stock may be redeemed at more
than one time, the time and price at which such redemption is most likely to
occur must be determined based on all of the facts and circumstances.
Applicable regulations provide a "safe harbor" under which a right to redeem
will not be treated as more likely than not to occur if (i) the issuer and the
United States Holder are not related within the meaning of the regulations;
(ii) there are no plans, arrangements, or agreements that effectively require
or are intended to compel the issuer to redeem the convertible preferred stock;
and (iii) exercise of the right to redeem would not reduce the yield of the
convertible preferred stock, as determined under the regulations. Regardless of
whether the optional redemptions are more than likely not to occur,
constructive dividend treatment will not result if the redemption premium does
not exceed a de minimis amount or is in the nature of a penalty for premature
redemption. Adelphia intends to take the position that the existence of
Adelphia's optional redemption rights does not result in a constructive
distribution to United States Holders of the convertible preferred stock.
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Conversion
No gain or loss generally will be recognized upon conversion of shares of
convertible preferred stock into shares of Class A common stock, except with
respect to any cash paid in lieu of fractional shares of Class A common stock.
However, under certain circumstances, a United States Holder of convertible
preferred stock may recognize gain or dividend income to the extent there are
dividends in arrears on such stock at the time of conversion into Class A
common stock. The tax basis of the Class A common stock received upon
conversion of shares of convertible preferred stock generally will be equal to
the tax basis of the shares of convertible preferred stock so converted and the
holding period of the Class A common stock generally will include the holding
period of the shares of convertible preferred stock converted. However, the tax
basis of any Class A common stock received on conversion and treated as a
dividend will be equal to its fair market value on the date of the distribution
and the holding period of such Class A common stock will commence on the day
after its receipt.
United States Holders of convertible preferred stock may be deemed to have
received a constructive distribution of stock that is taxable as a dividend
when the conversion ratio is adjusted to reflect a cash or property
distribution with respect to stock into which such preferred stock is
convertible. An adjustment to the conversion price made pursuant to a bona fide
reasonable adjustment formula which has the effect of preventing the dilution
of the interest of the United States Holders, however, generally will not be
considered to result in a constructive distribution of stock. Certain of the
possible adjustments provided in the convertible preferred stock, including,
those in connection with the special conversion rights applicable to the
convertible preferred stock may not qualify as being pursuant to a bona fide
reasonable adjustment formula. If a nonqualifying adjustment were made, the
United States Holders of convertible preferred stock might be deemed to have
received a taxable stock dividend (or if certain adjustments are not made). In
such case, the amount of the dividend to be included in income would be the
fair market value of the additional Class A common stock to which United States
Holders of convertible preferred stock would be entitled by reason of the
reduction in the conversion price.
Sale Or Other Taxable Disposition
A United States Holder who sells or otherwise disposes of convertible
preferred stock or Class A common stock in a taxable transaction will recognize
capital gain or loss equal to the difference between the amount of cash and the
fair market value of property received and the United States Holder's adjusted
tax basis in the convertible preferred stock or Class A common stock disposed.
Such gain or loss would be long-term capital gain or loss if the holding period
exceeded one year. For corporate taxpayers, long-term capital gains are taxed
at the same rate as ordinary income. For individual taxpayers, net capital
gains (the excess of the taxpayer's net long-term capital gains over this net
short-term capital losses) will be subject to a maximum tax rate of 20%, if
such stock were held for more than 12 months.
Backup Withholding
A United States Holder of convertible preferred stock or Class A common
stock will be subject to backup withholding at the rate of 31% with respect to
"reportable payments," which include dividends on, and gross proceeds of a sale
of, the convertible preferred stock or Class A common stock unless (i) such
United States Holder is a corporation or comes within other exempt categories
and, when required, demonstrates this fact, or (ii) provides a correct taxpayer
identification number,
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<PAGE>
certifies as to no loss of exemption from backup withholding and otherwise
complies with applicable requirements of the backup withholding rules. A United
States Holder of convertible preferred stock or Class A common stock who does
not provide Adelphia with his or her correct taxpayer identification number may
be subject to penalties imposed by the IRS. Amounts paid as backup withholding
do not constitute an additional tax and will be credited against the United
States Holders' federal income tax liabilities, so long as the required
information is provided to the IRS. Adelphia will report to United States
Holders of convertible preferred stock and Class A common stock and to the IRS
the amount of any "reportable payments" for each calendar year and the amount
of tax withheld, if any, with respect to payments on the convertible preferred
stock or Class A common stock.
Non-United States Holders
Dividends
Generally, any dividend paid to a Non-United States Holder of convertible
preferred stock or Class A common stock will, except as described below, be
subject to withholding of United States federal income tax at a 30% rate or
such lower rate as may be specified by an applicable income tax treaty, unless
the dividend is effectively connected with the conduct of a trade or business
of the Non-United States Holder within the United States and, where a tax
treaty applies, is attributable to a United States permanent establishment
maintained by the Non-United States Holder. If the dividend is so effectively
connected with the conduct of a trade or business of the Non-United States
Holder within the United States, the dividend would be subject to United States
federal income tax on a net income basis at applicable graduated individual or
corporate rates and would be exempt from the 30% withholding tax described
above. A Non-United States Holder may claim exemption from withholding under
the effectively connected income exception by filing Form 4224 (Statement
Claiming Exemption from Withholding of Tax on Income Effectively Connected with
the Conduct of Business in the United States) with Adelphia or its paying
agent. Under the recently finalized Treasury regulations (the "Final
Regulations"), Non-United States Holders will generally be required to provide
Form W-8 in lieu of Form 4224, although alternative documentation may be
applicable in certain situations. To the extent a distribution exceeds current
and accumulated earnings and profits, it will be treated first as a return of
the holder's basis to the extent thereof, and then as a gain from the sale of a
capital asset. Any withholding tax on distributions in excess of Adelphia's
current and accumulated earnings and profits is refundable to the Non-United
States Holder upon the filing of an appropriate claim for refund with the
United States IRS.
In addition to the graduated rate described above, dividends received by a
corporate Non-United States Holder that are effectively connected with a United
States trade or business may, under certain circumstances, be subject to an
additional "branch profits tax" at a 30% rate or such lower rate as may be
specified by an applicable income tax treaty.
Under current United States Treasury regulations, dividends paid to an
address outside the United States are presumed to be paid to a resident of such
country (unless the payor has knowledge to the contrary) for purposes of the
withholding discussed above, and, under the current interpretation
of United States Treasury regulations, for purposes of determining the
applicability of a tax treaty rate. Under the Final Regulations, however, a
Non-United States Holder of convertible preferred stock or Class A common stock
who wishes to claim the benefit or an applicable treaty rate (and to avoid
backup withholding as discussed below) for dividends paid after December 31,
1999, will be required to satisfy applicable certification and other
requirements.
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A Non-United States Holder of convertible preferred stock or Class A common
stock that is eligible for a reduced rate of United States withholding tax
pursuant to a tax treaty may obtain a refund of any excess amounts currently
withheld by filing an appropriate claim for refund with the United States IRS.
Disposition Of Convertible Preferred Stock Or Class A Common Stock
A Non-United States Holder generally will not be subject to United States
federal income tax on any gain recognized upon the sale or other disposition
of convertible preferred stock or Class A common stock unless (i) such gain is
effectively connected with a United States trade or business of the Non-United
States Holder and, if a tax treaty applies, attributable to a United States
permanent establishment maintained by the Non-United States Holder; (ii) the
Non-United States Holder is an individual who is a former citizen of the
United States who lost such citizenship within the preceding ten-year period
(or former long-term resident of the United States who relinquished United
States residency on or after February 6, 1995) whose loss of citizenship or
permanent residency had as one of its principal purposes the avoidance of
United States tax; (iii) in the case of certain Non-United States Holders who
are non-resident alien individuals and hold the convertible preferred stock or
Class A common stock as a capital asset, such individuals are present in the
United States for 183 days or more days in the taxable year of disposition and
either (a) the individual has a "tax home" in the United States for United
States federal income tax purposes or (b) the gain is attributable to an
office or other fixed place of business maintained by the individual in the
United States; or (iv) Adelphia is or has been a "United States real property
holding corporation" ("USRPHC") within the meaning of section 897(c)(2) of the
Code at any time within the shorter of the five-year period preceding such
disposition or such Non-United States Holder's holding period (the "Required
Holding Period"), and, provided that the convertible preferred stock or Class
A common stock is "regularly traded on an established securities market" for
tax purposes, the Non-United States Holder held, directly or indirectly,
convertible preferred stock or Class A common stock with a fair market value
in excess of 5% of the fair market value of all Adelphia convertible preferred
stock or Class A common stock outstanding at any time during Required Holding
Period.
If an individual Non-United States Holder falls under clauses (i) or (ii)
above, the holder will be taxed on the net gain derived from the sale under
regular United States federal income tax rates. If an individual Non-United
States Holder falls under clause (iii) above, the holder generally will be
subject to a flat 30% tax on the gain derived from the sale which may be
offset by United States capital losses (notwithstanding the fact that the
holder is not considered a resident of the United States). If a Non-United
States Holder that is a foreign corporation falls under clause (i) above, it
will be taxed on its gain under regular graduated United States federal income
tax rates and, in addition, will under certain circumstances be subject to the
branch profits tax equal to 30% of its "effectively connected earning and
profits" within the meaning of the Code for the taxable year, as adjusted for
certain items, unless it qualifies for a lower rate under an applicable income
tax treaty.
Although not free from doubt, Adelphia believes that it is not and has not
been for the last five years a USRPHC for federal income tax purposes.
Although Adelphia believes that the convertible preferred stock or Class A
common stock will be treated as "regularly traded on an established securities
market," if the convertible preferred stock or Class A common stock were not
so treated, on a sale or other disposition of such stock, the transferee of
such stock would be required to withhold 10% of the proceeds of such
disposition, unless Adelphia were to provide a certification that it is not
(and has not been during a specific period) a USRPHC or another exemption
applied.
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Redemption and Conversion Of Convertible Preferred Stock
A Non-United States Holder generally will not recognize any gain or loss for
United States federal income tax purposes upon conversion of convertible
preferred stock into Class A common stock, except with respect to any cash paid
in lieu of fractional shares of Class A common stock, which would be subject to
the rules described under "Disposition of Convertible Preferred Stock or Class
A Common Stock." A redemption of convertible preferred stock for cash will be
an event which will constitute either (i) a dividend to the extent of
Adelphia's current and accumulated earnings and profits, or (ii) a sale or
exchange. See "United States Holders--Optional Redemption For Class A Common
Stock Or Cash." To the extent the redemption is treated as a dividend, the Non-
United States Holder's tax consequences are described in "Non-United States
Holders--Dividends" and to the extent the redemption is treated as a sale or
exchange, the Non-United States Holder's tax consequences are described in
"Non-United States Holders--Disposition Of Convertible Preferred Stock Or Class
A Common Stock."
Information Reporting And Backup Withholding
Adelphia must report annually to the IRS and to each Non-United States
Holder the amount of dividends paid to such holder and the amount of any tax
withheld. These information reporting requirements apply regardless of whether
withholding is required. Copies of the information returns reporting such
dividends and withholding may also be made available to the tax authorities in
the country in which the Non-United States Holder resides under the provisions
of an applicable income tax treaty.
Under current law, backup withholding at the rate of 31% generally will not
apply to dividends paid to a Non-United States Holder at an address outside the
United States (unless the payor has knowledge that the payee is a U.S. person).
Under the Final Regulations, however, a Non-United States Holder will be
subject to backup withholding unless applicable certification requirements are
met.
Payment of the proceeds of a sale of convertible preferred stock or Class A
common stock by or through a United States office of a broker is subject to
both backup withholding and information reporting unless the beneficial owner
certifies under penalties of perjury that it is a Non-United States Holder or
otherwise establishes an exemption. In general, backup withholding and
information reporting will not apply to a payment of the proceeds of a sale of
convertible preferred stock or Class A common stock by or through a foreign
office of a broker. If, however, such broker is, for United States federal
income tax purposes a United States person, a controlled foreign corporation,
or a foreign person that derives 50% or more of its gross income for a certain
period from the conduct of a trade or business in the United States, or, for
taxable years beginning after December 31, 1999, a foreign partnership, in
which one or more United States persons, in the aggregate, own more than 50% of
the income or capital interests in the partnership or if the partnership is
engaged in a trade or business in the United States, such payments will be
subject to information reporting, but not backup withholding, unless (1) such
broker has documentary evidence in its records that the beneficial owner is a
Non-United States Holder and certain other conditions are met, or (2) the
beneficial owner otherwise establishes an exemption.
Any amounts withheld under the backup withholding rules may be allowed as a
refund or a credit against such holder's United States federal income tax
liability provided the required information is furnished to the IRS.
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Federal Estate Taxes
Convertible preferred stock or Class A common stock held (or treated as
owned) by an individual Non-United States Holder at the time of death will be
included in such holder's gross estate for United States federal estate tax
purposes and may be subject to United States federal estate tax, unless an
applicable estate tax treaty provides otherwise.
THE FOREGOING DISCUSSION IS FOR GENERAL INFORMATION AND IS NOT TAX ADVICE.
ACCORDINGLY, EACH PROSPECTIVE HOLDER OF CONVERTIBLE PREFERRED STOCK OR CLASS A
COMMON STOCK SHOULD CONSULT ITS TAX ADVISOR AS TO THE PARTICULAR TAX
CONSEQUENCES TO IT OF THE CONVERTIBLE PREFERRED STOCK AND CLASS A COMMON STOCK,
INCLUDING THE APPLICABILITY AND EFFECT OF ANY STATE, LOCAL OR FOREIGN INCOME
TAX LAWS, AND ANY RECENT OR PROSPECTIVE CHANGES IN APPLICABLE TAX LAWS.
CLASS A COMMON STOCK OFFERING
On April 23, 1999, Adelphia entered into an agreement to sell, and on April
28, 1999, Adelphia expects to consummate the Common Stock Offering of, 8.0
million shares of Class A common stock. The Class A common stock is being
offered by delivery of a prospectus supplement for the Common Stock Offering.
No requirement exists that we sell Class A common stock in order to consummate
the sale of convertible preferred stock in the Convertible Preferred Stock
Offering.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, as well as proxy statements
and other information with the SEC. You may read and copy any document we file
with the SEC at the SEC's Public Reference Room at 450 Fifth Street, N.W.,
Washington, D.C. 20549 or at its Regional Offices in Chicago, Illinois or New
York, New York. You may obtain further information about the operation of the
Public Reference Room by calling the SEC at 1-800-SEC-0330. Our SEC filings are
also available to the public over the Internet at the SEC's web site at
http://www.sec.gov, which contains reports, proxy statements and other
information regarding registrants like us that file electronically with the
SEC.
This prospectus supplement is part of a registration statement on Form S-3
filed by us with the SEC under the Securities Act. As permitted by SEC rules,
this prospectus supplement does not contain all of the information included in
the registration statement and the accompanying exhibits filed with the SEC.
You may refer to the registration statement and its exhibits for more
information.
The SEC allows us to "incorporate by reference" into this prospectus
supplement the information we file with the SEC. This means that we can
disclose important information to you by referring you to those documents. The
information incorporated by reference is considered to be part of this
prospectus supplement. If we subsequently file updating or superseding
information in a document that is incorporated by reference into this
prospectus supplement, the subsequent information will also become part of this
prospectus supplement and will supersede the earlier information.
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<PAGE>
We are incorporating by reference the following documents that we have
filed with the SEC:
. our Annual Report on Form 10-K for the 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, as amended by
Adelphia's Form 10-K/A dated July 27, 1998;
. our Quarterly Reports on Form 10-Q for the quarters ended June 30, 1998,
September 30, 1998 and December 31, 1998 (collectively, the "Form
10-Qs");
. our Current Reports on Form 8-K for the events dated June 29, 1998,
July 2, 1998, August 3, 1998, August 18, 1998, September 10, 1998,
November 9, 1998, Novermber 12, 1998, December 23, 1998, January 11,
1999, February 22, 1999, February 23, 1999, March 5, 1999, March 30,
1999, March 31, 1999, April 9, 1999, April 19, 1999, April 21, 1999 and
April 23, 1999.
. our definitive proxy statement dated September 11, 1998 with respect to
the Annual Meeting of Stockholders held on October 6, 1998; and
. the description of our Class A common stock contained in our
registration statement filed with the SEC under Section 12 of the
Exchange Act and subsequent amendments and reports filed to update such
description.
We are also incorporating by reference into this prospectus supplement all
of our future filings with the SEC under Sections 13(a), 13(c), 14 or 15(d) of
the Exchange Act until the Convertible Preferred Stock Offering has been
completed.
You may obtain a copy of any of our filings which are incorporated by
reference, at no cost, by writing to or telephoning us at the following
address:
Adelphia Communications Corporation
Main at Water Street
Coudersport, Pennsylvania 16915
Attention: Investor Relations
Telephone: (814) 274-9830
You should rely only on the information provided in this prospectus
supplement or incorporated by reference. We have not authorized anyone to
provide you with different information. You should not assume that the
information in this prospectus supplement is accurate as of any date other
than the date on the first page of the prospectus supplement. We are not
making this offer of securities in any state or country in which the offer or
sale is not permitted.
LEGAL MATTERS
The validity of the convertible preferred stock and the Class A common
stock into which it may be converted will be passed upon for us by Buchanan
Ingersoll Professional Corporation, Pittsburgh, Pennsylvania. Attorneys of
that firm who are representing us in the Convertible Preferred Stock Offering
own an aggregate of 2,300 shares of our Class A common stock and 15,100 shares
of Hyperion's Class A common stock. The validity of the convertible preferred
stock and the Class A common stock into which it may be converted will be
passed upon on behalf of the underwriters by Latham & Watkins, New York, New
York.
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EXPERTS
The consolidated financial statements 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 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
supplement by reference from Adelphia'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.
The consolidated financial statements of FrontierVision Partners, L.P. and
subsidiaries as of December 31, 1998 and 1997, and for each of the years in the
three year period ended December 31, 1998, have been incorporated by reference
herein and in the registration statement from Adelphia's Current Report on Form
8-K filed April 19, 1999, in reliance upon the report of KPMG LLP, independent
certified public accountants, incorporated by reference herein, and upon the
authority of said firm as experts in accounting and auditing.
The consolidated financial statements of Harron Communications Corp. and
subsidiaries as of December 31, 1998 and 1997 and for each of the three years
in the period ended December 31, 1998 incorporated in this prospectus
supplement by reference from Adelphia's Current Report on Form 8-K filed April
19, 1999 have been audited by Deloitte & Touche LLP, independent auditors, as
stated in their report, which is incorporated herein by reference, and has been
so incorporated in reliance upon the report of such firm given upon their
authority as experts in accounting and auditing.
The consolidated financial statements of Century Communications Corp. and
subsidiaries as of May 31, 1998 and 1997 and for each of the three years in the
period ended May 31, 1998 incorporated in this prospectus supplement by
reference from Adelphia's Current Report on Form 8-K filed on April 19, 1999
have been audited by Deloitte & Touche LLP, independent auditors as stated in
their report, which is incorporated herein by reference, and has been so
incorporated in reliance upon the report of such firm given upon their
authority as experts in accounting and auditing.
S-43
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Prospectus
ADELPHIA COMMUNICATIONS CORPORATION
Debt Securities
Preferred Stock
Class A Common Stock
Class B Common Stock
This prospectus relates to:
. Adelphia Communications Corporation's debentures, notes and other debt
securities in one or more series which may be senior debt securities or
subordinated debt securities,
. shares of preferred stock of Adelphia issuable in series designated by the
board of directors of Adelphia,
. shares of Class A common stock, and
. shares of Class B common stock, which may be offered in combination or
separately from time to time by Adelphia.
The aggregate initial offering price of all of the securities which may be
sold pursuant to this prospectus will not exceed U.S. $1,761,000,000, or its
equivalent based on the applicable exchange rate at the time of issue in one or
more foreign currencies or currency units as shall be designated by Adelphia.
The Class A common stock is quoted on the Nasdaq National Market. The Class
A common stock's ticker symbol is "ADLAC." On April 19, 1999, the closing sale
price on the Nasdaq National Market of a single share of Class A common stock
was $59.969.
Our common stock includes Class A and Class B common stock. The rights of
holders of the Class A common stock and Class B common stock differ with
respect to certain aspects of dividends, liquidations and voting. The Class A
common stock has 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.
You should carefully review "Risk Factors" beginning on page 4 for a
discussion of things you should consider when investing in securities of
Adelphia.
----------------
Neither the SEC nor any state securities commission has approved or
disapproved of these securities or passed upon the adequacy or accuracy of this
prospectus. Any representation to the contrary is a criminal offense.
This Prospectus May Not Be Used To Consummate Sales Of Securities Unless
Accompanied By A Prospectus Supplement.
----------------
The date of this Prospectus is April 20, 1999.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
Adelphia................................................................... 2
Risk Factors............................................................... 4
Ratio of Earnings to Combined Fixed Charges and Preferred Stock Dividends.. 16
Dilution................................................................... 17
Use of Proceeds............................................................ 17
Description of Debt Securities............................................. 18
Description of Capital Stock............................................... 31
Book Entry Issuance........................................................ 35
Plan of Distribution....................................................... 37
Where You Can Find More Information........................................ 39
Legal Matters.............................................................. 40
Experts.................................................................... 41
</TABLE>
<PAGE>
ADELPHIA
Adelphia is a leader in the telecommunications industry with cable
television and local telephone operations. Our operations consist of providing
telecommunications services primarily over our networks, which are commonly
referred to as broadband networks because they can transmit large quantities of
voice, video and data by way of digital or analog signals. As of December 31,
1998, we owned or managed cable television systems with broadband networks that
passed in front of 3,252,830 homes and served 2,304,325 basic subscribers. John
J. Rigas, the Chairman, President, Chief Executive Officer and founder of
Adelphia, has owned and operated cable television systems since 1952.
We own cable systems in twelve states which are organized into seven
regional clusters: Western New York, Virginia, Western Pennsylvania, New
England, Eastern Pennsylvania, Ohio and New Jersey. These systems are located
primarily in suburban areas of large and medium-sized cities within the 50
largest television markets. As of December 31, 1998, the broadband networks for
these systems passed in front of 2,131,978 homes and served 1,528,307 basic
subscribers.
We also provide management and consulting services to other partnerships and
corporations engaged in the ownership and operation of cable television
systems. John J. Rigas and members of his immediate family, including entities
they own or control, have substantial ownership interests in these partnerships
and corporations. As of December 31, 1998, the broadband networks for cable
systems owned by these Rigas family partnerships and corporations passed in
front of 177,250 homes and served 134,443 basic subscribers.
We also own a 50% voting interest and nonvoting preferred limited
partnership interests in Olympus Communications, L.P. Olympus is a joint
venture limited partnership that operates a large cable system in Florida. As
of December 31, 1998, the broadband networks for this system passed in front of
943,602 homes and served 641,575 basic subscribers.
Through our subsidiary, Hyperion Telecommunications, Inc., we own and
operate a large competitive local exchange carrier in the eastern United
States. This means that Hyperion provides its customers with alternatives to
the incumbent local telephone company for local telephone and
telecommunications services. Hyperion's telephone operations are referred to as
being facilities based, which means it generally owns the local
telecommunications networks and facilities it uses to deliver these services,
rather than leasing or renting the use of another party's networks to do so. As
of December 31, 1998, Hyperion managed and operated 22 telecommunications
networks, including two under construction, serving 46 markets. Hyperion's
Class A common stock is listed on the Nasdaq National Market under the symbol
"HYPT."
Our executive offices are located at Main at Water Street, Coudersport,
Pennsylvania 16915, and our telephone number is (814) 274-9830.
2
<PAGE>
Recent Developments
Please see the applicable prospectus supplement and Adelphia's recent public
filings for recent developments.
3
<PAGE>
RISK FACTORS
Before you invest in Adelphia's securities, you should be aware that there
are various risks, including those described below. You should consider
carefully these risk factors together with all of the other information
included in this prospectus before you decide to purchase any securities of
Adelphia.
High Level Of
Indebtedness
Adelphia has a substantial amount of debt. We
As of December 31, borrowed this money to purchase and to expand our
1998, we owed cable systems and other operations and, to a lesser
approximately $3.5 extent, for investments and loans to our
billion. Our high level affiliates. At December 31, 1998, our indebtedness
of indebtedness can have totaled approximately $3,527,452,000. This included
important adverse approximately:
consequences to us and
to you.
. $1,810,212,000 of Adelphia Parent Company
public debt. When we use the term "Adelphia
Parent Company" in this prospectus, we are
referring only to Adelphia Communications
Corporation as a parent holding company
entity, and not to its subsidiaries;
. $1,246,456,000 of debt owed by our
subsidiaries to banks, other financial
institutions and other persons; and
. $470,784,000 of public debt owed by Hyperion.
Debt service consumes Our high level of indebtedness can have important
a substantial portion of adverse consequences to us and to you. It requires
the cash we generate. that we spend a substantial portion of the cash we
This could affect our get from our business to repay the principal and
ability to invest in our interest on these debts. Otherwise, we could use
business in the future these funds for general corporate purposes or for
as well as to react to capital improvements. Our ability to obtain new
changes in our industry loans for working capital, capital expenditures,
or economic downturns. acquisitions or capital improvements may be limited
by our current level of debt. In addition, having
such a high level of debt could limit our ability
to react to changes in our industry and to economic
conditions generally. In addition to our debt, at
December 31, 1998, the Adelphia Parent Company also
had approximately $148,191,000 and Hyperion had
approximately $228,674,000 of redeemable
exchangeable preferred stock which contain payment
obligations that are
4
<PAGE>
similar to our debt obligations in these respects.
Olympus also has a substantial amount of debt.
Approximately 32% of Our debt comes due at various times up to the year
this debt must be paid 2009, including an aggregate of approximately
by April 1, 2003 and all $1,126,169,000 which, as of December 31, 1998, we
of it must be paid by must pay by April 1, 2003.
2009.
Our Business Requires Our business requires substantial additional
Substantial Additional financing on a continuing basis for capital
Financing And If We Do expenditures and other purposes including:
Not Obtain That
Financing We May Not Be
Able To Upgrade Our . constructing and upgrading our plant and
Plant, Offer Services, networks--some of these upgrades we must make
Make Payments When Due to comply with the requirements of local
Or Refinance Existing cable franchise authorities;
Debt.
. offering new services;
. scheduled principal and interest payments;
. refinancing existing debt; and
. acquisitions and investments.
There can be no guarantee that we will be able to
issue additional debt or sell stock or other
additional equity on satisfactory terms, or at all,
to meet our future financing needs.
We Have Had Large Losses
And Negative The Total Convertible Preferred Stock, Common Stock
Stockholders' Equity And and Other Stockholders' Equity (Deficiency) at
We Expect This To December 31, 1998 was a deficit of approximately
Continue $1,021,746,000. Our continuing net losses, which
are mainly due to our high levels of depreciation
and amortization and interest expense, have created
this deficiency. Our recent net losses applicable
to our common stockholders were approximately as
follows for the periods specified:
. fiscal year ended March 31, 1996--
$119,894,000;
. fiscal year ended March 31, 1997--
$130,642,000;
. fiscal year ended March 31, 1998--
$192,729,000; and
. nine months ended December 31, 1998--
$135,848,000.
5
<PAGE>
We expect to continue to incur large net losses for
the next several years.
Our earnings have Our earnings could not pay for our combined fixed
been insufficient to pay charges and preferred stock dividends during these
for our fixed charges periods by the amounts set forth in the table
and preferred stock below, although combined fixed charges and
dividends. preferred stock dividends included substantial non-
cash charges for depreciation, amortization and
non-cash interest expense on some of our debts and
the non-cash expense of Hyperion's preferred stock
dividends:
<TABLE>
<CAPTION>
Earnings Non-Cash
Deficiency Charges
------------ ------------
<S> <C> <C>
. fiscal year ended
March 31, 1996 $ 78,189,000 $127,319,000
. fiscal year ended
March 31, 1997 $ 61,848,000 $165,426,000
. fiscal year ended
March 31, 1998 $113,941,000 $195,153,000
. nine months ended
December 31, 1998 $116,899,000 $186,022,000
</TABLE>
Historically, the cash we generate from our
If we could not operating activities and borrowings has been
refinance our debt or sufficient to meet our requirements for debt
obtain new loans, we service, working capital, capital expenditures, and
would likely have to investments in and advances to our affiliates, and
consider various options we have depended on getting additional borrowings
such as the sale of to meet our liquidity requirements. Although in the
additional equity or past we have been able both to refinance our debt
some of our assets to and to obtain new debt, there can be no guarantee
meet the principal and that we will be able to continue to do so in the
interest payments we future or that the cost to us or the other terms
owe, negotiate with our which would affect us would be as favorable to us
lenders to restructure as our current loans and credit agreements. We
existing loans or believe that our business will continue to generate
explore other options cash and that we will be able to obtain new loans
available under to meet our cash needs. However, the covenants in
applicable laws the indentures and credit agreements for our
including those under current debt limit our ability to borrow more
reorganization or money.
bankruptcy laws. We can
not guarantee that any
options available to us
would enable us to repay
our debt in full.
6
<PAGE>
Competition
Our cable television The telecommunications services provided by
business is subject to Adelphia are subject to strong competition and
strong competition from potential competition from various sources. Our
several sources which cable television systems compete with other means
could adversely affect of distributing video to home televisions such as
revenue or revenue Direct Broadcast Satellite systems, commonly known
growth. as DBS systems, and Multichannel Multipoint
Distribution systems. Some of the regional Bell
telephone operating companies 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 regional Bell
operating companies and local telephone companies
have facilities which are capable of delivering
cable television service. The equipment which
telephone companies use in providing local exchange
service may give them competitive advantages over
us in distributing video to home televisions. The
regional Bell operating companies and other
potential competitors have much greater resources
than Adelphia and would constitute formidable
competition for our cable television business. We
cannot predict either the extent to which
competition will continue to materialize or, if
such competition materializes, the extent of its
effect on our cable television business.
We also face competition from other communications
and entertainment media, including conventional
off-air television broadcasting services,
newspapers, movie theaters, live sporting events
and home video products. We cannot predict the
extent to which competition may affect us.
Hyperion's operations In each of the markets served by Hyperion's
are also subject to risk networks, the competitive local exchange carrier
because Hyperion services offered by Hyperion compete principally
competes principally with the services offered by the incumbent local
with established local telephone exchange carrier company serving that
telephone carriers that area. Local telephone companies have long-standing
have long-standing relationships with their customers, have the
utility relationships potential to subsidize competitive services from
with their customers and monopoly service revenues, and benefit from
pricing flexibility for favorable state and federal regulations. The merger
local telephone of Bell Atlantic and NYNEX created a very large
services. company whose combined territory covers a
substantial portion of Hyperion's markets. Other
combinations are occurring in the industry, which
may have a material adverse effect on Hyperion and
us.
7
<PAGE>
We believe that local telephone companies will gain
increased pricing flexibility from regulators as
competition increases. Hyperion's operating results
and cash flow could be materially and adversely
affected by actions by regulators, including
permitting the incumbent local telephone companies
in Hyperion's markets to do the following:
. lower their rates substantially;
. engage in aggressive volume and term discount
pricing practices for their customers; or
. charge excessive fees to Hyperion for
interconnection to the incumbent local
telephone company's networks.
If the regional Bell The regional Bell operating companies can now
telephone companies obtain regulatory approval to offer long distance
could get regulatory services if they comply with the interconnection
approval to offer long requirements of the federal Telecommunications Act
distance service in of 1996. To date, the FCC has denied the requests
competition with for approval filed by regional Bell operating
Hyperion's significant companies in Hyperion's operating areas. However,
customers, some of an approval of such a request could result in
Hyperion's major decreased market share for the major long distance
customers could lose carriers which are among Hyperion's significant
market share. customers. This could have a material adverse
effect on Hyperion.
The regional Bell
telephone companies Some of the Regional Bell operating companies have
continue to seek other also recently filed petitions with the FCC
regulatory approvals requesting waivers of other obligations under the
that could significantly federal Telecommunications Act of 1996. These
enhance their involve services Hyperion also provides such as
competitive position high speed data, long distance, and services to
against Hyperion. Internet Service Providers. If the FCC grants the
regional Bell operating companies' petitions, this
could have a material adverse effect on Hyperion.
Potential competitors Potential competitors for Hyperion include other
to Hyperion's competitive local exchange carriers, incumbent
telecommunications local telephone companies which are not subject to
services include the regional Bell operating companies' restrictions on
regional Bell telephone offering long distance service, AT&T, MCIWorldCom,
companies, AT&T, Sprint and other long distance carriers, cable
MCIWorldCom and Sprint, television companies, electric utilities, microwave
electric utilities and carriers, wireless telecommunications providers and
other companies that private networks built by large end users. Both
have advantages over AT&T and MCIWorldCom have announced that they have
Hyperion. begun to offer local telephone services in some
areas of the country, and AT&T recently announced a
new wireless technology
8
<PAGE>
for providing local telephone service. AT&T and
Tele-Communications, Inc. have merged. Although
Hyperion has good relationships with the long
distance carriers, they could 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 local telephone
companies, have financial, personnel and other
resources substantially greater than those of
Hyperion, as well as other competitive advantages
over Hyperion.
We Are Subject To
Extensive Regulation
Our cable television The cable television industry and the provision of
and telecommunications local telephone exchange services are subject to
businesses are heavily extensive regulation at the federal, state and
regulated as to rates we local levels, and many aspects of such regulation
can charge and other are currently the subject of judicial proceedings
matters. This regulation and administrative or legislative proposals. In
could limit our ability particular, the FCC adopted regulations that limit
to increase rates, cause our ability to set and increase rates for our basic
us to decrease then and cable programming service packages and for the
current rates or require provision of cable television-related equipment.
us to refund previously The law permits certified local franchising
collected fees. 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 cable television industry is subject to state
and local regulations and we must comply with rules
of the local franchising authorities to retain and
renew our 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.
9
<PAGE>
The federal
Telecommunications Act The federal Telecommunications Act of 1996
of 1996 may have a substantially changed federal, state and local laws
significant impact on and regulations governing our cable television and
our cable television and telecommunications businesses. This law could
telephone businesses. materially affect the growth and operation of the
cable television industry and the cable services we
provide. Although this legislation may lessen
regulatory burdens, the cable television industry
may be subject to new competition as a result.
There are numerous rulemakings that have been and
continue to be undertaken by the FCC which will
interpret and implement the provisions of this law.
Furthermore, portions of this law have been, and
likely other portions will be, challenged in the
courts. We cannot predict the outcome of such
rulemakings or lawsuits or the shortand long-term
effect, financial or otherwise, of this law and FCC
rulemakings on us.
Similarly, the Telecommunications Act of 1996
removes entry barriers for all companies and could
increase substantially the number of competitors
offering comparable services in Hyperion's markets
or potential markets. Furthermore, we cannot
guarantee 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
Hyperion.
Unequal Voting Rights Of
Stockholders Adelphia has two classes of common stock--Class A
which carries one vote per share and Class B which
carries ten votes per share. Under our Certificate
of Incorporation, the Class A shares elect only one
of our directors.
Control Of Voting Power
By The Rigas Family
As of April 1, 1999, the Rigas family beneficially
The Rigas family can owned shares representing about 48% of the total
control stockholder number of outstanding shares of both classes of
decisions on very Adelphia's common stock and about 81% of the total
important matters. voting power of Adelphia's shares. The public holds
a majority of the outstanding Class A shares,
although the Rigas family also owns about 36% of
those shares as of April 1, 1999. The Rigas family
owns about 99% of Adelphia's Class B shares. The
Rigas family also owns shares of Adelphia's 8%
Series C Cumulative Convertible preferred stock
which, if converted, would increase its voting
power and beneficial ownership. As a result of the
Rigas family's stock ownership and an
10
<PAGE>
agreement among the Class B stockholders, members
of the Rigas family as of April 1, 1999 have the
power to elect seven of eight Adelphia directors,
and if they converted their Convertible preferred
stock might be able to elect all eight directors.
In addition, the Rigas family could control
stockholder decisions on other matters such as
amendments to our Certificate of Incorporation and
Bylaws, and mergers or other fundamental corporate
transactions.
There Are Potential John J. Rigas and the other executive officers of
Conflicts Of Interest Adelphia, including other members of the Rigas
Between Adelphia And The family, own other corporations and partnerships,
Rigas Family which are managed by us 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.
These activities could present a conflict of
interest with us, such as how much time our
executive officers devote to our business. In
addition, there have been and will continue to be
transactions between us and the executive officers
or the other entities they own or have affiliations
with. Our public debt indentures contain covenants
that place some restrictions on transactions
between us and our affiliates.
Holding Company
Structure And Potential The Adelphia Parent Company directly owns no
Impact Of Restrictive significant assets other than stock, partnership
Covenants In Subsidiary interests, equity and other interests in our
Debt Agreements subsidiaries and in other companies. This creates
risks regarding our ability to provide cash to the
Adelphia Parent Company to repay the interest and
principal which it owes, our ability to pay cash
dividends to our common stockholders in the future,
and the ability of our subsidiaries and other
companies to respond to changing business and
economic conditions and to get new loans.
The Adelphia Parent The public indentures, and the credit agreements
Company depends on its for bank and other financial institution loans, of
subsidiaries and other our subsidiaries and other companies restrict their
companies in which it ability and the ability of the companies they own
has investments, to fund to make payments to the Adelphia Parent Company.
its cash needs. These agreements also place other restrictions on
the borrower's ability to borrow new funds and
include requirements for the borrowers to remain in
11
<PAGE>
compliance with the loans. The ability of a
subsidiary or a company in which we have invested
to comply with debt restrictions may be affected by
events that are beyond our control. The breach of
any of these covenants could result in a default
which could result in all loans and other amounts
owed to its lenders, to be due and payable. Our
subsidiaries and companies in which we have
invested might not be able to repay in full the
accelerated loans.
It Is Unlikely You Will Adelphia has never declared or paid cash dividends
Receive A Return On Your on any of its common stock and has no intention of
Shares Through The doing so in the foreseeable future. As a result, it
Payment Of Cash is unlikely that you will receive a return on your
Dividends shares through the payment of cash dividends.
Future Sales Of
Outstanding Common Stock Sales of a substantial number of shares of Class A
Could Adversely Affect common stock or Class B common stock, including
The Market Price Of Our sales by any pledgees of such shares, could
Common Stock adversely affect the market price of our Class A
common stock and could impair our ability in the
future to raise capital through stock offerings.
Under various registration rights agreements or
arrangements, as of January 26, 1999, the Rigas
family has the right, subject to some limitations,
to require Adelphia to register substantially all
of the shares which it owns of the Class A common
stock--15,029,119 shares, Class B common stock--
10,736,544 shares and the equivalent number of
shares of Class A common stock into which they may
be converted, and convertible preferred stock--
80,000 shares and the 9,433,962 shares of Class A
common stock into which they may be converted.
Among others, Adelphia has registered or agreed to
register for public sale the following shares:
. for the Rigas family--up to 11,000,000 shares
of Class A common stock, 80,000 shares of
convertible preferred stock and the Class A
common stock issuable upon conversion of the
convertible preferred stock;
. for Booth American Company--3,571,428 shares
of Class A common stock owned as of March 24,
1998;
12
<PAGE>
. for the selling stockholders receiving shares
in the Verto Communications, Inc.
acquisition--2,561,024 shares of Class A
common stock;
. for a Rigas family partnership--4,000,000
shares of Class A common stock purchased by
it in connection with the January 14, 1999
equity offerings;
. for the owners of FrontierVision Partners,
L.P.--7,000,000 shares of Class A common
stock in connection with the FrontierVision
acquisition pending as of April 18, 1999, and
for the benefit of FrontierVision in certain
circumstances if that transaction does not
close, 1,000,000 shares of Class A common
stock; and
. in connection with the Century Communications
Corp. acquisition pending as of April 18,
1999, Adelphia expects to register
approximately 48,700,000 shares of Class A
common stock.
Approximately 14,904,000 shares of Class A common
stock and up to 80,000 shares of Convertible
preferred stock, including the underlying Class A
common stock, have been pledged in connection with
margin loans made to members of the Rigas family.
These pledgees could freely sell any shares
acquired upon a foreclosure.
Purchasers Of Our Common
Stock Will Incur Persons purchasing common stock will incur
Immediate Dilution immediate and substantial net tangible book value
dilution.
Adelphia's Acquisitions
And Expansion Could Because we are experiencing a period of rapid
Involve Operational expansion through acquisition, the operating
Risks complexity of Adelphia, as well as the
responsibilities of management personnel, have
increased. Our ability to manage such expansion
effectively will require us to continue to expand
and improve our operational and financial systems
and to expand, train and manage its employee base.
The Century, FrontierVision and Harron
Communications Corp. acquisitions, all pending as
of April 18, 1999, involve the acquisition of
companies that have previously operated
independently. We may not be able to integrate the
13
<PAGE>
operations of these companies without some level of
difficulty, such as the loss of key personnel.
There is no guarantee that we will be able to
realize the benefits expected from the integration
of operations from these transactions.
Because the cable systems in our pending
acquisitions are in the same industry as those of
Adelphia, the acquired systems will generally be
subject to the same risks as those of Adelphia,
such as those relating to competition, regulation,
year 2000 issues and technological developments.
Year 2000 Issues Present The year 2000 issue refers to the inability of
Risks To Our Business computerized systems and technologies to recognize
Operations In Several and process dates beyond December 31, 1999. This
Ways could present risks to the operation of our
business in several ways. Our computerized business
applications that could be adversely affected by
the year 2000 issue include:
. information processing and financial
reporting systems;
. customer billing systems;
. customer service systems;
. telecommunication transmission and reception
systems; and
. facility systems.
System failure or miscalculation could result in an
inability to process transactions, send invoices,
accept customer orders or provide customers with
products and services. Although we are evaluating
the impact of the year 2000 issue on our business
and are seeking to implement necessary solutions,
this process has not been completed.
There can be no assurance that the systems of other
companies on which our systems rely will be year
2000 ready or timely converted into systems
compatible with our systems. Our failure or a
third-party's failure to become year 2000 ready, or
our inability to become compatible with third
parties with which we have a material relationship,
may have a material adverse effect on us, including
significant service interruption or outages;
however, we cannot currently estimate the extent of
any such adverse effects.
14
<PAGE>
Forward-Looking
Statements In This The statements contained or incorporated by
Prospectus Are Subject reference in this prospectus that are not
To Risks And historical facts are "forward-looking statements"
Uncertainties and 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 set forth or incorporated by
reference in this prospectus, including
"Management's Discussion and Analysis of Financial
Condition and Results of Operations" in Adelphia's
1998 Annual Report on Form 10-K and in Adelphia's
Form 10-Qs, 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, us. These
risks and uncertainties include, but are not
limited to, uncertainties relating to economic
conditions, the availability and cost of capital,
acquisitions and divestitures, government and
regulatory policies, the pricing and availability
of equipment, materials, inventories and
programming, technological developments, year 2000
issues and changes in the competitive environment
in which we operate. 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.
15
<PAGE>
RATIO OF EARNINGS TO COMBINED FIXED CHARGES AND
PREFERRED STOCK DIVIDENDS
The following table sets forth the ratio of earnings to 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:
. earnings consist of loss before income taxes and extraordinary items
plus fixed charges, excluding capitalized interest, and
. fixed charges consist of interest, whether expensed or capitalized, plus
amortization of debt issuance costs plus the assumed interest component
of rent expense.
<TABLE>
<CAPTION>
Fiscal Year Ended March 31,
- ----------------------------------------------------------------------------------------------------------
1994 1995 1996 1997 1998
----- ----- ----- ----- -----
<S> <C> <C> <C> <C>
-- -- -- -- --
</TABLE>
For the years ended March 31, 1994, 1995, 1996, 1997 and 1998, and the nine
months ended December 31, 1998, Adelphia'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, $113,941,000, and
$116,899,000, respectively.
16
<PAGE>
DILUTION
The net tangible book value of Adelphia's common stock as of December 31,
1998 was a deficit of approximately $2,050,905,000 or negative $48.72 a share.
Net tangible book value per share represents the amount of Adelphia's
convertible preferred stock, common stock and other stockholders' equity
(deficiency), less intangible assets, divided by shares of Adelphia's common
stock outstanding. Purchasers of common stock will have an immediate dilution
of net tangible book value which, due to our having a net tangible book value
deficit, will exceed the purchase price per share. For example, in the January
14, 1999 equity offerings, the purchase price of a single share initially sold
to the public was $45.00 and the net tangible book value dilution per share was
$78.53 based on net tangible book value as of December 31, 1998. 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 by
Adelphia and the pro forma net tangible book value per share of the common
stock immediately after completion of such offering.
USE OF PROCEEDS
Unless otherwise specified in the applicable prospectus supplement, we
intend to apply the net proceeds from the sale of the securities to which this
prospectus relates to its general funds to be used for general corporate
purposes including capital expenditures, acquisitions, the reduction of
indebtedness, investments and other purposes. We may invest funds not required
immediately for such purposes in short-term obligations or may use them to
reduce the future level of our indebtedness.
17
<PAGE>
DESCRIPTION OF DEBT SECURITIES
The following description sets forth general terms and provisions of the
debt securities to which any prospectus supplement may relate. We will describe
the particular terms and provisions of the series of debt securities offered by
a prospectus supplement, and the extent to which such general terms and
provisions described below may apply thereto, in the prospectus supplement
relating to such series of debt securities.
The senior debt securities are to be issued in one or more series under an
indenture, as supplemented or amended from time to time between Adelphia and an
institution that we will name in the related prospectus supplement, as trustee.
For ease of reference, we will refer to the indenture relating to senior debt
securities as the senior indenture and we will refer to the trustee under that
indenture as the senior trustee. The subordinated debt securities are to be
issued in one or more series under an indenture, as supplemented or amended
from time to time, between Adelphia and an institution that we will name in the
related prospectus supplement, as trustee. For ease of reference, we will refer
to the indenture relating to subordinate debt securities as the subordinate
indenture and we will refer to the trustee under that indenture as the
subordinate trustee. This summary of certain terms and provisions of the debt
securities and the indentures is not necessarily complete, and we refer you to
the copy of the form of the indentures which are filed as an exhibit to the
registration statement of which this prospectus forms a part, and to the Trust
Indenture Act. Whenever we refer to particular defined terms of the indentures
in this Section or in a prospectus supplement, we are incorporating these
definitions into this prospectus or the prospectus supplement.
General
The debt securities will be issuable in one or more series pursuant to an
indenture supplemental to the applicable indenture or a resolution of
Adelphia's board of directors or a committee of the board. Unless otherwise
specified in a prospectus supplement, each series of senior debt securities
will rank pari passu in right of payment with all of Adelphia Parent Company's
other senior unsecured obligations. Each series of subordinated debt securities
will be subordinated and junior in right of payment to the extent and in the
manner set forth in the subordinated indenture and the supplemental indenture
relating to that debt. Except as otherwise provided in a prospectus supplement,
the indentures do not limit the incurrence or issuance of other secured or
unsecured debt of Adelphia, whether under the indentures, any other indenture
that Adelphia may enter into in the future or otherwise. For more information,
you should read the prospectus supplement relating to a particular offering of
securities.
The applicable prospectus supplement or prospectus supplements will describe
the following terms of each series of debt securities:
. the title of the debt securities and whether such series constitutes
senior debt securities or subordinated debt securities;
. any limit upon the aggregate principal amount of the debt securities;
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. the date or dates on which the principal of the debt securities is
payable or the method of that determination or the right, if any, of
Adelphia to defer payment of principal;
. the rate or rates, if any, at which the debt securities will bear
interest (including reset rates, if any, and the method by which any
such rate will be determined), the interest payment dates on which
interest will be payable and the right, if any, of Adelphia to defer any
interest payment;
. the place or places where, subject to the terms of the indenture as
described below under the caption "--Payment and Paying Agents," the
principal of and premium, if any, and interest, if any, on the debt
securities will be payable and where, subject to the terms of the
indenture as described below under the caption "--Denominations,
Registration and Transfer," Adelphia will maintain an office or agency
where debt securities may be presented for registration of transfer or
exchange and the place or places where notices and demands to or upon
Adelphia in respect of the debt securities and the indenture may be
made;
. any period or periods within, or date or dates on which, the price or
prices at which and the terms and conditions upon which debt securities
may be redeemed, in whole or in part, at the option of Adelphia pursuant
to any sinking fund or otherwise;
. the obligation, if any, of Adelphia to redeem or purchase the debt
securities pursuant to any sinking fund or analogous provisions or at
the option of a holder and the period or periods within which, the price
or prices at which, the currency or currencies including currency unit
or units, in which and the other terms and conditions upon which the
debt securities will be redeemed or purchased, in whole or in part,
pursuant to such obligation;
. the denominations in which any debt securities will be issuable if other
than denominations of $1,000 and any integral multiple thereof;
. if other than in U.S. Dollars, the currency or currencies, including
currency unit or units, in which the principal of, and premium, if any,
and interest, if any, on the debt securities will be payable, or in
which the debt securities shall be denominated;
. any additions, modifications or deletions in the events of default or
covenants of Adelphia specified in the indenture with respect to the
debt securities;
. if other than the principal amount, the portion of the principal amount
of debt securities that will be payable upon declaration of acceleration
of the maturity thereof;
. any additions or changes to the indenture with respect to a series of
debt securities that will be necessary to permit or facilitate the
issuance of the series in bearer form, registrable or not registrable as
to principal, and with or without interest coupons;
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. any index or indices used to determine the amount of payments of
principal of and premium, if any, on the debt securities and the manner
in which such amounts will be determined;
. subject to the terms described under "--Global Debt Securities," whether
the debt securities of the series will be issued in whole or in part in
the form of one or more global securities and, in such case, the
depositary for the global securities;
. the appointment of any trustee, registrar, paying agent or agents;
. the terms and conditions of any obligation or right of Adelphia or a
holder to convert or exchange debt securities into preferred securities
or other securities;
. whether the defeasance and covenant defeasance provisions described
under the caption "--Satisfaction and Discharge; Defeasance" will be
inapplicable or modified;
. any applicable subordination provisions in addition to those set forth
herein with respect to subordinated debt securities; and
. any other terms of the debt securities not inconsistent with the
provisions of the applicable indenture.
We may sell debt securities at a substantial discount below their stated
principal amount, bearing no interest or interest at a rate which at the time
of issuance is below market rates. We will describe material U.S. federal
income tax consequences and special considerations applicable to the debt
securities in the applicable prospectus supplement.
If the purchase price of any of the debt securities is payable in one or
more foreign currencies or currency units or if any debt securities are
denominated in one or more foreign currencies or currency units or if the
principal of, premium, if any, or interest, if any, on any debt securities is
payable in one or more foreign currencies or currency units, we will set forth
the restrictions, elections, material U.S. federal income tax considerations,
specific terms and other information with respect to such issue of debt
securities and such foreign currency or currency units in the applicable
prospectus supplement.
If any index is used to determine the amount of payments of principal,
premium, if any, or interest on any series of debt securities, we will describe
the material U.S. federal income tax, accounting and other considerations
applicable thereto in the applicable prospectus supplement.
Denominations, Registration and Transfer
Unless otherwise specified in the applicable prospectus supplement, the debt
securities will be issuable only in registered form, without coupons, in
denominations of $1,000 and any integral multiple thereof. Debt securities of
any series will be exchangeable for other debt securities of the same issue and
series, of any authorized denominations of a like
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aggregate principal amount, the same original issue date, stated maturity and
bearing the same interest rate.
Holders may present each series of debt securities for exchange as provided
above, and for registration of transfer, with the form of transfer endorsed
thereon, or with a satisfactory written instrument of transfer, duly executed,
at the office of the appropriate securities registrar or at the office of any
transfer agent designated by Adelphia for such purpose and referred to in the
applicable prospectus supplement, without service charge and upon payment of
any taxes and other governmental charges as described in the indenture.
Adelphia will appoint the trustee of each series of debt securities as
securities registrar for such series under the indenture. If the applicable
prospectus supplement refers to any transfer agents, in addition to the
securities registrar initially designated by Adelphia with respect to any
series, Adelphia may at any time rescind the designation of any such transfer
agent or approve a change in the location through which any such transfer agent
acts, provided that Adelphia maintains a transfer agent in each place of
payment for the series. Adelphia may at any time designate additional transfer
agents with respect to any series of debt securities.
In the event of any redemption, neither Adelphia nor the trustee will be
required to:
. issue, register the transfer of or exchange debt securities of any
series during a period beginning at the opening of business 15 days
before the day of mailing of a notice for redemption of debt securities
of that series, and ending at the close of business on the day of
mailing of the relevant notice of redemption, or
. transfer or exchange any debt securities so selected for redemption,
except, in the case of any debt securities being redeemed in part, any
portion not being redeemed.
Global Debt Securities
Unless otherwise specified in the applicable prospectus supplement, the debt
securities of a series may be issued in whole or in part in the form of one or
more global securities that we will deposit with, or on behalf of, a depositary
identified in the prospectus supplement relating to such series. Global debt
securities may be issued only in fully registered form and in either temporary
or permanent form. Unless and until it is exchanged in whole or in part for the
individual debt securities represented by it, a global debt security may not be
transferred except as a whole by the depositary for the global debt security to
a nominee of the depositary or by a nominee of the depositary to the depositary
or another nominee of the depositary or by the depositary or any nominee to a
successor depositary or any nominee of the successor.
The specific terms of the depositary arrangement with respect to a series of
debt securities will be described in the prospectus supplement relating to the
series. Adelphia anticipates that the following provisions will generally apply
to depositary arrangements.
Upon the issuance of a global debt security, and the deposit of the global
debt security with or on behalf of the applicable depositary, the depositary
for the global debt security or
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its nominee will credit on its book-entry registration and transfer system, the
respective principal amounts of the individual debt securities represented by
the global debt security to the accounts of persons, more commonly known as
participants, that have accounts with the depositary. These accounts will be
designated by the dealers, underwriters or agents with respect to the debt
securities or by Adelphia if the debt securities are offered and sold directly
by Adelphia. Ownership of beneficial interests in a global debt security will
be limited to participants or persons that may hold interests through
participants. Ownership of beneficial interests in the global debt security
will be shown on, and the transfer of that ownership will be effected only
through, records maintained by the applicable depositary or its nominee with
respect to interests of participants and the records of participants with
respect to interests of persons who hold through participants. The laws of some
states require that certain purchasers of securities take physical delivery of
the securities in definitive form. These limits and laws may impair the ability
to transfer beneficial interests in a global debt security.
So long as the depositary for a global debt security, or its nominee, is the
registered owner of the global debt security, the depositary or its nominee, as
the case may be, will be considered the sole owner or holder of the debt
securities represented by the global debt security for all purposes under the
indenture. Except as provided below, owners of beneficial interests in a global
debt security will not be entitled to have any of the individual debt
securities of the series represented by the global debt security registered in
their names, will not receive or be entitled to receive physical delivery of
any debt securities of the series in definitive form and will not be considered
the owners or holders of them under the indenture.
Payments of principal of, and premium, if any, and interest on individual
debt securities represented by a global debt security registered in the name of
a depositary or its nominee will be made to the depositary or its nominee, as
the case may be, as the registered owner of the global debt security
representing the debt securities. None of Adelphia, or the trustee, any paying
agent, or the securities registrar for the debt securities will have any
responsibility or liability for any aspect of the records relating to or
payments made on account of beneficial ownership interest of the global debt
security for the debt securities or for maintaining, supervising or reviewing
any records relating to those beneficial ownership interests.
Adelphia expects that the depositary for a series of debt securities or its
nominee, upon receipt of any payment of principal, premium or interest in
respect of a permanent global debt security representing any of the debt
securities, immediately will credit participants' accounts with payments in
amounts proportionate to their respective beneficial interest in the principal
amount of the global debt security for the debt securities as shown on the
records of the depositary or its nominee. Adelphia also expects that payments
by participants to owners of beneficial interests in the global debt security
held through the participants will be governed by standing instructions and
customary practices, as is now the case with securities held for the accounts
of customers in bearer form or registered in "street name." These payments will
be the responsibility of these participants.
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Unless otherwise specified in the applicable prospectus supplement, if the
depositary for a series of debt securities is at any time unwilling, unable or
ineligible to continue as depositary and a successor depositary is not
appointed by Adelphia within 90 days, Adelphia will issue individual debt
securities of the series in exchange for the global debt security representing
the series of debt securities. In addition, unless otherwise specified in the
applicable prospectus supplement, Adelphia may at any time and in its sole
discretion, subject to any limitations described in the prospectus supplement
relating to the debt securities, determine not to have any debt securities of
the series represented by one or more global debt securities and, in such
event, will issue individual debt securities of the series in exchange for such
global debt securities. Further, if Adelphia so specifies with respect to the
debt securities of a series, an owner of a beneficial interest in a global debt
security representing debt securities of the series may, on terms acceptable to
Adelphia, the trustee and the depositary for the global debt security, receive
individual debt securities of the series in exchange for such beneficial
interests, subject to any limitations described in the prospectus supplement
relating to the debt securities. In any such instance, an owner of a beneficial
interest in a global debt security will be entitled to physical delivery of
individual debt securities of the series represented by the global debt
security equal in principal amount to its beneficial interest and to have the
debt securities registered in its name. Individual debt securities of the
series so issued will be issued in denominations, unless otherwise specified by
Adelphia, of $1,000 and integral multiples thereof. The applicable prospectus
supplement may specify other circumstances under which individual debt
securities may be issued in exchange for the global debt security representing
any debt securities.
Payment and Paying Agents
Unless otherwise indicated in the applicable prospectus supplement, payment
of principal of, and premium, if any, and any interest on debt securities will
be made at the office of the trustee in New York or at the office of such
paying agent or paying agents as Adelphia may designate from time to time in
the applicable prospectus supplement, except that at the option of Adelphia
payment of any interest may be made:
. except in the case of global debt securities, by check mailed to the
address of the person or entity entitled thereto as such address shall
appear in the securities register; or
. by transfer to an account maintained by the person or entity entitled
thereto as specified in the securities register, provided that proper
transfer instructions have been received by the regular record date.
Unless otherwise indicated in the applicable prospectus supplement, we
will make payment of any interest on debt securities to the person or
entity in whose name the debt security is registered at the close of
business on the regular record date for the interest payment, except in
the case of defaulted interest. Adelphia may at any time designate
additional paying agents or rescind the designation of any paying agent;
however, Adelphia will at all times be required to maintain a paying
agent in each place of payment for each series of debt securities.
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Any moneys deposited with the trustee or any paying agent, or held by
Adelphia in trust, for the payment of the principal of, and premium, if any, or
interest on any debt security and remaining unclaimed for two years after such
principal, and premium, if any, or interest has become due and payable will, at
the request of Adelphia, be repaid to Adelphia or released from such trust, as
applicable, and the holder of the debt security will thereafter look, as a
general unsecured creditor, only to Adelphia for payment.
Option to Defer Interest Payments or to Pay-in-Kind
If provided in the applicable prospectus supplement, Adelphia will have the
right, at any time and from time to time during the term of any series of debt
securities, to defer the payment of interest for such number of consecutive
interest payment periods as may be specified in the applicable prospectus
supplement, subject to the terms, conditions and covenants, if any, specified
in such prospectus supplement, provided that an extension period may not extend
beyond the stated maturity of the final installment of principal of the series
of debt securities. If provided in the applicable prospectus supplement,
Adelphia will have the right, at any time and from time to time during the term
of any series of debt securities, to make payments of interest by delivering
additional debt securities of the same series. Certain material U.S. federal
income tax consequences and special considerations applicable to the debt
securities will be described in the applicable prospectus supplement.
Subordination
Except as set forth in the applicable prospectus supplement, the
subordinated indenture provides that the subordinated debt securities are
subordinated and junior in right of payment to all senior indebtedness of
Adelphia. If:
. Adelphia defaults in the payment of any principal, or premium, if any,
or interest on any senior indebtedness when the same becomes due and
payable, whether at maturity or at a date fixed for prepayment or
declaration or otherwise; or
. an event of default occurs with respect to any senior indebtedness
permitting the holders thereof to accelerate the maturity thereof and
written notice of such event of default, requesting that payments on
subordinated debt securities cease, is given to Adelphia by the holders
of senior indebtedness,
then unless and until the default in payment or event of default shall have
been cured or waived or shall have ceased to exist, no direct or indirect
payment, in cash, property or securities, by set-off or otherwise, will be made
or agreed to be made on account of the subordinated debt securities or interest
thereon or in respect of any repayment, redemption, retirement, purchase or
other acquisition of subordinated debt securities.
Except as set forth in the applicable prospectus supplement, the
subordinated indenture provides that in the event of:
. any insolvency, bankruptcy, receivership, liquidation, reorganization,
readjustment, composition or other similar proceeding relating to
Adelphia, its creditors or its property;
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. any proceeding for the liquidation, dissolution or other winding-up of
Adelphia, voluntary or involuntary, whether or not involving insolvency
or bankruptcy proceedings;
. any assignment by Adelphia for the benefit of creditors; or
. any other marshaling of the assets of Adelphia;
all present and future senior indebtedness, including, without limitation,
interest accruing after the commencement of the proceeding, assignment or
marshaling of assets, will first be paid in full before any payment or
distribution, whether in cash, securities or other property, will be made by
Adelphia on account of subordinated debt securities. In that event, any
payment or distribution, whether in cash, securities or other property, other
than securities of Adelphia or any other corporation provided for by a plan of
reorganization or a readjustment, the payment of which is subordinate, at
least to the extent provided in the subordination provisions of the indenture,
to the payment of all senior indebtedness at the time outstanding and to any
securities issued in respect thereof under any such plan of reorganization or
readjustment and other than payments made from any trust described in the
"Satisfaction and Discharge; Defeasance" below, which would otherwise but for
the subordination provisions be payable or deliverable in respect of
subordinated debt securities, including any such payment or distribution which
may be payable or deliverable by reason of the payment of any other
indebtedness of Adelphia being subordinated to the payment of subordinated
debt securities will be paid or delivered directly to the holders of senior
indebtedness, or to their representative or trustee, in accordance with the
priorities then existing among such holders until all senior indebtedness
shall have been paid in full. No present or future holder of any senior
indebtedness will be prejudiced in the right to enforce subordination of the
indebtedness evidenced by subordinated debt securities by any act or failure
to act on the part of Adelphia.
The term "senior indebtedness" is defined as the principal, premium, if
any, and interest on:
. all indebtedness of Adelphia, whether outstanding on the date of the
issuance of subordinated debt securities or thereafter created, incurred
or assumed, which is for money borrowed, or which is evidenced by a note
or similar instrument given in connection with the acquisition of any
business, properties or assets, including securities;
. any indebtedness of others of the kinds described in the first bullet
point above for the payment of which Adelphia is responsible or liable
as guarantor or otherwise; and
. amendments, renewals, extensions and refundings of any such
indebtedness;
unless in any instrument or instruments evidencing or securing such
indebtedness or pursuant to which the same is outstanding, or in any such
amendment, renewal, extension or refunding, it is expressly provided that such
indebtedness is not superior in right of payment to subordinated debt
securities. The senior indebtedness will continue to be senior
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indebtedness and entitled to the benefits of the subordination provisions
irrespective of any amendment, modification or waiver of any term of the senior
indebtedness or extension or renewal of the senior indebtedness.
Except as provided in the applicable prospectus supplement, the subordinated
indenture for a series of subordinated debt does not limit the aggregate amount
of senior indebtedness that may be issued by Adelphia. As of December 31, 1998,
senior indebtedness of the Adelphia Parent Company aggregated approximately
$1,810,212,000. In addition, because Adelphia is a holding company, the
subordinated debt securities are effectively subordinated to all existing and
future liabilities of Adelphia's subsidiaries.
Modification of Indentures
From time to time, Adelphia and the trustees may modify the indentures
without the consent of any holders of any series of debt securities with
respect to some matters, including:
. to cure any ambiguity, defect or inconsistency or to correct or
supplement any provision which may be inconsistent with any other
provision of the indenture;
. to qualify, or maintain the qualification of, the indentures under the
Trust Indenture Act; and
. to make any change that does not materially adversely affect the
interests of any holder of such series of debt securities.
In addition, under the indentures, Adelphia and the trustee may modify some
rights, covenants and obligations of Adelphia and the rights of holders of any
series of debt securities with the written consent of the holders of at least a
majority in aggregate principal amount of the series of outstanding debt
securities; but no extension of the maturity of any series of debt securities,
reduction in the interest rate or extension of the time for payment of
interest, change in the optional redemption or repurchase provisions in a
manner adverse to any holder of the series of debt securities, other
modification in the terms of payment of the principal of, or interest on, the
series of debt securities, or reduction of the percentage required for
modification, will be effective against any holder of the series of outstanding
debt securities without the holder's consent.
In addition, Adelphia and the trustees may execute, without the consent of
any holder of the debt securities, any supplemental indenture for the purpose
of creating any new series of debt securities.
Events of Default
The indentures provide that any one or more of the following described
events with respect to a series of debt securities that has occurred and is
continuing constitutes an "event of default" with respect to that series of
debt securities:
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. failure for 60 days to pay any interest or any sinking fund payment on
the series of debt securities when due, (subject to the deferral of any
due date in the case of an extension period);
. failure to pay any principal or premium, if any, on the series of the
debt securities when due whether at maturity, upon redemption, by
declaration or otherwise;
. failure to observe or perform in any material respect certain other
covenants contained in the indenture for 90 days after written notice
has been given to Adelphia from the trustee or the holders of at least
25% in principal amount of the series of outstanding debt securities;
. default resulting in acceleration of other indebtedness of Adelphia for
borrowed money where the aggregate principal amount so accelerated
exceeds $25 million and the acceleration is not rescinded or annulled
within 30 days after the written notice thereof to Adelphia by the
trustee or to Adelphia and the trustee by the holders of 25% in
aggregate principal amount of the debt securities of the series then
outstanding, provided that the event of default will be remedied, cured
or waived if the default that resulted in the acceleration of such other
indebtedness is remedied, cured or waived; or
. certain events in bankruptcy, insolvency or reorganization of Adelphia.
The holders of a majority in outstanding principal amount of the series of
debt securities have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the trustee of the
series. The trustee or the holders of not less than 25% in aggregate
outstanding principal amount of the series may declare the principal due and
payable immediately upon an event of default. The holders of a majority in
aggregate outstanding principal amount of the series may annul the declaration
and waive the default if the default (other than the non-payment of the
principal of the series which has become due solely by the acceleration) has
been cured and a sum sufficient to pay all matured installments of interest and
principal due otherwise than by acceleration has been deposited with the
trustee of the series.
The holders of a majority in outstanding principal amount of a series of
debt securities affected thereby may, on behalf of the holders of all the
holders of the series of debt securities, waive any past default, except a
default in the payment of principal or interest, unless the default has been
cured and a sum sufficient to pay all matured installments of interest and
principal due otherwise than by acceleration has been deposited with the
trustee of the series, or a default in respect of a covenant or provision which
under the related indenture cannot be modified or amended without the consent
of the holder of each outstanding debt security of the series. Adelphia is
required to file annually with the trustees a certificate as to whether or not
Adelphia is in compliance with all the conditions and covenants applicable to
it under the indentures.
In case an event of default shall occur and be continuing as to a series of
debt securities, the trustee of the series will have the right to declare the
principal of and the interest on the
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debt securities, and any other amounts payable under the indenture, to be
forthwith due and payable and to enforce its other rights as a creditor with
respect to the debt securities.
No holder of any debt securities will have any right to institute any
proceeding with respect to the indenture or for any remedy thereunder, unless
the holder shall have previously given to the trustee written notice of a
continuing event of default and unless also the holders of at least 25% in
aggregate principal amount of the outstanding debt securities of the series
shall have made written request and offered reasonably indemnity to the trustee
of the series to institute the proceeding as a trustee, and unless the trustee
shall not have received from the holders of a majority in aggregate principal
amount of the outstanding debt securities of the class a direction inconsistent
with the request and shall have failed to institute the proceeding within 60
days. However, these limitations do not apply to a suit instituted by a holder
of a debt security for enforcement of payment of the principal or interest on
the debt security on or after the respective due dates expressed in the debt
security.
Consolidation, Merger, Sale of Assets and Other Transactions
Unless otherwise indicated in the applicable prospectus supplement, the
indentures provide that Adelphia will not consolidate with or merge into any
other person or entity or sell, assign, convey, transfer or lease its
properties and assets substantially as an entirety to any person or entity
unless:
. either Adelphia is the continuing corporation, or any successor or
purchaser is a corporation, partnership, or trust or other entity
organized under the laws of the United States of America, any State
thereof or the District of Columbia, and the successor or purchaser
expressly assumes Adelphia's obligations on the debt securities under a
supplemental indenture; and
. immediately before and after giving effect thereto, no event of default,
and no event which, after notice or lapse of time or both, would become
an event of default, shall have happened and be continuing.
Unless otherwise indicated in the applicable prospectus supplement, the
general provisions of the indentures do not afford holders of the debt
securities protection in the event of a highly leveraged or other transaction
involving Adelphia that may adversely affect holders of the debt securities.
Satisfaction and Discharge; Defeasance
The indentures provide that when, among other things, all debt securities
not previously delivered to the trustee for cancellation:
. have become due and payable, or
. will become due and payable at their stated maturity within one year,
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and Adelphia deposits or causes to be deposited with the trustee, as trust
funds in trust for the purpose, an amount in the currency or currencies in
which the debt securities are payable sufficient to pay and discharge the
entire indebtedness on the debt securities not previously delivered to the
trustee for cancellation, for the principal, and premium, if any, and interest
to the date of the deposit or to the stated maturity, as the case may be, then
the indenture will cease to be of further effect (except as to Adelphia's
obligations to pay all other sums due pursuant to the indenture and to provide
the officers' certificates and opinions of counsel described therein), and
Adelphia will be deemed to have satisfied and discharged the indenture.
The indentures provide that Adelphia may elect either:
. to terminate, and be deemed to have satisfied, all its obligations with
respect to any series of debt securities, except for the obligations to
register the transfer or exchange of such debt securities, to replace
mutilated, destroyed, lost or stolen debt securities, to maintain an
office or agency in respect of the debt securities and to compensate and
indemnify the trustee ("defeasance"); or
. to be released from its obligations with respect to certain covenants,
("covenant defeasance") upon the deposit with the trustee, in trust for
such purpose, of money and/or U.S. Government Obligations, as defined in
the indenture, which through the payment of principal and interest in
accordance with the term used will provide money, in an amount
sufficient (in the opinion of a nationally recognized firm of
independent public accountants) to pay the principal of, interest on and
any other amounts payable in respect of the outstanding debt securities
of the series.
Such a trust may be established only if, among other things, Adelphia has
delivered to the trustee an opinion of counsel (as specified in the indenture)
with regard to certain matters, including an opinion to the effect that the
holders of the debt securities will not recognize income, gain or loss for
Federal income tax purposes as a result of the deposit and discharge and will
be subject to Federal income tax on the same amounts and in the same manner and
at the same times as would have been the case if the deposit and defeasance or
covenant defeasance, as the case may be, had not occurred.
Redemption
Unless otherwise indicated in the applicable prospectus supplement, debt
securities will not be subject to any sinking fund requirements.
Unless otherwise indicated in the applicable prospectus supplement, Adelphia
may, at its option, redeem the debt securities of any series in whole at any
time or in part from time to time, at the redemption price set forth in the
applicable prospectus supplement plus accrued and unpaid interest to the date
fixed for redemption, and debt securities in denominations larger than $1,000
may be redeemed in part but only in integral multiples of $1,000. If the debt
securities of any series are so redeemable only on or after a specified date or
upon the satisfaction of additional conditions, the applicable prospectus
supplement will specify the date or describe the conditions.
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Adelphia will mail notice of any redemption at least 30 days but not more
than 60 days before the redemption date to each holder of debt securities to be
redeemed at the holder's registered address. Unless Adelphia defaults in the
payment of the redemption price, on and after the redemption date interest
shall cease to accrue on the debt securities or portions thereof called for
redemption.
Conversion or Exchange
If and to the extent indicated in the applicable prospectus supplement, the
debt securities of any series may be convertible or exchangeable into other
securities. The specific terms on which debt securities of any series may be so
converted or exchanged will be set forth in the applicable prospectus
supplement. These terms may include provisions for conversion or exchange,
either mandatory, at the option of the holder, or at the option of Adelphia, in
which case the number of shares of other securities to be received by the
holders of debt securities would be calculated as of a time and in the manner
stated in the applicable prospectus supplement.
Certain Covenants
The indentures contain certain covenants regarding, among other matters,
corporate existence, payment of taxes and reports to holders of debt
securities. If and to the extent indicated in the applicable prospectus
supplement, these covenants may be removed or additional covenants added with
respect to any series of debt securities.
Governing Law
The indentures and the debt securities will be governed by and construed in
accordance with the laws of the State of New York.
Information Concerning the Trustees
Each trustee shall have and be subject to all the duties and
responsibilities specified with respect to an indenture trustee under the Trust
Indenture Act. Subject to these provisions, each trustee is under no obligation
to exercise any of the powers vested in it by the indenture at the request of
any holder of the debt securities, unless offered reasonable indemnity by the
holder against the costs, expenses and liabilities which might be incurred
thereby. Each trustee is not required to expend or risk its own funds or
otherwise incur personal financial liability in the performance of its duties
if the trustee reasonably believes that repayment or adequate indemnity is not
reasonably assured to it.
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DESCRIPTION OF CAPITAL STOCK
The following description of the capital stock of Adelphia and certain
provisions of Adelphia's Certificate of Incorporation and Bylaws as of April
18, 1999 is a summary and is qualified in its entirety by Adelphia's
Certificate of Incorporation and Bylaws, which documents are exhibits to the
registration statement covering this prospectus.
Adelphia's authorized capital stock consists of 200,000,000 shares of Class
A common stock, 25,000,000 shares of Class B common stock, and 5,000,000 shares
of preferred stock.
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 this 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).
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:
. for the election of directors, and
. 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 common stock have
sufficient voting power to elect the remaining seven members of the current
eight-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
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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 this amount is paid, holders of the Class B common stock
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:
. the distinctive designation of each series and the number of shares that
will constitute the series;
. the voting rights, if any, of shares of the series;
. the dividend rate on the shares of the series, any restriction,
limitation or condition upon the payment of dividends, whether dividends
will be cumulative and the dates on which dividends are payable;
. the prices at which, and the terms and conditions on which, the shares
of the series may be redeemed, if the shares are redeemable;
. the purchase or sinking fund provisions, if any, for the purchase or
redemption of shares of the series;
. any preferential amount payable upon shares of the series in the event
of the liquidation, dissolution or winding up of Adelphia or the
distribution of its assets;
. 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
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convertible. Adelphia has designated and has outstanding two classes of
preferred stock--8 1/8% Series C Convertible preferred stock and 13%
Cumulative Exchangeable preferred stock. For ease of reference, we refer
to the 8 1/8% Series C convertible preferred stock as the Convertible
preferred stock and 13% Series B Cumulative Exchangeable preferred stock
as the Exchangeable preferred stock; and
. In connection with the foregoing designations, the maximum number of
shares authorized of 8 1/8% 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 $81.25 per share of
the Convertible preferred stock per annum. The 8 1/8% 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 Adelphia,
the holders of the 8 1/8% Convertible preferred stock are entitled to receive
the liquidation preference for the 8 1/8% 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 the sale, conveyance, exchange
or transfer shall be in connection with a liquidation, dissolution or winding-
up of the business of Adelphia. The 8 1/8% Convertible preferred stock ranks
pari passu with the Exchangeable preferred stock and ranks senior to the
common stock of Adelphia with respect to dividends and liquidation.
Each share of 8 1/8% Convertible preferred stock is convertible based upon
its stated liquidation preference into shares of Class A common stock of
Adelphia at any time at the election of the holder of it at a conversion price
of $8.48 per share of Adelphia Class A common stock, or approximately 117.9245
shares of Class A common stock per share of 8 1/8% 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 8 1/8% Convertible preferred stock is not entitled to vote
in the election of directors of Adelphia or upon any other matter, except as
provided by law, unless a Voting Rights Triggering Event, as defined in the
related Certificate of Designation, occurs with respect to the 8 1/8%
Convertible preferred stock. If this occurs, the board of directors will be
expanded by two seats, the directors for which shall then be elected by the
holders of the 8 1/8% Convertible preferred stock. The 8 1/8% Convertible
preferred stock is not subject to mandatory redemption.
The 8 1/8% 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 8 1/8% Convertible
preferred stock plus accrued dividends in the years beginning August 1, 2000,
2001 and 2002 and thereafter, respectively.
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Exchangeable Preferred Stock. The shares of Exchangeable preferred stock are
redeemable at the option of Adelphia, on or after July 15, 2002. Adelphia 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. The Exchangeable preferred stock is not entitled to vote
in the election of directors of Adelphia or upon any other matter, except as
provided by law, unless a Voting Rights Triggering Event, as defined in the
related Certificate of Designation, occurs with respect to the Exchangeable
preferred stock. If this occurs, the board of directors will be expanded by two
seats, the directors for which shall then be elected by the holders of the
Exchangeable preferred stock.
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.
We will describe the particular terms and conditions of a series of
preferred stock offered by a prospectus supplement in the prospectus supplement
relating to such series of preferred stock. The applicable prospectus
supplement or prospectus supplements will describe the following terms of each
series of preferred stock being offered:
.its title;
. the number of shares offered, any liquidation preference per share and
the purchase price;
. any applicable dividend rate(s), period(s) and/or payment date(s) or
method(s) of calculation;
. if dividends apply whether they shall be cumulative or non-cumulative
and, if cumulative, the date from which dividends shall accumulate;
.any procedures for any auction and remarketing;
.any provisions for a sinking fund;
.any provisions for redemption;
.any listing of such preferred stock on any securities exchange or market;
. the terms and conditions, if applicable, upon which it will be
convertible into common stock or another series of preferred stock of
Adelphia, including the conversion price (or manner of calculation
thereof) and conversion period;
. the terms and conditions, if applicable, upon which it will be
exchangeable into debt securities of Adelphia, including the exchange
price (or manner of calculation thereof) and exchange period;
.any voting rights;
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.a discussion of any applicable material and/or special United States
federal income tax considerations;
.whether interests in that series of preferred stock will be represented by
depositary shares;
.its relative ranking and preferences as to any dividend rights and rights
upon liquidation, dissolution or winding up of the affairs of Adelphia;
.any limitations on the future issuance of any class or series of preferred
stock ranking senior to or on a parity with the series of preferred
stock being offered as to dividend rights and rights upon liquidation,
dissolution or winding up of the affairs of Adelphia; and
.any other specific terms, preferences, rights, limitations or
restrictions.
Transfer Agent
The Transfer Agent and Registrar for the Class A common stock and the
Exchangeable preferred stock is American Stock Transfer & Trust Company. The
Transfer Agent and Registrar for the Class B common stock is Adelphia.
BOOK ENTRY ISSUANCE
Unless otherwise specified in the applicable prospectus supplement, DTC will
act as depositary for securities issued in the form of global securities. Such
securities will be issued only as fully-registered securities registered in the
name of Cede & Co. (DTC's nominee). One or more fully-registered global
securities will be issued for such securities representing in the aggregate the
total number of such securities, and will be deposited with or on behalf of
DTC.
DTC is a limited-purpose trust company organized under the New York Banking
Law, a "banking organization" within the meaning of the New York Banking Law, a
member of the Federal Reserve System, a "clearing corporation" within the
meaning of the New York Uniform Commercial Code, and a "clearing agency"
registered pursuant to the provisions of Section 17A of the Exchange Act. DTC
holds securities that its participants deposit with DTC. DTC also facilitates
the settlement among its participants of securities transactions, such as
transfers and pledges, in deposited securities through electronic computerized
book-entry changes in participants' accounts, thereby eliminating the need for
physical movement of securities certificates. Direct participants include
securities brokers and dealers, banks, trust companies, clearing corporations
and certain other organizations. DTC is owned by a number of its direct
participants and by the New York Stock Exchange, the American Stock Exchange
and the National Association of Securities Dealers, Inc. Access to the DTC
system is also available to others, known as indirect participants, such as
securities brokers and dealers, banks and trust companies that clear through or
maintain custodial relationships with direct participants, either directly or
indirectly. The rules applicable to DTC and its participants are on file with
the Commission.
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Purchases of securities within the DTC system must be made by or through
direct participants, which will receive a credit for such Securities on DTC's
records. The ownership interest of each actual purchaser of each Security,
commonly referred to as the beneficial owner is in turn to be recorded on the
direct and indirect participants' records. Beneficial owners will not receive
written confirmation from DTC of their purchases, but beneficial owners are
expected to receive written confirmations providing details of the
transactions, as well as periodic statements of their holdings, from the direct
or indirect participants through which the beneficial owners purchased
securities. Transfers of ownership interests in securities issued in the form
of global securities are to be accomplished by entries made on the books of
participants acting on behalf of beneficial owners. Beneficial owners will not
receive certificates representing their ownership interests in such securities,
except in the event that use of the book-entry system for such securities is
discontinued.
DTC has no knowledge of the actual beneficial owners of the securities
issued in the form of global securities. DTC's records reflect only the
identity of the direct participants to whose accounts such securities are
credited, which may or may not be the beneficial owners. The participants will
remain responsible for keeping account of their holdings on behalf of their
customers.
Conveyance of notices and other communications by DTC to direct
participants, by direct participants to indirect participants, and by direct
participants and indirect participants to beneficial owners will be governed by
arrangements among them, subject to any statutory or regulatory requirements as
may be in effect from time to time.
Although voting with respect to securities issued in the form of global
securities is limited to the holders of record of such securities, in those
instances in which a vote is required, neither DTC nor Cede & Co. will itself
consent or vote with respect to such securities. Under its usual procedures,
DTC would mail an omnibus proxy to the issuer of such securities as soon as
possible after the record date. The omnibus proxy assigns Cede & Co.'s
consenting or voting rights to those direct participants to whose accounts such
securities are credited on the record date, identified in a listing attached to
the omnibus proxy.
Payments in respect of securities issued in the form of global securities
will be made by the issuer of such securities to DTC. DTC's practice is to
credit direct participants' accounts on the relevant payment date in accordance
with their respective holdings shown on DTC's records unless DTC has reason to
believe that it will not receive payments on such payment date. Payments by
participants to beneficial owners will be governed by standing instructions and
customary practices and will be the responsibility of such participant and not
of DTC or Adelphia, subject to any statutory or regulatory requirements as may
be in effect from time to time. Payments to DTC are the responsibility of the
issuer of the applicable securities, disbursement of such payments to direct
participants is the responsibility of DTC, and disbursements of such payments
to the beneficial owners is the responsibility of direct and indirect
participants.
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DTC may discontinue providing its services as depositary with respect to any
securities at any time by giving reasonable notice to the issuer of such
securities. In the event that a successor depositary is not obtained,
individual security certificates representing such securities are required to
be printed and delivered. Adelphia, at its option, may decide to discontinue
use of the system of book-entry transfers through DTC or a successor
depositary.
The information in this section concerning DTC and DTC's book-entry system
has been obtained from sources that Adelphia believe to be accurate, but
Adelphia assumes no responsibility for the accuracy thereof. Adelphia has no
responsibility for the performance by DTC or its Participants of their
respective obligations as described herein or under the rules and procedures
governing their respective operations.
PLAN OF DISTRIBUTION
Any of the securities being offered under this prospectus may be sold in any
one or more of the following ways from time to time:
. through agents;
. to or through underwriters;
. through dealers; and
. directly by Adelphia to purchasers.
The distribution of the securities may be effected from time to time in one
or more transactions at a fixed price or prices, which may be changed, at
market prices prevailing at the time of sale, at prices related to such
prevailing market prices or at negotiated prices. Securities may also be
offered or sold through depository receipts issued by a depository institution.
Offers to purchase securities may be solicited by agents designated by
Adelphia from time to time. Any agent involved in the offer or sale of the
securities under this prospectus will be named, and any commissions payable by
Adelphia to these agents will be set forth, in a related prospectus supplement.
Unless otherwise indicated in a prospectus supplement, any agent will be acting
on a reasonable best efforts basis for the period of its appointment. Any agent
may be deemed to be an underwriter, as that term is defined in the Securities
Act, of the securities so offered and sold.
If securities are sold by means of an underwritten offering, Adelphia will
execute an underwriting agreement with an underwriter or underwriters at the
time an agreement for such sale is reached, and the names of the specific
managing underwriter or underwriters, as well as any other underwriters, the
respective amounts underwritten and the terms of the transaction, including
commissions, discounts and any other compensation of the underwriters and
dealers, if any, will be set forth in a related prospectus supplement. That
prospectus supplement and this prospectus will be used by the underwriters to
make resales of the securities. If underwriters are used in the sale of any
securities in connection with this prospectus, those securities will be
acquired by the underwriters for their own account and
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may be resold from time to time in one or more transactions, including
negotiated transactions, at fixed public offering prices or at varying prices
determined by the underwriters and Adelphia at the time of sale. Securities may
be offered to the public either through underwriting syndicates represented by
managing underwriters or directly by one or more underwriters. If any
underwriter or underwriters are used in the sale of securities, unless
otherwise indicated in a related prospectus supplement, the underwriting
agreement will provide that the obligations of the underwriters are subject to
some conditions precedent and that the underwriters with respect to a sale of
these securities will be obligated to purchase all such Securities if any are
purchased.
Adelphia may grant to the underwriters options to purchase additional
securities, to cover over-allotments, if any, at the initial public offering
price, with additional underwriting commissions or discounts, as may be set
forth in a related prospectus supplement. If Adelphia grants any over-allotment
option, the terms of that over-allotment option will be set forth in the
prospectus supplement for these securities.
If a dealer is utilized in the sale of the securities in respect of which
this prospectus is delivered, Adelphia will sell these securities to the dealer
as principal. The dealer may then resell such securities to the public at
varying prices to be determined by such dealer at the time of resale. Any such
dealer may be deemed to be an underwriter, as such term is defined in the
Securities Act, of the securities so offered and sold. The name of the dealer
and the terms of the transaction will be set forth in the prospectus supplement
relating to those offers and sales.
Offers to purchase securities may be solicited directly by Adelphia and
those sales may be made by Adelphia directly to institutional investors or
others, who may be deemed to be underwriters within the meaning of the
Securities Act with respect to any resale of those securities. The terms of any
sales of this type will be described in the prospectus supplement.
Securities may also be offered and sold, if so indicated in the related
prospectus supplement, in connection with a remarketing upon their purchase, in
accordance with a redemption or repayment in connection with their terms, or
otherwise, by one or more firms "remarketing firms," acting as principals for
their own accounts or as agents for Adelphia. Any remarketing firm will be
identified and the terms of its agreement, if any, with Adelphia and its
compensation will be described in a related prospectus supplement. Remarketing
firms may be deemed to be underwriters, as that term is defined in the
Securities Act, in connection with the securities remarketed by them.
If so indicated in a related prospectus supplement, Adelphia may authorize
agents and underwriters to solicit offers by certain institutions to purchase
securities from Adelphia at the public offering price set forth in a related
prospectus supplement as part of delayed delivery contracts providing for
payment and delivery on the date or dates stated in a related prospectus
supplement. Such delayed delivery contracts will be subject to only those
conditions set forth in a related prospectus supplement. A commission indicated
in a related prospectus supplement will be paid to underwriters and agents
soliciting purchases of securities pursuant to delayed delivery contracts
accepted by Adelphia.
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Agents, underwriters, dealers and remarketing firms may be entitled under
relevant agreements with Adelphia to indemnification by Adelphia against some
liabilities, including liabilities under the Securities Act, or to contribution
with respect to payments which such agents, underwriters, dealers and
remarketing firms may be required to make in respect thereof.
Each series of securities will be a new issue and, other than the Class A
common stock, which is quoted on the Nasdaq National Market, will have no
established trading market. Unless otherwise specified in a related prospectus
supplement, Adelphia will not be obligated to list any series of securities on
an exchange or otherwise. We cannot assure you that there will be any liquidity
in the trading market for any of the securities.
Agents, underwriters, dealers and remarketing firms may be customers of,
engage in transactions with, or perform services for, Adelphia and its
subsidiaries in the ordinary course of business.
WHERE YOU CAN FIND MORE INFORMATION
Adelphia files annual, quarterly and special reports, as well as proxy
statements and other information with the SEC. You may read and copy any
document Adelphia files with the SEC at the SEC's Public Reference Room at 450
Fifth Street, N.W., Washington, D.C. 20549 or at its Regional Offices in
Chicago, Illinois or New York, New York. You may obtain further information
about the operation of the Public Reference Room by calling the SEC at 1-800-
SEC-0330. Adelphia's SEC filings are also available to the public over the
Internet at the SEC's web site at http://www.sec.gov, which contains reports,
proxy statements and other information regarding registrants like Adelphia that
file electronically with the SEC.
This prospectus is part of a registration statement on Form S-3 filed by
Adelphia with the SEC under the Securities Act. As permitted by SEC rules, this
prospectus does not contain all of the information included in the registration
statement and the accompanying exhibits filed with the SEC. You may refer to
the registration statement and its exhibits for more information.
The SEC allows Adelphia to "incorporate by reference" into this prospectus
the information it files with the SEC. This means that Adelphia can disclose
important information to you by referring you to those documents. The
information incorporated by reference is considered to be part of this
prospectus. If Adelphia subsequently files updating or superseding information
in a document that is incorporated by reference into this prospectus, the
subsequent information will also become part of this prospectus and will
supersede the earlier information.
Adelphia is incorporating by reference the following documents that it has
filed with the SEC:
. its Annual Report on Form 10-K for the 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
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fiscal year ended December 31, 1997 of Olympus Communications, L.P. and
Olympus Capital Corporation, as amended by Adelphia's Form 10-K/A dated
July 27, 1998;
. its Quarterly Reports on Form 10-Q for the quarters ended June 30, 1998
September 30, 1998 and December 31, 1998;
. its Current Reports on Form 8-K for the events dated June 29, 1998, July
2, 1998, August 3, 1998, August 18, 1998, September 10, 1998, November
9, 1998, November 12, 1998, December 23, 1998, January 11, 1999,
February 22, 1999, February 23, 1999, March 5, 1999, March 30, 1999,
March 31, 1999, April 9, 1999 and April 19, 1999;
. its definitive proxy statement dated September 11, 1998 with respect to
the Annual Meeting of Stockholders held on October 6, 1998; and
. the description of its Class A common stock contained in Adelphia's
registration statement filed with the SEC under Section 12 of the
Exchange Act and subsequent amendments and reports filed to update such
description.
Adelphia is also incorporating by reference into this prospectus all of its
future filings with the SEC under Sections 13(a), 13(c), 14 or 15(d) of the
Exchange Act until this offering has been completed.
You may obtain a copy of any of our filings which are incorporated by
reference, at no cost, by writing to or telephoning us at the following
address:
Adelphia Communications Corporation
Main at Water Street
Coudersport, Pennsylvania 16915
Attention: Investor Relations
Telephone: (814) 274-9830
You should rely only on the information provided in this prospectus or
incorporated by reference. We have not authorized anyone to provide you with
different information. You should not assume that the information in this
prospectus is accurate as of any date other than the date on the first page of
the prospectus. Adelphia is not making this offer of securities in any state or
country in which the offer or sale is not permitted.
LEGAL MATTERS
Buchanan Ingersoll Professional Corporation, Pittsburgh, Pennsylvania will
pass upon the validity of the securities. Any required information regarding
ownership of Adelphia's securities by lawyers of such firm will be contained in
the applicable prospectus supplement. If the securities are underwritten, the
applicable prospectus supplement will also set forth whether and to what
extent, if any, a law firm for the underwriters will pass upon the validity of
the securities.
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EXPERTS
The consolidated financial statements 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 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 Adelphia'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.
The consolidated financial statements of FrontierVision Partners, L.P. and
subsidiaries as of December 31, 1998 and 1997, and for each of the years in the
three year period ended December 31, 1998, have been incorporated by reference
herein and in this registration statement from Adelphia's Current Report on
Form 8-K filed April 19, 1999, in reliance upon the report of KPMG LLP,
independent certified public accountants, incorporated by reference herein, and
upon the authority of said firm as experts in accounting and auditing.
The consolidated financial statements of Harron Communications Corp. and
subsidiaries as of December 31, 1998 and 1997 and for each of the three years
in the period ended December 31, 1998 incorporated in this prospectus by
reference from Adelphia's Current Report on Form 8-K filed April 19, 1999 have
been audited by Deloitte & Touche LLP, independent auditors, as stated in their
report, which is incorporated herein by reference, and has been so incorporated
in reliance upon the report of such firm given upon their authority as experts
in accounting and auditing.
The consolidated financial statements of Century Communications Corp. and
subsidiaries as of May 31, 1998 and 1997 and for each of the three years in the
period ended May 31, 1998 incorporated in this prospectus by reference from
Adelphia's Current Report on Form 8-K filed April 19, 1999 have been audited by
Deloitte & Touche LLP, independent auditors as stated in their report, which is
incorporated herein by reference, and has been so incorporated in reliance upon
the report of such firm given upon their authority as experts in accounting and
auditing.
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2,500,000 Shares
Adelphia Communications Corporation
5 1/2% Series D Convertible Preferred Stock
(liquidation preference $200 per share)
ADELPHIA LOGO
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PROSPECTUS SUPPLEMENT
April 26, 1999
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Salomon Smith Barney
Credit Suisse First Boston
Goldman, Sachs & Co.
CIBC World Markets
Donaldson, Lufkin & Jenrette
Lehman Brothers
Merrill Lynch & Co.
Morgan Stanley Dean Witter
NationsBanc Montgomery Securities LLC
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