<PAGE>
Filed pursuant to Rule
424(b)(3) Registration Nos.
33-67390 and 33-67390-01
MARCUS CABLE COMPANY, L.P.
MARCUS CABLE CAPITAL CORPORATION
Supplement to Prospectus
Dated April 25, 1996
The date of this Supplement is August 14, 1996
On August 14, 1996, Marcus Cable Company filed the attached Quarterly
Report on Form 10-Q for the period ended June 30, 1996.
<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
X Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the quarterly period ended June 30, 1996
or
Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the transition period from to
Commission File Numbers 33-67390; 33-67390-01; 33-81088; 33-81088-01;
33-81088-02; 33-93808; 33-93808-01
MARCUS CABLE COMPANY, L.P.
MARCUS CABLE OPERATING COMPANY, L.P.
MARCUS CABLE CAPITAL CORPORATION
MARCUS CABLE CAPITAL CORPORATION II
MARCUS CABLE CAPITAL CORPORATION III
(Exact name of registrants as specified in their charters)
Delaware 75-2337471
Delaware 75-2495706
Delaware 75-2546077
Delaware 75-2546713
Delaware 75-2599586
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2911 Turtle Creek Boulevard, Suite 1300
Dallas, Texas 75219-6257
(Address of principal executive offices) (Zip Code)
(214) 521-7898
(Registrants' telephone number, including area code)
Indicate by check mark whether the registrants (1) have filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrants were required to file such reports), and (2) have been subject to
such filing requirements for the past 90 days. Yes X No
There is no established trading market for any of the registrants' voting
securities. As of the date of this report, there were 1,000 shares of common
stock of Marcus Cable Capital Corporation and 1,000 shares of common stock of
Marcus Cable Capital Corporation III outstanding, all of which are owned by
Marcus Cable Company, L.P., and 1,000 shares of common stock of Marcus Cable
Capital Corporation II outstanding, all of which are owned by Marcus Cable
Operating Company, L.P.
<PAGE>
<PAGE> 1
MARCUS CABLE COMPANY, L.P.
MARCUS CABLE OPERATING COMPANY, L.P.
MARCUS CABLE CAPITAL CORPORATION
MARCUS CABLE CAPITAL CORPORATION II
MARCUS CABLE CAPITAL CORPORATION III
Index to Quarterly Report Form 10-Q
June 30, 1996
Page No.
Definitions 3
PART I FINANCIAL INFORMATION
Item 1: Financial Statements - Marcus Cable Company, L.P. and Subsidiaries
Consolidated Balance Sheets as of
December 31, 1995 and June 30, 1996 4
Consolidated Statements of Operations
for the Three Months and Six Months
Ended June 30, 1995 and 1996 5
Consolidated Statements of Cash Flows
for the Six Months Ended June 30,
1995 and 1996 6
Notes to the Consolidated Financial Statements 7-10
Consolidating Schedules 11-12
Separate financial statements of Operating as issuer of the 13 1/2% Notes have
not been presented, as the aggregate net assets, earnings and partners' capital
of Operating are substantially equivalent to the net assets, earnings and
partners' capital of the Company and its subsidiaries on a consolidated basis.
Additionally, separate financial statements of Capital, Capital II and Capital
III have not been presented because these entities have no operations and
substantially no assets or equity.
<PAGE>
<PAGE> 2
Item 2: Management's Discussion and Analysis of Financial
Condition and Results of Operations 13-18
PART II OTHER INFORMATION
Item 1: Legal Proceedings 19
Item 2: Changes in Securities 19
Item 3: Defaults Upon Senior Securities 19
Item 4: Submission of Matters to a Vote of Security Holders 19
Item 5: Other Information 19
Item 6: Exhibits and Reports on Form 8-K 19
<PAGE>
<PAGE> 3
DEFINITIONS
When used herein, the following terms will have the meaning indicated.
Term Definition
11 7/8% Debentures 11 7/8% Senior Debentures, due October 1, 2005,
which are obligations of MCC and Capital
13 1/2% Notes 13 1/2% Senior Subordinated Guaranteed Discount
Notes, due August 1, 2004, which are obligations
of Operating and Capital II that are guaranteed
by MCC
14 1/4% Notes 14 1/4% Senior Discount Notes, due December 15,
2005, which are obligations of MCC and Capital
III
1992 Cable Act Cable Television Consumer Protection and
Competition Act of 1992
1996 Telecom Act Telecommunications Act of 1996
CALP Cencom of Alabama, L.P.
CALP Acquisition The August 31, 1995 purchase of remaining CALP
ordinary limited partnership interests,
redemption of all CALP special limited partner-
ship interests and retirement of CALP's senior
bank debt
Capital Marcus Cable Capital Corporation
Capital II Marcus Cable Capital Corporation II
Capital III Marcus Cable Capital Corporation III
Company Marcus Cable Company, L.P. and subsidiaries
CPST Cable Programming Service Tier
EBITDA Earnings Before Interest, Taxes, Depreciation
and Amortization
FCC Federal Communications Commission
Goldman Sachs Goldman, Sachs & Co.
LIBOR London InterBank Offered Rate
Maryland Cable Maryland Cable Partners, L.P.
Maryland Cable Agreement The management agreement between Operating
and Maryland Cable
Maryland Cable System Cable system owned by Maryland Cable (also the
"Managed System")
MCC Marcus Cable Company, L.P. and subsidiaries
MCA Marcus Cable Associates, L.P.
MCALP Marcus Cable of Alabama, L.P. (formerly "CALP")
MCDM Marcus Cable of Delaware and Maryland, L.P.
MCP Marcus Cable Partners, L.P.
Operating Marcus Cable Operating Company, L.P.
Operating Partnerships MCP, MCDM, MCALP and MCA
Sammons Sammons Communications, Inc. and certain of its
subsidiaries
Sammons Acquisition The November 1, 1995 purchase of the Sammons
Systems
Sammons Systems Certain cable television systems purchased from
Sammons
San Angelo Systems Certain cable television systems in and around
San Angelo, Texas which were divested on June 30,
1995
Senior Credit Facility $1,100,000,000 Credit Agreement among Operating,
MCC, Banque Paribas, Chemical Bank, Citibank,
N.A., The First National Bank of Boston, Goldman
Sachs, Union Bank and certain other lenders
referred to therein, dated as of August 31, 1995
SFAS Statement of Financial Accounting Standard
<PAGE>
<PAGE> 4
MARCUS CABLE COMPANY, L.P. AND SUBSIDIARIES
Consolidated Balance Sheets
(in thousands)
December 31, June 30,
Assets 1995 1996
------ ---- ----
(unaudited)
Current assets:
Cash and cash equivalents $ 17,409 $ 19,052
Accounts receivable, net of allowance
of $1,564 and $902, respectively 16,946 12,503
Prepaid expenses and other 1,860 3,073
--------- ---------
Total current assets 36,215 34,628
Property and equipment, net (note 2) 538,452 550,745
Other assets, net (note 3) 1,185,387 1,136,883
--------- ---------
$1,760,054 $1,722,256
========= =========
Liabilities and Partners' Capital
---------------------------------
Current liabilities:
Current maturities of long-term
debt (note 6) $ 339 $ 303
Note payable (note 4) --- 10,000
Accrued liabilities (note 5) 50,350 45,012
Accrued interest 12,734 11,171
--------- ---------
Total current liabilities 63,423 66,486
Long-term debt (note 6) 1,407,551 1,421,445
Subsidiary limited partner interests (246) (246)
Partners' capital 289,326 234,571
Commitments and contingencies --- ---
--------- ---------
$1,760,054 $1,722,256
========= =========
See accompanying notes to the consolidated financial statements.
<PAGE>
<PAGE> 5
MARCUS CABLE COMPANY, L.P. AND SUBSIDIARIES
Consolidated Statements of Operations
(unaudited)
(in thousands)
Three months ended Six months ended
June 30, June 30,
1995 1996 1995 1996
---- ---- ---- ----
Revenues:
Cable services $ 37,593 $ 106,424 $ 73,724 $ 208,573
Management fees (note 7) 951 579 1,860 1,146
------ ------- ------ -------
Total revenues 38,544 107,003 75,584 209,719
Operating expenses:
Selling, service and system
management 13,130 39,285 25,817 78,350
General and administrative 6,134 17,963 12,059 35,754
Depreciation and amortization 17,752 39,806 35,945 78,899
------ ------ ------ -------
37,016 97,054 73,821 193,003
------ ------ ------ -------
Operating income 1,528 9,949 1,763 16,716
Other (income) expenses:
Gain on divestiture of cable
system (26,435) --- (26,435) ---
Interest expense 17,011 35,785 33,298 71,645
Interest income (188) (105) (416) (179)
------ ------ ------ ------
(9,612) 35,680 6,447 71,466
------ ------ ------ ------
Income (loss) before extra-
ordinary item 11,140 (25,731) (4,684) (54,750)
Extraordinary item - loss on early
retirement of debt 7,542 --- 7,542 ---
------ ------ ------ ------
Net income (loss) $ 3,598 $ (25,731) $(12,226) $ (54,750)
====== ====== ====== ======
See accompanying notes to the consolidated financial statements.
<PAGE>
<PAGE> 6
MARCUS CABLE COMPANY, L.P. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(unaudited)
(in thousands)
Six months ended
June 30,
1995 1996
---- ----
Cash flows from operating activities:
Net loss $ (12,226) $ (54,750)
Adjustments to reconcile net loss to net
cash provided by operating activities:
Extraordinary item - loss on early
retirement of debt 7,542 ---
Gain on divestiture of cable television
system (26,435) ---
Depreciation and amortization 35,945 78,899
Amortization of debt issuance costs 755 1,608
Accretion of discount on notes 16,588 29,023
Changes in assets and liabilities, net
of effects of acquisitions:
Accounts receivable (476) 4,443
Prepaid expenses (260) (1,213)
Other assets (721) (79)
Accrued interest payable 175 (1,563)
Accounts payable and accrued liabilities (3,011) (5,327)
------- -------
Net cash provided by operating
activities 17,876 51,041
Cash flows from investing activities:
Acquisitions of cable systems and
franchises, net of cash acquired (325,541) (876)
Net proceeds from divestiture of cable
television systems 65,063 ---
Investment in CALP (1,020) ---
Additions to property and equipment (10,956) (43,346)
------- ------
Net cash used in investing
activities (272,454) (44,222)
Cash flows from financing activities:
Contributions by limited partners, net of
syndication costs 107,425 ---
Proceeds from note payable --- 10,000
Proceeds from long-term debt 385,003 ---
Repayment of long-term debt (219,050) (15,000)
Payment of debt issuance costs (14,838) ---
Payment of capital lease obligations (110) (176)
------- ------
Net cash provided by (used in)
financing activities 258,430 (5,176)
------- ------
Net increase in cash and cash equivalents 3,852 1,643
Cash and cash equivalents at beginning of period 5,328 17,409
------- ------
Cash and cash equivalents at end of period $ 9,180 $ 19,052
======= ======
Supplemental disclosure of cash flow information:
Interest paid $ 15,780 $ 42,577
====== ======
See accompanying notes to the consolidated financial statements.
<PAGE>
<PAGE> 7
MARCUS CABLE COMPANY, L.P. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) General
MCC is a Delaware limited partnership formed on January 17,
1990 for the purpose of acquiring, operating and developing
cable television systems. MCC derives its primary source of
revenues by providing various levels of cable television
programming and services to residential and business
customers. MCC's operations are conducted through
Operating, an operating holding company in which MCC serves
as the general partner with a 99.8% ownership interest.
Operating in turn conducts its operations through the
Operating Partnerships, in which it, directly or indirectly,
serves as the general partner and owns a greater than 99.0%
interest.
(b) BASIS OF PRESENTATION
The consolidated financial statements include the accounts of
MCC, Capital, Capital II, Capital III, Operating and the
Operating Partnerships. All significant intercompany accounts
and transactions have been eliminated in consolidation.
(c) INTERIM FINANCIAL INFORMATION
In the opinion of management, the accompanying unaudited
interim consolidated financial information of the Company
contains all adjustments, consisting only of those of a
recurring nature, necessary to present fairly (i) the
Company's financial position as of June 30, 1996, (ii) the
results of its operations for the three months and six
months ended June 30, 1995 and 1996 and (iii) its cash flows
for the six months ended June 30, 1995 and 1996. These
financial statements are for interim periods and do not
include all of the detail normally provided in annual
financial statements and should be read in conjunction with
the consolidated financial statements of the Company for the
year ended December 31, 1995, included in the Company's
Annual Report on Form 10-K.
(d) RECLASSIFICATIONS
Certain reclassifications have been made to the prior
periods' balances to conform to the current year presentation.
<PAGE>
<PAGE> 8
(2) PROPERTY AND EQUIPMENT
Property and equipment consists of the following (in thousands):
December 31, June 30,
1995 1996
Cable systems $ 567,521 $ 607,139
Vehicles and other 19,845 23,488
Land and buildings 10,364 11,336
------- -------
$ 597,730 $ 641,963
Accumulated depreciation (59,278) (91,218)
------- -------
$ 538,452 $ 550,745
======= =======
(3) OTHER ASSETS
Other assets consist of the following (in thousands):
December 31, June 30,
1995 1996
Franchise rights $ 1,181,243 $ 1,181,243
Going concern value of acquired
cable systems 45,856 45,914
Noncompetition agreements 32,633 32,633
Debt issuance costs 43,246 43,299
Other 1,071 957
--------- ---------
$ 1,304,049 $ 1,304,046
Accumulated amortization (118,662) (167,163)
--------- ---------
$ 1,185,387 $ 1,136,883
========= =========
(4) NOTE PAYABLE
On February 15, 1996, the Company entered into a $10,000,000 note
payable with a bank, the proceeds of which were used to reduce
borrowings under the Senior Credit Facility, thus increasing the
Company's available borrowings. The interest rate on the note
payable is lower than the interest rate on the Senior Credit
Facility, and is based on the Federal Funds rate plus a margin
ranging from 1.00% to 1.20%. The note payable can be repaid at
any time.
<PAGE>
<PAGE> 9
(5) ACCRUED LIABILITIES
Accrued liabilities consist of the following (in thousands):
December 31, June 30,
1995 1996
Accrued property taxes $ 3,552 $ 3,725
Accrued acquisition costs 3,438 3,438
Accrued programming costs 8,371 8,724
Accrued franchise fees 8,730 5,911
Accrued operating liabilities 18,916 17,989
Other accrued liabilities 7,343 5,225
------ ------
$ 50,350 $ 45,012
====== ======
(6) LONG-TERM DEBT
The Company has outstanding borrowings under long-term debt
arrangements as follows (in thousands):
December 31, June 30,
1995 1996
Senior Credit Facility $ 885,000 $ 870,000
13 1/2% Senior Subordinated
Discount Notes 258,979 276,459
14 1/4% Senior Discount Notes 162,027 173,570
11 7/8% Senior Debentures 100,000 100,000
Capital leases 1,884 1,719
--------- ---------
1,407,890 1,421,748
Less current maturities 339 303
--------- ---------
$ 1,407,551 $ 1,421,445
========= =========
Amounts outstanding under the Senior Credit Facility bear interest
at either the i) Eurodollar rate, ii) prime rate or iii) CD base
rate, in each case plus a margin ranging up to 2.75% subject to
certain adjustments based on the ratio of Operating's total debt
to EBITDA, as defined. At June 30, 1996, borrowings under the
Senior Credit Facility bore interest at an average interest rate
of 7.80%. The Company pays a commitment fee ranging from .250% to
.375% on the unused commitment under the Senior Credit Facility.
To reduce the impact of changes in interest rates on its floating
rate long-term debt, the Company has entered into certain interest
rate swap agreements with certain of the participating banks under
the Senior Credit Facility. At June 30, 1996, interest rate swap
agreements covering a notional balance of $650,000,000 are
outstanding. These outstanding swap agreements mature during 1997
and 1998 and require the Company to pay a fixed rate of 5.77% to
5.81%, plus the applicable interest rate margin, while the
counterparty pays a floating rate based on one or three-month
LIBOR. Extensions are available within the swap agreements at the
option of the counterparties.
<PAGE>
<PAGE> 10
As interest rates change under the interest rate swap agreements,
the differential to be paid or received is recognized as an
adjustment to interest expense. The Company is not exposed to
credit loss as its interest rate swap agreements are with certain
of the participating banks under the Company's Senior Credit
Facility. During the three months and six months ended June 30,
1996, the Company incurred additional costs under its interest
rate swap agreements of approximately $465,000 and $725,000,
respectively, as compared to one or three month LIBOR borrowing
rates.
(7) RELATED PARTY TRANSACTIONS
Affiliates of Goldman Sachs own limited partnership interests in
MCC. Maryland Cable, which is controlled by an affiliate of
Goldman Sachs, owns the Maryland Cable System which serves
customers in and around Prince Georges County, Maryland.
Operating manages the Maryland Cable System under the Maryland
Cable Agreement, which was entered into in September of 1994.
Operating earns a management fee, payable monthly, equal to 4.7%
of the revenues of Maryland Cable as well as certain reimbursable
expenses. Pursuant to such agreement, Operating earned management
fees of approximately $579,000 and $1,146,000 during the three
month and six month periods ended June 30, 1996, respectively.
This management agreement will terminate upon the sale of Maryland
Cable (see note 8).
(8) SUBSEQUENT EVENTS
On July 8, 1996, the Company acquired the assets of Futurevision
Cable Systems of Brookhaven for a purchase price of approximately
$2,600,000, subject to working capital adjustments. The system
serves 2,500 customers in and around the city of Brookhaven,
Mississippi.
On July 31, 1996, the Company acquired the assets of Frankfort
Cable Communications, Inc., which serve approximately 5,600
customers in and around the city of Frankfort, Indiana, for a
purchase price of approximately $6,700,000, subject to working
capital adjustments.
On July 30, 1996, Maryland Cable entered into an agreement to sell
all of its assets to an affiliate of Jones Intercable, Inc. The
acquisition is subject to various governmental approvals and is
expected to close on or around the end of 1996.
On August 1, 1996, the Company entered into an agreement with an
unrelated third party to sell its cable television systems serving
12,600 customers in the state of Washington. The sale is expected
to close in the fourth quarter of 1996.
<PAGE>
<PAGE> 11
<TABLE>
<CAPTION>
MARCUS CABLE COMPANY, L.P. AND SUBSIDIARIES
Consolidation Schedule - Balance Sheet Information
As of June 30, 1996
(in thousands)
(Unaudited)
Combined Operating
Operating Capital Elimin- Consol- Capital Elimin-
Partnerships II Operating ations idated Capital III MCC ations Company
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Current assets:
Cash and cash equivalents 10,600 1 7,695 -- 18,296 1 1 754 -- 19,052
Accounts receivable, net 45,955 -- 2,783 (36,235) 12,503 -- -- -- -- 12,503
Prepaid expenses and other 2,056 -- 1,017 -- 3,073 -- -- -- -- 3,073
------ ------ ------ ------ ------ ---- ---- ----- ----- -------
Total current assets 58,611 1 11,495 (36,235) 33,872 1 1 754 -- 34,628
Property and equipment, net 545,928 -- 4,817 -- 550,745 -- -- -- -- 550,745
Other assets, net 1,137,176 -- 1,497,784 (1,496,060) 1,139,440 -- -- 3,901 (6,458) 1,136,883
Investment in subsidiary -- -- 235,371 (235,371) -- -- -- 506,457 (506,457) --
------ ------ ------ ------ ------ ---- ---- ----- ----- -------
Total assets 1,742,255 1 1,749,467 (1,767,666) 1,724,057 1 1 511,112 (512,915) 1,722,256
====== ====== ====== ====== ====== ==== ==== ====== ====== =======
Current liabilities:
Current maturities of long-
term debt 81 -- 222 -- 303 -- -- -- -- 303
Note payable -- -- 10,000 -- 10,000 -- -- -- -- 10,000
Accrued liabilities 68,897 -- 77,272 (94,699) 51,470 -- -- -- (6,458) 45,012
Accrued interest 11,171 -- 8,202 (11,171) 8,202 -- -- 2,969 -- 11,171
------ ------ ------ ------ ------ ---- ---- ----- ----- -------
Total current liabilities 80,149 -- 95,696 (105,870) 69,975 -- -- 2,969 (6,458) 66,486
Long-term debt 1,426,736 -- 1,147,562 (1,426,425) 1,147,873 -- -- 273,572 -- 1,421,445
Subsidiary limited
partner interests -- -- (246) -- (246) -- -- -- -- (246)
Partners' capital 235,370 1 506,455 (235,371) 506,455 1 1 234,571 (506,457) 234,571
------ ------ ------ ------ ------ ---- ---- ----- ----- -------
Total liabilities and
partners' capital 1,742,255 1 1,749,467 (1,767,666) 1,724,057 1 1 511,112 (512,915) 1,722,256
====== ====== ====== ====== ====== ===== ===== ====== ====== =======
</TABLE)
<PAGE>
<PAGE> 12
</TABLE>
<TABLE>
<CAPTION>
MARCUS CABLE COMPANY, L.P. AND SUBSIDIARIES
Consolidating Schedule - Statement of Operations Information
For the six months ended June 30, 1996
(in thousands)
(Unaudited)
Combined Operating
Operating Capital Elimin- Consol- Capital Elimin-
Partnerships II Operating ations idated Capital III MCC ations Company
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues:
Cable services 208,573 -- -- -- 208,573 -- -- -- -- 208,573
Management fees -- -- 1,146 -- 1,146 -- -- -- -- 1,146
------ ------ ------ ------ ------ ---- ---- ----- ----- -------
Total revenues 208,573 -- 1,146 -- 209,719 -- -- -- -- 209,719
Operating expenses:
Selling, service and
system management 77,480 -- 870 -- 78,350 -- -- -- -- 78,350
General and administrative 29,971 -- 5,783 -- 35,754 -- -- -- -- 35,754
Allocated corporate costs 5,685 -- (5,685) -- -- -- -- -- -- --
Depreciation and
amortization 78,465 -- 434 -- 78,899 -- -- -- -- 78,899
------ ------ ------ ------ ------ ---- ---- ----- ----- -------
191,601 -- 1,402 -- 193,003 -- -- -- -- 193,003
------ ------ ------ ------ ------ ---- ---- ----- ----- -------
Operating income (loss) 16,972 -- (256) -- 16,716 -- -- -- -- 16,716
Other (income) expense:
Interest expense 71,899 -- 53,771 (71,865) 53,805 -- -- 17,840 -- 71,645
Interest income 135 -- (72,166) 71,865 (166) -- -- (13) -- (179)
Equity earnings of
subsidiaries -- -- 55,062 (55,062) -- -- -- 36,923 (36,923) --
------ ------ ------ ------ ------ ---- ---- ----- ----- -------
72,034 -- 36,667 (55,062) 53,639 -- -- 54,750 (36,923) 71,466
------ ------ ------ ------ ------ ---- ---- ----- ----- -------
Net loss (55,062) -- (36,923) 55,062 (36,923) -- -- (54,750) 36,923 (54,750)
====== ====== ====== ====== ====== ==== ==== ====== ====== =======
</TABLE)
<PAGE>
<PAGE> 13
ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the attached
consolidated financial statements and notes thereto, and with the
Company's audited consolidated financial statements and notes thereto
for the fiscal year ended December 31, 1995, included in the Company's
Annual Report on Form 10-K.
RESULTS OF OPERATIONS
Operating results for the three months and six months ended June 30,
1995 consist of the results of MCC's operations in Wisconsin, Minnesota,
Delaware, Maryland and San Angelo, Texas, along with management fee
revenue from managed systems in Maryland and Alabama. The Company sold
the San Angelo, Texas systems on June 30, 1995, acquired the managed
system in Alabama on August 31, 1995 and acquired cable television
systems from Sammons on November 1, 1995. Therefore, operating results
for the three months and six months ended June 30, 1996 do not include
the results of operations for the cable television systems in San
Angelo, Texas or the management fees for the previously managed system
in Alabama.
SIX MONTHS ENDED JUNE 30, 1996 COMPARED TO THE SIX MONTHS ENDED JUNE 30,
1995
Revenues increased from $75,584,000 in the first six months of 1995 to
$209,719,000 for the six months ended June 30, 1996. The CALP and
Sammons Acquisitions resulted in increased revenues of $134,903,000, net
of a decrease in management fees earned by Operating of $802,000. The
divestiture of the San Angelo Systems on June 30, 1995 resulted in a
$6,022,000 decrease in revenues. The remaining increase in revenues was
caused by continued customer growth as well as increased rates. Rates
charged to customers for certain services were increased for a majority
of the Company's systems effective June 1, 1996 resulting in increased
revenues for the second quarter of 1996. The Company's basic customers
and pay units increased from 425,781 and 269,078, respectively, at June
30, 1995 to 1,177,153 and 650,229, respectively, at June 30, 1996 due to
the CALP and Sammons Acquisitions, continued marketing and sales
efforts, and the extension of existing plant infrastructure to pass
additional dwelling units, offset by the divestiture of the San Angelo
Systems.
Selling, service and system management expenses increased from
$25,817,000 for the six months ended June 30, 1995 to $78,350,000 for
the six months ended June 30, 1996, primarily due to a $52,307,000
increase from the CALP and Sammons Acquisitions, offset by a $2,238,000
decrease from the divestiture of the San Angelo Systems. The remaining
increase resulted primarily from growth within the Company's existing
systems, increased marketing efforts, the development of advertising
sales efforts and increased rates charged by certain programming
vendors. However, effective April 1, 1996, the Company became a member
of Telesynergies, a cable television cooperative buying venture which
has begun to produce programming savings in the second quarter of 1996.
<PAGE>
<PAGE> 14
General and administrative expenses increased from $12,059,000 for the
six months ended June 30, 1995 to $35,754,000 for the six months ended
June 30, 1996. The $21,474,000 increase from the CALP and Sammons
Acquisitions was offset by a $718,000 decrease from the divestiture of
the San Angelo Systems. The remaining increase resulted primarily from
the necessary expansion of the home office operations in order to manage
the increased size of the business.
Depreciation and amortization expenses increased from $35,945,000 for
the six months ended June 30, 1995 to $78,899,000 for the six months
ended June 30, 1996 due primarily to the CALP and Sammons Acquisitions
offset by a $4,072,000 decrease from the divestiture of the San Angelo
Systems. Interest expense increased from $33,298,000 for the six months
ended June 30, 1995 to $71,645,000 for the six months ended June 30,
1996 due to the inclusion of interest expense relating to the borrowings
under the 14 1/4% Notes and the Senior Credit Facility, which became
effective on June 9, 1995 and August 31, 1995, respectively. Borrowings
increased from $509,805,000 at June 30, 1995 to $1,430,029,000 at June
30, 1996. The weighted average interest rate for total debt outstanding
during the six months ended June 30, 1996 was 9.98%, compared with
11.69% for the six months ended June 30, 1995.
The difference between loss before extraordinary item for the six months
ended June 30, 1995 of $4,684,000, compared to a loss before
extraordinary item of $54,750,000 for the six months ended June 30, 1996
was due to the net effects of the $26,435,000 gain from the sale of the
San Angelo cable television systems in 1995 and the increases in
depreciation, amortization and interest expense as discussed above. The
extraordinary loss of $7,542,000 recorded during the second quarter of
1995 related to the write-off of debt issuance costs from the early
retirement of debt.
As a result of the foregoing, EBITDA increased from $37,708,000 in the
first six months of 1995 to $95,615,000 in the first six months of 1996.
THREE MONTHS ENDED JUNE 30, 1996 COMPARED TO THE THREE MONTHS ENDED JUNE
30, 1995
Revenues increased from $38,544,000 in the three months ended June 30,
1995 to $107,003,000 in the three months ended June 30, 1996. The CALP
and Sammons Acquisitions resulted in increased revenues of $69,027,000,
net of a decrease in management fees earned by Operating of $409,000.
The divestiture of the San Angelo Systems on June 30, 1995 resulted in a
$3,051,000 decrease in revenues. The remaining increase in revenues was
caused by continued customer growth as well as increased rates. Rates
charged to customers for certain services were increased for a majority
of the Company's systems effective June 1, 1996 resulting in increased
revenues for the second quarter of 1996. The Company's basic customers
and pay units increased from 425,781 and 269,078, respectively, at June
30, 1995 to 1,177,153 and 650,229, respectively, at June 30, 1996 due to
the CALP and Sammons Acquisitions, continued marketing and sales
efforts, and the extension of existing plant infrastructure to pass
additional dwelling units, offset by the divestiture of the San Angelo
Systems.
<PAGE>
<PAGE> 15
Selling, service and system management expenses increased from
$13,130,000 for the three months ended June 30, 1995 to $39,285,000 for
the three months ended June 30, 1996, primarily due to a $26,491,000
increase from the CALP and Sammons Acquisitions, offset by a $1,148,000
decrease from the divestiture of the San Angelo Systems. The remaining
increase resulted primarily from growth within the Company's existing
systems, increased marketing efforts, the development of advertising
sales efforts and increased rates charged by certain programming
vendors. However, programming rates are expected to decrease in the
future as the Telesynergies discounts will phase in over time.
General and administrative expenses increased from $6,134,000 for the
three months ended June 30, 1995 to $17,963,000 for the three months
ended June 30, 1996. The $10,781,000 increase from the CALP and Sammons
Acquisitions was offset by a $339,000 decrease from the divestiture of
the San Angelo Systems. The remaining increase resulted primarily from
the necessary expansion of the home office operations in order to manage
the increased size of the business.
Depreciation and amortization expenses increased from $17,752,000 for
the three months ended June 30, 1995 to $39,806,000 for the three months
ended June 30, 1996 due primarily to the CALP and Sammons Acquisitions
offset by a $2,050,000 decrease from the divestiture of the San Angelo
Systems. Interest expense increased from $17,011,000 for the three
months ended June 30, 1995 to $35,785,000 for the three months ended
June 30, 1996 due to the inclusion of interest expense relating to the
borrowings under the 14 1/4% Notes and the Senior Credit Facility, which
became effective on June 9, 1995 and August 31, 1995, respectively.
Borrowings, excluding capital leases, increased from $509,805,000 at
June 30, 1995 to $1,430,029,000 at June 30, 1996. The weighted average
interest rate for total debt outstanding during the three months ended
June 30, 1996 was 9.94%, compared with 11.78% for the three months ended
June 30, 1995.
The difference between income before extraordinary item for the three
months ended June 30, 1995 of $11,140,000, compared to a loss before
extraordinary item of $25,731,000 for the three months ended June 30,
1996 was due to the net effects of the $26,435,000 gain from the sale of
the San Angelo cable television systems in 1995 and the increases in
depreciation, amortization and interest expense as discussed above. The
extraordinary loss of $7,542,000 recorded during the second quarter of
1995 related to the write-off of debt issuance costs from the early
retirement of debt.
As a result of the foregoing, EBITDA increased from $19,280,000 for the
second quarter of 1995 to $49,755,000 in the second quarter of 1996.
LIQUIDITY AND CAPITAL RESOURCES
The Company has grown significantly over the past several years through
acquisitions as well as through upgrading, extending and rebuilding its
existing cable television systems. Since expansion by means of these
methods is capital intensive, the Company has relied upon various
sources of financing to meet its funding needs. These sources have
included contributions from equity investors, borrowings under various
debt instruments and positive cash flows from operations.
<PAGE>
<PAGE> 16
As of June 30, 1996, unreturned capital contributions from equity
investors totaled approximately $493,327,000. The Company has an
aggregate of $1,431,748,000 of indebtedness outstanding in the form of
the 11 7/8% Debentures, 13 1/2% Notes, 14 1/4% Notes, borrowings under its
Senior Credit Facility, note payable and capital lease obligations. The
Company has an additional $228,209,000 of borrowing capacity under its
Revolving Credit Facility. The Company generated cash flows from
operating activities of $27,412,000 and $51,041,000 for the three month
and six month periods ended June 30, 1996, respectively. Funding from
equity contributions, borrowings and cash flow from operations have been
sufficient to meet the Company's debt service, working capital and
capital expenditure requirements.
Certain of the Company's systems will be upgraded or rebuilt to 750 MHz
or 550 MHz band width capacity over the next several years to allow for
additional programming and service offerings. Capital expenditures are
expected to approximate $101,000,000 (or $85 per customer) in 1996 and
include certain upgrade and rebuild projects.
Cash interest is payable monthly and quarterly on borrowings outstanding
under the Company's Senior Credit Facility and semiannually on the 11 7/8%
Debentures. No cash interest is payable on the 13 1/2% Notes until
February 1, 2001 and no cash interest is payable on the 14 1/4% Notes until
December 15, 2000. Maturities of long-term debt total $228,750,000 over
the next four years.
The Company expects to cover both interest and principal payments on its
long-term obligations through internally generated funds. Funds for the
Company's capital expenditure requirements may be provided through
internally generated funds or by borrowings under its Senior Credit
Facility.
RECENT ACCOUNTING PRONOUNCEMENTS
The provisions of SFAS No. 121, "Accounting for the Impairment of Long-
Lived Assets and for Long-Lived Assets to be Disposed Of" is effective
for the Company in 1996. There was no impact on the Company upon
adoption. No other recent accounting pronouncements have been issued
which the Company has not adopted and which are expected to have a
material effect on the Company's consolidated financial statements and
related disclosures.
INFLATION
Based on the FCC's current rate regulation standards, an inflation
factor is included in the benchmark formula in establishing the initial
permitted rate. Subsequent to establishing the initial rate, an annual
rate increase based on the year-end inflation factor is permitted. In
addition to annual rate increases, certain costs over the prescribed
inflation factors, defined by the FCC as "external costs", may be passed
through to customers.
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<PAGE> 17
Certain of the Company's expenses generally increase with inflation.
However, the Company does not believe that its financial results have
been adversely affected by inflation. Periods of high inflation could
have an adverse effect to the extent that increased borrowing costs for
floating rate debt may not be offset by increases in revenues. As of
June 30, 1996, the Company has $230,000,000 of outstanding borrowings
under its Senior Credit Facility and other facilities which are subject
to floating interest rates after considering the Company's interest rate
swap agreements. The rates are based on either the Eurodollar rate,
prime rate, CD base rate or Federal Funds rate, plus a margin ranging up
to 2.75% subject to certain adjustments based on the ratio of
Operating's total debt to EBITDA.
To reduce the impact of changes in interest rates on its floating rate
long-term debt, the Company entered into certain interest rate swap
agreements with certain of the participating banks under the Senior
Credit Facility. At June 30, 1996, interest rate swap agreements
covering a notional balance of $650,000,000 were outstanding. These
outstanding swap agreements mature during 1997 and 1998 and require the
Company to pay a fixed rate of 5.77% to 5.81% plus the applicable
interest rate margin, while the counterparty pays a floating rate based
on one or three-month LIBOR. Extensions are available within the swap
agreements at the option of the counterparties.
REGULATION IN THE CABLE TELEVISION INDUSTRY
On February 1, 1996 Congress passed the 1996 Telecom Act, which was
subsequently signed into law on February 8, 1996. This new law will
alter federal, state and local laws and regulation for
telecommunications providers and services, including the Company. There
are numerous rulemakings to be undertaken by the FCC which will
interpret and implement the 1996 Telecom Act. On April 9, 1996, the FCC
acted to implement the 1996 Telecom Act, adopting an Order and Notice of
Proposed Rulemaking. The Order and Notice amends certain rules to
implement the 1996 Telecom Act, establishes interim rules to govern
implementation of the 1996 Telecom Act pending the adoption of final
rules, and proposes certain final rules. The Order and Notice focuses
principally on rules relating to cable television rate regulation.
Under the 1996 Telecom Act, regulation of CPST's will generally continue
until the statutory date of March 31, 1999. It is not possible at this
time to predict the outcome of such rulemakings. Until the various
required rulemakings are implemented which amend the rules under the
previous cable acts, the Company continues to be subject to the
provisions of the 1992 Cable Act.
Based on the FCC's 13th Order of Reconsideration, operators may adjust
their rates once per year to reflect changes in inflation, external
costs, and the number of regulated channels that are projected for the
coming 12 months. As a result, effective June 1, 1996, the Company has
adjusted rates for a majority of its systems to reflect the estimated
aggregate changes in such costs.
<PAGE>
<PAGE> 18
The Company believes that it has materially complied with all provisions
of the 1992 Cable Act, including the rate setting provisions promulgated
by the FCC. However, in jurisdictions which have chosen not to certify,
refunds covering a one-year period on basic service may be ordered if
the Company is regulated at a later date and is unable to justify its
rates through a benchmark or cost-of-service filing. During the six
month period ended June 30, 1996, there were no rate refunds issued.
There are, however, certain CPST rate complaints still pending at the
FCC. Reviews involving two of the Company's larger systems have been
completed in which the FCC found no errors in the Company's rate
calculations. As a result, the related complaints were denied. If the
FCC, through its pending reviews, determines that the Company's CPST
rates are unreasonable, it has the authority to order the Company to
reduce such rates and to refund to customers any overcharges with
interest occurring from the filing date of the rate complaint at the
FCC. The amount of refunds, if any, which may be payable by the Company
in the event that these systems' rates are successfully challenged by
franchising authorities is not currently estimable.
Because the FCC has not yet resolved pending rate complaints involving
the Company and because franchise authorities may certify in the future,
the overall impact of these regulations and other provisions of the 1992
Cable Act cannot be determined at this time, nor can the ultimate
provisions of the 1996 Telecom Act and its effect on the Company's
business be determined.
<PAGE>
<PAGE> 19
PART II - OTHER INFORMATION
Item 1 - Legal Proceedings
- --------------------------
There were no material legal proceedings instituted during the six
months ended June 30, 1996 to which the Company is a party or of which
any of its property is subject.
Item 2 - Changes in Securities
- ------------------------------
None
Item 3 - Defaults Upon Senior Securities
- ----------------------------------------
None
Item 4 - Submission of Matters to a Vote of Security Holders
- ------------------------------------------------------------
None
Item 5 - Other Information
- --------------------------
None
Item 6 - Exhibits and Reports on Form 8-K
- -----------------------------------------
None
<PAGE>
<PAGE> 20
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
each of the registrants have duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
MARCUS CABLE COMPANY, L.P.
(Registrant)
By: Marcus Cable Properties, L.P., its general partner,
By: Marcus Cable Properties, Inc., its general partner,
August 14, 1996 By: /s/ Jeffrey A. Marcus
Its: President and Chief Executive Officer
By: /s/ Thomas P. McMillin
Its: Senior Vice President and
Chief Financial Officer
MARCUS CABLE OPERATING COMPANY, L.P.
(Registrant)
By: Marcus Cable Company, L.P., its general partner,
By: Marcus Cable Properties, L.P., its general partner,
By: Marcus Cable Properties, Inc., its general partner,
August 14, 1996 By: /s/ Jeffrey A. Marcus
Its: President and Chief Executive Officer
By: /s/ Thomas P. McMillin
Its: Senior Vice President and
Chief Financial Officer
<PAGE>
<PAGE> 21
MARCUS CABLE CAPITAL CORPORATION
(Registrant)
August 14, 1996 By: /s/ Jeffrey A. Marcus
Its: President and Chief Executive Officer
By: /s/ Thomas P. McMillin
Its: Senior Vice President and
Chief Financial Officer
MARCUS CABLE CAPITAL CORPORATION II
(Registrant)
August 14, 1996 By: /s/ Jeffrey A. Marcus
Its: President and Chief Executive Officer
By: /s/ Thomas P. McMillin
Its: Senior Vice President and
Chief Financial Officer
MARCUS CABLE CAPITAL CORPORATION III
(Registrant)
August 14, 1996 By: /s/ Jeffrey A. Marcus
Its: President and Chief Executive Officer
By: /s/ Thomas P. McMillin
Its: Senior Vice President and
Chief Financial Officer
</TABLE>
