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 16, 1997, as supplemented by
Prospectus Supplements Dated May 15, 1997 and August 14, 1997
The date of this Supplement is November 14, 1997
On November 14, 1997, Marcus Cable Company, L.P. filed the attached
Quarterly Report on Form 10-Q for the period ended September 30,
1997.
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 September 30, 1997
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>
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
<TABLE>
INDEX TO QUARTERLY REPORT FORM 10-Q
SEPTEMBER 30, 1997
<CAPTION>
Page No.
<S> <C> <C>
Definitions 3-4
PART I FINANCIAL INFORMATION
Item 1: Financial Statements - Marcus Cable Company, L.P. and
Subsidiaries
Consolidated Balance Sheets as of
September 30, 1997 and December 31, 1996 5
Consolidated Statements of Operations for the
Three and Nine months Ended September 30, 1997
and 1996 6
Consolidated Statements of Cash Flows for the
Nine months Ended September 30, 1997 and 1996 7
Notes to the Consolidated Financial Statements 8-12
Consolidating Schedules 13-14
</TABLE>
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 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.
The Private Securities Litigation Reform Act of 1995 provides a
"safe harbor" for forward looking statements. Certain information
included in this Form 10-Q contains statements that are forward
looking, such as statements relating to the effects of future
regulation, future capital commitments and future acquisitions.
Such forward-looking information involves important risks and
uncertainties that could significantly affect expected results in
the future from those expressed in any forward-looking statements
made by, or on behalf of the Company. These risks and uncertainties
include, but are not limited to, uncertainties relating to economic
conditions, acquisitions and divestitures, government and regulatory
policies, the pricing and availability of equipment, materials,
inventories and programming, technological developments and changes
in the competitive environment in which the Company operates.
Investors are cautioned that all forward-looking statements involve
risks and uncertainties.
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Item 2: Management's Discussion and Analysis of Financial
Condition and Results of Operations 15-23
PART II OTHER INFORMATION
Item 1: Legal Proceedings 24
Item 2: Changes in Securities 24
Item 3: Defaults Upon Senior Securities 24
Item 4: Submission of Matters to a Vote of Security Holders 24
Item 5: Other Information 24
Item 6: Exhibits and Reports on Form 8-K 24
</TABLE>
<PAGE>
<TABLE>
DEFINITIONS
When used herein, the following terms will have the meaning
indicated.
<CAPTION>
Term Definition
<S> <C>
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 ConsumerProtection
and Competition Act of 1992
1996 Telecom Act Telecommunications Act of 1996
Cable System Cash Flow System cash flow before corporate
expenses and depreciation and
amortization
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
Harron Harron Communications, Corp. and
certain of its subsidiaries
Harron Systems Certain cable television systems
purchased from Harron
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
MCC Marcus Cable Company, L.P. and
subsidiaries
MCA Marcus Cable Associates, L.P.
MCALP Marcus Cable of Alabama, L.P.
MCDM Marcus Cable of Delaware and
Maryland, L.P.
MCP Marcus Cable Partners, L.P.
Operating Marcus Cable Operating Company,
L.P.
Operating Partnerships MCA, MCALP, MCDM and MCP
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Sammons Sammons Communications, Inc. and
certain of its subsidiaries
Sammons Systems Certain cable television systems
purchased from Sammons
Senior Credit Facility $1,150,000,000 Credit Agreement
among Operating, MCC, Banque
Paribas, Chase Manhattan 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, as amended
SFAS Statement of Financial Accounting
Standard
Systems Cable television systems owned by
the Company
Time Warner Time Warner Entertainment Company,
L.P. and certain of its
subsidiaries
Time Warner Systems Certain cable television systems
received in trade with Time Warner
<PAGE>
</TABLE>
<TABLE>
MARCUS CABLE COMPANY, L.P. AND SUBSIDIARIES
Consolidated Balance Sheets
(in thousands)
<CAPTION>
September 30, December 31,
Assets 1997 1996
(unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 258 $ 6,034
Accounts receivable, net
of allowance of $1,503 and
$1,900, respectively 20,679 17,043
Prepaid expenses and other 2,228 2,432
----------- -----------
Total current assets 23,165 25,509
Property and equipment, net (note 3) 667,925 578,507
Other assets, net (note 4) 1,027,658 1,083,534
----------- -----------
$ 1,718,748 $ 1,687,550
=========== ===========
Liabilities and Partners' Capital
Current liabilities:
Current maturities of
long-term debt (note 5) $ 65,636 $ 41,819
Accrued liabilities 55,186 49,405
Accrued interest 9,163 10,664
----------- -----------
Total current liabilities 129,985 101,888
Long-term debt (note 5) 1,478,852 1,396,652
Subsidiary limited partner interests (246) (246)
Partners' capital 110,157 189,256
Commitments and contingencies --- ---
----------- -----------
$ 1,718,748 $ 1,687,550
=========== ===========
</TABLE>
See accompanying notes to the consolidated financial statements.
<PAGE>
<TABLE>
MARCUS CABLE COMPANY, L.P. AND SUBSIDIARIES
Consolidated Statements of Operations
(unaudited)
(in thousands)
<CAPTION>
Three months ended Nine months ended
September 30, September 30,
1997 1996 1997 1996
<S> <C> <C> <C> <C>
Revenues:
Cable services $123,086 $111,101 $348,438 $319,674
Management
fees (note 6) 75 588 5,539 1,734
-------- -------- -------- --------
Total revenues 123,161 111,689 353,977 321,408
-------- -------- -------- --------
Operating expenses:
Selling, service
and system
management 45,301 39,561 130,146 117,911
General and
administrative 18,332 18,031 53,130 53,785
Depreciation and
amortization 48,921 42,097 138,095 120,996
-------- -------- -------- --------
112,554 99,689 321,371 292,692
-------- -------- -------- --------
Operating income 10,607 12,000 32,606 28,716
-------- -------- -------- --------
Other expenses:
Interest
expense, net 38,358 36,808 111,705 108,279
-------- -------- -------- --------
Net loss $(27,751) $(24,808) $(79,099) $(79,563)
======== ======== ======== ========
</TABLE>
See accompanying notes to the consolidated financial statements.
<PAGE>
<TABLE>
MARCUS CABLE COMPANY, L.P. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(unaudited)
(in thousands)
<CAPTION>
Nine months ended
September 30,
1997 1996
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (79,099) $ (79,563)
Adjustments to reconcile net
loss to net cash provided by
operating activities:
Depreciation and amortization 138,095 120,996
Amortization of debt issuance costs 2,920 2,444
Accretion of discount on notes 50,812 44,400
Changes in assets and liabilities,
net of effects of acquisitions:
Accounts receivable (3,636) 2,203
Prepaid expenses 204 (2,150)
Other assets (186) (89)
Accrued interest (1,501) 1,420
Accrued liabilities 5,781 (3,462)
---------- ----------
Net cash provided by
operating activities 113,390 86,199
---------- ----------
Cash flows from investing activities:
Acquisitions of cable systems and
franchises, net of cash acquired (34,551) (10,222)
Additions to property and equipment (137,671) (73,925)
---------- ----------
Net cash used in
investing activities (172,222) (84,147)
---------- ----------
Cash flows from financing activities:
Proceeds from borrowings 170,000 20,338
Repayment of long-term debt (115,081) (25,000)
Payment of debt issuance costs (1,464) ---
Payment of capital lease obligations (399) (306)
---------- ----------
Net cash provided by (used in)
financing activities 53,056 (4,968)
---------- ----------
Net decrease in cash
and cash equivalents (5,776) (2,196)
Cash and cash equivalents at
beginning of period 6,034 17,409
---------- ---------
Cash and cash equivalents at
end of period $ 258 $ 14,493
========== =========
Supplemental disclosure of cash
flow information:
Interest paid $ 59,398 $ 60,228
========== =========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
MARCUS CABLE COMPANY, L.P. AND SUBSIDIARIES
Notes to the 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 a general partner and in which MCC owns a
greater than 99.00% 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 99.00%
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) Franchise Fees
Local governmental authorities impose franchise fees on
the Systems ranging up to a federally mandated maximum of
5.0% of gross revenues. On a monthly basis, such fees
are collected from the Systems' customers. Historically,
franchise fees in certain of the Systems (i.e., the
former Sammons Systems) were not separately itemized on
customers' bills. Such fees were considered part of the
monthly charge for basic services and equipment, and
therefore were reported as revenue and expense in the
Company's financial results. The Company began the
process of itemizing such fees on all customers' bills to
conform with the collection of, and accounting for,
franchise fees in the remaining Systems in November 1996
and completed the process during the first quarter of
1997. As a result, beginning in the first quarter of
1997, such fees are no longer included as revenue or as
general and administrative expenses. The net accounting
effect of this change is a quarterly reduction in revenue
of approximately $1,700,000 and a corresponding reduction
in general and administrative expenses, versus the
comparable period in 1996.
(d) 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 September 30, 1997,
(ii) the results of its operations for the three and nine
<PAGE>
months ended September 30, 1997 and 1996 and (iii) its
cash flows for the nine months ended September 30, 1997
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,
1996, included in the Company's Annual Report on Form 10-K.
(2) Acquisition
On July 1, 1997, the Company purchased cable television
systems serving approximately 22,000 customers located near
Dallas-Fort Worth, Texas for an aggregate purchase price of
$34,500,000. The purchase was financed with funds available
under the Senior Credit Facility. The acquisition was
accounted for as a purchase and, accordingly, the purchase
price was allocated to tangible and intangible assets based on
estimated fair market values at the date of acquisition.
Operating results of the acquired company are included in the
accompanying financial statements from the date of
acquisition. Net assets acquired as a result of this
acquisition are summarized as follows (in thousands):
<TABLE>
<CAPTION>
<S> <C>
Property and Equipment $ 20,000
Noncompetition agreement 1,000
Franchise rights 13,500
-----------
Total purchase price $ 34,500
===========
</TABLE>
(3) Property and Equipment
<TABLE>
Property and equipment consists of the following (in
thousands):
<CAPTION>
September 30, December 31,
1997 1996
<S> <C> <C>
Cable and Electronics $ 484,500 $ 440,513
Other 383,790 269,580
----------- ----------
868,290 710,093
Accumulated Depreciation (200,365) (131,586)
----------- ----------
$ 667,925 $ 578,507
=========== ==========
</TABLE>
<PAGE>
(4) Other Assets
<TABLE>
Other assets consist of the following (in thousands):
<CAPTION>
September 30, December 31,
1997 1996
<S> <C> <C>
Franchise rights $ 1,188,692 $ 1,175,009
Going concern value of
acquired cable systems 45,969 45,969
Noncompetition agreements 32,914 31,914
Debt issuance costs 44,964 43,500
Other 1,123 1,069
----------- -----------
1,313,662 1,297,461
Accumulated amortization (286,004) (213,927)
----------- -----------
$ 1,027,658 $ 1,083,534
=========== ===========
</TABLE>
(5) Long-term Debt
<TABLE>
The Company had outstanding borrowings under long-term debt
arrangements as follows (in thousands):
<CAPTION>
September 30, December 31,
1997 1996
<S> <C> <C>
Senior Credit Facility $ 910,000 $ 855,000
13 1/2% Senior Subordinated
Discount Notes, due
August 1, 2004 325,558 295,119
14 1/4% Senior Discount Notes,
Due December 15, 2004 206,235 185,862
11 7/8% Senior Debentures, due
October 1, 2005 100,000 100,000
Note Payable 206 287
Capital leases 2,489 2,203
----------- -----------
1,544,488 1,438,471
Less current maturities (65,636) (41,819)
----------- -----------
$ 1,478,852 $ 1,396,652
=========== ===========
</TABLE>
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 of up to 2.25%,
subject to certain adjustments based on the ratio of
Operating's total debt to EBITDA. At September 30, 1997,
borrowings under the Senior Credit Facility bore interest at
rates ranging from 6.79% to 8.30% under the Eurodollar and
prime rate options. The Company pays a commitment fee ranging
from 0.250% to 0.375% on the unused commitment under the Senior
Credit Facility.
<PAGE>
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
September 30, 1997, interest rate swap agreements covering a
notional balance of $250,000,000 were outstanding which require
the Company to pay fixed rates ranging from 5.75% to 5.77%,
plus the applicable interest rate margin. These agreements
mature during 1998 and 1999, and allow for the optional
extension by the counterparty for additional periods and
certain of the agreements provide for the automatic termination
in the event that one month LIBOR exceeds 6.75% on any monthly
reset date. The Company has also entered into an interest rate
swap agreement covering an aggregate notional principal amount
of $100,000,000 which matures in the year 2000 whereby the
Company receives one month LIBOR plus 0.07% and is required to
pay the higher of one month LIBOR at either the beginning or
end of the interest period, plus the applicable interest rate
margin. In addition, the Company has entered into interest
rate swap agreements covering an aggregate notional principal
amount of $150,000,000 which mature in the year 2000, with
forward start dates in November 1997. These agreements require
the Company to pay fixed rates of 5.77%, plus the applicable
interest rate margin, and will automatically terminate in the
event that one month LIBOR exceeds 6.75% on any monthly reset
date.
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. During the
three months ended September 30, 1997, the Company recognized
an interest benefit of $20,600 and during the nine months ended
September 30, 1997, the Company recognized additional interest
expense of $566,400 under its interest rate swap agreements.
On March 14, 1997, Operating entered into an agreement to amend
its Senior Credit Facility. The amendment provides for, among
other items, a reduction in the interest rate margins under the
Senior Credit Facility, as well as increased flexibility for
the Company as it relates to investments, permitted lines of
businesses and the incurrence of unsecured indebtedness. The
amendment also resulted in a $50,000,000 increase in the
availability under the Revolving Credit Facility.
(6) Related Party Transactions
Affiliates of Goldman Sachs own limited partnership interests
in MCC. Maryland Cable, which is controlled by an affiliate of
Goldman Sachs, owned the Maryland Cable System which served
customers in and around Prince Georges County, Maryland.
Operating managed the Maryland Cable System under the Maryland
Cable Agreement, which was entered into in September of 1994.
Operating earned a management fee, payable monthly, equal to
4.7% of the revenues of Maryland Cable, and was reimbursed for
certain expenses.
Effective January 31, 1997, the Maryland Cable System was sold
to Jones Communications of Maryland, Inc. Pursuant to the
Maryland Cable Agreement, Operating recognized incentive
management fees of $986,000 in May 1997 and $4,083,000 in
January 1997 in conjunction with the sale. Additional
incentive management fees may be recognized upon dissolution of
Maryland Cable, anticipated to occur during 1998. There is no
<PAGE>
assurance that any of such fees will be realized. Although
Operating is no longer involved in the active management of
those cable television systems, Operating has entered into an
agreement with Maryland Cable to oversee the activities, if
any, of Maryland Cable through the liquidation of the
partnership. Pursuant to such agreement, Operating will earn
a nominal monthly fee. Including the incentive management fees
noted above, Operating earned total management fees of $75,000
and $5,539,000, respectively, during the three month and nine
month periods ended September 30, 1997.
(7) Pending Exchange
On June 20, 1997, the Company entered into a definitive
agreement with Time Warner to exchange cable television systems
in the states of Wisconsin and Indiana serving in aggregate
approximately 125,000 customers. According to the terms of the
agreement, Time Warner will receive systems serving
approximately 55,000 customers, while the Company will receive
systems serving approximately 70,000 customers. In addition to
the contribution of its systems, the Company will pay
$20,000,000 to Time Warner which will be funded with borrowings
under the Senior Credit Facility. This exchange is subject to
regulatory approval and certain closing conditions and is
expected to close by year end.
(8) Subsequent Events
On October 7, 1997, the Company announced that it intends to
offer for sale certain cable television systems that are not
within the six core clusters operated by the Company. Systems
to be sold serve approximately 200,000 customers in
Delaware/Maryland, Virginia, Connecticut, Mississippi,
Louisiana, Illinois, Oklahoma and the panhandle of Texas.
On October 28, 1997, the Company entered into a definitive
agreement to purchase certain cable television systems serving
approximately 23,000 customers in Alabama. The communities
served by these systems are adjacent to the Company's existing
systems in the suburban Birmingham, Alabama area. This
transaction is subject to certain closing conditions, including
governmental and regulatory approval, and is expected to occur
during the first half of 1998. The purchase will be funded
with borrowings under the Senior Credit Facility.
<PAGE>
<TABLE>
MARCUS CABLE COMPANY, L.P. AND SUBSIDIARIES
Consolidating Schedule - Balance Sheet Information
As of September 30, 1997
(unaudited)
(in thousands)
ASSETS
<CAPTION>
Combined
Operating Capital Elimin- Operating Capital Elimin-
Partnerships II Operating ations Consolidated Capital III Company ations Company
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Current assets:
Cash and cash equivalents 3,706 1 (4,205) 0 (498) 1 1 754 0 258
Accounts receivable, net 89,849 0 36,578 (105,748) 20,679 0 0 0 0 20,679
Prepaid expenses and other 1,314 0 914 0 2,228 0 0 0 0 2,228
---------- ----- --------- ---------- ----------- ----- ----- ------- ------- ---------
Total current assets 94,869 1 33,287 (105,748) 22,409 1 1 754 0 23,165
Property and equipment, net 661,303 0 6,622 0 667,925 0 0 0 0 667,925
Other assets, net 1,028,406 0 1,599,196 (1,583,692) 1,043,910 0 0 8,216 (24,468) 1,027,658
Investment in subsidiaries 0 0 110,604 (110,604) --- 0 0 431,768 (431,768) ---
---------- ----- --------- ---------- ----------- ----- ----- ------- -------- --------
Total assets 1,784,578 1 1,749,709 (1,800,044) 1,734,244 1 1 440,738 (456,236) 1,718,748
========== ===== ========= ========== =========== ===== ===== ======= ======== ========
Current liabilities:
Current maturities of
long-term debt 188 0 65,448 0 65,636 0 0 0 0 65,636
Accrued liabilities 124,867 0 77,232 (140,854) 61,245 0 0 18,409 (24,468) 55,186
Accrued interest 9,163 0 3,226 (9,163) 3,226 0 0 5,937 0 9,163
---------- ----- --------- ---------- ---------- ----- ----- ------- -------- ---------
Total current
liabilities 134,218 0 145,906 (150,017) 130,107 0 0 24,346 (24,468) 129,985
Long-term debt 1,539,757 0 1,172,283 (1,539,423) 1,172,617 0 0 306,235 0 1,478,852
Subsidiary limited partner
interest 0 0 (246) 0 (246) 0 0 0 0 (246)
Partners' capital 110,603 1 431,766 (110,604) 431,766 1 1 110,157 (431,768) 110,157
---------- ----- --------- ---------- ---------- ----- ----- ------- -------- ---------
Total liabilities and
parterns' capital 1,784,578 1 1,749,709 (1,800,044) 1,734,244 1 1 440,738 (456,236) 1,718,748
========== ===== ========= ========== ========== ===== ===== ======= ======== =========
</TABLE>
<PAGE>
<TABLE>
MARCUS CABLE COMPANY, L.P. AND SUBSIDIARIES
Consolidating Schedule - Statement of Operations Information
For the nine months ended September 30, 1997
(unaudited)
(in thousands)
<CAPTION>
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 348,438 --- --- --- 348,438 --- --- --- --- 348,438
Management fees --- --- 5,539 --- 5,539 --- --- --- --- 5,539
--------- ------ --------- ------ --------- ------- ------- ----- ------ -------
Total revenues 348,438 --- 5,539 --- 353,977 --- --- --- --- 353,977
--------- ------ --------- ------ --------- ------- ------- ----- ------ -------
Operating expenses:
Selling, service and
system management 128,455 --- 1,691 --- 130,146 --- --- --- --- 130,146
General and administrative 42,567 --- 10,563 --- 53,130 --- --- --- --- 53,130
Allocated corporate costs 6,834 --- (6,834) --- --- --- --- --- --- ---
Depreciation and amortization 137,112 --- 983 --- 138,095 --- --- --- --- 138,095
--------- ------ --------- ------ --------- ------- ------- ----- ------ -------
314,968 --- 6,403 --- 321,371 --- --- --- --- 321,371
--------- ------ --------- ------ --------- ------- ------- ----- ------ -------
Operating income 33,470 --- (864) --- 32,606 --- --- --- --- 32,606
Other (income) expense:
Interest (income) expense, net 112,440 --- (30,625) --- 81,815 --- --- 29,890 --- 111,705
Equity earnings (loss)
of subsidiaries --- --- 78,970 (78,970) --- --- --- 49,209 (49,209) ---
--------- ------ --------- ------- --------- ------- ------- ------ ------- -------
112,440 --- 48,345 (78,970) 81,815 --- --- 79,099 (49,209) 111,705
--------- ------ --------- -------- --------- ------- ------- ------ ------- -------
Net loss (78,970) --- (49,209) 78,970 (49,209) --- --- (79,099) 49,209 (79,099)
========= ====== ========= ======== ========= ======= ======= ====== ======= =======
</TABLE>
<PAGE>
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, 1996, included
in the Company's Annual Report on Form 10-K.
GENERAL
The Company's business strategy focuses on three principles: (i)
forming regional clusters of cable television systems through
strategic acquisitions, internal growth and divestitures of non-strategic
assets, (ii) promoting internal growth and enhanced
operating and financial performance by streamlining operations in
newly clustered systems and applying innovative marketing techniques
and (iii) upgrading systems and employing state-of-the-art
technology to enhance existing service and to develop, on a cost-effective
basis, ancillary revenue streams.
The Company has followed a systematic approach in acquiring,
operating and developing cable television systems based on the
principle of increasing operating cash flow while maintaining a high
quality standard of service. The Company's acquisition strategy
focuses on cable television systems in proximity to its existing
systems or of sufficient size to serve as cores for new operating
regions. The Company believes that increasing its operating scale
through strategic acquisitions, as well as through internal growth,
enhances its ability to reduce its programming costs, develop new
technologies, offer new services and improve operating margins, and
thus improve its long-term competitiveness.
In continuing to implement the Company's acquisition strategy, the
Company acquired the Harron Systems in July of 1997, which are in
proximity to other systems owned by the Company in the Dallas/Ft.
Worth Metroplex. The Company's basic customer count increased by
over 22,000 as a result of this acquisition. Funding for the $34.5
million purchase was provided by borrowings under the Senior Credit
Facility. The Company has also entered into a definitive agreement
to purchase the assets of Mountain Brook Cablevision, Inc. and
Shelby Cable, Inc. The cable television system serves approximately
23,000 customers in the Mountain Brook and Shelby County areas of
suburban Birmingham, adjacent to the Company's existing systems in
the Birmingham market. The transaction is subject to certain
regulatory approval and the closing is expected to occur during the
first half of 1998. The acquisition will be financed with funds
available under the Senior Credit Facility.
In addition, the Company has entered into a definitive agreement
with Time Warner to exchange cable television systems in the states
of Wisconsin and Indiana serving in total approximately 125,000
customers. The Company will exchange systems serving approximately
55,000 customers in municipalities surrounding the metropolitan
areas of Milwaukee and Green Bay, Wisconsin, for systems serving
approximately 70,000 customers in the communities of Eau Claire,
Beloit, Marshfield and Merrill, Wisconsin and Warsaw, Indiana. In
addition to the contribution of its systems, the Company will pay an
additional $20,000,000 to Time Warner. Funding for this purchase is
<PAGE>
expected to be provided by borrowings under the Senior Credit
Facility. The exchange is subject to regulatory approval and
certain closing conditions and is scheduled to close by year end.
These transactions are described in Notes 2, 7 and 8 to the
unaudited consolidated financial statements.
Future expansion efforts are expected to focus on acquiring or
exchanging systems in proximity to existing operations, with the
strategic goal of forming or expanding clusters of systems to permit
operating efficiencies and economies of scale. Opportunistic
divestitures, in areas where consolidation opportunities do not
exist, are also considered. In implementing the Company's
divestiture strategy, the Company has recently identified certain
non-strategic cable systems which are being offered for sale. Upon
completion of the sale of these non-strategic systems, the Company
will own and operate six core groups of cable systems. See
discussion concerning these systems offered for sale in Note 8 to
the unaudited consolidated financial statements.
The Company strives to maintain high technological standards in its
cable television systems on a cost-effective basis. Currently, the
Company is systematically rebuilding and upgrading its cable systems so that
within the next three years substantially all existing systems will
have a bandwidth of between 450 MHz and 862 MHz. This program
should enable the Company to deliver technological innovations to
its customers as such services become commercially viable. As part
of this program, certain systems, such as those serving the areas in
and around Ft. Worth/Tarrant County (Texas), Glendale/Burbank
(California) and suburban Birmingham (Alabama) together with
selected systems in Wisconsin, Indiana, Tennessee and other states
in which the Company operates cable systems, are being upgraded to
750 MHz or 862 MHz with two-way communication capabilities.
LIQUIDITY AND CAPITAL RESOURCES
Acquiring and upgrading cable television systems is contingent upon
the availability of cash provided by operations, borrowings from the
Company's existing credit facilities and the Company's ability to
obtain additional debt or equity financing. Although in the past
the Company has been able to obtain financing through equity
investments, debt issuances and bank borrowings, there can be no
assurance that the capital resources necessary to accomplish the
Company's business strategy will be available, or that the terms
will be favorable to the Company.
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.
As of September 30, 1997, unreturned capital contributions from
equity investors totaled approximately $493,327,000. The Company
has an aggregate of $1,544,488,000 of indebtedness outstanding in
the form of the 11 7/8% Debentures, 13 1/2% Notes, 14 1/4% Notes,
borrowings under the Senior Credit Facility and note payable and
capital lease obligations. The Company has an additional
<PAGE>
$211,059,000 of borrowing capacity under its Revolving Credit
Facility after considering committed lines of credit of $3,941,000.
The Company generated cash flows from operating activities of
$113,390,000 for the nine month period ended September 30, 1997. In
addition to cash flows from operating activities, funding from
equity contributions and borrowings have been sufficient to meet the
Company's debt service, working capital and capital expenditure
requirements.
Cash interest is payable monthly, quarterly and semiannually on
borrowings outstanding under the Company's Senior Credit Facility
and the 11 7/8% Debentures. No cash interest is payable on the 13
1/2% Notes until February 1, 2000 and no cash interest is payable on
the 14 1/4% Notes until December 15, 2000. Maturities of long-term
debt approximate $552,539,000 over the next five years. The
Company expects to cover both interest and principal payments on its
long-term obligations through internally generated funds and
borrowings under the Senior Credit Facility.
As the Company continues to accelerate the upgrading and rebuilding
of its broadband networks in preparation for the delivery of
additional services, capital expenditures are expected to
approximate $192,000,000 (or $160 per customer) in 1997.
Approximately 60% of such expenditures are earmarked to enhance the
reliability and capacity of the Company's broadband cable networks.
The Company purchased property and equipment totaling approximately
$138,378,000 during the nine months ended September 30, 1997. The
Company expects to fund future capital expenditures through cash
generated from operations and available borrowings under the Senior
Credit Facility.
RESULTS OF OPERATIONS
The Company generates the majority of its revenues from monthly
customer fees for basic and premium services, installation income
and other ancillary services (such as the rental of home terminal
devices). Additional revenues are generated from pay-per-view
programming, advertising sales and commissions from home shopping
networks. Revenues were also generated from fees earned in
conjunction with the sale of and the management of Maryland Cable.
The comparability of operating results between the three and nine
months ended September 30, 1997 and the corresponding period for
1996 are affected by several events which occurred during 1997 and
1996 (collectively referred to as the "Pro Forma Adjustments").
These events include 1) the acquisition of cable systems as follows:
systems serving approximately 22,000 basic customers in Texas on
July 1, 1997, a system serving approximately 5,400 basic customers in
Indiana on July 31, 1996, a system serving approximately 2,600 basic
customers in Mississippi on July 8, 1996 and a system serving approximately
700 basic customers in Texas on January 11, 1996; 2) the sale of the
Company's cable system serving approximately 12,600
customers in Washington on October 11, 1996; 3) the sale of the
previously managed Maryland Cable system on January 31, 1997; and 4)
as described in Note 1 to the unaudited consolidated financial
statements, the conforming change in the accounting for franchise
fees in certain of the Systems.
<PAGE>
Revenues
Revenues for the three months ended September 30, 1997 totaled
$123,161,000, which is an increase of $11,472,000, or 10.3%, over
the revenues of $111,689,000 for the three months ended September
30, 1996. Revenues for the nine months ended September 30, 1997 of
$353,977,000 increased $32,569,000, or 10.1%, over the revenues of
$321,408,000 for the nine months ended September 30, 1996.
Substantially all of this increase was attributable to growth in
basic, pay-per-view, advertising sales revenue, equipment sales and
rentals and increases in management fee revenue. The effects of
these increases in revenue were offset by a revenue reduction of
approximately $1,700,000 for the three months ended September 30,
1997 and $5,100,000 for the nine months ended September 30, 1997, as
a result of the conforming change regarding franchise fee
itemization in the former Sammons Systems. Normalizing the effects
of the Pro Forma Adjustments, pro forma revenue increased
$12,340,000, or 11.1%, and $33,755,000, or 10.6%, respectively, for
the three and nine months ended September 30, 1997.
The Company's basic service revenues increased $10,249,000, or
12.6%, to $91,474,000 for the three months ended September 30, 1997
from $81,225,000 for the three months ended September 30, 1996. For
the nine months ended September 30, 1997, basic service revenues
increased $22,799,000, or 9.9%, to $254,256,000 from $231,457,000
for the nine months ended September 30, 1996. Pro forma basic
service revenues increased $10,925,000, or 13.6%, and $27,503,000,
or 11.9%, respectively, for the three and nine months ended
September 30, 1997. The growth in basic service revenue primarily
reflects increases in the number of basic customers, new product
offerings and the full effect of the rate adjustments implemented in
June of 1997.
The Company's advertising revenues increased $847,000, or 24.8%, to
$4,264,000 for the three months ended September 30, 1997 from
$3,417,000 for the three months ended September 30, 1996.
Advertising revenues for the nine months ended September 30, 1997
increased $1,960,000, or 19.4%, to $12,085,000 from $10,125,000 for
the nine months ended September 30, 1996. This growth is mainly the
result of increases in the number of insertable channels, improved
channel utilization and greater market demand.
Pay-per-view revenue increased $205,000, or 12.4%, to $1,856,000 for
the three months ended September 30, 1997 from $1,651,000 for the
three months ended September 30, 1996. For the nine months ended
September 30, 1997, pay-per-view revenue increased $2,048,000, or
47.6%, to $6,351,000 from $4,303,000 for the nine months ended
September 30, 1996. The nine month increase is due in part to the
success of the Holyfield/Tyson rematch. Additionally, the increases
are a result of system upgrades and rebuilds which have increased
the penetration of addressable converters and the availability of
pay-per-view products. Acquisitions and divestitures have had
minimal effect on pay-per-view revenue.
The Company's management fee revenues decreased $513,000, or 87.2%,
to $75,000 for the three months ended September 30, 1997 from
$588,000 for the three months ended September 30, 1996. The
decrease is a direct result of the sale of the Maryland Cable
Systems, as discussed in Note 6 to the unaudited consolidated
financial statements. Management fee revenue for the nine months
ended September 30, 1997 increased $3,805,000, or 219.4%, to
$5,539,000 from $1,734,000 for the nine months ended September 30,
1996 which was due to the recognition of incentive management fees
<PAGE>
in conjunction with the sale of the Maryland Cable System.
Operating recognized incentive management fees of $986,000 in May
1997 and $4,083,000 in January 1997 in conjunction with the sale.
The Company will continue to earn a nominal monthly management fee
through the liquidation of the Maryland Cable partnership.
Additional incentive management fees may be recognized upon the
termination of the Maryland Cable partnership, expected to occur
during 1998.
Customer Information
The following table illustrates the changes in the Company's
basic customers and premium units which have significantly
contributed to the revenue fluctuations previously noted. The
increase in basic customers for the nine months ended September
30, 1997 equates to an annualized growth rate of 2.0%.
Substantially all of the internal growth in basic customers is
attributable to continued marketing and sales efforts as well
as the continued extension of physical cable plant in order to
pass additional dwelling units. The decrease in premium units
from December 31, 1996 was anticipated as a reaction to the
annual rate increase implemented during June of 1997 and
changes in the Company's marketing strategy to no longer
promote "deep discount" sales offers.
<TABLE>
<CAPTION>
Acutal Pro Forma Actual Pro Forma
September 30, September 30, December 31 , December 31,
1997 1996(a) 1996 1996(b)
<S> <C> <C> <C> <C>
Basic
Customers 1,222,096 1,198,578 1,181,293 1,202,893
Premium
Units 638,610 668,270 666,702 679,602
- --------------------
(a) Excludes approximately 12,800 basic customers and 5,300 premium
units served by the cable systems in Washington which were
subsequently sold to a third party on October 11, 1996.
Includes approximately 20,800 basic customers and 12,300
premium units served by systems in Texas purchased in July
1997.
(b) Includes approximately 21,600 basic customers and 12,900
premium units served by the cable systems in Texas which were
purchased in July 1997.
</TABLE>
Costs and Expenses
Selling, service and system management expenses consist primarily of
labor costs and other expenses associated with programming,
marketing, engineering and plant maintenance and advertising.
General and administrative costs consist primarily of salaries for
administrative personnel, customer billing costs, bad debt expense,
property taxes and copyright fees.
Selling, service and system management expenses increased $5,740,000
or 14.5%, to $45,301,000 for the three months ended September 30,
1997 from $39,561,000 for the three months ended September 30, 1996.
For the nine months ended September 30, 1997, selling, service and
system management expenses increased $12,235,000, or 10.4%, to
$130,146,000 from $117,911,000 for the nine months ended September
30, 1996. One factor of the increase noted resulted from an
<PAGE>
increase in programming costs of $3,832,000, or 15.0%, and
$10,600,000, or 14.0%, respectively, for the three and nine months
ended September 30, 1997. Substantially all of this programming
cost increase is attributable to increases in the cost of basic
satellite programming as a result of annual cost increases,
incremental basic customer growth and the addition of satellite
programming channels to certain of the Company's rebuilt systems.
Another factor contributing to the increase in selling, service and
system management expenses resulted from an increase in plant
expense of $1,654,000, or 18.5%, and $3,643,000, or 13.5%,
respectively, for the three and nine months ended September 30,
1997. The majority of the plant expense increase resulted from
extensions and rebuilds of certain of the Company's systems, as
previously described. Offsetting the increases in programming and
plant expense was a decrease in marketing costs of $2,480,000, or
24.6%, for the nine months ended September 30, 1997, as a result of
channel launch support received from programmers. Pro forma
selling, service and system management expenses increased
$4,906,000, or 12.1%, and $11,726,000, or 9.7%, respectively, for
the three and nine months ended September 30, 1997.
General and administrative expenses increased $301,000, or 1.7%, to
$18,332,000 for the three months ended September 30, 1997 from
$18,031,000 for the three months ended September 30, 1996. For the
nine months ended September 30, 1997, general and administrative
expenses decreased $655,000, or 1.2%, to $53,130,000 from
$53,785,000 for the nine months ended September 30, 1996. The
decrease was due primarily to the reduction in franchise fee
expense, as a result of the conforming itemization of such costs on
customers' bills. Pro forma general and administrative expenses
increased $1,840,000, or 11.2%, and $4,498,000, or 9.1%,
respectively, for the three and nine months ended September 30,
1997. The pro forma increase in general and administrative expense
mainly represents incremental labor costs, rising billing costs as
a result of upgrading the Company's customer care platform and
increased customer receivable reserves.
Depreciation and amortization expenses increased $6,824,000, or
16.2%, for the three months ended September 30, 1997 to $48,921,000
from $42,097,000 for the three months ended September 30, 1996. For
the nine months ended September 30, 1997, depreciation and
amortization increased $17,099,000, or 14.1%, to $138,095,000 from
$120,996,000 for the nine months ended September 30, 1996. The
increase is principally a result of the additional capital
expenditures incurred to rebuild and upgrade the physical plant and
equipment of certain of the Systems.
Operating Income
Operating income decreased $1,393,000, or 11.6%, to $10,607,000 for
the three months ended September 30, 1997 from $12,000,000 for the
comparable period in 1996 mainly due to the large increase in
depreciation and amortization as discussed above. Operating income
increased $3,890,000, or 13.5%, to $32,606,000 for the nine months
ended September 30, 1997 from $28,716,000 for the same period in
1996. This increase is due primarily to the recognition of the
incentive management fee in conjunction with the sale of Maryland
cable and the impact of the acquisition and divestiture activity
noted above.
The cable television industry generally measures the performance of
A cable system in terms of system cash flow before corporate
expenses and depreciation and amortization (often referred to as
<PAGE>
"Cable System Cash Flow") and a cable television company in terms of
operating income before depreciation and amortization (often
referred to as "EBITDA"). These measures are not intended to be a
substitute or improvement on the terms disclosed on the financial
statements, rather these measures are included as industry
standards. Cable System Cash Flow increased $6,614,000, or 11.6%,
to $63,685,000 for the three months ended September 30, 1997 from
$57,071,000 for the three months ended September 30, 1996. For the
nine months ended September 30, 1997, Cable System Cash Flow
increased $19,223,000, or 12.2%, to $177,416,000 from $158,193,000
for the nine months ended September 30, 1996. EBITDA increased
$5,431,000, or 10.0%, to 59,528,000 for the three months ended
September 30, 1997 from $54,097,000 for the three months ended
September 30, 1996. For the nine months ended September 30, 1997,
EBITDA increased $20,989,000, or 14.0%, to $170,701,000 from
$149,712,000 for the nine months ended September 30, 1996. Pro
forma Cable System Cash Flow and EBITDA for the three months and
nine months ended September 30, 1997 increased 10.9% and 10.4% and
12.3% and 11.7%, respectively, over the comparable periods in 1996.
Other Expenses
Net interest expense increased $1,550,000, or 4.2%, to $38,358,000
for the three months ended September 30, 1997 from $36,808,000 for
the three months ended September 30, 1996. For the nine months
ended September 30, 1997, net interest expense increased $3,426,000,
or 3.2%, to $111,705,000 from $108,279,000 for the nine months ended
September 30, 1996. These increases are primarily due to the
scheduled increase in accretion for the 13 1/2% Notes and the 14
1/4% Notes of $6,338,000 for the nine months ended September 30,
1997. This accretion increase was offset by a decrease in the
average borrowing costs under the Senior Credit Facility. Total
indebtedness, including public indebtedness, increased to
$1,544,488,000 at September 30, 1997 from $1,448,018,000 at
September 30, 1996. The weighted average interest rate, including
commitment fees, for total debt outstanding during the three months
and nine months ended September 30, 1997 was 9.82% and 9.86%,
respectively, compared with 10.04% and 10.00%, respectively, for the
three months and nine months ended September 30, 1996.
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1996, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards ("SFAS") No. 125,
"Transfers of Financial Assets and Extinguishments of Liabilities".
SFAS No. 125 provides accounting and reporting standards for
transfers and servicing of financial assets and extinguishments of
liabilities. The provisions of SFAS No. 125 are generally effective
for transactions occurring after December 31, 1996. There has been
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
<PAGE>
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.
Certain of the Company's expenses, such as those for wages and
benefits, equipment repair and replacement, billing and marketing
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 September 30,
1997, the Company had $560,000,000 of outstanding borrowings under
the Senior Credit Facility which are subject to floating interest
rates. The rates are based on either the Eurodollar rate, prime
rate, CD base rate or Federal Funds rate, plus a margin of up to
2.25% 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 September 30, 1997, interest rate swap
agreements covering a notional balance of $250,000,000 were
outstanding which require the Company to pay fixed rates ranging
from 5.75% to 5.77%, plus the applicable interest rate margin.
These agreements mature during 1998 and 1999, and allow for the
optional extension by the counterparty for additional periods and
certain of these agreements provide for the automatic termination in
the event that one month LIBOR exceeds 6.75% on any monthly reset
date. The Company has also entered into an interest rate swap
agreement covering an aggregate notional principal amount of
$100,000,000 which matures in the year 2000 whereby the Company
receives one month LIBOR plus 0.07% and is required to pay the
higher of one month LIBOR at either the beginning or end of the
interest period, plus the applicable interest rate margin. In
addition, the Company has entered into interest rate swap agreements
covering an aggregate notional principal amount of $150,000,000
which mature in the year 2000, with forward start dates in November
1997. These agreements require the Company to pay fixed rates of
5.77%, plus the applicable interest rate margin, and will
automatically terminate in the event that one month LIBOR exceeds
6.75% on any monthly reset date.
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. During the three months ended
September 30, 1997, the Company recognized an interest benefit of
$20,600 and during the nine months ended September 30, 1997, the
Company recognized additional interest expense of $566,400 under its
interest rate swap agreements.
REGULATION IN THE CABLE TELEVISION INDUSTRY
The operation of cable television systems is extensively regulated
by the FCC, certain state governments and most local governments.
On February 8, 1996, the President signed into law the 1996 Telecom
Act. This new law alters the regulatory structure governing the
nation's telecommunications providers. It removes barriers to
competition in both the cable television market and the local
telephone market. Among other things, it reduces the scope of cable
rate regulation.
<PAGE>
The 1996 Telecom Act required the FCC to undertake a host of
implementing rulemakings, the final outcome of which cannot yet be
determined. Moreover, Congress and the FCC have frequently
revisited the subject of cable television regulation and may do so
again. Future legislative and regulatory changes could adversely
affect the Company's operations.
The 1996 Telecom Act sunsets FCC regulation of CPST rates for all
cable television systems (regardless of size) on March 31, 1999. It
also relaxes existing uniform rate requirements by specifying that
uniform rate requirements do not apply where the operator faces
"effective competition," and by exempting bulk discounts to multiple
dwelling units, although complaints about predatory pricing still
may be made to the FCC. 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.
The Company believes that it has materially complied with provisions
of the 1996 Telecom Act and the 1992 Cable Act, including rate
setting provisions promulgated by the FCC. However, in
jurisdictions which have chosen not to certify to regulate certain
rates, 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.
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. During the
three month period ended September 30, 1997, there were no rate
refunds issued. There are, however, rate complaints currently
pending at the FCC concerning certain of the Company's CPST rates.
Pursuant to the re-regulation covering the time period from
September 1, 1993 through May 15, 1994, there is currently one cost-of-service
filing under review by the FCC. Pursuant to the re-regulation covering the
time period from May 1994 to the date
hereof, there are 20 benchmark filings under review by the FCC.
These pending reviews potentially affect 137,200 of the Company's
basic customers. During 1996 and 1997, reviews involving certain
Systems serving approximately 160,700 customers were 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 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 date such rate
complaint was filed at the FCC. The amount of refunds, if any,
which may be required by the FCC in the event the Company's CPST
rates are found to be unreasonable is not currently estimable.
Because the FCC has not yet resolved pending rate complaints
involving the Company and because franchise authorities may certify
to regulate certain rates in the future, the overall impact of these
regulations and other provisions of the 1996 Telecom Act and the
1992 Cable Act on the Company's business cannot be determined at
this time.
<PAGE>
PART II - OTHER INFORMATION
ITEM 1 - LEGAL PROCEEDINGS
There were no material legal proceedings instituted during the nine
months ended September 30, 1997 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
(a) Exhibits
Included in this report:
<TABLE>
Exhibit:
<CAPTION>
<S> <C>
27.1 Financial Data Schedule (supplied for the
information of the Commission)
</TABLE>
(b) Reports on Form 8-K
None.
<PAGE>
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,
November 14, 1997 By: /s/ Jeffrey A. Marcus
Jeffrey A. Marcus
Its: President, Chief Executive
Officer and Sole Director of
Marcus Cable Properties, Inc.
(Principal Executive Officer)
By: /s/ Thomas P. McMillin
Thomas P. McMillin
Its: Senior Vice President and Chief
Financial Officer of Marcus
Cable Properties, Inc.
(Principal Financial and
Accounting 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,
November 14, 1997 By: /s/ Jeffrey A. Marcus
Jeffrey A. Marcus
Its: President, Chief Executive
Officer and Sole Director of
Marcus Cable Properties, Inc.
(Principal Executive Officer)
By: /s/ Thomas P. McMillin
Thomas P. McMillin
Its: Senior Vice President and Chief
Financial Officer of Marcus
Cable Properties, Inc.
(Principal Financial and
Accounting Officer)
<PAGE>
MARCUS CABLE CAPITAL CORPORATION
(Registrant)
November 14, 1997 By: /s/ Jeffrey A. Marcus
Jeffrey A. Marcus
Its: President, Chief Executive
Officer and Sole Director of
Marcus Cable Capital Corporation
(Principal Executive Officer)
By: /s/ Thomas P. McMillin
Thomas P. McMillin
Its: Senior Vice President and Chief
Financial Officer of Marcus
Cable Capital Corporation
(Principal Financial and
Accounting Officer)
MARCUS CABLE CAPITAL CORPORATION II
(Registrant)
November 14, 1997 By: /s/ Jeffrey A. Marcus
Jeffrey A. Marcus
Its: President, Chief Executive
Officer and Sole Director of
Marcus Cable Capital Corporation
II (Principal Executive Officer)
By: /s/ Thomas P. McMillin
Thomas P. McMillin
Its: Senior Vice President and Chief
Financial Officer of Marcus
Cable Capital Corporation II
(Principal Financial and
Accounting Officer)
<PAGE>
MARCUS CABLE CAPITAL CORPORATION III
(Registrant)
November 14, 1997 By: /s/ Jeffrey A. Marcus
Jeffrey A. Marcus
Its: President, Chief Executive
Officer and Sole Director of
Marcus Cable Capital Corporation
III (Principal Executive
Officer)
By: /s/ Thomas P. McMillin
Thomas P. McMillin
Its: Senior Vice President and Chief
Financial Officer of Marcus
Cable Capital Corporation III
(Principal Financial and
Accounting Officer)
