<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
/ 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 Number 0-24924
-------------------------------
THE ASSOCIATED GROUP, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 51-0260858
(State of Incorporation) (I.R.S. Employer Identification No.)
200 Gateway Towers, Pittsburgh, Pennsylvania 15222
(Address of principal executive offices) (Zip Code)
412-281-1907
(Registrant's telephone number)
Indicate by check mark whether the Registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter
period that the Registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days.
Yes X No
--- ---
The number of shares outstanding of each of the issuer's classes of
common stock, as of November 10, 1997:
Common Stock, Class A 18,765,924
Common Stock, Class B 18,804,760
<PAGE>
PART I--FINANCIAL INFORMATION
Item 1. Financial Statements
THE ASSOCIATED GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
September 30, December 31,
1997 1996
-------------- ------------
(amounts in thousands)
ASSETS
Current assets:
Cash and cash equivalents
(approximates fair value) $ 8,194 $ 3,341
Accounts receivable, less allowance for
doubtful accounts (September 30,
1997--$2,733,000) December 31,
1996--$2,355,000) 3,126 4,051
Receivable from related parties 1,008 203
Inventory held for resale 1,591 1,622
Prepaid expenses and other assets 1,868 651
Deferred income taxes 4,838 2,008
-------- --------
Total current assets 20,625 11,876
Property and equipment, net of accumulated
depreciation and amortization (September 30,
1997--$28,298,000; December 31,
1996--$24,952,000) 30,480 27,513
Marketable equity securities, at fair value
(cost: September 30, 1997--$7,726,000;
December 31, 1996--$6,882,000) (Note 3) 641,935 425,895
Notes receivable from related parties 31,567 28,780
Investments in wireless communications
affiliates (Note 4) 7,310 16,108
Other noncurrent assets 14,009 8,762
-------- --------
Total assets $745,926 $518,934
======== ========
See notes to consolidated financial statements
<PAGE>
THE ASSOCIATED GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (UNAUDITED) - Continued
September 30, December 31,
1997 1996
-------------- ------------
(amounts in thousands)
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 6,719 $ 7,716
Employee compensation 3,933 1,975
Due to cellular equipment vendor 15,069 15,069
Short-term obligations (Note 5) 108,291 77,526
Current portion of long-term debt 2,082 2,082
Subsidiary appreciation rights
liability - current (Note 6) 17,898 1,879
Other current liabilities 3,129 1,004
-------- --------
Total current liabilities 157,121 107,251
Deferred compensation 2,164 1,440
Subsidiary appreciation rights liability -
long-term (Note 6) 36,815 899
Long-term debt, excluding current portion 7,117 8,326
Deferred income taxes 189,663 127,183
Minority interests (Note 7) 9,906 7,830
Contingent liability (Note 8) 4,000 -
Stockholders' equity:
Preferred stock, par value $.01 per share;
authorized 5,000,000 shares; none issued - -
Class A Common Stock, par value $.10
per share; authorized 100,000,000 shares;
18,765,924 and 9,382,962 issued and
outstanding in 1997 and 1996 (Note 9) 1,876 938
Class B Common Stock, par value $.10 per share;
authorized 50,000,000 shares; 18,802,360 and
9,397,910 issued and outstanding in 1997 and
1996 (Note 9) 1,880 940
Additional paid-in capital 22 12
Unrealized gain on marketable equity
securities, net of deferred taxes
(September 30, 1997--$221,973,000;
December 31, 1996--$146,654,000) 412,236 272,359
Retained earnings (deficit) (Note 9) (76,874) (8,244)
-------- --------
Total stockholders' equity 339,140 266,005
-------- --------
Total liabilities and stockholders' equity $745,926 $518,934
======== ========
See notes to consolidated financial statements
<PAGE>
THE ASSOCIATED GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended September 30, Nine Months Ended September 30,
1997 1996 1997 1996
----------------------------------- ----------------------------------
(amounts in thousands, except share and per share amounts)
<S> <C> <C> <C> <C>
Revenues:
Wireless communication services $ 5,243 $ 4,163 $ 15,379 $ 12,448
Radio broadcasting 828 843 2,286 1,773
Art gallery sales 162 116 469 426
---------------- ------------------ ---------------- -----------------
6,233 5,122 18,134 14,647
Costs and expenses:
Cost of sales:
Wireless communication services 2,291 2,189 8,719 6,627
Radio broadcasting 210 188 615 517
Art gallery sales 115 93 326 322
Direct research and development expenses 1,738 2,392 5,042 6,075
Sales, general and administrative expenses 18,261 7,941 38,967 16,324
Non-cash subsidiary appreciation rights (Note 6) 14,062 - 51,935 -
Depreciation and amortization expense 1,392 1,369 4,060 3,882
---------------- ------------------ ---------------- -----------------
38,069 14,172 109,664 33,747
---------------- ------------------ ---------------- -----------------
Operating loss (31,836) (9,050) (91,530) (19,100)
Equity in loss of affiliate - (618) - (1,412)
Other income (expense):
Gain on sale of marketable equity
securities (Note 3) - 1 2,485 3,398
Gain on sale of investment in wireless
communications affiliate (Note 4) 12,177 - 12,177 -
Interest and dividend income 736 523 2,068 1,651
Interest expense (2,119) (1,108) (5,631) (3,115)
Other income (expense), net 210 123 321 (31)
Minority interests (Note 7) (726) 2,477 (2,076) 3,828
---------------- ------------------ ---------------- -----------------
10,278 2,016 9,344 5,731
---------------- ------------------ ---------------- -----------------
Loss before income taxes (21,558) (7,652) (82,186) (14,781)
Income tax benefit 2,930 2,686 15,434 5,013
================ ================== ================ =================
Net loss $ (18,628) $ (4,966) $ (66,752) $ (9,768)
================ ================== ================ =================
Net loss per common share (Note 9) $ (.50) $ (.13) $ (1.78) $ (.26)
================ ================== ================ =================
Weighted average common shares outstanding (Note 9) 37,565,414 37,560,244 37,563,612 37,543,234
</TABLE>
See notes to consolidated financial statements
Note:
The net losses for the three and nine months ended September 30, 1997 include
non-cash subsidiary rights expense of Teligent, L.L.C., and do not reflect a
minority interest in Teligent's losses for the periods of $12,353,000 and
$36,068,000 (income effects) for the three and nine months ended September 30,
1997, respectively. Minority interest income is not recognizable under Generally
Accepted Accounting Principles due to the negative equity position of Teligent.
If such minority interests were recognized, the net loss would have been
$(6,275,000), or $(.17) per share, and $(30,684,000), or $(.82) per share, for
the respective three and nine months ended September 30, 1997.
<PAGE>
THE ASSOCIATED GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
Nine Months Ended September 30,
1997 1996
-----------------------------------------------
(amounts in thousands)
<S> <C> <C>
Cash Flows From Operating Activities
Net loss $ (66,752) $ (9,768)
Adjustments to reconcile net loss to net cash
Used in operating activities:
Depreciation and amortization 4,060 3,882
Provision for losses on accounts receivable 872 971
Equity in loss of affiliate - 1,412
Gain on sale of marketable equity securities (Note 3) (2,485) (3,398)
Gain on sale of investment in wireless communications
affiliate (Note 4) (12,177) -
Minority interests (Note 7) 2,076 (3,828)
Provision for deferred income taxes (15,807) (5,204)
Non-cash subsidiary appreciation rights (Note 6) 51,935 -
Contingent liability (Note 8) 4,000 -
Amortization of notes receivable from related parties 2,138 -
Other 143 32
Changes in assets and liabilities:
Accounts receivable 104 (1,350)
Inventory held for resale 31 80
Prepaid expenses and other assets (1,217) 420
Accounts payable (997) 775
Employee compensation 1,958 198
Other current liabilities 2,125 49
Deferred compensation 724 60
------------------ -----------------
Net Cash Used In Operating Activities (29,269) (15,669)
Cash Flows From Investing Activities
Cash and cash equivalents from consolidation of affiliate - 751
Cash paid for acquisition - (2,639)
Purchases of property and equipment, net (6,345) (3,038)
Proceeds from sale of marketable equity securities (Note 3) 2,512 3,414
Purchase of marketable equity securities (871) -
Proceeds from sale of investment in wireless communications
affiliate (Note 4) 21,371 -
Investments in wireless communications affiliates (396) (3,530)
Payment relating to acquisition of wireless communications
business (Note 2) (5,570) -
Increase in notes receivable from related parties (5,982) (10,908)
Other investing activities, net (163) (428)
------------------ -----------------
Net Cash Provided By (Used In) Investing Activities 4,556 (16,378)
</TABLE>
See notes to consolidated financial statements
<PAGE>
THE ASSOCIATED GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) - Continued
<TABLE>
<CAPTION>
Nine Months Ended September 30,
1997 1996
-----------------------------------------------
(amounts in thousands)
<S> <C> <C>
Cash Flows From Financing Activities
Proceeds from short-term obligations 51,765 31,278
Repayment of short-term obligations (21,000) (1,600)
Increase in due to cellular equipment vendor - 605
Repayment of long-term debt (1,209) (1,211)
Investment by minority interests - 3,743
Other financing activities, net 10 14
------------------ -----------------
Net Cash Provided By Financing Activities 29,566 32,829
------------------ -----------------
Net Increase In Cash And Cash Equivalents 4,853 782
Cash And Cash Equivalents At Beginning Of Period 3,341 1,018
------------------ -----------------
Cash And Cash Equivalents At End Of Period $ 8,194 $ 1,800
================== =================
See notes to consolidated financial statements
<PAGE>
THE ASSOCIATED GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
1. BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements of The Associated
Group, Inc. and Subsidiaries (the "Company," as used herein, includes all
consolidated subsidiaries, unless the context otherwise indicates) have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Rule 10-01 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the nine months ended September 30, 1997,
are not necessarily indicative of the results that may be expected for the year
ended December 31, 1997. For further information, refer to the financial
statements and footnotes thereto included in the Company's Annual Report on Form
10-K for the year ended December 31, 1996.
Certain amounts in the financial statements for the 1996 periods have been
reclassified to conform to the financial statement presentation for the current
period. These reclassifications have no effect on the net loss.
2. PENDING TRANSACTIONS AND SUBSEQUENT EVENTS
At September 30, 1997, Microwave Services, Inc. ("MSI"), a wholly owned
subsidiary of the Company and a licensee of Digital Electronic Message Services
("DEMS") channels, and Digital Services Corporation ("DSC"), another licensee of
DEMS channels, held 55% and 45% voting member equity interests, respectively, in
Teligent, L.L.C. ("Teligent"), formerly known as Associated Communications,
L.L.C., a joint venture limited liability company of MSI and DSC.
In October 1997, Teligent consummated the transaction contemplated by the Stock
Contribution Agreement (the "FirstMark Stock Agreement") entered into on March
10, 1997 by Teligent with another DEMS licensee, FirstMark Communications, Inc.
("FirstMark"), and its sole stockholder (the "FirstMark Sole Stockholder"). The
transaction included the contribution of all of the stock of FirstMark to
Teligent in exchange for cash and a 5% ownership interest in Teligent. Included
in other noncurrent assets on the Company's consolidated balance sheet at
September 30, 1997 is $5,570,000 comprised of the initial cash payments pursuant
to the FirstMark Stock Agreement. Upon closing in October 1997, Teligent paid to
the FirstMark Sole Stockholder an additional $4,950,000.
On September 30, 1997, Teligent, MSI and DSC entered into an agreement (the "NTT
Purchase Agreement") with Nippon Telegraph and Telephone Corporation ("NTT"),
whereby NTT agreed to make a $100 million investment in Teligent (the "NTT
Investment") in exchange for a 12.5% equity interest in Teligent. The NTT
Purchase Agreement provides for the NTT Investment to close in two stages. At
the first closing, which was completed on November 13, 1997, NTT purchased for
$40 million a 5% equity interest in Teligent. At the second closing (the "Second
Closing"), NTT will purchase for $60 million an additional 7.5% equity interest
in Teligent. The Second Closing is currently scheduled to occur
contemporaneously with the consummation of the Offerings (as defined below).
On October 7, 1997, registration statements were filed with the Securities and
Exchange Commission for an initial public offering of the common stock (the
"Equity Offering"), and a concurrent debt offering (the "Notes Offering" and,
together with the Equity Offering, the "Offerings"), of Teligent, Inc.,
currently a wholly owned subsidiary of Teligent.
Immediately prior to the consummation of the Offerings, Teligent will merge with
and into Teligent, Inc. (the "Reorganization"), with Teligent, Inc. surviving
the merger. Pursuant to the Reorganization, all Teligent member interests will
be converted into Teligent, Inc. common stock and Teligent, Inc. will succeed to
the business and assets of Teligent.
In September 1997, in connection with the NTT transaction and a possible initial
public offering by Teligent, Inc., Teligent, MSI, the Company, DSC, Telecom-DTS
Investors, L.L.C., an affiliate of DSC and the owner of the member interest in
Teligent previously held by DSC ("Telecom-DTS"), and the owners of Telecom-DTS
entered into an agreement (the "Members Agreement") whereby, among other things,
the Company and MSI agreed with DSC that upon a "Change in Control" (as defined
in the Members Agreement) of the Company or MSI, the Company will no longer have
the right to elect a majority of the Board of Directors of Teligent or Teligent,
Inc., as applicable. In addition, in the Members Agreement, MSI and Telecom-DTS
granted to the other rights of first refusal and co-sale rights with respect to
any sale or transfer by the other (other than to an affiliate or pursuant to a
pledge arrangement, and excluding any public sale or distribution whether
pursuant to a registration statement, Rule 144 or otherwise) of member interests
in Teligent or shares of the common stock of Teligent, Inc. (other than common
stock acquired in public market transactions), as applicable. Pursuant to the
Members Agreement, the Company and the owners of Telecom-DTS also granted to the
other rights of first refusal and co-sale rights, with the same exceptions, with
respect to any sale or transfer by the other of shares of MSI, or member or
other equity interests of Telecom-DTS, but only if member interests in Teligent
or shares of common stock of Teligent, Inc., as applicable, constitute all or
substantially all of the assets of MSI or Telecom-DTS, respectively.
On November 6, 1997, MSI and Telecom-DTS made an additional $60 million combined
capital contribution to Teligent (the "Additional Sponsor Cash Contributions").
MSI's share of such Additional Sponsor Cash Contributions was $33 million. In
addition, the Company has agreed to contribute the assets and liabilities of
Associated Communications of Los Angeles ("ACLA"), the Company's wireless
competitive access provider, to Teligent (the "ACLA Contribution" and, together
with the Additional Sponsor Cash Contributions, the "Additional Sponsor Equity
Contributions").
3. MARKETABLE EQUITY SECURITIES
In December 1996, the board of directors of Tele-Communications, Inc. ("TCI")
declared a dividend to holders of record of Liberty Media Group Series A Common
Stock ("Liberty Series A") and Liberty Media Group Series B Common Stock
("Liberty Series B") as of December 27, 1996. In 1997, the Company received one
share of Liberty Series A for every two shares of Liberty Series A owned and one
share of Liberty Series A for every two shares of Liberty Series B owned.
During 1997, the Company sold 110,000 shares of Liberty Series A for proceeds of
approximately $2,512,000, and has recognized pretax gains on these sales of
approximately $2,485,000.
In the third quarter 1997, TCI consummated an exchange offer, whereby, subject
to certain terms, conditions and limits, TCI offered to issue one share of TCI
Ventures Group Series A or Series B Common Stock in exchange for each validly
tendered share of TCI Group Series A or Series B Common Stock, respectively. In
September 1997, in connection with this exchange offer, the Company tendered
3,368,774 shares of TCI Group Series A Common Stock in exchange for 3,368,774
shares of TCI Ventures Group Series A Common Stock.
<PAGE>
The cost and market value of marketable equity securities classified as
available for sale at September 30, 1997, are as follows:
</TABLE>
<TABLE>
<CAPTION>
Cost of Market Value of
Name of Issuer and Number of Each Issue Each Issue
Title of Each Issue Shares In Thousands In Thousands
- -------------------------------------------------------- ----------------- -------------------- --------------------
<S> <C> <C> <C>
Tele-Communications, Inc.:
TCI Group Series A Common Stock 9,111,202 $ 2,559 $186,780
TCI Group Series B Common Stock 7,071,852 1,178 148,067
TCI Ventures Group Series A Common Stock 3,368,774 946 70,323
Liberty Media Group Series A Common Stock 5,453,970 1,339 163,278
Liberty Media Group Series B Common Stock 1,767,963 273 52,155
TCI Satellite Entertainment, Inc.:
Series A Common Stock 1,247,997 334 9,438
Series B Common Stock 707,185 90 6,188
Others Various 1,007 5,706
-------------------- --------------------
$ 7,726 $641,935
==================== ====================
</TABLE>
Including the effects of the sale of marketable equity securities during the
periods, adjustments to the unrealized gain on marketable equity securities, net
of tax, recorded as a separate component of stockholders' equity were
$139,877,000 and ($65,053,000) in the nine months ended September 30, 1997 and
1996, respectively.
4. INVESTMENTS IN WIRELESS COMMUNICATIONS AFFILIATES
In August 1997, the Company sold its ownership interest in Corporacion
Mobilcom, S.A. de C.V. ("Mobilcom") to Nextel Communications, Inc. for
proceeds of approximately $21,371,000, and has recognized a pretax gain on
the sale of approximately $12,177,000.
5. SHORT-TERM OBLIGATIONS
The Company's outstanding short-term obligations were as follows (in thousands):
<TABLE>
<CAPTION>
September 30, 1997 December 31, 1996
------------------ -----------------
<S> <C> <C>
General Credit Facilities:
$100 million demand discretionary bank line of credit $ 19,000 $ 19,000
Three brokerage margin loan facilities 50,791 56,526
------------------ -----------------
69,791 75,526
Teligent Credit Facility:
$50 million secured bank revolving credit facility 38,500 2,000
------------------ -----------------
$108,291 $77,526
================== =================
</TABLE>
Included in the general credit facilities listed above is a brokerage margin
loan facility obtained by the Company in January 1997. At September 30, 1997, an
aggregate of 8,511,202 and 3,368,774 shares of TCI Group Series A Common Stock
and TCI Ventures Group Series A Common Stock, respectively, was pledged as
collateral under the Company's general credit facilities.
On November 7, 1997, all outstanding amounts payable under the Teligent Credit
Facility were repaid and such facility was terminated.
6. SUBSIDIARY APPRECIATION RIGHTS
The Company has recognized a liability and related compensation expense for
Company Appreciation Rights ("CARs") granted to Teligent's Chairman and CEO (the
"Executive") under his employment agreement and an aggregate of 1,600,000
appreciation units ("Appreciation Units") granted to employees and directors
(the "Grantees") of Teligent pursuant to the Teligent Long-Term Incentive
Compensation Plan under the provisions of Accounting Principals Board Opinion
No. 25 ("APB 25") "Accounting for Stock Issued to Employees". Under APB 25,
expense recognition is accelerated such that the expense recorded exceeds the
actual amount exercisable under the vesting schedules applicable to the CARs and
Appreciation Units. The recorded liability under APB 25 is $54,713,000 as of
September 30, 1997, of which only $17,898,000 is exercisable as of that date.
The actual amount of compensation payable, if any, to the Executive and the
Grantees at the time of settlement, as well as the cumulative amount of
compensation expense recorded in the financial statements, if any, will depend
upon the vesting status and the fair market value of Teligent, among other
factors.
In connection with the Equity Offering (see Note 2), the CARs and all
Appreciation Units will be converted, effective as of the consummation of the
Equity Offering, into stock options of Teligent, Inc. having the same vesting
schedule, vesting rights and term as the applicable CAR or Appreciation Unit
converted.
7. MINORITY INTEREST
The minority interest liability and related income or expense reflects the
outside minority ownership of consolidated subsidiaries. However, in 1997 the
minority interests for the three and nine month periods ended September 30, 1997
do not reflect the minority interest in Teligent's losses of $12,353,000 and
$36,068,000 (income effects). Such minority interest income is not recognizable
under Generally Accepted Accounting Principles. If such minority interests were
recognized, the Company's net loss would have been $(6,275,000) or $(.17) per
share, and $(30,684,000), or $(.82) per share, for the respective three and nine
months ended September 30, 1997.
8. CONTINGENT LIABILITY
On September 30, 1997, Teligent terminated a preexisting agreement with an
equipment vendor. In connection with this termination, Teligent may be required
to reimburse the vendor for up to $4 million in research and development costs.
9. CAPITAL STOCK AND PER SHARE DATA
On October 7, 1997, the Company's Board of Directors approved a two-for-one
stock split of the Company's Class A Common Stock and Class B Common Stock
effected in the form of a stock dividend of one share of Class A Common Stock
and one share of Class B Common Stock for each outstanding share of Class A
Common Stock and Class B Common Stock, respectively, held by stockholders of
record on October 17, 1997. Class A Common Stock, Class B Common Stock, retained
earnings (deficit) and weighted average shares outstanding for the 1997 periods
have been adjusted to reflect the stock dividend. Prior period per share amounts
and the weighted average number of shares outstanding have been restated to
reflect the stock dividend.
Weighted average common shares outstanding do not include common stock
equivalents since their effect on the net loss per common share would be
antidilutive.
<PAGE>
In February 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 128, "Earnings Per Share" ("FASB 128"). FASB
128 specifies the computation, presentation and disclosure requirements for
earnings per share. FASB 128 is effective for financial statements issued for
periods ending after December 15, 1997, including interim periods, and requires
restatement of all prior-period per share data presented. Earlier application is
not permitted. The Company plans to adopt FASB 128 at year-end 1997. The
implementation of FASB 128 is not expected to have a material impact on the
reported per share data of the Company.
10. SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid for interest was approximately $2,523,000 and $1,565,000 for the nine
months ended September 30, 1997 and 1996, respectively. The Company made no
federal or state income tax payments during the nine months ended September 30,
1997 and 1996. Grupo Portatel, S.A. de C.V. ("Grupo"), a consolidated subsidiary
of the Company, paid approximately $375,000 and $475,000 in Mexican taxes in the
nine months ended September 30, 1997 and 1996, respectively. Noncash financing
activities of the Company for the nine months ended September 30, 1996 include a
contribution by minority interests of notes receivable from related parties of
$7,162,000 and long-term debt of $2,845,000 assumed by a cellular equipment
vendor, as guarantor of Grupo's long-term debt.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
This Form 10-Q contains certain forward looking statements about the
Company's completion of pending transactions and availability of certain tax
benefits. Any such statements are subject to risks that could cause the actual
results or amounts to vary materially.
Financial Condition
Currently, the Company's cash requirements (other than those of
Teligent) are being met by a $100,000,000 demand discretionary bank line of
credit and margin loan facilities with three brokerage firms. Borrowings under
the $100,000,000 line of credit are limited to 65% of the market value of the
TCI Group common stock pledged as security under the agreement, and bear
interest at rates as offered by the bank at the time of borrowing. The line
expires on November 30, 1997, and the Company presently anticipates renewal of
such facility.
The Company's margin loan facilities are secured by shares of TCI Group
Series A Common Stock and TCI Ventures Group Series A Common Stock. Borrowings
under one of the margin loan facilities are limited to 65% of the market value
of the pledged stock, with an additional 15% collateral requirement if
borrowings exceed $100,000,000, up to a maximum of $200,000,000. Borrowings
under the other two brokerage margin loan facilities are limited to 50% of the
market value of the pledged stock. Borrowings under the three margin loan
facilities bear interest at variable rates based upon the broker call rate or
the Fed Funds rate plus an applicable margin, as offered by the brokerage firm
at the time of borrowing. The weighted average interest rate under the
$100,000,000 line of credit and the margin loan facilities for the nine months
ended September 30, 1997 was approximately 6.3%.
As of November 10, 1997, based on (a) the market value of the 8,511,202
and 3,368,774 shares of TCI Group Series A Common Stock and TCI Ventures Group
Series A Common Stock, respectively, pledged in the aggregate and (b) aggregate
outstanding short-term obligations under these credit facilities of
approximately $106,060,000, the Company's unused borrowing capacity is
approximately $72,155,000. A significant portion of the Company's assets are
liquid, and can be pledged as security for added borrowing capacity. Given the
market value of the remaining shares of marketable equity securities that can be
pledged as additional security, the Company's borrowing facilities provide for
maximum aggregate unused borrowings of approximately $294,881,000 as of November
10, 1997. The Company's ability to meet cash needs in the near term for future
development depends in large part on the value of the marketable equity
securities. The Company periodically evaluates its financial position and
alternative financing arrangements.
In the nine months ended September 30, 1997, the Company sold 110,000
shares of Liberty Series A for proceeds of approximately $2,512,000, and has
recognized a pretax gain on the sale of approximately $2,485,000. The Company
expects to utilize its net operating loss carryforwards to offset the federal
income tax liability which would otherwise result from the gain. The Company
used the proceeds from the sale of the securities for working capital and to
fund the development of its wireless communications businesses.
In August 1997, the Company sold its ownership interest in Corporacion
Mobilcom, S.A. de C.V. ("Mobilcom") to Nextel Communications, Inc. ("Nextel")
for proceeds of approximately $21,371,000, and has recognized a pretax gain on
the sale of approximately $12,177,000. The Company expects to utilize its net
operating loss carryforwards to offset the federal income tax liability which
would otherwise result from the gain. The Company used the proceeds from the
sale of its ownership interest in Mobilcom primarily for the repayment of
$21,000,000 of short-term obligations in August 1997.
On November 7, 1997, using the proceeds from the Additional Sponsor
Cash Contributions (see Note 2 to the consolidated financial statements included
elsewhere herein and incorporated herein by reference), Teligent paid off and
terminated its $50,000,000 secured bank revolving credit facility which was
previously used to meet the cash needs of Teligent. Borrowings under this credit
facility bore interest at variable rates based upon the LIBOR rate, prime rate
or the Fed Funds rate,
<PAGE>
plus an applicable margin, as offered by the bank. The weighted average interest
rate under this credit facility for the nine months ended September 30, 1997 was
approximately 8.6%.
On September 30, 1997, Teligent entered into an agreement with NTT
whereby NTT will invest $100 million in Teligent (see Note 2 to the consolidated
financial statements included elsewhere herein and incorporated herein by
reference). In addition, Teligent, Inc., currently a wholly owned subsidiary of
Teligent, filed registration statements for the Offerings with the Securities
and Exchange Commission on October 7, 1997 (see Note 2 to the consolidated
financial statements included elsewhere herein and incorporated herein by
reference).
Teligent has also entered into a commitment letter with Northern
Telecom, Inc. ("Nortel") setting forth the anticipated terms and conditions
under which Nortel will provide loans to Teligent in an aggregate amount of up
to $780 million which will be used to finance the purchase of certain
telecommunications equipment, software and services pursuant to the definitive
agreement contemplated by an Equipment Purchase Letter of Intent and to provide
working capital (the "Vendor Financing"). The obligation of Nortel to provide
the Vendor Financing is subject to numerous conditions, including the
negotiation, execution and delivery of definitive documentation relating to the
Vendor Financing. There can be no assurance that the parties will be able to
reach agreement on the terms of such definitive documentation.
Pursuant to the FirstMark Stock Agreement, through September 30, 1997,
Teligent made payments totaling $5,570,000 (see Note 2 to the consolidated
financial statements included elsewhere herein and incorporated herein by
reference). In October 1997, upon consummation of the transaction contemplated
by the FirstMark Stock Agreement, Teligent made an additional cash payment of
$4,950,000.
On November 6, 1997, MSI made a $33 million capital contribution to
Teligent (see Note 2 to the consolidated financial statements included
elsewhere herein and incorporated herein by reference). As a result of the NTT
Investment, the Vendor Financing, the Offerings and the Additional Sponsor Cash
Contributions (see Note 2 to the consolidated financial statements included
elsewhere herein and incorporated herein by reference), the Company does not
currently anticipate having to make additional capital contributions to
Teligent. However, there can be no assurance that all of the foregoing
transactions will be fully consummated and, accordingly, that additional capital
contributions by the Company will not be required.
Portatel del Sureste, S.A. de C.V. ("Portatel"), a wholly owned
subsidiary of Grupo, has long-term debt obligations under various credit
facilities with a U.S. bank and various related parties (the "Portatel Credit
Agreements"). Such long-term obligations are denominated in U.S. dollars and
were incurred for working capital, including the purchase and construction of
cellular telephone infrastructure equipment. The outstanding debt under the
Portatel Credit Agreements at September 30, 1997 is $9,199,000. Grupo and
Portatel have no external available lines of credit as of September 30, 1997.
The Company may be required to meet additional capital requirements with respect
to its ownership interest in Grupo.
Net cash used in operating activities was $29,269,000 and $15,669,000
for the nine months ended September 30, 1997 and 1996, respectively. The
Company's operating cash needs increased in the 1997 period primarily for
expenses of Teligent, which was formed in March 1996. Net cash provided by
investing activities was $4,556,000 in the nine months ended September 30, 1997
and net cash used in investing activities was $16,378,000 for the same period of
1996. The $20,934,000 change between periods was primarily due to $21,371,000 in
proceeds received from the sale of the Company's interest in Mobilcom in the
1997 period. The 1997 period includes $5,570,000 paid pursuant to the FirstMark
Stock Agreement (see Note 2 to the consolidated financial statements included
elsewhere herein and incorporated herein by reference) and an increase in
capital expenditures attributable to construction of Teligent's broadband
wireless network, whereas the 1996 period includes larger advances to related
parties, including an advance to the Chairman and CEO of Teligent. Net cash
provided by financing activities in the 1997 and 1996 periods of $29,566,000 and
$32,829,000, respectively, was principally from the net borrowings of the
Company. The decrease in net borrowings between periods is primarily the result
of using proceeds from the sale of the Company's interest in Mobilcom for the
repayment of approximately $21,000,000 of the Company's short-term obligations
in August 1997. Overall, gross borrowings in the 1997 period were higher
principally to finance the investing and operating activities of Teligent.
<PAGE>
Operating Results for the Three Months Ended September 30, 1997,
Compared to the Three Months Ended September 30, 1996
Revenues from wireless communication services increased $1,080,000, or
26% in the 1997 period compared to the 1996 period. The increase is attributable
to an increase in Grupo's cellular communication services revenue, principally a
result of growth in Grupo's subscriber base. Cost of wireless communication
services increased $102,000, or 5% between periods principally due to operating
costs incurred by Teligent, which began providing wireless communication
services in 1996, offset by favorable adjustments in the 1997 quarter negotiated
with Grupo's long distance carrier and a reduction of certain fees payable by
Portatel to Mexican regulatory authorities pursuant to the concession granted to
Portatel to provide cellular telephone services.
Radio broadcasting revenues of $828,000 and $843,000 were relatively
consistent between periods and the cost of radio broadcasting increased $22,000,
or 12%. The increase in costs is principally the result of programming costs
associated with a format change at WLYR-FM (formerly known as WCEZ-FM).
Direct research and development expenses of $1,738,000 and $2,392,000
in the 1997 and 1996 periods, respectively, primarily represent expenditures for
TruePosition(TM) ("TruePosition"), the Company's wireless location business. The
decrease between periods of $654,000 is primarily due to expenditures in the
1996 period for equipment tested in field trials. Sales, general and
administrative expenses were $18,261,000 and $7,941,000 in the 1997 and 1996
periods, respectively. The increase from 1996 to 1997 of $10,320,000 was
principally the result of expenditures relating to the growth of Teligent's
operations.
The non-cash subsidiary appreciation rights expense for Teligent of
$14,062,000 recorded in the third quarter of 1997 reflects a non-cash charge
resulting from additional grants and vesting. Grants commenced in September 1996
and therefore no expense was recorded in the 1996 period.
The Company's equity in loss of affiliate was $618,000 in the 1996
period and reflects the Company's share of the results of Teletrac, Inc.
("Teletrac") for the 1996 period. Through November 1996, the Company held 20% of
the voting stock of Teletrac and accounted for its investment in Teletrac under
the equity method. As a result of Teletrac's issuance of convertible preferred
stock in early December 1996, the Company's voting interest in Teletrac was
reduced to approximately 13% and, accordingly, the Company began accounting for
its investment under the cost method.
A pretax gain of $12,177,000 was realized in the third quarter of 1997
on the sale of the Company's ownership interest in Mobilcom to Nextel for
proceeds of approximately $21,371,000. Interest and dividend income was $736,000
and $523,000 in the 1997 and 1996 periods, respectively. The increase in 1997 of
$213,000 is primarily the result of an increase in the level of receivables from
related parties, which includes certain interest-bearing notes. Interest expense
was $2,119,000 and $1,108,000 in the 1997 and 1996 periods, respectively. The
increase in 1997 of $1,011,000 is the result of an increase in the level of
short-term obligations, offset in part by a decrease in the level of Portatel's
long-term debt. Minority interests were $726,000 of expense in the 1997 period
and $2,477,000 of income in the 1996 period. The 1997 minority interest expense
represents the minority ownership interest in the net income of all consolidated
subsidiaries except Teligent. The 1996 minority interest included the minority
interest ownership interest in Teligent's net loss. Such interest is not
recognized in 1997 under Generally Accepted Accounting Principles ("GAAP") due
to the negative equity position of Teligent in 1997 (See Note 7 to the
consolidated financial statements included elsewhere herein and incorporated
herein by reference).
The Company recognized an income tax benefit (net of foreign tax
expense of Grupo) at an effective rate of approximately 14% and 35% in the 1997
and 1996 periods, respectively. The principal difference between the 1997
effective tax rate and the statutory rate is the recognition by the Company of
100% of the net loss of Teligent with no minority interest adjustment (see Note
7 to the consolidated financial statements included elsewhere herein), while the
Company's tax benefit reflects 55% of such loss. Based on current projections,
the Company anticipates it will generate a net operating loss for federal income
taxes for the year ended December 31, 1997.
<PAGE>
The Company's net loss was $18,628,000 for the three months ended
September 30, 1997, compared to a net loss of $4,966,000 for the three months
ended September 30, 1996. The higher loss in the 1997 period resulted primarily
from the non-cash charge recorded for the Teligent appreciation rights (net of
the income tax benefit), as well as increased operating and administrative
expenditures for the start-up of Teligent, offset in part by the gain on sale of
Mobilcom.
Operating Results for the Nine Months Ended September 30, 1997,
Compared to the Nine Months Ended September 30, 1996
Revenues from wireless communication services increased $2,931,000, or
24% in the 1997 period compared to the 1996 period. The increase is attributable
to an increase in Grupo's cellular communication services revenue, principally a
result of growth in Grupo's subscriber base. Cost of wireless communication
services increased $2,092,000, or 32% between periods principally due to
operating costs incurred by Teligent, which began providing wireless
communication services in 1996.
Radio broadcasting revenues increased $513,000, or 29% for the 1997
period compared to the 1996 period, and the cost of radio broadcasting increased
$98,000, or 19%. The increase in revenues and costs is principally the result of
the acquisition of WLYR-FM (formerly known as WCEZ-FM) on May 31, 1996.
Direct research and development expenses of $5,042,000 and $6,075,000
in the 1997 and 1996 periods, respectively, primarily represent expenditures for
TruePosition. The decrease between periods of $1,033,000 is primarily due to
expenditures in 1996 for equipment tested in field trials. Sales, general and
administrative expenses were $38,967,000 and $16,324,000 in the 1997 and 1996
periods, respectively. The increase from 1996 to 1997 of $22,643,000 was
principally the result of expenditures relating to the growth of Teligent's
operations.
The non-cash subsidiary appreciation rights expense for Teligent of
$51,935,000 recorded in the first nine months of 1997 reflects a non-cash charge
resulting from additional grants, vesting, and the appreciation in value of
Teligent. Grants commenced in September 1996 and therefore no expense was
recorded in the 1996 period.
The Company's equity in loss of affiliate was $1,412,000 in the 1996
period and reflects the Company's share of the results of Teletrac for the 1996
period. Through November 1996, the Company held 20% of the voting stock of
Teletrac and accounted for its investment in Teletrac under the equity method.
As a result of Teletrac's issuance of convertible preferred stock in early
December 1996, the Company's voting interest in Teletrac was reduced to
approximately 13% and, accordingly, the Company began accounting for its
investment under the cost method.
The $2,485,000 pretax gain on the sale of marketable equity securities
in the 1997 period is the result of the sale of 110,000 shares of Liberty Series
A and the $3,398,000 pretax gain on the sale of marketable equity securities in
the 1996 period is the result of the sale of 41,598 shares of
Tele-Communications, Inc. Class B 6% Cumulative Redeemable Exchangeable Junior
Preferred Stock and 90,000 shares of General Communication, Inc. Class A Common
Stock. A pretax gain of $12,177,000 was realized in the third quarter of 1997 on
the sale of the Company's ownership interest in Mobilcom to Nextel for proceeds
of approximately $21,371,000. Interest and dividend income was $2,068,000 and
$1,651,000 in the 1997 and 1996 periods, respectively. The increase in 1997 of
$417,000 is primarily the result of an increase in the level of receivables from
related parties, which includes certain interest-bearing notes. Interest expense
was $5,631,000 and $3,115,000 in the 1997 and 1996 periods, respectively. The
increase in 1997 of $2,516,000 is the result of an increase in the level of
short-term obligations, offset in part by a decrease in the level of Portatel's
long-term debt. Minority interests were $2,076,000 of expense in the 1997 period
and $3,828,000 of income in the 1996 period. The 1997 minority interest expense
represents the minority ownership interest in the net income of all consolidated
subsidiaries except Teligent. The 1996 minority interest included the minority
interest ownership interest in Teligent's net loss. Such interest is not
recognized in 1997 under GAAP due to the negative equity position of Teligent in
1997 (See Note 7 to the consolidated financial statements included elsewhere
herein and incorporated herein by reference).
<PAGE>
The Company recognized an income tax benefit (net of foreign tax
expense of Grupo) at an effective rate of approximately 19% and 34% in the 1997
and 1996 periods, respectively. The principal difference between the 1997
effective tax rate and the statutory rate is the recognition by the Company of
100% of the net loss of Teligent with no minority interest adjustment (see Note
7 to the consolidated financial statements included elsewhere herein and
incorporated herein by reference), while the Company's tax benefit reflects 55%
of such loss. Based on current projections, the Company anticipates it will
generate a net operating loss for federal income taxes for the year ended
December 31, 1997.
The Company's net loss was $66,752,000 for the nine months ended
September 30, 1997, compared to a net loss of $9,768,000 for the nine months
ended September 30, 1996. The higher loss in the 1997 period resulted primarily
from the non-cash charge recorded for the Teligent appreciation rights (net of
the income tax benefit), as well as increased operating and administrative
expenditures for the start-up of Teligent, offset in part by the gain on sale of
Mobilcom.
<PAGE>
PART II--OTHER INFORMATION
Item 1. Legal Proceedings
As disclosed in the Company's Annual Report on Form 10-K for the year
ended December 31, 1996, the Federal Communications Commission (the
"FCC") issued an Order (the "Relocation Order") on March 14, 1997
providing for the relocation of the digital electronic message system
("DEMS") licenses from the 18 GHz band to a reallocated portion of the
24 GHz band, pursuant to a request by the National Telecommunications &
Information Administration acting on behalf of the Department of
Defense. The Relocation Order provided for the relocation of DEMS from
100 MHz over 5 channels at 18 GHz to 400 MHz over 5 channels at 24 GHz,
allowing DEMS systems to maintain equivalent information capacity to
similarly engineered systems at 18 GHz. On June 24, 1997, the FCC
issued an additional order (the "Implementation Order"), which
implemented the Relocation Order in part by modifying various DEMS
licenses, including those held by affiliates of the Company, to
authorize DEMS operations at 24 GHz. The Relocation Order and the
Implementation Order were subject to an administrative and judicial
review period and, during this period, five parties filed petitions
with the FCC seeking either partial or full reconsideration or review
of one or both orders. One of the parties, WinStar Communications,
Inc., subsequently withdrew its petition. The remaining four parties --
BellSouth Corporation, Millimeter Wave Carrier Association, Inc.,
DirecTV Enterprises, Inc. and WebCel Communications, Inc. -- have
challenged the FCC's issuance of the Relocation Order without
conducting a notice and comment rulemaking proceeding pursuant to the
national security exemption to the FCC's otherwise applicable statutory
requirement to promulgate rules through notice and comment proceedings.
In addition, DirectTV Enterprises, Inc. has filed a petition for
rulemaking with the FCC, requesting that the FCC grant permission for
DirecTV to construct and operate satellite uplink facilities in certain
areas on a portion of the 24 GHz frequencies allocated and granted to
DEMS licensees. The FCC has the option to dismiss the petitions or to
initiate public notice and comment proceedings concerning the issues
which the FCC decided in the Relocation Order. The Company and its
affiliates have filed timely responses with the FCC opposing the
petitions for reconsideration and review, and continue to build-out
their networks as permitted under their licenses, the Relocation Order
and the Implementation Order.
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits. The following exhibits are filed as part of this Form
10-Q:
Exhibit
Number Description
------- -----------
3.1 Restated Certificate of Incorporation, filed as
Exhibit 3.1 to Registration Statement on Form 10/A
dated November 15, 1994 and incorporated herein by
reference.
3.2 Amended and Restated By-Laws, filed as Exhibit 3.2
to Registration Statement on Form 10/A dated
November 15, 1994 and incorporated herein by
reference.
4.1 Common Stock Certificates, filed as Exhibits 4.2 and
4.3 to Form 8-K, dated December 22, 1994 and
incorporated herein by reference.
4.2 Rights Agreement, dated as of December 15, 1994, by
and between the Company and Mellon Bank, N.A., filed
as Exhibit 4.1 to Form 8-K, dated December 22, 1994
and incorporated herein by reference.
10.1 Securities Purchase Agreement, dated as of September
30, 1997, by and among Teligent, L.L.C., Microwave
Services, Inc., Digital Services Corporation, and
Nippon Telegraph and Telephone Corporation, filed as
Exhibit 10.3 to Amendment No. 1 to the Registration
Statement on Form S-1 of Teligent, Inc.
(Registration No. 333-37381) filed on October 30,
1997 and incorporated herein by reference.
10.2 Agreement, dated September 29, 1997, among
Teligent, L.L.C., Digital Services Corporation,
Telecom-DTS Investors, L.L.C., Microwave Services,
Inc., The Associated Group, Inc. and certain other
parties, filed as Exhibit 10.6 to Amendment No. 2 to
the Registration Statement on Form S-1 of Teligent,
Inc. (Registration No. 333-37381) filed on November
10, 1997 and incorporated herein by reference.
27 Article 5 Financial Data Schedule for Quarterly
Report on Form 10-Q for the quarter ended September
30, 1997 (filed only electronically with the
Securities and Exchange Commission).
(b) Reports on Form 8-K. The Company did not file any reports on Form
8-K during the three months ended September 30, 1997.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
THE ASSOCIATED GROUP, INC.
(Registrant)
Date: November 13, 1997 By: /s/ Myles P. Berkman
--------------------
Myles P. Berkman
Chairman, President, Chief Executive Officer
and Treasurer
(Principal Financial and Accounting Officer)
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Page Where
Found or
Exhibit Incorporated
Number by Reference
----------- -----------------
<S> <C> <C>
3.1 Restated Certificate of Incorporation, filed as Exhibit 3.1 to *
Registration Statement on Form 10/A dated November 15, 1994 and
incorporated herein by reference.
3.2 Amended and Restated By-Laws, filed as Exhibit 3.2 to Registration *
Statement on Form 10/A dated November 15, 1994 and incorporated herein by
reference.
4.1 Common Stock Certificates, filed as Exhibits 4.2 and 4.3 to Form *
8-K, dated December 22, 1994 and incorporated herein by reference.
4.2 Rights Agreement, dated as of December 15, 1994, by and between *
the Company and Mellon Bank, N.A., filed as Exhibit 4.1 to Form
8-K, dated December 22, 1994 and incorporated herein by reference.
10.1 Securities Purchase Agreement, dated as of September 30, 1997, by and among **
Teligent, L.L.C., Microwave Services, Inc., Digital Services Corporation,
and Nippon Telegraph and Telephone Corporation, filed as Exhibit 10.3 to
Amendment No. 1 to the Registration Statement on Form S-1 of Teligent, Inc.
(Registration No. 333-37381) filed on October 30, 1997 and incorporated
herein by reference.
10.2 Agreement, dated September 29, 1997, among Teligent, L.L.C., Digital **
Services Corporation, Telecom-DTS Investors, L.L.C., Microwave Services,
Inc., The Associated Group, Inc. and certain other parties, filed as
Exhibit 10.6 to Amendment No. 2 to the Registration Statement on Form S-1
of Teligent, Inc. (Registration No. 333-37381) filed on November 10, 1997
and incorporated herein by reference.
27 Article 5 Financial Data Schedule for Quarterly Report on Form ***
10-Q for the quarter ended September 30, 1997.
</TABLE>
- ------------------
* Previously filed and incorporated herein by reference
** Previously filed electronically with the Securities and Exchange Commission
and incorporated herein by reference
*** Filed only electronically with the Securities and Exchange Commission
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
consolidated financial statements of The Associated Group, Inc. as of and for
the nine months ended September 30, 1997 included in Form 10-Q for the quarter
ending September 30, 1997 and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 8,194
<SECURITIES> 0<F1>
<RECEIVABLES> 5,859
<ALLOWANCES> 2,733
<INVENTORY> 1,591
<CURRENT-ASSETS> 20,625
<PP&E> 58,778
<DEPRECIATION> 28,298
<TOTAL-ASSETS> 745,926
<CURRENT-LIABILITIES> 157,121
<BONDS> 7,117
0
0
<COMMON> 3,756<F2>
<OTHER-SE> 335,384
<TOTAL-LIABILITY-AND-EQUITY> 745,926
<SALES> 469
<TOTAL-REVENUES> 18,134
<CGS> 326
<TOTAL-COSTS> 9,660
<OTHER-EXPENSES> 9,102
<LOSS-PROVISION> 872
<INTEREST-EXPENSE> 5,631
<INCOME-PRETAX> (82,186)
<INCOME-TAX> (15,434)
<INCOME-CONTINUING> (66,752)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (66,752)
<EPS-PRIMARY> (1.78)<F2>
<EPS-DILUTED> 0
<FN>
<F1>Does not include $641,935 of noncurrent marketable equity securities.
<F2>Reflects a two-for-one stock split of The Associated Group, Inc. Class A
Common Stock and Class B Common Stock effected in the form of a stock dividend
of one share of Class A Common Stock and one share of Class B Common Stock for
each outstanding share of Class A Common Stock and Class B Common Stock,
respectively, held by stockholders of record on October 17, 1997. All per
share amounts and the weighted average number of shares outstanding in the
consolidated financial statements included in Form 10-Q for the quarter ending
September 30, 1997 have been adjusted to reflect the stock dividend. Previously
filed Financial Data Schedules have not been restated to reflect the stock
dividend.
</FN>
</TABLE>
