UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
X Quarterly Report under Section 13 or 15(d) of the Securities Exchange
- -------
Act of 1934
For the quarterly period ended September 30, 2001
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: 333-19327
OLYMPUS COMMUNICATIONS, L.P.*
(Exact name of registrant as specified in its charter)
Delaware 25-1622615
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
OLYMPUS CAPITAL CORPORATION*
(Exact name of registrant as specified in its charter)
Delaware 23-2868925
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
---------------------------------------------------------
One North Main Street
Coudersport, PA 16915-1141
(Address of principal (Zip code)
executive offices)
814-274-9830
(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
registrant was required to file such reports), and (2) have been subject to such
filing requirements for the past 90 days.
Yes X No __
* Olympus Communications, L.P. and Olympus Capital Corporation meet the
conditions set forth in General Instruction H (1)(a) and (b) to the Form 10-Q
and are therefore filing with the reduced disclosure format.
OLYMPUS COMMUNICATIONS, L.P. AND SUBSIDIARIES
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION
Page
Item 1. Financial Statements 3
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations 10
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 15
SIGNATURES 16
SAFE HARBOR STATEMENT
The Private Securities Litigation Reform Act of 1995 provides a "safe
harbor" for forward-looking statements. Certain information included in this
Quarterly Report on Form 10-Q including Management's Discussion and Analysis of
Financial Condition and Results of Operations, is forward-looking, such as
information relating to the effects of future regulation, future capital
commitments and the effects of competition. Such forward-looking information
involves important risks and uncertainties that could significantly affect
expected results in the future from those expressed in any forward-looking
statements made by, or on behalf of, Olympus Communications, L.P. ("Olympus"
and, collectively with its subsidiaries, the "Company"). These "forward looking
statements" can be identified by the use of forward-looking terminology such as
"believes," "expects," "may," "will," "should," "intends" or "anticipates" or
the negative thereof or other variations thereon or comparable terminology or by
discussions of strategy that involve risks or uncertainties. These risks and
uncertainties include, but are not limited to, uncertainties relating to general
business and economic conditions, acquisitions and divestitures, risks
associated with the Company's growth and financings, the availability and cost
of capital, government and regulatory policies, the pricing and availability of
equipment, materials, inventories and programming, product acceptance, the
Company's ability to execute on its various business plans and to construct,
expand and upgrade its networks, risks associated with reliance on the
performance and financial condition of vendors and customers, technological
developments, and changes in the competitive environment in which the Company
operates. Readers are cautioned that such forward-looking statements are only
predictions, that no assurance can be given that any particular future results
will be achieved, and that actual events or results may differ materially. For
further information regarding those risks and uncertainties and their potential
impact on the Company, see the prospectus and latest prospectus supplement filed
under Registration Statement No. 333-64224 of Adelphia Communications
Corporation, under the heading "Risk Factors." In evaluating such statements,
readers should specifically consider the various factors which could cause
actual events or results to differ materially from those indicated by such
forward-looking statements.
ITEM 1. Financial Statements
OLYMPUS COMMUNICATIONS, L.P. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
(Dollars in thousands)
December 31, September 30,
2000 2001
---------------- -----------------
ASSETS
Property, plant and equipment - net $ 1,279,835 $ 1,768,708
Intangible assets - net 3,618,864 4,395,392
Cash and cash equivalents 35,920 13,443
Subscriber receivables - net 44,782 60,158
Prepaid expenses and other assets - net 52,524 90,357
Due from affiliates - net -- 397,012
---------------- -----------------
Total $ 5,031,925 $ 6,725,070
================ =================
LIABILITIES AND PARTNERS' EQUITY
Subsidiary debt $ 841,355 $ 1,784,981
Parent debt 203,020 202,631
Other debt 127,664 134,055
Accounts payable 181,550 154,217
Subscriber advance payments and deposits 15,639 21,904
Accrued interest and other liabilities 77,773 112,004
Due to affiliates - net 264,578 --
Deferred income taxes 679,715 674,645
---------------- -----------------
Total liabilities 2,391,294 3,084,437
---------------- -----------------
Commitments and Contingencies (Note 8)
Partners' equity:
Limited partners' interests 407,813 407,813
General partners' equity 2,232,818 3,232,820
---------------- -----------------
Total partners' equity 2,640,631 3,640,633
---------------- -----------------
Total $ 5,031,925 $ 6,725,070
================ =================
See the accompanying notes to condensed consolidated financial statements.
OLYMPUS COMMUNICATIONS, L.P. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
(Dollars in thousands)
Three Months Ended Nine Months Ended
September 30, September 30,
---------------------------------- ---------------------------------
2000 2001 2000 2001
----------------- ---------------- ----------------- ---------------
Revenues $ 175,924 $ 223,266 $ 518,576 $ 659,878
---------------- ---------------- ---------------- -----------------
Operating expenses:
Direct operating and programming 62,191 81,418 185,246 236,971
Selling, general and administrative 23,638 31,527 74,956 97,688
Depreciation and amortization 56,773 82,132 175,016 233,432
Management fees to managing affiliates 11,078 12,456 29,925 33,877
---------------- ---------------- ---------------- -----------------
Total 153,680 207,533 465,143 601,968
---------------- ---------------- ---------------- -----------------
Operating income 22,244 15,733 53,433 57,910
---------------- ---------------- ---------------- -----------------
Other (expense) income:
Interest expense (19,766) (29,581) (63,603) (91,993)
Interest (expense) income - affiliates (929) 327 (26) (285)
Gain on cable systems exchange -- -- 19,258 73,009
Other 406 (4,282) 464 (3,665)
---------------- ---------------- ---------------- -----------------
Total (20,289) (33,536) (43,907) (22,934)
---------------- ---------------- ---------------- -----------------
Income (loss) before income taxes
and extraordinary loss 1,955 (17,803) 9,526 34,976
Income tax (expense) benefit (430) 5,005 (2,096) 5,384
---------------- ---------------- ---------------- -----------------
Income (loss) before extraordinary loss 1,525 (12,798) 7,430 40,360
Extraordinary loss on early retirement of debt
(net of tax expense of $280) -- (7,760) -- (7,760)
---------------- ---------------- ---------------- -----------------
Net income (loss) $ 1,525 $ (20,558) $ 7,430 $ 32,600
================ ================ =============== =================
See the accompanying notes to condensed consolidated financial statements.
OLYMPUS COMMUNICATIONS, L.P. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(Dollars in thousands)
Nine Months Ended
September 30,
----------------------------------
2000 2001
----------------------------------
Cash flows from operating activities:
Net income $ 7,430 $ 32,600
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization 175,016 233,432
Deferred income taxes 2,096 (5,384)
Extraordinary loss on early retirement of debt 7,760
Gain on cable systems exchange (19,258) (73,009)
Non-cash interest 5,962 7,098
Other -- 3,343
Changes in operating assets and liabilities, net of effects of
acquisitions and cable systems exchange:
Subscriber receivables (8,865) (14,000)
Prepaid expenses and other assets (11,992) (29,085)
Accounts payable 16,522 (33,211)
Subscriber advance payments and deposits 4,048 6,659
Accrued interest and other liabilities 7,773 15,167
----------------- ----------------
Net cash provided by operating activities 178,732 151,370
----------------- ----------------
Cash flows from investing activities:
Expenditures for property, plant and equipment (276,142) (408,687)
Acquisitions (16,336) (3,988)
--------------- ----------------
Cash used for investing activities (292,478) (412,675)
--------------- ----------------
Cash flows from financing activities:
Proceeds from debt 1,204,374 5,131,673
Repayments of debt (1,214,988) (4,185,567)
Cost associated with debt financings -- (42,010)
Amounts advanced from (to) affiliates 128,822 (665,268)
Capital distributions (25) --
----------------- ----------------
Net cash provided by financing activities 118,183 238,828
----------------- ----------------
Increase (decrease) in cash and cash equivalents 4,437 (22,477)
Cash and cash equivalents, beginning of period 12,021 35,920
----------------- ----------------
Cash and cash equivalents, end of period $ 16,458 $ 13,443
================ ================
See the accompanying notes to condensed consolidated financial statements.
OLYMPUS COMMUNICATIONS, L.P. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
(Dollars in thousands)
1. The Partnership and Basis of Presentation
Olympus Communications, L.P. ("Olympus" or the "Company") is a limited
partnership, formed under the laws of Delaware, between ACC Operations, Inc. and
ACC Holdings II, LLC, wholly-owned subsidiaries of Adelphia Communications
Corporation (together with its subsidiaries "Adelphia"). Olympus' operations
consist of providing telecommunications services primarily over its networks,
which are commonly referred to as broadband networks because they can transmit
large quantities of voice, video and data by way of digital or analog signals.
Olympus Capital Corporation, a wholly-owned subsidiary of the Company, was
formed solely for the purpose of serving as a co-issuer with Olympus
Communications, L.P. of the 10 5/8% Senior Notes due 2006 (the "Senior Notes").
Olympus Capital Corporation has no substantial assets or liabilities and no
operations of any kind and the Indenture, pursuant to which such Senior Notes
were issued, limits Olympus Capital Corporation's ability to acquire or hold any
significant assets or other properties or engage in any business activities
other than in connection with the issuance of the Senior Notes.
The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with accounting principles generally accepted in the
United States of America for interim financial information and with the
instructions of Form 10-Q and Rule 10-01 of Regulation S-X. Such principles are
applied on a basis consistent with those reflected in the December 31, 2000 Form
10-K Report of the Company filed with the Securities and Exchange Commission.
The condensed consolidated financial statements contained herein should be read
in conjunction with the consolidated financial statements and related notes
contained in the December 31, 2000 Annual Report on Form 10-K. In the opinion of
management, the unaudited condensed consolidated financial statements contained
herein include all adjustments (consisting of only recurring adjustments)
necessary for a fair presentation of the results of operations for the interim
periods presented. These interim results of operations are not necessarily
indicative of results for future periods.
2. Significant Events Subsequent to the Annual Report
On January 1, 2001, Adelphia and certain of its subsidiaries, including
Olympus, closed the previously announced cable systems exchange with Comcast
Corporation. As part of the transaction, Olympus added approximately 44,000
subscribers in Orange County, California. In exchange, Comcast Corporation
received approximately 56,000 subscribers in Ft. Myers, Florida from Olympus.
The cable systems exchange was recorded at fair value and purchase accounting
was applied as of the date of the transaction. This transaction resulted in a
gain of $73,009 and an increase to property, plant and equipment and intangibles
of $16,778 and $57,063, respectively. The Company has made a preliminary
allocation of the purchase accounting which is subject to final allocation and
appraisal.
On January 1, 2001, Olympus distributed cable systems serving approximately
50,000 subscribers primarily in and around Orange County, Florida to Adelphia
(the "January 2001 Distribution"). On September 28, 2001, Olympus and certain
subsidiaries of Adelphia closed on a new $2,030,000 senior secured credit
facility. The credit facility consists of a $765,000 8 3/4 year reducing
revolving credit loan, a $765,000 8 3/4 year term loan and a $500,000 9 year
term loan. Concurrent with the closing of the September 28, 2001 senior secured
credit facility, Adelphia contributed cable systems serving approximately
1,180,000 basic subscribers to Olympus or to subsidiaries of Olympus (the
"September 2001 Contribution"). As the cable systems distributed and contributed
constituted businesses contained within separate legal entities under common
control, the January 2001 Distribution and the September 2001 Contribution have
been reported as a change in reporting entity. As a result, the condensed
consolidated financial statements included herein have been recast to reflect
the distribution and contribution for periods that the cable systems were under
the common control of Adelphia.
The following shows the effects on the historical periods of the change in
reporting entity:
Three Months Ended Nine Months Ended
September 30, September 30,
---------------------------- ----------------------------
2000 2001 2000 2001
------------- -------------- ------------- --------------
Increase (decrease) in income or reduction
of loss before extraordinary items $ 7,277 $ (4,350) $ 32,955 $ (16,626)
Increase (decrease) in net income or
reduction of net loss $ 7,277 $ (10,738) $ 32,955 $ (23,014)
Certain of the cable systems that were part of the September 2001
Contribution were acquired by Adelphia during 2001. The contributions of systems
acquired by Adelphia during 2001 resulted in an increase primarily to property,
plant and equipment, intangibles and general partners' equity of approximately
$176,000, $806,000 and $967,000, respectively. The following unaudited
financial information assumes that these acquisitions had occurred on
January 1, 2000.
Three Months Nine Months Nine Months
Ended Ended Ended
September 30, September 30, September 30,
2000 2000 2001
------------------ ------------------ -----------------
Revenues $ 201,331 $ 592,261 $ 677,368
Income before Extraordinary Loss 2,749 10,483 41,269
Net Income 2,749 10,483 33,509
3. Debt
The Company's debt was comprised of the following:
December 31, September 30,
2000 2001
---------------- -----------------
Subsidiary Debt:
Notes to banks $ 841,355 $ 1,784,981
================ ================
Parent Debt:
10 5/8% Senior Notes due 2006 $ 203,020 $ 202,631
================ ================
Other Debt:
Capital leases and other $ 127,664 $ 134,055
================ ================
4. Supplemental Financial Information
Cash payments for interest were $64,146 and $92,119 for the nine months
ended September 30, 2000 and 2001, respectively. Accumulated depreciation of
property, plant and equipment amounted to $543,848 and $652,853 at December 31,
2000 and September 30, 2001, respectively. Accumulated amortization of
intangible assets amounted to $416,299 and $505,662 at December 31, 2000 and
September 30, 2001, respectively.
5. Income taxes
Income tax (expense) benefit for the three and nine months ended September
30, 2000 and 2001 was substantially comprised of deferred taxes.
6. Derivative Financial Instruments
The Company is exposed to certain risks arising from transactions that are
entered into in the normal course of business. The Company may enter into
derivative financial instrument transactions in order to manage or reduce these
risks. The Company's policies do not permit active trading of, or speculation
in, derivative financial instruments.
The Company manages its interest rate risk through the use of interest rate
protection instruments such as swaps, caps and collars. The use of such interest
rate protection instruments (as required by some of the Company's borrowing
agreements) is intended to minimize the volatility of cash flows caused by
interest rate fluctuations. These instruments are not designated as hedging
instruments under the provisions of SFAS No. 133. Therefore, the change in the
fair value of these instruments is recorded in "Other" in the condensed
consolidated statement of operations.
7. Recent Accounting Pronouncements
In July 2001, the FASB issued SFAS No. 141, "Business Combinations," and
SFAS No. 142, "Goodwill and Other Intangible Assets." These statements make
significant changes to the accounting for business combinations, goodwill, and
intangible assets. SFAS No. 141 eliminates the pooling-of-interests method of
accounting for business combinations with limited exceptions for combinations
initiated prior to July 1, 2001. In addition, it further clarifies the criteria
for recognition of intangible assets separately from goodwill. This statement is
effective for business combinations completed after June 30, 2001.
SFAS No. 142 discontinues the practice of amortizing goodwill and
indefinite-lived intangible assets and initiates an annual review for
impairment. Intangible assets with a determinable useful life will continue to
be amortized over their useful lives. SFAS No. 142 applies to goodwill and
intangible assets acquired after June 30, 2001. Goodwill and intangible assets
existing prior to July 1, 2001 will be affected when the Company adopts the
statement. SFAS No. 142 is effective for fiscal years beginning after December
15, 2001. At September 30, 2001 the carrying value of goodwill and
indefinite-lived intangible assets that will no longer be amortized approximated
$4,341,612. Amortization of such assets was approximately $28,474 and $90,690
for the three and nine months ended September 30, 2001, respectively. The
Company has not yet completed its impairment assessment of goodwill and
indefinite-lived intangible assets which will be required upon implementation of
the standard.
In August 2001, The FASB issued SFAS No. 144, "Accounting for the Impairment
or Disposal of Long-Lived Assets." SFAS No. 144, which addresses financial
accounting and reporting for the impairment of long-lived assets and for
long-lived assets to be disposed of, supercedes SFAS No. 121 and is effective
for fiscal years beginning after December 15, 2001. While the Company is
currently evaluating the impact the adoption of SFAS No. 144 will have on its
financial position and results of operations, it does not expect such impact to
be material.
8. Commitments and Contingencies
Reference is made to Management's Discussion and Analysis of Financial
Condition and Results of Operations and the Annual Report for a discussion of
material commitments and contingencies.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
(Dollars in thousands)
See Safe Harbor Statement following the table of contents, which section is
incorporated by reference herein.
Introduction
Olympus Communications, L.P. and subsidiaries ("Olympus" or the "Company")
is a limited partnership, formed under the laws of Delaware, between ACC
Operations, Inc. and ACC Holdings II, LLC, wholly-owned subsidiaries of
Adelphia Communications Corporation ("Adelphia").
Olympus Capital Corporation, a wholly-owned subsidiary of the Company, was
formed solely for the purpose of serving as a co-issuer with Olympus
Communications, L.P. of the 10 5/8% Senior Notes due 2006 (the "Senior Notes").
Olympus Capital Corporation has no substantial assets or liabilities and no
operations of any kind and the Indenture, pursuant to which such Senior Notes
were issued, limits Olympus Capital Corporation's ability to acquire or hold any
significant assets or other properties or engage in any business activities
other than in connection with the issuance of the Senior Notes.
On January 1, 2001, Olympus distributed cable systems serving approximately
50,000 subscribers primarily in and around Orange County, Florida to Adelphia
(the "January 2001 Distribution"). On September 28, 2001, Olympus and certain
subsidiaries of Adelphia closed on a new $2,030,000 senior secured credit
facility. The credit facility consists of a $765,000 8 3/4 year reducing
revolving credit loan, a $765,000 8 3/4 year term loan and a $500,000 9 year
term loan. Concurrent with the closing of the September 28, 2001 senior secured
credit facility, Adelphia contributed cable systems serving approximately
1,180,000 basic subscribers to Olympus or to subsidiaries of Olympus (the
"September 2001 Contribution"). As the cable systems distributed and contributed
constituted businesses contained within separate legal entities under common
control, the January 2001 Distribution and the September 2001 Contribution have
been reported as a change in reporting entity. As a result, the condensed
consolidated financial statements included herein have been recast to reflect
the distribution and contribution for periods that the cable systems were under
the common control of Adelphia.
As of September 30, 2001, the Company owned systems with broadband networks
that passed in front of approximately 2,865,000 and served 1,787,000 basic
subscribers.
Results of Operations
Three and Nine Months Ended September 30, 2001
Olympus earned substantially all of its revenues in the three and nine
months ended September 30, 2000 and 2001 from monthly subscriber fees for basic,
satellite, digital, premium and ancillary services (such as installations and
equipment rentals), local and national advertising sales, high speed data
services and pay per view programming.
The changes in Olympus' operating results for the three and nine months
ended September 30, 2001, compared to the same period of the prior year, were
primarily the result of the continued roll-out of digital cable and high speed
data services, vendor price increases for the Company's programming, the impact
of subscriber rate increases and expanding existing cable television operations.
The high level of depreciation and amortization associated with acquisitions
in recent years, the continuing upgrade and expansion of systems, and interest
associated with financing activities will continue to have a negative impact on
the reported results of operations. Olympus expects to report net losses for the
foreseeable future.
The following table is derived from Olympus's Condensed Consolidated
Statements of Operations that are included in this Form 10-Q and sets forth the
historical percentage relationship to revenues of the components of operating
income contained in such financial statements for the periods indicated.
Three Months Ended Nine Months Ended
September 30, September 30,
2000 2001 2000 2001
------------- ------------- ------------- -------------
Revenues 100.0% 100.0% 100.0% 100.0%
Operating expenses:
Direct operating and programming 35.4% 36.5% 35.7% 35.9%
Selling, general and administrative 13.4% 14.1% 14.5% 14.8%
Depreciation and amortization 32.3% 36.8% 33.7% 35.4%
Management fees to managing affiliate 6.3% 5.6% 5.8% 5.1%
------------- ------------- ------------- -------------
Operating income 12.6% 7.0% 10.3% 8.8%
============= ============= ============= =============
Revenues
Revenues increased approximately 26.9% and 27.2% for the three and nine
month periods ended September 30, 2001, compared with the same periods of the
prior year, primarily due to certain recently acquired cable systems contributed
to Olympus by Adelphia, growth in digital cable and high speed data revenue,
basic subscriber growth, rate increases and growth in electronic security
monitoring and advertising revenues.
Direct Operating and Programming Expenses
Direct operating and programming expenses increased 30.9% and 27.9% for
the three and nine month periods ended September 30, 2001, compared with the
same period of the prior year, primarily due to certain recently acquired cable
systems contributed to Olympus by Adelphia, increased technical costs associated
with providing digital cable services as well as increased basic and premium
programming costs.
Selling, General and Administrative Expenses
These expenses, which are mainly comprised of costs related to system
offices, customer service representatives, and sales and administrative
employees, increased 33.4% and 30.3% for the three and nine month periods ended
September 30, 2001, compared with the same periods of the prior year. These
increases were primarily due to certain recently acquired cable systems
contributed to Olympus by Adelphia, incremental costs associated with providing
new services, marketing expenses and wages.
Depreciation and Amortization
Depreciation and amortization was higher for the three and nine month
periods ended September 30, 2001 compared with the same periods of the prior
year, primarily due to certain recently acquired cable systems contributed to
Olympus by Adelphia and increased capital expenditures.
Management Fees to Managing Affiliate
Pursuant to the terms of the Company's Partnership Agreement, the Company
pays to Adelphia, on a quarterly basis, an amount representing an allocation of
the corporate overhead of Adelphia and its subsidiaries (as provided in the
management agreement) with respect to the Company for such period, which
allocation is based upon the ratio of the Company's cable subscribers to the
total cable subscribers owned or managed by Adelphia. In addition to the
management fees described above, certain systems included in the September 2001
Contribution have agreements with a subsidiary of Adelphia which provides for
the payment of management fees of up to 5% of gross revenues. Management fees
were substantially unchanged as a percentage of revenues for the three and nine
month periods ended September 30, 2001 as compared with the same periods of the
prior year.
Interest Expense
Interest expense increased 41.4% and 45.0% for the three and nine month
periods ended September 30, 2001, compared with the same periods of the prior
year. These increases were primarily due to increases in the average amount of
debt outstanding compared to the prior year, partially offset by decreases in
interest rates.
Gain on Cable Systems Exchange
On May 1, 2000, the Company closed on a cable systems exchange with AT&T
Corporation. As a result of this transaction, the Company recorded a gain of
approximately $19,300 in the nine months ended September 30, 2000.
On January 1, 2001, Adelphia and certain subsidiaries, including the
Company, closed on a cable systems exchange with Comcast Corporation. As a
result of this transaction, the Company recognized a gain of approximately
$73,000 in the nine months ended September 30, 2001.
Liquidity and Capital Resources
The cable television business is capital intensive and typically requires
continual financing for the construction, modernization, maintenance, expansion,
and acquisition of cable systems. The Company historically has committed
significant capital resources for these purposes. These expenditures were funded
through long-term borrowings, advances from affiliates and internally generated
funds. The Company's ability to generate cash to meet its future needs will
depend generally on its results of operations and the continued availability of
external financing.
Capital expenditures for the nine month periods ended September 30, 2000 and
2001 were $276,142 and $408,687, respectively. This increase was primarily due
to increased investment related to the rebuilding and upgrading of the Company's
broadband network. The Company expects capital expenditures for the remaining
three months of the year ending December 31, 2001 to range from approximately
$100,000 to $130,000.
The Company generally has funded its working capital requirements, capital
expenditures, and acquisitions through long-term borrowings, primarily from
banks, issuance of public debt, advances from affiliates and internally
generated funds. The Company generally has funded the principal and interest
obligations on its long-term borrowings by refinancing the principal with new
loans and by paying the interest out of internally generated funds.
At September 30, 2001, the Company's total outstanding debt aggregated
approximately $2,121,667, which included approximately $202,631 of parent debt
and approximately $1,919,036 of subsidiary and other debt. In addition, the
Company had an aggregate of approximately $13,443 in cash and cash equivalents,
and as of September 30, 2001, approximately $30,000 in unused credit lines with
banks, all of which was also available to affiliates, part of which is subject
to achieving certain levels of operating performance.
At September 30, 2001, the Company has unused credit lines under reducing
revolving credit facilities with revolver periods which expire through 2010. The
Company's weighted average interest rate on subsidiary debt was approximately
7.8% and 5.0% at September 30, 2000 and September 30, 2001, respectively.
The following table sets forth the scheduled reductions in principal under
all agreements for indebtedness at December 31 for each of the next four years
and three months, based on amounts outstanding at September 30, 2001:
Three months ending December 31, 2001 $ 315
Year ending December 31, 2002 122,688
Year ending December 31, 2003 1,263
Year ending December 31, 2004 23,977
Year ending December 31, 2005 163,295
The Company plans to continue to explore and consider new commitments,
arrangements or transactions to refinance existing debt, increase the Company's
liquidity or decrease the Company's leverage. These could include, among other
things, the future issuance of debt and the negotiation of new or amended credit
facilities by the Company, or its subsidiaries. These could also include
entering into acquisitions, joint ventures or other investment or financing
activities, although no assurance can be given that any such transactions will
be consummated. The Company's ability to borrow under current credit facilities
and to enter into refinancings and new financings is limited by covenants
contained in its subsidiaries' credit agreements, including covenants under
which the ability to incur indebtedness is in part a function of applicable
ratios of total debt to cash flow.
The Company believes that cash and cash equivalents, internally generated
funds, borrowings under existing credit facilities, advances from Adelphia or
other affiliates and future financing sources will be sufficient to meet its
short-term and long-term liquidity and capital requirements. Although in the
past the Company has been able to refinance its indebtedness or obtain new
financing, there can be no assurance that the Company will be able to do so in
the future or that the terms of such financings would be favorable.
Management believes that the telecommunications industry, including the
cable television and telephone industries, continues to be in a period of
consolidation characterized by mergers, joint ventures, acquisitions, system
swaps, sales of all or part of cable companies or their assets, and other
partnering and investment transactions of various structures and sizes involving
cable or other telecommunications companies. The Company continues to evaluate
new opportunities that allow for the expansion of its business through the
acquisition of additional cable television systems in geographic proximity to
its existing regional markets or in locations that can serve as a basis for new
market areas. The Company, like other cable television companies, has
participated from time to time and is participating in preliminary discussions
with third parties regarding a variety of potential transactions, and the
Company has considered and expects to continue to consider and explore potential
transactions of various types with other cable and telecommunications companies.
However, no assurances can be given as to whether any such transaction may be
consummated or, if so, when.
Regulatory and Competitive Matters
The operations of the Company are affected by changes and developments in
governmental regulation, competitive forces and technology. The cable television
industry and the Company are subject to extensive regulation at the federal,
state and local levels.
Cable television companies operate under franchises granted by local
authorities. Because such franchises are non-exclusive, the Company is subject
to competition with other cable operators and, in some cases, systems operated
by the municipal franchising authorities themselves. The Company is also subject
to competition from DBS and wireless service providers, which are not subject to
regulation on the local level, since they do not utilize the public rights of
way. These providers are also exempt from many of the federal regulations
applicable to the cable industry. This difference in regulatory schemes hinders
the Company's ability to compete on a level playing field.
The Company is subject to rate regulation by certain franchising authorities
that have petitioned the FCC for certification to regulate the Company's rates.
Such rate regulation, however, is limited to the basic, or lowest level, service
tier.
Federal regulations also limit the Company's discretion to select certain
programming services, by mandating the carriage of local broadcast television
stations, franchise-required public, educational and governmental channels, and
unaffiliated commercial leased access programming services. Such mandatory
carriage obligations could increase if the FCC decides to extend such mandatory
carriage rules to the digital level of service, which issue is currently pending
before the FCC. These mandatory carriage requirements limit the capacity
available to the Company for revenue-generating programming services.
Additionally, the FCC is currently considering a rulemaking to determine the
regulatory status of Internet service. Specifically, the FCC is reviewing
whether Internet service is a cable service and, therefore, subject to
regulation at the local level, or a telecommunications service and, therefore,
subject to regulation at the state level. The outcome of the decision could have
an impact on such factors as the rates the Company may charge for such service,
the extent to which the Company would have to make its Internet facilities
available to the franchising authorities and unaffiliated service providers, and
the rates the Company must pay utilities for pole attachments. For further
information regarding regulatory and competitive matters and their affect on the
Company, see the Company's most recent Form 10-K.
PART II - Other Information
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
Exhibit No. Description
10.01 Credit Agreement dated as of September 28, 2001 among Olympus
Cable Holdings, LLC, Adelphia Company of Western Connecticut,
Highland Video Associates, L.P., Coudersport Television Cable
Company, Adelphia Holdings 2001, LLC, and Bank of Montreal, as
the Administrative Agent, and the other Agents and Lenders party
thereto (incorporated herein by reference to Exhibit 10.01
to Form 8-K as filed by Adelphia on October 12, 2001).
(b) Reports on Form 8-K:
None.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrants have duly caused this report to be signed on their behalf by the
undersigned thereunto duly authorized.
OLYMPUS COMMUNICATIONS, L.P.
BY: ACC OPERATIONS, INC.
Managing General Partner
Date: November 14, 2001 By: /s/ Timothy J. Rigas
--------------------
Timothy J. Rigas
Executive Vice President,
Treasurer, Principal
Accounting Officer and
Principal Financial Officer
of ACC Operations, Inc.
Date: November 14, 2001 OLYMPUS CAPITAL CORPORATION
By: /s/ Timothy J. Rigas
--------------------
Timothy J. Rigas
Executive Vice President,
Treasurer, Principal
Accounting Officer and
Principal Financial Officer