SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) February 29, 1996
-----------------
LENFEST COMMUNICATIONS, INC.
----------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 33-96804 23-2094942
-------- -------- ----------
State or other jurisdiction Commission (I.R.S. Employer
of incorporation or file number Identification Number)
organization
1105 North Market St., Suite 1300,
P.O. Box 8985,
Wilmington, Delaware 19899
---------------------------------------------------
(Address of Principal executive offices) (Zip Code)
(302) 427-8602
----------------------------------------------------
(Registrant's telephone number, including area code)
Lenfest Communications, Inc. (the "Company") hereby
amends and restates in its entirety Items 7(a) and 7(b) of the
Report on Form 8-K,. dated March 13, 1996, previously filed with
the Securities and Exchange Commission.
Item 7 Financial Statements and Exhibits.
(a) Financial Statements of Businesses Acquired.
The audited financial statements required by this Item
begin on page F-1 and continue to page F-15.
(b) Pro Forma Financial Information.
The pro forma financial information required by this Item
begins on page F-16 and continues to page F-23.
SAMMONS CABLE
(As Defined in Note 1)
COMBINED FINANCIAL STATEMENTS
WITH REPORT OF INDEPENDENT ACCOUNTANTS
for the years ended December 31, 1993, 1994 and 1995
Report of Independent Accountants
The Board of Directors
Sammons Communications, Inc. and
Lenfest Communications, Inc.:
We have audited the accompanying combined balance sheets of Sammons Cable (as
defined in Note 1) as of December 31, 1994 and 1995, and the related combined
statements of income, changes in equity investment and cash flows for each of
the years in the three-year period ended December 31, 1995. These combined
financial statements are the responsibility of Sammons Communications, Inc.
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the combined financial position of Sammons Cable as of
December 31, 1994 and 1995, and the combined results of their operations and
their cash flows for each of the years in the three-year period ended December
31, 1995 in conformity with generally accepted accounting principles.
/s/ Coopers & Lybrand L.L.P
Dallas, Texas
April 18, 1996
SAMMONS CABLE
COMBINED BALANCE SHEETS
December 31, 1994 and 1995
(Amounts in Thousands)
December 31,
---------------------------
ASSETS 1994 1995
----------- ------------
Cash and cash equivalents $ 496 $ 703
Accounts receivable subscribers, net of allowance of
$163 in 1994 and $157 in 1995 5,153 5,565
Deferred federal and state income taxes 6,532 5,884
--------- ----------
Total current assets 12,181 12,152
--------- ----------
Property and equipment:
Cable systems 197,909 204,892
Vehicles and other 8,519 8,541
Land and buildings 4,915 4,736
--------- ----------
211,343 218,169
Less accumulated depreciation (127,908) (142,474)
--------- ----------
Net property and equipment 83,435 75,695
Franchises and goodwill, net of accumulated amortization of
$25,215 in 1994 and $28,195 in 1995 95,495 92,516
Other assets 1,805 5,128
--------- ----------
Total assets $ 192,916 $ 185,491
========= ==========
The accompanying notes are an integral part of the combined financial
statements.
2
SAMMONS CABLE
COMBINED BALANCE SHEETS, Continued
December 31, 1994 and 1995
(Amounts in Thousands)
December 31,
---------------------------
LIABILITIES AND EQUITY INVESTMENT 1994 1995
------------ ------------
Current liabilities:
Accounts payable, trade $ 1,851 $ 932
Interest payable 1,034 -
Accrued expenses 5,896 4,853
Deferred revenue 3,846 3,981
Federal and state income taxes payable 109 161
Notes payable--parent 134,724 -
---------- ---------
Total current liabilities 147,460 9,927
Accrued pensions and other 715 666
Subscriber advance payments and deposits 377 363
Deferred federal and state income taxes 21,579 25,393
---------- ---------
Total liabilities 170,131 36,349
Commitments and contingencies (Note 7)
Equity investment 22,785 149,142
---------- ---------
Total liabilities and equity investment $ 192,916 $ 185,491
========== =========
The accompanying notes are an integral part of the combined financial
statements.
3
SAMMONS CABLE
COMBINED STATEMENTS OF INCOME
for the years ended December 31, 1993, 1994 and 1995
(Amounts in Thousands)
Year Ended December 31,
---------------------------------------
1993 1994 1995
----------- ----------- ----------
Revenues $ 93,893 $ 95,241 $ 100,619
---------- --------- ---------
Operating expenses:
Service expense 12,561 12,682 11,129
Local origination expense 217 235 296
Pay-per view expense 998 924 925
Marketing expense 1,452 1,698 1,140
Programming cost 20,222 23,321 25,219
General and administrative 14,256 14,480 15,647
Management fees 4,696 4,771 5,037
Depreciation and amortization 17,315 17,924 17,877
---------- ---------- --------
71,717 76,035 77,270
---------- ---------- --------
Operating income 22,176 19,206 23,349
Other income 192 473 615
Interest expense (12,850) (12,923) (12,399)
---------- ---------- --------
Income before provision for federal
and state income taxes 9,518 6,756 11,565
Provision for federal and state income taxes (4,411) (2,941) (4,703)
---------- ---------- --------
Net income $ 5,107 $ 3,815 $ 6,862
========== ========== ========
The accompanying notes are an integral part of the combined financial
statements.
4
SAMMONS CABLE
COMBINED STATEMENTS OF CHANGES IN
EQUITY INVESTMENT
for the years ended December 31, 1993, 1994 and 1995
(Amounts in Thousands)
Balance at January 1, 1993 $ 36,354
Net income 5,107
Reduction in equity investment (10,950)
------------
Balance at December 31, 1993 30,511
Net income 3,815
Reduction in equity investment (11,541)
------------
Balance at December 31, 1994 22,785
Net income 6,862
Conversion of note payable--parent (Note 2) 134,724
Reduction in equity investment (15,229)
------------
Balance at December 31, 1995 $ 149,142
============
The accompanying notes are an integral part of the combined financial
statements.
5
SAMMONS CABLE
COMBINED STATEMENTS OF CASH FLOWS
for the years ended December 31, 1993, 1994 and 1995
(Amounts in Thousands)
Years Ended December 31,
-------------------------------------
1993 1994 1995
---------- ---------- ----------
Cash flows from operating activities:
Net income $ 5,107 $ 3,815 $ 6,862
--------- --------- ---------
Adjustments to reconcile net income to net cash provided by operating
activities:
Provision for uncollectible receivables 836 776 691
Depreciation and amortization 17,315 17,924 17,877
Provision for deferred income taxes 4,196 2,760 4,462
Gain on sales of property and equipment (32) (178) (88)
Changes in certain assets and liabilities:
Accounts receivable, subscribers (1,490) (749) (1,103)
Other assets (794) 369 (991)
Accounts payable, trade 473 180 (919)
Interest payable 512 (1) (1,034)
Accrued expenses 513 (912) (1,092)
Subscriber advance payments and deposits (6) 27 (14)
Deferred revenue 104 940 135
Federal and state income taxes payable 22 (25) 52
--------- --------- ---------
Total adjustments 21,649 21,111 17,976
--------- --------- ---------
Net cash provided by operating activities 26,756 24,926 24,838
--------- --------- ---------
Cash flows from investing activities:
Proceeds from sales of property and equipment 90 179 262
Cable system acquisitions (17,386) - -
Purchases of property and equipment (13,241) (13,273) (7,262)
Investment in partnerships - - (2,402)
--------- --------- ---------
Net cash used in investing activities (30,537) (13,094) (9,402)
--------- --------- ---------
Cash flows from financing activities:
Net change in equity investment (10,950) (11,541) (15,229)
Issuance of notes payable--parent 14,724 - -
Issuance of term debt 75 - -
Payments of term debt - (75) -
---------- --------- ---------
Net cash provided by (used in) financing activities 3,849 (11,616) (15,229)
---------- --------- ---------
Net increase in cash and cash equivalents 68 216 207
Cash and cash equivalents, beginning of year 212 280 496
---------- --------- ---------
Cash and cash equivalents, end of year $ 280 $ 496 $ 703
========= ========= =========
Supplemental information:
Interest paid $ 12,338 $ 12,924 $ 13,433
========= ========= =========
Income taxes paid $ 191 $ 207 $ 189
========= ========= =========
The accompanying notes are an integral part of the combined financial
statements.
6
SAMMONS CABLE
NOTES TO COMBINED FINANCIAL STATEMENTS
1. Organization and Summary of Significant Accounting Policies:
Organization and Basis of Presentation
The combined financial statements include the accounts of certain cable
television systems which were previously owned by Sammons Communications,
Inc. ("SCI") (collectively, "Sammons Cable"). SCI is a wholly-owned
subsidiary of Sammons Enterprises, Inc. ("SEI"). In May 1995, SCI entered
into an asset purchase agreement (the "Agreement") to sell Sammons Cable
and other cable systems to TCI Communications, Inc. ("TCI") for
approximately $800,000,000 in cash, subject to various conditions and
approvals as defined in the agreement. Upon closing of the transaction (see
Note 11), Sammons Cable is to be assigned to Lenfest Communications, Inc.
("Lenfest"). These combined financial statements include the historical
basis of assets, liabilities and operations of the cable television systems
to be assigned to Lenfest. In addition, these financial statements include
allocations of certain corporate administrative costs attributed to the
cable systems to be assigned to Lenfest. The methods by which such amounts
are attributable or allocated are deemed reasonable by management of SCI.
All significant intersystem balances and transactions have been eliminated
from the combined financial statements. The following cable television
systems are included in the accompanying combined financial statements:
System Coverage Area
Sammons Communications of New Jersey, Inc. Vineland, NJ
Atlantic City/Pleasantville,
NJ
Oxford Valley Cablevision, Inc. Bensalem, PA
Sammons Communications of Pennsylvania, Inc. Harrisburg, PA
Cash and Cash Equivalents
Sammons Cable considers all demand deposit accounts to be cash equivalents.
7
SAMMONS CABLE
NOTES TO COMBINED FINANCIAL STATEMENTS, Continued
Property and Equipment
Property and equipment is stated at cost. Depreciation is computed on a
straight-line basis over the estimated useful lives of the related assets
as follows:
Cable systems 5 to 15 years
Vehicles and other 4 to 10 years
Buildings 15 to 25 years
The material and labor costs for the initial connection of a residence are
capitalized and depreciated over ten years. The costs of subsequently
disconnecting and reconnecting a residence are charged to expense in the
period incurred.
Certain costs incurred during the period of cable system construction are
deferred and amortized over the estimated useful lives of the related cable
systems.
When property is retired or otherwise disposed of, the related cost and
accumulated depreciation are removed from the accounts and any resulting
gain or loss is reflected in income in the period incurred.
Franchises and Goodwill
Goodwill acquired prior to October 31, 1970 is not being amortized.
Goodwill acquired subsequent to October 31, 1970 is capitalized and
amortized on a straight-line basis over forty years.
The direct costs to acquire cable television franchises are capitalized and
amortized on a straight-line basis over the lives of the franchises, not
exceeding forty years.
Sammons Cable continually reevaluates the propriety of the carrying amount
of goodwill and other intangibles as well as the amortization period to
determine whether current events and circumstances warrant adjustments to
the carrying value and/or revisions of the estimated useful lives. At this
time, Sammons Cable believes that no significant impairment of goodwill or
other intangibles has occurred.
8
SAMMONS CABLE
NOTES TO COMBINED FINANCIAL STATEMENTS, Continued
Equity Investment
Equity investment represents the excess of assets over liabilities for
Sammons Cable. Equity investment is increased or decreased by the net
income (loss) of Sammons Cable plus or minus advances from or to the
parent.
Income Taxes
Sammons Cable is a member of SEI's consolidated United States federal
income tax group. The policy for intercompany allocation of federal income
taxes provides that Sammons Cable computes the provision for federal income
taxes on a separate company basis. Sammons Cable makes payments to, or
receives payments from, SEI in the amount they would have paid to or
received from the Internal Revenue Service had they not been members of the
consolidated tax group. The separate company provisions and payments are
computed using the tax elections made by SEI. Sammons Cable uses the
"flow-through" method of accounting for investment tax credits.
In accordance with the provisions of Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes," deferred tax liabilities
and assets are recognized based upon the difference between the financial
statement and tax bases of assets and liabilities using enacted tax rates
in effect for the year in which the differences are expected to reverse.
Accounting Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
Other Accounting Issues
In March 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed of." This
statement requires that long-lived assets and certain identifiable
intangibles held and used by an entity be reviewed for impairment whenever
circumstances indicate that the carrying amount of an asset may not be
recoverable. The impact of this standard has been assessed by management
and should not have a material effect on Sammons Cable's financial
statements.
9
SAMMONS CABLE
NOTES TO COMBINED FINANCIAL STATEMENTS, Continued
2. Notes Payable--Parent:
During 1995, Sammons Cable renewed a financing arrangement with SEI which
provided revolving lines of credit of $134,723,541 maturing May 30, 1996.
Outstanding borrowings under the revolving lines of credit bear interest at
9% payable quarterly. Borrowings against these lines totaled $134,723,541
at December 31, 1994; such borrowings were settled during 1995 through
intercompany accounts and have been appropriately reflected as such in the
equity investment.
3. Income Taxes:
The provision for income taxes consists of the following (amounts in
thousands):
1993 1994 1995
-------- --------- ---------
Current:
Federal $ 215 $ 181 $ 241
State - - -
Deferred:
Federal 3,153 2,129 3,734
State 1,043 631 728
------- -------- --------
$ 4,411 $ 2,941 $ 4,703
======= ======== ========
10
SAMMONS CABLE
NOTES TO COMBINED FINANCIAL STATEMENTS, Continued
The components of the net deferred tax liability are as follows (amounts in
thousands):
1994 1995
------------ ------------
Deferred tax liability:
Amortization--franchise cost $ (29,295) $ (28,302)
Basis in property and equipment (18,285) (16,773)
----------- -----------
(47,580) (45,075)
----------- -----------
Deferred tax asset:
Net operating loss ("NOL") carryforwards 29,338 22,330
Investment credit ("ITC") carryforwards and
alternative minimum tax credits 2,575 2,736
Accrued pension liability 114 33
Various accrued expenses not currently deductible 506 467
----------- -----------
32,533 25,566
Valuation allowance - -
----------- -----------
Net deferred tax liability $ (15,047) $ (19,509)
=========== ===========
Net current deferred tax asset $ 6,532 $ 5,884
Net noncurrent deferred tax liability (21,579) (25,393)
----------- -----------
Net deferred tax liability $ (15,047) $ (19,509)
=========== ===========
The difference between the provision for income taxes attributable to
income before income taxes and the amounts that would be expected using the
U.S. federal statutory income tax rate of 35% is as follows (amounts in
thousands):
1993 1994 1995
------------ ------------ ------------
Federal income taxes at the statutory rate $ 3,331 $ 2,365 $ 4,048
State income taxes 679 410 474
Amortization of nondeductible intangibles 97 97 97
Effect of one percent federal tax rate increase
on deferred tax balance at January 1, 1993 226 - -
Other 78 69 84
----------- ----------- -----------
Provision for income taxes $ 4,411 $ 2,941 $ 4,703
=========== =========== ===========
11
SAMMONS CABLE
NOTES TO COMBINED FINANCIAL STATEMENTS, Continued
The NOL carryforwards, ITC tax carryforwards and AMT credit carryforwards
have been utilized by other members of SEI's consolidated tax group.
Consistent with SEI's policy for intercompany allocation of federal income
taxes, Sammons Cable will be reimbursed at such time as the credit and
carryforwards could be utilized on a separate company basis. The NOL
carryforwards expire in the years 2002 - 2006 and the ITC tax carryforwards
in 1998.
4. Employee Stock Ownership Plan:
SCI is a participant in the Sammons Enterprises, Inc. Employee Stock
Ownership Plan ("ESOP"). Sammons Cable's allocated contribution to the ESOP
was approximately $486,000 and $299,000 for 1993 and 1994, respectively.
There was no ESOP contribution in 1995.
5. Employee Benefit Plans:
Sammons Cable is a participant in SEI's noncontributory defined benefit
pension plan (the "Pension Plan") covering certain full-time employees.
Pension benefits are generally based upon years of service and include
accruing pension cost currently, contributing the maximum amount deductible
for federal income taxes and meeting minimum funding standards of the
Employee Retirement Income Security Act of 1974 as determined by an
actuarial valuation. Pension Plan assets consist primarily of cash
equivalents, listed stocks and bonds, and group annuity contracts with an
affiliated insurance company.
As a participant in the Plan, Sammons Cable is allocated a portion of the
Plan's annual expense. Sammons Cable's allocated share of the 1993, 1994
and 1995 pension expense was approximately $164,000, $182,000 and $183,000,
respectively.
6. Postretirement Benefits Other Than Pensions:
Sammons Cable provides certain postretirement health care and life
insurance benefits for eligible active and retired employees through SEI's
defined benefit plan (the "Postretirement Plan"). As a participant in the
Postretirement Plan, Sammons Cable is allocated a portion of the
Postretirement Plan's annual expense. Sammons Cable's allocated share of
the 1993, 1994 and 1995 expense was approximately $64,000, $72,000 and
$87,000, respectively.
12
SAMMONS CABLE
NOTES TO COMBINED FINANCIAL STATEMENTS, Continued
7. Commitments and Contingencies:
Sammons Cable generally acts as a self-insurer with regard to loss or
damage to its cable distribution systems. No provision for future losses
has been provided.
At December 31, 1994, Sammons Cable had purchase commitments of
approximately $427,000 for property and equipment. There were no purchase
commitments at December 31, 1995.
Sammons Cable pays pole use, vehicle, office space, land and plant
facilities rentals under various agreements. Rental expense for 1993, 1994
and 1995 was approximately $1,036,000, $1,275,000 and $1,312,000, including
amounts paid to a related party of approximately $325,000, $418,000 and
$492,000, respectively.
Approximate minimum future rentals under noncancelable operating leases are
as follows (amounts in thousands):
Year ending December 31:
1996 $ 106
1997 81
1998 58
1999 26
2000 10
Thereafter 21
---------
$ 302
=========
8. Acquisitions:
During 1993, Sammons Cable acquired the assets of several cable television
systems for an aggregate purchase price of $17,086,000 including franchise
agreements and goodwill of $12,423,000. The acquisitions were accounted for
as purchases, and accordingly, the results of operations have been included
in the combined financial statements from their respective dates of
acquisition, principally April 1993.
13
SAMMONS CABLE
NOTES TO COMBINED FINANCIAL STATEMENTS, Continued
9. Related Party Transactions:
Sammons Cable pays SCI and other related parties for various services. In
addition, Sammons Cable reimburses SCI for certain general and operating
expenses. These amounts are as follows (amounts in thousands):
1993 1994 1995
------ ------ ------
Management fee expense $ 4,696 $ 4,771 $ 5,037
Reimbursement of general and administrative
expenses 2,284 2,420 2,732
10. Litigation:
In the course of conducting its business, Sammons Cable is from time to
time named as a defendant in litigation actions. Sammons Cable is currently
involved as a defendant in certain legal issues. Management currently
believes the disposition of all claims and disputes, individually or in the
aggregate, should not have a material adverse effect on Sammons Cable's
combined financial position.
11. Subsequent Event:
On February 29, 1996, the purchase and assignment of Sammons Cable to
Lenfest was completed, subject to a purchase price adjustment, as defined
in the purchase agreement.
14
UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
The following unaudited pro forma condensed consolidated financial statements
are based on the historical financial statements of the Company and the
historical financial statements of the cable television systems acquired by the
Company in the tax-free exchange ("TCI Exchange") of its cable television
systems located in the Oakland, California area ("California Assets") for the
cable television assets ("Wilmington Assets") held by an indirect subsidiary
("Heritage") of Tele-Communications, Inc. ("TCI") and located in the Wilmington,
Delaware area ("Wilmington System") and acquisition of the Sammons Assets
("Sammons Acquisition"), adjusted to give effect to the (i) TCI Exchange, (ii)
the Sammons Acquisition, (iii) the acquisition of the 40% partnership interest
in South Jersey Cablevision Associates ("South Jersey Acquisition") (iv)
borrowings under the new credit facility to finance the Sammons Acquisition and
(v) the public debt offering (all of the foregoing are collectively, the
"Transactions"). The Pro Forma Condensed Consolidated Statement of Operations
gives effect to the Transactions as if they had occurred as of January 1, 1995,
and the Pro Forma Condensed Consolidated Balance Sheet gives effect to the
Transactions as if they had occurred as of December 31, 1995. The pro forma
adjustments are described in the accompanying notes and are based upon available
information and certain assumptions that management believes are reasonable. The
Pro Forma Condensed Consolidated Financial Statements do not purport to
represent what the Company's results of operations or financial condition would
actually have been had the Transactions in fact occurred on such dates or to
project the Company's results of operations or financial condition for any
future date or period. The Pro Forma Condensed Consolidated Financial Statements
should be read in conjunction with the historical financial statements of the
Company (included in the Company's Form 10-K, dated March 29, 1996), the
Wilmington System (included in the Company's Form 8-K/A, dated April 29, 1996)
and Sammons Cable (included elsewhere in this Form 8-K/A).
The TCI Exchange involves a transaction between related parties, the Company and
a subsidiary of TCI. TCI is an indirect 50% stockholder of the Company. The
Company and TCI are not entities under common control. The Company is accounting
for the exchange of the cable systems' assets as a nonmonetary exchange of
productive assets in accordance with Accounting Principles Board Opinion Number
29. For financial statement purposes, the Company is not recording a gain or
loss on the cable television assets exchanged, but will recognize a gain of
approximately $7 million on the exchange of its approximately 42% general
partnership interest in Bay Cable Advertising that is included in the TCI
Exchange. The Company has allocated the net book values of the assets exchanged
to the identifiable tangible and intangible assets acquired. For tax purposes,
the TCI Exchange has been structured in such a way that, to the greatest extent
possible, the transfer qualifies as a tax-free exchange of like-kind assets
under Section 1031 of the Internal Revenue Code. The taxable gain recognized on
this transaction is presently estimated to be $1 - 2 million on the cable
television assets and $7 million on the partnership interest.
The Sammons and South Jersey Acquisitions are accounted for under the purchase
method of accounting. The total purchase prices for the Sammons and South Jersey
Acquisitions have been allocated to the identifiable tangible and intangible
assets and liabilities of the acquired business based upon the Company's
preliminary estimate of their fair values with the remainder allocated to
goodwill. The allocations of the purchase prices are subject to revision when
additional information concerning asset and liability valuations is obtained. In
the opinion of the Company's management, the final asset and liability
valuations for the Acquisitions will not result in any material change to the
pro forma financial data presented.
The Pro Forma Condensed Consolidated Financial Statements give effect only to
the adjustments set forth in the accompanying notes and does not reflect any
benefits anticipated by the Company's management as a result of the TCI Exchange
or the Sammons and South Jersey Acquisitions.
Lenfest Communications, Inc. and Subsidiaries
Pro Forma Condensed Consolidated Balance Sheet (unaudited)
As of December 31, 1995
(dollars in thousands)
TCI Exchange
------------------------------
Historical(a)
----------------------- Pro Forma
Lenfest Wilmington Adjustments(b) Pro Forma
------- ---------- --------------- ---------
ASSETS
Cash and cash equivalents ............................... $164,943 $ 114 $ (114) $119,779
(45,164)
Receivables, inventory and prepaids ..................... 21,768 1,122 (2,012) 20,878
Marketable securities ................................... 169,581 - 169,581
Property and equipment, net of accumulated depreciation . 211,780 34,654 (31,539) 214,895
Other investments ....................................... 59,482 - (3,781) 55,701
Goodwill, net ........................................... 52,874 - 52,874
Deferred franchise costs, net .......................... 133,525 103,946 (3,275) 185,837
(48,359)
Other intangible assets, net ............................ 33,804 - 33,804
Deferred tax asset ...................................... 14,707 - (2,441) 12,266
Other assets ............................................ 2,569 - 2,569
======== ======== ========= ========
$865,033 $139,836 $(136,685) $868,184
======== ======== ========= ========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Debt .................................................... $831,010 $ - $831,010
Payables and accruals ................................... 41,131 1,813 $ (1,813) 41,131
Deferred tax liability .................................. 9,940 52,893 (52,893) 9,940
Other liabilities ....................................... 24,706 - (1,382) 23,324
-------- -------- --------- --------
Total liabilities ............................ 906,787 54,706 (56,088) 905,405
Minority interest ....................................... 3,438 - 3,438
Stockholders' equity (deficit)
Common stock ........................................... 2 - 2
Additional paid-in capital ............................. 50,747 - 50,747
Unrealized gain (loss) on marketable securities ........ 40,410 - 40,410
Cumulative foreign currency translation adjustment ..... 7,560 - 7,560
Accumulated net assets of systems exchanged or acquired. - 85,130 (85,130) -
Accumulated deficit .................................... (143,911) - 4,533 (139,378)
-------- -------- --------- --------
(45,192) 85,130 (80,597) (40,659)
-------- -------- --------- --------
$865,033 $139,836 $(136,685) $868,184
======== ======== ========= ========
Sammons Acquisition
---------------------------------------------------
Sammons Pro Forma
Historical(a) Adjustments Pro Forma
-------------- ----------- ---------
ASSETS
Cash and cash equivalents ............................... $ 703 $ (703) (c) $ 13,313
(106,466) (d)
Receivables, inventory and prepaids ..................... 5,565 26,443
Marketable securities ................................... - 169,581
Property and equipment, net of accumulated depreciation . 75,695 73,143 (e) 363,733
Other investments ....................................... - 55,701
Goodwill, net ........................................... 77,210 (77,210) (c) 79,695
26,821 (e)
Deferred franchise costs, net .......................... 15,306 334,280 (e) 535,423
Other intangible assets, net ............................ - 33,804
Deferred tax asset ...................................... 5,884 (5,884) (c) 12,266
Other assets ............................................ 5,128 (5,128) (c) 2,569
======== ======== ==========
$185,491 $238,853 $1,292,528
======== ======== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Debt .................................................... $ - $420,000 (d) $1,251,010
Payables and accruals ................................... 6,612 (6,612) (c) 41,131
Deferred tax liability .................................. 25,393 (25,393) (c) 9,940
Other liabilities ....................................... 4,344 27,668
-------- -------- ----------
Total liabilities ............................ 36,349 387,995 1,329,749
Minority interest ....................................... - 3,438
Stockholders' equity (deficit)
Common stock ........................................... - 2
Additional paid-in capital ............................. - 50,747
Unrealized gain (loss) on marketable securities ........ - 40,410
Cumulative foreign currency translation adjustment ..... - 7,560
Accumulated net assets of systems exchanged or acquired. 149,142 (149,142) (c) -
Accumulated deficit .................................... - (139,378)
-------- -------- ----------
149,142 (149,142) (40,659)
-------- -------- ----------
$185,491 $238,853 $1,292,528
======== ======== ==========
See notes to unaudited pro forma condensed consolidated financial statements.
Lenfest Communications, Inc. and Subsidiaries
Pro Forma Condensed Consolidated Statement of Operations (unaudited)
For the Year Ended December 31, 1995
(dollars in thousands)
TCI Exchange Sammons Acquisition
Historical(a) --------------------------- ---------------------------------------
----------------------- Pro Forma Sammons Pro Forma
Lenfest Wilmington Adjustments Pro Forma Historical Adjustments Pro Forma
------- ---------- ----------- --------- ---------- ----------- ---------
Revenues................... $ 266,249 $58,030 $(49,182) (f) $275,097 $100,619 $375,716
Programming Expenses....... 65,423 13,504 (12,965) (f) 66,073 26,440 (4,749) (g) 87,764
111 (g)
Selling, general &
administrative............ 59,310 11,024 (11,681) (f) 58,653 21,824 (5,037) (g) 75,440
Technical and other........ 29,174 4,278 (3,477) (f) 29,975 11,129 41,104
Depreciation and
amortization.............. 77,994 8,155 (9,013) (f) 74,207 17,877 1,626 (d) 112,123
(3,224) (h) (4,340) (d)
295 (i) 22,753 (h)
-------- ------- -------- -------- -------- -------- --------
Total operating expenses. 231,901 36,961 (39,954) 228,908 77,270 10,253 316,431
-------- ------- -------- -------- -------- -------- --------
Operating income (loss).. 34,348 21,069 (9,228) 46,189 23,349 (10,253) 59,285
Interest expense........... (61,244) (9,164) 17 (f) (61,227) (12,399) (44,830) (d) (106,057)
9,164 (j) 12,399 (j)
Other income (expense)..... 4,306 - 33 (f) 3,907 615 4,522
(212) (i)
(220) (k)
-------- ------- -------- -------- -------- -------- --------
Income (loss) before taxes
and extraordinary loss... $(22,590) $11,905 $ (446) $(11,131) $ 11,565 $(42,684) $(42,250)
======== ======= ======== ======== ======== ======== ========
See notes to unaudited pro forma condensed consolidated financial statements.
Lenfest Communications, Inc. and Subsidiaries
Notes to Pro Forma Condensed Consolidated Financial Statements (unaudited)
(dollars in thousands)
(a) The pro forma presentation includes the historical statements of
financial position and operations of Lenfest Communications, Inc., the
Wilmington System and Sammons.
(b) The following table represents the decrease to the net assets of the
Wilmington System in order to transfer to the Wilmington System the
historical costs of the net cable television assets of the California
Assets and the cable television system designated by Heritage to be
acquired by a subsidiary of the Company and delivered to Heritage as
part of the TCI Exchange ("Fort Collins Assets") exchanged and the fair
value of the Bay Cable Advertising partnership interest exchanged.
Net book value of California cable television assets disposed $ 35,444
Fair value of Bay Cable Advertising partnership interest disposed 10,755
Acquisition cost of Fort Collins cable television assets 54,385
Net settlement adjustment (9,221)
-------------
Total consideration 91,363
Net book value of Wilmington System cable television assets acquired 139,722
-------------
(Deficit) of consideration over net book value of assets acquired $ (48,359)
=============
Adjustment to the historical Wilmington System assets included in the
pro forma balance sheet:
Deferred franchise costs $ (48,359)
=============
The asset exchange is subject to post-closing working capital and other
adjustments, as defined in the asset exchange agreement.
Additional adjustments represent the elimination of California assets and
liabilities exchanged, Wilmington System assets not acquired and Wilmington
System liabilities not assumed:
California Wilmington
-------------- --------------
Assets
Cash $ - $ 114
Receivables and prepaids 2,012 -
Property and equipment, net 31,539 -
Bay Cable Advertising investment 3,781 -
Deferred franchise costs, net 3,275 -
Liabilities
Payables and accruals - 1,813
Deferred tax liability - 52,893
Other liabilities 1,382 -
Accumulated net assets - 85,130
In addition, the exchange of the Bay Cable Advertising partnership interest
results in a gain of approximately $7 million, net of deferred tax expense of
$2.4 million.
Lenfest Communications, Inc. and Subsidiaries
Notes to Pro Forma Condensed Consolidated Financial Statements (unaudited)
(dollars in thousands)
(c) Represents the elimination of historical assets not purchased and
historical liabilities not assumed related to the Sammons Acquisition.
(d) The Company entered into a bank credit facility in the aggregate amount
of $600 million which consists of a $400 million term loan facility and
a $200 million revolving credit facility. The Company drew $420 million
to complete the Sammons Acquisition. Interest is based on LIBOR plus
0.75% to 1.75%. Interest is calculated on $420 million at an estimated
average rate of 7.5% for 1995. Debt issuance costs of $4 million are
being amortized over 7.25 years.
In November 1995, the Company issued $700 million principal amount of
8.375% senior notes due 2005. The net proceeds of the offering,
approximately $685.7 million, was used to prepay certain debt, including
a prepayment penalty of approximately $10 million, and provided funding
for the TCI Exchange and provided partial funding for the Sammons
Acquisition. Debt issuance costs of $13.6 million were capitalized and
are being amortized over the term of the notes.
Interest on the above debt in excess of interest included in the
historical information on debt repaid is presented as a pro forma
adjustment. Amortization of debt issuance costs included in the
historical statement of operations has been eliminated as a pro forma
adjustment.
(e) Represents the increase from historical amounts to the estimated fair
market value of all tangible and intangible assets acquired and
liabilities assumed in the Sammons Acquisition comprised of the
following:
Purchase price $ 530,966
Less estimated net proceeds from anticipated exchange of (4,500)
Gettysburg system
-------------
Net purchase price 526,466
Net book value of tangible and intangible assets acquired (92,222)
-------------
Excess of purchase price over book value of assets acquired $ 434,244
=============
Allocation of excess purchase price to estimated fair market value:
Property and equipment $ 73,143
Goodwill 26,821
Intangible assets 334,280
-------------
$ 434,244
=============
The asset acquisitions are subject to post-closing working capital and
other adjustments, as defined in the asset exchange agreement.
Lenfest Communications, Inc. and Subsidiaries
Notes to Pro Forma Condensed Consolidated Financial Statements (unaudited)
(dollars in thousands)
(f) These pro forma adjustments remove the California revenues and expenses
that are included in the historical statement of operations of the
Company.
(g) The Company obtains most of its cable television programming from
Satellite Services, Inc. a subsidiary of TCI, pursuant to an agreement.
The Company's programming costs that it obtains from Satellite Services,
Inc. are based upon TCI's costs plus an administrative fee. Pro forma
statements of operations reflect the Company's estimates of these
administrative fees as an increase in programming expenses for the
Wilmington System.
The benefits of this agreement are available with respect to the Sammons
Systems. The pro forma adjustments to programming expenses in the pro
forma statement of operations reflects the Company's estimates of
programming expense savings using the rates at which the Company
obtained its programming. For the year ended December 31, 1995, these
savings on the Sammons Systems are estimated to be $4.7 million.
The management fees paid by the Sammons Systems to their parent in the
amounts of $5.0 million for the year ended December 31, 1995 are
eliminated.
(h) Adjustments to depreciation and amortization represent the incremental
depreciation and amortization charges resulting from the net increase in
historical amounts to fair market value related to the Sammons
Acquisition and TCI Exchange. (See Notes b and e).
(i) South Jersey Cablevision Associates ("South Jersey") was a 60% owned
consolidated subsidiary from its inception in 1993 until June 1995, when
the Company acquired the remaining 40%. The pro forma adjustments
reflect the elimination of the minority interest and incremental
depreciation and amortization resulting from the excess of the amount
paid for the acquisition of the minority interest over the historical
book value of the minority interest as if the additional acquisition was
consummated as of January 1, 1995.
Minority interest in loss $ 212
======
Incremental depreciation and amortization
on increase in historical amountsto fair market value. $ 295
======
(j) Represents the elimination of the historical interest on intercompany
debt and advances to the Wilmington and Sammons Systems. The Company
will not assume any intercompany debt in the Transactions.
Lenfest Communications, Inc. and Subsidiaries
Notes to Pro Forma Condensed Consolidated Financial Statements (unaudited)
(dollars in thousands)
(k) The Company owns equity interests in several affiliates accounted for by
the equity method. During 1995, the Company has increased its ownership
in some of these affiliates. The pro forma adjustments reflect the
additional equity income (loss) that would have been recognized as if
these additional investments had taken place as of January 1, 1995.
Percentage Owned
January 1, 1995
-----------------
Equity
Income
Actual Pro Forma (loss)
------ --------- -----
Garden State Cablevision, L.P. 40% 50% $ (3)
Raystay Co. 32 45 66
L-TCI Associates 50 68 (283)
-----
$(220)
=====
SIGNATURE
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.
LENFEST COMMUNICATIONS, INC.
May 13, 1996 By: /s/ Harry F. Brooks
- ----------------- -----------------------------------------
Date Harry F. Brooks,
Executive Vice President (authorized
officer and Principal Financial
Officer)