FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES AND EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1996
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES AND EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 33-96804
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LENFEST COMMUNICATIONS, INC.
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(Exact name of registrant as specified in its charter)
DELAWARE 23-2094942
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
1105 North Market St., Suite 1300,
P.O. Box 8985,
Wilmington, Delaware 19899
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(Address of Principal executive offices) (Zip Code)
(302) 427-8602
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(Registrant's telephone number, including area code)
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
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Indicate the number of shares outstanding of each of the issuer's class of
common stock, as of May 13, 1996: 158,896 shares of Common Stock, $0.01 par
value per share.
LENFEST COMMUNICATIONS, INC.
Index
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Page
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Part I. Financial Information
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Item 1. Financial Statements
Report on Review by Independent Certified
Public Accountants
Condensed Consolidated Balance Sheets as of
March 31, 1996 (unaudited) and as of
December 31, 1995
Condensed Consolidated Statements of Operations
for the three months ended March 31, 1996
(unaudited) and March 31, 1995 (unaudited)
Condensed Consolidated Statements of Cash Flows
for the three months ended March 31, 1996
(unaudited) and March 31, 1995 (unaudited)
Notes to Condensed Consolidated Financial
Statements
Statement by Management Concerning Review of
Interim Financial Information by Independent
Certified Public Accountants
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
Part II. Other Information
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Item 1. Legal Proceedings
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
Part I. Financial Information
Item 1. Financial Statements
REPORT ON REVIEW BY INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders
Lenfest Communications, Inc. and Subsidiaries:
We have reviewed the accompanying condensed consolidated balance sheet of
Lenfest Communications, Inc. and subsidiaries as of March 31, 1996, and the
related consolidated statements of operations and the condensed consolidated
statements of cash flows for the three months ended March 31, 1996 and 1995,
included in the accompanying Securities and Exchange Commission Form 10-Q for
the period ended March 31, 1996. These condensed consolidated financial
statements are the responsibility of the Company's management.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures to
financial data and making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit conducted
in accordance with generally accepted auditing standards, the objective of
which is the expression of an opinion regarding the condensed consolidated
financial statements taken as a whole. Accordingly, we do not express such an
opinion.
Based on our review, we are not aware of any material modifications that should
be made to the accompanying condensed consolidated financial statements for
them to be in conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet as of December 31, 1995, and the
related consolidated statements of operations, changes in stockholders' equity
(deficit) and cash flows for the year then ended (not presented herein). In our
report dated March 22, 1996, we expressed an unqualified opinion on those
consolidated financial statements. In our opinion, the information set forth in
the accompanying condensed consolidated balance sheet as of December 31, 1995,
is fairly stated, in all material respects, in relation to the consolidated
balance sheet from which it has been derived.
PRESSMAN CIOCCA & SMITH
Hatboro, Pennsylvania
May 10, 1996
PART I - FINANCIAL INFORMATION
ITEM I - FINANCIAL STATEMENTS
LENFEST COMMUNICATIONS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
March December
31, 1996 31, 1995
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(Unaudited) (*)
ASSETS
Cash and cash equivalents $ 19,469 $ 164,943
Marketable securities 83,342 169,581
Accounts receivable - unrelated parties, less allowance
for doubtful accounts of $1,014 in 1996 and $1,104 in 1995 16,994 12,701
Accounts receivable - affiliate 2,280 103
Notes receivable 26,585 86
Inventories 4,023 4,932
Prepaid expenses 3,532 3,946
Property and equipment, net of accumulated depreciation
of $262,594 in 1996 and $327,096 in 1995 381,217 211,780
Investments, principally in affiliates 51,357 59,482
Goodwill, net of amortization of $23,216 in 1996 and
$22,390 in 1995 75,910 52,874
Deferred franchise costs, net of amortization of $114,156 in
1996 and $126,796 in 1995 509,645 133,525
Other intangible assets, net of amortization of $10,485 in
1996 and $10,495 in 1995 35,259 33,804
Deferred Federal tax asset, net 45,234 14,707
Other assets 7,098 2,569
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$ 1,261,945 $ 865,033
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(*) Condensed from audited financial statements.
See independent certified public accountants' review report and accompanying
notes.
LENFEST COMMUNICATIONS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS, (continued)
(Dollars in thousands)
March December
31, 1996 31, 1995
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(Unaudited) (*)
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Notes payable and obligations under capital leases $ 1,269,769 $ 831,010
Accounts payable and accrued expenses - unrelated parties 46,688 33,926
Accounts payable - affiliate 10,257 7,205
Deferred state tax liability 9,141 9,940
Customer service prepayments and deposits 8,585 9,255
Investment in Garden State Cablevision, L.P. 17,598 15,451
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TOTAL LIABILITIES 1,362,038 906,787
MINORITY INTEREST in equity of consolidated subsidiaries 3,565 3,438
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY (DEFICIT)
Common stock, $.01 par value, 158,896 shares authorized,
issued and outstanding 2 2
Additional paid-in capital 50,747 50,747
Unrealized gain (loss) on marketable securities, net of deferred
taxes (18,371) 40,410
Cumulative foreign currency translation adjustment,
net of deferred taxes 11,042 7,560
Accumulated deficit (147,078) (143,911)
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(103,658) (45,192)
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$ 1,261,945 $ 865,033
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(*) Condensed from audited financial statements.
See independent certified public accountants' review report and accompanying
notes.
LENFEST COMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(Dollars in thousands)
Three Months Ended
March 31,
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1996 1995
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REVENUES $ 80,367 $ 64,106
OPERATING EXPENSES
Service 6,492 4,794
Programming - from affiliate 11,256 9,396
Programming - other cable 4,881 4,024
Programming - non-cable 3,094 2,720
Selling and marketing 3,273 1,895
General and administrative 14,878 11,786
Cost of sales - equipment 1,775 2,072
Depreciation 14,066 12,372
Amortization 8,049 5,686
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67,764 54,745
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OPERATING INCOME 12,603 9,361
OTHER INCOME (EXPENSE)
Interest expense (19,881) (14,279)
Equity in net (losses) of unconsolidated affiliates (7,185) (3,092)
Net gain on sales of securities 27 13,115
Gain on disposal of partnership interest 6,974 --
Other income (net) 3,945 1,185
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(16,120) (3,071)
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INCOME (LOSS) BEFORE INCOME TAXES (3,517) 6,290
INCOME TAX (EXPENSE) BENEFIT 350 (2,283)
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NET INCOME (LOSS) (3,167) 4,007
BEGINNING ACCUMULATED DEFICIT (143,911) (125,677)
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ENDING ACCUMULATED DEFICIT $ (147,078) $ (121,670)
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See independent certified public accountants' review report and accompanying
notes.
LENFEST COMMUNICATIONS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Dollars in thousands)
Three Months Ended
March 31,
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1996 1995
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CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ (3,167) $ 4,007
Adjustments for noncash charges 19,526 9,737
Changes in assets and liabilities 13,609 (5,226)
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NET CASH PROVIDED BY
OPERATING ACTIVITIES 29,968 8,518
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisitions of cable systems (576,132) --
Non-cable acquisition (1,100) (198)
Purchases of property and equipment (8,479) (11,320)
Proceeds from sales of marketable securities 1,374 14,344
Purchases of marketable securities (185) (846)
Loans to Australis Media (26,530) --
Investments in and loans and advances to unconsolidated
affiliates (2,864) (9,349)
Distributions and loans and advances from unconsolidated
affiliate 729 72
Other investing activities (764) 60
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NET CASH (USED BY)
INVESTING ACTIVITIES (613,951) (7,237)
CASH FLOWS FROM FINANCING ACTIVITIES
Increases in debt 438,720 5,000
Debt reduction:
Notes -- (10,000)
Obligations under capital leases (13) (7)
(Increase) in other intangible assets - financing (198) (154)
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NET CASH PROVIDED BY (USED BY)
FINANCING ACTIVITIES 438,509 (5,161)
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NET (DECREASE) IN CASH
AND CASH EQUIVALENTS (145,474) (3,880)
CASH AND CASH EQUIVALENTS AT BEGINNING
OF PERIOD 164,943 4,302
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CASH AND CASH EQUIVALENTS
AT END OF PERIOD $ 19,469 $ 422
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See independent certified public accountants' review report and accompanying
notes.
LENFEST COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1 - BASIS OF PRESENTATION
Condensed Financial Information and Results of Operations
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In the opinion of the management of Lenfest Communications, Inc. and
subsidiaries (the Company), the accompanying condensed unaudited consolidated
financial statements have been prepared in accordance with generally accepted
accounting principles and with the regulations of the Securities and Exchange
Commission and contain all adjustments (consisting of only normal recurring
adjustments) necessary to make the condensed consolidated financial statements
not misleading and to present fairly the consolidated financial condition as of
March 31, 1996, the consolidated results of operations and consolidated cash
flows for the three months ended March 31, 1996 and 1995.
Certain information and note disclosures normally included in the Company's
annual consolidated financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted. These condensed
consolidated financial statements should be read in conjunction with the
audited consolidated financial statements and notes thereto included in the
Company's Form 10-K dated March 29, 1996. The results of operations for the
periods ended March 31, 1996 and 1995, are not necessarily indicative of
operating results for the full year.
Prior period financial statements have been reclassified to conform with
current period presentation.
NOTE 2 - INVENTORIES
Inventories are stated at the lower of cost or market on a first-in, first-out
basis. Inventories consist of equipment sold by the Company's promotional and
advertising subsidiaries.
Inventories are summarized as follows:
March 31, December 31,
1996 1995
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(Dollars in thousands)
Raw materials $ 2,823 $ 3,428
Finished goods and work-in process 1,200 1,504
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$ 4,023 $ 4,932
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NOTE 3 - SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Three Months Ended
March 31,
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1996 1995
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(Dollars in thousands)
Cash paid during the period for
Interest $ 3,932 $ 16,707
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Income taxes $ -- $ --
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LENFEST COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, (continued)
(Unaudited)
NOTE 3 - SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION, (continued)
Supplemental Schedule Relating to Acquisitions
1996 1995
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(Dollars in thousands)
Property and equipment $ 161,896 $ 1,347
Goodwill and other intangible assets 22,075 6,158
Deferred franchise costs 388,761 -
Other assets 4,500 -
Customer prepayments and deposits - (307)
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577,232 7,198
Amount financed -- 7,000
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NET CASH PAID $ 577,232 $ 198
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Noncash Investing and Financing Transactions
In February 1996, the Company exchanged the assets of its cable television
systems in the East San Francisco Bay area with a book value of $33,053,000,
its 41.67% partnership interest in Bay Cable Advertising with a book value of
$3,781,000 and a fair market value of $10,755,000, and the right to purchase a
cable television system located in Fort Collins, CO, which right was acquired
for $54,385,000, less preliminary settlement adjustments of $9,219,000 for a
Wilmington, Delaware and surrounding area cable television system. The assets
of the Wilmington system have been recorded at the net book value of the cable
television system assets exchanged and the market value of the partnership
interest, less the settlement adjustment. A gain of $6,974,000, which
represents the excess of the market value of the partnership interest over its
book value has been included in the statement of operations.
In 1995, the Company financed its $19,240,000 loan to Australis Media Limited
and $20,000,000 of its additional investment in Garden State Cablevision, L.P.,
$10,000,000 of which was borrowed from a stockholder and then repaid.
NOTE 4 - NEW BUSINESS AND ACQUISITIONS
On February 29, 1996, the Company acquired four cable television systems from
Sammons Communications, Inc. for approximately $531,000,000. The systems, which
are located in Bensalem and Harrisburg, Pa. and in Vineland and Atlantic
City/Pleasantville, N.J., pass approximately 358,000 homes and serve
approximately 282,000 basic subscribers. For financial reporting purposes, the
Company accounts for the acquisition of these assets under the purchase method.
The Company paid for a fifth system, located in Gettysburg, Pa., but did not
take title to it. The Company is managing the system and has signed an
agreement to transfer it to GS Communications, Inc. The acquisition was funded
in part by $420,000,000 borrowed under the Company's bank credit facility, and
the remaining proceeds from a public offering of debt securities in November
1995.
LENFEST COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, (continued)
(Unaudited)
NOTE 4 - NEW BUSINESS AND ACQUISITIONS, (continued)
Effective February 12, 1996, the Company exchanged the assets of its cable
television systems in the East San Francisco Bay area and its 41.67%
partnership interest in Bay Cable Advertising for the Wilmington, Delaware and
surrounding area cable television system, owned by a subsidiary of
Tele-Communications, Inc. ("TCI"). In connection with the exchange, the Company
acquired the right to purchase a cable system for approximately $54 million.
This right, along with the underlying cable television system assets, were
included with the assets transferred to TCI. For financial reporting purposes,
the Company is accounting for this exchange as a nonmonetary exchange of
productive assets in accordance with Accounting Principles Board Opinion Number
29, whereby the assets acquired are valued at the historical cost values of the
assets disposed. (See Note 3). The acquisition of these cable systems were
financed with proceeds from the Company's public offering of debt securities in
November 1995.
On June 23, 1995, the Company, through its newly formed subsidiary, Lenfest
South Jersey Investments, Inc. purchased the remaining 40% minority general
partnership interest in South Jersey Cablevision Associates for $8,838,000.
On January 10, 1995, the Company, through its subsidiary, Lenfest Jersey, Inc.,
acquired a 10.005% general partnership interest in Garden State Cablevision,
L.P. for $29,250,000, increasing its ownership to a total of 50% of the
partnership.
On January 4, 1995, the Company acquired all of the general and limited
partnership interests of OPM Real Estate, L.P., a company that provided
microwave transmission services throughout Delaware, Maryland and Virginia, for
a price of $7,500,000 before deductions for customer prepayments and deposits.
The Company acquired these interests through MicroNet Diversified Investments,
Inc. and MicroNet Delmarva, Inc., newly formed, wholly owned subsidiaries of
MicroNet, Inc., a wholly owned subsidiary of the Company. Immediately upon
acquisition, the name of the limited partnership was changed to MicroNet
Delmarva Associates, L.P. ("Associates"). As an indirect, wholly owned
subsidiary of the Company, Associates is included in the consolidated financial
statements of the Company. This acquisition was financed in part by a
$7,000,000 credit facility issued by PNC Bank, N.A., to MicroNet, Inc.
NOTE 5 - INVESTMENTS, PRINCIPALLY IN AFFILIATES
The Company, through several subsidiaries, owns non-controlling equity
interests in several general partnerships and corporations. Under the equity
method, the initial investments are recorded at cost. Subsequently, the
carrying amount of the investments are adjusted to reflect the Company's share
of net income or loss of the affiliates as they occur. Losses in excess of
amounts recorded as investments on the Company's books have been offset against
loans and advances to these unconsolidated affiliates to the extent they exist.
The Company, through its subsidiary, Lenfest Jersey, Inc., owns a 10.005%
general partnership interest and a 39.995% limited partnership interest in
Garden State Cablevision L.P. ("Garden State"), a cable company now serving
approximately 202,000 subscribers in Southern New Jersey. The Company accounts
for its investment in Garden State under the equity method. The Company is
allocated a total of 50% of Garden State's losses. In addition, the Company is
required to make up its partner capital deficits upon termination or
liquidation of the Garden State partnership. Because of the requirement to make
up capital deficits, the accompanying financial statements reflect equity in
accumulated losses, net of related receivables, in excess of the initial
investment in Garden State in the amount of $17,598,000 and $15,451,000 at
March 31, 1996 and December 31, 1995, respectively.
LENFEST COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, (continued)
(Unaudited)
NOTE 5 - INVESTMENTS, PRINCIPALLY IN AFFILIATES, (continued)
Summarized statements of operations of Garden State, accounted for under the
equity method for the three months ended March 31, 1996 and 1995, is as
follows:
1996 1995
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Results of Operations
Revenues $ 24,179 $ 22,997
Operating expenses (10,826) (10,258)
Depreciation and amortization (12,076) (11,604)
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OPERATING INCOME 1,277 1,135
Interest expense (4,313) (5,024)
Other expense (1,451) (1,381)
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NET LOSS $ (4,487) $ (5,270)
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NOTE 6 - COMMITMENTS AND CONTINGENCIES
On April 1, 1993, the Federal Communications Commission ("FCC") adopted
regulations ("Rate Rule I") under The Cable Television Consumer Protection and
Competition Act of 1992 (the "1992 Cable Act") governing rates charged to
subscribers for basic and tier service and for equipment and installation
charges (the "Regulated Services"). The 1992 Cable Act placed the Company's
regulated services under the jurisdiction of local franchising authorities and
the FCC. The rate regulations do not apply to services offered on an individual
service basis, such as per-channel or pay-per-view services. The FCC's rate
regulations became effective on September 1, 1993. Under Rate Rule I, the
regulated services were evaluated against competitive "benchmark" rates
established by the FCC. Cable operators could justify basic and service tier
rates that were above the benchmarks by using reasonable cost-of-service
principles. During 1995, the FCC announced its revised benchmark rules ("Rate
Rule II") and its interim cost-of-service rule. Rate Rule II revised the
benchmark formulas established by the FCC in 1993 and is applied prospectively
from May 15, 1994. Rate Rule II requires cable operators to reduce existing
rates to the higher of (i) the rates calculated using the revised benchmarks or
(ii) a level 17 percent below such cable operators' rates as of September 30,
1992, adjusted for inflation and certain increases in programming costs. Rates
may be increased periodically to reflect inflation and increases in certain
external costs. In addition, rates may be increased for tier service when new
programming channels are added. At the end of 1995, the FCC adopted final cost
of service rules ("COS Rule"). Cable operators which cannot or do not wish to
comply with Rate Rule II may choose to justify their existing rates under the
COS Rule. This rule establishes a cost-of-service rate system which evaluates
the rates charged by cable operators based on their operating expenses and
capital costs.
The Company believes that it has complied in all material respects with the
provision of the 1992 Cable Act, including its rate setting provisions.
However, the Company's rates for Regulated Services are subject to review by
the FCC, if a complaint has been filed, or the appropriate franchise authority,
if such authority has been certified. If, as a result of the review process, a
cable system cannot substantiate its rates, it could be required to
retroactively reduce its rates to the appropriate benchmark and refund the
excess portion of rates received. Any refunds of the excess portion of tier
service rates would be retroactive to the date of complaint. Any refunds of the
excess portion of all other Regulated Service rates would be retroactive to the
later of September 1, 1993, or one year prior to the Refund Order issued by the
applicable franchise authority. The amount of refunds, if any, which could be
payable by the Company in the event that systems rates are successfully
challenged by franchising authorities is not considered to be material.
LENFEST COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, (continued)
(Unaudited)
NOTE 6 - COMMITMENTS AND CONTINGENCIES, (continued)
The News Corporation Limited ("News") has filed an action against the Company
for unspecified damages in the Supreme Court of New South Wales, Australia. The
action claims that the Company violated an alleged oral agreement it made to
inform News prior to taking any steps to effect a recapitalization plan for
Australis Media Limited. The Company does not believe that the suit has merit.
The action relates to the recapitalization plan for Australis Media Limited
commenced on April 19, 1996, and completed on May 10, 1996. (See Note 7).
On March 28, 1996, the Company signed an agreement to acquire from Cable TV
Fund 14-A, Ltd, an affiliate of Jones Intercable, Inc., its Turnersville, New
Jersey cable television system for a purchase price of approximately $84.5
million, subject to certain adjustments. At the closing, which is expected to
occur in the fourth quarter of 1996, the Company expects that the Turnersville
System will have approximately 36,300 basic subscribers.
H.F. Lenfest, the Company's president and chief executive officer, and TCI have
jointly and severally guaranteed a $75 million obligation of Australis incurred
in connection with the purchase of program licenses in April 1995. The amount
of such guaranty will be reduced to $35 million upon Australis providing a
letter of credit in connection with such licenses. In addition, in February
1996, Mr. Lenfest provided his personal guaranty of an approximately $18.7
million loan to Lenfest Australis, Inc. by two commercial banks. The Company
has agreed to indemnify Mr. Lenfest against losses incurred by him in
connection with his guarantees to the fullest extent permitted under the
Company's debt obligations. Mr. Lenfest has unilaterally agreed to limit the
amount of the indemnity he would seek to the amount available under the
Company's bank credit facility.
On January 20, 1995, an individual (the "Plaintiff") filed suit in the Federal
Court of Australia, New South Wales District Registry against the Company and
several other entities and individuals (the "Defendants") including Mr. Lenfest
involved in the acquisition of a company owned by the Plaintiff, the assets of
which included the right to acquire Satellite License B from the Australian
government. The Plaintiff alleges that the Defendants defrauded him by making
certain representations to him in connection with the acquisition of his
company and claims total damages of Australian $718 million (approximately U.S.
$562 million). The Plaintiff also alleges that Australis and Mr. Lenfest owed
to him a fiduciary duty and that both parties breached his duty. The Defendants
have denied all claims made against them by the Plaintiff and stated their
belief that the Plaintiff's allegations are without merit and their intention
to defend this action vigorously.
The Company has also been named as a defendant in various legal proceedings
arising in the ordinary course of business. In the opinion of management, the
ultimate amount of liability with respect to the above actions will not
materially affect the financial position or the results of operations of the
Company.
The Company is obligated to purchase additional shares of stock valued at a
total of 49.8 million French francs (approximately $9,884,000) in Videopole for
the years 1996-1997. The Company's future commitment in dollars is subject to
change in the exchange rate.
NOTE 7 - SUBSEQUENT EVENTS
On April 30, 1996, the Company acquired all of the assets of two cable
television systems located in Southern New Jersey for an aggregate purchase
price of approximately $27 million, subject to certain adjustments. One of the
systems is an overbuild of a system presently owned by the Company. The systems
serve approximately 13,600 basic subscribers.
LENFEST COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, (continued)
(Unaudited)
NOTE 7 - SUBSEQUENT EVENTS, (continued)
Effective May 10, 1996, the Company guaranteed $75 million of a $125 million
bank credit facility issued to Australis Media Limited by Toronto Dominion
Australia Limited. To fund its guaranty, if it is called, the Company obtained
a stand-by $75 million Senior Subordinate Credit Facility from The
Toronto-Dominion Bank. In consideration of the guaranty, the Company will
receive, after shareholder approval which is expected to be obtained,
approximately 31.3 million options exercisable at A$.20 (approximately $.16)
per share at anytime before December 31, 1998. The Company also has the right
to convert any portion of the amount guaranteed into ordinary shares or
convertible debentures at A$.545 (approximately $.435) per security, on or
before December 31, 1998.
LENFEST COMMUNICATIONS, INC. AND SUBSIDIARIES
STATEMENT BY MANAGEMENT CONCERNING REVIEW OF
INTERIM FINANCIAL INFORMATION BY INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANTS
The March 31, 1996 and 1995 condensed consolidated financial statements
included in this filing on Form 10-Q have been reviewed by Pressman Ciocca &
Smith, Independent Certified Public Accountants, in accordance with established
professional standards and procedures for such a review.
The review report of Pressman Ciocca & Smith is included in Part I, Item 1.
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
General
Substantially all of the Company' revenues are earned from
subscriber fees for cable television programming services, the sale of
advertising, commissions for products sold through home shopping networks and
ancillary services (such as rental of converters and remote control devices and
installations). Recent federal law and regulations, including the decision to
re-regulate certain aspects of the cable television industry, have affected the
Company's ability to increase or restructure its rates for certain services.
These re-regulation activities are intended to reduce customer rates for basic
cable television service and limit future rate increases.
The Company has generated increases in revenues, operating
income and cash flow for the three months ended March 31, 1996 primarily through
acquisitions and to a lesser extent through internal subscriber growth. The high
level of depreciation and amortization associated with the Company's
acquisitions and capital expenditures, and interest costs related to its
financing activities have caused the Company to report net losses. Management
believes that such net losses are common for cable television companies and that
the Company may continue to incur net losses in the future. In order for the
Company to reach profitability, management believes that the Company must
maintain on average an annual growth rate in homes passed of 2%, an annual
growth rate of 3-4% in basic subscribers, an annual average increase in basic
and cable programming services revenues of 6% and an annual average increase in
unregulated revenues, such as pay-per-view, advertising and home shopping, of
15-20%. Management does not expect the Company to generate net income prior to
1998.
Results of Operations
The following tables, which are derived from, and should be
read in conjunction with, the Company's Consolidated Financial Statements, set
forth the historical percentage relationship of the components of operating
income for the periods indicated. The tables provide information on the
Company's predominant business unit, its Core Cable Television Operations, and
for the Company as a whole. The Core Cable Television Operations historically
have achieved better results than have the Company's non-cable,
communications-related business subsidiaries.
CONSOLIDATED RESULTS
===========================================================================================================
Percentage of Revenues
Three Months Ended
March 31
- -----------------------------------------------------------------------------------------------------------
1996 1995
- -----------------------------------------------------------------------------------------------------------
Revenues 100.0% 100.0%
- -----------------------------------------------------------------------------------------------------------
Programming expenses 23.9 25.2
- -----------------------------------------------------------------------------------------------------------
Selling, general & administrative 22.6 21.3
- -----------------------------------------------------------------------------------------------------------
Technical and other 10.3 10.7
- -----------------------------------------------------------------------------------------------------------
Depreciation & amortization 27.5 28.2
- -----------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------
Operating income 15.7 14.6
===========================================================================================================
CORE CABLE TELEVISION OPERATION (RESTRICTED GROUP)
===========================================================================================================
Percentage of Revenues
Three Months Ended
March 31
- -----------------------------------------------------------------------------------------------------------
1996 1995
- -----------------------------------------------------------------------------------------------------------
Revenues 100.0% 100.0%
- -----------------------------------------------------------------------------------------------------------
Programming expenses 23.4 24.4
- -----------------------------------------------------------------------------------------------------------
Selling, general & administrative 19.6 19.3
- -----------------------------------------------------------------------------------------------------------
Technical and other 7.3 6.4
- -----------------------------------------------------------------------------------------------------------
Depreciation & amortization 29.3 29.2
- -----------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------
Operating income 20.4 20.7
===========================================================================================================
Three months ended March 31, 1996 compared with three months ended March 31,
1995
Assets for the Company increased overall 45.9% to approximately
$1.3 billion over the December 31, 1995 year-end. There were large increases in
deferred franchise costs of 282% to approximately $510 million and in property,
plant and equipment of 80% to approximately $381 million. In both cases, the
increases were primarily attributable to the Wilmington Exchange (as defined
below) and the Sammons Acquisition (as defined below) (collectively, the
"Acquisitions"). Notes receivable increased to approximately $26.6 million due
to loans to an affiliate, Australis Media, Limited. Likewise, the total
liabilities of the Company increased overall 50.2% to approximately $1.4
billion over the comparable three-month period of the prior year due largely to
the Acquisitions. The largest increases were in accounts payable of 38.5% to
approximately $57 million, and an increase of 52.8% to approximately $1.3
billion for notes payable, in each case as a result of the Acquisitions.
Revenues for the Company increased 25.4% to approximately $80.4
million in the 1996 three-month period as compared to the 1995 three-month
period, primarily as a result of a 29.8% increase in revenues from the
Company's Core Cable Television Operations. The increase was primarily
attributable to the Acquisitions.
Operating expenses increased 23.6% to approximately $67.7 million
(84% of total revenues) in the 1996 three-month period. Depreciation and
amortization increased 22.5% to approximately $22 million (27.5% of total
revenues) in the 1996 three-month period. All increases were due largely to the
Acquisitions.
Interest expense increased 39.2% to approximately $19.9 million in
the 1996 three-month period. The increase was primarily the result of
additional indebtedness associated with the Public Notes issued in November
1995 and borrowings under the Company's Bank Credit Facility for the purpose of
funding acquisitions.
Other income decreased by approximately $7.4 million to
approximately $3.8 million in the 1996 three-month period due largely to losses
on equity investments in unconsolidated affiliates held by the Company's
non-cable subsidiaries (the "Unrestricted Subsidiaries"). In addition, in the
comparable 1995 three-month period other income included an approximate $13
million gain on the sale of marketable securities.
Core Cable Television Operations
Revenues increased 29.8% to approximately $69 million in the 1996
three-month period as compared to the 1995 three-month period. Premium service
revenues grew by 51.2% to approximately $17.4 million. Pay-per-view revenues
increased 106.7% to approximately $2 million. Equipment rental revenue
increased by 58.4% to approximately $2.2 million. All the increases are
primarily attributable to the acquisition of cable television systems serving
approximately 297,200 subscribers as well as internal growth of approximately
6,900 subscribers during the first quarter 1996.
In the 1996 three-month period, programming expense increased 24.3%
to approximately $16.1 million (23.4% of revenues of Core Cable Television
Operations) as a result of an increase in rates charged to the Company by the
suppliers of services in proportion to the increase in the number of basic cable
television subscribers served by the Company. Selling, general and
administrative expense increased 31.6% to approximately $13.5 million (19.6% of
total revenues of Core Cable Television Operations) as a result of cost of
living increases related to employee salaries and increased number of employees
attributable to the acquisitions. Technical and other expenses increased 48.7%
to approximately $5 million (7.3% of total revenues of Core Cable Television
Operations) as compared to the 1995 three-month period. Depreciation and
amortization increased 30.9% to approximately $20.4 million as a result of
acquisitions.
Operating income increased 28.4% to approximately $14.1 million
(20.4% of total revenues of Core Cable Television Operations), as the increase
in revenues more than offset the increases in other operating expenses due
largely to the acquisition of approximately 281,000 subscribers in the last
month of the 1996 three-month period.
Unrestricted Subsidiaries
Revenues increased 3.6% to approximately $11.3 million in the 1996
three-month period as compared to the 1995 three-month period, primarily as a
result of increased activity in the satellite transmission, promotional
services, and increased equipment sales of the Company's MicroNet and StarNet
subsidiaries.
Programming expense decreased 1.9% to approximately $3 million,
selling, general and administrative expense increased 35.8% to approximately
$4.6 million; and technical and other expense increased 3% to approximately
$1.4 million. The technical and other expense increase is primarily
attributable to the increased development expenses incurred by the Company's
StarNet Development, Inc. subsidiary. Depreciation and amortization decreased
29.8% to approximately $1.8 million in the 1996 three-month period as compared
to the 1995 three-month period.
Operating loss was approximately $1.4 million as compared to an
approximate $1.6 million loss in the prior period.
Interest expense amounted to approximately $0.5 million. The loss
before income taxes increased by approximately $0.8 million in the 1995
three-month period to approximately $6.9 million.
Recent Accounting Pronouncements
The Financial Accounting Standards Board has issued its Statement
123 on accounting for stock-based compensation, which encourages employers to
account for stock compensation awards based on their fair value at the date the
awards are granted. Statement 123 is effective for calendar year 1996; however
it does not apply to the Company because the Company does not have stock
options or stock compensation.
Liquidity and Capital Resources
The Company's businesses require cash for operations and for
capital expenditures. In addition, the Company has followed a strategy of
expansion through selective acquisitions of cable television systems and
communications-related businesses for cash. As of March 31, 1996, the Company
has committed to purchase three cable television systems for an aggregate cash
purchase price of approximately $111.5 million.
To date, cash requirements have been funded by cash flow from
operations and borrowings. At March 31, 1996, the Company had aggregate senior
debt of approximately $1.24 billion and bank debt at the subsidiary level of
approximately $25.7 million. The senior debt consisted of three debt
obligations in the amount of approximately $75 million, $31.5 million and $14.2
million (collectively, the "Private Placement Notes"), the Company's $700
million in principal amount of 8 3/8% Senior Notes Due 2005 ("Public Notes")
and a $600 million bank credit facility (the "Bank Credit Facility") consisting
of a $400 million term loan and $20 million borrowed under the $200 million
revolving credit facility portion of the Bank Credit Facility. The Company
issued the Private Placement Notes from 1988 to 1991 in connection with
refinancing of revolving bank debt, initially incurred to make acquisitions.
The Company issued the Public Notes on November 14, 1995 pursuant to a
registration statement on Form S-1 and used a portion of the approximately
$685.7 million net proceeds (a) to retire then existing bank debt and a portion
of the Private Placement Notes, (b) to fund the Company's obligation to acquire
cable television system assets valued at approximately $45 million in order to
complete the tax-free exchange ("Wilmington Exchange") of the Company's cable
television assets located in the Oakland, California area (and such newly
acquired assets) for cable television assets owned by a subsidiary of
TeleCommunications, Inc. ("TCI") and located in the Wilmington, Delaware area
("Wilmington System") and (c) to fund approximately $106.6 million of the
approximately $531 million (including the reimbursement of approximately $2
million in capital expenditures) purchase price for the acquisition of cable
television systems in Pennsylvania and New Jersey (the "Sammons Acquisition")
from Sammons Communications, Inc. ("Sammons") . On February 29, 1996, the
Company borrowed $400 million under the term loan portion of the Bank Credit
Facility and approximately $20 million under the revolving credit portion of
the Bank Credit Facility to fund a portion of purchase price for the Sammons
Acquisition.
The Company's operations are conducted through its direct and indirect
subsidiaries. As a holding company, the Company has no independent operations
and, therefore, is dependent on the cash flow of its subsidiaries to meet its
own obligations, including the payment of interest and principal obligations on
the Private Placement Notes, Public Notes and the Bank Credit Facility when due.
There are no restrictions relating to the payment to the Company of dividends,
advances or other payments by the subsidiaries of the Company.
Cash flow generated from continuing operations, excluding changes in
operating assets and liabilities that result from timing issues and considering
only adjustments for noncash charges was approximately $16.5 million for the
three months ended March 31, 1996 compared to approximately $13.7 million for
the three months ended March 31, 1995. The increase in cash flow was a result
of the completion of the Wilmington Exchange, the Sammons Acquisition and the
realization of the full effect of rate increases which were implemented in 1995.
During the 1996 three-month period the Company was required to make interest
payments of approximately $3.9 million on its outstanding debt, whereas during
the 1995 three-month period the Company was required under its then existing
debt obligations to make interest payments of approximately $16.7 million.
For the period 1996 through 2000, the Company's Core Cable Television
Operations expect to incur approximately $300 million in capital expenditures
related to its upgrade program and approximately $150 million for routine
maintenance capital expenditures. At March 31, the Company has expended
approximately $8.5 million.
The Company is obligated to make additional investments of FF49.8 million
in 1996 and 1997 (approximately $9.9 million in the aggregate, subject to
currency exchange rate fluctuations) related to its indirect investment in
Videopole. The foregoing amounts assume that the Company will be required to
make the investments required to be provided by the Company's joint venture
partner, TCI. Any funds provided by the Company as a result of the failure by
TCI to make its required investments will result in an adjustment to the
partnership interests. The Company made payments on behalf of TCI in 1995 and
expects to continue to make such payments.
Future minimum lease payments under all capital leases and non-cancelable
operating leases for each of the years 1996 through 1999 are $6.6 million
($845,000 of which is payable to a principal stockholder), $5.1 million (of
which $891,000 is payable to a principal stockholder), $4.4 million (of which
$938,000 is payable to a principal stockholder) and $2.3 million (of which
$988,000 is payable to a principal stockholder), respectively.
The Company has net operating loss carryforwards which it expects to
utilize notwithstanding recent and expected near term losses. The net operating
losses begin to expire in the year 2001 and will fully expire in 2009.
Management bases its expectation on its belief that depreciation and
amortization expense will level off and that interest expense will decline as
debt is repaid, resulting in higher levels of pre-tax income.
The Company is a party to several interest rate cap and swap agreements
to reduce the impact of changes in interest rates on its floating rate
indebtedness which will become outstanding under the Bank Credit Facility. In
the second quarter of 1995, the Company entered into an interest rate swap
agreement having a notional principal amount of $200 million to reduce its
exposure to fluctuations in interest rates. The Company has maintained these
agreements in anticipation of incurring additional floating rate indebtedness
under the Bank Credit Facility. The Company will have exposure to changes in
interest rates during any period that the Company was floating rate
indebtedness outstanding. The Company does not ordinarily enter into interest
rate or currency hedge agreements except as described above.
The Company, through its Lenfest Australia, Inc. subsidiary, holds an
equity investment in Australis Media Limited ("Australis"), an Australian
public company which provides programming via MMDS and DBS licenses to
substantially all of Australia's major population centers. As of March 22,
1996, the investment had a fair value of approximately U.S. $81.9 million. On
March 29, 1996 Australis' securities were suspended from trading on the
Australian exchange pending an announcement from Australis regarding is
recapitalization plans.
On January 19, 1996, Lenfest Australia, Inc. loaned Australis
approximately U.S. $18.5 million on an unsecured basis. Such loan had an
original due date of February 26, 1996 which has been extended to the earlier
of August 1, 1996 or the refinancing by Australis of the Australis Credit
Facility (defined below). The Company loaned the funds to Lenfest Australia,
Inc. on an intercompany basis. On February 29, 1996, Lenfest Australia, Inc.
entered into a credit facility (as subsequently amended, the "Lenfest Australia
Credit Facility") with two of the banks which are parties to the Bank Credit
Facility. The amount borrowed was approximately $18.7 million, which was used
to repay the intercompany advance from the Company and transaction costs
associated with the loan to Lenfest Australia, Inc. The Lenfest Australia
Credit Facility is an interest only, unsecured facility which must be repaid on
the earlier of repayment of the loans by Australis and August 29, 1996. As a
condition to granting their consent to the Lenfest Australia Credit Facility,
the lenders under the Bank Credit Facility required the Company to agree to
reduce the aggregate principal amount available for advances under the
revolving credit portion of the Bank Credit Facility by $20 million so long as
any portion of the Lenfest Australia Credit Facility remains outstanding. As a
result, at March 31, 1996 the Company had available approximately $160 million
under the revolving credit facility. In March and April 1996, the Company
loaned an additional U.S. $15.5 million to Australis from cash on hand. These
loans were repaid, with interest, on May 11, 1996.
The Company and certain other equity investors in Australis (collectively,
the "Australis Guarantors") have agreed to assist in a recapitalization of
Australis. On May 10, 1996, Australis, a bank (which is an affiliate of a
lender under the Bank Credit Facility) and the Australis Guarantors entered
into agreements which provide that the bank will lend Australis up to U.S. $125
million (the "Australis Bank Facility") and that the Australis Guarantors
severally will guarantee borrowings under the Australis bank facility. The
Company's several portion ("Australis Guaranty") is up to U.S. $75 million of
the Australis Credit Facility. The agreement between Australis and the
Australis Guarantors requires that Australis seek the approval of the Australis
Guarantors of a business plan before Australis may draw additional funds under
the Australis Bank Facility and that Australis grant warrants to purchase
additional equity securities and provide certain other rights to the Australis
Guarantors. The granting of the warrants and the rights is subject to
Australian regulatory requirements and the prior consent of the Australis
shareholders, both of which are expected to be satisfied or obtained. The
Australis Bank Facility requires that it be repaid on or before October 31,
1996. Australis has announced that it plans to repay the Australis Credit
Facility with the proceeds of long term financing. In connection with the
closing on the Australis Credit Facility, Australis repaid the U.S. $15.5
million loans made by the Company in March and April 1996. The Company expects
the U.S. $18.5 million loan by Lenfest Australia, Inc. to be repaid from the
proceeds of the long term financing proposed by Australis. It was necessary for
the Company to obtain the consent of certain of the holders of the Private
Placement Notes to permit the Company to incur the Australis Guaranty. The
holders of the Private Placement Notes consented by letter agreements dated May
2, 1996.
To fund the Australis Guaranty, the Company entered into a stand-by U.S.
$75 million Senior Subordinated Credit Facility ("Stand-by Facility") on May 2,
1996 with the Toronto-Dominion Bank (an affiliate of the lender under the
Australis Bank Facility and one of the lenders under the Lenfest Australia
Credit Facility). The terms of the Stand-by Facility provide that any loan will
be subordinated to the senior lenders to the Company, be unsecured, be interest
only, and be due on the first to occur of November 18, 1996, the issuance of
public debt by Australis in an amount sufficient to repay the Australis Bank
Facility or the issuance of additional public securities by the Company. In
connection with the Stand-by Facility, it was necessary for the Company to amend
the Bank Credit Facility to permit the creation of subordinated debt. The
lenders under the Bank Credit Facility consented to the amendment on April 29,
1996 ("Second Amendment").
Although the Company has approximately $160 million available under its
Bank Credit Facility, the Company will be unable to make additional borrowings
if the ratio of its senior debt to annualized operating cash flow ("Senior Debt
Leverage Ratio") and the ratio of its total (senior and subordinated) debt to
annualized operating cash flow ("Total Debt Leverage Ratio") are not in
compliance with the leverage ratio requirements under its various borrowing
agreements after giving effect to each borrowing and the use of proceeds of the
borrowing. The Private Placement Notes require that the Company's Senior Debt
Leverage Ratio and Total Debt Leverage Ratio be no more than 700% and 750%,
respectively, through September 30, 1996, and 650% and 700%, respectively,
thereafter. The Senior Notes require that the Company's Total Debt Leverage
Ratio be no more than [800%]. The Bank Credit Facility, as amended by the Second
Amendment, requires that the Company's Senior Debt Leverage Ratio be no more
than 690% through June 30, 1996, 650% from July 1, 1996 through September 30,
1996 and 625% from October 1, 1996 through December 31, 1996 and Total Debt
Leverage Ratio be no more than 725% through September 30, 1996 and at the
ratios required for Senior Debt Leverage Ratio thereafter. Management believes
that the Company will be in compliance with the required Senior and Total Debt
Leverage Ratios through December 31, 1996 and thereafter.
As a result of the increase in the permitted Senior Debt Leverage Ratio
under the Bank Credit Facility, the Company on April 30, 1996 completed the
acquisition of two cable television systems for an aggregate purchase price of
approximately $27 million. The acquisition of a third cable television system
is expected to be completed in the fourth quarter of 1996 for approximately
$84.5 million. Under the terms of the Bank Credit Facility, the Company is
required to obtain the consent of the lenders under the Bank Credit Facility to
acquire cable television assets for an aggregate purchase price in excess of
$50 million. Management believes that such consent will be obtained.
Management believes that cash flow generated from the operating
activities of the Core Cable Television Operations will be sufficient to enable
the Company for the foreseeable future to make capital expenditures, to meet
operating expenses and pay the taxes of the Company and to service its
indebtedness. The Company's ability to borrow funds to make additional
investments in or acquisitions of cable television systems, including the
completion of the acquisition of the cable television system presently expected
to be completed in the fourth quarter of 1996, and to borrow funds under the
Bank Credit Facility if required to repay the Lenfest Australia Credit Facility
will require that the Company be in compliance with the Senior and Total Debt
Leverage Ratios, or obtain the consent of the holders of the Company's
indebtedness to a waiver or amendment of the applicable Senior or Total Debt
Leverage Ratio. Management believes that the Company would either be in
compliance with such Debt Leverage Ratios or obtain the required consents. The
Company is examining its alternatives for obtaining additional sources of funds
on terms most advantageous to the Company and in a manner consistent with the
Company's current debt obligations.
Inflation
The net impact of inflation on operations has not been material in the
last three years due to the relatively low rates of inflation during this
period. If the rate of inflation increases the Company may increase subscriber
rates to keep pace with the increase in inflation, although there may be timing
delays.
Part II. Other Information
Item 1. Legal Proceedings
On May 3, 1996 the News Corporation Limited ("News") filed in the Supreme
Court of New South Wales, Australia an action seeking unspecified damages as a
result of the alleged violation by the Company of an alleged oral agreement to
inform News prior to the Company taking any steps to effect a recapitalization
plan for Australis. The Company believes that the suit is without merit.
Item 5. Other Information
As of February 12, 1996, the Company completed the Wilmington Exchange.
The Wilmington Exchange was the subject of a Report on Form 8-K and 8-K/A dated
February 26, 1996 and April 26, 1996, respectively, both of which are
incorporated herein by reference.
On February 29, 1996, the Company completed the Sammons Acquisition. The
Sammons Acquisition was the subject of a Report on Form 8-K and 8-K/A dated
March 13, 1996 and May 13, 1996, respectively, both of which are incorporated
herein by reference.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits.
The following Exhibits are furnished as part of this Report:
** 1 Underwriting Agreement between the Registrant and Salomon Brothers Inc. as
representatives of the several underwriters, dated November 8, 1995.
* 2.1 Amended and Restated Asset Exchange Agreement, dated September 8, 1995,
between LenComm, Inc. and Lenfest West, Inc. and Heritage Cablevision of
Delaware, Inc.
* 2.2 Asset Purchase Agreement, dated as of May 9, 1995, by and between TCI
Communications Inc. and Sammons Communications of New Jersey, Inc.,
Oxford Valley Cablevision, Inc., Sammons Communications of Pennsylvania,
Inc., NTV Realty, Inc., Capital Telecommunications, Inc. and AC
Communications, Inc.
* 2.3 Assignment and Assumption Agreement, dated as of June 1,
1995, among TCI Communications, Inc., TKR Cable Company and
Lenfest Communications, Inc.
* 2.4 Asset Purchase Agreement, dated as of September 7, 1995, by and between
Lenfest Atlantic, Inc. and Tri-County Cable Television Company.
* 2.5 Letter Agreement, dated July 13, 1995, between Suburban Cable TV Co., Inc.,
and Service Electric Cable TV, Inc.
* 2.6 Letter Agreement, dated August 12, 1995, between Suburban Cable TV Co.,
Inc., and Service Electric Cablevision, Inc.
+ 2.7 Assignment and Assumption Agreement, dated as of February 16, 1996, by and
between Heritage Cablevision of Delaware, Inc. and Lenfest New Castle
County, a Delaware general partnership.
+ 2.8 Bill of Sale, Assignment and Assumption and Release, dated as of February 16,
1996, by and among Lenfest New Castle County, Heritage Cablevision of
Delaware, Inc. and The World Company.
+ 2.9 Asset Purchase Agreement, dated March 28, 1996, between Cable TV Fund 14-
A, Ltd. and Lenfest Atlantic, Inc.
* 4.1 Form of Note.
** 4.2 Indenture between the Company and The Bank of New York, dated as of
November 1, 1995.
*10.1 Credit Agreement, dated as of June 24, 1994, as amended
December 16, 1994 and January 10, 1995, among Lenfest
Communications, Inc., the Toronto-Dominion Bank and PNC Bank,
National Association, as Managing Agents, the Lenders and
Toronto-Dominion (Texas), Inc., as Administrative Agent.
*10.2 Note Agreement, dated as of May 22, 1989, among Lenfest Communications,
Inc. and the Prudential Insurance Company of America with respect to
$50,000,000 10.69% Senior Notes due 1998.
*10.3 Note Agreement, dated as of September 14, 1988 among Lenfest
Communications, Inc. and certain Institutions described therein with respect to
$125,000,000 10.15% Senior Notes due 2000.
*10.4 Note Agreement dated as of September 27, 1991 among Lenfest
Communications, Inc. and Certain Institutions described therein with respect to
$100,000,000 9.93% Senior Notes due 2001.
*10.5 Programming Supply Agreement, effective as of September 30, 1986, between
Satellite Services, Inc. and Lenfest Communications, Inc.
*10.6 Lease dated as of May 1, 1990 by and between H.F. Lenfest and Marguerite
Lenfest and Suburban Cable TV Co. Inc.
*10.7 Lease dated as of May 1, 1990 by and between H.F. Lenfest and Marguerite
Lenfest and Suburban Cable TV Co. Inc.
*10.8 Lease dated as of May 24, 1990 by and between H.F. Lenfest and Marguerite
Lenfest and MicroNet, Inc.
*10.9 Lease, dated as of June 20, 1991, as amended January 1, 1995, by and between
H.F. Lenfest and Marguerite Lenfest and StarNet, Inc. (as successor to NuStar).
*10.10 Supplemental Agreement, dated December 15, 1981, by and between TCI Growth,
Inc., H.F. Lenfest, Marguerite Lenfest and Lenfest Communications, Inc. and Joinder
Agreement executed by LMC Lenfest, Inc.
*10.11 Amendment to Supplemental Agreement, dated May 4, 1984 between Lenfest
Communications, Inc. and TCI Growth, Inc.
*10.12 Agreement, dated July 1, 1990, between H.F. Lenfest, Marguerite B. Lenfest, Diane
A. Lenfest, H. Chase Lenfest, Brook J. Lenfest and the Lenfest Foundation,
Telecommunications, Inc. and Liberty Media Corporation.
*10.13 Agreement and Consent, dated as of November 1, 1990, by and among TCI
Development Corporation, TCI Holdings, Inc., TCI Liberty, Inc., Liberty Cable,
Inc., H.F. Lenfest, Marguerite B. Lenfest, H. Chase Lenfest, Brook J. Lenfest, Diane
A. Lenfest and Lenfest Communications, Inc.
*10.14 Letter Agreement, dated as of December 18, 1991, among Liberty Media
Corporation, Lenfest Communications, Inc., Marguerite B. Lenfest, Diane A.
Lenfest, H. Chase Lenfest, Brooke J. Lenfest and the Lenfest Foundation.
*10.15 Irrecovable Proxies of H. Chase Lenfest, Diane A. Lenfest and Brook J. Lenfest,
each dated March 30, 1990.
*10.16 Partnership Agreement of L-TCI Associates dated April 1993 between Lenfest
International, Inc. and UA-France, Inc.
*10.17 Stock Pledge Agreement, dated May 28, 1993, between Lenfest York, Inc. and
CoreStates Bank, N.A., as Collateral Agent.
*10.18 Pledge Agreement, dated July 29, 1994, between Lenfest Raystay Holdings, Inc. and
Farmers Trust Company as Collateral Agent.
*10.19 Agreement, dated September 30, 1986, between Lenfest Communications, Inc. and
Tele-Communications, Inc.
*10.20 Agreement for the Sale of Advertising on Cable Television Stations, dated as of
November 25, 1991 between Suburban Cable TV Co. Inc. and Cable AdNet
Partners.
**10.21 Letter Agreement, dated November 8, 1995, between the Company and The
Prudential Insurance Company of America. (In accordance with Item 601 of
Regulation SK, agreements between the Company and J.P. Morgan Investment
Management Co. and Banker's Trust have not been filed because they are identical
in all material respects to the filed exhibit.)
**10.22 Letter Agreement, dated November 8, 1995, between the Company and The Prudential
Insurance Company of America. (In accordance with Item 601 of Regulation SK,
agreements between the Company and MLB Life Assurance Corp., Full & Co., AUSA
Life Insurance Company, Inc. and Equitable Life Assurance Society have not been
filed because they are identical in all material respects to the filed exhibit.)
**10.23 Letter Agreement, dated October 31, 1995, between the Company and PPM America.
(In accordance with Item 601 of Regulation SK, agreements between the Company
and Unum Life Insurance Company of America and First Unum Life Insurance
Company, New York Life Insurance Co., SAFECO Life Insurance Co., American
Enterprise Life Insurance Company, IDS Life Insurance Company of New York and
Teachers Insurance and Annuity Association of America have not been filed
because they are identical in all material respects to the filed exhibit.)
**10.24 Letter Agreement, dated November 9, 1995, between the Company and Unum Life
Insurance Company of America and First Unum Life Insurance Company.
**10.25 Credit Agreement, dated as of December 14, 1995, among Lenfest Communications,
Inc., The Toronto-Dominion Bank, PNC Bank, National Association and NationsBank
of Texas, N.A., as Arranging Agents, the Lenders and Toronto-Dominion (Texas),
Inc., as Administrative Agent.
+10.26 First Amendment, dated as of February 29, 1996, to Credit Agreement, dated as of
December 14, 1995, by and among Lenfest Communications, Inc., The
Toronto-Dominion Bank, PNC Bank, National Association and NationsBank of Texas,
N.A., as Arranging Agents, the Lenders and Toronto-Dominion (Texas), Inc., as
Administrative Agent.
+10.27 Agreement, dated as of February 29, 1996, in favor of the Company by H.F.
Lenfest.
+10.28 Credit Agreement, dated as of February 29, 1996, between Lenfest Australia, Inc.
and The Toronto-Dominion Bank and NationsBank of Texas, N.A. and Toronto-
Dominion (Texas), Inc. as Administrative Agent.
+10.29 Sublease Agreement, dated March 21, 1996, between Suburban Cable TV Co. Inc. and
Surgical Laser Technologies, Inc.
+10.30 Letter Agreement, dated November 30, 1995, between the Company and The
Prudential Insurance Company of America.
+10.31 Letter Agreement, dated November 30, 1995, between the Company and The
Prudential Insurance Company of America. (In accordance with Item 601 of
Regulation SK, agreements between the Company and MLB Life Assurance Corp. and
Full & Co. have not been filed because they are identical in all material
respects to the filed exhibit.)
10.32 Form of Second Amendment, dated as of April 29, 1996, to Credit Agreement,
dated as of December 14, 1995, by and among Lenfest Communications, Inc., The
Toronto-Dominion Bank, PNC Bank, National Association and NationsBank of Texas,
N.A., as Arranging Agents, the Lenders and Toronto-Dominion (Texas), Inc., as
Administrative Agent.
10.33 Form of Letter Agreement, dated May 2, 1996, between the Company and The
Prudential Insurance Company of America.
10.34 Form of Letter Agreement, dated May 2, 1996, between the Company
and The Prudential Insurance Company of America. (In accordance
with Item 601 of Regulation SK, agreements between the Company
and ECM Fund, L.P.I and Equitable Life Assurance Society
have not been filed because they are identical in all material
respects to the filed exhibit.)
10.35 Form of Senior Subordinated Credit Agreement, dated as of May 2, 1996,
between Lenfest Communications, Inc. and The Toronto-Dominion Bank.
27. Financial Data Schedule.
- ------------------------
* Incorporated by reference to the Company's Registration Statement on Form
S-1, No. 33-96804.
** Incorporated by reference to the Company's Report on Form 10-Q, dated
December 22, 1995.
+ Incorporated by reference to the Company's Report on Form 8-K, dated
February 26, 1996.
+ Incorporated by reference to the Company's Report on Form 10-K, dated March
29, 1996.
(b) Reports on Form 8-K
The Company filed Reports on Form 8-K and 8-K/A dated February 26,
1996 and April 26, 1996, respectively, reporting on the Wilmington Exchange and
providing proforma and audited financial information in connection with the
completion of that transaction. The Company also filed Reports on Form 8-K and
8-K/A dated March 13, 1996 and May 13, 1996, respectively, reporting on the
Sammons Acquisition and providing proforma and audited financial information in
connection with the completion of that transaction.
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)
EXHIBIT INDEX
Exhibit
Number Title or Description Page Number
- ------ -------------------- -----------
10.32 Form of Second Amendment, dated as of April 29, 1996, to Credit
Agreement, dated as of December 14, 1995, by and among Lenfest
Communications, Inc., The Toronto-Dominion Bank, PNC Bank, National
Association and NationsBank of Texas, N.A., as Arranging Agents, the
Lenders and Toronto-Dominion (Texas), Inc., as Administrative Agent.
10.33 Form of Letter Agreement, dated May 2, 1996, between the Company and
The Prudential Insurance Company of America.
10.34 Form of Letter Agreement, dated May 2, 1996, between the Company and
The Prudential Insurance Company of America. (In accordance with
Item 601 of Regulation SK, agreements between the Company and ECM
Fund, L.P. I and Equitable Life Assurance Society have not been
filed because they are identical in all material respects
to the filed exhibit.)
10.35 Form of Senior Subordinated Credit Agreement, dated as of May 2,
1996, between Lenfest Communications, Inc. and The Toronto-Dominion
Bank.
27. Financial Data Schedule.