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 EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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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
----- -----
Indicate the number of shares outstanding of each of the Registrant's
classes of common stock, as of August 13, 1997: 158,896 shares of Common Stock,
$0.01 par value per share. All shares of the Registrant's Common Stock are
privately held, and there is no market price or bid and asked price for said
Common Stock.
LENFEST COMMUNICATIONS, INC.
Index
Part I. Financial Information Page
----
Item 1. Financial Statements
Report on Review by Independent Certified Public Accountants 2
Condensed Consolidated Balance Sheets as of June 30, 1997
(unaudited) and as of December 31, 1996 3
Consolidated Statements of Operations for the three months and
six months ended June 30, 1997 (unaudited) and June 30, 1996
(unaudited) 5
Consolidated Statements of Cash Flows for the six months ended
June 30, 1997 (unaudited) and June 30, 1996 (unaudited) 6
Notes to Condensed Consolidated Financial Statements
(unaudited) 8
Statement by Management Concerning Review of Interim Financial
Information by Independent Certified Public Accountants 17
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations 18
Part II. Other Information
Item 5. Other Information 24
Item 6. Exhibits and Reports on Form 8-K 24
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 June 30, 1997, and the
related consolidated statements of operations for the three month and six month
periods ended June 30, 1997 and 1996, and the consolidated statements of cash
flows for the six months ended June 30, 1997 and 1996, included in the
accompanying Securities and Exchange Commission Form 10-Q for the period ended
June 30, 1997. These condensed consolidated financial statements are the
responsibility of the Company's management.
We conducted our reviews 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 reviews, 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, 1996, and the
related consolidated statements of operations, stockholders' equity (deficit)
and cash flows for the year then ended (not presented herein). In our report
dated March 24, 1997, 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, 1996, as
restated, is fairly stated in all material respects in relation to the
consolidated balance sheet from which it has been derived.
As discussed in Note 2 to the financial statements, the Company has entered into
an agreement to sell substantially all of the assets of MicroNet, Inc. and
MicroNet Delmarva Associates, LP, wholly owned subsidiaries of the Company.
Prior period financial statements have been restated to reflect the continuing
operations of the Company.
/s/ Pressman Ciocca Smith LLP
Hatboro, Pennsylvania
August 8, 1997
2
LENFEST COMMUNICATIONS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
June 30, December 31,
1997 1996
-------------- --------------
(Unaudited) (*)
ASSETS
Cash and cash equivalents $ 4,313 $ 19,162
Marketable securities 38,313 79,830
Accounts receivable, trade and other, less allowance for
doubtful accounts of $2,275 in 1997 and $1,985 in 1996 24,525 19,885
Inventories 2,771 2,757
Prepaid expenses 2,830 2,364
Property and equipment, net of accumulated depreciation
of $326,553 in 1997 and $288,869 in 1996 410,249 372,387
Investments, principally in affiliates, and related receivables 58,999 51,743
Goodwill, net of amortization of $26,942 in 1997 and
$25,202 in 1996 72,350 74,404
Deferred franchise costs, net of amortization of $166,016 in
1997 and $144,563 in 1996 532,668 494,568
Other intangible assets, net of amortization of $14,032 in 1997
and $11,540 in 1996 23,723 24,908
Deferred Federal tax asset, net 59,859 52,257
Net assets of discontinued operations 20,480 20,971
Other assets 3,786 6,552
-------------- --------------
$ 1,254,866 $ 1,221,788
============== ==============
(*) Condensed from audited financial statements.
See independent certified public accountants' review report and accompanying
notes.
3
LENFEST COMMUNICATIONS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS, (continued)
(Dollars in thousands)
June 30, December 31,
1997 1996
-------------- --------------
(Unaudited) (*)
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Notes payable and obligations under capital leases $ 1,357,687 $ 1,312,863
Accounts payable and accrued expenses - unrelated parties 44,363 38,781
Accounts payable - affiliate 12,762 12,855
Deferred state tax liability 8,816 9,066
Customer service prepayments and deposits 8,120 8,614
Investment in Garden State Cablevision, L.P. 76,293 72,454
-------------- --------------
TOTAL LIABILITIES 1,508,041 1,454,633
MINORITY INTEREST in equity of consolidated subsidiaries 381 945
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 (loss) on marketable securities, net of deferred
taxes (10,898) (9,866)
Accumulated deficit (293,407) (274,673)
-------------- --------------
(253,556) (233,790)
-------------- --------------
$ 1,254,866 $ 1,221,788
============== ==============
(*) Condensed from audited financial statements.
See independent certified public accountants' review report and accompanying
notes.
4
LENFEST COMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(Dollars in thousands)
Three Months Ended Six Months Ended
June 30, June 30,
------------------------------ ------------------------------
1997 1996 1997 1996
------------ ------------- ------------ -------------
REVENUES $ 112,117 $ 101,029 $ 219,785 $ 177,865
OPERATING EXPENSES
Service 9,151 7,704 17,906 12,755
Programming - from affiliate 15,594 14,059 31,281 25,315
Programming - other cable 8,277 6,311 16,052 11,192
Selling and marketing 4,586 4,429 8,674 7,591
General and administrative 20,744 16,484 39,046 30,472
Direct costs - non-cable 5,112 4,810 10,565 9,679
Depreciation 19,486 17,052 38,118 30,406
Amortization 12,435 11,446 25,949 19,199
--------- --------- --------- ---------
95,385 82,295 187,591 146,609
--------- --------- --------- ---------
OPERATING INCOME 16,732 18,734 32,194 31,256
OTHER INCOME (EXPENSE)
Interest expense (29,000) (27,722) (60,864) (47,521)
Equity in net (losses) of unconsolidated
affiliates (2,110) (2,022) (818) (9,207)
Recognized (loss) on decline in market value
of securities - Australis Media Limited -- (66,945) -- (66,945)
Provision for reduction in value of note
receivable and accrued interest -- (19,685) -- (19,685)
Gain on disposition of partnership interest -- -- -- 7,210
Other income and expense (net) 848 (297) 1,358 3,435
--------- --------- --------- ---------
(30,262) (116,671) (60,324) (132,713)
--------- --------- --------- ---------
(LOSS) BEFORE INCOME TAXES (13,530) (97,937) (28,130) (101,457)
INCOME TAX BENEFIT 3,860 3,044 8,126 3,390
--------- --------- --------- ---------
(LOSS) FROM CONTINUING OPERATIONS (9,670) (94,893) (20,004) (98,067)
DISCONTINUED OPERATIONS
Income (loss) from operations of MicroNet,
Inc. to be disposed of (net of applicable income
taxes of $526 in 1997 and $94 in 1996) 397 (264) 1,270 (257)
--------- --------- --------- ---------
(LOSS) BEFORE EXTRAORDINARY LOSS (9,273) (95,157) (18,734) (98,324)
EXTRAORDINARY LOSS
Early extinguishment of debt, net of applicable
income taxes of $1,337 -- (2,484) -- (2,484)
--------- --------- --------- ---------
NET (LOSS) (9,273) (97,641) (18,734) (100,808)
BEGINNING ACCUMULATED DEFICIT (284,134) (147,078) (274,673) (143,911)
--------- --------- --------- ---------
ENDING ACCUMULATED DEFICIT $(293,407) $(244,719) $(293,407) $(244,719)
========= ========= ========= =========
See independent certified public accountants' review report and accompanying
notes.
5
LENFEST COMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Dollars in thousands)
Six Months Ended
June 30,
----------------------------------
1997 1996
-------------- --------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net (loss) $ (18,734) $(100,808)
Adjustments to reconcile net (loss) to net cash provided
by operating activities
Depreciation and amortization 64,067 49,605
Extraordinary loss -- 3,821
Accretion of debt discount 999 308
Accretion of discount on marketable securities (net) (477) --
Net (gains) losses on sales of marketable securities 50 (307)
Recognized loss on decline in market value of securities -- 66,945
Provision for potential reduction in note receivable and
accrued interest -- 19,685
(Gain) on disposition of partnership interest -- (7,210)
Deferred income tax (benefit) (8,200) (6,300)
(Gain) on sale of property and equipment (107) (27)
Equity in net losses of unconsolidated affiliates 818 9,207
Minority interest (564) (943)
Change in net assets of discontinued operations 491 659
Changes in operating assets and liabilities, net of effects
from acquisitions
Accounts receivable (4,640) (571)
Accrued interest receivable -- (1,155)
Inventories (14) 1,123
Prepaid expenses (1,066) 226
Other assets 2,766 (429)
Accounts payable and accrued expenses:
Affiliate (93) 10,381
Unrelated parties 6,182 (4,035)
Customer service prepayments and deposits (494) 1,359
--------- ---------
NET CASH PROVIDED BY
OPERATING ACTIVITIES 40,984 41,534
--------- ---------
See independent certified public accountants' review report and accompanying
notes.
6
LENFEST COMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Dollars in thousands)
Six Months Ended
June 30,
-------------------------------------
1997 1996
-------------- --------------
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisitions of cable systems $ (84,500) $ (604,032)
Non cable acquisitions - (1,100)
Purchases of property and equipment (50,630) (19,611)
Purchases of marketable securities (553) (326)
Proceeds from sales of property and equipment 107 182
Proceeds from sales of marketable securities 41,813 1,662
Loans to Australis Media Limited - (34,030)
Proceeds from note receivable - 15,500
Investments in unconsolidated affiliates (6,592) (2,761)
Distributions from unconsolidated affiliates 75 236
(Increase) in other intangible assets - investing (1,313) (1,076)
Loans and advances to unconsolidated affiliates (698) (121)
Loans and advances from unconsolidated affiliates 2,980 1,145
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NET CASH (USED BY)
INVESTING ACTIVITIES (99,311) (644,332)
CASH FLOWS FROM FINANCING ACTIVITIES
Increases in debt 105,000 907,201
Early extinguishment of debt - (448,821)
Other debt reduction:
Notes (60,500) (10,500)
Obligations under capital leases (675) (36)
(Increase) in other intangible assets - financing (347) (6,392)
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NET CASH PROVIDED BY
FINANCING ACTIVITIES 43,478 441,452
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NET (DECREASE) IN CASH (14,849) (161,346)
CASH AND CASH EQUIVALENTS AT BEGINNING
OF PERIOD 19,162 164,422
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CASH AND CASH EQUIVALENTS
AT END OF PERIOD $ 4,313 $ 3,076
============= =============
See independent certified public accountants' review report and accompanying
notes.
7
LENFEST COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1 - BASIS OF PRESENTATION
Condensed Financial Information and Results of Operations
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
June 30, 1997, the consolidated results of operations for the three and six
months ended June 30, 1997 and 1996, and consolidated cash flows for the six
months ended June 30, 1997 and 1996.
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 26, 1997. The results of operations for the periods ended
June 30, 1997 and 1996, are not necessarily indicative of operating results for
the full year.
Prior period financial statements have been restated to reflect the continuing
operations of the Company.
NOTE 2 - DISCONTINUED OPERATIONS
As of July 8, 1997, Suburban Cable TV Co. Inc. ("Suburban Cable"), a wholly-
owned subsidiary of the Company, entered into an agreement to sell substantially
all of the assets of MicroNet, Inc. ("MicroNet") and MicroNet Delmarva
Associates, LP and certain assets of Suburban Cable, Lenfest Atlantic, Inc. and
Lenfest New Castle County, Inc. related to their tower rental and microwave
service businesses. The purchase price is approximately $70.3 million, subject
to adjustments. It is anticipated that the sale will close late in the fourth
quarter of this year. The sale represents the disposition of a major segment of
the Company's tower rental and microwave service businesses. The net assets of
MicroNet have been separately classified in the accompanying consolidated
balance sheets and consist of the following at June 30, 1997 and December 31,
1996:
June 30, December 31,
1997 1996
-------------- --------------
(Dollars in thousands)
Cash $ 2,724 $ 1,471
Accounts receivable 1,993 2,916
Prepaid expenses 299 460
Property and equipment 16,078 16,642
Goodwill 3,863 4,120
Other intangible assets 1,003 1,168
Deferred federal tax asset 3,363 3,363
Other assets 77 60
Notes payable (7,000) (7,000)
Accounts payable and accrued expenses (1,252) (1,596)
Deferred state tax liability (99) (99)
Customer service prepayments (569) (534)
------------- -------------
$ 20,480 $ 20,971
============= =============
8
LENFEST COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 2 DISCONTINUED OPERATIONS, (continued)
Operating results of MicroNet for the three month and six month periods ended
June 30, 1997 and 1996, are shown separately in the accompanying consolidated
statements of operations and consists of the following:
Three Months Ended Six Months Ended
June 30, June 30,
------------------------------ -----------------------------
1997 1996 1997 1996
------------ ------------- ------------ ------------
Revenues $ 4,328 $ 3,269 $ 9,396 $ 6,800
Operating expenses (2,721) (2,442) (5,504) (4,884)
Depreciation and amortization (888) (927) (1,776) (1,832)
----------- ------------ ----------- -----------
OPERATING INCOME (LOSS) 719 (100) 2,116 84
Interest expense (180) (265) (350) (450)
Other income 18 11 30 15
Income tax (expense) benefit (160) 90 (526) 94
----------- ------------ ----------- -----------
NET INCOME (LOSS) $ 397 $ (264) $ 1,270 $ (257)
=========== ============ =========== ===========
NOTE 3 - INVENTORIES
Inventories are stated at the lower of cost or market on a first-in, first-out
basis. Inventories consist of equipment assembled and sold by the Company's
non-cable wholly owned subsidiaries.
Inventories are summarized as follows:
June 30, December 31,
1997 1996
-------------- --------------
(Dollars in thousands)
Raw materials $ 2,517 $ 2,285
Finished goods and work-in process 254 472
-------------- --------------
$ 2,771 $ 2,757
============== ==============
NOTE 4 - SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Six Months Ended
June 30,
------------------------------------
1997 1996
-------------- --------------
(Dollars in thousands)
Cash paid during the period for
Interest $ 60,524 $ 46,139
============== ==============
Income taxes $ 1,522 $ -
============== ==============
9
LENFEST COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, (continued)
(Unaudited)
NOTE 4 - SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION, (continued)
Supplemental Schedule Relating to Acquisitions
1997 1996
-------------- --------------
(Dollars in thousands)
Property and equipment $ 25,350 $ 168,792
Goodwill and other intangible assets - 29,336
Deferred franchise costs 59,150 398,260
Equity interests in affiliates - 2,877
Other assets - 5,867
------------- --------------
$ 84,500 $ 605,132
============= ==============
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 $33,194,000, its
41.67% partnership interest in Bay Cable Advertising with a book value of
$3,545,000 and a fair market value of $10,755,000, and the right to receive
assets of a cable television system located in Fort Collins, CO, which right was
acquired for $54,385,000, less settlement adjustments of $8,799,000 for the
assets of a cable television system serving Wilmington, Delaware and the
surrounding area. 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
$7,210,000, which represents the excess of the market value of the partnership
interest over its book value has been included in the statements of operations.
NOTE 5 - NEW BUSINESS AND ACQUISITIONS
On January 10, 1997, the Company acquired a cable television system from Cable
TV Fund 14-A, Ltd., an affiliate of Jones Intercable, Inc., for approximately
$84,500,000, subject to certain adjustments. The system, located in
Turnersville, New Jersey, passed approximately 47,000 homes and served
approximately 36,900 basic customers. For financial reporting purposes, the
Company accounts for the acquisition of these assets under the purchase method.
This acquisition was funded in part by borrowings under the bank credit
facility.
On September 30, 1996, the Company, through its subsidiary, Lenfest Advertising,
Inc. d/b/a Radius Communications, ("Radius"), acquired the assets of Metrobase
Cable Advertising from a subsidiary of Harron Communications Corp. for
approximately $4,500,000. For financial reporting purposes, the Company accounts
for the acquisition of these assets under the purchase method. This acquisition
was funded from available cash.
On September 30, 1996, the Company through its newly formed subsidiary, Lenfest
Clearview, Inc. ("Clearview") completed the acquisition of a 30% general
partnership interest in a newly formed general partnership, Clearview Partners
(the "Partnership"). The Company contributed $500,000 and its right to receive
the assets of the Gettysburg, PA cable television system (see acquisition from
Sammons Communications, Inc. discussed below) and its right to exchange the
assets of the Gettysburg system for the assets of the Stewartstown, PA cable
television system owned by GS Communications, Inc. The Company received a
payment of $4.5 million from GS Communications, Inc. in connection with these
transactions. No gain or loss was recorded on the exchange. Clearview CATV,
Inc., an unaffiliated company, contributed the assets and certain liabilities of
its cable television system located in Maryland and Pennsylvania to the
Partnership for a 70% general partnership interest. The Partnership's systems
passed approximately 13,400 homes and served approximately 9,650 basic
customers. The Company reports its proportionate share of partnership net income
(loss) on the equity method. The Company's cash contribution was made from
available cash.
10
LENFEST COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, (continued)
(Unaudited)
NOTE 5 - NEW BUSINESS AND ACQUISITIONS, (continued)
On September 11, 1996, StarNet, Inc. ("StarNet"), a wholly owned subsidiary of
the Company, entered into a joint venture with Prevue Networks, Inc. ("Prevue"),
a wholly owned subsidiary of United Video Satellite Group, Inc. (UVSG) to
combine the two companies' pay-per-view promotion services. StarNet contributed
its Barker(R) service to the joint venture and received a 28% partnership
interest. The new joint venture, Sneak Prevue, L.L.C., is based in Tulsa,
Oklahoma and is managed and controlled by UVSG. The Company reports its
proportionate share of net income (loss) on the equity method.
On April 30, 1996, the Company acquired from Tri-County Cable Television
Company, an affiliate of Time Warner, its Salem, NJ cable television system for
approximately $16,000,000. The system passed approximately 10,600 homes and
served approximately 7,700 basic customers. On the same date, the Company
acquired from Shore Cable Company of New Jersey its Ventnor, NJ cable television
system for approximately $11,000,000. The system passed approximately 6,100
homes and served approximately 5,000 basic customers. For financial reporting
purposes, the Company accounts for the acquisition of these assets under the
purchase method. These acquisitions were funded in part by borrowings under the
bank credit facility existing at that date.
On February 29, 1996, the Company acquired the assets of four cable television
systems and equity interests in three affiliates from Sammons Communications,
Inc. for approximately $531,000,000. The systems, located in Bensalem and
Harrisburg, PA and in Vineland and Atlantic City/Pleasantville, N.J., passed
approximately 358,000 homes and served approximately 282,000 basic customers.
The equity interests consist of a 50% partnership interest in Hyperion
Telecommunications of Harrisburg, a 50% partnership interest in Atlantic
Communication Enterprises and a 25% partnership interest in Cable Adcom. For
financial reporting purposes, the Company accounted for the acquisition of these
assets under the purchase method. The acquisition was funded in part by
$420,000,000 borrowed under the Company's bank credit facility existing at that
date, and the remaining proceeds from a public offering of debt securities in
November 1995. The Company paid for the assets of a fifth system, located in
Gettysburg, PA, but did not take title. The Company was managing the system from
February 29, 1996, until the assets of the system were transferred to GS
Communications, Inc. on September 30, 1996.
In February 1996, the Company completed an exchange transaction with a
subsidiary of Tele-Communications, Inc. ("TCI") whereby the Company exchanged
the assets of its cable television systems in the East San Francisco Bay area
with a book value of $33,194,000, its 41.67% partnership interest in Bay Cable
Advertising with a book value of $3,545,000 and a fair market value of
$10,755,000, and the right to receive assets of a cable television system
located in Fort Collins, CO, which right was acquired for $54,385,000, less
settlement adjustments of $8,799,000 for the assets of a cable television
system, serving Wilmington, Delaware and surrounding area. 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 $7,210,000, which represents
the excess of the market value of the partnership interest over its book value
has been included in the statements of operations. The acquisition of the assets
of these cable systems was financed with proceeds from the Company's public
offering of debt in November 1995.
On February 12, 1996, the Company purchased the Philadelphia area assets of
Cable AdNet, Inc., a subsidiary of TCI for approximately $1,100,000.
11
LENFEST COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, (continued)
(Unaudited)
NOTE 6 - MARKETABLE SECURITIES
The Company's investment in the securities of Australis Media Limited
("Australis") consists of 77,982,000 shares of voting common stock and
269,427,000 non-voting convertible debentures. The debentures are classified as
equity securities by Australis as the debentures are unsecured non-voting
securities that have interest entitlements equivalent in both timing and amount
to the dividend entitlements attaching to common stock and will be subordinated
to all creditors other than common stock shareholders upon any liquidation or
winding up. The convertible debentures will not be redeemable for cash but will
be convertible into ordinary shares on a one-for-one basis providing that
certain conditions are met.
The aggregate cost basis and market values of the securities at June 30, 1997
and December 31, 1996 are as follows:
Gross
Aggregate Unrealized
Cost Gain Fair
Basis (Loss) Value
-------------- -------------- --------------
June 30, 1997 (Dollars in thousands)
Australis Media Limited common stock $ 10,885 $ (3,831) $ 7,054
Australis Media Limited convertible debentures 33,687 (8,300) 25,387
Other marketable equity securities 3,974 1,898 5,872
-------------- -------------- --------------
$ 48,546 $ (10,233) $ 38,313
============== ============== ==============
December 31, 1996
Australis Media Limited common stock $ 10,885 $ (2,505) $ 8,380
Australis Media Limited convertible debentures 33,687 (7,952) 25,735
Australis Holdings Pty Limited senior secured
discount notes 41,026 - 41,026
Other marketable equity securities 3,781 908 4,689
-------------- -------------- --------------
$ 89,379 $ (9,549) $ 79,830
============== ============== ==============
In December 1993, the Company acquired 11,000,000 shares of the voting stock and
173,000,000 non-voting debentures of Australis Media Limited ("Australis") for
$90,972,000. As of August 12, 1996, the Australis securities held by the Company
had a market value of approximately $24,000,000. Due to uncertainty regarding
the long-term financing of Australis, the Company determined that the decline in
market value was other than temporary and, accordingly, the Company recognized a
loss of $66.9 million, as of June 30, 1996, resulting from a write-down of the
Australis investment from cost. The write-down established a new cost basis in
the Australis investment.
On October 31, 1996, the Company purchased senior secured discount notes of
Australis Holdings Pty Limited, with a face value of $71,339,000 and 71,339
warrants of Australis for an aggregate of $40,000,000. These discount notes and
warrants were sold in May 1997, for $41,503,000. In connection with the
Australis long-term financing, the Company purchased 43,482,000 shares of voting
stock and 49,188,779 non-voting debentures for $40,000,000. At the time of the
transaction, these securities had a fair value of $13,600,000, and the Company
recognized a loss of $26,400,000.
12
LENFEST COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, (continued)
(Unaudited)
NOTE 6 - MARKETABLE SECURITIES, (continued)
On December 23, 1996, the Company received 18,000,000 shares of voting stock and
52,238,547 non-voting debentures of Australis in connection with the termination
of a technical services agreement with Australis and also received 500,000
shares of voting stock for late repayment of a loan to the Company by Australis.
The securities were recorded at the fair value when received, which was
$7,000,000 and the income recognized has been offset against the recognized
losses on the decline in market value. On December 23, 1996, the Company
converted 5,000,000 non-voting debentures of Australis into 5,000,000 shares of
voting stock.
In accordance with the Statement of Financial Accounting Standards No. 115,
"Accounting for Certain Investments in Debt and Equity Securities", all of the
Company's securities are classified as available for sale. Net realized gains
(losses) from the sale of marketable securities, in the amount of $(27,000) and
$307,000 are included in the accompanying consolidated statements of operations
for the six months ended June 30, 1997 and 1996, respectively. The specific
identification method is used to determine the cost of each security at the time
of sale.
NOTE 7 - INVESTMENTS, PRINCIPALLY IN AFFILIATES
The Company, through several subsidiaries, owns non-controlling partnership
interests in several general partnerships. 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 serving
approximately 204,000 customers in southern New Jersey at June 30, 1997. 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 investments in
Garden State in the amount of $76,293,000 and $72,454,000 at June 30, 1997 and
December 31, 1996, respectively.
Summarized statements of operations of Garden State, accounted for under the
equity method for the six months ended June 30, 1997 and 1996, is as follows:
1997 1996
-------------- --------------
(Dollars in thousands)
Results of Operations
Revenues $ 54,546 $ 49,469
Operating expenses (23,022) (21,682)
Depreciation and amortization (22,892) (24,169)
-------------- --------------
OPERATING INCOME 8,632 3,618
Interest expense (11,364) (8,382)
Other expense (3,273) (2,968)
-------------- --------------
NET LOSS $ (6,005) $ (7,732)
============== ==============
13
LENFEST COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, (continued)
(Unaudited)
NOTE 8 - LONG-TERM DEBT
Notes payable and obligations under capital leases consisted of the following at
June 30, 1997 and December 31, 1996:
June 30, December 31,
1997 1996
-------------- --------------
(Dollars in thousands)
8 3/8% senior notes due November 1, 2005 $ 686,514 $ 685,970
10 1/2% senior subordinated notes due June 15, 2006 293,600 293,105
Bank credit facility 285,000 230,000
11.30% senior promissory notes due September 1, 2000 60,000 60,000
11.84% senior promissory notes due May 15, 1998 10,500 21,000
9.93% senior promissory notes due September 30, 2001 13,125 13,125
Obligations under capital leases 8,948 9,663
-------------- --------------
$ 1,357,687 $ 1,312,863
============== ==============
NOTE 9 - CORPORATE INCOME TAXES
The Company uses the asset and liability method of accounting for income taxes
in accordance with Financial Accounting Standards Board Statement (SFAS) No.
109, "Accounting for Income Taxes". SFAS 109 requires recognition of deferred
tax assets and liabilities for the expected future tax consequences of events
that have been recognized in the financial statement or tax returns. Under this
method, deferred tax liabilities and assets are determined based on the
differences between the financial statement carrying amounts and tax bases of
assets and liabilities using enacted tax rates in effect in the years in which
the differences are expected to reverse. Differences between financial reporting
and tax bases arise most frequently from differences in timing of income and
expense recognition. Deferred income tax expense is measured by the change in
the net deferred income tax asset or liability during the period.
The net income tax benefit differs from amounts expected by applying the U.S.
Federal income tax rate of 35% to loss before income taxes primarily from
nondeductible amortization on goodwill and certain other intangibles and
provision for state income taxes.
14
LENFEST COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, (continued)
(Unaudited)
NOTE 10 - COMMITMENTS AND CONTINGENCIES
The Federal Communications Commission ("FCC") has adopted regulations 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 basic service, equipment and installation rates
under the jurisdiction of local franchising authorities and its tier service
rates under the jurisdiction of 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 rate regulations adopt a benchmark price cap system
for measuring the reasonableness of existing basic and tier service rates.
Alternatively, cable operators have the opportunity to make cost-of-service
showings which, in some cases, may justify rates above the applicable
benchmarks. The rules also require that charges for cable-related equipment
(e.g., converter boxes and remote control devices) and installation services be
unbundled from the provision of cable service and based upon actual costs plus a
reasonable profit. The regulations also provide that future rate increases may
not exceed an inflation-indexed amount, plus increases in certain costs beyond
the cable operator's control, such as taxes, franchise fees and increased
programming costs. Cost based adjustments to these capped rates can also be made
in the event a cable operator adds or deletes channels. In addition, new product
tiers consisting of services new to the cable system can be created free of rate
regulation as long as certain conditions are met such as not moving services
from existing tiers to the new tier. There is also a streamlined cost-of-service
methodology available to justify a rate increase on basic and regulated nonbasic
tiers for "significant" system rebuilds or upgrades.
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 Cable Programming Services Tier are subject to review by
the FCC, if a complaint has been filed by a franchising authority. The
appropriate franchise authority, if such authority has been certified, may
regulate the Basic Service Tier, equipment charges and installation rates. 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 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.
H.F. Lenfest, on behalf of the Company, and TCI have jointly and severally
guaranteed an aggregate of $67 million obligation of Australis incurred in
connection with the purchase of program licenses in April 1995. The terms of the
guarantees provide that the amount of the guarantees will be reduced on a
dollar-for-dollar basis with payments made by Australis under the licenses and
with the provision of one or more letters of credit, which letters of credit may
not exceed $33.5 million. The Company has terminated discussions with Australis
concerning the Company providing the letters of credit. The Company has agreed
to indemnify Mr. Lenfest against loss from such guaranty to the fullest extent
permitted under the Company's debt obligations. Under the terms of the Company's
bank credit facility, however, Mr. Lenfest's claims for indemnification are
limited to $33.5 million, which amount will be further reduced by the aggregate
face amount of any letters of credit issued with respect to the guarantees.
Effective March 6, 1997, Mr. Lenfest released the parent Company and its cable
operating subsidiaries from their indemnity obligation until the last to occur
of September 30, 1997, and the last day of any fiscal quarter during which the
Company could incur the indemnity obligation without violating the terms of its
bank credit facility. Certain of the Company's non-cable subsidiaries have
indemnified Mr. Lenfest for his obligations under the guarantee under an
agreement dated June 5, 1997.
15
LENFEST COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, (continued)
(Unaudited)
NOTE 10 - COMMITMENTS AND CONTINGENCIES, (continued)
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. $541
million as of June 30, 1997). The Plaintiff also alleges that Australis and Mr.
Lenfest owed to him a fiduciary duty and that both parties breached this 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. They are
defending 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 Videopole stock at a
total of 15.6 million French francs (approximately $2.7 million as of June 30,
1997) in 1997. The Company's future commitment in dollars is subject to change
in the exchange rate.
16
LENFEST COMMUNICATIONS AND SUBSIDIARIES
STATEMENT BY MANAGEMENT CONCERNING REVIEW OF
INTERIM FINANCIAL INFORMATION BY INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANTS
The June 30, 1997 and 1996 condensed consolidated financial statements included
in this filing on Form 10-Q have been reviewed by Pressman Ciocca Smith LLP,
Independent Certified Public Accountants, in accordance with established
professional standards and procedures for such a review.
The review report of Pressman Ciocca Smith LLP is included in Part I, Item 1.
17
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
GENERAL
Substantially all of the Company's revenues are earned from customer
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, remote control devices and
installations).
The Company has generated increases in revenues and EBITDA for the
three and the six months ended June 30, 1997 primarily due to increases in
monthly revenue per customer and internal customer growth. As used herein,
"EBITDA" represents consolidated net income plus the provision for income taxes,
interest expense, depreciation, amortization, any other non-cash items reducing
consolidated net income and cash actually distributed by an unconsolidated
affiliate, minus all non-cash items increasing consolidated net income. EBITDA
is presented because it is a widely accepted financial indicator of a company's
ability to incur and service debt. EBITDA should not be considered as an
alternative to net income, as an indicator of the operating performance of the
Company or as an alternative to cash flows as a measure of liquidity. EBITDA is
not a measure under generally accepted accounting principles.
RESULTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 1997 COMPARED WITH THREE MONTHS ENDED
JUNE 30, 1996
CONSOLIDATED RESULTS
Revenues for the Company increased 11.0% to $112.1 million for the 1997
three-month period as compared to the 1996 three-month period, primarily as a
result of a 12.9% increase in revenues from the Company's Core Cable Television
Operations. The increase in revenue was primarily attributable to rate increases
and an increase in the number of customers through internal customer growth and
the Turnersville Acquisition.
Operating expenses increased 15.9% to $95.4 million (85.1% of total
revenues) in the 1997 three-month period as compared to the 1996 three-month
period primarily due to Core Cable Television Operations. The increase was
comprised of the following: (i) service expense and direct costs increase of
14.0% to $14.3 million (12.7% of total revenues); (ii) cable programming expense
increase of 17.2% to $23.9 million (21.3% of total revenues); (iii) selling,
general and administrative expense increase of 21.1% to $25.3 million (22.6% of
total revenues); and (iv) depreciation and amortization increase of 12.0% to
$31.9 million (28.5% of total revenues).
Loss before income taxes decreased to $13.5 million in the 1997
three-month period from $97.9 million in the 1996 three-month period. The
decrease in loss was primarily attributable to the 1996 loss associated with
the write down of the Company's investment in Australis of $86.6 million.
Without the write down, the loss during the 1996 three-month period would have
been $11.3 million.
Interest expense increased 4.6% to $29.0 million due to an increase in
average indebtedness to $1,372.4 million for the 1997 three-month period from
$1,269.7 million for the 1996 three-month period as a result of borrowings in
connection with the Turnersville Acquisition and the investments in Australis
Media Limited ("Australis") made on October 31, 1996.
Equity in net losses of unconsolidated affiliates increased 4.4% to
$2.1 million primarily due to losses from recently acquired equity interests in
Hyperion Telecommunications and Sneak Prevue L.L.C.
EBITDA increased 5.2% to $50.4 million in the 1997 three-month period
as compared to the 1996 three-month period. EBITDA margin decreased to 45.0%
from 47.5%.
18
Core Cable Television Operations
At June 30, 1997, the Company had approximately 988,300 basic customers
and passed approximately 1,349,200 homes as compared to approximately 919,000
basic customers and approximately 1,265,700 homes passed at June 30, 1996.
Excluding basic customers added in the Turnersville Acquisition and seasonal
customers of approximately 7,000, the systems owned at June 30, 1997 added
approximately 7,900 basic customers for an annualized internal growth rate of
3.4%. Revenues increased 12.9% to $104.4 million in the 1997 three-month period
as compared to the 1996 three-month period. The increase in revenue was
primarily attributable to rate increases, internal customer growth and the
addition of approximately 36,900 basic customers as a result of the Turnersville
Acquisition.
Operating expenses increased 16.1% to $83.7 million (80.2% of Core Cable
Television Operations revenues) in the 1997 three-month period primarily as a
result of the Turnersville Acquisition. The increase was comprised of the
following: (i) service expense increase of 18.8% to $9.1 million (8.7% of Core
Cable Television Operations revenues) attributable to technical salaries and
general operating expenses; (ii) cable programming expense increase of 17.2% to
$23.9 million (22.9% of Core Cable Television Operations revenues); (iii)
selling, general and administrative expense increase of 23.3% to $20.2 million
(19.4% of Core Cable Television Operations revenues); and (iv) depreciation and
amortization increase of 10.3% to $30.5 million (29.2% of Core Cable Television
Operations revenues).
EBITDA increased 8.6% to $52.9 million in the 1997 three-month period
compared to the 1996 three-month period. The EBITDA margin decreased to 50.7%
from 52.7% in the 1996 three-month period due to selling, general and
administrative expenses increasing at a greater rate than revenues.
Unrestricted Subsidiaries
As of July 8, 1997, Suburban Cable TV Co. Inc. ("Suburban Cable"), a
wholly-owned subsidiary of the Company, entered into an agreement to sell
substantially all of the assets of MicroNet, Inc. ("MicroNet") and MicroNet
Delmarva Associates, LP ("MicroNet Delmarva") and certain assets of Suburban
Cable, Lenfest Atlantic, Inc. and Lenfest New Castle County, Inc. related to
their tower rental and microwave service businesses. The purchase price is
approximately $70.3 million, subject to adjustments. It is anticipated that the
sale will close late in the fourth quarter of this year. Effective with the
three-month period ended June 30, 1997, the Company's Unrestricted Subsidiary,
MicroNet, is accounted for as discontinued operations. The revenues and
expenses of MicroNet are not included with the consolidated revenues and
expenses of the Company, but are reflected as income (loss) from discontinued
operations. The prior period financial statements have been restated to reflect
the continuing operations of the Company.
The largest of the Company's remaining Unrestricted Subsidiaries are
StarNet, Inc. ("StarNet") and Radius Communications ("Radius"). Revenues for the
Unrestricted Subsidiaries decreased 9.5% to $7.7 million in the 1997 three-month
period as compared to the 1996 three-month period.
Operating expenses increased 14.4% to $11.7 million (150.4% of
Unrestricted Subsidiaries revenues) in the 1997 three-month period as compared
to the 1996 three-month period. The increase was comprised of the following: (i)
service expense and direct costs increase of 6.3% to $5.2 million (66.0% of
Unrestricted Subsidiaries revenues); (ii) selling, general and administrative
expense increase of 13.3% to $5.1 million (65.9% of Unrestricted Subsidiaries
revenues); and (iii) depreciation and amortization increase of 65.2% to $1.4
million (18.5% of Unrestricted Subsidiaries revenues).
EBITDA was negative $2.5 million in the 1997 three-month period and
negative $0.8 million in the 1996 three-month period, and the operating loss was
$3.9 million as compared to $1.6 million.
StarNet revenues decreased by 41.8% to $1.1 million in the 1997
three-month period as compared to the 1996 three-month period, primarily due to
a decrease in network advertising revenue during the Company's transition to
Customized NuStar service. Direct costs decreased 38.9% to $1.0 million due to
decreased manufacturing activities related to StarNet's multimedia equipment and
services. Technical expenses decreased by 9.7% to $0.1 million due to the
reduced use of contracted employees. Selling, general and administrative
expenses decreased 43.4% to $0.5 million due to the reduction of the Company's
administrative department. Depreciation expense decreased by 24.3% to $0.3
million as a result of the contribution of assets related to the Company's
Barker(R) service from StarNet to Sneak Prevue, L.L.C., a partnership between
StarNet and Sneak Prevue, Inc. Operating loss was $0.7 million in the 1997
three-month period as compared to $1.0 million for the 1996 three-month period.
19
Radius began operations on February 12, 1996. In addition, on
September 30, 1996 it purchased assets which contribute a significant portion of
its revenues and expenses. For these reasons, no meaningful comparison can be
made between the three-month periods ended June 30,1997 and 1996. For the three
month period ended June 30, 1997, Radius had revenues of $6.6 million. Expenses
were comprised of: affiliate fees of $3.0 million, production and programming
expenses of $0.5 million, selling, general, and administrative expenses of $2.3
million and depreciation and amortization of $0.5 million. Its operating income
was $0.3 million for the period.
The income from discontinued operations of MicroNet was $0.4 million
for the 1997 three-month period compared to a loss of $0.3 million for the 1996
three-month period.
SIX MONTHS ENDED JUNE 30, 1997 COMPARED WITH SIX MONTHS ENDED
JUNE 30, 1996
CONSOLIDATED RESULTS
Revenues for the Company increased 23.6% to $219.8 million for the 1997
six-month period as compared to the 1996 six-month period, primarily as a result
of a 26.5% increase in revenues from the Company's Core Cable Television
Operations. The increase in revenue was a result of the realization of the full
effect of the TCI Exchange and the Sammons Acquisition (completed near the end
of the first quarter of 1996), the Salem and Shore Acquisitions (completed in
the middle of the second quarter of 1996) and the Turnersville Acquisition
completed on January 10, 1997 (collectively, the "Acquisitions"). The
Acquisitions, including revenue growth added after the completion of the
Acquisitions, accounted for $35.4 million, a 19.9% increase. Rate increases and
internal customer growth accounted for $6.5 million, a 3.7% increase.
Operating expenses increased 28.0% to $187.6 million (85.3% of total
revenues) in the 1997 six-month period as compared to the 1996 six-month period.
The Acquisitions accounted for $30.6 million, a 20.9% increase, while $10.4
million, a 7.1% increase, resulted from costs associated with internal growth.
These increases were comprised of the following: (i) service expense and direct
costs increase of 26.9% to $28.5 million (12.9% of total revenues), $2.8 million
of which was attributable to the Acquisitions; (ii) cable programming expense
increase of 29.6% to $47.3 million (21.5% of total revenues), $9.1 million of
which was attributable to the Acquisitions; (iii) selling, general and
administrative expense increase of 25.4% to $47.7 million (21.7% of total
revenues), $5.5 million of which was attributable to the Acquisitions; and (iv)
depreciation and amortization increase of 29.2% to $64.1 million (29.2% of total
revenues), $13.2 million of which was attributable to the Acquisitions.
Interest expense increased 28.1% to $60.9 million in the 1997 six-month
period as compared to the 1996 six-month period. The increase was primarily the
result of an increase in average indebtedness to $1,382.6 million for the 1997
six-month period from $967.2 million for the 1996 six-month period as a result
of borrowings in connection with the Acquisitions and the investments in
Australis made on October 31, 1996.
Equity in net losses of unconsolidated affiliates decreased to a loss
of $0.8 million from a loss of $9.2 million during the 1996 six-month period.
The Company's unconsolidated affiliates include several cable television
operators which incur high levels of depreciation, amortization and interest
expenses. This decrease was primarily due to Raystay Co., which realized a gain
on the sale of cable systems and Videopole, whose loss decreased $2.3 million to
$2.6 million.
During the 1996 six-month period, there was also a $7.2 million gain on
disposition of a partnership interest.
Loss before income taxes decreased to $28.1 million in the 1997
six-month period from $101.5 million in the 1996 six-month period. The decrease
was primarily attributable to the 1996 recognized loss on the Company's
investment in Australis of $86.6 million. Without the write down, the loss
during the 1996 six-month period would have been $14.9 million.
During the 1996 six-month period, the Company incurred extraordinary
charges from the write-off of the unamortized loan costs associated with a bank
credit facility that was prepaid with the proceeds of the Company's Subordinated
Notes and with initial borrowings under the Bank Credit Facility (See Liquidity
and Capital Resources). These charges increased net loss by $2.5 million, net
of income tax benefit of $1.3 million.
EBITDA increased 21.0% to $99.1 million in the 1997 six-month period as
compared to the 1996 six-month period. EBITDA margin decreased to 45.1% from
46.1%.
20
Core Cable Television Operations
At June 30, 1997, the Company had approximately 988,300 basic customers
and passed approximately 1,349,200 homes as compared to approximately 919,000
basic customers and approximately 1,265,700 homes passed at June 30, 1996.
Excluding basic customers added in the Turnersville Acquisition and seasonal
customers of approximately 7,000, the systems owned at June 30, 1997 added
approximately 12,400 basic customers for an annualized internal growth rate of
2.7%. The Turnersville Acquisition added approximately 36,900 basic customers.
Revenues increased 26.5% to $204.3 million in the 1997 six-month period as
compared to the 1996 six-month period. The Acquisitions accounted for $35.4
million, a 21.9% increase. The increase in revenue was primarily attributable to
rate increases and the Turnersville Acquisition.
Operating expenses increased 30.2% to $165.1 million (80.8% of Core Cable
Television Operations revenues) in the 1997 six-month period. The Acquisitions
accounted for $30.6 million, a 24.1% increase, while 6.1% resulted from costs
associated with the internal customer growth and increased costs. These
increases were comprised of the following: (i) service expense increase of 40.4%
to $17.9 million (8.8% of Core Cable Television Operations revenues)
attributable to technical salaries and general operating expenses, $2.8 million
of which was attributable to the Acquisitions; (ii) cable programming expense
increase of 29.7% to $47.3 million (23.2% of Core Cable Television Operations
revenues), $9.1 million of which was attributable to the Acquisitions; (iii)
selling, general and administrative expense increase of 28.3% to $38.4 million
(18.7% of Core Cable Television Operations revenues), $5.5 million of which was
attributable to the Acquisitions; and (iv) depreciation and amortization
increase of 29.1% to $61.5 million (30.1% of Core Cable Television Operations
revenues), $13.2 million of which was attributable to the Acquisitions.
EBITDA increased 24.1% to $103.5 million in the 1997 six-month period
compared to the 1996 six-month period. Of this increase, 21.5% was attributable
to the Acquisitions. The EBITDA margin decreased to 50.7% from 51.6% in the 1996
six-month period due to revenues increasing at a lesser rate than expenses.
Unrestricted Subsidiaries
The largest of the Company's Unrestricted Subsidiaries are StarNet and
Radius. Revenues of the Unrestricted Subsidiaries decreased 5.4% to
$15.4 million in the 1997 six-month period as compared to the 1996 six-month
period.
Operating expenses increased 13.6% to $22.5 million (145.7% of
Unrestricted Subsidiaries revenues) in the 1997 six-month period as compared to
the 1996 six-month period primarily due to Radius. The increase was comprised of
the following: (i) service expense and direct costs increase of 9.1% to $10.6
million (68.4% of Unrestricted Subsidiaries revenues); (ii) selling, general and
administrative expense increase of 14.5% to $9.3 million (60.3% of Unrestricted
Subsidiaries revenues); and (iii) depreciation and amortization increase of
31.4% to $2.6 million (17.0% of Unrestricted Subsidiaries revenues).
EBITDA was negative $4.4 million in the 1997 six-month period and
negative $1.5 million in the 1996 six-month period, and the operating loss was
$7.0 million as compared to $3.5 million.
StarNet revenues decreased by 47.0% to $2.2 million in the 1997
six-month period as compared to the 1996 six-month period, primarily due to a
decrease in service revenue caused by the contribution of The Barker(R) service
to Sneak PreVue LLC in September, 1996 and lost network advertising revenue
during the Company's transition to the new Customized NuStar service. Direct
costs decreased 40.1% to $2.0 million due primarily to the reduction of
operational expenses associated with The Barker (R) service. Technical expenses
increased by 26.5% to $0.2 million due to the development of digital inserter
equipment intended to be produced for Radius. Selling, general and
administrative expense decreased 26.1% to $1.1 million due to eliminating The
Barker(R) service and Promoter services in 1996. Operating loss was $1.7 million
in the 1997 six-month period as compared to $1.5 million for the 1996 six-month
period.
21
Radius began operations on February 12, 1996. In addition, on
September 30, 1996 it purchased assets which contribute a significant portion of
its revenues and expenses. For these reasons, no meaningful comparison can be
made between the six-month periods ended June 30,1997 and 1996. For the six
month period ended June 30, 1997, Radius had revenues of $11.8 million. Expenses
were comprised of the following: affiliate fees of $5.5 million, production and
programming expenses of $1.2 million, selling, general, and administrative
expenses of $4.4 million and depreciation and amortization of $0.9 million. Its
operating loss was $0.1 million for the period.
The income from the discontinued operations of MicroNet increased to
$1.3 million from a loss of $0.3 million during the 1996 six-month period.
Recent Accounting Pronouncements
The Financial Accounting Standards Board (the "FASB") has issued
Statement No. 128 "Earnings Per Share". Since the Company's stock is not
publicly held, this statement does not apply to the Company. The FASB also
issued Statement No. 129 "Disclosure of Information about Capital Structure,"
which is effective for periods ending after December 15, 1997, and also issued
Statements No. 130 "Reporting Comprehensive Income" and No. 131 "Disclosures
about Segments of an Enterprise and Related Information." Statements 130 and 131
are effective for periods beginning after December 15, 1997. Statements 129, 130
and 131, when applied, will provide additional information and disclosures
regarding the Company's capital structure, comprehensive income and segments.
LIQUIDITY AND CAPITAL RESOURCES
The Company's businesses require cash for operations, debt service,
capital expenditures and acquisitions. To date, cash requirements have been
funded by cash flow from operations and borrowings. At June 30, 1997, the
Company had aggregate total indebtedness of approximately $1,357.7 million,
which excluded bank debt at the subsidiary level of $7.0 million. The Company's
senior indebtedness of approximately $1,064.1 million consisted of: (i) three
debt obligations in the amount of approximately $60.0 million, $10.5 million and
$13.1 million (collectively, the "Private Placement Notes"); (ii)$686.5 million
of 8 3/8% Notes; (iii) $285.0 million under a bank credit facility dated as of
June 27, 1996 (the "Bank Credit Facility"); and (iv) obligations under capital
leases of approximately $9.0 million. The Bank Credit Facility consists of a
$150.0 million term loan facility and a $300.0 million revolving credit
facility. At June 30, 1997, the term loan was fully drawn and $135.0 million was
drawn under the revolving credit facility.
At June 30, 1997, the only outstanding senior subordinated indebtedness
was the Company's Subordinated Notes in the amount of $293.6 million. The
Subordinated Notes are general unsecured obligations of the Company subordinate
in right of payment to all present and future senior indebtedness of the
Company.
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
when due, on its indebtedness. There are no restrictions relating to the payment
to the Company of dividends, advances or other payments by any of the Company's
subsidiaries except MicroNet.
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 $37.9 million for the
six-month period ended June 30, 1997 compared to approximately $34.0 million for
the six-month period ended June 30, 1996. The increase was primarily the net
result of increased cash flow from the Acquisitions and increased revenue per
customer offset by increased interest expense incurred as a result of borrowings
made in connection with the Acquisitions and investments in Australis. During
the 1997 six-month period, the Company was required to make interest payments of
approximately $60.5 million on outstanding debt obligations, whereas in the 1996
six-month period, the Company was required under its then existing debt
obligations to make interest payments of approximately $46.1 million.
22
On January 6, 1997, the Company made an investment of approximately
$6.6 million in Videopole. During 1997, the Company is obligated to make an
additional investment of approximately $2.7 million in Videopole.
As of July 8, 1997, Suburban Cable entered into an agreement to sell
substantially all of the assets of MicroNet and MicroNet Delmarva and certain
assets of Suburban Cable, Lenfest Atlantic, Inc. and Lenfest New Castle County,
Inc. related to their tower rental and microwave service businesses. The
purchase price is approximately $70.3 million, subject to adjustments. It is
anticipated that the sale will close late in the fourth quarter of this year.
Future minimum lease payments under all capital leases and
noncancellable operating leases for each of the years 1997 through 2001 are $9.2
million (of which $890,000 is payable to a principal stockholder), $8.9 million
(of which $938,000 is payable to a principal stockholder), $7.3 million (of
which $988,000 is payable to a principal stockholder), $5.8 million (of which
$1,040,000 is payable to a principal stockholder), and $4.5 million (of which
$1,095,000 is payable to a principal stockholder).
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 2011.
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 pretax income.
The Company is party to several interest rate swap agreements (in an
aggregate amount of $300 million) to convert a portion of the Company's fixed
rate debt to a LIBOR based rate, thereby obtaining the benefits of long-term
funds while paying an effective rate of interest based on the cost of short-term
funds. The Company does not otherwise ordinarily enter into interest rate or
currency hedge agreements.
In connection with the refinancing of Australis on October 31, 1996,
the Company purchased $71,339,000 15% Senior Secured Discount Notes due 2002 of
Australis Holdings Pty. Ltd and related warrants for Australis stock
(collectively, the "Notes"). The Company paid $40.0 million to purchase these
Notes. As of June 30, 1997, the Company had sold all of its Notes for
approximately $41.5 million and used the proceeds to reduce senior indebtedness.
For a further description of the Company's holdings in Australis and the
refinancing transaction, see the Company's financial statements included
elsewhere in this report as well as the Company's report on Form 10-K for the
year ended December 31, 1996.
On July 25, 1997, Australis, The News Corporation, Limited ("News") and
Telstra Corporation Limited ("Telstra") signed an agreement to merge Foxtel, one
of the two cable television companies in Australia, which is equally owned by
News and Telstra, into Australis. After the merger, News and Telstra would have
a 66.5% interest in Australis while the other Australis shareholders would
retain 33.5% of the merged entity. The agreement is subject to the approval of
Australis' shareholders and is expected to close in the fourth quarter of this
year.
In November 1994, H. F. Lenfest and TCI International, Inc. jointly and
severally guaranteed $67.0 million in program license obligations of the
distributor of Australis' movie programming. The terms of the guarantees provide
that the amount of the guarantees will be reduced on a dollar-for-dollar basis
with the provision of one or more letters of credit, which will not exceed $33.5
million. The Company has terminated discussions with Australis concerning the
Company providing the letters of credit. At June 30, 1997, the amount subject to
the guarantee under the license agreements was approximately $54.9 million.
The Company had agreed to indemnify Mr. Lenfest against loss from such
guaranty to the fullest extent permitted under the Company's debt obligations.
Under the terms of the Bank Credit Facility, Mr. Lenfest's claims for
indemnification are limited to $33.5 million, which amount will be further
reduced by the aggregate face amount of any letters of credit issued with
respect to the guarantees. Effective March 6, 1997, however, Mr. Lenfest
released the parent Company and its cable operating subsidiaries from their
indemnity obligation until the last to occur of September 30, 1997, and the last
day of any fiscal quarter during which the Company could incur the indemnity
obligation without violating the terms of the Bank Credit Facility. Certain of
the Company's Unrestricted Subsidiaries indemnified Mr. Lenfest for his
obligations under the guarantee under an agreement dated June 5, 1997.
23
Management believes that the Company has sufficient funds available
from operating cash flow and from borrowing capacity under the Bank Credit
Facility to fund its operations, capital expenditure plans and debt service
throughout 1997. However, the Company's ability to borrow funds under the Bank
Credit Facility requires that the Company be in compliance with the Senior and
Total Debt Leverage Ratios or obtain the consent of the lenders thereunder to a
waiver or amendment of the applicable Senior or Total Debt Leverage Ratio.
Management believes that the Company will be in compliance with such Debt
Leverage Ratios.
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 customer
rates to keep pace with the increase in inflation, although there may be timing
delays.
Part II. OTHER INFORMATION
Item 5. OTHER INFORMATION
On July 10, 1997, H. F. Lenfest selected Diane A. Lenfest, his
daughter, as one of the three directors that Mr. Lenfest has the right to
designate. Diane A. Lenfest replaced Samuel W. Morris, Jr., Vice
President/General Counsel of the Company.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
The following Exhibits are furnished as part of this Report:
Exhibit
Number Title or Description
- ------- --------------------
(a) Exhibits.
The following Exhibits are furnished as part of this Report:
*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.
24
*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 11, 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.
2.10 Asset Purchase Agreement, dated as of July 8, 1997, between
Suburban Cable TV Co. Inc. and American Tower Systems, Inc.
+++3.1 Restated Certificate of Incorporation of the Company.
+++3.2 Amended and Restated Bylaws of the Company.
*4.1 Form of $700,000,000 8 3/8% Senior Note Due 2005.
**4.2 Indenture between the Company and The Bank of New York, dated as of
November 1, 1995.
+++4.3 Indenture, dated as of June 15, 1996, between the Company and The
Bank of New York.
+++4.4 Form of Certificated Note, dated June 27, 1996, between the Company
and Salomon Brothers Inc. (In accordance with Item 601 of
Regulation S-K similar Notes between the Company and Salomon
Brothers Inc. have not been filed because they are identical in all
material respects to the filed exhibit.)
+++4.5 Form of 10 1/2% Senior Subordinated Note, dated June 27, 1996, in
the principal sum of $296,700,000.
+++4.6 Registration Agreement, dated as of June 20, 1996, between the
Company and Salomon Brothers Inc., Toronto Dominion Securities
(USA) Inc., CIBC Wood Gundy Securities Corp. and NationsBanc
Capital Markets, Inc.
*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.
25
*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, Brook J. Lenfest and
the Lenfest Foundation.
*10.15 Irrevocable 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.
26
**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 S-K, 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 S-K, agreements between the Company and MBL
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 S-K,
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 S-K, agreements between the Company and MBL
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.
27
++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 S-K, 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.
+++10.36 Letter Agreement, dated June 11, 1996, and accepted June 20,
1996, between the Company and MBL Life Assurance Corporation. (In
accordance with Item 601 of Regulation S-K, an agreement between
the Company and The Prudential Insurance Company of America has not
been filed because it is identical in all material respects to the
filed exhibit.)
+++10.37 Letter Agreement, dated June 20, 1996, between the Company and
The Prudential Insurance Company of America.
+++10.38 Credit Agreement, dated June 27, 1996, between the Company, The
Toronto-Dominion Bank, PNC Bank, National Association and
NationsBank of Texas, as Arranging Agents, the Lenders and
Toronto-Dominion (Texas), Inc., as Administrative Agent.
+++10.39 First Amendment, dated August 29, 1996, to Credit Agreement,
dated as of February 29, 1996, by and among Lenfest Australia,
Inc., The Toronto-Dominion Bank, NationsBank of Texas, N.A. and
Toronto-Dominion (Texas), Inc.
#10.40 Second Amendment, dated September 30, 1996, to Credit Agreement,
dated as of February 29, 1996, by and among Lenfest Australia,
Inc., The Toronto-Dominion Bank, NationsBank of Texas, N.A. and
Toronto-Dominion (Texas), Inc.
#10.41 Form of First Amendment, dated as of October 28, 1996, to Credit
Agreement, dated as of June 27, 1996, 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.
##10.42 Letter, dated March 6, 1997, from H. F. Lenfest to the Company.
10.43 Agreement, dated as of June 5, 1997, by and between H. F. Lenfest
and Lenfest Jersey, Inc., Lenfest York, Inc., Lenfest Raystay, Inc.
and MicroNet, Inc.
+21. Subsidiaries of the Company.
27. Financial Data Schedule.
* Incorporated by reference to the Company's Registration Statement
on Form S-1, No. 33-96804, declared effective by the Securities and
Exchange Commission on November 8, 1995.
** Incorporated by reference to the Company's Report on Form 10-Q,
dated December 22, 1995, for the quarter ended September 30, 1995.
28
*** 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, for the year ended December 31, 1995.
++ Incorporated by reference to the Company's Report on Form 10-Q, for
the quarter ended March 31, 1996.
+++ Incorporated by reference to the Company's Registration Statement
on Form S-4, No. 333-09631, dated August 6, 1996.
# Incorporated by reference to the Company's Report on Form 10-Q,
dated November 14, 1996, for the quarter ended September 30, 1996.
## Incorporated by reference to the Company's Report on Form 10-K,
dated March 22, 1997, for the year ended December 31, 1996.
(b) Reports on Form 8-K.
None.
29
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.
DATE: August 14, 1997 By: /s/ Harry F. Brooks
-----------------------------------
Harry F. Brooks
Executive Vice President (authorized
officer and Principal Financial Officer)
30