-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, WZ0luf91PrHhdhZ644lvbups/rAHoDOAFfZRODa6L1kRD5Mi2w5HvRAajVZrdGlB ZRZE7V1nS+ZKFvDd2XZaNw== 0000861255-99-000013.txt : 19991117 0000861255-99-000013.hdr.sgml : 19991117 ACCESSION NUMBER: 0000861255-99-000013 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990930 FILED AS OF DATE: 19991115 FILER: COMPANY DATA: COMPANY CONFORMED NAME: OLYMPUS COMMUNICATIONS LP CENTRAL INDEX KEY: 0000861255 STANDARD INDUSTRIAL CLASSIFICATION: CABLE & OTHER PAY TELEVISION SERVICES [4841] IRS NUMBER: 251622615 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 333-19327 FILM NUMBER: 99754857 BUSINESS ADDRESS: STREET 1: ONE NORTH MAIN STREET STREET 2: P O BOX 472 CITY: COUDERSPORT STATE: PA ZIP: 16915-1141 BUSINESS PHONE: 8142749830 MAIL ADDRESS: STREET 1: ONE NORTH MAIN STREET STREET 2: P O BOX 472 CITY: COUDERSPORT STATE: PA ZIP: 16915-1141 FILER: COMPANY DATA: COMPANY CONFORMED NAME: OLYMPUS CAPITAL CORP CENTRAL INDEX KEY: 0000754019 STANDARD INDUSTRIAL CLASSIFICATION: CABLE & OTHER PAY TELEVISION SERVICES [4841] IRS NUMBER: 232868925 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 333-19327-01 FILM NUMBER: 99754858 BUSINESS ADDRESS: STREET 1: MAIN AT WATER STREET STREET 2: P O BOX 472 CITY: COUDERSPORT STATE: PA ZIP: 16915-1141 BUSINESS PHONE: 8142749830 MAIL ADDRESS: STREET 1: MAINT AT WATER STREET STREET 2: P O BOX 472 CITY: COUDERSPORT STATE: PA ZIP: 16915 10-Q 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q X Quarterly Report under Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended September 30, 1999 Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from ______________ to _____________ Commission File Number: 333-19327 OLYMPUS COMMUNICATIONS, L.P. (Exact name of registrant as specified in its charter) Delaware 25-1622615 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) OLYMPUS CAPITAL CORPORATION (Exact name of registrant as specified in its charter) Delaware 23-2868925 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) --------------------------------------------------------- One North Main Street Coudersport, PA 16915-1141 (Address of principal (Zip code) executive offices) 814-274-9830 (Registrants' telephone number including area code) Indicate by check mark whether the registrants (1) have filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) have been subject to such filing requirements for the past 90 days. Yes X No __
OLYMPUS COMMUNICATIONS, L.P. AND SUBSIDIARIES INDEX Page Number PART I - FINANCIAL INFORMATION Item 1. Financial Statements Condensed Consolidated Balance Sheets - December 31, 1998 and September 30, 1999................3 Condensed Consolidated Statements of Operations - Three and Nine Months Ended September 30, 1998 and 1999....................................................................4 Condensed Consolidated Statements of Cash Flows - Nine Months Ended September 30, 1998 and 1999..................................................................................5 Notes to Condensed Consolidated Financial Statements............................................6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations..................................................................................8 Item 3. Quantitative and Qualitative Disclosures about Market Risk......................................16 PART II - OTHER INFORMATION Item 1. Legal Proceedings...............................................................................17 Item 2. Changes in Securities...........................................................................17 Item 3. Defaults Upon Senior Securities.................................................................17 Item 4. Submission of Matters to a Vote of Security Holders.............................................17 Item 5. Other Information...............................................................................17 Item 6. Exhibits and Reports on Form 8-K................................................................17 SIGNATURES...............................................................................................18
-2-
PART I - FINANCIAL INFORMATION Item 1. Financial Statements OLYMPUS COMMUNICATIONS, L.P. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (Dollars in thousands) December 31, September 30, ---------------------------- 1998 1999 ----------- ----------- ASSETS: Cable systems, at cost, net of accumulated depreciation and amortization: Property, plant and equipment $ 355,470 $ 396,072 Intangible assets 577,171 563,838 ----------- ----------- Total 932,641 959,910 Cash and cash equivalents 44,617 6,488 Subscriber receivables - net 14,407 15,621 Prepaid expenses and other assets - net 20,334 15,941 ----------- ----------- Total $ 1,011,999 $ 997,960 =========== =========== LIABILITIES AND PARTNERS' EQUITY (DEFICIENCY): Subsidiary debt $ 519,443 $ 175,000 Parent debt 200,000 200,000 Other debt 7,539 7,204 Accounts payable 23,311 23,572 Subscriber advance payments and deposits 6,965 8,612 Accrued interest and other liabilities 29,904 26,876 Accrued priority return on preferred limited partner interests 36,397 71,462 Due to affiliates - net 283,436 647,447 Deferred income taxes 40,951 41,225 ----------- ----------- Total liabilities 1,147,946 1,201,398 ----------- ----------- Commitments and contingencies (Note 5) Partners' equity (deficiency): Limited partners' interests 570,298 618,073 General partners' equity (deficiency) (706,245) (821,511) ----------- ----------- Total partners' equity (deficiency) (135,947) (203,438) ----------- ----------- Total $ 1,011,999 $ 997,960 =========== =========== See notes to condensed consolidated financial statements.
-3-
OLYMPUS COMMUNICATIONS, L.P. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (Dollars in thousands) Three Months Ended Nine Months Ended September 30, September 30, -------------------------------------------------- 1998 1999 1998 1999 ---------- --------- --------- --------- Revenues $ 54,380 $ 64,640 $ 156,497 $ 192,857 --------- --------- --------- --------- Operating expenses: Direct operating and programming 18,376 22,761 53,324 67,625 Selling, general and administrative 9,287 11,412 27,157 34,408 Depreciation and amortization 12,890 17,718 37,139 54,118 Management fees to managing affiliate 3,769 3,868 9,356 13,324 --------- --------- --------- --------- Total 44,322 55,759 126,976 169,475 --------- --------- --------- --------- Operating income 10,058 8,881 29,521 23,382 --------- --------- --------- --------- Other income (expense): Interest expense (14,886) (5,343) (40,912) (24,939) Interest expense - affiliates (1,650) (16,566) (4,950) (35,101) Other 176 (273) 1,160 (393) --------- --------- --------- --------- Total (16,360) (22,182) (44,702) (60,433) --------- --------- --------- --------- Loss before income taxes (6,302) (13,301) (15,181) (37,051) Income tax expense (56) (94) (84) (274) --------- --------- --------- --------- Net loss (6,358) (13,395) (15,265) (37,325) Priority return on preferred and senior limited partner interests (22,876) (27,324) (65,590) (77,890) --------- --------- --------- --------- Net loss of general and limited partners after priority return $ (29,234) $ (40,719) $ (80,855) $(115,215) ========= ========= ========= ========= Basic and diluted net loss per general and limited partners' unit after priority return $ (2,923) $ (4,072) $ (8,086) $ (11,522) ========= ========= ========= ========= See notes to condensed consolidated financial statements.
-4-
OLYMPUS COMMUNICATIONS, L.P. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (Dollars in thousands) Nine Months Ended September 30, ------------------------- 1998 1999 ---------- ---------- Cash flows from operating activities: Net loss $ (15,265) $ (37,325) Adjustments to reconcile net loss to net cash provided by operating activities: Depreciation 20,929 29,467 Amortization 16,210 24,651 Deferred income taxes 84 274 Changes in operating assets and liabilities, net of effects of acquisitions: Subscriber receivables 725 (1,215) Prepaid expenses and other assets (4,971) (2,464) Accounts payable 3,329 261 Subscriber advance payments and deposits (1,198) 1,647 Accrued interest and other liabilities 4,040 (3,145) --------- --------- Net cash provided by operating activities 23,883 12,151 --------- --------- Cash flows from investing activities: Business acquisitions (112,778) (2,124) Proceeds from sale of assets 10,469 -- Capital expenditures (43,705) (70,666) --------- --------- Net cash used for investing activities (146,014) (72,790) --------- --------- Cash flows from financing activities: Proceeds from debt 99,500 175,000 Repayments of debt (43,877) (521,401) Payments of priority returns (56,475) (42,825) Amounts advanced from affiliates 61,776 364,011 Issuance of preferred limited partner interests 61,425 47,775 Capital distributions (100) (50) --------- --------- Net cash provided by financing activities 122,249 22,510 --------- --------- Increase (decrease) in cash and cash equivalents 118 (38,129) Cash and cash equivalents, beginning of period 3,554 44,617 --------- --------- Cash and cash equivalents, end of period $ 3,672 $ 6,488 ========= ========= See notes to condensed consolidated financial statements.
-5- OLYMPUS COMMUNICATIONS, L.P. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Dollars in thousands) The accompanying unaudited condensed consolidated financial statements of Olympus Communications, L.P. and its substantially wholly owned subsidiaries ("Olympus" or the "Company") have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission. In the opinion of management, all adjustments, consisting of only normal recurring accruals necessary for a fair presentation of the financial position of Olympus at September 30, 1999, and the results of operations for the three and nine months ended September 30, 1998 and 1999, have been included. These condensed consolidated financial statements should be read in conjunction with Olympus' consolidated financial statements included in its Annual Report on Form 10-K for the year ended December 31, 1998 ("Annual Report"). The results of operations for the three and nine months ended September 30, 1999 are not necessarily indicative of the results to be expected for the year ending December 31, 1999. 1. The Registrants: Olympus Communications, L.P. is a joint venture limited partnership formed under the laws of Delaware. Prior to the redemption of Olympus' partnership interests described below, 50% of the outstanding voting interests were held by ACP Holdings, Inc., a wholly-owned subsidiary of Adelphia Communications Corporation ("Adelphia") and the managing general partner of Olympus. The remaining 50% of the voting interest was held by various wholly-owned subsidiaries of FPL Group, Inc. On January 28, 1999, the partners entered into an agreement pursuant to which Adelphia would acquire FPL Group's partnership interests in Olympus. The transaction closed on October 1, 1999. Olympus' operations consist primarily of selling video programming which is distributed to subscribers in Florida for a monthly fee through a network of fiber optic and coaxial cables. Olympus Capital Corporation, a wholly-owned subsidiary of the Company, was formed solely for the purpose of serving as a co-issuer with Olympus Communications, L.P. of the 10 5/8% Senior Notes due 2006 (the "Senior Notes"). Olympus Capital Corporation has no substantial assets or liabilities and no operations of any kind and the Indenture, pursuant to which such Senior Notes were issued, limits Olympus Capital Corporation's ability to acquire or hold any significant assets or other properties or engage in any business activities other than in connection with the issuance of the Senior Notes. 2. Significant Events Subsequent to the Annual Report: On May 6, 1999, certain subsidiaries and affiliates of Adelphia and Olympus closed on an $850,000 credit facility. The credit facility consists of a $600,000, 8 1/2 year reducing revolving credit loan and a $250,000, 9 year term loan. Proceeds from initial borrowings were held as cash by certain of Olympus' affiliates and used to repay existing indebtedness of the co-borrower group. On October 1, 1999, Olympus completed the previously announced redemption of its partnership interests held by Telesat Cablevision, Inc., a subsidiary of FPL Group, Inc. The redemption was made in exchange for non cash assets of Olympus valued at approximately $108,000 pursuant to the previously announced redemption agreement between the parties. As a result of the redemption, Olympus has become a wholly-owned subsidiary partnership of Adelphia Communications Corporation and the financial results of Olympus will be consolidated with those of Adelphia and Adelphia's other consolidated subsidiaries. Prior to the redemption, Olympus was a nonconsolidated joint venture of Adelphia accounted for on the equity method. -6- 3. Supplemental Financial Information: Cash payments for interest were $39,791 and $60,320 for the nine months ended September 30, 1998 and 1999, respectively. Accumulated depreciation of property, plant and equipment amounted to $172,867 and $200,978 at December 31, 1998 and September 30, 1999, respectively. Accumulated amortization of intangible assets amounted to $144,548 and $167,410 at December 31, 1998 and September 30, 1999, respectively. 4. Commitments and Contingencies: Reference is made to Management's Discussion and Analysis of Financial Condition and Results of Operations and the Annual Report for a discussion of material commitments and contingencies. 5. Recent Accounting Pronouncements: Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative Instruments and Hedging Activities," establishes accounting and reporting standards for derivative instruments and for hedging activities. It requires that an entity recognize all derivatives as either assets or liabilities in the statement of financial position and measure those instruments at fair value. Management of the Company has not completed its evaluation of the impact of SFAS No. 133 on the Company's financial statements. In July 1999, SFAS No. 137 was issued to delay the effective date of SFAS No. 133 to fiscal quarters of fiscal years beginning after June 15, 2000. -7- Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations OLYMPUS COMMUNICATIONS, L.P. AND SUBSIDIARIES (Dollars in thousands) Results of Operations The Private Securities Litigation Reform Act of 1995 provides a "safe harbor" for forward-looking statements. Certain information included in this Form 10-Q, including Management's Discussion and Analysis of Financial Condition and Results of Operations, is forward-looking, such as information relating to the effects of future regulation, future capital commitments and the effects of competition. Such forward-looking information involves important risks and uncertainties that could significantly affect expected results in the future from those expressed in any forward-looking statements made by, or on behalf of, the Company. These risks and uncertainties include, but are not limited to, uncertainties relating to economic conditions, acquisitions and divestitures, the availability and cost of capital, government and regulatory policies, the pricing and availability of equipment, materials, inventories and programming, product acceptance, technological developments, year 2000 issues and changes in the competitive environment in which the Company operates. Readers are cautioned that such forward-looking statements are only predictions, that no assurance can be given that any particular future results will be achieved, and that actual events or results may differ materially. In evaluating such statements, readers should specifically consider the various factors which could cause actual events or results to differ materially from those indicated by such forward-looking statements. For further information regarding those risks and uncertainties and their potential impact on the Company, see the Adelphia prospectus and most recent prospectus supplement filed under Registration Statement No. 333-78027, under the caption "Risk Factors." Olympus Communications, L.P. and subsidiaries ("Olympus" or the "Company") is a joint venture limited partnership formed under the laws of Delaware. Prior to the redemption of its partnership interests held by subsidiaries of FPL Group, Inc. on October 1, 1999, 50% of the outstanding voting interests were held by ACP Holdings, Inc., a wholly-owned subsidiary of Adelphia Communications Corporation ("Adelphia") and managing general partner of Olympus. The remaining 50% of the voting interest was held by various wholly owned subsidiaries of FPL Group, Inc. On January 28, 1999, the partners announced an agreement pursuant to which Adelphia would acquire FPL Group's partnership interests in Olympus. The transaction closed on October 1, 1999. Olympus Capital Corporation, a wholly-owned subsidiary of the Company, was formed solely for the purpose of serving as a co-issuer with Olympus Communications, L.P. of the 10 5/8% Senior Notes due 2006 (the "Senior Notes"). Olympus Capital Corporation has no substantial assets or liabilities and no operations of any kind and the Indenture, pursuant to which such Senior Notes were issued, limits Olympus Capital Corporation's ability to acquire or hold any significant assets or other properties or engage in any business activities other than in connection with the issuance of the Senior Notes. Olympus earned substantially all of its revenues in the nine months ended September 30, 1998 and 1999 from monthly subscriber fees for basic, satellite, premium and ancillary services (such as installations and equipment rentals), local and national advertising sales, electronic security monitoring services, digital cable services, high speed data services, pay-per-view programming, and home shopping networks. The changes in Olympus' operating results for the quarter ended September 30, 1999, compared to the same period of the prior year, were primarily the result of acquisitions, expanding existing cable television -8- operations, the impact of subscriber rate increases which became effective June 1, 1998 and 1999, growth in advertising revenue, and vendor price increases for the Company's programming. The high level of depreciation and amortization associated with the significant number of acquisitions in recent years, the continuing program of upgrading and expansion of systems and interest costs associated with financing activities will continue to have a negative impact on the reported results of operations. Olympus expects to report net losses for the next several years. OLYMPUS COMMUNICATIONS, L.P. AND SUBSIDIARIES (Dollars in thousands) The following table sets forth certain cable television system data at the dates indicated.
September 30, ------------------------------- Percent 1998 1999 Increase ---------- ----------- --------- Homes Passed by Cable 828,500 970,630 17.2% Basic Subscribers 551,588 646,759 17.3%
The following table is derived from Olympus' condensed consolidated financial statements that are included in this Form 10-Q and sets forth the percentage relationship to revenues of the components of operating income contained in such financial statements for the periods indicated.
Three Months Ended Nine Months Ended September 30, September 30, ------------------------------- --------------------------- 1998 1999 1998 1999 ------------- ------------- ----------- ------------ Revenues 100.0% 100.0% 100.0% 100.0% Operating expenses: Direct operating and programming 33.8% 35.2% 34.1% 35.1% Selling, general and administrative 17.1% 17.7% 17.3% 17.8% Depreciation and amortization 23.7% 27.4% 23.7% 28.1% Management fees to managing affiliate 6.9% 6.0% 6.0% 6.9% ------------- ------------- ----------- ------------ Operating income 18.5% 13.7% 18.9% 12.1% ============= ============= =========== ============
-9- Revenues. The primary revenue sources, reflected as a percentage of total revenues, for the periods indicated were as follows:
Three Months Ended Nine Months Ended September 30, September 30, ---------------------------------------------------------- 1998 1999 1998 1999 ------------ ------------ ------------ ------------ Regulated service and equipment 75% 74% 73% 75% Premium programming services 10% 9% 11% 9% Advertising sales and other services 15% 17% 16% 16%
Total revenues increased approximately 18.9% and 23.2% for the three and nine month periods ended September 30, 1999 compared with the same periods of the prior year, primarily due to acquisitions, basic subscriber growth, the impact of rate increases and growth in advertising revenues, partially offset by price reductions on certain services. The increase in revenues was attributable to the following:
Three Months Nine Months Ended Ended September 30, 1999 September 30, 1999 ---------------------- --------------------- Acquisitions 60% 72% Basic subscriber growth 12% 10% Rate increases 6% 8% Advertising sales and other services 22% 10%
Direct Operating and Programming Expenses. Direct operating and programming expenses, which are mainly basic and premium programming costs and technical expenses, increased 23.9% and 26.8% for the three and nine month periods ended September 30, 1999 compared with the same periods of the prior year. Such increases were primarily due to increased operating expenses from acquired systems, increased basic programming costs and increased technical costs associated with providing cable modem services. Selling, General and Administrative Expenses. These expenses, which are mainly comprised of costs related to system offices, customer service representatives, and sales and administrative employees, increased 22.9% and 26.7% for the three and nine month periods ended September 30, 1999 compared with the same periods of the prior year. This increase was primarily due to incremental costs associated with acquisitions and subscriber growth. Depreciation and Amortization. Depreciation and amortization was higher for the three and nine month periods ended September 30, 1999 compared with the same periods of the prior year, primarily due to increased depreciation and amortization related to acquisitions and increased capital expenditures. -10- Management Fees to Managing Affiliate. Pursuant to the terms of the Company's Partnership Agreement, the Company pays to Adelphia, on a quarterly basis, an amount representing an allocation of the corporate overhead of Adelphia and its subsidiaries (as provided in the management agreement) with respect to the Company for such period, which allocation is based upon the ratio of the Company's cable subscribers to the total cable subscribers owned or managed by Adelphia. Management fees decreased as a percentage of revenues for the three month period ended September 30, 1999 as compared with the same period of the prior year, primarily due to revenues increasing proportionately at a higher rate than allocated corporate costs. Management fees increased as a percentage of revenues for the nine month period ended September 30, 1999 as compared with the same period of the prior year, primarily due to increased corporate expenditures. Interest Expense. Interest expense decreased 64.1% and 39.0% for the three and nine month periods ended September 30, 1999, respectively, compared with the same periods of the prior year. The decrease in interest was primarily attributable to a decrease in the average amount of debt outstanding during the periods. Interest Expense-Affiliates. The Company is charged interest on advances due to Adelphia and other affiliates. Such advances were used by the Company for acquisitions, capital expenditures, repayment of debt and working capital. Interest expense-affiliates increased approximately 904.0% and 609.1% for the three and nine month periods ended September 30, 1999 compared with the same periods of the prior year primarily due to increased affiliate payables related to debt repayments and acquisitions. Liquidity and Capital Resources The cable television business is capital intensive and typically requires continual financing for the construction, modernization, maintenance, expansion, and acquisition of cable systems. The Company historically has committed significant capital resources for these purposes. These expenditures were funded through long-term borrowings and advances from affiliates and internally generated funds. The Company's ability to generate cash to meet its future needs will depend generally on its results of operations and the continued availability of external financing. Capital expenditures for the nine month periods ended September 30, 1998 and 1999 were $43,705 and $70,666, respectively. The Company expects capital expenditures for the remaining three months of the year ending December 31, 1999 to range from $25,000 to $30,000. The Company generally has funded its working capital requirements, capital expenditures, and acquisitions through long-term borrowings, primarily from banks, issuance of public debt, advances from affiliates and internally generated funds. The Company generally has funded the principal and interest obligations on its long-term borrowings from banks by refinancing the principal with new loans and by paying the interest out of internally generated funds. Olympus has funded the interest obligations on its public borrowings from internally generated funds. At September 30, 1999, the Company's total outstanding debt aggregated approximately $380,000 which included approximately $200,000 of parent debt, and approximately $180,000 of subsidiary debt. In addition, the Company had an aggregate of approximately $6,500 in cash and cash equivalents, and as of September 30, 1999, $776,500 in unused credit lines with banks, which includes $600,000 also available to affiliates, part of which is subject to achieving certain levels of operating performance. During the current quarter Olympus made net advances to Adelphia and other affiliates totaling approximately $155,000 in repayment of amounts previously advanced. At September 30, 1999 net advances due to affiliates aggregated approximately $647,000. On October 1, 1999 the Company borrowed an additional $176,500 and repaid a portion of the amount due to affiliates. -11- At September 30, 1999, the Company's unused credit lines were provided by reducing revolving credit facilities whose revolver periods expire through 2007. The Company's weighted average interest rate on subsidiary debt was approximately 6.97% and 6.67% at September 30, 1998 and 1999 respectively. Mandatory reductions in principal under all agreements for indebtedness for the four years and three months after September 30, 1999, based on amounts outstanding at September 30, 1999, are as follows: Three months ending December 31, 1999 $ 1,441 Year ending December 31, 2000 1,441 Year ending December 31, 2001 1,441 Year ending December 31, 2002 81,441 Year ending December 31, 2003 96,441
The Company plans to continue to explore and consider new commitments, arrangements or transactions to refinance existing debt, increase the Company's liquidity or decrease the Company's leverage. These could include, among other things, the future issuance of debt and the negotiation of new or amended credit facilities by the Company or its subsidiaries. These could also include entering into acquisitions, joint ventures or other investment or financing activities, although no assurance can be given that any such transactions will be consummated. The Company's ability to borrow under current credit facilities and to enter into refinancings and new financings is limited by covenants contained in its subsidiaries' credit agreements, including covenants under which the ability to incur indebtedness is in part a function of applicable ratios of total debt to cash flow. The redemption of the Olympus partnership interests held by FPL Group constitutes a change of control under the Company's Senior Notes. As a result, the holders of the Senior Notes have the right to require the Company to purchase their Senior Notes at 101% of the aggregate principal amount thereof plus accrued and unpaid interest. The Company's offer to re-purchase the Senior Notes expired without any holders exercising their option. The Company believes that cash and cash equivalents, internally generated funds, borrowings under existing credit facilities, and future financing sources will be sufficient to meet its short-term and long-term liquidity and capital requirements. Although in the past the Company has been able to refinance its indebtedness or obtain new financing, there can be no assurance that the Company will be able to do so in the future or that the terms of such financings would be favorable. Management believes that the telecommunications industry, including the cable television and telephone industries, continues to be in a period of consolidation characterized by mergers, joint ventures, acquisitions, sales of all or part of cable companies or their assets, and other partnering and investment transactions of various structures and sizes involving cable or other telecommunications companies. The Company continues to evaluate new opportunities that allow for the expansion of its business through the acquisition of additional cable television systems in geographic proximity to its existing regional markets or in locations that can serve as a basis for new market areas. The Company, like other cable television companies, has participated from time to time and is participating in preliminary discussions with third parties regarding a variety of potential transactions, and the Company has considered and expects to continue to consider and explore potential transactions of various types with other cable and telecommunications companies. However, no assurances can be given as to whether any such transaction may be consummated or, if so, when, or that additional competition from this industry consolidation will not have an adverse effect on the Company. -12- Regulatory and Competitive Matters The cable television operations of the Company may be adversely affected by changes and developments in governmental regulation, competitive forces and technology. The cable television industry and the Company are subject to extensive regulation at the federal, state and local levels. The 1992 Cable Act significantly expanded the scope of regulation of certain subscriber rates and a number of other matters in the cable industry, such as mandatory carriage of local broadcast stations and retransmission consent, and increased the administrative costs of complying with such regulations. The FCC has adopted rate regulations that establish, on a system-by-system basis, maximum allowable rates for (i) basic and cable programming services (other than programming offered on a per-channel or per-program basis), based upon a benchmark methodology, and (ii) associated equipment and installation services based upon cost plus a reasonable profit. Under the FCC rules, franchising authorities are authorized to regulate rates for basic services and associated equipment and installation services, and the FCC will regulate rates for regulated cable programming services in response to complaints filed with the agency. The Telecommunications Act of 1996 (the "1996 Act") ended FCC regulation of cable programming service tier rates on March 31, 1999. Rates for basic services are set pursuant to a benchmark formula. Alternatively, a cable operator may elect to use a cost-of-service methodology to show that rates for basic services are reasonable. Refunds with interest will be required to be paid by cable operators who are required to reduce regulated rates. The FCC has reserved the right to reduce or increase the benchmarks it has established. The rate regulations also limit increases in regulated rates to an inflation indexed amount plus increases in certain costs such as taxes, franchise fees, costs associated with specific franchise requirements 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 or completes a significant system rebuild or upgrade. Because of the limitation on rate increases for regulated services, future revenue growth from cable services will rely to a much greater extent than has been true in the past on increased revenues from unregulated services and new subscribers than from increases in previously unregulated rates. The FCC has adopted regulations implementing all of the requirements of the 1992 Cable Act. The FCC is also likely to continue to modify, clarify or refine the rate regulations. Olympus cannot predict the effect of the 1996 Act on future rulemaking proceedings or changes to the rate regulations. No assurance can be given as to what other future actions Congress, the FCC or other regulatory authorities may take or the effects thereof on Olympus. Cable television companies operate under franchises granted by local authorities which are subject to renewal and renegotiation from time to time. Because such franchises are generally non-exclusive, there is a potential for competition with the systems from other operators of cable television systems, including public systems operated by municipal franchising authorities themselves, and from other distribution systems capable of delivering television programming to homes. The 1992 Cable Act and the 1996 Act contain provisions which encourage competition from such other sources. The Company cannot predict the extent to which competition will materialize from other cable television operators, local telephone companies, other distribution systems for delivering television programming to the home, or other potential competitors, or, if such competition materializes, the extent of its effect on the Company. -13- The 1996 Act repealed the prohibition on local exchange telephone companies ("LECs") from providing video programming directly to customers within their local exchange areas other than in rural areas or by specific waiver of FCC rules. The 1996 Act also authorized LECs to operate "open video systems" ("OVS") without obtaining a local cable franchise, although LECs operating such a system can be required to make payments to local governmental bodies in lieu of cable franchise fees. Where demand exceeds capacity, up to two-thirds of the channels on an OVS must be available to programmers unaffiliated with the LEC. The statute states that the OVS scheme supplants the FCC's "video dialtone" rules. The FCC has promulgated rules to implement the OVS concept, and New Jersey Bell Telephone Company has been granted permission to convert its video dialtone authorization in Dover Township, New Jersey to an OVS authorization. The Company believes that the provision of video programming by telephone companies in competition with the Company's existing operations could have an adverse effect on the Company's financial condition and results of operations. At this time, the impact of any such effect is not known or estimable. The Company also competes with direct broadcast satellite ("DBS") service providers. DBS has been available to consumers since 1994. A single DBS satellite can provide more than 100 channels of programming. DBS service can be received virtually anywhere in the United States through the installation of a small outdoor antenna. DBS service is being heavily marketed on a nationwide basis by several service providers. At this time, any impact of DBS competition on the Company's future results is not known or estimable. Year 2000 Issue The year 2000 issue refers to the inability of computerized systems and technologies to recognize and process dates beyond December 31, 1999. The Company has evaluated the impact of the year 2000 issue on its business applications and its products and services. This could present risks to the operations of the Company's business in several ways. The evaluation included a review of the Company's information technology systems, cable network equipment, telephony equipment, and other embedded technologies. A significant portion of the Company's computerized systems and technologies have been developed, installed or upgraded in recent years and are generally more likely to be year 2000 ready. The Company's evaluation also included evaluating the potential impact as a result of its reliance on third-party systems that may have the year 2000 issue. Computerized business applications that could be adversely affected by the year 2000 issue include: - - information processing and financial reporting systems; - - customer billing systems; - - customer service systems; - - telecommunication transmission and reception systems; and - - facility systems. System failure or miscalculation could result in an inability to process transactions, send invoices, accept customer orders or provide customers with products and services. Customers could also experience a temporary inability to receive or use the Company's products and services. -14- The Company has developed a program to assess and address the year 2000 issue. This program consists of the following phases: - - inventorying and assessing the impact on affected technology and systems; - - developing solutions for affected technology and systems; - - modifying or replacing affected technology and systems; - - testing and verifying solutions; - - implementing solutions; and - - developing contingency plans. The Company has completed its inventory and assessment of affected computerized systems and technologies. The Company is in the final stages of its year 2000 compliance program with respect to the remediation of the affected systems and technologies. The Company has engaged a consulting firm familiar with its financial reporting systems. This firm has developed and tested year 2000 solutions that the Company has implemented. The Company has certified all eight financial systems as year 2000 compliant. A third-party billing vendor currently facilitates customer billing. This third-party vendor has certified that it implemented and successfully tested its own year 2000 solution in April 1999. Telecommunication plant rebuilds and upgrades in recent years have minimized the potential impact of the year 2000 issue on the Company's facilities, customer service, telecommunication transmission and reception systems. The Company has substantially completed a comprehensive internal inventory and assessment of all hardware components and component controlling software throughout its telecommunication networks and has implemented substantially all modifications, upgrades or replacements resulting from the internal review. Costs incurred to date directly related to addressing the year 2000 issue have been approximately $69. The Company has also redeployed internal resources to meet the goals of its year 2000 program. The Company currently estimates the total cost of its year 2000 remediation program to be approximately $211. Although the Company will continue to incur substantial capital expenditures in the ordinary course of meeting its telecommunications system upgrade goals through the year 2000, it will not specifically accelerate its expenditures to facilitate year 2000 readiness, and accordingly such expenditures are not included in the above estimate. The Company is communicating with others with whom it does significant business to determine their year 2000 readiness and to determine the extent to which the Company is vulnerable to the year 2000 issue related to those third parties. The Company purchases much of its technology from third parties. There can be no assurance that the systems of other companies on which the Company's systems rely will be year 2000 ready or timely converted into systems compatible with the Company systems. The Company's failure or a third-party's failure to become year 2000 ready or the Company's inability to become compatible with third parties with which the Company has a material relationship, including companies that the Company acquires, may have a material adverse effect on the Company, including significant service interruption or outages; however, the Company cannot currently estimate the extent of any such adverse effects. -15- The Company is in the process of identifying secondary sources to supply its systems or services in the event it becomes probable that any of its systems will not be year 2000 ready prior to the end of 1999. The Company is also in the process of identifying secondary vendors and service providers to replace those vendors and service providers whose failure to be year 2000 ready could lead to a significant delay in the Company's ability to provide its service to its customers. Item 3. Quantitative and Qualitative Disclosures about Market Risk No material changes have occurred during the nine months ended September 30, 1999 for interest rate swaps. Principal outstanding on variable rate debt declined approximately $344.4 million and the fair market value of fixed rate debt declined approximately $17.0 million during the nine months ended September 30, 1999 compared to December 31, 1998. ------------------------------------------------- -16- OLYMPUS COMMUNICATIONS, L.P. AND SUBSIDIARIES PART II - Other Information Item 1. Legal Proceedings None Item 2. Changes in Securities None Item 3. Defaults Upon Senior Securities None Item 4. Submission of Matters to a Vote of Security Holders None Item 5. Other Information None Item 6. Exhibits and Reports on Form 8-K (a) Exhibits: Exhibit 10.8 Bank Credit Facility dated May 6, 1999 among the registrant, other borrowers and the lenders named therein (incorporated herein by reference to Exhibit 10.01 to Current Report on Form 8-K for the event dated September 16, 1999 filed by Adelphia Communications Corporation (File No. 0-16014)). Exhibit 27.01 Financial Data Schedule (supplied for the information of the Commission). (b) Reports on Form 8-K: The Company did not file any reports on Form 8-K during the quarter ended September 30, 1999. ------------------------------------------------- -17- OLYMPUS COMMUNICATIONS, L.P. AND SUBSIDIARIES SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrants have duly caused this report to be signed on their behalf by the undersigned thereunto duly authorized. OLYMPUS COMMUNICATIONS, L.P. BY: ACP HOLDINGS, INC. Managing General Partner Date: November 15, 1999 By: /s/ Timothy J. Rigas -------------------- Timothy J. Rigas Executive Vice President, Treasurer and Principal Financial Officer of ACP Holdings, Inc. Date: November 15, 1999 OLYMPUS CAPITAL CORPORATION By: /s/ Timothy J. Rigas Timothy J. Rigas Executive Vice President, Treasurer and Principal Financial Officer -18- INDEX TO EXHIBITS Exhibit List: Please refer to Part II, Item 6 for an exhibit list. -19- EX-27.01 2
5 FINANCIAL DATA SCHEDULE FOR OLYMPUS COMMUNICATIONS, LP FOR THE NINE MONTHS ENDED SEPT. 30, 1999. INFORMATION IS ONLY INCLUDED FOR OLYMPUS COMMUNICATIONS LP(A REGISTRANT) AND DOES NOT INCLUDE INFORMATION FOR OLYMPUS CAPITAL CORP., WHICH HAS NO OPERATIONS. 0000861255 OLYMPUS COMMUNICATIONS, L.P. 1,000 9-MOS DEC-31-1999 SEP-30-1999 6,488 0 15,621 0 0 0 396,072 0 997,960 0 382,204 0 0 0 (203,438) 997,960 0 192,857 0 169,475 0 0 24,939 (37,051) 274 (37,325) 0 0 0 (37,325) 0 0 RECEIVABLES NET OF ALLOWANCE PP&E NET OF DEPRECIATION
-----END PRIVACY-ENHANCED MESSAGE-----