-----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, MUu4wiYfzDJ2pdd5PySbXjWuU1PVDCdQEmfK/KByGdA4dH27vpFCXIgvOZBt78ht IqTxYZXVwb2pErtnmxVNlw== 0000950159-96-000084.txt : 19960703 0000950159-96-000084.hdr.sgml : 19960703 ACCESSION NUMBER: 0000950159-96-000084 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960331 FILED AS OF DATE: 19960515 SROS: AMEX FILER: COMPANY DATA: COMPANY CONFORMED NAME: STORER COMMUNICATIONS INC CENTRAL INDEX KEY: 0000094679 STANDARD INDUSTRIAL CLASSIFICATION: 4841 IRS NUMBER: 592638096 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-03872 FILM NUMBER: 96566264 BUSINESS ADDRESS: STREET 1: CENTER SQUARE EAST TOWER STREET 2: 1500 MARKET STREET 33RD FLOOR CITY: PHILADELPHIA STATE: PA ZIP: 19192-2148 BUSINESS PHONE: 2156651700 10-Q 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) (X) Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the Quarterly Period Ended: MARCH 31, 1996 OR ( ) 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 1-3872 STORER COMMUNICATIONS, INC. (Exact name of registrant as specified in its charter) DELAWARE 59-2638096 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 1500 Market Street, Philadelphia, PA 19102-2148 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (215) 665-1700 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 twelve months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such requirements for the past 90 days. Yes __X__ No ____ -------------------------- As of March 31, 1996, there were 239.99 shares of Common Stock outstanding. The Registrant meets the conditions set forth in General Instructions H (1)(a) and (b) of Form 10-Q and is therefore filing this form with the reduced disclosure format. STORER COMMUNICATIONS, INC. AND SUBSIDIARIES FORM 10-Q QUARTER ENDED MARCH 31, 1996 TABLE OF CONTENTS Page Number PART I. FINANCIAL INFORMATION Item 1. Financial Statements Condensed Consolidated Balance Sheet at March 31, 1996 and December 31, 1995 (Unaudited).........................................2 Condensed Consolidated Statement of Operations and Accumulated Deficit for the Three Months Ended March 31, 1996 and 1995 (Unaudited).....................................3 Condensed Consolidated Statement of Cash Flows for the Three Months Ended March 31, 1996 and 1995 (Unaudited).....................................4 Notes to Condensed Consolidated Financial Statements (Unaudited).....................5 - 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations...........................................7 - 8 PART II. OTHER INFORMATION Item 1. Legal Proceedings........................................9 Item 6. Exhibits and Reports on Form 8-K.........................9 ----------------------------------- The Private Securities Litigation Reform Act of 1995 provides a "safe harbor" for forward-looking statements. Certain information included in this Quarterly Report is forward-looking, such as information relating to future capital commitments and the effects of future regulation. 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, government and regulatory policies, the pricing and availability of equipment, materials, inventories and programming, technological developments and changes in the competitive environment in which the Company operates. STORER COMMUNICATIONS, INC. AND SUBSIDIARIES FORM 10-Q QUARTER ENDED MARCH 31, 1996 PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS CONDENSED CONSOLIDATED BALANCE SHEET (Unaudited)
(Dollars in thousands) March 31, December 31, 1996 1995 ASSETS Cash and cash equivalents................................................. $1,221 $1,386 Accounts receivable, less allowance for doubtful accounts of $2,344 and $2,605.......................................... 11,263 14,737 Prepaid charges and other................................................. 4,252 3,701 Property and equipment.................................................... 677,089 671,153 Accumulated depreciation............................................... (314,569) (307,945) ---------- ---------- Property and equipment, net............................................ 362,520 363,208 ---------- ---------- Deferred charges.......................................................... 1,493,593 1,492,906 Accumulated amortization............................................... (277,168) (267,680) ---------- ---------- Deferred charges, net.................................................. 1,216,425 1,225,226 ---------- ---------- Due from affiliates....................................................... 230,111 215,013 Investment................................................................ 18,717 17,941 Other assets.............................................................. 4,150 3,844 ---------- ---------- $1,848,659 $1,845,056 ========== ========== LIABILITIES AND STOCKHOLDER'S EQUITY Accounts payable and accrued expenses..................................... $49,085 $54,310 Accrued interest.......................................................... 5,231 1,749 Other liabilities......................................................... 31,136 33,136 Debt. ................................................................... 125,090 124,615 Deferred income taxes..................................................... 460,968 456,658 ---------- ---------- Total liabilities.................................................. 671,510 670,468 ---------- ---------- COMMITMENTS AND CONTINGENCIES STOCKHOLDER'S EQUITY Common stock, $.01 par value - authorized, 10,000 shares; issued and outstanding, 239.99 shares Additional capital..................................................... 2,946,942 2,923,635 Accumulated deficit.................................................... (1,126,056) (1,128,642) Unrealized gain on marketable securities............................... 10,212 9,707 Finance Sub securities................................................. (653,949) (630,112) ---------- ---------- Total stockholder's equity......................................... 1,177,149 1,174,588 ---------- ---------- $1,848,659 $1,845,056 ========== ==========
See notes to condensed consolidated financial statements. 2 STORER COMMUNICATIONS, INC. AND SUBSIDIARIES FORM 10-Q QUARTER ENDED MARCH 31, 1996 CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS AND ACCUMULATED DEFICIT (Unaudited)
(Dollars in thousands) Three Months Ended March 31, 1996 1995 SERVICE INCOME............................................................ $103,880 $95,418 ----------- ----------- COSTS AND EXPENSES Operating.............................................................. 46,164 43,320 Selling, general and administrative.................................... 20,786 19,511 Depreciation and amortization.......................................... 26,256 21,736 ----------- ----------- 93,206 84,567 ----------- ----------- OPERATING INCOME.......................................................... 10,674 10,851 INVESTMENT (INCOME) EXPENSE Interest expense....................................................... 4,189 4,021 Investment income...................................................... (109) (39) ----------- ----------- 4,080 3,982 ----------- ----------- INCOME BEFORE INCOME TAX EXPENSE.......................................... 6,594 6,869 INCOME TAX EXPENSE........................................................ 4,008 3,405 ----------- ----------- NET INCOME................................................................ 2,586 3,464 ACCUMULATED DEFICIT Beginning of period ................................................... (1,128,642) (1,144,253) ----------- ----------- End of period.......................................................... ($1,126,056) ($1,140,789) =========== ===========
See notes to condensed consolidated financial statements. 3 STORER COMMUNICATIONS, INC. AND SUBSIDIARIES FORM 10-Q QUARTER ENDED MARCH 31, 1996 CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (Unaudited)
(Dollars in thousands) Three Months Ended March 31, 1996 1995 OPERATING ACTIVITIES Net income............................................................. $2,586 $3,464 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization........................................ 26,256 21,736 Non-cash interest expense............................................ 707 455 Deferred income tax expense (benefit)................................ 3,508 (1,087) ------- ------- 33,057 24,568 Decrease in accounts receivable, prepaid charges and other and other assets......................................... 2,617 728 Decrease in accounts payable and accrued expenses, accrued interest and other liabilities............................. (3,974) (768) ------- ------- Net cash provided by operating activities........................ 31,700 24,528 ------- ------- FINANCING ACTIVITIES Net transactions with affiliates....................................... (15,098) (10,188) ------- ------- Net cash used in financing activities............................ (15,098) (10,188) ------- ------- INVESTING ACTIVITIES Additions to property and equipment and other.......................... (16,767) (14,508) ------- ------- Net cash used in investing activities............................ (16,767) (14,508) ------- ------- DECREASE IN CASH AND CASH EQUIVALENTS..................................... (165) (168) CASH AND CASH EQUIVALENTS, beginning of period............................ 1,386 1,329 ------- ------- CASH AND CASH EQUIVALENTS, end of period.................................. $1,221 $1,161 ====== ======
See notes to condensed consolidated financial statements. 4 STORER COMMUNICATIONS, INC. AND SUBSIDIARIES FORM 10-Q QUARTER ENDED MARCH 31, 1996 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS Basis of Presentation The condensed consolidated balance sheet at December 31, 1995 has been condensed from the audited balance sheet at that date. The condensed consolidated balance sheet at March 31, 1996 and the condensed consolidated statements of operations and accumulated deficit and of cash flows for the three months ended March 31, 1996 and 1995 have been prepared by Storer Communications, Inc. (the "Company") and have not been audited by the Company's independent auditors. In the opinion of management, all adjustments (which include only normal recurring adjustments) necessary to present fairly the financial position, results of operations and cash flows at March 31, 1996 and for all periods presented have been made. Certain information and note disclosures normally included in the Company's annual 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 financial statements and notes thereto included in the Company's December 31, 1995 Annual Report on Form 10-K filed with the Securities and Exchange Commission. The results of operations for the period ended March 31, 1996 are not necessarily indicative of operating results for the full year. 2. INVESTMENT As of March 31, 1996 and December 31, 1995, the Company's unrestricted publicly traded equity investment, classified as available for sale, was recorded at its estimated fair value of $18.7 million and $17.9 million, respectively, based on the quoted market prices at such dates. The unrealized gain on this investment of $15.7 million and $14.9 million as of March 31, 1996 and December 31, 1995, respectively, has been reported in the Company's condensed consolidated balance sheet as an increase in stockholder's equity, net of deferred income taxes of $5.5 million and $5.2 million, respectively. 3. RELATED PARTY TRANSACTIONS The Company's programming costs, management fees (based on 6% of gross revenues) and certain administrative costs are charged to the Company by Comcast Corporation ("Comcast"), the Company's indirect parent, and its subsidiaries. These costs totaled $41.4 million and $37.7 million during the three months ended March 31, 1996 and 1995, respectively, and are included in operating, selling, general and administrative expenses. Due from affiliates in the Company's condensed consolidated balance sheet primarily consists of cash transfers to the Company's parent under a cash management program, net of expenses charged to the Company by Comcast and its subsidiaries. 4. STATEMENT OF CASH FLOWS - SUPPLEMENTAL INFORMATION The Company recognized non-cash dividends on the preferred stock of Comcast Storer Finance Sub, Inc. of approximately $22.3 million and $19.1 million during the three months ended March 31, 1996 and 1995, respectively. The preferred stock dividends recognized were credited to the Company's additional capital. 5 STORER COMMUNICATIONS, INC. AND SUBSIDIARIES FORM 10-Q QUARTER ENDED MARCH 31, 1996 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONCLUDED (Unaudited) 5. CONTINGENCIES The Company is subject to claims which arise in the ordinary course of its business and other legal proceedings. In the opinion of management, the amount of ultimate liability with respect to these actions will not materially affect the financial position or results of operations of the Company. The Company has settled the majority of outstanding proceedings challenging its rates charged for regulated cable services. In December 1995, the Federal Communications Commission ("FCC") adopted an order approving a negotiated settlement of rate complaints pending against the Company for cable programming service tiers ("CPSTs") which provided approximately $3.9 million in refunds, plus interest, being given in the form of bill credits, to approximately 490,000 of the Company's cable subscribers. Approximately $1.2 million of bill credits for such refunds, including interest, were given during the three months ended March 31, 1996. This FCC order resolved the Company's benchmark rate cases covering the period September 1993 through July 1994 and the Company's cost-of-service cases for CPSTs covering the period September 1993 through December 1995. As part of the negotiated settlement, the Company agreed to forego certain inflation and external cost adjustments for systems covered by its cost-of-service filings for CPSTs. The FCC's order has been appealed to a federal appellate court by a local franchising authority whose rate complaint against Comcast was resolved by the negotiated settlement. The Company currently is seeking to justify rates for basic cable services and equipment in certain of its cable systems in the State of Connecticut on the basis of a cost-of-service showing. The State of Connecticut has ordered the Company to reduce such rates and to make refunds to subscribers. The Company has appealed the Connecticut decision to the FCC. The Company's management believes that the ultimate resolution of these pending regulatory matters will not have a material adverse impact on the Company's financial position or results of operations. 6 STORER COMMUNICATIONS, INC. AND SUBSIDIARIES FORM 10-Q QUARTER ENDED MARCH 31, 1996 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Liquidity and Capital Resources The Company's business is capital intensive and continually requires cash for development and expansion. The Company has historically met its cash needs through its cash and cash equivalents, cash flows from operating activities as well as interest and principal received on certain securities issued by Comcast Storer Finance Sub, Inc., an indirect wholly owned subsidiary of Comcast Corporation, to the Company (the "Finance Sub Securities"). The Company believes that it will be able to meet its current and long-term liquidity needs and capital requirements, including fixed charges, through its cash flows from operating activities, existing cash and cash equivalents, interest and principal received on the Finance Sub Securities, amounts due from affiliates and other external financing. Results of Operations Summarized consolidated financial information for the Company for the three months ended March 31, 1996 and 1995 is as follows (dollars in millions, "NM" denotes percentage is not meaningful):
Three Months Ended March 31, Increase / (Decrease) 1996 1995 $ % Service income............................................ $103.9 $95.4 $8.5 8.9% Operating, selling, general and administrative expenses............................................... 67.0 62.8 4.2 6.7 ------ ----- Operating income before depreciation and amortization (1) ...................................... 36.9 32.6 4.3 13.2 Depreciation and amortization............................. 26.2 21.7 4.5 20.7 ------ ----- Operating income.......................................... 10.7 10.9 (0.2) (1.8) ------ ----- Interest expense.......................................... 4.2 4.0 0.2 5.0 Investment income......................................... (0.1) 0.1 NM Income tax expense........................................ 4.0 3.4 0.6 17.6 ------ ----- Net income................................................ $2.6 $3.5 ($0.9) (25.7%) ==== ==== - - ------------ (1) Operating income before depreciation and amortization is commonly referred to in the Company's business as "operating cash flow." Operating cash flow is a measure of a company's ability to generate cash to service its obligations, including debt service obligations, and to finance capital and other expenditures. In part due to the capital intensive nature of the Company's business and the resulting significant level of non-cash depreciation and amortization expense, operating cash flow is frequently used as one of the bases for comparing the Company's business. Operating cash flow does not purport to represent net income or net cash provided by operating activities, as those terms are defined under generally accepted accounting principles, and should not be considered as an alternative to such measurements as an indicator of the Company's performance.
Of the $8.5 million increase in service income from 1995 to 1996, $2.5 million is attributable to subscriber growth, $4.9 million relates to changes in rates and $1.1 million relates to growth in other product offerings. 7 STORER COMMUNICATIONS, INC. AND SUBSIDIARIES FORM 10-Q QUARTER ENDED MARCH 31, 1996 Of the $4.2 million increase in operating, selling, general and administrative expenses from 1995 to 1996, $2.9 million is attributable to increases in the costs of cable programming as a result of subscriber growth, additional programming offerings and changes in rates and $1.3 million results from increases in the cost of labor and other volume related expenses. It is anticipated that the Company's cost of cable programming will increase in the future as cable programming rates increase and additional sources of cable programming become available. The increase in depreciation and amortization expense of $4.5 million from 1995 to 1996 is primarily due to the effects of capital expenditures and the rebuild and upgrade of certain of the Company's cable plant. For the three months ended March 31, 1996 and 1995, the Company's earnings before income tax expense and fixed charges (interest expense) of $10.8 million and $10.9 million, respectively, exceeded its fixed charges of $4.2 million and $4.0 million, respectively. The Company believes that its operations are not materially affected by inflation. Regulatory Developments The Company has settled the majority of outstanding proceedings challenging its rates charged for regulated cable services. In December 1995, the Federal Communications Commission ("FCC") adopted an order approving a negotiated settlement of rate complaints pending against the Company for cable programming service tiers ("CPSTs") which provided approximately $3.9 million in refunds, plus interest, being given in the form of bill credits, to approximately 490,000 of the Company's cable subscribers. Approximately $1.2 million of bill credits for such refunds, including interest, were given during the three months ended March 31, 1996. This FCC order resolved the Company's benchmark rate cases covering the period September 1993 through July 1994 and the Company's cost-of- service cases for CPSTs covering the period September 1993 through December 1995. As part of the negotiated settlement, the Company agreed to forego certain inflation and external cost adjustments for systems covered by its cost-of-service filings for CPSTs. The FCC's order has been appealed to a federal appellate court by a local franchising authority whose rate complaint against Comcast was resolved by the negotiated settlement. The Company currently is seeking to justify rates for basic cable services and equipment in certain of its cable systems in the State of Connecticut on the basis of a cost-of-service showing. The State of Connecticut has ordered the Company to reduce such rates and to make refunds to subscribers. The Company has appealed the Connecticut decision to the FCC. The Company's management believes that the ultimate resolution of these pending regulatory matters will not have a material adverse impact on the Company's financial position or results of operations. 8 STORER COMMUNICATIONS, INC. AND SUBSIDIARIES FORM 10-Q QUARTER ENDED MARCH 31, 1996 PART II. OTHER INFORMATION ITEM 1. Legal Proceedings The Company is not party to litigation which, in the opinion of the Company's management, will have a material adverse effect on the Company's financial position or results of operations. ITEM 6. Exhibits and Reports on Form 8-K (a) Exhibits required to be filed by Item 601 of Regulation S-K: 27.1 Financial Data Schedule (b) Reports on Form 8-K - None. 9 STORER COMMUNICATIONS, INC. AND SUBSIDIARIES FORM 10-Q QUARTER ENDED MARCH 31, 1996 SIGNATURE Pursuant to the Requirements of the Securities and Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. STORER COMMUNICATIONS, INC. -------------------------------------------- /s/ LAWRENCE S. SMITH -------------------------------------------- Lawrence S. Smith Senior Vice President Accounting and Administration (Chief Accounting Officer) Date: May 15, 1996 10 EX-27.1 2
5 This schedule contains summary financial information extracted from the consolidated statement of operations and consolidated balance sheet and is qualified in its entirety by reference to such financial statements. 0000094679 STORER COMMUNICATIONS INC 1,000 3-MOS DEC-31-1996 MAR-31-1996 1,221 0 13,607 (2,344) 0 0 677,089 (314,569) 1,848,659 0 125,090 0 0 0 1,177,149 1,848,659 103,880 103,880 0 (93,206) 0 0 (4,189) 6,594 (4,008) 2,586 0 0 0 2,586 0 0 The company utilizes an unclassified balance sheet. As a result, a zero value is reported for both current assets and current liabilities.
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