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opinion.
In our opinion, such consolidated ¬nancial statements present fairly, in all material
respects, the ¬nancial position of Adelphia Communications Corporation and subsidiar-
ies at March 31, 1995 and 1996, and the results of their operations and their cash ¬‚ows
for each of the three years in the period ended March 31, 1996 in conformity with gener-
ally accepted accounting principles.
As discussed in Note 7 to the consolidated ¬nancial statements, effective April 1,
1993, the Company changed its method of accounting for income taxes.
DELOITTE & TOUCHE LLP
Pittsburgh, Pennsylvania
June 28, 1996
586 Credit Analysis and Distress Prediction




14-34
Credit Analysis and Distress Prediction




CONSOLIDATED BALANCE SHEETS




Adelphia Communications Corporation
(Dollars in thousands, except per-share amounts)

Year Ended March 31,
1995 1996
Assets:
Cable television systems, at cost, net of accumulated
depreciation and amortization
Property, plant and equipment $ 518,405 $ 560,376
Intangible assets 546,116 568,898
Total 1,064,521 1,129,274
Cash and cash equivalents 5,045 10,809
Investments 48,968 68,147
Preferred equity investment in Managed Partnership 18,338 18,338
Subscriber receivables”net 20,433 23,803
Prepaid expenses and other assets”net 48,352 52,658
Related party investments and receivables”net 61,634 30,894
Total $1,267,291 $1,333,923
Liabilities and Stockholders™ Equity (De¬ciency):
Notes payable of subsidiaries to banks and institutions $1,086,350 $1,224,675
12-1/2% Senior Notes due 2002 400,000 400,000
10-1/4 Senior Notes due 2000 99,011 99,158
11-7/8 Senior Debentures due 2004 124,470 124,502
9-7/8 Senior Debentures due 2005 127,994 128,118
9-1/2 Senior Pay-In-Kind Notes due 2004 164,370 180,357
Other debt 19,415 18,663
Accounts payable 42,872 66,668
Subscriber advance payments and deposits 16,494 14,706
Accrued interest and other liabilities 87,751 99,106
110,139 106,209
Total Liabilities 2,278,866 2,462,162
Commitments and contingencies (Note 4)
Stockholders™ equity (de¬ciency):
Class A Common Stock, $.01 par value, 50,000,000 and
200,000,000 shares authorized, respectively; 14,906,691
and 15,364,009 shares outstanding respectively 149 154
Class B Common Stock, $.01 par value, 25,000,000 shares
authorized and 10,944,476 shares outstanding 109 109
Additional paid-in capital 211,190 214,415
Accumulated de¬cit (1,223,023) (1,342,917)
Total Stockholders™ Equity (De¬ciency) (1,011,575) (1,128,239)
TOTAL $1,267,291 $1,333,923
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Credit Analysis and Distress Prediction




14-35 Part 2 Business Analysis and Valuation Tools




CONSOLIDATED STATEMENT OF OPERATIONS
Adelphia Communications Corporation




(Dollars in thousands, except per-share amounts)

Year Ended March 31,
1994 1995 1996
Revenues $ 319,045 $ 361,505 $ 403,597
Operating expenses:
Direct operating and programming 90,547 106,993 124,116
Selling, general and administrative 52,801 63,487 68,357
Depreciation and amortization 89,402 97,602 111,031
Rate regulation ” ” 5,300
Total 232,750 268,082 308,804
Operating income 86,295 93,423 94,793

Other income (expense):
Interest income from af¬liates 9,188 11,112 10,623
Other income (299) 1,453 ”
Priority investment income from Olympus 22,300 22,300 28,852
Interest expense (182,136) (195,698) (210,691)
Equity in loss of joint ventures (30,054) (44,349) (46,257)
Total (181,001) (205,182) (217,473)
Loss before income taxes, extraordinary loss and cumula-
tive effect of change in accounting principle (94,706) (111,759) (122,680)
Income tax (expense) bene¬t (2,742) 5,475 2,786
Loss before extraordinary loss and cumulative effect of
change in accounting principle (97,448) (106,284) (119,894)
Extraordinary loss on early retirement of debt (752) ” ”
Cumulative effect of change in accounting for income
taxes (89,660) ” ”
Net loss $(187,860) $(106,284) $(119,894)
Loss per weighted average share of common stock before
extraordinary loss and cumulative effect of change in
accounting principle (5.66) (4.32) (4.56)
$ $ $
Extraordinary loss per weighted average share of change
in accounting for income taxes (0.04) ” ”
Cumulative effect per weighted average share of change
in accounting for income taxes (5.21) ” ”
Net loss per weighted average share of common stock $ (10.91) $ (4.32) $ (4.56)
Weighted average shares of common stock outstanding
(in thousands) 17,221 24,628 26,305

See notes to consolidated financial statements.
588 Credit Analysis and Distress Prediction




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Credit Analysis and Distress Prediction




CONSOLIDATED STATEMENTS OF CASH FLOWS




Adelphia Communications Corporation
(Dollars in thousands)

Year Ended March 31,
1994 1995 1996
Cash ¬‚ows from operating activities:
Net loss $(187,860) $(106,284) $(119,894)
Adjustments to reconcile net loss to net cash provided by operating
activities:
Depreciation 56,370 66,064 70,890
Amortization 33,032 31,538 40,141
Noncash interest expense 1,680 14,756 16,288
Equity in loss of joint ventures 30,054 44,349 46,257
Rate regulation ” ” 2,700
Extraordinary loss on debt retirement 752 ” ”
Loss on disposal of property 1,051 ” ”
Cumulative effect of change in accounting for income taxes 89,660 ” ”
Increase (decrease) in deferred income taxes, net of effects of
acquisitions (5,975) (3,930)
2,061
Changes in operating assets and liabilities, net of effects of
acquisitions and divestitures:
Subscriber receivables (155) (478) (3,370)
Prepaid expenses and other assets (16,288) (21,152) (14,465)
Accounts payable 5,871 14,789 23,796
Subscriber advance payments and deposits (1,134) 699 (1,788)
Accrued interests and other liabilities 11,858 10,630 7,662
Net cash provided by operating activities 26,952 48,936 64,287
Cash ¬‚ows from investing activities:
Cable television systems acquired (21,681) (70,256) (60,804)
Expenditures for property, plant and equipment (75,894) (92,082) (100,089)
Investments in other joint ventures (8,890) (38,891) (24,333)
Preferred equity investment in Management Partnership (18,338) ” ”
Amounts invested in and advanced to Olympus and related parties (45,285) (46,046) (4,236)
Alternate access rights acquired (27,000) ” ”
(197,088)
Net cash used for investing activities (247,275) (189,462)
Cash ¬‚ows from ¬nancing activities:
Proceeds from debt 744,770 155,314 273,508
Repayments of debt (690,232) (38,107) (138,694)
Costs associated with debt ¬nancing (4,961) (2,759) (3,875)
Issuance of Class A Common Stock 155,963 14,861 ”
Net cash provided by ¬nancing activities 205,540 129,309 130,939
Increase (decrease) in cash and cash equivalents 35,404 (69,030) 5,764
Cash and cash equivalents, beginning of year 38,671 74,075 5,045
Cash and cash equivalents, end of year $ 74,075 $ 5,045 $ 10,809
Supplemental disclosure of cash ¬‚ow activity”
Cash payments for interest $ 178,840 $193,206 $198,369

See notes to consolidated financial statements.
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Credit Analysis and Distress Prediction




14-37 Part 2 Business Analysis and Valuation Tools




SELECTED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Adelphia Communications Corporation




(Dollars in thousands, except per-share amounts)


1. The Company and Summary of assumed, included in notes payable of subsidiaries
to banks and institutions, was $52,000 at closing.
Significant Accounting Policies:
On June 30, 1994, Adelphia acquired from
The Company and Basis for Consolidation Olympus 85% of the common stock of Northeast
Cable, Inc. (“Northeast”) for a purchase price of
Adelphia Communications Corporation and
$31,875. Northeast owns cable television systems
subsidiaries (“Adelphia”) owns, operates, and man-
which, at the acquisition date, served approximately
ages cable television systems and other related tele-
36,500 subscribers in eastern Pennsylvania. Of the
communication businesses. Adelphia™s operations
purchase price, $16,000 was paid in cash and the
consist primarily of selling video programming
remainder resulted in a decrease in Adelphia™s
which is distributed to subscribers for a monthly fee
receivable from Olympus. Debt assumed, included
through a network of ¬ber optic and coaxial cables.
in notes payable of subsidiaries to banks and institu-
These services are offered in the respective franchise
tions, was $42,300 at closing.
areas under the name Adelphia Cable Communica-
tions. On January 10, 1995, Adelphia issued
399,087 shares of Class A Common Stock in con-
The consolidated ¬nancial statements include
nection with the merger of a wholly-owned subsid-
the accounts of Adelphia and its more than 50%
iary of Adelphia into Oxford Cablevision, Inc.
owned subsidiaries. All signi¬cant intercompany
(“Oxford”), one of the Terry Family cable systems. At
accounts and transactions have been eliminated in
the acquisition date, Oxford served approximately
consolidation.
4,200 subscribers located in the North Carolina
During the years ended March 31, 1995 and counties of Granville and Warren.
1996, Adelphia consummated several relationships,
each of which was accounted for using the purchase On January 31, 1995, Adelphia acquired a
method. Accordingly, the ¬nancial results of each majority equity position in Tele-Media Company of
acquisition have been included in the consolidated Martha™s Vineyard, L.P for $11,775, a cable system
.
results of Adelphia effective with the date acquired. which, at the acquisition data, served approximately
A description of the acquisitions is provided below. 7,000 subscribers located in Martha™s Vineyard,
Massachusetts.
On June 16, 1994, Adelphia invested $34,000
in TMC Holdings Corporation (“THC”), the parent of On April 12, 1995, Adelphia acquired cable
Tele-Media Company of Western Connecticut. THC systems from Clear Channels Cable TV Company
owns cable television systems which, at the acquisi- located in Kittanning, New Bethlehem, and Freeport,
tion date, served approximately 43,000 subscribers Pennsylvania for $17,456. These systems served
in western Connecticut. The investment in THC pro- approximately 10,700 subscribers at the date of
vides Adelphia with a $30,000 preferred equity acquisition.
interest in THC and a 75% non-voting common
equity interest with a liquidation preference to the On January 9, 1996, Adelphia completed the
remaining 25% common stock ownership interest in acquisition of the cable system of Eastern Telecom
THC. Adelphia has the right to convert such interest Corporation and Robinson Cable TV, Inc. These sys-
to a 75% voting common equity interest, with a liqui- tems served approximately 24,000 subscribers

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