AVALON CABLE, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The consolidated financial statements herein include the accounts of the
Company and its wholly-owned subsidiaries.
These condensed financial statements should be read in conjunction with the
Company's audited financial statements as of December 31, 1998 and notes thereto
as included in the Company's Registration Statement on Form S-4 filed with the
Securities and Exchange Commission ("SEC") and declared effective with the SEC
on July 22, 1999.
The financial statements as of September 30,1999 and for the three and nine
month periods ended September 30,1999 and 1998 are unaudited; however, in the
opinion of management, such statements include all adjustments (consisting
solely of normal and recurring adjustments except for the acquisition of Cross
Country Cable, LLC ("Cross Country"), Nova Cablevision, Inc., Nova Cablevision
VI, L.P. and Nova Cablevision VII, L.P. ("Nova Cable"), Novagate Communication
Corporation ("Novagate"), Traverse Internet, R/Com. L.C., Taconic Technology
Corporation ("Taconic"), the Mercom merger and the contribution of assets and
liabilities by Avalon Cable of Michigan, Inc.) necessary to present fairly the
financial information included therein.
3. MERGER AND ACQUISITIONS
The Merger agreement between Michigan Holdings and Avalon Cable of
Michigan, Inc. permitted Avalon Cable of Michigan, Inc. to agree to acquire the
1,822,810 shares (approximately 38% of the outstanding stock) of Mercom that it
did not own (the "Mercom Acquisition"). On September 10, 1998 Avalon Cable of
Michigan, Inc. and Mercom entered into a definitive agreement (the "Mercom
Merger Agreement") providing for the acquisition by Avalon Cable of Michigan,
Inc. of all of such shares at a price of $12.00 per share. Avalon Cable of
Michigan, Inc. completed this acquisition in March 1999. The total estimated
consideration paid in conjunction with the Mercom Acquisition, excluding fees
and expenses was $21,900. The purchase price was allocated as follows:
approximately $13,800 to the elimination of minority interest, $1,170 to
property, plant and equipment, $6,700 to cable franchises and the excess of
consideration paid over the fair market value of the net assets acquired, or
goodwill, of $240.
In March 1999, Avalon Cable of Michigan, Inc. acquired the cable television
systems of Nova Cable for approximately $7,800, excluding transaction fees.
On January 21, 1999, the Company through its subsidiary, Avalon New
England, acquired Novagate for a purchase price of $2,900.
On March 26, 1999, the Company through its subsidiary, Avalon Michigan,
acquired the assets of R/Com, L.C., for a total purchase price of approximately
In January 1999, the Company acquired all of the issued and outstanding
common Stock of Cross Country for a purchase price of approximately $2,500,
excluding transaction fees.
On April 1, 1999, the Company, through its subsidiary, Avalon New England,
acquired Traverse Internet for $2,400.
The acquisitions have been accounted for as purchases and the results of
the companies acquired have been included in the accompanying financial
statements since their acquisition dates. Accordingly, the consideration was
allocated to the net assets based on their respective fair market values. The
excess of the consideration paid over the estimated fair market values of the
net assets acquired was $12,940 and is being amortized using the straight line
method over 15 years.
In July 1999, Avalon New England purchased all of the cable systems of
Taconic Technology Corporation for approximately $8,525 (excluding transaction