PICAYUNE MS, LAFOURCHE LA, ST. TAMMANY LA, ST. LANDRY LA,
POINTE COUPEE LA, AND JACKSON TN CABLE TELEVISION SYSTEMS
(INCLUDED IN TWI CABLE INC.)
NOTES TO COMBINED FINANCIAL STATEMENTS
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Description of Business
The cable television systems operating in the metropolitan areas of
Picayune, Mississippi; Lafourche, Louisiana; St. Tammany, Louisiana; St.
Landry, Louisiana; Pointe Coupee, Louisiana; and Jackson, Tennessee (the
"Combined Systems") are principally engaged in the cable television business
under non-exclusive franchise agreements, which expire at various times
beginning in 1999. The Combined Systems' operations consist primarily of
selling video programming which is distributed to subscribers for a monthly
fee through a network of coaxial and fiber-optic cables.
Prior to January 4, 1996, the Combined Systems were included in certain
subsidiaries of Cablevision Industries Corporation ("CVI"). On January 4,
1996, CVI merged into a wholly owned subsidiary of Time Warner Inc. (the "CVI
Merger"). On October 1, 1996, Time Warner Inc. ("Time Warner") completed a
reorganization amongst certain of its wholly owned cable television
subsidiaries whereby CVI was renamed TWI Cable Inc. ("TWI Cable").
Basis of Presentation
TWI Cable has committed to sell the Combined Systems to Renaissance Media
Holdings LLC ("Renaissance") pursuant to an Asset Purchase Agreement with
Renaissance, dated November 14, 1997. Accordingly, the accompanying combined
financial statements of the Combined Systems reflect the "carved out"
historical financial position, results of operations, cash flows and changes
in net assets of the operations of the Combined Systems as if they had been
operating as a separate company. Effective as of January 1, 1996, the Combined
Systems' financial statements reflect the new basis of accounting arising from
Time Warner's merger with CVI. Based on Time Warner's allocation of the
purchase price, the assets and liabilities of the Combined Systems were
revalued resulting in goodwill allocated to the Combined Systems of
approximately $52,971,000, which is being amortized over its estimated life of
40 years. In addition, approximately $220,981,000 was allocated to cable
television franchises and other intangible assets, which is being amortized
over periods up to 20 years. The Combined Systems' financial statements
through December 31, 1995 reflect the historical cost of their assets and
liabilities and results of their operations.
The combined statements have been adjusted to include the allocation of
certain corporate expenses incurred by Time Warner Cable and/or TWI Cable on
the Combined Systems' behalf. These allocations were required to reflect all
costs of doing business which management believes results in reasonable
allocations of such costs included in the TWC management fee and other
divisional expenses as disclosed in Note 3.
The combined financial statements as of and for the three months ended March
31, 1998 and 1997 included herein are unaudited and have been prepared
pursuant to the rules and regulations of the Securities and Exchange
Commission. Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to such rules and
regulations. However, in the opinon of management of the Combined Systems, the
combined financial statements as of and for the three months ended March 31,
1997 and 1998 include all adjustments, consisting only of normal recurring
adjustments, necessary to present fairly the financial information.
Basis of Combination
The combined financial statements include the assets, liabilities, revenues,
expenses, income, loss and cash flows of the Combined Systems, as if the
Combined Systems were a single company. Significant intercompany accounts and
transactions between the Combined Systems have been eliminated. Significant
accounts and transactions with Time Warner and its affiliates are disclosed as
related party transactions (see Note 3).