Print Page  Close Window

SEC Filings

S-4/A
RENAISSANCE MEDIA GROUP LLC filed this Form S-4/A on 09/04/1998
Entire Document
 
<PAGE>
 

        MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
                             RESULTS OF OPERATIONS
 
OVERVIEW
 
  Holdings was formed on November 5, 1997 and entered into the Asset Purchase
Agreement dated November 14, 1997 with Time Warner to acquire the Systems. The
Acquisition was consummated on April 9, 1998. Holdings was initially
capitalized with a $15.0 million capital contribution from MSCPIII, MSCP
Investors and MSCI and received a $1.0 million advance capital contribution
from the Management Investors. The $16.0 million in funds received by Holdings
was utilized to fund the escrow deposit of $15.0 million required under the
Asset Purchase Agreement and to provide working capital. For the period from
inception through March 31, 1998, Holdings has earned interest income on the
escrow deposit and the working capital fund and has incurred costs, primarily
related to the Acquisition. Prior to the consummation of the Acquisition,
Holdings assigned all of its interest in the Asset Purchase Agreement to
Renaissance Media, and all assets and liabilities of Holdings became assets
and liabilities of Renaissance Media. The Systems are clustered in southern
Louisiana, western Mississippi and western Tennessee and, as of June 30, 1998,
passed 180,561 homes, served 126,985 basic subscribers and had 60,189 premium
service units. The Company is the 4th largest cable television system operator
in Louisiana and the 5th largest cable television system operator in Tennessee
based upon the Systems' numbers of subscribers at June 30, 1998.
 
  The Systems were owned and operated by CVI or related entities prior to the
acquisition of CVI by Time Warner on January 4, 1996 and were owned and
operated by Time Warner since that date until April 9, 1998. As a result, the
assets of the Systems have been reflected utilizing Time Warner's basis from
January 4, 1996 to April 9, 1998 and at CVI's basis prior to January 4, 1996.
 
  The Company intends to increase its subscriber base and operating cash flow
by pursuing cable television system acquisitions, improving and upgrading its
technical plant and expanding its service offerings. The Company will pursue
selective acquisitions in markets which are contiguous to the Systems and in
non-contiguous mid-sized markets serving more than 30,000 subscribers where
local or regional clusters can be formed. The Company believes that by
clustering systems it will be able to realize economies of scale, such as
reduced payroll, reduced billing and technical costs per subscriber, reduced
advertising sales costs, increased local advertising sales, more efficient
roll-out and utilization of new technologies and consolidation of its customer
service functions. The Company plans to improve and upgrade its technical
plant, which should allow it to provide a wide array of new services and
service tiers, as well as integrate new interactive features into advanced
analog and digital set-top consumer equipment. The Company also plans to
develop and provide new cable and broadband services and develop ancillary
businesses including digital video and high speed Internet access services.
 
  Industry analysts generally consider EBITDA to be an important measure of
comparative operating performance in the cable television industry, and when
used in comparison to debt levels or the coverage of interest expense, as a
measure of liquidity. However, EBITDA should be considered in addition to, not
as a substitute for, operating income, net income, cash flow and other
measures of financial performance and liquidity reported in accordance with
generally accepted accounting principles. EBITDA as defined herein may not be
comparable to similarly titled measures reported by other companies. An
analysis of changes in EBITDA are set forth below under "--Liquidity and
Capital Resources."
 
  Revenues. The Systems' revenues are primarily attributable to subscription
fees charged to subscribers for basic and premium cable television programming
services. Basic revenue consists of monthly subscription fees for basic and
CPST services. Multiple dwelling unit accounts typically are offered a bulk
rate in exchange for single point billing and basic service to all units.
Premium revenue consists of monthly subscription fees for programming provided
on a per-channel basis. In addition, other revenue is derived from new product
tiers, pay-per-view fees, installation and reconnection fees charged to
subscribers to receive service, monthly equipment rental fees, advertising
revenue and commissions related to the sale of goods by home shopping services
and
 
                                      36