AVALON CABLE OF MICHIGAN HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands except per share data)
o Avalon Michigan contributed its assets and liabilities, excluding
deferred tax liabilities, net to Avalon Cable LLC in exchange for an
approximate 88% voting interest in Avalon Cable LLC. Avalon Cable LLC
contributed these assets and liabilities, excluding the Senior Discount
Notes and associated debt finance costs, to its wholly-owned subsidiary,
Avalon Cable of Michigan LLC;
o Avalon Cable of Michigan LLC has become the operator of the Michigan
cluster replacing Avalon Michigan;
o Avalon Cable of Michigan LLC is an obligor on the Senior Subordinated
Notes replacing Avalon Michigan; and
o Avalon Michigan is a guarantor of the obligations of Avalon Cable of
Michigan LLC under the Senior Subordinated Notes. Avalon Michigan does
not have significant assets, other than its 88% investment in Avalon
Cable LLC at June 30, 1999.
As a result of this reorganization between entities under common control,
the Company accounted for the reorganization similar to a polling-of-interests.
Under the pooling-of-interests method, the results of operations include the
results of operations from the earliest date that a member becomes a part of the
control group by inception or acquisition. For the Company, the results of
operations are from the date of inception (September 4, 1997) for Avalon New
England, a wholly-owned subsidiary of Avalon Cable LLC.
The Company has a majority interest in Avalon Cable LLC. Avalon Cable LLC
wholly owns Avalon Cable Holdings Finance, Inc., Avalon New England and Avalon
Cable of Michigan LLC.
Avalon Cable of Michigan LLC and Avalon New England provide cable services
to various areas in Michigan and New England, respectively. Avalon New England
and Avalon Cable of Michigan LLC's cable systems offer customer packages for
basic cable programming services which are offered at a per channel charge or
packaged together to form a tier of services offered at a discount from the
combined channel rate. Avalon New England and Avalon Cable of Michigan LLC's
cable systems also provide premium cable services to their customers for an
extra monthly charge. Customers generally pay initial connection charges and
fixed monthly fees for cable programming and premium cable services, which
constitute the principal sources of revenue for the Company.
Avalon Cable Holdings Finance, Inc. was formed for the sole purpose of
facilitating financings associated with the acquisition of various cable
operating companies. Avalon Cable Holdings Finance, Inc. conducts no other
2. Basis of Presentation
Pursuant to the rules and regulations of the Securities and Exchange
Commission, certain financial information has been condensed and certain
footnote disclosures have been omitted. Such information and disclosures are
normally included in financial statements prepared in accordance with generally
accepted accounting principles.
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 June 30,1999 and for the three and six month
periods ended June 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