MARCUS CABLE COMPANY, L.L.C. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
(1) ORGANIZATION AND BASIS OF PRESENTATION
Marcus Cable Company, L.L.C. ("MCCLLC") and subsidiaries (collectively, the
"Company") is a Delaware limited liability company, formerly Marcus Cable
Company, L.P. ("MCCLP"). MCCLP was formed as a Delaware limited partnership and
was converted to a Delaware limited liability company on June 9, 1998 (note 3).
The Company derives its primary source of revenues by providing various levels
of cable television programming and services to residential and business
customers. The Company's operations are conducted through Marcus Cable Operating
Company, L.L.C. ("MCOC"), a wholly-owned subsidiary of the Company. The Company
has operated its cable television systems primarily in Texas, Wisconsin,
Indiana, California and Alabama.
The accompanying consolidated financial statements include the accounts of
MCCLLC and its subsidiary limited liability companies and corporations. All
significant intercompany accounts and transactions have been eliminated in
On April 23, 1998, Vulcan Cable, Inc. and Paul G. Allen (collectively
referred to as "Vulcan") acquired all of the outstanding limited partnership
interests and substantially all of the general partner interest in MCCLP. Under
the terms of the purchase agreement, the owner of the remaining 0.6% general
partner interest (the "Minority Interest") in the Company can cause Vulcan to
purchase the 0.6% general partner interest under certain conditions, or Vulcan
can cause the Minority Interest to sell its interest to Vulcan under certain
conditions, at a fair value of not less than $8,000.
As a result of this acquisition (the "Vulcan Acquisition"), the Company has
applied purchase accounting in the preparation of the accompanying consolidated
financial statements. Accordingly, MCCLP adjusted its equity as of April 23,
1998 to reflect the amount paid in the Vulcan Acquisition and has allocated that
amount to assets acquired and liabilities assumed based on their relative fair
values. The excess of the purchase price over the fair value of MCCLP's tangible
and separately identifiable intangible assets less liabilities was allocated as
franchises. The allocation of the purchase price is based, in part, on
preliminary information which is subject to adjustment upon completion of
certain appraisal and valuation information.
The total transaction was valued at $3,243,475 and was allocated as
Property, plant and equipment.......... 735,832
Noncompetition agreements.............. 6,343
Other assets........................... 8,925
The transaction was initially funded through cash payments of $1,392,000
from Vulcan and the assumption of $1,809,621 in net liabilities. In addition,
Vulcan incurred direct costs of the acquisition (principally financial advisory,
legal and accounting fees) of $20,000, which will be reimbursed by the Company.
In addition, the Company recorded the fair value of the Minority Interest of
$8,000 in equity and $13,854 in direct transaction costs.
In connection with the Vulcan Acquisition, the Company incurred transaction
costs of approximately $114,167, comprised of $90,167 paid to employees of the