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SEC Filings

10-K405
RENAISSANCE MEDIA GROUP LLC filed this Form 10-K405 on 03/31/1999
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Item 7--Management's Discussion and Analysis of Financial Condition and
       Results of Operations
 
Overview
 
   Holdings was formed on November 5, 1997 and entered into the Time Warner
Asset Purchase Agreement with Time Warner on November 14, 1997 to acquire the
Systems. 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 Time Warner Asset Purchase Agreement and to provide
working capital. For the period from inception through March 31, 1998,
Holdings earned interest income on the escrow deposit and the working capital
fund and incurred costs, primarily related to the Acquisition. Prior to the
consummation of the Acquisition, Holdings assigned all of its interest in the
Time Warner Asset Purchase Agreement to Renaissance Media, and all assets and
liabilities of Holdings became assets and liabilities of Renaissance Media.
The Acquisition was consummated on April 9, 1998. The Systems acquired in the
Acquisition are clustered in southern Louisiana, western Mississippi and
western Tennessee and, as of December 31, 1998, passed 185,620 homes, served
129,164 basic subscribers and had 58,712 premium service units.
 
   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 CVI's basis prior to January 4, 1996.
 
   Subject to the terms and conditions of the Charter Purchase Agreement, the
Company intends to increase its subscriber base and operating cash flow by
improving and upgrading its technical plant and expanding its service
offerings. The Company believes that by clustering systems it is 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. Subject to the terms and conditions of the Charter Purchase
Agreement, 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
 
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