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, based upon the number of Combined System
subscribers managed by Time Warner Cable and the ratio of Combined System
subscribers to total TWI Cable subscribers, respectively. These allocations
reflect all costs of doing business that the Combined Systems would have
incurred on a stand alone basis as disclosed in Note 3. Management believes
that these allocations are reasonable.
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).
Use of Estimates
The preparation of combined financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the combined financial
statements and footnotes thereto. Actual results could differ from those