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SEC Filings

S-4/A
AVALON CABLE OF MICHIGAN INC/ filed this Form S-4/A on 07/22/1999
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            AVALON CABLE OF MICHIGAN HOLDINGS, INC. AND SUBSIDIARIES
 
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                  (dollars in thousands except per share data)
                               December 31, 1998
 
1. Basis of Presentation and Description of Business
 
   Avalon Cable of Michigan Holdings, Inc. ("the Company") was formed in June
1998, pursuant to the laws of the state of Delaware. Avalon Cable of Michigan
Inc. ("Avalon Michigan") was formed in June 1998, pursuant to the laws of the
state of Delaware as a wholly owned subsidiary of the Company. On June 3, 1998,
Avalon Michigan entered into an Agreement and Plan of Merger (the "Agreement")
among the Company, Cable Michigan, Inc. ("Cable Michigan") and Avalon Michigan,
pursuant to which Avalon Michigan will merge into Cable Michigan and Cable
Michigan will become a wholly owned subsidiary of the Company (the "Merger").
 
   In accordance with the terms of the Agreement, each share of common stock,
par value $1.00 per share ("common stock"), of Cable Michigan outstanding prior
to the effective time of the Merger (other than treasury stock shares owned by
the Company or its subsidiaries, or shares as to which dissenters' rights have
been exercised) shall be converted into the right to receive $40.50 in cash
(the "Merger Consideration"), subject to certain possible closing adjustments.
 
   In conjunction with the acquisition of Cable Michigan, Avalon Michigan
acquired Cable Michigan's 62% ownership interest in Mercom, Inc. ("Mercom").
 
   On November 6, 1998, Avalon Michigan completed its merger into and with
Cable Michigan. The total consideration paid in conjunction with the merger,
including fees and expenses was $431,629, including repayment of all existing
Cable Michigan indebtedness and accrued interest of $135,205. Subsequent to the
merger, the arrangements with RCN and CTE for certain support services were
terminated. The Agreement also permitted Avalon Michigan to agree to acquire
the remaining shares of Mercom that it did not own.
 
   The Company contributed $137,375 in cash to Avalon Michigan, which was used
to consummate the Merger. On November 5, 1998, the Company received $105,000 in
cash in exchange for promissory notes to lenders (the "Bridge Agreement"). On
November 6, 1998, the Company contributed the proceeds received from the Bridge
Agreement and an additional $35,000 in cash to Avalon Michigan in exchange for
100 shares of common stock.
 
   On November 6, 1998, Avalon Cable of New England Holdings, Inc. contributed
its 100% interest in Avalon Cable of New England LLC ("Avalon New England") to
Avalon Cable LLC in exchange for a membership interest in Avalon Cable LLC.
This contribution was between entities under common control and was accounted
for similar to a pooling-of-interests. Under this pooling-of-interests method,
the results of operations for Avalon include the results of operations from the
date of inception (September 4, 1997) of Avalon New England. On that same date,
Avalon Cable LLC received $63,000 from affiliated entities, which was comprised
of (i) a $45,000 capital contribution by Avalon Investors, LLC ("Avalon
Investors") and (ii) a $18,000 promissory note from Avalon Cable Holdings LLC
("Avalon Holdings"), which was used to make a $62,800 cash contribution to
Avalon New England.
 
   The cash contribution received by Avalon New England was used to (i)
extinguish existing indebtedness of $29,600 and (ii) fund a $33,200 loan to
Avalon Holdings Finance which matures on December 31, 2001.
 
   On December 10, 1998, Avalon Cable LLC received a dividend distribution from
Avalon New England in the amount of $18,206, which was used by Avalon Cable LLC
to pay off the promissory note payable to Avalon Holdings, plus accrued
interest.
 
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