AVALON CABLE OF MICHIGAN HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(dollars in thousands except per share data)
December 31, 1998
On March 26, 1999, after the acquisition of Mercom, Inc., the Company
completed a series of transactions to facilitate certain aspects of its
financing between affiliated entities under common control. As a result of
. 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 to its wholly-owned subsidiary, Avalon Cable
of Michigan LLC ("Avalon Michigan LLC");
. Avalon Michigan LLC has become the operator of the Michigan cluster
replacing Avalon Michigan;
. Avalon Michigan LLC is an obligor on the Senior Subordinated Notes
replacing Avalon Michigan; and
. Avalon Michigan is a guarantor of the obligations of Avalon Michigan LLC
under the Senior Subordinated Notes. Avalon Michigan does not have
significant assets, other than its investment in Avalon Cable LLC.
. The Company contributed the Senior Discount Notes to Avalon Cable LLC and
became a guarantor of the Senior Discount Notes. The Company does not
have significant assets, other than its 88% investment in Avalon Cable
As a result of this reorganization between entities under common control,
the Company accounted for the reorganization similar to a pooling-of-interests.
Under the pooling-of-interests method, the results of operations include the
results of operations from the earliest date that a member became 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.
Avalon Michigan has a majority-interest in Avalon Cable LLC. Avalon Cable
LLC wholly-owns Avalon Cable Holdings Finance, Avalon New England, and Avalon
Avalon New England and Avalon Michigan provide cable service to the western
New England area and the state of Michigan, respectively. Avalon New England
and Avalon 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 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 principle
sources of revenue for the Company.
Avalon Holdings Finance was formed for the sole purpose of facilitating
financings associated with the acquisitions of various cable operating
companies. Avalon Holdings Finance conducts no other activities.
2. Summary of Significant Accounting Policies
Principles of consolidation
The consolidated financial statements of the Company include the accounts of
the Company and of all its wholly and majority owned subsidiaries. All
significant transactions between the Company and its subsidiaries have been