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SEC Filings

S-4/A
AVALON CABLE OF MICHIGAN INC/ filed this Form S-4/A on 07/22/1999
Entire Document
 
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                AVALON CABLE OF MICHIGAN, INC. AND SUBSIDIARIES
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
 
 Revenue recognition
 
   Revenues from cable services are recorded in the month the service is
provided. Installation fee revenue is recognized in the period in which the
installation occurs to the extent that direct selling costs meet or exceed
installation revenues.
 
 Advertising expense
 
   Advertising costs are expensed as incurred. Advertising expense charged to
operations was $82 for the year ended December 31, 1998.
 
 Concentration of credit risk
 
   Financial instruments which potentially expose the Company to a
concentration of credit risk include cash and subscriber and other receivables.
The Company had cash in excess of federally insured deposits at financial
institutions at December 31, 1998. The Company does not believe that such
deposits are subject to any unusual credit risk beyond the normal credit risk
associated with operating its business. The Company extends credit to customers
on an unsecured basis in the normal course of business. The Company maintains
reserves for potential credit losses and such losses, in the aggregate, have
not historically exceeded management's expectations. The Company's trade
receivables reflect a customer base centered in Michigan and New England. The
Company routinely assesses the financial strength of its customers; as a
result, concentrations of credit risk are limited.
 
 Property, plant and equipment
 
   Property, plant and equipment is stated at its fair value for items acquired
from Cable Michigan, historical cost for the minority interests share of Mercom
property, plant and equipment and cost for additions subsequent to the merger.
Initial subscribers installation costs, including materials, labor and overhead
costs, are capitalized as a component of cable plant and equipment. The cost of
disconnection and reconnection are charged to expense when incurred.
Depreciation is computed for financial statement purposes using the straight-
line method based on the following lives:
 

<TABLE>
   <S>                                                              <C>
   Buildings and improvements...................................... 10-25 years
   Cable plant and equipment.......................................  5-12 years
   Vehicles........................................................  5    years
   Office furniture and equipment..................................  5-10 years
</TABLE>

 
 Intangible assets
 
   Intangible assets represent the estimated fair value of cable franchises and
goodwill resulting from acquisitions. Cable franchises are amortized over a
period ranging from 13 to 15 years on a straight-line basis. Goodwill is the
excess of the purchase price over the fair value of the net assets acquired,
determined through an independent appraisal, and is amortized over 15 years
using the straight-line method. Deferred financing costs represent direct costs
incurred to obtain long-term financing and are amortized to interest expense
over the term of the underlying debt utilizing the effective interest method.
 
 
                                     F-116