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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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                     CABLE MICHIGAN, INC. AND SUBSIDIARIES
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
 
   For periods prior to October 1, 1997, during which the Company was a wholly
owned subsidiary of C-TEC, earnings (loss) per share was calculated by dividing
net income (loss) by one-fourth the average common shares of C-TEC outstanding,
based upon a distribution ratio of one share of Company common stock for each
four shares of C-TEC common equity owned.
 
  Income taxes
 
   The Company and Mercom file separate consolidated federal income tax
returns. Prior to the Distribution, income tax expense was allocated to C-TEC's
subsidiaries on a separate return basis except that C-TEC's subsidiaries
receive benefit for the utilization of net operating losses and investment tax
credits included in the consolidated tax return even if such losses and credits
could not have been used on a separate return basis. The Company accounts for
income taxes using Statement of Financial Accounting Standards No. 109--
"Accounting for Income Taxes". The statement requires the use of an asset and
liability approach for financial reporting purposes. The asset and liability
approach requires the recognition of deferred tax assets and liabilities for
the expected future tax consequences of temporary differences between financial
reporting basis and tax basis of assets and liabilities. If it is more likely
than not that some portion or all of a deferred tax asset will not be realized,
a valuation allowance is recognized.
 
  Reclassification
 
   Certain amounts have been reclassified to conform with the current year's
presentation.
 
3. Business Combination and Dispositions
 
   The Agreement between Avalon Cable of Michigan Holdings, Inc. and the
Company permitted the Company to agree to acquire the 1,822,810 shares
(approximately 38% of the outstanding stock) of Mercom that it did not own (the
"Mercom Acquisition"). On September 10, 1998 the Company and Mercom entered
into a definitive agreement (the "Mercom Merger Agreement") providing for the
acquisition by the Company of all of such shares at a price of $12.00 per
share. The Company completed this acquisition in March 1999. The total
estimated consideration payable in conjunction with the Mercom Acquisition,
excluding fees and expenses was $21,900.
 
   In March 1999, Avalon Michigan Inc. acquired the cable television systems of
Nova Cablevision, Inc., Nova Cablevision VI, L.P. and Nova Cablevision VII,
L.P. for approximately $7,800, excluding transaction fees.
 
   In July 1997, Mercom sold its cable system in Port St. Lucie, Florida for
cash of approximately $3,500. The Company realized a pretax gain of $2,571 on
the transaction.
 
4. Property, Plant and Equipment
 

<TABLE>
<CAPTION>
                                                        December 31, November 5,
                                                            1997        1998
                                                        ------------ -----------
<S>                                                     <C>          <C>
Cable plant............................................   $158,655    $174,532
Buildings and land.....................................      2,837       2,917
Furniture, fixtures and vehicles.......................      5,528       6,433
Construction in process................................        990         401
                                                          --------    --------
Total property, plant and equipment....................    168,010     184,283
Less accumulated depreciation..........................    (94,174)   (106,718)
                                                          --------    --------
Property, plant and equipment, net.....................   $ 73,836    $ 77,565
                                                          ========    ========
</TABLE>

 
   Depreciation expense was $15,728, $16,431 and $14,968 for the years ended
December 31, 1996 and 1997, and the period from January 1, 1998 to November 5,
1998, respectively.
 
                                      F-63