Exhibit 99.03
ARAHOVA COMMUNICATIONS, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION
The unaudited pro forma financial information presented on the following
pages is derived from the historical financial statements of Arahova and TCI
Century Systems. TCI Century Systems is comprised of the combined financial
information of five cable television systems and one related advertising sales
office, wholly-owned by various subsidiaries of Tele-Communications, Inc.
("TCI"), serving certain customers within California. The unaudited pro forma
condensed consolidated balance sheet information as of November 30, 1999 gives
pro forma effect to the formation of the joint venture limited partnership in
the Los Angeles, CA area by Arahova with TCI (the "Joint Venture") and the
swap of cable systems between the Joint Venture and TCI on December 7, 1999.
The unaudited pro forma condensed consolidated statements of continuing
operations information for the year ended May 31, 1999 and the six months
ended November 30, 1999 have been presented as if the acquisition of Arahova
by Adelphia Communications Corporation ("Adelphia"), the swap of cable systems
with TCI, and the formation of the Joint Venture, all occurred on June 1,
1998.
The unaudited pro forma financial information gives effect to the
acquisition of Arahova by Adelphia, the swap of cable systems with TCI, and
the formation of the Joint Venture under the purchase method of accounting and
is based upon the assumptions and adjustments described in the accompanying
notes to the unaudited pro forma condensed consolidated financial statements
presented on the following pages.
The pro forma adjustments do not reflect any operating efficiencies and cost
savings that may be achievable with respect to the combined companies. The pro
forma adjustments do not include any adjustments to historical revenues for
any future price changes or any adjustments to selling and marketing expenses
for any future operating changes.
The unaudited pro forma financial information is not necessarily indicative
of the financial position or operating results that would have occurred had
the acquisition of Arahova by Adelphia, the swap of cable systems with TCI,
and the formation of the Joint Venture been consummated on the dates for which
such transactions are being given effect. The pro forma adjustments reflecting
the acquisition of Arahova by Adelphia, the swap of cable systems with TCI and
the formation of the Joint Venture are based upon the assumptions set forth in
the notes to the unaudited pro forma condensed consolidated financial
statements.
The unaudited pro forma financial statements presented on the following
pages should be read in conjunction with the audited and unaudited historical
financial statements (including the notes thereto) of Arahova, which are
contained in its respective annual report on Form 10-K for the year ended May
31, 1999 and quarterly report on Form 10-Q for the quarters ended August 31,
1999 and November 30, 1999, which are incorporated herein by reference, and of
TCI Century Systems, which are included elsewhere in this current report on
Form 8-K/A.
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ARAHOVA COMMUNICATIONS, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
NOVEMBER 30, 1999
(Dollars in thousands)
TCI Century
Arahova Systems Pro Forma
TCI Century Pro Forma Pro Forma Arahova
Arahova (a) Systems*(a) Adjustments (b) Adjustments (c) Consolidated
----------- ----------- --------------- --------------- ------------
Assets:
Property, plant and
equipment--net......... $ 780,604 $ 168,607 $ (55,052) $ -- $ 894,159
Intangible assets--net.. 5,792,230 881,842 (289,098) (350,319) 6,034,655
Cash and cash
equivalents............ 215,659 3,216 (140,640) -- 78,235
Other assets--net....... 193,818 12,316 10,615 -- 216,749
----------- ---------- --------- --------- ----------
Total assets.......... $ 6,982,311 $1,065,981 $(474,175) $(350,319) $7,223,798
=========== ========== ========= ========= ==========
Liabilities and
Stockholders' Equity
(Deficiency):
Subsidiary debt......... $ 1,002,882 $ -- $(423,657) $ -- $ 579,225
Parent debt............. 1,892,147 -- -- -- 1,892,147
Deferred income taxes... 1,641,567 350,319 -- (350,319) 1,641,567
Intercompany notes owed
to Tele-Communications,
Inc. ("TCI")........... -- 215,000 (215,000) -- --
Other liabilities....... 289,854 6,626 13,612 -- 310,092
----------- ---------- --------- --------- ----------
Total liabilities..... 4,826,450 571,945 (625,045) (350,319) 4,423,031
----------- ---------- --------- --------- ----------
Parent's interest in
subsidiary and other
minority interests..... 167,386 -- (386,000) 494,036 275,422
----------- ---------- --------- --------- ----------
Stockholders' equity
(deficiency):
Common stock and
additional paid-in
capital................ 3,082,437 -- -- -- 3,082,437
Accumulated deficit..... (7,656) -- -- -- (7,656)
Related party
receivables--net....... (1,086,306) -- 536,870 -- (549,436)
Partners' equity........ -- 494,036 -- (494,036) --
----------- ---------- --------- --------- ----------
Stockholders' equity
(deficiency)......... 1,988,475 494,036 536,870 (494,036) 2,525,345
----------- ---------- --------- --------- ----------
Total............... $ 6,982,311 $1,065,981 $(474,175) $(350,319) $7,223,798
=========== ========== ========= ========= ==========
- --------
*As of September 30, 1999
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ARAHOVA COMMUNICATIONS, INC.
NOTES TO THE UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
NOVEMBER 30, 1999
(Dollars in thousands)
(a) Represents historical amounts.
(b) Represents the net effects of: (i) approximately $33,000 acquisition
price for a cable system in the Moreno Valley/Riverside County area of
southern California ("Moreno"), acquired from American Cable TV Investors
V, Ltd.; (ii) intercompany advances of $507,000 and additional borrowings
of $471,000 under a new Arahova credit facility which closed on December
7, 1999, net of repayments of existing Arahova subsidiary debt of
$894,000 and intercompany notes owed to TCI of $215,000; (iii)
preliminary adjustments recorded in connection with applying purchase
accounting to the Moreno acquisition, including an initial allocation of
$7,300 and $41,100 to Property, plant and equipment--net and Intangible
assets--net, respectively; and (iv) the recording of the system swap with
TCI.
(c) Represents the net effects of: (i) the formation of the Joint Venture and
TCI's 25% minority ownership interest in the Joint Venture and (ii) the
removal of TCI Century Systems deferred tax liability due to the Joint
Venture being a partnership.
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ARAHOVA COMMUNICATIONS, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF CONTINUING OPERATIONS
YEAR ENDED MAY 31, 1999
(Dollars in thousands)
Old TCI
Century Systems New TCI TCI Century
Eleven Months Century Systems Arahova Systems Pro Forma
Old Ended One Month Ended Pro Forma Pro Forma Arahova
Arahova (a) February 28, 1999 (a) March 31, 1999 (a) Adjustments Adjustments Consolidated
----------- --------------------- ------------------ ----------- ----------- ------------
Revenues................ $ 519,584 $147,830 $14,000 $ 98,150(b) $ -- $779,564
--------- -------- ------- -------- ------- --------
Operating Expenses:
Direct operating and
programming........... 111,603 61,936 6,016 140,855(b) -- 320,410
Selling, general and
administrative........ 115,790 34,013 2,741 (3,427)(c) -- 149,117
Depreciation and
amortization.......... 158,153 37,237 4,178 50,400(d) (11,266)(h) 238,702
Merger and
integration costs..... 7,922 -- -- -- -- 7,922
--------- -------- ------- -------- ------- --------
Total................ 393,468 133,186 12,935 187,828 (11,266) 716,151
--------- -------- ------- -------- ------- --------
Operating income
(loss)................ 126,116 14,644 1,065 (89,678) 11,266 63,413
--------- -------- ------- -------- ------- --------
Other (expense) income:
Interest expense--
net................... (191,803) -- -- 13,470(e) -- (178,333)
Minority interest in
income of
subsidiaries.......... (11,597) -- -- (3,506)(f) -- (15,103)
Gain on sale
of assets............. 5,646 -- -- -- -- 5,646
Other.................. 79 (114) 30 -- -- (5)
--------- -------- ------- -------- ------- --------
Total................ (197,675) (114) 30 9,964 -- (187,795)
--------- -------- ------- -------- ------- --------
(Loss) income before
income taxes........... (71,559) 14,530 1,095 (79,714) 11,266 (124,382)
Income tax benefit
(expense).............. 13,453 (5,953) (385) 22,732(g) -- 29,847
--------- -------- ------- -------- ------- --------
Net (loss) income ...... $ (58,106) $ 8,577 $ 710 $(56,982) $11,266 $(94,535)
========= ======== ======= ======== ======= ========
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ARAHOVA COMMUNICATIONS, INC.
NOTES TO THE UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF
CONTINUING OPERATIONS
YEAR ENDED MAY 31, 1999
(Dollars in thousands)
(a) Represents historical amounts. The consolidated financial statements for
periods prior to October 1, 1999 for Arahova are referred to herein as
"Old Arahova", and the consolidated financial statements for periods
subsequent to September 30, 1999 are referred to herein as "New Arahova".
On March 9, 1999, AT&T Corp. acquired TCI in a merger. For financial
reporting purposes such merger was deemed to have occurred on March 1,
1999. The combined financial statements for periods prior to March 1,
1999 for the TCI Century Systems are referred to herein as "Old TCI
Century Systems," and the combined financial statements for periods
subsequent to February 28, 1999 are referred to herein as "New TCI
Century Systems."
(b) Represents the net effects of: (i) historical amounts for the twelve
months ended March 31, 1999 for Moreno; (ii) reclassification of
programming expense from a reduction of revenues to direct operating and
programming expense and reclassification of interest income from revenues
to a decrease in interest expense--net to conform to Adelphia's
presentation; and (iii) the effect of the system swap with TCI.
(c) Represents the net effects of: (i) historical amounts for the twelve
months ended March 31, 1999 for Moreno and (ii) the effects of the system
swap with TCI.
(d) Represents the net effects of: (i) depreciation and amortization expense
for the twelve months ended March 31, 1999 for Moreno, giving effect to
the application of purchase accounting; (ii) additional amortization
expense resulting from deferred loan financing fees relating to the
credit facility which closed on December 7, 1999; (iii) the effects of
the system swap with TCI; and (iv) additional depreciation and
amortization expense resulting from the merger of Arahova into Adelphia,
giving effect to the application of purchase accounting. Pro forma
depreciation and amortization is calculated on a straight-line basis
consistent with Adelphia's accounting policy and with Adelphia's
depreciation and amortization periods. The cost basis of the purchased
assets utilized in these calculations is based on preliminary asset
allocations among property, plant and equipment (primarily operating
plant and equipment depreciated over 5 to 12 years) and intangible assets
(primarily purchased franchises and goodwill amortized over 40 years) and
is subject to final allocation adjustments.
(e) Represents the net effects of: (i) interest expense on incremental
borrowings from intercompany advances and additional borrowings under the
Arahova credit facility which closed on December 7, 1999 net of
repayments of existing Arahova subsidiary debt; (ii) reclassification of
interest income from revenues to interest expense--net to conform to
Adelphia's presentation; and (iii) the effects of the system swap with
TCI.
(f) Represents the effects of TCI's minority ownership interest in the Joint
Venture.
(g) Represents the estimated effect on the income tax provision of the
acquisition of Arahova by Adelphia, the swap of cable systems with TCI
and the formation of the Joint Venture.
(h) Represents reduction of amounts resulting from calculating depreciation
and amortization on a straight-line basis consistent with Adelphia's
accounting policy and with Adelphia's depreciation and amortization
periods. The cost basis of the purchased assets utilized in these
calculations is based on preliminary asset allocations among property,
plant and equipment (primarily operating plant and equipment depreciated
over 5 to 12 years) and intangible assets (primarily purchased franchises
and goodwill amortized over 40 years) and is subject to final allocation
adjustments.
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ARAHOVA COMMUNICATIONS, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF CONTINUING OPERATIONS
SIX MONTHS ENDED NOVEMBER 30, 1999
(Dollars in thousands)
Old Arahova New Arahova
Four Months Two Months TCI Century
Ended Ended Arahova Systems Pro Forma
September 30, November 30, TCI Century Pro Forma Pro Forma Arahova
1999 (a) 1999 (a) Systems* (a) Adjustments Adjustments Consolidated
------------- ------------ ------------ ----------- ----------- ------------
Revenues................ $ 231,230 $117,633 $86,503 $(16,853)(b) $ -- $ 418,513
--------- -------- ------- -------- ------- ---------
Operating Expenses:
Direct operating and
programming........... 92,455 37,712 37,595 (5,979)(b) -- 161,783
Selling, general and
administrative........ 47,610 20,087 22,228 (1,921)(b) -- 88,004
Depreciation and
amortization.......... 59,665 32,383 27,328 10,270(c) (12,254)(g) 117,393
Stock compensation..... 26,232 -- -- -- -- 26,232
Merger and integration
costs................. 174,153 3,140 -- -- -- 177,293
--------- -------- ------- -------- ------- ---------
Total................ 400,115 93,322 87,151 2,370 (12,254) 570,705
--------- -------- ------- -------- ------- ---------
Operating (loss)
income................. (168,885) 24,311 (648) (19,223) 12,254 (152,192)
--------- -------- ------- -------- ------- ---------
Other (expense) income:
Interest expense--
net................... (53,929) (27,689) -- (3,686)(d) -- (85,304)
Minority interest in
income
of subsidiaries....... (4,911) (5,874) -- (2,084)(e) -- (12,869)
Other.................. 337 -- (176) -- -- 161
--------- -------- ------- -------- ------- ---------
Total................ (58,503) (33,563) (176) (5,770) -- (98,012)
--------- -------- ------- -------- ------- ---------
(Loss) income before
income taxes........... (227,388) (9,252) (824) (24,993) 12,254 (250,204)
Income tax (expense)
benefit................ (5,837) 1,596 274 29,823(f) -- 25,856
--------- -------- ------- -------- ------- ---------
Net (loss) income....... $(233,225) $ (7,656) $ (550) $ 4,830 $12,254 $(224,348)
========= ======== ======= ======== ======= =========
- --------
*Six months ended September 30, 1999
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ARAHOVA COMMUNICATIONS, INC.
NOTES TO THE UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF
CONTINUING OPERATIONS
SIX MONTHS ENDED NOVEMBER 30, 1999
(Dollars in thousands)
(a) Represents historical amounts. The consolidated financial statements for
periods prior to October 1, 1999 for Arahova are referred to herein as
"Old Arahova", and the consolidated financial statements for periods
subsequent to September 30, 1999 are referred to herein as "New Arahova".
The consolidated financial statements for periods prior to October 1,
1999 for the Arahova systems are referred to herein as "Old Arahova" and
the consolidated financial statements for periods subsequent to September
30, 1999 are referred to herein as "New Arahova."
(b) Represents the net effects of: (i) historical amounts for the six months
ended October 31, 1999 for Moreno; and (ii) the effects of the system
swap with TCI.
(c) Represents the net effects of: (i) depreciation and amortization expense
for the six months ended October 31, 1999 for Moreno, giving effect to
the application of purchase accounting; (ii) additional amortization
expense resulting from deferred loan financing fees relating to the
credit facility which closed on December 7, 1999; (iii) the effects of
the system swap with TCI; and (iv) additional depreciation and
amortization expense resulting from the merger of Arahova into Adelphia,
giving effect to the application of purchase accounting. Pro forma
depreciation and amortization is calculated on a straight-line basis
consistent with Adelphia's accounting policy and with Adelphia's
depreciation and amortization periods. The cost basis of the purchased
assets utilized in these calculations is based on preliminary asset
allocations among property, plant and equipment (primarily operating
plant and equipment depreciated over 5 to 12 years) and intangible assets
(primarily purchased franchises and goodwill amortized over 40 years) and
is subject to final allocation adjustments.
(d) Represents the net effects of: (i) interest expense on incremental
borrowings from intercompany advances and additional borrowings under the
Arahova credit facility which closed on December 7, 1999, net of
repayments of existing Arahova subsidiary debt; and (ii) the effects of
the system swap with TCI.
(e) Represents the effects of TCI's minority ownership interest in the Joint
Venture.
(f) Represents the estimated effect on the income tax provision of the
acquisition of Arahova by Adelphia, the swap of cable systems with TCI
and the formation of the Joint Venture.
(g) Represents a reduction of amounts resulting from calculating depreciation
and amortization on a straight-line basis consistent with Adelphia's
accounting policy and with Adelphia's depreciation and amortization
periods. The cost basis of the purchased assets utilized in these
calculations is based on preliminary asset allocations among property,
plant and equipment (primarily operating plant and equipment depreciated
over 5 to 12 years) and intangible assets (primarily purchased franchises
and goodwill amortized over 40 years) and is subject to final allocation
adjustments.
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