1
EXHIBIT 1
APPRAISAL REPORT:
FAIR MARKET VALUATION
OF
FALCON CABLE SYSTEMS COMPANY, L.P.
PASADENA, CALIFORNIA
As of December 31, 1995
Prepared for:
FALCON CABLE SYSTEMS COMPANY, L.P./ADVISORY COMMITTEE
Pasadena, CA
Prepared by:
MALARKEY-TAYLOR ASSOCIATES, INC.
1130 Connecticut Avenue, N.W.
Suite 325
Washington, D.C. 20036
(202) 835-7800
April 29, 1996
(C) Copyright 1996 Malarkey-Taylor Associates, Inc.
2
APPRAISAL REPORT:
FAIR MARKET VALUATION
OF
FALCON CABLE SYSTEMS COMPANY, L.P.
PASADENA, CALIFORNIA
TABLE OF CONTENTS
I. EXECUTIVE SUMMARY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
A. Introduction, Purpose, and Methodology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
B. Conclusions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
II. PURPOSE OF APPRAISAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
III. INDUSTRY OVERVIEW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
A. Historical Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
B. Industry Characteristics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
1. General Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2. Regulation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3. Financial/Economic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
4. Competition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
IV. SYSTEM DESCRIPTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
A. History and Market . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
1. Gilroy, CA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
2. Hesperia, CA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
3. San Luis Obispo, CA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
4. Tulare, CA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
5. Central Region, OR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
6. Coos Bay, OR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
7. Dallas, OR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
8. Florence, OR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
B. Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
1. Gilroy, CA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
2. Hesperia, CA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
3. San Luis Obispo, CA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
4. Tulare, CA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
5. Central Region, OR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
6. Coos Bay, OR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
7. Dallas, OR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
8. Florence, OR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
3
TABLE OF CONTENTS (continued)
C. Rates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
D. Subscribers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
E. System Mileage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
F. Physical Plant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
1. Gilroy, CA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
2. Hesperia, CA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
3. San Luis Obispo, CA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
4. Tulare, CA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
5. Central Oregon, OR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
6. Coos Bay, OR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82
7. Dallas, OR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83
8. Florence, OR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84
G. Franchises . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84
H. Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88
1. Gilroy, CA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89
2. Hesperia, CA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89
3. San Luis Obispo, CA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89
4. Tulare, CA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89
5. Central Region, OR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90
6. Coos Bay, OR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90
7. Dallas, OR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90
8. Florence, OR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90
I. Financial History . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91
1. Gilroy, CA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91
2. Hesperia, CA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91
3. San Luis Obispo, CA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91
4. Tulare, CA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91
5. Central Region, OR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92
6. Coos Bay, OR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92
7. Dallas, OR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92
8. Florence, OR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92
V. TOTAL SYSTEM VALUE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93
A. Valuation Procedure and Methods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93
B. Discounted Cash Flow Methodology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95
1. Net Cash Flow/Return on Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96
2. Net Cash Flow/Return On Investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97
3. Cash Flow Projections . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97
4. Residual Value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99
5. Discount Rates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100
C. Direct Income Methodology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101
D. Value Conclusions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102
4
TABLE OF CONTENTS (continued)
VI. ALLOCATION OF VALUE TO SALE AND EXCHANGE CLUSTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103
A. Purpose of Allocation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103
B. Methodology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103
C. Headend Value Allocations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104
VII. CONTINGENCIES AND LIMITING CONDITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 106
VIII. STATEMENT OF VALUE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 108
IX. QUALIFICATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 110
A. Qualifications of Malarkey-Taylor Associates, Inc. (MTA) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 110
B. Qualifications of Robert M. Jones . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 111
C. Qualifications of Susan Donovan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 112
D. Qualifications of Keke Tan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 113
5
APPENDIX A - DCF Valuation Exhibits for Falcon Systems
(the following set of Exhibits has been prepared for each of
the eight Systems valued)
A. Valuation Methods
B-1. Profit and Loss/Sources and Uses-Return on Equity -
Low Value
B-2. Profit and Loss/Sources and Uses-Return on Equity -
High Value
C-1. Debt Amortization-Return on Equity - Low Value
C-2. Debt Amortization-Return on Equity - High Value
D. Return on Investment
E. Cable Television Subscribers
F. Cable Television Service Rates
G. Cash Flow Projections
H. Capital Expenditures
I. Depreciation Schedule
J. Valuation Assumptions
APPENDIX B - Allocation of System Fair Market Values to Sale and Exchange
Clusters for Coos Bay, Dallas, and Florence
APPENDIX C - Allocation of Sale and Exchange Cluster Values to Headends for
Coos Bay, Dallas, and Florence
6
APPRAISAL REPORT:
FAIR MARKET VALUATION
OF
FALCON CABLE SYSTEMS COMPANY
PASADENA, CALIFORNIA
I. EXECUTIVE SUMMARY
A. INTRODUCTION, PURPOSE, AND METHODOLOGY
Malarkey-Taylor Associates, Inc. (MTA) was retained to conduct a fair
market valuation, as of December 31, 1995, of eight groups of cable systems
(the Systems) owned by the limited partnership of Falcon Cable Systems Company,
L.P. (Falcon). The Systems are located in California and Oregon, and are
identified as: Gilroy, Hesperia, San Luis Obispo, and Tulare in the state of
California, and Central Region, Coos Bay, Dallas, and Florence in the state of
Oregon. In addition to estimating the individual fair market values of the
Systems, MTA has allocated the System values for Coos Bay, Dallas, and
Florence, among the operating headends in the particular Systems. MTA was
chosen as one of three appraisers performing these tasks in preparation for a
potential buyout by Falcon's General Partner of the interest of the Limited
Partners or a sale of the company. MTA was retained specifically by the
Advisory Committee for the potential transaction.
The cable television Systems served approximately 135,000 subscribers
throughout eighteen counties in California and Oregon, as of December 31, 1995.
This independent appraisal will allow the Advisory Committee to confirm the
fair market value of the Systems as a business enterprise, in consideration of
alternatives attendant to the expiration of the limited partnership in December
1996.
Fair market value is the cash price a willing buyer would give a
willing seller in an arm's length transaction in order to complete the sale.
It is assumed that both buyer
1
7
and seller have been informed of all relevant facts and neither is under any
compulsion to conclude the transaction. MTA also assumes that the tangible
assets will remain in their present locations and will continue to be employed
in their highest and best use, i.e., the delivery of cable television signals
to subscribers.
For each System, MTA used five generally accepted cable television
valuation methods using the income approach to valuation in establishing the
range of total fair market values of the System as a going concern. The first
method used a multiple of the past year's operating income derived from
comparable asset values of privately-held and publicly-traded cable companies.
The second method used a lower multiple of the annualized current month's
operating income. The third method applied a slightly lower multiple of next
year's projected operating income. The fourth method was a discounted net cash
flow analysis in which a purchase price (estimated fair market value) was
calculated to achieve a target after-tax return on equity, given particular
operating and financing assumptions specific to the System's assets. The fifth
method was a discounted cash flow analysis that measured the net present value
of the pre-tax operating cash flows (less capital expenditures, plus the
residual value of the System) that represent the return on total investment.
To allocate a System's fair market value among its operating headends,
MTA examined 1) the number of subscribers served by the headend, 2) the
projected operating cash flows to be generated by each headend, and 3) the
projected free cash flows to be generated by each headend after capital
expenditures were considered. Allocation percentages were developed for these
three criteria, which were then averaged to determine the final allocation
value for each of the selected headends.
B. CONCLUSIONS
MTA's conclusions as to the range of System fair market values are
based upon information and data supplied by Falcon and System management;
onsite inspections by representatives of MTA of a representative portion of the
Systems and service areas; and general cable industry information. In MTA's
opinion, the data which support the
2
8
valuations are reliable and sound. Our estimates of each System's fair market
value as a business enterprise are as follows:
Gilroy, CA $76,000,000
Hesperia, CA 38,846,000
San Luis Obispo, CA 29,585,000
Tulare, CA 31,972,000
Central Region, OR 26,294,000
Coos Bay, OR 34,501,000
Dallas, OR 35,334,000
Florence, OR 10,696,000
COMBINED SYSTEMS $283,228,000
The allocations of the above values to the headends within Coos Bay,
Dallas, and Florence are found in Appendix C to this report. A summary of the
Sale properties is as follows:
Sale
Coos Bay, OR $27,837,000
Dallas, OR 15,402,000
Florence, OR 271,000
Gilroy, CA 76,000,000
Tulare, CA 31,972,000
SLO, CA 29,585,000
Central, OR 26,294,000
-----------
TOTAL $207,361,000
A summary of the Exchange properties is as follows:
Exchange
Coos Bay $ 6,664,000
Dallas 19,932,000
Hesperia 38,846,000
Florence 10,425,000
-----------
TOTAL $75,867,000
3
9
II. PURPOSE OF APPRAISAL
Malarkey-Taylor Associates, Inc. (MTA) was retained to conduct a fair
market valuation, as of December 31, 1995, of the eight groups of cable
television systems (the Systems) owned by the limited partnership of Falcon
Cable Systems Company, L.P. (Falcon). Additionally, for the Coos Bay, Dallas,
and Florence Systems, MTA has allocated the System fair market value among the
headends comprising the particular System. As of the appraisal date, the
Systems served approximately 135,000 subscribers in California and Oregon. The
partnership is slated to expire in December 1996, with a buyout by the General
Partner of the interest of the Limited Partners or a sale of the company. MTA
was retained by the Advisory Committee to this transaction, which will use this
appraisal to confirm the fair market value of the Systems as a business
enterprise, in consideration of alternatives attendant to the expiration of the
limited partnership.
Fair market value is the cash price a willing buyer would give a
willing seller in an arm's length transaction in order to complete the sale.
It is assumed that both buyer and seller have been informed of all relevant
facts and neither is under any compulsion to conclude the transaction and that
the tangible assets will remain in their present locations and will continue to
be employed in their highest and best use, i.e., the delivery of cable
television signals to subscribers.
4
10
III. INDUSTRY OVERVIEW
A. HISTORICAL BACKGROUND
Cable television was born in the late 1940's. The first systems were
built during the period 1948 to 1964. Most of these early systems were located
in rural areas where off-air television reception was limited and picture
quality was poor. The cable system basically provided a reception service,
offering up to 12 channels with no unique programming. Systems generally
enjoyed high levels of penetration, ranging from approximately 70% to 90% of
homes passed.
During the period 1965 to 1972, cable systems were built in
medium-sized markets, importing distant television signals via terrestrial
microwave. Rulings by the Federal Communications Commission (FCC) in 1965 and
1966 initiated a regulatory period that lasted two decades. FCC constraints
were placed on importing distant signals which inhibited the construction of
systems in the largest 100 markets. The U.S. Supreme Court affirmed the FCC's
regulatory authority over the cable television industry. The typical cable
television system generally remained a 12- to 24- channel reception service
with some additional program selections via imported signals. Programming
unique to cable television did not exist. Basic penetrations of between 50%
and 60% of homes passed were typical for newly-cabled markets.
In 1972, the FCC eased its restrictions on signal importation, thus
making it feasible for cable television operators to enter the nation's top 100
markets with differentiated product. Satellite delivered premium television
services (HBO, Showtime) and Super Stations (WTBS) were introduced in 1975.
Cable exclusive networks, such as ESPN, CNN, USA, and others, soon followed.
During the mid- to late-1970's, new 24- to 36-channel cable television systems
emerged as a result of these communications satellite services. Significant
increases in programming options allowed cable systems to attract ample numbers
of subscribers to attain operational profitability even where off-air broadcast
reception and leisure-time options were above average. The smallest 50 of the
top 100 markets were built first, followed by the larger metropolitan areas.
Premium, or
5
11
pay, services were the primary force behind basic penetration gains reaching
30% to 45% of homes passed in these new markets.
During the period 1979 to 1983, the remaining major markets were
franchised. Cable channel options increased dramatically, both in pay services
(Disney, Cinemax, Bravo, Movie Channel) and basic services (MTV, Lifetime,
Nickelodeon, regional sports, CNN, and others). Systems with 54 and more
channels were built, offering an abundance of program alternatives. Cable
system operators instituted price increases for pay services and established
elaborate tiering structures to compensate for local constraints on basic
service pricing. In newer cable markets, basic penetrations of homes passed
began to edge above the 40% level.
In 1984, the U.S. Congress approved and President Reagan signed the
Cable Communications Policy Act, the first comprehensive cable legislation to
be enacted. The most significant feature of the legislation was the ultimate
removal of price controls on basic cable service in all but the very smallest
cable systems. Discretionary price increases of up to 5% were allowed in 1985
and 1986, and all price controls were removed in January 1987. During the
period 1984 to 1992, the mix of cable offerings and pricing changed as growth
in pay subscriptions slowed down and local constraints on basic price increases
were removed. Basic penetrations continued to rise in major markets, and
nationwide penetration reached 60% of homes passed by cable. New revenue
sources emerged in the form of pay-per-view, advertising, and home shopping.
The industry emphasized programming quality and marketing in order to increase
overall penetration levels above the 60% level.
The Cable Television Consumer Protection and Competition Act of 1992
was passed on October 5, 1992, which imposed significant new regulations,
particularly on subscriber rates and programming packaging. Generally,
programming packages were specifically segregated between the "basic tier" and
the "satellite programming tier(s)" since the level of regulation was different
for each of them. After the new regulations were implemented, the overall
cable industry experienced a slight reduction in revenues in 1993, but learned
to cope with the new regulations in 1994 and continued its overall
6
12
growth due to added services, increased subscriber penetrations and repackaging
of programming services.
B. INDUSTRY CHARACTERISTICS
1. General Background
Cable television is a capital intensive business. The right to
operate a cable system is authorized by the local government. Substantial
up-front capital is required in plant and equipment with second entrants facing
even greater capital construction costs due primarily to space limitations on
utility poles. A considerable percentage of total operating costs are fixed.
Similar to utilities, once cable television has exceeded its break-even
requirements, operating margins grow very rapidly and remain fairly predictable
from year to year.
Unlike most businesses, market analysis in cable is better pursued on
the basis of system type than generic geographic or demographic criteria. The
classification of a cable system in any individual market tends to reflect the
competitive characteristics and demand dynamics resident in that market. In
general, there are two primary categories of cable systems--classic and modern.
Classic cable systems are those built in locations where reception of
over-the-air television signals has historically been poor or limited. They
were the earliest systems built, usually serving communities with lower
densities (40 to 90 homes per mile), higher subscriber penetrations (60% to 90%
of homes passed), lower average revenues per subscriber, and higher cash flow
margins (45% to 65%) relative to modern systems. They usually were built with
fewer channels but may have been upgraded at a later time. Expectations for
additional growth in these markets tends to be lower than the industry average.
The downside risk of investing in these systems is relatively low.
Modern cable systems have been constructed since the introduction of
pay and other cable-specific programming in the mid-1970's. They tend to serve
urban and suburban communities which have higher densities (70 to 120 and more
homes per mile), better quality off-air programming, and more extensive
competition for consumers'
7
13
leisure time. These systems were built with broader channel capacity (36 to 54
or more channels), individual subscriber addressability, local programming
capability, and the capacity for advertising sales. They tend to have lower
penetration (30% to 55%) than classic systems. More rapid growth has been
experienced in these systems than in classic systems because of higher
household growth rates, more potential for penetration gains, and greater
opportunities for ancillary revenues. They are also more risky because of
greater off-air competition and higher overall operating costs.
It is estimated that 32,255 communities are served throughout the
United States by approximately 13,000 operating cable systems. The industry is
structured into approximately 660 MSO's which manage these systems on a
wholly-owned, partially-owned, or management contract basis. Economic forces
within the industry are causing significant shifts in the ownership of these
companies, resulting in increasing consolidation of the industry into the hands
of fewer, larger operators.
Management characteristics in the industry vary considerably between
the MSO headquarters and system operating levels and between different
categories of systems. At the corporate level, nearly all of the mid-to-large
sized MSO's have a strong representation of professionally trained and
field-seasoned management among their ranks. Strong emphasis is placed on
strategic, financial planning and operating control functions at this level,
and the staffing reflects those requirements. Even the more entrepreneurial
MSO's are well-staffed with lawyers, accountants, and MBA's.
System-level management requirements vary significantly with the
category of system under consideration. Classic cable operations often require
custodial management to oversee customer service and maintenance functions.
Strategic, marketing, and financial management tends to be handled at the
corporate level. Billing functions are processed through service bureaus
specializing in cable systems. Very little management complexity is left at
the system level, and the positions tend to be filled accordingly.
Large-scale, urban cable operations are much more dynamic and demanding. They
require far more sophisticated and versatile management capabilities. The
physical plant, budgets, and operating staffs in these systems are considerably
larger.
8
14
More of the strategic, marketing, and financial planning functions are handled
locally. The political liaison requirements with the cities are far more
complex. Not surprisingly, the caliber of management found in these systems is
substantially higher than that found in classic systems, and tends to be
professionally trained, financially aware, and politically astute.
2. Regulation
Historically, the extent to which the cable television industry has
been regulated at the local, state and federal levels, has varied. Following
the deregulation of service prices in the 1984 Cable Communications Policy Act,
the next several years saw regulatory constraints on cable reduced at both the
local and federal levels. Subsequent public perception of the industry as
abusing its newly-won pricing freedom and additional consolidation in the
industry led to enactment of the Cable Television Consumer Protection and
Competition Act of 1992 on October 5, 1992, ushering in a new period of
extensive regulation. Many aspects of such regulation are currently the
subject of judicial, administrative or legislative proceedings or proposals.
This law required the FCC to regulate the operation of cable television systems
in a number of areas, including rates that may be charged by systems.
On September 1, 1993, rate changes mandated by the FCC under the 1992
Act went into effect for most systems. The FCC implemented a benchmark rate
structure that was intended to reduce the federally regulated portion of the
average cable subscriber's monthly bill by 10%. Most of the resulting
reductions in subscriber bills were attributable to the decline in equipment
and additional outlet charges. However, with the mandated reconfiguration of
basic service and the expanded basic tier, some subscribers' bills increased.
For cable operators, the effects of the rate change were estimated to reduce
revenue by 3% to 5% on an industrywide basis.
In February 1994, the FCC announced further rate reductions of 7% in
order to fully implement the 1992 Cable Act. As an alternative, cable systems
were permitted to file Cost of Service showings if implementation of the
mandated rate reductions was not
9
15
feasible. By yearend 1995, widescale telecommunications reform appeared
imminent; although, the extent to which or even whether this reform would
entail relief from rate regulation was unclear. The likelihood that providers
of cable and telephony services would be allowed engage in both businesses was
a near certainty, however, the timetable for these changes was uncertain.
3. Financial/Economic
Cable's rapid financial growth and expectations for future growth have
drawn the attention of the capital markets and helped fuel consolidation within
the industry. With most cable markets already franchised and constructed,
growth-oriented MSO's turned to acquisitions as their primary method of
expansion. A flurry of acquisitions occurred during the period of 1986 through
1989, with the peak being reached in 1988. Most of these acquisitions were
made by companies already in the cable business who were seeking national
consolidation or regional clustering of cable television systems to produce
greater economies of scale and operating efficiencies. The number of
transactions decreased in 1990 due to federal government restrictions on banks
pertaining to highly leveraged transactions (HLT), uncertainty about the
regulatory environment, and other factors.
HLT restrictions caused less money to be available for the expansion,
upgrading, and trading of cable systems in 1990 and 1991. These restrictions
were subsequently removed in June 1992, and while the number of acquisitions
increased, they did not reach the same levels seen in the latter half of the
1980's. Passage of the Cable Television Consumer Protection and Competition
Act of 1992 and the resultant rate regulation decreased the overall
attractiveness of the cable industry to potential investors.
By 1994, several of the largest MSO's had formed or were exploring
alliances with both long distance and local telephone companies, as both the
cable and telephone industries were planning to enter one another's primary
lines of business. Simultaneously, a number of mid-sized MSO's were developing
exit strategies based on
10
16
the belief that success in the evolving cable industry would require a critical
mass of subscribers and access to substantial amounts of capital.
While the development of voice, video and data delivery technologies
holds the promise of substantial new services and revenues for the industry,
the near-term outlook based on established programming services continues to be
positive. Operators expect to continue to increase operating income by
continuing to attract more subscribers, exploit current and additional
opportunities for ancillary revenues, and improve operating efficiencies.
4. Competition
During the next several years, the cable industry may face additional
competition which could emerge in the form of system overbuilds, the
introduction of new technologies, and entry into the video distribution
business by telephone companies.
The long-term viability of overbuilds in most cable markets is
questionable at best. An overbuilder splits up the subscriber base, incurring
higher costs per subscriber and lower margins overall. Many attempted
overbuilders have been bought out by the incumbent or have simply gone out of
business. The likelihood of a successful overbuild in all but a few markets is
very small.
Cable television has begun to face increasing competition from new
distribution technologies including direct-broadcast satellite (DBS), satellite
master antenna television (SMATV), and multichannel multipoint distribution
service (MMDS). The ultimate success or failure of any of these television
delivery systems will depend largely on a combination of the three
interconnected factors of technology, regulation, and economics.
Malarkey-Taylor anticipates that the threat to cable television by these
technologies in the next few years will not be material, although various
technologies are proving adept at providing services in certain niche markets.
MMDS and SMATV typically have little or no effect on mature cable systems,
except in large urban areas where a high percentage of homes passed are in
multiple dwelling units (MDU's). DBS presents a greater competitive threat.
The DBS industry, which is still very young, has
11
17
thus far focused on building its customer base in areas not wired for cable
television. As of 1994, leaders in the DBS industry predicted that between 10%
and 20% of television households nationwide would use their service within ten
years. However, DBS is hampered by the fact that it does not carry off-air
broadcast signals.
Telephone companies have long shown an interest in expanding into
video distribution. For the most part, this competition has not materialized
as a result of existing regulatory restraints and technical limitations. By
the end of 1993, there was widespread recognition that technological
developments would force dramatic changes in such regulation, as the
telecommunications industry entered a consolidation period characterized by
mergers, joint ventures, and acquisitions.
Fiber optics are increasingly being utilized as telephone and cable
companies begin experimenting with 'full service' networks with the capability
of delivering voice, video and data services to the home. Several of the
largest MSO's, in conjunction with telephone companies, have built these
experimental systems to determine their feasibility from both technological and
marketing perspectives.
As of the mid-1990's, the telephone industry still is in the
experimental stage with regard to using fiber optic cable to deliver video
services to the home. For technological and financial reasons, full use of
fiber is probably years away. Additionally, federal legislation permitting
telephone and cable companies to compete directly with one another will most
likely incorporate a time delay before competition begins.
12
18
IV. SYSTEM DESCRIPTION
A. HISTORY AND MARKET
Tables I (A1) through (B4) present demographic data published in
Marketing Statistics' Demographics USA 1995 for the counties comprising the
regions served by the eight Systems in California and Oregon, respectively. In
California, the counties of Santa Clara, Monterey, San Benito, and San
Bernardino, or portions thereof, comprised the Gilroy System's service area.
The Hesperia System served portions of San Bernardino and Kern Counties.
Sections of San Luis Obispo and Santa Barbara Counties were located in the San
Luis Obispo System's service area, while the Tulare System's service area
included portions of Tulare and Fresno counties. Data for population,
households, and Effective Buying Income (EBI) were estimated for 1994 and
projected for 1999. Also presented, for comparison purposes, are statewide
data for California and nationwide data.
From 1994 through 1999, total U.S. population was projected to grow at
0.89% per year, and the annual growth rate of total households was forecasted
at 1.05%. Over the same period, the State of California was projected to
experience population growth of 0.70% per year and household growth of 0.45%
per year. Nationwide, average household EBI of $45,937 in 1994 was projected
to grow at 3.00% per year. The average household EBI in California in 1994 was
$50,713, with an annual growth rate of 2.30% through 1999.
1. Gilroy, CA
The counties (or portions thereof) of Santa Clara, Monterey, and San
Benito, California comprised the Gilroy System's service area. As of December
1995, about 42% of Gilroy's subscribers resided in Santa Clara, 37% in
Monterey, and 20% in San Benito. Subscribers ranged from low-income migrant
farm workers to well-educated professionals, although the preponderance of
subscribers were low income Hispanics. As of December 31, 1995, the Gilroy
System served 33,078 subscribers.
13
19
Santa Clara County is home to the community of Gilroy. Prominent
industries in this county include food processing, retail sales, tourism,
services, the manufacturing of paper products, and seed production. Major
employers include Gilroy Foods, Gilroy Canning (food processing), and Outlet
Shopping Centers (discount retail). Major medical facilities include South
Valley Hospital and Kaiser out-patient medical offices. There is a two-year
community college, Gavilan College, in Gilroy.
The economy of Santa Clara was adversely impacted by the 1993 closure
of the military facility Fort Ord. However, as of December 31, 1995, Gilroy
was beginning to grow in popularity as a bedroom community to Silicon Valley.
Additionally, Abbott Labs was slated to move into the area, bringing an
estimated 900 new jobs to the region.
The economy of Monterey County is based on agriculture, services,
retail trade, and manufacturing. Major employers include Basic Vegetable
Products, Casey Newspapers/Casey Printing (printing and publishing), and Cal
Compak Foods. Major medical facilities include Mee Memorial Hospital and
SoMoCo Medical Group. There is one community college extension facility in
King City. System subscribers in this county are frequently seasonal, signing
on in May and off in November to correspond with the immigrant labor work
schedule. However, the nature of the workplace is beginning to change as King
City attracts more residents commuting to Salinas for employment.
Industries present in San Benito County include agriculture, retail
trade, manufacturing, and services. The primary medical facilities in San
Benito County are Hazel Hawkins Memorial Hospital and San Benito Health
Foundation and Clinic.
Off-air reception of regional broadcast television signals was
generally poor for residents of the Gilroy System's service area. MMDS
providers had some presence in Greenfield (Monterey County), however, they did
not present a real threat to the cable operator as of the appraisal date.
Table I (A1) includes demographic data for the counties in the Gilroy
System. As shown, Santa Clara was much larger, with a 1994 population of
1,574,700, than Monterey (356,700) and San Benito (41,600). However, with an
annual projected
14
20
population growth rate of 2.82% through 1999, San Benito was forecasted to
expand the most rapidly. Population in Santa Clara was projected to grow at
0.81% annually, while Monterey's population was forecasted to decline at a
yearly rate of 2.04%.
As with population, the number of households in Santa Clara in 1994,
531,600, was proportionately larger than either Monterey or San Benito.
Projected household growth in San Benito was the highest of the three counties,
at 2.69% per year. Household growth was projected to be 0.42% per year in
Santa Clara, while in Monterey the number of households was projected to
decline at an annual rate of 2.46% through 1999.
Average EBI per household in Santa Clara in 1994 was estimated to be
$63,372. The corresponding figures were $50,626 in Monterey and $45,062 in San
Benito. Santa Clara also had a higher projected annual EBI growth rate of
2.63% than both Monterey (2.51%) and San Benito (0.36%). Household EBI figures
were substantially higher in Santa Clara and moderately higher in Monterey than
the national average of $45,937. The corresponding figure in San Benito was
comparable to the national average, although the majority of the Gilroy System
subscribers were low income.
TABLE I (A1)
Annual
1994 1999 Growth Rate
Estimate Projection 1994-1999
-------- ---------- ---------
GILROY SYSTEM
Santa Clara County, CA
- ----------------------
Total Population 1,574,700 1,639,400 0.81%
Total Households 531,600 542,800 0.42%
Median Age 33.05 N/A
Effective Buying Income (EBI)
Total EBI (000's) $33,688,736 $39,158,109 3.05%
Average Household EBI $63,372 $72,141 2.63%
15
21
TABLE I (A1) (CONTINUED)
Annual
1994 1999 Growth Rate
Estimate Projection 1994-1999
-------- ---------- ---------
GILROY SYSTEM
Monterey County, CA
- -------------------
Total Population 356,700 321,800 -2.04%
Total Households 112,700 99,500 -2.46%
Median Age 31.0 N/A
Effective Buying Income (EBI)
Total EBI (000's) $5,705,518 $5,701,382 -0.01%
Average Household EBI $50,626 $57,300 2.51%
San Benito County, CA
- ---------------------
Total Population 41,600 47,800 2.82%
Total Households 12,700 14,500 2.69%
Median Age 31.4 N/A
Effective Buying Income (EBI)
Total EBI (000's) $572,283 $665,112 3.05%
Average Household EBI $45,062 $45,870 0.36%
State of California
- -------------------
Total Population 31,957,300 33,089,800 0.70%
Total Households 10,886,200 11,130,600 0.45%
Median Age 32.7 N/A
Effective Buying Income (EBI)
Total EBI (000's) $552,074,838 $632,548,630 2.76%
Average Household EBI $50,713 $56,830 2.30%
United States of America
- ------------------------
Total Population 262,213,300 274,074,500 0.89%
Total Households 96,571,000 101,749,100 1.05%
Median Age 34.15 N/A
Effective Buying Income (EBI)
Total EBI (000's) $4,436,178,724 $5,418,070,332 4.08%
Average Household EBI $45,937 $53,249 3.00%
16
22
2. Hesperia, CA
As of December 31, 1995, the Hesperia System served portions of San
Bernardino and Kern Counties. About 77% of System subscribers resided in San
Bernardino, while the other 23% were in Kern County. Hesperia is primarily a
residential town. The majority of local businesses are small, such as
restaurants, motels, and shops. A substantial portion of the local population,
approximately 30%, receives some form of state-sponsored financial aid. About
40% of residents in the neighboring community of Adelanto are welfare
recipients. The 1993 closure of George Air Force Base, a military facility
located in the region, was an important factor causing high unemployment in the
region. Despite the high level of welfare recipients, as of the valuation
date, Adelanto and Rosamond were growing more rapidly than other parts of the
System's service area. These communities provided a source of affordable
housing for families with modest income.
The economy of Kern County is supported by services, agriculture,
retail trade, and mineral extraction. Major employers include Sun
World/Superior Farms, Grimmway Farms, and Giumarra Vineyards. Major medical
facilities include Mercy Healthcare, San Joaquin, Kern Medical Memorial, Mercy
Southwest, and Good Samaritan. The county is home to a branch campus of
California State University, the Pacific School of Law, and one community
college.
San Bernardino County had a population of 1,605,900 in 1994, with a
projected yearly growth rate of 0.61% through 1999, as shown in Table I (A2).
Kern County had a smaller population of 617,900, but a higher growth rate of
1.56%. The number of households in San Bernardino was 516,000 in 1994 and was
forecasted to grow at 0.39% per year through 1999. As with population, Kern
County had fewer households, at 200,500, but a higher household growth rate of
1.47% per year, than San Bernadino.
Estimated average EBI per household in San Bernardino in 1994 was
$44,943, with an annual growth rate of 2.22%. Kern County had a lower EBI of
$40,409, but a slightly higher EBI growth rate of 2.32% per year. Household
EBI figures for Hesperia
17
23
service area were lower than the corresponding figures for the State of
California and the U.S. as a whole.
TABLE I (A2)
Annual
1994 1999 Growth Rate
Estimate Projection 1994-1999
-------- ---------- ---------
HESPERIA SYSTEM
San Bernardino County, CA
-------------------------
Total Population 1,605,900 1,655,600 0.61%
Total Households 516,000 526,200 0.39%
Median Age 30.2 N/A
Effective Buying Income (EBI)
Total EBI (000's) $23,087,593 $26,279,762 2.62%
Average Household EBI $44,743 $49,943 2.22%
Kern County, CA
---------------
Total Population 617,900 667,600 1.56%
Total Households 200,500 215,700 1.47%
Median Age 30.75 N/A
Effective Buying Income (EBI)
Total EBI (000's) $8,101,940 $9,775,806 3.83%
Average Household EBI $40,409 $45,321 2.32%
3. San Luis Obispo, CA
Sections of San Luis Obispo and Santa Barbara Counties comprised the
San Luis Obispo System's service area. Generally, the communities served by
the System are economically stable. Particularly large employers in the region
contributing to the stability include the Pacific Gas and Electricity Company
and California Polytech College. Other large private employers include
Mid-State Bank, Hind Inc. (sportswear), and American Eagle Airline. The coast
of San Luis Obispo is populated with tourists and supports numerous restaurants
and hotels. The community of Atascadero, populated primarily by
low-to-middle-income residents, is home to Atascadero State Hospital.
18
24
Almost 93% of System subscribers resided in San Luis Obispo County,
which had a 1994 population of 229,900. The county was forecasted to grow at a
rate of 0.58% per year through 1999, as shown in Table I (A3). The households
in San Luis Obispo, totaling 84,500 in 1994, were projected to grow at a yearly
rate of 0.61%. Estimated average household EBI in San Luis Obispo of $45,148
was forecasted to grow by 2.18% annually. Although lower than the California
statewide household EBI figure, it was comparable to nationwide household EBI.
TABLE I (A3)
Annual
1994 1999 Growth Rate
Estimate Projection 1994-1999
-------- ---------- ---------
SAN LUIS OBISPO SYSTEM
San Luis Obispo County, CA
--------------------------
Total Population 229,900 236,700 0.58%
Total Households 84,500 87,100 0.61%
Median Age 34.6 N/A
Effective Buying Income (EBI)
Total EBI (000's) $3,815,008 $4,380,903 2.80%
Average Household EBI $45,148 $50,297 2.18%
Santa Barbara County, CA
------------------------
Total Population 338,400 398,100 3.30%
Total Households 133,400 134,800 0.21%
Median Age 33 N/A
Effective Buying Income (EBI)
Total EBI (000's) $7,021,150 $7,945,923 2.51%
Average Household EBI $52,632 $58,946 2.29%
4. Tulare, CA
The Tulare System serves portions of both Tulare County and Fresno
County. However, subscribers in Fresno comprised only about 1% of total Tulare
System subscribers. The vast majority resided in Tulare County. The service
area's economy is agriculture-based, and, as of 1995 was still experiencing the
negative effects of a 1991
19
25
crop-destroying freeze, which led to continuing high levels of unemployment.
The largest employer in the area was Wal Mart Distribution Center. About 50%
of the System's service area residents were Hispanic, many of whom were illegal
residents.
As of the appraisal date, Choice Wireless, an MMDS provider that
entered the market in 1993, had an estimated 3,000 subscribers, many in the
Tulare System's service area. As of December 1995, Choice Wireless offered
fewer channels, but at a lower price than the comparable System package.
Off-air reception of regional broadcast television stations from Fresno and
Bakersfield was good. The three factors of low- income residents, easy access
to off-air signals, and the presence of an aggressive competitor kept downward
pressure on the System's subscriber levels.
In 1994, Tulare County had a population of 351,000, with an annual
growth rate of 1.63%, shown in Table I (A4). The number of households in the
county was 107,800 in 1994, and was estimated to grow at 1.49% per year through
1999. In 1994, the average household EBI of $37,515 in Tulare was notably
lower than the corresponding figures for the State of California and the U.S.
as a whole.
TABLE I (A4)
Annual
1994 1999 Growth Rate
Estimate Projection 1994-1999
-------- ---------- ---------
TULARE SYSTEM
Tulare County, CA
-----------------
Total Population 351,000 380,500 1.63%
Total Households 107,800 116,100 1.49%
Median Age 30.2 N/A
Effective Buying Income (EBI)
Total EBI (000's) $4,044,102 $5,020,144 4.42%
Average Household EBI $37,515 $43,240 2.88%
20
26
TABLE I (A4) (CONTINUED)
Annual
1994 1999 Growth Rate
Estimate Projection 1994-1999
-------- ---------- ---------
TULARE SYSTEM
Fresno County, CA
-----------------
Total Population 755,800 812,500 1.46%
Total Households 246,000 263,900 1.41%
Median Age 30.25 N/A
Effective Buying Income (EBI)
Total EBI (000's) $9,658,848 $11,543,464 3.63%
Average Household EBI $39,264 $43,742 2.18%
In Oregon, portions of the counties of Lane, Douglas, Linn and
Josephine were served by the Central Region System. Portions of Coos and
Douglas Counties were included in the Coos Bay System's service area. The
Dallas System's service area covered the counties of Tillamook, Polk, Marion,
and Clatsop, and the Florence System served portions of Lane County. Data for
population, households, and Effective Buying Income (EBI) were estimated for
1994 and projected for 1999. Also presented, for comparison purposes, are
statewide data for Oregon and nationwide data.
From 1994 through 1999, the State of Oregon was projected to
experience population growth of 1.66% per year and household growth of 1.79%
per year. The average household EBI in Oregon in 1994 was estimated at
$40,597, and it was projected to grow at 3.32% per year through 1999.
5. Central Region, OR
Portions of the counties of Lane, Douglas, Josephine, and Linn
comprised the Central Region System's service area. About 71% of the
subscribers resided in Lane, 23% in Douglas, 3% in Josephine, while the
remainder resided in Linn.
The economy in Lane County is based on retail, lumber and wood, and
tourism. Major medical facilities in Lane County are Sacred Heart General
Hospital and
21
27
McKenzie Williamette Hospital. Higher education is available at the local
campus of the University of Oregon. Lane Community College provides an
additional education option. Douglas County is very similar to Lane County
economically, with retail trade, lumber and wood, and services as its dominant
industries.
As of the appraisal date, an MMDS competitor, American Telecasting,
had been in the Central Region System's service area for about two years.
There were no SMATV operators in the market, which was most likely due to the
limited numbers of MDU's in the area.
Table I (B1) indicates that Lane County had a 1994 population of
300,900, which was forecasted to grow at a rate of 1.23% through 1999. Douglas
County's smaller population of 98,800 was also forecasted to grow at a lower
yearly rate of 0.86%. The number of Households in Lane was estimated at
118,000 in 1994, and was forecasted to grow annually by 1.45%. As with
population, the number of households in Douglas was proportionately lower
(37,400) than the corresponding figure in Lane. Projected household growth for
Douglas was lower as well.
Average household EBI in 1994 was estimated to be $37,290 in Lane and
$32,121 in Douglas. Both EBI figures were notably lower than corresponding
figures for the State of Oregon ($40,597) and the U.S. as a whole ($45,957).
The annual EBI growth rates were projected at 3.28% in Lane and 2.55% in
Douglas.
TABLE I (B1)
Annual
1994 1999 Growth Rate
Estimate Projection 1994-1999
-------- ---------- ---------
CENTRAL REGION SYSTEM
Linn County, OR
---------------
Total Population 98,700 106,900 1.61%
Total Households 37,300 40,400 1.61%
Median Age 36.2 N/A
22
28
TABLE I (B1) (CONTINUED)
Annual
1994 1999 Growth Rate
Estimate Projection 1994-1999
-------- ---------- ---------
CENTRAL REGION SYSTEM
Effective Buying Income (EBI)
Total EBI (000's) $1,365,909 $1,754,617 5.14%
Average Household EBI $36,620 $43,431 3.47%
Josephine County, OR
--------------------
Total Population 69,700 79,500 2.67%
Total Households 28,100 32,600 3.02%
Median Age 40.8 N/A
Effective Buying Income (EBI)
Total EBI (000's) $864,228 $1,153,979 5.95%
Average Household EBI $30,755 $35,398 2.85%
Lane County, OR
---------------
Total Population 300,900 319,900 1.23%
Total Households 118,000 126,800 1.45%
Median Age 35.35 N/A
Effective Buying Income (EBI)
Total EBI (000's) $4,400,199 $5,557,458 4.78%
Average Household EBI $37,290 $43,829 3.28%
Douglas County, OR
------------------
Total Population 98,800 103,100 0.86%
Total Households 37,400 39,400 1.05%
Median Age 37.3 N/A
Effective Buying Income (EBI)
Total EBI (000's) $1,201,337 $1,435,185 3.62%
Average Household EBI $32,121 $36,426 2.55%
State of Oregon
---------------
Total Population 3,120,400 3,387,800 1.66%
Total Households 1,207,400 1,319,600 1.79%
Median Age 35.8 N/A
23
29
TABLE I (B1) (CONTINUED)
Annual
1994 1999 Growth Rate
Estimate Projection 1994-1999
-------- ---------- ---------
CENTRAL REGION SYSTEM
Effective Buying Income (EBI)
Total EBI (000's) $49,016,991 $63,085,455 5.18%
Average Household EBI $40,597 $47,806 3.32%
United States of America
------------------------
Total Population 262,213,300 274,074,500 0.89%
Total Households 96,571,000 101,749,100 1.05%
Median Age 34.15 N/A
Effective Buying Income (EBI)
Total EBI (000's) $4,436,178,724 $5,418,070,332 4.08%
Average Household EBI $45,937 $53,249 3.00%
6. Coos Bay, OR
The Coos Bay System served portions of Coos County and Douglas County.
However, about 90% of the subscribers resided in Coos County. Industries that
are predominant in Coos County include agriculture, commercial fishing, and
forestry. Bay Area Hospital serves the county.
As of the appraisal date, DBS competitors in the market included
Direct TV and Primestar, although, the number of subscribers was limited and
had yet to impact the System. SMATV operators also had a limited presence in
the market. There were no MMDS competitors in the market.
As shown in Table I (B2), Coos County had a population of 62,800, with
a projected annual growth rate of 0.50% through 1999. The number of households
was estimated at 25,200 in 1994, and was projected to grow at 0.78% per year.
Average household EBI in 1994 was estimated to be $31,285 in Coos, and was
forecasted to grow at an annual rate of 2.63%. Average EBI figures for the
System's service area were significantly lower than both the Oregon statewide
and nationwide averages.
24
30
TABLE I (B2)
Annual
1994 1999 Growth Rate
Estimate Projection 1994-1999
-------- ---------- ---------
COOS BAY SYSTEM
Coos County, OR
---------------
Total Population 62,800 64,400 0.50%
Total Households 25,200 26,200 0.78%
Median Age 38.75 N/A
Effective Buying Income (EBI)
Total EBI (000's) $788,394 $933,095 3.43%
Average Household EBI $31,285 $35,614 2.63%
Douglas County, OR
------------------
Total Population 98,800 103,100 0.86%
Total Households 37,400 39,400 1.05%
Median Age 37.3 N/A
Effective Buying Income (EBI)
Total EBI (000's) $1,201,337 $1,435,185 3.62%
Average Household EBI $32,121 $36,426 2.55%
7. Dallas, OR
The counties of Polk, Tillamook, Marion, and Clatsop comprised the
Dallas System's service area. Approximately 38% of System subscribers resided
in Polk, 31% in Marion, 24% in Tillamook, while less than 7% were in Clatsop.
The economy of the service area is based on lumber and wood products,
agriculture, and manufacturing. Valley Community Hospital serves the area from
the City of Dallas in Polk County.
In terms of population, Marion was the largest county in the service
area, with a population of 253,300. Population figures for Polk and Tillamook
were 56,500 and 23,500, respectively. With an annual growth rate of 2.43%,
Polk was projected to expand more rapidly than both Tillamook (1.96%) and
Marion (1.84%). The number of households in Marion in 1994 was 91,700.
Households totaled 20,600 in Polk and 9,700
25
31
in Tillamook. Projected household growth for Polk of 2.58%, was higher than
growth in Tillamook (1.98%) and Marion (1.89%).
Estimated average EBI per household of $40,200 in Marion was higher
than EBI figures for Polk and Tillamook of $36,245 and $32,432, respectively.
Marion also had a higher projected annual EBI growth rate at 3.45% than both
Tillamook (3.17%) and Polk (1.79%). Household EBI figures in the Dallas
System's service area were lower than EBI figures for both the State of Oregon
and the U.S. as a whole. This information is presented in Table I (B3).
TABLE I (B3)
Annual
1994 1999 Growth Rate
Estimate Projection 1994-1999
-------- ---------- ---------
DALLAS SYSTEM
Tillamook County, OR
--------------------
Total Population 23,500 25,900 1.96%
Total Households 9,700 10,700 1.98%
Median Age 41.3 N/A
Effective Buying Income (EBI)
Total EBI (000's) $314,595 $405,556 5.21%
Average Household EBI $32,432 $37,902 3.17%
Clatsop County, OR
------------------
Total Population 35,400 37,700 1.27%
Total Households 14,100 15,100 1.38%
Median Age 37.05 N/A
Effective Buying Income (EBI)
Total EBI (000's) $465,808 $529,530 2.60%
Average Household EBI $33,036 $35,068 1.20%
Polk County, OR
---------------
Total Population 56,500 63,700 2.43%
Total Households 20,600 23,400 2.58%
Median Age 35.5 N/A
26
32
TABLE I (B3) (CONTINUED)
Annual
1994 1999 Growth Rate
Estimate Projection 1994-1999
-------- ---------- ---------
DALLAS SYSTEM
Effective Buying Income (EBI)
Total EBI (000's) $746,649 $926,837 4.42%
Average Household EBI $36,245 $39,608 1.79%
Marion County, OR
-----------------
Total Population 253,300 277,500 1.84%
Total Households 91,700 100,700 1.89%
Median Age 35.05 N/A
Effective Buying Income (EBI)
Total EBI (000's) $3,686,300 $4,796,522 5.41%
Average Household EBI $40,200 $47,632 3.45%
8. Florence, OR
As of the appraisal date, the Florence System's subscribers resided in
or near Lane County, Oregon. Lane County, served by the Central Region System,
was discussed earlier in this report. Data is presented in Table I (B4).
TABLE I (B4)
Annual
1994 1999 Growth Rate
Estimate Projection 1994-1999
-------- ---------- ---------
FLORENCE SYSTEM
Lane County, OR
---------------
Total Population 300,900 319,900 1.23%
Total Households 118,000 126,800 1.45%
Median Age 35.35 N/A
Effective Buying Income (EBI)
Total EBI (000's) $4,400,199 $5,557,458 4.78%
Average Household EBI $37,290 $43,829 3.28%
27
33
B. SERVICES
Tables II (A1) through (H2) present information on programming offered
to subscribers in the eight Systems, as of the appraisal date. Given the use
of multiple headends in each System and varying channel capacities, program
line-ups available to subscribers differed within the individual Systems. The
premium services are shown in boldface and tier services are indicated by =, +,
++ and +++ markings.
1. Gilroy, CA
As of December 31, 1995, Gilroy subscribers were served by four
headends. Table II (A1) presents the programming service offered by the Gilroy
headend, which is microwaved to the counties of Santa Clara and San Benito.
Subscribers receiving this programming service comprised about 60% of total
System subscribers. Programming included a 21-channel basic service, two tier
services, six premium channels, and one pay-per-view channel. Basic service
included fourteen local broadcast TV stations, six satellite-delivered
services, and one community access programming service. Premium services
included Encore, The Movie Channel, The Disney Channel, Showtime, Cinemax and
HBO. The single pay-per-view service offered was Request. Subscribers
residing in Monterey and San Benito, which comprised about 19% of System
subscribers, received the same service with one exception -- Encore was not
available. In its place, C-SPAN was offered.
Roughly 9% of subscribers received programming from the
Soledad/Gonzales headend. The 35-channel lineup presented in Table II (A2)
included a 16-channel basic service, a 7-channel tier service, a 6-channel tier
service, five premium channels, and one pay-per-view service.
About 8% of System subscribers received the programming shown in Table
II (A3) from the King City headend, while less than 5% received the same
programming from the Greenfield headend. These subscribers received a
24-channel basic service, a 3-channel tier, a 5-channel tier service, and three
premium channels.
28
34
TABLE II (A1)
GILROY HEADEND
* 1 REQUEST - PAY PER VIEW
2 KTVU 2-Fox Oakland, CA
3 KICU-TV 36-IND San Jose, CA
4 KRON-TV 4-NBC San Francisco, CA
5 KCCN-TV 46-CBS Monterey, CA
6 KSBW 8-NBC Salinas-Monterey, CA
7 KGO-TV 7-ABC San Francisco, CA
8 KCBA 35-Fox Salinas-Monterey, CA
9 KQED 9-PBS San Francisco, CA
10 KPIX 5-CBS San Francisco, CA
11 KBHK-TV 44-Ind San Francisco, CA
12 KNTV 11-ABC San Jose, CA
13 KSMS-TV 67-Univsn Monterey, CA
14 KTEH 54-PBS San Jose, CA
* 15 ENCORE
* 16 THE MOVIE CHANNEL
* 17 THE DISNEY CHANNEL
* 18 SHOWTIME
* 20 CINEMAX
* 21 HBO
+ 22 The Family Channel
+ 23 USA Network
+ 24 The Discovery Channel
+ 25 TNT
= 26 CNN
= 27 The Nashville Network
= 28 ESPN
29 Lifetime
30 QVC
31 Arts & Entertainment
32 Nickelodeon
33 WTBS 17-IND Atlanta, GA
34 Local - Community Access/PEG
35 KSTS 48-Telemundo San Jose, CA
36 MTV
29
35
TABLE II (A2)
SOLEDAD/GONZALES
* 1 REQUEST - PAY PER VIEW
2 KTVU 2-Fox Oakland, CA
3 WTBS 17-IND Atlanta, GA
4 KCCN-TV 46-CBS Monterey, CA
5 KCBA 35-Fox Salinas-Monterey, CA
6 KSBW 8-NBC Salinas-Monterey, CA
7 Local - Community Access/PEG
8 Local - Community Access/PEG
+ 9 USA Network
10 KNTV 11-ABC San Jose, CA
11 KQED 9-PBS San Francisco, CA
12 KICU-TV 36-IND San Jose, CA
13 KSMS-TV 67-Univsn Monterey, CA
14 QVC
= 15 Lifetime
= 16 The Family Channel
= 17 ESPN
= 18 The Nashville Network
= 20 American Movie Classics
= 21 Country Music TV
= 22 Galavision
+ 23 CNN
+ 24 The Discovery Channel
* 25 HBO
* 26 CINEMAX
* 28 SHOWTIME
29 Sneak Prevue
* 30 THE MOVIE CHANNEL
* 31 THE DISNEY CHANNEL
+ 32 Nickelodeon
+ 33 CNN Headline News
34 Arts & Entertainment
+ 35 Cartoon Network
36 MTV
37 Home Shopping Network
30
36
TABLE II (A3)
KING CITY AND GREENFIELD HEADENDS
* 2 THE MOVIE CHANNEL
3 KCBA 35-Fox Salinas-Monterey, CA
4 The Discovery Channel
* 5 SHOWTIME
6 The Family Channel
7 Galavision
8 KTVU 2-Fox Oakland, CA
9 KQED 9-PBS San Francisco, CA
10 KSBW 8-NBC Salinas-Monterey, CA
11 KNTV 11-ABC San Jose, CA
12 KCCN-TV 46-CBS Monterey, CA
13 KSMS-TV 67-Univsn Monterey, CA
* 14 THE DISNEY CHANNEL
15 Local - Monterey Co. Office Educational
16 Local - Community Access/PEG
+ 17 WTBS 17-IND Atlanta, GA
+ 18 WGN-TV
+ 20 TNT
+ 21 CNN
+ 22 CNN Headline News
23 QVC
24 The Nashville Network
25 USA Network
26 MTV
27 Nickelodeon
28 ESPN
= 29 The Learning Channel
= 30 The Weather Channel
= 31 Arts & Entertainment
32 Bravo
33 American Movie Classics
34 Country Music TV
35 Sci-Fi Channel
36 Lifetime
37 Home Shopping Network
31
37
2. Hesperia, CA
The Hesperia System operated with five headends as of the appraisal
date. Table II (B1) presents the programming available to subscribers served
by the Hesperia headend, who comprised 58% of total System subscribers.
Programming included a 21-channel basic service, an 8-channel tier service, a
7-channel tier service, six premium channels, and one pay-per-view service.
Basic service included nine local broadcast TV stations, 12 satellite-delivered
services, and one local community programming channel. Premium services
included HBO, Cinemax, Showtime, The Movie Channel, Encore, and The Disney
Channel. Request pay-per-view service was also offered.
About 19% of System subscribers received the programming shown in
Table II (B2) from the Adelanto headend. This line-up was similar to the
line-up available from the Hesperia headend. Minor differences included the
packaging of Comedy Central and VH-1, and the inclusion of BET in place of
Nostalgia.
About 18% of subscribers had access to a 40-channel programming
service from the Mojave/Rosamond headend shown in Table II (B3). Included were
a 26-channel basic service (channel 29 was shared by Comedy Central and VH-1),
a 5-channel tier service, a 4-channel tier, and five premium channels.
About 4% of System subscribers received a 28-channel programming
service from the Boron headend, while 1% received a 40-channel programming
service from the North Edwards headend. These services are presented in Tables
II (B4) and (B5), respectively.
TABLE II (B1)
HESPERIA HEADEND
2 KCBS-TV 2-CBS Los Angeles, CA
= 3 ESPN
4 KNBC 4-NBC Los Angeles, CA
5 KTLA 5-Ind Los Angeles, CA
6 KCET 28-PBS Los Angeles, CA
32
38
TABLE II (B1) (CONTINUED)
HESPERIA HEADEND
7 KABC-TV 7-ABC Los Angeles, CA
8 KHIZ 64-Ind Barstow, CA
9 KCAL 9-Ind Los Angeles, CA
10 Univision
11 KTTV 11-Fox Los Angeles, CA
12 WGN-TV
13 KCOP 13-Ind Los Angeles, CA
14 QVC
15 Local - Character Generated
= 16 The Travel Channel
= 17 Arts & Entertainment
= 18 The Family Channel
= 19 Country Music TV
= 20 Lifetime
= 21 The Nashville Network
= 22 American Movie Classics
+ 23 CNN Headline News
+ 24 The Discovery Channel
25 The Learning Channel
26 C-SPAN
+ 27 Nickelodeon
+ 28 USA Network
+ 29 CNN
30 Comedy Central
30 VH-1
31 Nostalgia
32 MTV
33 TNT
+ 34 Prime Sports
* 35 HBO
36 WTBS 17-Ind Atlanta, GA
* 37 CINEMAX
* 38 SHOWTIME
* 39 THE MOVIE CHANNEL
* 40 ENCORE
* 41 THE DISNEY CHANNEL
* 42 REQUEST - PAY PER VIEW
43 Home Shopping Network
+ 44 TV Food Network
33
39
TABLE II (B2)
ADELANTO HEADEND
2 KCBS-TV 2-CBS Los Angeles, CA
= 3 ESPN
4 KNBC 4-NBC Los Angeles, CA
5 KTLA 5-Ind Los Angeles, CA
6 KCET 28-PBS Los Angeles, CA
7 KABC-TV 7-ABC Los Angeles, CA
8 KHIZ 64-Ind Barstow, CA
9 KCAL 9-Ind Los Angeles, CA
10 Univision
11 KTTV 11-Fox Los Angeles, CA
12 WGN-TV
13 KCOP 13-Ind Los Angeles, CA
14 QVC
15 Local - Character Generated
= 16 The Travel Channel
= 17 Arts & Entertainment
= 18 The Family Channel
= 19 Country Music TV
= 20 Lifetime
= 21 The Nashville Network
= 22 American Movie Classics
+ 23 CNN Headline News
+ 24 The Discovery Channel
25 The Learning Channel
26 C-SPAN
+ 27 Nickelodeon
+ 28 USA Network
+ 29 CNN
= 30 Comedy Central
= 30 VH-1
31 Black Entertainment TV
32 MTV
33 TNT
+ 34 Prime Sports
* 35 HBO
36 WTBS 17-Ind Atlanta, GA
* 37 CINEMAX
34
40
TABLE II (B2) (CONTINUED)
ADELANTO HEADEND
* 38 SHOWTIME
* 39 THE MOVIE CHANNEL
* 40 ENCORE
* 41 THE DISNEY CHANNEL
* 42 REQUEST - PAY PER VIEW
43 Home Shopping Network
+ 44 TV Food Network
35
41
TABLE II (B3)
MOJAVE/ROSAMOND HEADEND
2 KCBS-TV 2-CBS Los Angeles, CA
3 KHIZ 64-Ind Barstow, CA
4 KNBC 4-NBC Los Angeles, CA
5 KTLA 5-Ind Los Angeles, CA
6 ESPN
7 KABC-TV 7-ABC Los Angeles, CA
8 KTBN-TV 40 Ind Los Angeles, CA
9 KCAL 9-Ind Los Angeles, CA
10 Spanish International Network
11 KTTV 11-Fox Los Angeles, CA
12 KCET 28-PBS Los Angeles, CA
13 KCOP 13-Ind Los Angeles, CA
14 The Family Channel
+ 15 TV Food Network
+ 16 ESPN 2
+ 17 WTBS 17-Ind Atlanta, GA
+ 18 WGN-TV
= 19 Lifetime
= 20 CNN
= 21 CNN Headline News
= 22 The Discovery Channel
= 23 American Movie Classics
* 24 HBO
* 25 CINEMAX
* 26 SHOWTIME
* 27 THE MOVIE CHANNEL
28 MTV
29 Comedy Central
29 VH-1
* 30 THE DISNEY CHANNEL
31 Local - Community Access/PEG
32 ACTS
33 CNBC
34 QVC
35 USA Network
36 Sci-Fi Channel
37 Bravo
38 E! - Entertainment
39 Home Shopping Network
40 The Nashville Network
41 Nickelodeon
36
42
TABLE II (B4)
BORON HEADEND
2 KCBS-TV 2-CBS Los Angeles, CA
+ 3 WTBS 17-Ind Atlanta, GA
4 KNBC 4-NBC Los Angeles, CA
5 KTLA 5-Ind Los Angeles, CA
* 6 SHOWTIME
7 KABC-TV 7-ABC Los Angeles, CA
8 KHIZ 64-Ind Barstow, CA
9 KCAL 9-Ind Los Angeles, CA
+ 10 The Discovery Channel
11 KTTV 11-Fox Los Angeles, CA
12 KBAK-TV 29-ABC Bakersfield, CA
13 KCOP 13-Ind Los Angeles, CA
14 MTV
15 KERO-TV 23-CBS Bakersfield, CA
16 Home Shopping Network
* 17 THE MOVIE CHANNEL
+ 18 CNN
20 The Family Channel
* 21 HBO
* 22 THE DISNEY CHANNEL
23 ESPN
24 C-SPAN
+ 25 The Nashville Network
26 QVC
+ 27 TV Food Network
28 Nickelodeon
= 29 American Movie Classics
= 30 Lifetime
37
43
TABLE II (B5)
NORTH EDWARDS HEADEND
2 KCBS-TV 2-CBS Los Angeles, CA
3 Arts & Entertainment
4 KNBC 4-NBC Los Angeles, CA
5 KTLA 5-Ind Los Angeles, CA
6 KCET 28-PBS Los Angeles, CA
7 KABC-TV 7-ABC Los Angeles, CA
8 KHIZ 64-Ind Barstow, CA
9 KCAL 9-Ind Los Angeles, CA
10 The Learning Channel
11 Fox Network
12 WGN-TV
13 KCOP 13-Ind Los Angeles, CA
14 QVC
15 KTBN-TV 40 Ind Los Angeles, CA
16 WTBS 17-Ind Atlanta, GA
17 C-SPAN
+ 18 CNN
+ 20 Nickelodeon
+ 21 CNN Headline News
+ 22 The Discovery Channel
= 23 American Movie Classics
= 24 The Family Channel
= 25 Lifetime
= 26 ESPN
= 27 Sci-Fi Channel
= 28 The Nashville Network
= 29 Country Music TV
30 Comedy Central
30 VH-1
31 MTV
32 TNT
+ 33 Prime Sports
* 34 HBO
* 35 CINEMAX
36 The Travel Channel
* 37 SHOWTIME
* 38 THE MOVIE CHANNEL
* 39 THE DISNEY CHANNEL
+ 40 USA Network
41 Home Shopping Network
+ 42 TV Food Network
38
44
3. San Luis Obispo, CA
As of the appraisal date, the San Luis Obispo System had four
headends. Table II (C1) presents the programming available to subscribers
receiving service from the San Luis Obispo County headend. These subscribers
comprised about 56% of total System subscribers. Programming included a
22-channel basic service, a 13-channel expanded basic service, a 6-channel tier
service, two 4-channel tiers, six premium channels, and one pay-per-view
service. Basic service included eight local broadcast TV stations, ten
satellite-delivered services, and five local community access programming
services. Premium services included The Disney Channel, Showtime, Cinemax,
HBO, The Movie Channel, and Playboy. The pay-per-view service Request was also
available. Due to limited capacity, channel sharing was employed for several
channels, including two local community access programming services, VH-1, and
Comedy Central.
About 37% of subscribers were served by the Atascadero headend. These
subscribers had access to the 36 channels of programming shown in Table II
(C2). Basic service included one local community access programming channel,
and the same local broadcast TV stations and satellite-delivered services
available at the San Luis Obispo County headend. Premium and pay-per-view
services also duplicated those at the San Luis Obispo County headend.
About 5% of San Luis Obispo System subscribers were served by the
Guadalupe headend, and less than 2% were served by the Los Alamos headend.
Tables II (C3) and (C4) present the programming services received by those
subscribers, respectively.
39
45
TABLE II (C1)
SAN LUIS OBISPO HEADEND
2 KCOY-TV 12-CBS Santa Maria, CA
3 KEYT-TV 3-ABC Santa Barbara, CA
4 KSBY 6-NBC San Luis Obispo, CA
5 KTLA 5-Ind Los Angeles, CA
6 California Channel
7 The Family Channel
8 KCET 28-PBS Los Angeles, CA
9 KCAL 9-Ind Los Angeles, CA
10 C-SPAN
11 KTTV 11-Fox Los Angeles, CA
12 QVC
13 KADY-TV 63-Ind Oxnard, CA
14 WTBS 17-Ind Atlanta, GA
15 Arts & Entertainment
16 The Learning Channel
* 17 THE DISNEY CHANNEL
+ 18 Prime Sports
* 19 SHOWTIME
* 20 CINEMAX
* 21 HBO
* 22 THE MOVIE CHANNEL
+ 23 Bravo
* 24 REQUEST - PAY PER VIEW
= 25 CNN
= 26 The Nashville Network
= 27 American Movie Classics
= 28 Lifetime
= 29 Comedy Central
= 30 CNBC
= 31 ESPN
32 Nickelodeon
33 USA Network
+ 34 The Discovery Channel
35 TNT
36 MTV
= 37 Univision
= 38 Prevue Guide
= 39 Home Shopping Network
= 40 Sneak Prevue
= 41 TV Food Network
= 42 ESPN 2
+++ 43 The History Channel
+++ 45 Country Music TV
40
46
TABLE II (C1) (CONTINUED)
SAN LUIS OBISPO HEADEND
+++ 46 FXM - Fox Movies
+++ 47 Eternal Word TV Network
++ 48 Cartoon Network
++ 50 E! - Entertainment TV
++ 51 Sci-Fi Channel
++ 52 Newstalk Television
+ 53 The Weather Channel
+ 54 CNN Headline News
+ 55 Home & Garden TV
59 Local - Government Access
60 Local - Educational Access
61 Local - Community Access/PEG
* 80 PLAYBOY
41
47
TABLE II (C2)
ATASCADERO HEADEND
2 KCOY-TV 12-CBS Santa Maria, CA
3 KEYT-TV 3-ABC Santa Barbara, CA
4 KSBY 6-NBC San Luis Obispo, CA
5 KTLA 5-Ind Los Angeles, CA
6 Local - Community Access/PEG
7 The Family Channel
8 KCET 28-PBS Los Angeles, CA
9 KCAL 9-Ind Los Angeles, CA
10 C-SPAN
11 KTTV 11-Fox Los Angeles, CA
12 QVC
13 KADY-TV 63-Ind Oxnard, CA
14 WTBS 17-Ind Atlanta, GA
15 Arts & Entertainment
16 The Learning Channel
* 17 THE DISNEY CHANNEL
+ 18 Prime Sports
* 19 SHOWTIME
* 20 CINEMAX
* 21 HBO
* 22 THE MOVIE CHANNEL
+ 23 Bravo
* 24 REQUEST - PAY PER VIEW
= 25 CNN
= 26 The Nashville Network
= 27 American Movie Classics
= 28 Lifetime
= 29 Comedy Central
= 29 VH-1
= 30 CNBC
= 31 ESPN
32 Nickelodeon
33 USA Network
+ 34 The Discovery Channel
35 TNT
36 MTV
* 80 PLAYBOY
42
48
TABLE II (C3)
GUADALUPE HEADEND
2 KCOY-TV 12-CBS Santa Maria, CA
3 KEYT-TV 3-ABC Santa Barbara, CA
4 KSBY 6-NBC San Luis Obispo, CA
5 KTLA 5-Ind Los Angeles, CA
6 Local - Community Access/PEG
7 K07TA 7-LPTV Santa Maria, CA
8 KCET 28-PBS Los Angeles, CA
9 KCAL 9-Ind Los Angeles, CA
10 C-SPAN
11 KTTV 11-Fox Los Angeles, CA
12 QVC
13 KADY-TV 63-Ind Oxnard, CA
14 WTBS 17-Ind Atlanta, GA
15 Arts & Entertainment
16 The Learning Channel
* 17 THE DISNEY CHANNEL
+ 18 Prime Sports
* 19 SHOWTIME
* 20 CINEMAX
* 21 HBO
* 22 THE MOVIE CHANNEL
+ 23 Bravo
* 24 REQUEST - PAY PER VIEW
= 25 CNN
= 26 The Nashville Network
= 27 American Movie Classics
= 28 Lifetime
= 29 Comedy Central
= 29 VH-1
= 30 CNBC
31 ESPN
32 Nickelodeon
33 USA Network
+ 34 The Discovery Channel
35 TNT
36 MTV
* 80 PLAYBOY
43
49
TABLE II (C4)
LOS ALAMOS HEADEND
2 QVC
3 KEYT-TV 3-ABC Santa Barbara, CA
4 The Family Channel
5 Bravo
6 KSBY 6-NBC San Luis Obispo, CA
* 7 HBO
* 8 CINEMAX
9 The learning Channel
10 MTV
11 ESPN
12 KCOY-TV 12-CBS Santa Maria, CA
13 Local - Community Access
= 14 USA Network
= 15 Lifetime
= 16 Country Music TV
+ 17 CNN
+ 18 WTBS 17-Ind Atlanta, GA
+ 19 The Discovery Channel
+ 20 CNN Headline News
* 21 THE DISNEY CHANNEL
* 22 GALAVISION
4. Tulare, CA
As of the appraisal date, the Tulare System was served by three
headends. About 98% of System subscribers received programming from the
Porterville/Tulare headend. As shown in Table II (D1), the service consisted
of a 21-channel basic service, two 6-channel tier services, five premium
channels, and one pay-per-view channel. Basic service included 14 local
broadcast TV stations, six satellite-delivered services, and one local
community access programming service. Premium services offered were The Disney
Channel, Cinemax, The Movie Channel, HBO, and Showtime. The pay-per-view
service Request was also offered.
44
50
About 1% of the subscribers received a 12-channel program line-up from
the California Hot Springs headend, and less than 1% subscribers received a
13-channel line-up from Jack Ranch/Posey headend. Tables II (D2) and (D3)
present this information.
TABLE II (D1)
PORTERVILLE/TULARE HEADEND
+ 1 Country Music TV
2 KSEE 24-NBC Fresno, CA
3 KFSN-TV 30-ABC Fresno, CA
4 KVPT 18-PBS Fresno, CA
5 KTLA 5-Ind Los Angeles, CA
6 KMPH 26-Fox Visalia-Fresno, CA
7 KJEO 47-CBS Fresno, CA
8 KBAK-TV 29-ABC Bakersfield, CA
9 KFTV 21-Univsn Hanford, CA
10 KERO-TV 23-CBS Bakersfield, CA
11 KNXT 49-ETV Visalia, CA
12 Local-Character Generated
13 USA Network
14 WTBS 17-Ind Atlanta, GA
+ 15 C-SPAN
+ 15 Prime Sports
+ 16 TNT
17 KGET 17-NBC Bakersfield, CA
= 18 The Discovery Channel
= 19 The Weather Channel
= 20 Lifetime
= 21 ESPN
= 22 CNBC
23 MTV
+ 24 CNN
= 25 Nickelodeon
+ 26 The Nashville Network
27 Trinity Broadcast Network
+ 28 CNN Headline News
29 Arts & Entertainment
* 30 THE DISNEY CHANNEL
* 31 CINEMAX
* 32 REQUEST - PAY PER VIEW
* 33 THE MOVIE CHANNEL
* 34 HBO
* 35 SHOWTIME
36 QVC
37 KAIL 53-Ind Fresno, CA
38 KMSG-TV 59-Telemundo Sanger, CA
39 KKAG 61-Ind Porterville, CA
45
51
TABLE II (D2)
CALIFORNIA HOT SPRINGS HEADEND
2 KSEE 24-NBC Fresno, CA
3 ESPN
4 KMPH 26-Fox Visalia-Fresno, CA
* 5 SHOWTIME
6 KERO-TV 23-CBS Bakersfield, CA
7 KBAK-TV 29-ABC Bakersfield, CA
8 QVC
9 KVPT 18-PBS Fresno, CA
10 CNN
11 Arts & Entertainment
12 Sci-Fi Channel
13 The Discovery Channel
TABLE II (D3)
JACK RANCH/POSEY HEADEND
2 KFSN-TV 30-ABC Fresno, CA
3 ESPN
4 KSEE 24-NBC Fresno, CA
* 5 THE MOVIE CHANNEL
6 KMPH 26-Fox Visalia-Fresno, CA
7 KJEO 47-CBS Fresno, CA
8 KBAK-TV 29-ABC Bakersfield, CA
9 QVC
10 CNN
11 KVPT 18-PBS Fresno, CA
12 Sci-Fi Channel
13 The Discovery Channel
22 CNN Headline News
5. Central Region, OR
As of the appraisal date, there were eight headends in the Central
Region System. Table II (E1) presents the programming available to subscribers
receiving service from the Bear Mountain headend. These subscribers,
comprising about 45% of total System subscribers, had access to a 15-channel
basic service, three tier services
46
52
with between four to six channels each, and five premium channels. The basic
line-up included seven local broadcast TV stations, nine satellite-delivered
services, one microwave-delivered service, and one local community access
programming channel. Premium services included The Movie Channel, Showtime,
HBO, Cinemax, and The Disney Channel. The same programming services were
offered to subscribers served from the Drain/Yoncalla headend, which served
less than 6% of System subscribers; and the Bear Mountain/Cottage Grove
headend, which served only about 3% of subscribers.
About 14% of System subscribers, served by the Sutherlin/Oakland
headend, received programming services presented in Table II (E2). A
15-channel basic service was comprised of six local broadcast TV stations,
eight satellite-delivered services, and one local community access programming
service. Additionally, a 4-channel tier, a 5-channel tier, and four premium
services were available to these subscribers.
Table II (E3) presents the programming offered to the 13% of total
System subscribers receiving service from the Cottage Grove headend.
Programming available included a 29-channel basic service, a 4-channel tier
service, and six premium channels. Basic service consisted of seven local
broadcast TV stations, 18 satellite-delivered programming services, one
microwave-delivered service, and three local community access programming
channels.
Approximately 10% of subscribers received the programming service
shown in Table II (E4) from the Veneta headend. Basic service consisted of
seven local broadcast TV stations, four satellite-delivered services, one
microwave-delivered service, and one local community access programming
channel. The subscribers could also receive a 4-channel tier, a 5-channel
tier, and four premium services.
The Cave Junction headend served less than 6% of System subscribers,
while the Brownsville headend served less than 4% of System subscribers. The
programming services available from those headends were presented in Tables II
(E5) and (E6), respectively.
47
53
TABLE II (E1)
BEAR MOUNTAIN AND BEAR MT./COTTAGE GROVE HEADENDS
+ 2 Nickelodeon
+ 3 Country Music TV
4 KEZI 9-ABC Eugene, OR
5 WGN-TV
6 KMTR 16-NBC Eugene, OR
7 KOAC-TV 7-PBS Corvallis, OR
8 KVAL-TV 13-CBS Eugene, OR
9 Local - Community Access/PEG
9 C-SPAN
10 WTBS 17-Ind Atlanta, GA
11 K25AS 25-Fox Eugene, OR
12 KEVU 34-Ind Eugene, OR
13 QVC
* 14 THE MOVIE CHANNEL
+ 15 The Discovery Channel
++ 16 The Weather Channel
* 17 SHOWTIME
* 18 HBO
+ 19 The Family Channel
20 Prime Sports Northwest
* 21 BLAZERCABLE
++ 22 Cinemax
= 23 CNN Headline News
= 24 ESPN
= 25 CNN
= 26 Lifetime
= 27 Sci-Fi Channel
+ 28 The Nashville Network
29 MTV
30 VH-1
30 Comedy Central
31 Arts & Entertainment
++ 32 Cartoon Network
* 33 THE DISNEY CHANNEL
++ 34 The Learning Channel
35 American Movie Classics
+ 36 USA Network
48
54
TABLE II (E2)
SUTHERLIN/OAKLAND HEADEND
* 2 HBO
3 KLSR-TV 29-Fox Winston, OR
4 KPIC 4-CBS Roseburg, OR
5 KOBI 5-NBC Medford, OR
6 ESPN
7 KOAC-TV 7-PBS Corvallis, OR
8 QVC
9 KEZI 9-ABC Eugene, OR
10 KMTR 16-NBC Eugene, OR
11 Local - Community Access/PEG
* 12 THE MOVIE CHANNEL
= 13 Country Music TV
+ 14 CNN Headline News
+ 15 CNN
+ 15 Blazercable
+ 16 TNT
17 The Family Channel
18 Nickelodeon
19 Arts & Entertainment
* 20 THE DISNEY CHANNEL
* 21 SHOWTIME
22 Lifetime
23 American Movie Classics
24 E! - Entertainment TV
= 95 Sci-Fi Channel
= 96 The Nashville Network
= 97 USA Network
+ 98 WGN-TV
+ 99 WTBS 17-Ind Atlanta, GA
49
55
TABLE II (E3)
COTTAGE GROVE HEADEND
2 KMTR 16-NBC Eugene, OR
3 C-SPAN
4 Local-Character Generated
5 KOBI 5-NBC Medford, OR
6 Local - Community Access/PEG
7 KOAC-TV 7-PBS Corvallis, OR
8 ESPN
9 KEZI 9-ABC Eugene, OR
10 Local - Community Access/PEG
11 K25AS 25-Fox Eugene, OR
12 KEVU 34-Ind Eugene, OR
13 KVAL-TV 13-CBS Eugene, OR
14 Arts & Entertainment
15 WGN-TV
16 WTBS 17-Ind Atlanta, GA
+ 17 WWOR-TV
+ 18 Nickelodeon
20 The Family Channel
+ 21 The Nashville Network
+ 22 Country Music TV
* 23 THE DISNEY CHANNEL
* 24 HBO
* 25 CINEMAX
* 26 SHOWTIME
+ 27 USA Network
+ 28 The Discovery Channel
= 29 CNN
30 Blazercable
= 30 CNN Headline News
= 31 The Weather Channel
32 New Inspirational Network
33 Trinity Broadcast Network
34 MTV
35 Nostalgia
36 American Movie Classics
37 The Learning Channel
* 38 THE MOVIE CHANNEL
39 Lifetime
* 40 ENCORE
41 QVC
= 42 Sci-Fi Channel
43 The Travel Channel
44 Bravo
45 fX
46 Home Shopping Network
50
56
TABLE II (E4)
VENETA HEADEND
2 KATU 2-ABC Portland, OR
= 3 ESPN
* 4 HBO
5 The Family Channel
6 KOIN 6-CBS Portland, OR
7 KOAC-TV 7-PBS Corvallis, OR
8 KMTR 16-NBC Eugene, OR
9 MTV
10 KVAL-TV 13-CBS Eugene, OR
11 KEZI 9-ABC Eugene, OR
12 K25AS 25-Fox Eugene, OR
13 Local - Community Access/PEG
+ 14 CNN Headline News
+ 15 CNN
= 16 Nickelodeon
= 17 USA Network
* 18 SHOWTIME
* 19 THE DISNEY CHANNEL
+ 20 WTBS 17-Ind Atlanta, GA
+ 21 The Nashville Network
+ 22 The Discovery Channel
* 23 THE MOVIE CHANNEL
24 Nostalgia
98 Blazercable
98 C-SPAN
= 99 Sci-Fi Channel
51
57
TABLE II (E5)
CAVE JUNCTION HEADEND
2 WTBS 17-Ind Atlanta, GA
3 The Family Channel
* 4 HBO
5 KOBI 5-NBC Medford, OR
6 ESPN
7 KSYS 8-PBS Medford, OR
8 Blazercable
= 8 CNN
= 9 USA Network
10 KTVL-TV 10-CBS Medford, OR
11 Nickelodeon
= 12 The Discovery Channel
13 KDRV 12-ABC Medford, OR
+ 14 American Movie Classics
= 15 CNN Headline News
+ 16 TNT
+ 17 Country Music TV
+ 18 The Nashville Network
19 Arts & Entertainment
20 Lifetime
21 QVC
* 22 CINEMAX
* 23 THE DISNEY CHANNEL
* 24 SHOWTIME
97 Trinity Broadcast Network
= 98 Sci-Fi Channel
99 Fox Network
52
58
TABLE II (E6)
BROWNSVILLE HEADEND
2 KATU 2-ABC Portland, OR
3 K25AS 25-Fox Eugene, OR
4 ESPN
5 WTBS 17-Ind Atlanta, GA
6 KOIN 6-CBS Portland, OR
7 KOAC-TV 7-PBS Corvallis, OR
8 KGW-TV 8-NBC Portland, OR
9 KEZI 9-ABC Eugene, OR
10 KMTR 16-NBC Eugene, OR
11 QVC
12 KPTV 12-Ind Portland, OR
13 KVAL-TV 13-CBS Eugene, OR
14 American Movie Classics
= 15 Sci-Fi Channel
16 Blazercable
16 Trinity Broadcast Network
* 17 SHOWTIME
* 18 HBO
* 19 THE DISNEY CHANNEL
* 20 THE MOVIE CHANNEL
+ 21 Country Music TV
+ 22 The Nashville Network
= 23 Arts & Entertainment
= 24 Lifetime
25 The Family Channel
26 Nickelodeon
+ 27 TNT
+ 28 The Discovery Channel
* 29 REQUEST - PAY PER VIEW
+ 30 CNN
= 31 USA Network
32 Home Shopping Network
33 Home & Garden TV
6. Coos Bay, OR
As of the appraisal date, Coos Bay was also served by eight headends.
About 58% of total System subscribers were served by the Coos Bay headend.
Programming shown in Table II (F1) included a 29-channel basic service, two
7-channel tier services, a
53
59
6-channel tier, six premium channels, and five pay-per-view services. Basic
service consisted of seven local broadcast TV stations, 20 satellite-delivered
services, and two local community access programming channels. Premium
services were HBO, Cinemax, Showtime, The Movie Channel, The Disney Channel,
and Encore. Pay-per-view services available included Action, Viewer's Choice,
Spice, and several Request services. Subscribers served by the Hauser headend,
comprising less than 3% of total System subscribers, received the same line-up
as Coos Bay with one additional satellite-delivered channel, WGN-TV.
Approximately 15% of System subscribers had available the 34-channel
programming service shown in Table II (F2). The Reedsport headend line-up
consisted of a 21-channel basic service, two 4-channel tiers, and five premium
channels. Basic service included seven local broadcast TV stations, 12
satellite-delivered services, two local community access programming services.
The Coquille headend served about 10% of System subscribers. As shown
in Table II (F3), this headend offered a total of 34 channels of programming,
including a 20-channel basic service, a 4-channel tier, a 6-channel tier, and
four premium channels.
Nearly 9% of System subscribers were served by the Bandon headend, and
received the 33-channel program line-up shown in Table II (F4). The Myrtle
Point headend served about 4% of subscribers, while the Powers and Gardiner
headends each served roughly 1%. The programming services received by these
subscribers are presented in Tables II (F5), (F6), and (F7), respectively.
54
60
TABLE II (F1)
COOS BAY AND HAUSER HEADENDS
2 KLSR-TV 63-Fox Eugene, OR
3 Local - Falcon Cable Marketplace
4 KCBY-TV 11-CBS Coos Bay, OR
5 KOBI 5-NBC Medford, OR
6 KMTZ 23-NBC Coos Bay, OR
7 KOAC-TV 7-PBS Corvallis, OR
8 American Movie Classics
9 KEZI 9-ABC Eugene, OR
10 Arts & Entertainment
11 QVC
12 KPTV 12-Ind Portland, OR
13 Prevue Guide
14 Local - Community Access/PEG
15 Mind Extension University
= 16 The Discovery Channel
= 17 CNN Headline News
= 18 ESPN
= 19 Blazercable
= 20 The Family Channel
= 21 Nickelodeon
= 22 CNN
23 Sneak Prevue
24 Lifetime
25 E! - Entertainment
26 fX
++ 27 WTBS 17-Ind Atlanta, GA
++ 28 The History Channel
* 29 HBO
* 30 CINEMAX
* 31 SHOWTIME
* 32 THE MOVIE CHANNEL
* 33 THE DISNEY CHANNEL
* 34 ENCORE
+ 35 The Nashville Network
+ 36 Comedy Central
+ 37 TNT
+ 38 USA Network
+ 39 Country Music TV
+ 40 Sci-Fi Channel
+ 41 Bravo
42 CNBC
43 Prime Sports Northwest
44 C-SPAN 2
55
61
TABLE II (F1) (CONTINUED)
COOS BAY AND HAUSER HEADENDS
45 MTV
46 The Learning Channel
47 VH-1
48 The Weather Channel
49 Home Shopping Network
50 C-SPAN
51 The Travel Channel
++ 52 FXM-Fox Movies
++ 53 Newstalk Television
++ 54 Cartoon Network
55 Trinity Broadcast Network
* 57 REQUEST - PAY PER VIEW
* 58 ACTION - PAY PER VIEW
* 59 REQUEST - PAY PER VIEW
* 60 VIEW'S CHOICE - PPV
* 61 SPICE - PAY PER VIEW
++ 63 ESPN 2
56
62
TABLE II (F2)
REEDSPORT HEADEND
2 ESPN
3 KLSR-TV 63-Fox Eugene, OR
4 QVC
5 KOBI 5-NBC Medford, OR
6 KMTZ 23-NBC Coos Bay, OR
7 KOAC-TV 7-PBS Corvallis, OR
8 The Family Channel
9 KEZI 9-ABC Eugene, OR
10 Blazercable
10 Local - Community Access/PEG
11 KCBY-TV 11-CBS Coos Bay, OR
12 KPTV 12-Ind Portland, OR
13 CNN
14 USA Network
= 15 Arts & Entertainment
= 16 The Nashville Network
= 17 Lifetime
= 18 American Movie Classics
+ 19 TNT
+ 20 The Discovery Channel
+ 21 WGN-TV
+ 22 WTBS 17-Ind Atlanta, GA
* 23 SHOWTIME
* 24 THE DISNEY CHANNEL
* 25 HBO
* 26 CINEMAX
* 27 THE MOVIE CHANNEL
28 CNN Headline News
29 C-SPAN
30 Bravo
31 E! - Entertainment
32 Sci-Fi Channel
33 Home Shopping Network
34 Home & Garden TV
35 Local - Community Access/PEG
57
63
TABLE II (F3)
COQUILLE HEADEND
2 KLSR-TV 63-Fox Eugene, OR
3 QVC
4 ESPN
5 KOBI 5-NBC Medford, OR
6 KMTZ 23-NBC Coos Bay, OR
* 7 SHOWTIME
8 KOAC-TV 7-PBS Corvallis, OR
9 KEZI 9-ABC Eugene, OR
10 The Family Channel
11 KCBY-TV 11-CBS Coos Bay, OR
12 KPTV 12-Ind Portland, OR
13 WTBS 17-Ind Atlanta, GA
= 14 Lifetime
= 15 USA Network
= 16 Arts & Entertainment
+ 17 The learning Channel
+ 18 Country Music TV
+ 19 The Discovery Channel
= 20 ESPN 2
+ 21 The Nashville Network
+ 22 Sci-Fi Channel
23 CNN Headline News
* 24 THE DISNEY CHANNEL
* 25 THE MOVIE CHANNEL
26 CNN
* 27 HBO
28 fX
29 Blazercable
30 Bravo
+ 31 C-SPAN
32 Home Shopping Network
33 E! - Entertainment TV
34 WGN-TV
35 Comedy Central
58
64
TABLE II (F4)
BANDON HEADEND
2 KLSR-TV 63-Fox Eugene, OR
3 QVC
4 ESPN
5 KOBI 5-NBC Medford, OR
6 KMTZ 23-NBC Coos Bay, OR
* 7 SHOWTIME
8 KOAC-TV 7-PBS Corvallis, OR
9 KEZI 9-ABC Eugene, OR
10 WGN-TV
11 KCBY-TV 11-CBS Coos Bay, OR
12 KPTV 12-Ind Portland, OR
13 The Family Channel
= 14 Arts & Entertainment
= 15 USA Network
= 16 Lifetime
+ 17 ESPN 2
+ 18 Country Music TV
+ 19 The Discovery Channel
+ 20 TNT
+ 21 The Nashville Network
+ 22 Sci-Fi Channel
* 23 HBO
24 CNN Headline News
* 25 THE MOVIE CHANNEL
26 CNN
27 Bravo
* 28 THE DISNEY CHANNEL
29 Comedy Central
30 fX
31 Home Shopping Network
32 C-SPAN
33 WTBS 17-Ind Atlanta, GA
34 E! - Entertainment TV
59
65
TABLE II (F5)
MYRTLE POINT HEADEND
2 KLSR-TV 63-Fox Eugene, OR
3 QVC
4 ESPN
5 KOBI 5-NBC Medford, OR
6 KMTZ 23-NBC Coos Bay, OR
7 Nickelodeon
8 KOAC-TV 7-PBS Corvallis, OR
9 KEZI 9-ABC Eugene, OR
10 The Family Channel
11 KCBY-TV 11-CBS Coos Bay, OR
12 KPTV 12-Ind Portland, OR
13 CNN Headline News
14 USA Network
= 15 The Discovery Channel
= 16 Sci-Fi Channel
= 17 Lifetime
= 18 VH-1
18 Comedy Central
18 Blazercable
+ 19 TNT
+ 20 WTBS 17-Ind Atlanta, GA
+ 21 The Nashville Network
+ 22 The Weather Channel
* 23 CINEMAX
* 24 THE DISNEY CHANNEL
* 25 THE MOVIE CHANNEL
* 26 SHOWTIME
* 27 HBO
28 Arts & Entertainment
29 CNN
30 Bravo
31 C-SPAN
32 Home Shopping Network
33 E! - Entertainment TV
34 The Learning Channel
35 MTV
60
66
TABLE II (F6)
POWERS HEADEND
2 KLSR-TV 63-Fox Eugene, OR
3 KOBI 5-NBC Medford, OR
4 KCBY-TV 11-CBS Coos Bay, OR
5 QVC
6 KMTZ 23-NBC Coos Bay, OR
7 ESPN
8 The Family Channel
9 KEZI 9-ABC Eugene, OR
10 Nickelodeon
11 The Learning Channel
12 CNN
13 KOAC-TV 7-PBS Corvallis, OR
14 The Discovery Channel
= 15 The Nashville Network
= 16 USA Network
= 17 Arts & Entertainment
* 18 THE DISNEY CHANNEL
+ 19 TNT
+ 20 WTBS 17-Ind Atlanta, GA
+ 21 WGN-TV
* 22 HBO
23 C-SPAN
24 Bravo
61
67
TABLE II (F7)
GARDINER HEADEND
2 CNN Headline News
3 KLSR-TV 63-Fox Eugene, OR
4 QVC
5 ESPN
6 KMTZ 23-NBC Coos Bay, OR
7 KOAC-TV 7-PBS Corvallis, OR
8 The Family Channel
9 KEZI 9-ABC Eugene, OR
10 Local - Community Access/PEG
11 KCBY-TV 11-CBS Coos Bay, OR
12 KPTV 12-Ind Portland, OR
13 CNN
16 The Nashville Network
17 WGN-TV
18 WTBS 17-Ind Atlanta, GA
20 The Discovery Channel
21 Home & Garden TV
* 23 SHOWTIME
* 24 THE DISNEY CHANNEL
* 25 HBO
* 26 CINEMAX
* 27 THE MOVIE CHANNEL
7. Dallas, OR
The Dallas System was served by seven headends. Tables II (G1)
through (G6) present the programming services available from those headends.
The Dallas headend, serving about 39% of total System subscribers, offered 39
channels of programming, including a 19-channel basic service, a 7-channel
tier, a 5-channel tier, seven premium channels, and one pay-per-view channel.
Basic service included ten local broadcast TV stations, seven
satellite-delivered services, two local community access programming services,
and one microwave-delivered service. Premium services available included The
Movie Channel, Showtime, HBO, The Disney Channel, Playboy, Cinemax, and Encore.
Request was the pay-per-view service offered by the Dallas headend.
62
68
The Nehalem headend served about 28% of System subscribers. Table II
(G2) presents the 34-channel programming service offered at this headend,
including a 33-channel basic service, a 7-channel tier service, a 5-channel
tier, seven premium channels, and one pay-per-view channel. Basic service
consisted of six local broadcast TV stations, six satellite-delivered services,
one microwave-delivered channel, and one local community access programming
channel.
Table II (G3) presents the programming service available to the 15% of
System subscribers served by the Tillamook headend. Those subscribers received
a 17-channel basic service, a 5-channel tier service, a 2-channel tier, and
five premium services. The Silverton headend served about 10% of System
subscribers and offered a 37-channel programming service as shown in Table II
(G4). Netarts/Oceanside served about 5% of subscribers, while Brickyard Road
served about 3%. Both headends offered the same 18-channel programming service
shown in Table II (G5). Less than 1% of the subscribers received the
five-channel programming service offered from Wilson River headend, presented
in Table II (G6).
TABLE II (G1)
DALLAS HEADEND
2 KATU 2-ABC Portland, OR
3 Local-Character Generator
4 Home & Garden TV
5 QVC
6 KOIN 6-CBS Portland, OR
7 KOAC-TV 7-PBS Corvallis, OR
8 KGW-TV 8-NBC Portland, OR
9 KEZI 9-ABC Eugene, OR
10 KPDX 49-Fox Vancouver, WA
11 KBSP-TV 22-HSN Salem, OR
12 KPTV 12-Ind Portland, OR
13 KVAL-TV 13-CBS Eugene, OR
14 WTBS 17-Ind Atlanta, GA
15 WGN-TV
17 Local - Community Access/PEG
+ 18 The Family Channel
* 19 THE MOVIE CHANNEL
63
69
TABLE II (G1) (CONTINUED)
DALLAS HEADEND
* 20 SHOWTIME
* 21 HBO
* 22 THE DISNEY CHANNEL
* 23 PLAYBOY
* 24 CINEMAX
+ 25 CNN
+ 26 USA Network
+ 27 TNT
+ 28 The Discovery Channel
29 MTV
30 KEBN 32-Ind Salem, OR
31 Blazercable
31 C-SPAN
32 Arts & Entertainment
= 33 ESPN
= 34 Nickelodeon
= 35 The Learning Channel
= 36 CNN Headline News
= 37 The Nashville Network
= 38 Prime Sports Northwest
= 39 Univision
* 40 ENCORE
* 41 REQUEST - PAY PER VIEW
64
70
TABLE II (G2)
NEHALEM HEADEND
2 KATU 2-ABC Portland, OR
3 Local-Character Generator
4 Comedy Central
5 WTBS 17-Ind Atlanta, GA
6 KOIN 6-CBS Portland, OR
7 QVC
8 KGW-TV 8-NBC Portland, OR
9 WGN
10 KOPB-TV 10-PBS Portland, OR
11 C-SPAN
12 KPTV 12-Ind Portland, OR
13 KPDX 49-Fox Vancouver, OR
14 Blazercable
= 15 The Family Channel
* 17 THE MOVIE CHANNEL
* 18 SHOWTIME
* 19 HBO
* 20 CINEMAX
* 21 THE DISNEY CHANNEL
* 22 PLAYBOY
+ 23 Nickelodeon
+ 24 The Nashville Network
+ 25 USA Network
+ 26 The Discovery Channel
+ 27 Country Music TV
= 30 CNN
= 31 CNN Headline News
= 32 ESPN
= 33 American Movie Classics
= 34 Arts & Entertainment
= 35 Lifetime
* 40 ENCORE
* 41 REQUEST - PAY PER VIEW
65
71
TABLE II (G3)
TILLAMOOK HEADEND
2 KATU 2-ABC Portland, OR
3 American Movie Classics
4 Local-Character Generator
5 QVC
6 KOIN 6-CBS Portland, OR
7 USA Network
8 KGW-TV 8-NBC Portland, OR
9 TNT
10 KOPB-TV 10-PBS Portland, OR
11 ESPN
12 KPTV 12-Ind Portland, OR
13 KPDX 49-Fox Vancouver, OR
14 The Family Channel
+ 17 WTBS 17-Ind Atlanta, GA
+ 18 WGN-TV
* 20 HBO
* 21 SHOWTIME
* 22 THE DISNEY CHANNEL
* 23 CINEMAX
24 Blazercable
25 Trinity Broadcast Network
26 Bravo
27 Lifetime
* 28 THE MOVIE CHANNEL
= 29 Arts & Entertainment
= 30 The Discovery Channel
= 31 The Nashville Network
= 32 CNN
= 33 CNN Headline News
66
72
TABLE II (G4)
SILVERTON HEADEND
2 KATU 2-ABC Portland, OR
3 Local-Character Generator
4 QVC
5 WTBS 17-Ind Atlanta, GA
6 KOIN 6-CBS Portland, OR
7 KOPB-TV 10-PBS Portland, OR
8 KGW-TV 8-NBC Portland, OR
9 C-SPAN
10 Local - Community Access/PEG
11 KBSP-TV 22-HSN Salem, OR
12 KPTV 12-Ind Portland, OR
13 KPDX 49-Fox Vancouver, OR
14 KEBN 32-Ind Salem, OR
15 ESPN
16 The Family Channel
+ 17 TNT
+ 18 USA Network
+ 19 The Discovery Channel
+ 20 The Nashville Network
+ 21 Country Music TV
* 22 HBO
* 23 CINEMAX
* 24 SHOWTIME
* 25 THE MOVIE CHANNEL
* 26 THE DISNEY CHANNEL
* 27 PPV- BLAZERCABLE
28 KNMT 24-TBN Portland, OR
29 Nickelodeon
30 Univision
31 Home & Garden TV
32 MTV
= 33 American Movie Classics
= 34 Lifetime
= 35 CNN
= 36 CNN Headline News
= 37 Arts & Entertainment
* 41 REQUEST - PAY PER VIEW
67
73
TABLE II (G5)
NETARTS/OCEANSIDE AND BRICKYARD ROAD HEADENDS
2 KATU 2-ABC Portland, OR
* 3 THE DISNEY CHANNEL
* 4 HBO
5 The Nashville Network
6 KOIN 6-CBS Portland, OR
7 WTBS 17-Ind Atlanta, GA
8 KGW-TV 8-NBC Portland, OR
9 The Family Channel
10 KOPB-TV 10-PBS Portland, OR
11 ESPN
12 KPTV 12-Ind Portland, OR
13 KPDX 49-Fox Vancouver, OR
17 The Discovery Channel
18 CNN
19 Arts & Entertainment
20 TNT
21 USA Network
22 Blazercable
TABLE II (G6)
WILSON RIVER HEADEND
2 KATU 2-ABC Portland, OR
6 KOIN 6-CBS Portland, OR
8 KGW-TV 8-NBC Portland, OR
10 KOPB-TV 10-PBS Portland, OR
12 KPTV 12-Ind Portland, OR
8. Florence, OR
The Florence System was served by two headends in Florence and
Mapleton. Table II (H1) presents the 56-channel programming service available
to the 95% of System subscribers receiving service from the Florence headend.
Programming included a 30-channel basic service, three tier services with
between four and six channels each, six premium channels, and five pay-per-view
channels. Basic service included six local broadcast TV stations, 22
satellite-delivered services, one microwave-delivered service,
68
74
and one local community access programming channel. Premium services consisted
of HBO, Cinemax, Showtime, The Disney Channel, The Movie Channel, and Encore.
Pay-per-view services included Request, Adam & Eve, Viewer's Choice, Action,
and Spice.
The remaining 5% of subscribers, served from the Mapleton headend, had
access to the 17 channels of programming shown in Table II (H2). Basic service
included six local broadcast TV stations and four satellite-delivered services.
Two tiers offering a total of six channels were also available. Premium
services consisted of HBO and The Disney Channel.
TABLE II (H1)
FLORENCE/DUNES CITY HEADENDS
2 WGN-TV
3 QVC
4 Prevue Guide
5 WTBS 17-Ind Atlanta, GA
6 KLSR-TV 6-Fox Eugene, OR
7 KOAC-TV 7-PBS Corvallis, OR
8 KMTR 16-NBC Eugene, OR
9 KEZI 9-ABC Eugene, OR
10 Local-Character Generated
11 Sneak Prevue
12 KPTV 12-Ind Portland, OR
13 KVAL-TV 13-CBS Eugene, OR
14 Nickelodeon
= 15 CNN
= 16 USA Network
= 17 The Discovery Channel
= 18 ESPN
19 The Family Channel
20 American Movie Classics
21 The Nashville Network
22 Lifetime
23 Arts & Entertainment
24 Blazercable
* 25 HBO
* 26 CINEMAX
* 27 SHOWTIME
* 28 THE DISNEY CHANNEL
++ 29 The Weather Channel
* 30 THE MOVIE CHANNEL
69
75
TABLE II (H1) (CONTINUED)
FLORENCE/DUNES CITY HEADENDS
31 Sci-Fi Channel
32 CNN Headline News
33 The Travel Channel
+ 34 TNT
+ 35 CNBC
36 E! - Entertainment TV
37 fX
38 Trinity Broadcast Network
+ 39 The Learning Channel
+ 40 Country Music TV
+ 41 Prime Sports Northwest
42 VH-1
* 43 ENCORE
++ 44 FXM - Fox Movies
++ 45 The History Channel
++ 46 Cartoon Network
++ 47 Fit TV
48 Downhome TV
* 49 REQUEST - PAY PER VIEW
* 50 ADAM & EVE PAY PER VIEW
* 51 VIEWER'S CHOICE - PPV
* 52 ACTION - PAY PER VIEW
* 53 SPICE - PAY PER VIEW
54 Home Shopping Network
55 Home & Garden TV
56 C-SPAN
+ 57 Bravo
70
76
TABLE II (H2)
MAPLETON HEADEND
2 KATU 2-ABC Portland, OR
3 QVC
4 ESPN
5 Sci-Fi Channel
6 KLSR-TV 6-Fox Eugene, OR
7 KOAC-TV 7-PBS Corvallis, OR
8 KMTR 16-NBC Eugene, OR
9 KEZI 9-ABC Eugene, OR
10 The Family Channel
+ 11 WGN-TV
+ 12 WTBS 17-Ind Atlanta, GA
13 KVAL-TV 13-CBS Eugene, OR
= 17 USA Network
= 18 Country Music TV
= 19 The Discovery Channel
* 20 HBO
* 21 The Disney Channel
C. RATES
The average monthly programming and equipment rental rates, and
one-time installation charges to subscribers for the preceding services as of
the appraisal date, are outlined in Tables III (A) and (B). Comparison data
for the basic service, pay service, and monthly revenue per subscriber are
published in MTA-EMCI's 1995 edition of Cable Trends 1980-2000, which uses
yearend 1994 operating and financial data.
Table III (A) presents information for the Systems operating in
California. As shown, the basic monthly service rate for Gilroy of $20.07, was
higher than the average rate of $18.50 for the nation. The corresponding rates
for Hesperia, at $18.03; Tulare, at $16.23; and San Luis Obispo, at $15.79 were
all lower than the national average. A la carte pay service rates were similar
in Gilroy, Hesperia, and San Luis Obispo, where HBO cost $11.95, and Showtime,
Cinemax, The Movie Channel, and The Disney Channel each cost $10.95. The a la
carte pay rate was $10.45 for all services in the
71
77
Tulare System. The service rates charged by the System were somewhat higher
than the average rate charged nationally of $9.25 per pay unit. Actual revenue
generated by the California Systems per pay unit ranged from $6.15 in Tulare to
$7.49 in San Luis Obispo.
The non-addressable converter rental ranged from $0.51 in Gilroy to
$2.04 in Hesperia, while the addressable converter rental varied from a low of
$1.13 in Gilroy to a high of $4.49 in Hesperia. The installation charge was
$45.00 per home plus materials throughout the California Systems.
On a nationwide basis, average monthly revenue per subscriber was
$30.32 as of the end of 1994, according to MTA-EMCI's research. The revenue
figure includes basic cable revenue, premium revenue, PPV revenue, local
advertising revenue, equipment rental revenue, and miscellaneous revenues.
During 1995, average revenue per subscriber figures were $36.20 in Hesperia,
$35.12 in Tulare, $33.67 in Gilroy, and $30.50 in San Luis Obispo -- all higher
than the nationwide average for 1994.
TABLE III (A)
GILROY HESPERIA SAN LUIS TULARE UNITED
OBISPO STATES
Basic Service (Average) $20.07 $18.03 $15.79 $16.23 $18.50
Expanded Basic Tier (Average) $5.03 $7.15 $7.54 $5.00 N/A
Revenue Per Pay Unit $7.04 $6.60 $7.49 $6.15 N/A
Pay Services (a la carte) $9.25
HBO $11.95 $11.95 $11.95 $10.45
Showtime $10.95 $10.95 $10.95 $10.45
Cinemax $10.95 $10.95 $10.95 $10.45
The Movie Channel $10.95 $10.95 $10.95 $10.45
The Disney Channel $10.95 $10.95 $10.95 $10.45
Playboy N/A N/A $10.95 $10.45
Encore $5.95 $5.95 N/A N/A
Pay Per View (Movie) $3.95 $3.95 $3.95 $3.95 N/A
72
78
TABLE III (A) (CONTINUED)
GILROY HESPERIA SAN LUIS TULARE UNITED
OBISPO STATES
Converters N/A
Addressable $1.13 $4.49 $2.38 $3.38
Non-addressable $0.51 $2.04 N/A N/A
Installation Charges: N/A
Hourly Rate * $45.00 $45.00 $45.00 $45.00
Revenue Per Subscriber Per Month $33.67 $36.20 $30.50 $35.12 $30.32
* Material additional
Table III (B) presents service rate information for the Oregon
Systems. As shown, the basic rate for Florence of $23.40 was the highest among
the Oregon Systems, as well as being higher than the 1994 national average.
Corresponding basic rates were $17.24 for Coos Bay, $16.60 for Dallas, and
$15.98 for Central Region. The a la carte pay rates were $11.95 for HBO; $5.95
for Encore; and $10.95 for Showtime, Cinemax, The Movie Channel, and The Disney
Channel. These rates were uniform throughout the Systems in Oregon.
Addressable converter rentals ranged substantially from $0.49 in
Central Region to $4.05 in Florence. Non-addressable converter rentals ranged
from $0.25 in Dallas to $2.68 in Florence. The rentals on non-addressable
converters were generally lower than the addressable rentals except in Central
Region, where a higher non-addressable rental of $1.23 was charged.
During 1995 monthly revenue per subscriber was $39.98 in Florence,
$31.48 in Coos Bay, and $30.39 in Dallas. These figures were higher than the
1994 national average of $30.32, while the revenue figure of $29.33 in the
Central Region System was lower.
73
79
TABLE III (B)
CENTRAL COOS DALLAS FLORENCE UNITED
REGION BAY STATES
Basic Service (Average) $15.98 $17.24 $16.47 $23.40 $18.50
Expanded Basic Tier (Average) $4.99 $3.78 $5.94 $3.79 N/A
Revenue Per Pay Unit $7.93 $6.41 $6.96 $8.00 N/A
Pay Services (a la carte) $9.25
HBO $11.95 $11.95 $11.95 $11.95
Showtime $10.95 $10.95 $10.95 $10.95
Cinemax $10.95 $10.95 $10.95 $10.95
The Movie Channel $10.95 $10.95 $10.95 $10.95
The Disney Channel $10.95 $10.95 $10.95 $10.95
Playboy N/A N/A $10.95 N/A
Encore $5.95 $5.95 $5.95 $5.95
Pay Per View (Movie) $3.95 $3.95 $3.95 $3.95 N/A
Converters N/A
Addressable $0.49 $2.45 $0.72 $4.05
Non-addressable $1.23 $0.86 $0.25 $2.68
Installation Charges: N/A
Hourly Rate * $45.00 $45.00 $45.00 $45.00
Revenue Per Subscriber Per Month $29.33 $31.48 $30.39 $39.98 $30.32
* Material additional
D. SUBSCRIBERS
Tables IV (A) and (B) present information on the number of homes
passed, basic subscribers, expanded/tier subscribers, pay units, converters,
and addressable homes for the Systems as of December 31, 1995. This
information is compared with similar figures, where available, for the United
States as a whole.
In California, as shown in Table IV (A), at the time of the appraisal
the Hesperia System had the highest basic penetration of 65.5%, which was
slightly higher than the national rate of 64.6%. Basic penetration rates for
San Luis Obispo, Gilroy, and Tulare
74
80
were 59.8%, 58.8%, and 37.1%, respectively. All were lower than the 64.6%
penetration rate for the nation.
Pay penetration for Tulare stood at 46.6%, higher than the
corresponding rates for Hesperia (46.0%), Gilroy (40.4%), and San Luis Obispo
(23.9%). However, pay penetration rates for the California Systems were all
much lower than the national pay penetration rate of 73.1%. Addressable home
penetration for Tulare of 51.3% was higher than the rates for Gilroy (39.1%),
Hesperia (33.2%), and San Luis Obispo (31.7%). The national average of
addressable home penetration was 40.3%.
TABLE IV (A)
GILROY HESPERIA SAN LUIS TULARE UNITED
OBISPO STATES
Homes Passed 56,219 28,280 26,138 41,053 91,500,000
Basic Subscribers 33,078 18,513 15,635 15,249 59,100,000
% of Homes Passed 58.8% 65.5% 59.8% 37.1% 64.6%
Expanded Basic Subscribers 30,391 17,593 13,605 14,787 N/A
% of Basic Subscribers 91.9% 95.0% 87.0% 97.0% N/A
Total Pay Units 13,465 8,507 3,733 7,110 43,200,000
% of Basic Subscribers 40.4% 46.0% 23.9% 46.6% 73.1%
Converters 17,120 7,218 6,009 8,791 N/A
% of Basic Subscribers 2.2% 3.7% 1.7% 57.6% N/A
Addressable Homes 12,924 6,140 4,964 7,830 23,800,000
% of Basic Subscribers 39.1% 33.2% 31.7% 51.3% 40.3%
Among the Oregon Systems, as shown in Table IV (B), as of the
appraisal date Coos Bay had the highest basic penetration of 75.6%. The
corresponding rates for Dallas, Central Region, and Florence were 71.2%, 54.0%,
and 50.4%, respectively. Basic penetration rates for Coos Bay and Dallas were
higher than the national average, while rates for Central Region and Florence
were lower.
Pay penetration for Dallas of 43.6%, was higher than the rates for
Coos Bay (39.2%), Central Region (38.8%), and Florence (26.7%). As with the
California
75
81
Systems, the Oregon pay penetration rates were much lower than the national
average of 73.1%. Addressable home penetration for Dallas of 40.2%, the
highest among the Oregon Systems, was comparable to the national average of
40.3%. The corresponding rates for Central Region, Florence, and Coos Bay were
35.3%, 34.6%, and 31.3%, respectively, which were lower than the corresponding
rate for the nation of 40.3%.
TABLE IV (B)
CENTRAL COOS DALLAS FLORENCE UNITED
REGION BAY STATES
Homes Passed 26,355 23,663 23,770 7,826 91,500,000
Basic Subscribers 14,225 17,900 16,928 3,947 59,100,000
% of Homes Passed 54.0% 75.6% 71.2% 50.4% 64.6%
Expanded Basic Subscribers 12,921 17,424 12,481 3,706 N/A
% of Basic Subscribers 90.8% 97.3% 73.7% 93.9% N/A
Total Pay Units 5,516 7,024 7,380 1,053 43,200,000
% of Basic Subscribers 38.8% 39.2% 43.6% 26.7% 73.1%
Converters 6,016 8,268 7,977 1,910 N/A
% of Basic Subscribers 42.3% 46.2% 47.1% 48.4% N/A
Addressable Homes 4,762 5,611 6,810 1,366 23,800,000
% of Basic Subscribers 33.5% 31.3% 40.2% 34.6% 40.3%
E. SYSTEM MILEAGE
According to System management, the mileage figures presented in
Tables V (A) and (B) are based on System maps. Since a complete walk- out of
the current Systems would be prohibitively expensive, MTA used the following
approach to corroborate the plant mileage:
1. Interviewed knowledgeable System personnel to ascertain the
source and reliability of the mileage estimates.
2. Noted the configuration of the Systems on area maps and the
existence and condition of plant in a representative portion of
the area served by the Systems.
76
82
3. Related the average density of the Systems to general
observations of densities while inspecting the Systems and
service areas.
Tables V (A) and (B) present management's best estimate of the number
of route miles of plant as represented by total strand and trench in each of
the Systems as of the appraisal date. Based upon the above procedures and cost
limitations, these estimates appear to be reasonable. Included in the mileage
figures are fiber optic miles.
TABLE V (A) - CALIFORNIA
Plant Miles
Aerial Underground Total
------ ----------- -----
Gilroy 323.8 340.9 664.7
Hesperia 478.3 199.7 678.0
San Luis Obispo 341.1 67.8 408.9
Tulare 532.8 143.0 675.9
TABLE V (B) - OREGON
Plant Miles
Aerial Underground Total
------ ----------- -----
Central Region 605.5 54.8 660.3
Coos Bay 384.0 60.8 444.8
Dallas 379.6 87.0 466.6
Florence 102.5 33.8 136.3
As of December 31, 1995, in California there were approximately 10
miles of fiber in Gilroy, 50 miles in Hesperia, 42 miles in San Luis Obispo,
and 24 miles in Tulare. In Oregon there were about 5 miles of fiber in Coos
Bay, 7 miles in Dallas, and .76 miles in Florence. As of the appraisal date,
there was no fiber in the Central Oregon System.
77
83
F. PHYSICAL PLANT
1. Gilroy, CA
As of the valuation date, Gilroy's central office facilities were
located at 7640 Eigleberry Street in Gilroy. This office space was owned by
the System. Payment offices were maintained in Soledad, King City, and
Greenfield. In addition, four headends were maintained in Gilroy, Greenfield,
King City, and Soledad/Gonzales. All of the headends were located on leased
premises.
Early construction of the plant took place at the Gilroy headend in
1970 and at Greenfield and King City in 1974. Gilroy was subsequently upgraded
in 1983. The Soledad/Gonzales headend was upgraded to its December 1995
capacity in 1989. As of December 31, 1995, the System passed about 56,219
homes with an estimated 664.7 miles of plant, for an overall density of 84.6
homes per mile.
As of the appraisal date, the System's feeder and trunk cable
bandwidths were 300 MHz at Gilroy, Greenfield, and King City, and 400 MHz at
Soledad/Gonzales. For programming, 35 channels were available throughout the
System, all of which were in use. Trunk amplifiers and line extenders in the
System were manufactured by Scientific Atlanta (S/A), Jerrold, and Magnavox.
S/A addressable converter models 8500, 8550, and 8580 were installed in homes
served from the Gilroy and Soledad/Gonzales headends. Non-addressable
converter model S/A 6783 was installed in all portions of the System.
The System's satellite antennas were manufactured by S/A, Comtech,
Microdyne, and Saturn. Processor manufacturers included S/A and Jerrold.
Stereo encoders and scramblers were manufactured by S/A. Advertising insertion
equipment was manufactured by Channelmatic and Sony, and back-up power supplies
were manufactured by Onan and Kohler.
2. Hesperia, CA
As of the appraisal date, Hesperia's central office facilities were
located at 9536 "C" Avenue in Hesperia. Separate office facilities were
located in Mojave. The System
78
84
maintained five headends in Adelanto, Boron, Hesperia, Mojave/Rosamond, and
North Edwards.
Initial construction took place at Boron in 1967, at Hesperia and
Adelanto in 1972, at Rosamond/Mojave in the early 1970's, and at North Edwards
in 1990. Rebuilds were completed at Hesperia and Adelanto in 1988, a 60%
rebuild took place at Boron in 1991. As of the appraisal date, the System
passed about 28,280 homes with an estimated 678 miles of plant, for an overall
density of 41.7 homes per mile.
As of the appraisal date, feeder and trunk cable bandwidths throughout
the System ranged from 270 MHz to 450 MHz. At Hesperia and Adelanto 43
channels were available and 100% of the capacity was utilized. At
Mojave/Rosamond and North Edwards 42 channels were available and 40 were in
use.
Trunk amplifiers and line extenders throughout the System were
manufactured by Magnavox and Thetacom. Addressable converters, installed in
homes served from the Adelanto, Hesperia, and North Edwards headends, were
manufactured by General Instrument (GI). Non-addressable converters were
manufactured by Hamlin.
The System's satellite antennas were manufactured by S/A, Prodelin,
A.F.C., and Channelmaster. Processors were manufactured by GI and S/A.
Advertising insertion equipment was manufactured by Ad-link and Channelmatic.
Backup power supplies were manufactured by Winco.
3. San Luis Obispo, CA
As of December 31, 1995, the San Luis Obispo System's central office
facilities were located at 7555 San Luis Avenue in Atascadero. These
facilities were shared by System personnel and the Western Division
headquarters. The System maintained four headends in Atascadero, Guadalupe,
SLO County, and Los Alamos.
Initial construction of the plant took place at Atascadero in 1976 and
at Los Alamos in 1985. A rebuild of Atascadero was accomplished in December
1995 just prior to the valuation date. As of December 31, 1995, the System
passed about 26,138
79
85
homes with an estimated 408.9 miles of plant, for an overall density of 63.9
homes per mile.
As of the appraisal date, fiber and feeder bandwidths were 750 MHz at
Atascadero. The channel capacity of the System ranged from 37 to 95 at
different headends. Throughout the System, trunk amplifiers and line extenders
were manufactured by S/A. Addressable converters in use were S/A model 8580.
Non-addressable converters in use were generally Regal RR-92s. Satellite
antennas were manufactured by S/A and Comtech and processors were manufactured
by S/A. Onan standby backup power supplies were installed in the System.
4. Tulare, CA
As of the appraisal date, the Tulare System maintained central office
facilities at 1152 W. Henderson in Porterville. There were three headends in
the System at California Hot Springs, Jack Ranch/Posey, and Porterville. All
were located at leased sites.
Portions of the System in Hot Springs and Jack Ranch/Posey were
initially constructed in 1963 and later upgraded in 1986. At the Porterville
headend, initial construction took place in 1975, followed by a rebuild in
1981. A fiber trunk overlay upgrade took place in 1995. As of December 1995,
the System passed about 41,503 homes with an estimated 690.3 miles of plant,
for an overall density of 60.1 homes per mile.
As of the appraisal date, feeder and trunk cable bandwidths were 270
MHz at Hot Springs and Jack Ranch/Posey. At Porterville, 50% of the plant's
bandwidth was 400 MHz or more, 35% was 300 MHz, and 15% was less than 300 MHz.
The Porterville headend provided a 42-channel capacity, about 90% of which (38
channels) was utilized as of the appraisal date. Twelve channels were in use
at Hot Springs and 13 were in use at Jack Ranch/Posey.
80
86
Trunk amplifiers and line extenders throughout the System were
manufactured by S/A, Magnavox, Century III, Jerrold Starline, and Vikoa. The
System's addressable converters included S/A models 8580, 8550, and 8500.
The System's satellite antennas were manufactured by S/A, Comtech,
Anixter, Tru Focus, and Andrews. Processors were manufactured by S/A, General
Instrument, Blonder Tongue, and PhaseCom. Receivers and scramblers were
manufactured by S/A. Advertising insertion equipment included a series Sony VP
7000 unit. The backup power supply at Porterville was an Onan L634 generator.
5. Central Oregon, OR
As of the appraisal date, the System's central office facilities were
located at 4739 Main Street in Springfield. Additional office space was
maintained in Cottage Grove. The System maintained eight headends at the
following locations: Bear Mountain, Bear Mountain/Cottage Grove,
Drain/Yoncalla, Brownsville, Cave Junction, Cottage Grove, Sutherlin/Oakland,
and Veneta.
Initial construction of the System's plant took place at Sutherlin in
1971, at Veneta in 1980, and at Bear Mountain in 1988. Upgrades were completed
at Sutherlin in 1981, at Cottage Grove in 1988, at Bear Mountain in 1992 and
1995, and at Veneta in 1995. As of the appraisal date, the System passed about
26,355 homes with an estimated 660.3 miles of plant, for an overall density of
39.9 homes per mile.
As of December 31, 1995, feeder and trunk cable bandwidths were 450
MHz at the Cave Junction, Cottage Grove and Veneta headends; 330 MHz at
Brownsville; 216 MHz at Sutherlin; and 300 MHz to 450 MHz at Bear Mountain.
The headends at Bear Mountain, Bear Mountain/Cottage Grove, Drain/Yoncalla, and
Brownsville used 80% of the 40-channel capacity. Fifty-two channels were
available at the Cottage Grove headend and 44 were in use. The
Sutherlin/Oakland, Cave Junction, and Veneta headends provided 28, 26, and
25-channel capacities respectively, all of which were utilized fully.
81
87
Trunk amplifiers and line extenders throughout the System were
manufactured by Magnavox, Coral, and Gamco. The manufacturers of addressable
converters in use included S/A and Jerrold. Non-addressable converters were
manufactured by Texscan, Jerrold, Hamlin, Panasonic, Eagle, and Arcom.
The System's satellite antennas were manufactured by Comtech, S/A,
Antenna Technology Corp., Simulsat, Global Image, Andrews, Wineguard, and
Channelmaster. Processors were manufactured by S/A, Jerrold, and Cadco, while
backup power supplies were manufactured by Onan.
6. Coos Bay, OR
As of the appraisal date, the System maintained its central facilities
at 1400 Newmark Avenue in Coos Bay. Offices were also kept in Reedsport.
There were eight headends located in Bandon, Coos Bay, Hauser, Coquille, Myrtle
Point, Powers, Gardiner, and Reedsport. The Reedsport and Coos Bay headend
sites were owned by the System. The others were leased.
Initial construction took place at Myrtle Point in 1970, at Reedsport
in 1971, at Bandon and Powers in 1980, and at Coos Bay in 1993. Electronic
upgrades were completed at Reedsport in 1985 and at Bandon in 1992. As of
December 31, 1995, the System passed about 23,663 homes with an estimated
444.76 miles of plant, for an overall density of 53.2 homes per mile.
As of the appraisal date, feeder and trunk cable bandwidths were 450
MHz at the Coos Bay, Bandon, and Coquille headends; 300 MHz at Myrtle Point and
Powers; and 270 MHz at Reedsport. For programming, 61 channels were available
at Bandon, Coos Bay, Hauser, and Coquille; 37 were available at Myrtle Point
and Powers; and 32 were available at Gardiner and Reedsport. Addressable
converters in use throughout the System were manufactured by S/A.
Non-addressable converters were manufactured by Jerrold.
The System's satellite antennas were manufactured by Andrews, Comtech,
MA/Com, S/A, and Channel Master Wire Mesh. Processors were manufactured by
82
88
Jerrold, S/A, and Cadco. Advertising insertion equipment was made by
Channelmatic Inc., and the System's backup power supply was manufactured by
Onan.
7. Dallas, OR
As of the appraisal date, the Dallas central office facilities were
located at 1862 Godsey Road in Dallas. Additional office facilities were
located in Garibaldi, Silverton, Nehalem, and Tillamook. Seven headends were
maintained in Brickyard, Dallas, Nehalem, Netarts/Oceanside, Silverton,
Tillamook, and Wilson River. The Tillamook and Nehalem headend sites were
owned and the others were leased.
Initial construction of the plant took place at Tillamook in 1958, at
Netarts in the early 1960's, and at Dallas in 1987. Upgrades took place at
Tillamook in 1983, at Nehalem in 1986, and at Dallas (including fiber) in 1995.
As of the appraisal date, the System passed about 23,770 homes with an
estimated 466.6 miles of plant, for an overall density of 50.9 homes per mile.
As of the appraisal date, feeder and trunk cable bandwidths were 330
MHz at the Tillamook, Dallas, Nehalem, and Silverton headends; and 270 MHz at
the Netarts and Brickyard. For programming, 39 channels were available at the
Dallas headend, 37 were available at Silverton, 33 at Nehalem, 29 at Tillamook,
and 5 at Wilson River. All of the channels available from these headends were
in use. Both the Brickyard Road and Netarts/Oceanside headends provided 22
channels, 18 of which were in use.
Trunk amplifiers and line extenders were manufactured by S/A,
Magnavox, Jerrold, C-Cor, Sylvania, Triple Crown, Anaconda, and Century III.
Addressable converters were installed in portions of the System served by the
Dallas, Nehalem, and Silverton headends, and they were manufactured by S/A.
Non-addressable converters were manufactured by Hamlin, Jerrold, and Oak.
The System's satellite antennas were manufactured by S/A, Vertex,
Comtech, and M/A-Com. Processors were manufactured by S/A, Jerrold, and
Blonder Tongue. Backup power supplies were manufactured by Onan and Alpha.
83
89
8. Florence, OR
As of the appraisal date, the System's central office facilities were
located at 1234 Rhodadendron Drive in Florence. The System was served by
headends in Florence/Dunes City and Mapleton.
Initial construction of plant took place in 1956. Upgrades of headend
equipment were done in 1962 and 1984. A gradual rebuild of distribution plant
took place from 1991 to 1993. As of the appraisal date, the System passed
about 7,826 homes with an estimated 136.29 miles of plant, for an overall
density of 57.4 homes per mile.
Feeder and trunk cable bandwidth throughout most of the System was 450
MHz. Channel capacity was 62 at the Florence/Dunes City headend, of which 56
were in use; and 17 (220 MHz) at Mapleton, all of which were in use. Trunk
amplifiers and line extenders in the System were manufactured by S/A.
Addressable converter models S/A 8600 and non-addressable models S/A 8511 were
also in use.
The System's satellite antennas were manufactured by Comtech and
Prodelin, and processors were manufactured by S/A. Advertising insertion
equipment was manufactured by AdCart. Backup power supplies were manufactured
by Onan.
G. FRANCHISES
As of December 31, 1995, the eight Falcon Systems together held a
total of 69 franchises. In California, Gilroy held 13 franchise agreements,
Hesperia and San Luis Obispo held four agreements each, and Tulare held seven.
For each System, the weighted average remaining life of its franchise
agreements was calculated. As of December 31, 1995, the weighted average
remaining lives of the franchise agreements, prior to renewals and extensions,
were approximately 3.1 years for Gilroy, 9.5 years for Hesperia, 6.9 years for
San Luis Obispo, and 2.1 years for Tulare. The individual agreements and their
expiration dates are shown in Table VI (A) for the California Systems.
84
90
TABLE VI (A)
REGION/FRANCHISE EXPIRATION DATE
GILROY, CA -
City of Gilroy May 16, 1999
City of Gonzales July 1, 2002
City of Greenfield November 4, 2003
City of Hollister December 31, 1997
King City September 23, 2003
La Mesa Naval Post Graduate School March 3, 1994
Monterey County October 1, 1998
Monterey County August 1, 1997
City of Morgan Hill May 24, 1996
San Benito County December 31, 1994
City of San Juan Bautista August 16, 1995
Santa Clara County April 7, 2002
City of Soledad June 11, 2002
Weighted Average Remaining Life 3.1
(In Years)
HESPERIA, CA -
City of Adelanto N/A
City of Hesperia June 7, 2006
Kern County January 31, 2007
San Bernardino County April 19, 2008
Weighted Average Remaining Life 9.5
(In Years)
SAN LUIS OBISPO, CA -
City of Atascadero July 14, 2001
City of Guadalupe August 12, 2006
San Luis Obispo County June 6, 2003
Santa Barbara County February 5, 1999
Weighted Average Remaining Life 6.9
(In Years)
85
91
TABLE VI (A) (CONTINUED)
REGION/FRANCHISE EXPIRATION DATE
TULARE, CA -
City of Exeter January 28, 1997
City of Farmersville January 24, 1997
City of Lindsay September 17, 1999
City of Orange Cove May 1, 2002
City of Porterville May 5, 1995
Tulare County February 1, 1998
City of Woodlake September 8, 2009
Weighted Average Remaining Life 2.1
(In Years)
In Oregon, the Central Region System held 14 franchise agreements,
Coos Bay held eight, Dallas held 16, and Florence held three agreements. As of
December 31, 1995, the weighted average remaining lives of the franchise
agreements, prior to renewals and extensions, were approximately 8.1 years for
Central Region, 4.4 years for Coos Bay, 4.3 years for Dallas, and 9.2 years for
Florence. A summary of the Oregon Systems' agreements is presented in Table VI
(B) on the following pages.
86
92
TABLE VI (B)
REGION/FRANCHISE EXPIRATION DATE
CENTRAL OREGON, OR -
City of Brownsville July 6, 2002
City of Cave Junction August 24, 2007
City of Coburg February 2, 2008
City of Cottage Grove November 7, 1998
City of Creswell November 7, 1995
City of Drain September 7, 2009
Lane County June 24, 2007
City of Lowell May 17, 1991
City of Oakland November 6, 1998
City of Oakridge June 30, 2005
City of Sutherlin November 1, 1997
City of Veneta November 24, 2006
City of West Fir June 30, 2005
City of Yoncalla November 10, 2007
No Franchise Required
Weighted Average Remaining Life 8.1
(In Years)
COOS BAY, OR -
City of Bandon June 5, 1994
City of Coos Bay June 30, 2004
City of Coquille June 30, 1996
City of Lakeside December 31, 2004
City of Myrtle Point June 2, 2001
City of North Bend June 30, 2004
City of Powers March 1, 1996
City of Reedsport October 3, 1998
No Franchise Required
Weighted Average Remaining Life 4.4
(In Years)
87
93
TABLE VI (B) (CONTINUED)
REGION/FRANCHISE EXPIRATION DATE
DALLAS, OR -
City of Bay City May 31, 2000
City of Cannon Beach July 7, 2002
City of Dallas October 8, 2002
City of Falls City March 7, 1999
City of Garibaldi September 14, 1997
City of Independence August 27, 2002
City of Jefferson January 14, 2003
City of Manzanita February , 1997
Marion County August 24, 1996
City of Monmouth August 4, 2002
City of Mt. Angel October 7, 1995
city of Nehalem October 8, 2001
City of Rockaway Beach December 8, 2002
City of Silverton January 1, 2000
City of Tillamook December 19, 1999
City of Wheeler November 16, 2013
No Franchise Required
Weighted Average Remaining Life 4.3
(In Years)
FLORENCE, OR -
Dunes City September 22, 2003
City of Florence September 13, 2003
Lane County June 24, 2007
Weighted Average Remaining Life 9.2
(In Years)
H. MANAGEMENT
During the site visits to the eight Falcon Systems, MTA's
representatives met and spoke extensively with System General Managers. The
amount of time that the GMs had been with their respective Systems varied from
several months to several years, although all had years of experience in cable
system management.
88
94
1. Gilroy, CA
At the time of the appraisal, there were 16 people in the technical
department, including a plant manager, seven technicians, a lead installer
(responsible for quality control), five installers, and two dispatchers. The
customer service group had 11 employees, including an operations manager and
ten customer service representatives (CSRs). The System also employed a
general manager, advertising sales people, and a direct sales staff.
2. Hesperia, CA
At the time of the appraisal, Hesperia's technical department operated
with a chief technician, a dispatcher, three installers, and three technicians.
There were six CSRs in the Hesperia offices. Additionally, there were two
technicians, two installers, and two CSRs operating out of the Mojave offices.
Finally, there were the general manager and an advertising sales person for the
System.
3. San Luis Obispo, CA
As of the appraisal date, San Luis Obispo's technical department
operated with a chief technician, two main technicians, one service technician,
one install technician, two installers, one dispatcher, and one warehouse
technician. The System periodically made use of contract installers.
Managerial and administrative duties were handled by the general manager, an
office manager, a lead customer service representative, and four customer
representatives. There was one sales person in the advertising sales
department.
4. Tulare, CA
As of December 31, 1995, the technical department for Tulare operated
with a chief engineer, four technicians, five installers, a converter manager,
two dispatchers, and one construction person. The System had a general manager
and an office manager/marketing manager. There were seven CSRs, two of whom
were part-time
89
95
employees. The advertising department was run with two sales people, and
direct sales were handled by contract sales people.
5. Central Region, OR
As of the appraisal date, the technical department at the Central
Region System was run with four technicians, three installers, and one
dispatcher. Managerial and administrative duties were handled by the General
Manager, an office manager, and three CSRs.
6. Coos Bay, OR
As of December 31, 1995, the technical department operated with a
chief technical manager, five technicians, four installers, and one dispatcher.
General office and administrative functions were dealt with by an office
manager and six CSRs. Additionally, there was a CSR at the Reedsport payment
office. Advertising sales were handled by two employees at Coos Bay. All
functions were overseen by the System's General Manager.
7. Dallas, OR
As of the appraisal date, the technical department at the Dallas
System operated with one dispatcher, four installers/technicians, and one
part-time technician. Managerial and administrative duties were handled by an
office manager and two customer service representatives. The System's General
Manager oversaw all functions.
8. Florence, OR
As of the appraisal date, Florence's technical department was run with
one installer and one technician. Customer service was handled by two
full-time CSRs and one part-time CSR. Advertising sales were handled by one
employee. All aspects of the System's operations were supervised by the
General Manager.
90
96
I. FINANCIAL HISTORY
1. Gilroy, CA
Based on unaudited financial statements for the year ending December
31, 1994, revenues for Gilroy were $13,249,767. Operating expenses totaled
$5,536,679, resulting in operating income of $7,713,088 with an operating
profit margin of 58.2%. Unaudited financial statements for the full twelve
months of 1995 indicate that operating profits of $7,650,850 were generated on
revenues of $13,145,698, for an operating margin of 58.2%.
2. Hesperia, CA
Unaudited financial statements for the year ending December 31, 1994
show revenues for Hesperia of $7,320,512. Operating expenses totaled
$3,203,982, leaving operating income of $4,116,529 with an operating profit
margin of 56.2%. Unaudited financial statements for 1995 indicate that
operating profits of $4,216,820 were generated on revenues of $7,846,604, for
an operating margin of 53.7%.
3. San Luis Obispo, CA
Unaudited financial statements for the year ending December 31, 1994
outline revenues for San Luis Obispo of $6,134,452. Operating expenses over
the same period totaled $2,966,706, resulting in operating income of $3,167,746
with an operating profit margin of 51.6%. Unaudited financial statements for
1995 indicate that operating profits of $2,548,832 were generated on revenues
of $5,728,559, for an operating margin of 44.5%.
4. Tulare, CA
Based on unaudited financial statements for the year ending December
31, 1994, revenues for Tulare reached $6,802,316. Operating expenses totaled
$3,468,775, leaving operating income of $3,333,541 with an operating profit
margin of 49.0%. Unaudited
91
97
financial statements for 1995 indicate that operating profits of $3,177,814
were generated on revenues of $6,506,018, for an operating margin of 48.8%.
5. Central Region, OR
Unaudited financial statements for the year ending December 31, 1994
detail revenues for Central Region of $5,028,970. Operating expenses reached
$2,217,403, resulting in operating income of $2,811,567 with an operating
profit margin of 55.9%. Unaudited financial statements for 1995 indicate that
operating profits of $2,712,460 were generated on revenues of $5,001,040, for
an operating margin of 54.2%.
6. Coos Bay, OR
Unaudited financial statements for the year ending December 31, 1994,
show revenues for the System of $6,658,404. Operating expenses totaled
$2,895,699, resulting in operating income of $3,762,705 with an operating
profit margin of 56.5%. Unaudited financial statements for 1995 indicate that
operating profits of $3,687,386 were generated on revenues of $6,775,525, for
an operating margin of 54.4%.
7. Dallas, OR
Based on unaudited financial statements for the year ending December
31, 1994, revenues for Dallas were $6,005,589. Over the same period, operating
expenses totaled $2,394,019, resulting in operating income of $3,611,569 with
an operating profit margin of 60.1%. Unaudited financial statements for 1995
indicate that operating profits of $3,664,003 were generated on revenues of
$6,074,204, for an operating margin of 60.3%.
8. Florence, OR
Unaudited financial statements for the year ending December 31, 1994
show revenues for Florence reached $1,604,711. Operating expenses totaled
$638,989, resulting in operating income of $965,722 with an operating profit
margin of 60.2%. Unaudited financial statements for 1995 indicate that
operating profits of $888,628 were generated on revenues of $1,695,633, for an
operating margin of 52.41%.
92
98
V. TOTAL SYSTEM VALUE
MTA has estimated the sum of the fair market values for the Systems as
a business enterprise to be $283,228,000 as of December 31, 1995. Fair market
value is the cash price a willing buyer would give a willing seller in an arm's
length transaction in order to complete the sale. It is assumed that both
buyer and seller have been informed of all relevant facts and neither is under
any compulsion to conclude the transaction and that the tangible assets will
remain in their present location and will continue to be employed in their
highest and best use, i.e., the delivery of cable television signals to
subscribers.
A. VALUATION PROCEDURE AND METHODS
MTA used the following basic methodology to determine the overall fair
market value of the System(s):
1. Performed onsite reviews to observe a representative portion
of the markets and homes passed, reviewed the number of
subscribers, and determined the quality and attractiveness of
the services provided.
2. Made inquiries of management to ascertain and/or verify items
relevant to the appraisal.
3. Estimated the availability of additional homes passed and the
probability of future growth.
4. Reviewed selected financial records and other documents to
verify certain financial data.
5. Estimated the expected changes in operations that a buyer most
likely would institute.
6. Applied generally accepted methods of estimating the fair
market value of the entity as a whole.
93
99
A business valuation typically is performed using one or more of three
approaches: the cost approach, the market approach, and the income approach.
Since the System will be relying to a large degree on intangible assets to
generate income, the cost approach is not appropriate in this case. The
market, or comparable sales, approach has not been used because of the
difficulty in choosing sales that reflect the same profitability, size, and
growth as the System. Therefore, this valuation has been based on the income
approach to valuation. The income approach is the best approach to valuing the
System because it reflects the future earnings potential of the System.
There are various established methods of determining a business
entity's total fair market value using the income approach. The most commonly
accepted methods are as follows:
1. Capitalization of projected net cash flow.
2. Capitalization of single-year operating profit.
3. Dividend capitalization.
4. Market price-to-book equity.
5. Price-earnings multiple.
Of the methods listed above, MTA normally relies primarily upon the
capitalization of projected net cash flow, or "discounted cash flow" approach,
to estimate total value. MTA generally favors discounted cash flow methodology
because it considers the broadest range of factors that will affect both the
present and future income, and therefore value, of a cable television system.
Accordingly, MTA usually gives greater consideration to the discounted cash
flow methods in its final judgment concerning the fair market value of a cable
television system.
MTA has prepared two discounted cash flow valuations for the System,
one which analyzes the projected return on equity and one which analyzes the
projected return on investment. MTA also has considered the second general
methodology listed above, i.e., capitalization of operating profit, in
conducting its valuation of the System.
94
100
The methodologies are described in Parts V-B and V-C of this report. The
values for the overall fair market value of the System are presented in
Exhibit A.
The remaining methods listed above, although widely used in other
industries, generally are inappropriate for valuing cable television systems.
Dividend capitalization, based upon actual dividends or capacity, usually is
irrelevant since few publicly-traded cable companies pay dividends and earnings
(which should be reflective of a dividend capacity) are not reflective of the
capacity to generate operating income. A comparison of market price-to-book
equity also is not valid usually since book equity varies widely from one
company to another as to how much intangible and tangible value is reflected on
the books. Finally, an analysis of price-earnings multiples generally is not
appropriate because they also vary widely within the industry and are not
representative of the financial position of most cable systems.
B. DISCOUNTED CASH FLOW METHODOLOGY
MTA has generated two discounted cash flow models to arrive at a total
System value. The return-on-equity model is based upon a hypothetical purchase
price that would achieve a target after-tax return on equity based on the
present value of the projected net cash flows. The return-on-investment model
measures the net present value of the projected pre-tax operating cash flows,
less capital expenditures, plus the residual value of the System, that
represent the return on total investment.
Both the return-on-equity and return-on-investment methods are
dependent upon projections of the System's future net cash flow and residual
value and on selection of an appropriate discount rate. MTA's calculations are
based on detailed projections of a variety of factors which will affect future
cash flow including housing growth, plant mileage, basic and pay subscriber
growth, subscriber rates, operating expenditures, and capital expenditures.
The projections and assumptions used in MTA's discounted cash flow models are
set forth in Exhibits E, F, G, and H. Exhibit E provides details of MTA's
projections for plant mileage, housing, and subscriber growth. Exhibit F shows
the rates subscribers were charged at the time of the appraisal for various
services and
95
101
MTA's projections for future growth. Exhibit G lists revenues and operating
expenses for all years throughout the projection period, and Exhibit H details
capital expenditures anticipated for the System. In addition, Exhibit J
includes miscellaneous assumptions such as the average remaining life of the
franchises under which the System operates, tax rates, the net fair market
value of beginning tangible assets, the breakdown between debt and equity and
the interest rate anticipated on the debt, and the multiples and discount rates
used in the various appraisal methods. MTA's determination and use of these
factors is discussed further below.
1. Net Cash Flow/Return on Equity
This method involves the use of multiple year projected operations for
the System and a predetermined target after-tax return on equity for a
hypothetical outside buyer. The projection period is based on the average
remaining franchise life of the System. A complete discussion of the selection
of the projection period is provided in Part V-B-3 of this report.
Based on the use of typical debt-to-equity ratios and debt services,
MTA has made certain assumptions concerning the capital structure that a
"typical, prudent outside buyer" might experience as well as the probable
interest rates that would be applicable in connection with any debt financing
that might be incurred, as shown in Exhibit J. To calculate future cash flows,
MTA has projected future subscribers, revenues, operating expenses, and capital
expenditures. MTA has then tested various hypothetical purchase prices, i.e.,
potential fair market values, to determine a value that yields the desired
return on equity, as shown in Exhibits C-1 and C-2.
Using the return-on-equity model, MTA has generated low and high cash
flow projections for the System shown in Exhibits B-1 and B-2. The difference
between the two projections reflects the range of potential returns on equity
that a buyer could reasonably expect to realize depending upon the initial
purchase price paid for the System.
96
102
2. Net Cash Flow/Return On Investment
This discounted cash flow method, similar to the preceding method, is
used to measure the net present value of the pre-tax operating cash flow, less
capital expenditures, plus the residual value of the System, that represent the
return on the total investment rather than that which could result from an
assumed purchase with a predetermined debt-to-equity ratio. To calculate
future cash flows, MTA has used the same projections for future subscribers,
revenues, operating expenses, and capital expenditures as in the
return-on-equity method. The projected cash flows for the System, plus the
last-year residual value of the System, less capital expenditures, are then
discounted to their present value using an acceptable discount factor based on
the weighted average cost of money, as shown in Exhibit D. MTA has used the
return on investment model, like the return on equity model, to generate low
and high values for the System. These values, shown in Exhibit D, represent
the present value of the future pre-tax operating cash flows and reflect more
conservative and more optimistic assumptions, respectively, as to the likely
return on investment that the System will generate over time.
3. Cash Flow Projections
There are many factors that affect the projections of a specific cable
system's cash flow. With respect to the System, MTA has analyzed the franchise
area, the costs incurred to meet franchise obligations, the length of the
franchise period, the degree of competition, and the historic results of the
System's operations. MTA also has examined factors that affect the industry,
such as possibility of regulation, competitive threats, rapid technical
changes, and the development of additional programming services. These factors
have been incorporated into MTA's projections of the System's future cash
flows.
The most critical factors in the expected cash flow of a specific
cable system are the opportunities for growth in the territory in which it
operates, i.e., its franchise area and the duration of the franchise. In
making its cash flow projections, MTA has
97
103
carefully reviewed the demographics of counties represented in the service
area. Demographic information was gathered from direct observation during
MTA's onsite visit, discussion with System management, Marketing Statistic's
Demographics USA 1995, U.S. Census Bureau data, and information obtained from
the local Chamber of Commerce.
MTA also has reviewed information pertaining to the System's
franchises in order to calculate their remaining life and made inquiries of
System management personnel to ascertain any relevant terms that may affect the
value of the System. MTA has calculated a weighted average remaining life of
the franchises in each of the eight regions.
The projection period used for the cash flows normally is the weighted
average remaining life of the franchises, except when the weighted life of the
franchises falls below seven or exceeds ten years. When the franchise life
falls below seven years, MTA uses a seven-year projection period, amortizing
the franchises over fifteen years as mandated by the Internal Revenue Service
(IRS). When the franchise life exceeds ten years, a ten-year projection period
is used, with the franchises amortized over fifteen years. MTA believes that
the cash flows realized from a projection period less than seven years
generally are not reflective of the value of a system than an investor would
consider when utilizing discounted cash flow methodology. MTA also believes
that the operating income resulting from income and expense projections beyond
ten years is increasingly uncertain and might produce less accurate values for
the System.
MTA's cash flow projections are also based in part on historical
operating data such as subscriber rates, the ratio of subscribers to homes
passed, and the age and condition of the System's distribution plant. MTA also
has relied on information provided by System management personnel, discussions
with System personnel, and MTA's familiarity with typical industry expenses and
operating trends to project the future financial performance of the System. As
shown in Exhibits E through H, MTA has projected increases in the number of
basic and pay subscribers, projected changes in
98
104
service rates, and estimated expenditures for future installation of cable
plant and other future capital requirements.
4. Residual Value
Under both the return-on-equity and the return-on-investment
approaches, MTA has calculated a residual value for the System following the
projection period. The residual represents the anticipated value of the System
at the end of the projection period. This value is added to the System's cash
flow stream in the final year of the projection period and then discounted back
to present value.
The residual is calculated as a multiple of the projected annual net
cash flow in the final year of the discounted cash flow analysis. The multiple
used reflects the degree of likelihood that the System will have significant
future income, and therefore value, at the end of the projection period. If
the franchise is likely to be renewed on the same terms as the current
franchise, and if there is a realistic expectation of continued growth in
income, a higher multiple will be applied. On the other hand, if the franchise
is not likely to be renewed, or is renewed on terms and conditions
significantly different from the current franchise, or if competitive or
technological factors jeopardize the operator's future income, a lower multiple
is appropriate.
Based on its experience and familiarity with the cable industry, and
its analysis of the System, MTA has calculated the System's residual value
using the last year's cash flow times a multiple of nine, as shown in Exhibit
D. This multiple reflects MTA's view that the System is likely to have
significant value in the last year of the projections, but that certain
unknowns and uncertainties must be factored into the multiple nonetheless.
Currently, the Cable Act of 1984 puts operators in a favorable position in that
cable franchises are generally likely to be renewed. However, the 1984 Act
provides no guarantee of renewal, and it is expected that the negotiation
process required to obtain a renewal will result in new franchises that will be
on terms significantly different and probably less favorable than current
franchises. In addition, concerns about how
99
105
re-regulation of the cable industry will affect the Act's renewal provisions
could have the effect of reducing or eliminating the operator's expectation of
renewal.
5. Discount Rates
A critical component of both the return-on-equity and the
return-on-investment approaches is the selection of the rate at which future
cash flows are discounted to their present value. The discount rate represents
the investor's expected return on capital, i.e., the rate of return that
reasonably reflects the risk being undertaken by the investor.
Considering the relative risk associated with the cable industry in
comparison to other industries, and the risk associated with the System in
particular, MTA has adopted a range of discount rates for its discounted cash
flow methods. In the after-tax return-on-equity model, MTA has applied an
after-tax discount rate of 14.0% for its low valuation, and a rate of 12.0% for
its high valuation. In the pre-tax return- on-investment model, the pre-tax
weighted average low valuation discount rate is 16.6%, while the high valuation
rate is 15.1%. The discount rates used in the two discounted cash flow methods
are indicated on Exhibit D and summarized in Exhibit A.
MTA has calculated the discount rate for the return-on-equity model by
first establishing a risk-free rate of return (the current rate of return
available on Treasury bills or Treasury bonds as of the valuation date) and
then adding the historical premium for risk that the market has presented to
holders of representative cable television stocks. This assumes that using
such historical data will provide a reasonable guide to future return
expectations after recognition for risk.
The discount rate incorporates systematic risk, which is the
sensitivity of the return on the subject investment to changes in the return
for the market as a whole. MTA also has considered in our selection of the
discount rates unsystematic risk, which is any risk premium directly associated
with the industry, particular company, or the subject system. Thus, internal
risk factors, such as the possibility of competition, municipal and customer
relations, rate structure, franchise stability, etc., have been examined in our
selection of the discount rates.
100
106
The discount rates used in the return-on-investment model is
determined by the "band of investment" method. The rates are based on an
average of the rate applicable to equity and the cost of debt weighted in the
proportions that are utilized for the particular system.
C. DIRECT INCOME METHODOLOGY
An alternative valuation method to the discounted cash flow method is
the direct income method, in which the estimate of the cable system's value is
based on current net operating income times a multiple selected by the
appraiser. MTA has applied several alternative versions of this method to the
System. In the first model, MTA used the System's actual annual net operating
income for the 12-month period preceding the valuation date, whenever the
appropriate data was available. When data was insufficient to ascertain the
actual net operating income for the past full year, MTA estimated the past
year's annual net operating income based on available financial information for
the past several months. In the second, the System's current cash flow as of
the appraisal date was annualized to create a "running rate" net operating
income projection. In the third model, MTA used the System's projected net
operating income for the twelve months following the appraisal date. The
results are shown in Exhibit A.
The multiples applied to each of these income figures are derived from
a variety of cable industry data. First, MTA has looked at the income and
stock value of several publicly traded cable companies near the appraisal date.
From this analysis, MTA has derived a range of multiples that it believes are
applicable to privately held cable systems, which includes adjustments for
control and marketability. Taking into account multiples derived from the sale
of other cable television systems, MTA has arrived at a composite figure for
each model. In the historical income model, MTA has applied a low multiple of
10.5 and a high multiple of 11.5. The running rate and projected income models
use slightly lower multiples to account for the additional risk and uncertainty
of using projections rather than historical data. The multiples used in each
of the three direct income approaches are indicated in Exhibit A.
101
107
D. VALUE CONCLUSIONS
The valuations yielded by each of the methods described above are
shown in Exhibit A. In arriving at a final System valuation, MTA considered
both discounted cash flow methods, i.e., the return-on-equity and
return-on-investment methods, and the direct income methods. Based upon the
foregoing analysis and a consideration of the various methods, MTA concludes
that the fair market values of the Systems as a business enterprise as of
December 31, 1995, were as follows:
Gilroy, CA $76,000,000
Hesperia, CA 38,846,000
San Luis Obispo, CA 29,585,000
Tulare, CA 31,972,000
Central Region, OR 26,294,000
Coos Bay, OR 34,501,000
Dallas, OR 35,334,000
Florence, OR 10,696,000
COMBINED SYSTEMS $283,228,000
Allocations of the above values to the headends within Coos Bay,
Dallas, and Florence are found in Appendix C to this report. Allocation
summaries for the identified Sale and Exchange properties are as follows:
Sale
Coos Bay, OR $27,837,000
Dallas, OR 15,402,000
Florence, OR 271,000
Gilroy, CA 76,000,000
Tulare, CA 31,972,000
SLO, CA 29,585,000
Central, OR 26,294,000
------------
TOTAL $207,361,000
Exchange
Coos Bay $6,664,000
Dallas 19,932,000
Hesperia 38,846,000
Florence 10,425,000
-----------
TOTAL $75,867,000
102
108
VI. ALLOCATION OF VALUE TO SALE AND EXCHANGE CLUSTERS
A. PURPOSE OF ALLOCATION
Certain affiliates of Falcon Cable Systems Company, L.P. have made a
preliminary proposal to the Advisory Committee to exchange their ownership
interests for a portion of the cable systems that represent an equal value.
After the exchange, the General Partner would exercise its right to acquire the
ownership interests of the unaffiliated owners. The proposal was designed such
that the unaffiliated owners would receive the same amount whether or not the
systems are exchanged with the affiliated members or all the systems are sold
as part of a sale and liquidation. Accordingly, it was necessary to compute
the value of the systems that would be exchanged (Exchange Systems) and the
remaining systems that would be sold (Sale Systems) in order to determine any
adjustments in the list of systems that would ensure that the unaffiliated
owners would receive the same amount whether or not the exchange took place.
B. METHODOLOGY
The fair market values assigned to certain Systems in the previous
section have been allocated to the headend service areas (headends) within
those Systems. Headend allocations have been calculated for Coos Bay, Dallas,
and Florence. To allocate each System's fair market value among its operating
headends, MTA examined 1) the number of subscribers served by the headend, 2)
the projected operating cash flows to be generated by the headend, and 3) the
projected free cash flows to be generated by the headend after capital
expenditures have been considered. Allocation percentages were developed based
on these three criteria and then averaged to determine a single allocation
percentage.
The allocation scheme based on the number of subscribers simply
divides the subscribers served from the headend by the total number of
subscribers served by the
103
109
System, resulting in the first allocation percentage. This allocation was
conducted in an identical manner for all three Systems.
The second and third allocation methods were preceded by a grouping of
each System's headends into two separate operating clusters identified as Sale
and Exchange clusters, based on Falcon's General Partner's identification of
headends that would potentially be exchanged for the General Partner's limited
partner equity interest. When the clusters within Coos Bay, Dallas, and
Florence were identified, an allocation of each original System's value between
the two groups was developed. Since each cluster's collective revenues,
operating expenses, and the level of capital expenditures to be supported were
not evenly dispersed among the headends, it was necessary to prepare DCF models
for the clusters based on the same methodology used to estimate the original
System value. Appropriate adjustments were made to mileage, homes passed,
subscribers, rates, operating expenses, and capital expenditures. The single
exception to this methodology involved the Mapleton headend in the Florence
System, which was identified as a Sale cluster. However, this headend's value
is best represented by the contribution it makes to the value of the Florence
System. Accordingly, Mapleton's value is the difference between the original
value for Florence and the Florence Exchange headend. After the allocation of
original System values to Sale and Exchange clusters was accomplished, MTA's
second allocation scheme using operating cash flow per headend was applied.
C. HEADEND VALUE ALLOCATIONS
To forecast operating cash flows per headend in the second allocation
method, MTA began with revenue projections based on the number of subscribers
to each service per headend and the weighted average rates for services in
those specific communities. Certain revenue streams such as installation
charges, advertising sales, and miscellaneous have been projected per headend
according to a simple subscriber-based allocation of the corresponding (either
Sale or Exchange) cluster's revenue projections. Accordingly, revenue streams
were projected per headend for 1996.
104
110
An operating profit margin was applied to the revenue streams to
forecast 1996 operating cash flow. The profit margin applied to the revenues
for each headend was the cumulative profit margin, incorporating all revenues
and cash flows, forecast in the corresponding cluster valuation. Headend cash
flows were projected to grow at the same annual rate as cash flows for the
corresponding cluster. Use of the cumulative margin and the cluster-wide cash
flow growth captures the impact on cash flow from new services launched after
the valuation date. Cumulative cash flows over the projection period for each
headend were divided by cumulative cash flows for the corresponding cluster.
In this manner, the second allocation percentage per headend was derived.
The third allocation method based on the free cash flow per headend
required an allocation of original System capital expenditures to each headend.
At the System level, certain expenditures, including converters, installations,
miscellaneous, and incremental upgrade/rebuild costs have been projected
directly by MTA. Plant mileage projections were based on a combination of
historical information, Falcon-provided projections, and the appraiser's
judgment. These expenditures were allocated between the headends based on the
appropriate statistic, either subscribers or plant miles. The specific
rebuild/upgrade expenditures per headend were based on plans and financial
projections prepared by Falcon and supplied to the appraisers. Cumulative
capital expenditures have been subtracted from cumulative operating cash flows
at the headend level and compared with the corresponding figure for the cluster
to provide the third allocation percentage.
The three allocation percentages were averaged to calculate a single
percentage. The average percentage is applied to the original System value to
determine an allocated value per headend. Where the sum of the allocated
values did not precisely match the original System value, the allocated values
were adjusted by the percentage difference between the two. This step results
in the final allocated value per headend which yields the overall values for
the Sale and Exchange properties.
According to this methodology, the sum the identified Sale headends,
as of December 31, 1995, is $207,361,000. The sum of the identified Exchange
headends as of the same date is $75,867,000.
105
111
VII. CONTINGENCIES AND LIMITING CONDITIONS
Our conclusions as to the value of the System's assets and asset
allocations are based upon the following, which to the best of our knowledge
and belief are reliable and sound:
1. Information and data obtained during an onsite inspection by
MTA representatives of a representative portion of the System
and communities served.
2. Selected documents including:
a. Various operating data and maps.
b. Miscellaneous internal data and documents.
The following limiting conditions apply to the subject appraisal:
1. MTA is under no obligation to update the appraisal to account
for events or additional data subsequent to the appraisal
date. The appraisal is based on laws and regulations in place
as of December 31, 1995, and does not reflect subsequent
changes, if any, in the relevant laws and regulations.
2. Neither this report nor any portions thereof may be used for
any purpose other than as stated herein nor may it be
reproduced or excerpted without the prior written consent of
MTA.
3. No copies of this report will be furnished to entities other
than the client without the client's specific permission or
direction unless ordered by a court of competent jurisdiction.
4. The comments and judgments of MTA as to the physical and
terminal state of the cable system were made by
representatives who are expert in valuing cable television
assets but not by qualified cable television engineers.
Consequently, readers should not rely on any statement made
herein for any purpose other than those set forth in this
appraisal.
106
112
5. Separate appraisals of the System-owned land, buildings,
improvements, and construction in progress were not conducted.
Values for the System's land, buildings, and improvements were
taken from the balance sheet, statements of assessed value for
tax purposes, or System estimates based on tax assessments.
6. MTA did not consider, or factor into the appraisal, any impact
on value that might be caused by the presence of toxic waste
or hazardous material including electromagnetic radiation or
other forms of radiofrequency radiation.
107
113
VIII. STATEMENT OF VALUE
MTA certifies that a personal inspection of a representative portion
of the communities and Systems was made by qualified representatives of this
firm and that, to the best of our knowledge, the statements contained in this
appraisal are correct and that the opinions stated are based on consideration
of the relevant factors. Neither MTA nor any of its representatives have any
current interest or contemplated future interest in the entities appraised.
The fee paid for this report was in no way dependent on the values determined
herein.
Based on the various analyses, computations, and considerations
discussed in this report, it is our professional judgment, subject to the
assumptions and limitations stated in this report, that the values as stated in
this report are true and correct. Therefore, it is the professional opinion of
MTA that the fair market values of the Systems as a business enterprise as of
December 31, 1995, are as stated below:
Gilroy, CA $76,000,000
Hesperia, CA 38,846,000
San Luis Obispo, CA 29,585,000
Tulare, CA 31,972,000
Central Region, OR 26,294,000
Coos Bay, OR 34,501,000
Dallas, OR 35,334,000
Florence, OR 10,696,000
-----------
COMBINED SYSTEMS $283,228,000
108
114
Value allocation summaries for the identified Sale and Exchange
properties, as of December 31, 1995, are as follows:
Sale
Coos Bay, OR $27,837,000
Dallas, OR 15,402,000
Florence, OR 271,000
Gilroy, CA 76,000,000
Tulare, CA 31,972,000
SLO, CA 29,585,000
Central, OR 26,294,000
-----------
TOTAL $207,361,000
Exchange
Coos Bay $6,664,000
Dallas 19,932,000
Hesperia 38,846,000
Florence 10,425,000
-----------
TOTAL $75,867,000
MALARKEY-TAYLOR ASSOCIATES, INC.
/s/ ROBERT M. JONES
---------------------------------
By: Robert M. Jones
President, MTA
/s/ SUSAN DONOVAN
---------------------------------
By: Susan Donovan
Senior Financial Analyst
April 29, 1996
109
115
IX. QUALIFICATIONS
A. QUALIFICATIONS OF MALARKEY-TAYLOR ASSOCIATES, INC. (MTA)
MTA has served the communications industry for nearly 30 years
specializing in the field of cable, cellular, paging, mobile radio, and
broadcasting technologies. We have completed thousands of projects for clients
in the communications industry and in the financial and investment communities.
Our organization is composed of a multi-disciplinary team of professionals who
combine academic training in accounting, finance, engineering, marketing,
management, economics, and law with many years of experience solving problems
for hundreds of clients in both the public and private sectors.
A large portion of our financial, engineering, and managerial
professionals' time is devoted to the appraisal of cable television systems,
cellular telephone systems, paging systems, and broadcast stations. Since
1964, we have appraised hundreds of communications properties for purposes of
financing, ownership transfers, property tax assessments, and estate planning
and probating. Our appraisal experience has included independent fair market
valuations and purchase price allocations, including valuation of both tangible
assets and intangible assets such as franchises, licenses, subscriber lists,
leases, and contracts. MTA has supplied expert testimony on cable, cellular,
paging, and broadcast property values in court and other legal hearings.
110
116
B. QUALIFICATIONS OF ROBERT M. JONES
Robert M. Jones is MTA-EMCI's President. He is responsible for the management
of the financial aspects of all projects. During Mr. Jones years of experience
in the cable industry, he has been involved in the analysis of hundreds of
systems and is thoroughly familiar with the fiscal management features of all
types of systems, from the smallest to the largest. He has the training,
experience, and industry knowledge to analyze and interpret financial and
operating statements, pro forma financial projections and related financial and
management information systems involved in appraisals , rate regulation,
valuations, management audits, feasibility studies, due diligence reviews, and
franchise applications and renewals. He has testified before court and
arbitration hearings concerning cable system values.
EXPERIENCE
Malarkey-Taylor Associates, Inc., Washington, D.C.; telecommunications
consultants and appraisers, specializing in cable television; 1972-1975 and
1978-present; President and Chief Operating Officer; responsible for the
financial aspects of all projects.
U.S. Army Communications Command, Ft. Ritchie, MD; U.S. Government organization
responsible for all non-tactical communications (e.g. telephone, microwave,
cable TV, etc.) in the United States; 1977-1978. Chief of Internal Review;
responsible for review and analysis of all financial and operational aspects of
approximately 100 communications facilities throughout the United States.
U.S. Renegotiation Board, Washington, D.C.; Review and oversight of defense
contracts with the U.S. Government; 1975-1977; responsible for review, analysis
and renegotiation of defense contracts.
U.S. General Accounting Office, Washington, D.C.; Research and review of
various aspects, especially financial, of projects and operating groups in the
Department of Defense; 1968-1969 and 1971-1972.
EDUCATION
M.A. Degree, Accounting University of Missouri, Columbia, MO.
B.B.A. Degree, Accounting, Texas Tech University, Lubbock, TX.
CERTIFICATION AND ORGANIZATIONS
Certified Public Accountant, Texas and Maryland
Senior Member, American Society of Appraisers
Member, American Institute of Certified Public Accountants
Member, Texas Society of Certified Public Accountants
111
117
C. QUALIFICATIONS OF SUSAN DONOVAN
Susan Donovan is a Senior Financial Analyst, in the Financial Services
department at Malarkey-Taylor. She provides valuation, financial and
consulting services to cable television and broadcasting companies. Ms.
Donovan is involved in the fair market valuation and asset appraisal of
publicly and privately held cable television systems and broadcast stations.
She has acquired an in-depth knowledge of the values of cable television
systems and broadcast stations, including their market characteristics, growth
prospects, construction costs, operating cost structures, and other industry
issues.
Ms. Donovan was previously with the communications consulting firms of
Broadcast Investment Analysts, Inc. and Frazier, Gross & Kadlec, both of
Washington, D.C., where she participated in asset appraisal and fair market
valuations for numerous broadcast properties.
EXPERIENCE
Senior Financial Analyst, Financial Services, Malarkey-Taylor Associates, Inc.,
Washington, D.C., 1993-present.
Financial Analyst, Broadcast Investment Analysts, Inc., Washington, D.C.,
1988-1992.
Research Analyst, Frazier, Gross & Kadlec, Washington, D.C., 1986-1988.
Assistant Editor and Editorial Coordinator, TV Digest (presently Warren
Publishing), Washington, D.C., 1985-1986.
EDUCATION
M.B.A., George Mason University, Fairfax, Virginia.
B.A., Political Science, Trinity College, Washington, D.C.
112
118
D. QUALIFICATIONS OF KEKE TAN
Keke Tan is a Financial Analyst in the Financial Services department
at Malarkey-Taylor. She is involved in the fair market valuation and asset
allocation of cable television systems.
Ms. Tan has gained in-depth knowledge of the telecommunications
industry from her previous work on various Management Information Systems (MIS)
projects, as a graduate research assistant at George Mason University (GMU).
While a student at GMU, Ms. Tan was responsible for the preparation of a
comprehensive financial management case study addressing both domestic and
international perspectives pertaining to the telecommunications industry.
Additionally, she has worked as a financial analyst at LCI International, Inc.,
a business and residential long distance telephone service provider.
EXPERIENCE
Financial Analyst, Financial Services, Malarkey-Taylor Associates, Inc.,
Washington, D.C., October 1995-present.
Graduate Research Assistant, George Mason University, Fairfax, VA, 1994-1995.
Financial Analyst, LCI International, Inc., McLean, VA, 1995.
Financial Associate, Commonwealth Capital, Inc., Alexandria, VA, 1994.
EDUCATION
M.B.A. (studies concentrating in Finance and MIS), George Mason University,
Fairfax, Virginia.
B.S., International Business Administration, Hunan University, Hunan, China.
113
119
APPENDIX A
DCF Valuation Exhibits for Falcon Systems
120
Gilroy, CA
121
FALCON CABLE SYSTEMS CO. EXHIBIT A
GILROY REGION - CALIFORNIA
AS OF DECEMBER 31, 1995
VALUATION METHODS
- ----------------- LOW HIGH
----------- -----------
I. MULTIPLE OF PAST YEAR'S OPERATING INCOME
OPERATING INCOME, PER BOOKS (12/31/95) $7,650,850 $7,650,850
VALUATION MULTIPLE 10.5 11.5
ESTIMATED FAIR MARKET VALUE $80,333,925 $87,984,775
----------- -----------
II. MULTIPLE OF "RUNNING RATE" OPERATING INCOME
ESTIMATED OPERATING INCOME
TOTAL CURRENT YEAR'S REVENUE $13,674,275 $13,674,275
OPERATING MARGIN, PER BOOKS (12/31/95) 58.2% 58.2%
----------- -----------
"RUNNING RATE" OPERATING INCOME 7,959,112 7,959,112
VALUATION MULTIPLE 10.0 11.0
ESTIMATED FAIR MARKET VALUE $79,591,116 $87,550,227
----------- -----------
III. MULTIPLE OF NEXT YEAR'S OPERATING INCOME
OPERATING INCOME $8,321,175 $8,321,175
VALUATION MULTIPLE 9.5 10.5
----------- -----------
ESTIMATED FAIR MARKET VALUE $79,051,165 $87,372,340
----------- -----------
IV. DISCOUNTED CASH FLOW RETURN ON EQUITY
TARGET RETURN ON EQUITY 14.0% 12.0%
ESTIMATED FAIR MARKET VALUE $68,767,468 $74,696,602
----------- -----------
V. DISCOUNTED CASH FLOW RETURN ON INVESTMENT
TARGET RETURN ON INVSTMT 16.6% 15.1%
ESTIMATED FAIR MARKET VALUE $67,554,967 $73,075,065
----------- -----------
SUMMARY OF VALUES
I. MULTIPLE OF PAST YEAR'S OPERATING INCOME $80,333,925 $87,984,775
II. MULTIPLE OF "RUNNING RATE" OPERATING INCOME 79,591,116 87,550,227
III. MULTIPLE OF NEXT YEAR'S OPERATING INCOME 79,051,165 87,372,340
IV. DISCOUNTED CASH FLOW RETURN ON EQUITY 68,767,468 74,696,602
V. DISCOUNTED CASH FLOW RETURN ON INVESTMENT 67,554,967 73,075,065
----------- -----------
RANGE OF ESTIMATED FAIR MARKET VALUES $72,662,000 $79,338,000
ESTIMATED FAIR MARKET VALUE $76,000,000
-----------
122
FALCON CABLE SYSTEMS CO. EXHIBIT B
GILROY REGION - CALIFORNIA LOW ANALYSIS
AS OF DECEMBER 31, 1995
RETURN ON EQUITY METHOD
PROFIT AND LOSS - LOW VALUE
- ---------------------------
YEAR ENDING DECEMBER 31, 1996 1997 1998 1999
---- ---- ---- ----
REVENUES $14,041,526 $15,361,691 $16,991,254 $18,911,275
OPERATING EXPENSES 5,720,351 6,323,315 6,998,292 7,728,029
----------- ----------- ----------- ------------
OPERATING INCOME $8,321,175 $9,038,377 $9,992,962 $11,183,246
OPERATING MARGIN 0.59 0.59 0.59 0.59
PARENT SERVICES/MGT FEE(5%) 702,076 768,085 849,563 945,564
FRANCHISE AMORTIZATION(15) 3,179,667 3,179,667 3,179,667 3,179,667
SUBSCRIBER LIST(8) 905,467 905,467 905,467 905,467
NON-COMPETE COVENANTS(0) 0 0 0 0
DEPRECIATION 1,640,173 3,820,456 4,786,445 5,555,825
INTEREST 3,306,134 3,539,424 3,962,766 4,135,473
----------- ----------- ----------- ------------
PRE-TAX INCOME ($1,412,341) ($3,174,720) ($3,690,945) ($3,538,750)
INCOME TAX (EXPENSE)/BENEFIT 480,196 1,079,405 1,254,921 1,203,175
----------- ----------- ----------- ------------
NET INCOME ($932,145) ($2,095,315) ($2,436,024) ($2,335,575)
SOURCES AND USES OF CASH
- ------------------------
SOURCES OF CASH -
PRE TAX INCOME ($1,412,341) ($3,174,720) ($3,690,945) ($3,538,750)
FRANCHISE AMORTIZATION(15) 3,179,667 3,179,667 3,179,667 3,179,667
SUBSCRIBER LIST(8) 905,467 905,467 905,467 905,467
NON-COMPETE COVENANTS(0) 0 0 0 0
DEPRECIATION 1,640,173 3,820,456 4,786,445 5,555,825
EQUITY 33,061,336
DEBT 33,061,336 2,332,901 4,233,426 3,801,512
RESIDUAL VALUE IN YEAR 7 ----------- ----------- ----------- ------------
TOTAL SOURCES OF CASH $70,435,637 $7,063,769 $9,414,060 $9,903,722
USES OF CASH -
PURCHASE PRICE - CURRENT $68,767,468
CAPITAL EXPENDITURES 1,567,208 7,064,729 7,339,613 7,621,830
DEBT RETIREMENT 0 0 2,074,447 2,281,891
TAXES PAID ON NET INCOME 0 0 0 0
TAXES PAID ON SALE (RESIDUAL) ----------- ----------- ----------- ------------
TOTAL USES OF CASH $70,334,677 $7,064,729 $9,414,060 $9,903,722
ANNUAL CASH INCREASE/(DECREASE) $100,960 ($960) ($0) $0
CUMULATIVE CASH 100,960 100,000 100,000 100,000
YEAR ENDING DECEMBER 31, 2000 2001 2002 TOTAL
---- ---- ---- -----
REVENUES $20,810,824 $22,442,561 $23,934,099 $132,493,230
OPERATING EXPENSES 8,573,875 9,242,147 9,878,234 54,464,242
----------- ----------- ----------- -------------
OPERATING INCOME $12,236,949 $13,200,414 $14,055,865 $78,028,988
OPERATING MARGIN 0.59 0.59 0.59
PARENT SERVICES/MGT FEE(5%) 1,040,541 1,122,128 1,196,705 6,624,661
FRANCHISE AMORTIZATION(15) 3,179,667 3,179,667 3,179,667 22,257,667
SUBSCRIBER LIST(8) 905,467 905,467 905,467 6,338,267
NON-COMPETE COVENANTS(0) 0 0 0 0
DEPRECIATION 5,307,702 4,590,197 4,277,742 29,978,539
INTEREST 3,907,284 3,353,366 2,660,833 24,865,280
----------- ----------- ----------- -------------
PRE-TAX INCOME ($2,103,711) $49,589 $1,835,452 ($12,035,426)
INCOME TAX (EXPENSE)/BENEFIT 715,262 (16,860) (624,054) 4,092,045
----------- ----------- ----------- -------------
NET INCOME ($1,388,449) $32,729 $1,211,398 ($7,943,381)
SOURCES AND USES OF CASH
- ------------------------
SOURCES OF CASH-
PRE TAX INCOME ($2,103,711) $49,589 $1,835,452 ($12,035,426)
FRANCHISE AMORTIZATION(5) 3,179,667 3,179,667 3,179,667 22,257,667
SUBSCRIBER LIST(8) 905,467 905,467 905,467 6,338,267
NON-COMPETE COVENANTS(0) 0 0 0 0
DEPRECIATION 5,307,702 4,590,197 4,277,742 29,978,539
EQUITY 33,061,336
DEBT 0 0 0 43,429,175
RESIDUAL VALUE IN YEAR 7 126,502,789 126,502,789
----------- ----------- ------------ ------------
TOTAL SOURCES OF CASH $7,289,124 $8,724,919 $136,701,115 $249,532,346
USES OF CASH-
PURCHASE PRICE - CURRENT $68,767,468
CAPITAL EXPENDITURES 1,749,949 1,799,592 1,878,395 29,021,317
DEBT RETIREMENT 5,539,175 6,925,327 26,608,335 43,429,175
TAXES PAID ON NET INCOME 0 0 0 0
TAXES PAID ON SALE (RESIDUAL) 25,586,037 25,586,037
----------- ----------- ----------- ------------
TOTAL USES OF CASH $7,289,124 $8,724,919 $54,072,767 $166,803,997
ANNUAL CASH INCREASE/(DECREASE) $0 ($0) $82,628,349 $82,728,349
CUMULATIVE CASH 100,000 100,000 82,728,349
123
FALCON CABLE SYSTEMS CO. EXHIBIT B
GILROY REGION - CALIFORNIA HIGH ANALYSIS
AS OF DECEMBER 31, 1995
RETURN ON EQUITY METHOD
PROFIT AND LOSS - HIGH VALUE
- ----------------------------
YEAR ENDING DECEMBER 31, 1996 1997 1998 1999
---- ---- ---- ----
REVENUES $14,041,526 $15,361,691 $16,991,254 $18,911,275
OPERATING EXPENSES 5,720,351 6,323,315 6,998,292 7,728,029
----------- ----------- ----------- ------------
OPERATING INCOME $8,321,175 $9,038,377 $9,992,962 $11,183,246
OPERATING MARGIN 0.59 0.59 0.59 0.59
PARENT SERVICES/MGT FEE(5%) 702,076 768,085 849,563 945,564
FRANCHISE AMORTIZATION(15) 3,179,667 3,179,667 3,179,667 3,179,667
SUBSCRIBER LIST(8) 905,467 905,467 905,467 905,467
NON-COMPETE COVENANTS(0) 0 0 0 0
DEPRECIATION 1,640,173 3,820,456 4,786,445 5,555,825
INTEREST 3,618,191 3,886,158 4,369,783 4,589,889
----------- ----------- ----------- ------------
PRE-TAX INCOME ($1,724,399) ($3,521,455) ($4,097,962) ($3,993,166)
INCOME TAX (EXPENSE)/BENEFIT 586,296 1,197,295 1,393,307 1,357,676
----------- ----------- ----------- ------------
NET INCOME ($1,138,103) ($2,324,160) ($2,704,655) ($1,674,149)
SOURCES AND USES OF CASH
- ------------------------
SOURCES OF CASH -
PRE TAX INCOME ($1,724,399) ($3,521,455) ($4,097,962) ($3,993,166)
FRANCHISE AMORTIZATION(15) 3,179,667 3,179,667 3,179,667 3,179,667
SUBSCRIBER LIST(8) 905,467 905,467 905,467 905,467
NON-COMPETE COVENANTS(0) 0 0 0 0
DEPRECIATION 1,640,173 3,820,456 4,786,445 5,555,825
EQUITY 36,181,914
DEBT 36,181,914 2,679,671 4,836,245 4,471,311
RESIDUAL VALUE IN YEAR 7 ----------- ----------- ----------- ------------
TOTAL SOURCES OF CASH $76,364,735 $7,063,805 $9,609,861 $10,119,104
USES OF CASH -
PURCHASE PRICE - CURRENT $74,696,602
CAPITAL EXPENDITURES 1,567,208 7,064,729 7,339,613 7,621,830
DEBT RETIREMENT 0 0 2,270,248 2,497,273
TAXES PAID ON NET INCOME 0 0 0 0
TAXES PAID ON SALE (RESIDUAL) ----------- ----------- ----------- ------------
TOTAL USES OF CASH $76,263,810 $7,064,729 $9,609,861 $10,119,104
ANNUAL CASH INCREASE/(DECREASE) $100,924 ($924) $0 $(0)
CUMULATIVE CASH 100,924 100,000 100,000 100,000
YEAR ENDING DECEMBER 31, 2000 2001 2002 TOTAL
---- ---- ---- -----
REVENUES $20,810,824 $22,442,561 $23,934,099 $132,493,230
OPERATING EXPENSES 8,573,875 9,242,147 9,878,234 54,464,242
----------- ----------- ----------- -------------
OPERATING INCOME $12,236,949 $13,200,414 $14,055,865 $78,028,988
OPERATING MARGIN 0.59 0.59 0.59
PARENT SERVICES/MGT FEE(5%) 1,040,541 1,122,128 1,196,705 6,624,661
FRANCHISE AMORTIZATION(15) 3,179,667 3,179,667 3,179,667 22,257,667
SUBSCRIBER LIST(8) 905,467 905,467 905,467 6,338,267
NON-COMPETE COVENANTS(0) 0 0 0 0
DEPRECIATION 5,307,702 4,590,197 4,277,742 29,978,539
INTEREST 4,340,162 3,829,532 3,184,616 27,818,332
----------- ----------- ----------- -------------
PRE-TAX INCOME ($2,536,589) ($426,577) $1,311,670 ($14,988,479)
INCOME TAX (EXPENSE)/BENEFIT 862,440 145,036 (445,968) 5,096,083
----------- ----------- ----------- -------------
NET INCOME ($1,674,149) ($281,541) $865,702 ($9,892,396)
SOURCES AND USES OF CASH
- ------------------------
SOURCES OF CASH-
PRE TAX INCOME ($2,536,589) $(426,577) $1,311,670 ($14,988,479)
FRANCHISE AMORTIZATION(5) 3,179,667 3,179,667 3,179,667 22,257,667
SUBSCRIBER LIST(8) 905,467 905,467 905,467 6,338,267
NON-COMPETE COVENANTS(0) 0 0 0 0
DEPRECIATION 5,307,702 4,590,197 4,277,742 29,978,539
EQUITY 36,181,914
DEBT 0 0 0 48,169,141
RESIDUAL VALUE IN YEAR 7 126,502,789 126,502,789
----------- ----------- ------------ -------------
TOTAL SOURCES OF CASH $6,856,246 $8,248,753 $136,177,333 $254,439,837
USES OF CASH-
PURCHASE PRICE - CURRENT $74,696,602
CAPITAL EXPENDITURES 1,749,949 1,799,592 1,878,395 29,021,317
DEBT RETIREMENT 5,106,297 6,449,162 31,846,160 48,169,141
TAXES PAID ON NET INCOME 0 0 0 0
TAXES PAID ON SALE (RESIDUAL) 22,566,094 22,566,094
----------- ----------- ----------- ------------
TOTAL USES OF CASH $6,856,246 $8,248,753 $56,290,649 $174,453,153
ANNUAL CASH INCREASE/(DECREASE) $0 $0 $79,886,684 $79,986,684
CUMULATIVE CASH 100,000 100,000 79,986,684
124
FALCON CABLE SYSTEMS CO. EXHIBIT C
GILROY REGION - CALIFORNIA LOW ANALYSIS
AS OF DECEMBER 31, 1995
RETURN ON EQUITY METHOD
DEBT AMORTIZATION - LOW VALUE
- -----------------------------
TOTAL YEAR 1 CASH REQUIREMENTS $66,122,671
YEAR 1 DEBT REQUIREMENTS 33,061,336
YEAR 1 EQUITY REQUIREMENTS 33,061,336
FINANCING AVAILABLE $49,730,525 $54,087,639 $58,749,450 $64,954,254
UNUSED LEVERAGE 16,669,189 18,693,403 21,196,234 25,881,417
SENIOR DEBT: 1996 1997 1998 1999
---- ---- ---- ----
BEGINNING DEBT $0 33,061,336 $33,061,336 $30,986,889
DEBT ADDED 33,061,336 0 0 0
TOTAL ANNUAL PAYMENTS 3,306,134 3,306,134 5,380,580 5,380,580
INTEREST 3,306,134 3,306,134 3,306,134 3,098,689
PRINCIPAL REPAYMENT 0 0 2,074,447 2,281,891
ENDING BALANCE 33,061,336 33,061,336 30,986,889 28,704,998
LINE OF CREDIT:
BEGINNING DEBT $0 $0 $2,332,901 $6,566,327
BORROWINGS 0 2,332,901 4,233,426 3,801,512
PRINCIPAL PAYMENTS 0 0 0 0
INTEREST 0 233,290 656,633 1,036,784
SENIOR DEBT COVERAGE 4.0 3.7 3.1 2.6
LOC DEBT COVERAGE 0.0 0.3 0.7 0.9
TOTAL DEBT COVERAGE 4.0 3.9 3.8 3.5
FINANCING AVAILABLE $72,691,097 $79,540,169 $85,802,688
UNUSED LEVERAGE 39,157,435 52,931,834 65,406,056
SENIOR DEBT: 2000 2001 2002 TOTAL
---- ---- ---- -----
BEGINNING DEBT $28,704,998 $26,194,918 $23,433,829
DEBT ADDED 0 0 0 33,061,336
TOTAL ANNUAL PAYMENTS 5,380,580 5,380,580 5,380,580 33,515,168
INTEREST 2,870,500 2,619,492 2,343,383 20,850,464
PRINCIPAL REPAYMENT 2,510,080 2,761,088 3,037,197 12,664,704
ENDING BALANCE 26,194,918 23,433,829 20,396,632
LINE OF CREDIT:
BEGINNING DEBT $10,367,839 $7,338,744 $3,174,505 $0
BORROWINGS 0 0 0 10,367,839
PRINCIPAL PAYMENTS 3,029,095 4,164,239 3,174,505 10,367,839
INTEREST 1,036,784 733,874 317,451 4,014,816
SENIOR DEBT COVERAGE 2.1 1.8 1.5
LOC DEBT COVERAGE 0.6 0.2 0.0
TOTAL DEBT COVERAGE 2.7 2.0 1.5
125
FALCON CABLE SYSTEMS CO. EXHIBIT C
GILROY REGION - CALIFORNIA HIGH ANALYSIS
AS OF DECEMBER 31, 1995
RETURN ON EQUITY METHOD
DEBT AMORTIZATION - HIGH VALUE
- ------------------------------
TOTAL YEAR 1 CASH REQUIREMENTS $72,363,827
YEAR 1 DEBT REQUIREMENTS 36,181,914
YEAR 1 EQUITY REQUIREMENTS 36,181,914
FINANCING AVAILABLE $57,381,375 $62,408,814 $67,787,827 $74,947,216
UNUSED LEVERAGE 21,199,461 23,547,230 26,360,245 31,545,598
SENIOR: 1996 1997 1998 1999
---- ---- ---- ----
BEGINNING DEBT $0 $36,181,914 $36,181,914 $33,911,685
DEBT ADDED 36,181,914 0 0 0
TOTAL ANNUAL PAYMENTS 3,618,191 3,618,191 5,888,440 5,888,440
INTEREST 3,618,191 3,618,191 3,618,191 3,391,167
PRINCIPAL REPAYMENT 0 0 2,270,248 2,497,273
ENDING BALANCE 36,181,914 36,181,914 33,911,665 31,414,392
LINE OF CREDIT:
BEGINNING DEBT $0 $0 $2,679,671 $7,515,916
BORROWINGS 0 2,679,671 4,836,245 4,471,311
PRINCIPAL PAYMENTS 0 0 0 0
INTEREST 0 267,967 751,592 1,198,723
SENIOR DEBT COVERAGE 4.3 4.0 3.4 2.8
LOC DEBT COVERAGE 0.0 0.3 0.8 1.1
TOTAL DEBT COVERAGE 4.3 4.3 4.1 3.9
FINANCING AVAILABLE $83,874,342 $91,777,118 $99,003,101
UNUSED LEVERAGE 45,579,020 66,131,427 76,681,282
SENIOR: 2000 2001 2002 TOTAL
---- ---- ---- -----
BEGINNING DEBT $31,414,392 $28,667,391 $25,645,690
DEBT ADDED 0 0 0 $36,181,914
TOTAL ANNUAL PAYMENTS 5,888,440 5,888,440 5,888,440 33,678,582
INTEREST 3,141,439 2,866,739 2,564,569 22,818,488
PRINCIPAL REPAYMENT 2,747,001 3,021,701 3,323,871 13,860,094
ENDING BALANCE 28,667,391 25,645,690 22,321,820
LINE OF CREDIT:
BEGINNING DEBT $11,987,227 $9,627,931 $6,200,470 $0
BORROWINGS 0 0 0 11,987,227
PRINCIPAL PAYMENTS 2,359,296 3,427,461 6,200,470 11,987,227
INTEREST 1,198,723 962,793 620,047 4,999,844
SENIOR DEBT COVERAGE 2.3 1.9 1.6
LOC DEBT COVERAGE 0.8 0.5 0.0
TOTAL DEBT COVERAGE 3.1 2.4 1.6
126
FALCON CABLE SYSTEMS CO. EXHIBIT D
GILROY REGION - CALIFORNIA
AS OF DECEMBER 31, 1995
RETURN ON INVESTMENT METHOD
PROFIT AND LOSS
- ---------------
YEAR ENDING DECEMBER 31, 1996 1997 1998 1999
---- ---- ---- ----
REVENUES $14,041,526 $15,361,691 $16,991,254 $18,911,275
OPERATING EXPENSES 5,720,351 6,323,315 6,998,292 7,728,029
----------- ----------- ----------- -----------
OPERATING INCOME 8,321,175 9,038,377 9,992,962 11,183,246
PLUS: RESIDUAL VALUE
LESS: CAPITAL EXPENDITURES 1,567,208 7,064,729 7,339,613 7,621,830
----------- ----------- ----------- -----------
TOTAL CASH FLOW $6,753,967 $1,973,647 $2,653,349 $3,561,415
NET PRESENT VALUE @ 16.6% $67,554,967
-----------
NET PRESENT VALUE @ 15.1% $73,075,065
-----------
YEAR ENDING DECEMBER 31, 2000 2001 2002 TOTAL
---- ---- ---- -----
REVENUES $20,810,824 $22,442,561 $23,934,099 $132,493,230
OPERATING EXPENSES 8,573,875 9,242,147 9,878,234 54,464,242
----------- ----------- ----------- ------------
OPERATING INCOME 12,236,949 13,200,414 14,055,865 78,028,988
PLUS: RESIDUAL VALUE 126,502,789 126,502,789
LESS: CAPITAL EXPENDITURES 1,749,949 1,799,592 1,878,395 29,021,317
----------- ----------- ------------ ------------
TOTAL CASH FLOW $10,487,000 $11,400,822 $138,680,258 $175,510,459
127
FALCON CABLE SYSTEMS CO. EXHIBIT E
GILROY REGION - CALIFORNIA
AS OF DECEMBER 31, 1995
CABLE TELEVISION SUBSCRIBERS
- ----------------------------
YEAR ENDING DECEMBER 31, 1996 1997 1998 1999 2000 2001 2002
------ ------ ------ ------ ------ ------ ------
BEGINNING MILES 664.7
MILES ADDED 20.5 18.1 17.1 15.9 14.6 13.6 13.6
CUMULATIVE MILES 685.2 703.3 720.4 736.3 751.0 764.5 778.1
DENSITY OF ADDITIONAL PLANT 89 88 87 86 85 85 84
HOMES PASSED - BEGINNING 56,219
NEW HOMES & EXTENSIONS 1,827 1,596 1,491 1,376 1,250 1,148 1,136
HOMES PASSED - ENDING 58,046 59,642 61,133 62,509 63,759 64,907 66,043
GROWTH IN HOMES 3.3% 2.8% 2.5% 2.3% 2.0% 1.8% 1.8%
BASIC - BEGINNING SUBSCRIBERS 33,078 34,443 35,689 36,887 38,029 39,108 40,137
AVERAGE SUBSCRIBERS 33,761 35,066 36,288 37,458 38,569 39,623 40,653
ENDING SUBSCRIBERS 34,443 35,689 36,887 38,029 39,108 40,137 41,170
PENETRATION 59.3% 59.8% 60.3% 60.8% 61.3% 61.8% 62.3%
EXPANDED BASIC - BEGINNING 30,391 31,645 32,790 33,890 34,940 35,932 36,876
AVERAGE SUBSCRIBERS 31,018 32,217 33,340 34,415 35,436 36,404 37,351
ENDING SUBSCRIBERS 31,645 32,790 33,890 34,940 35,932 36,876 37,825
PENETRATION 91.9% 91.9% 91.9% 91.9% 91.9% 91.9% 91.9%
NEW PRODUCT TIER #1 - BEGINNING 13,992 15,086 17,951 18,554 19,129 19,672 20,189
AVERAGE SUBSCRIBERS 14,539 16,519 18,253 18,841 19,400 19,930 20,449
ENDING SUBSCRIBERS 15,086 17,951 18,554 19,129 19,672 20,189 20,708
PENETRATION 43.8% 50.3% 50.3% 50.3% 50.3% 50.3% 50.3%
NEW PRODUCT TIER #2 - BEGINNING 0 0 928 3,836 8,785 12,045 12,362
AVERAGE SUBSCRIBERS 0 464 2,382 6,310 10,415 12,204 12,521
ENDING SUBSCRIBERS 0 928 3,836 8,785 12,045 12,362 12,680
PENETRATION 0.0% 2.6% 10.4% 23.1% 30.8% 30.8% 30.8%
NEW PRODUCT TIER #3 - BEGINNING 0 0 928 3,836 8,785 12,045 12,362
AVERAGE SUBSCRIBERS 0 464 2,382 6,310 10,415 12,204 12,521
ENDING SUBSCRIBERS 0 928 3,836 8,785 12,045 12,362 12,680
PENETRATION 0.0% 2.6% 10.4% 23.1% 30.8% 30.8% 30.8%
PAY TV - BEGINNING UNITS 13,465 13,332 14,171 15,200 16,241 17,093 17,543
AVERAGE UNITS 13,398 13,751 14,685 15,720 16,667 17,318 17,768
ENDING UNITS 13,332 14,171 15,200 16,241 17,093 17,543 17,994
PENETRATION 38.7% 39.7% 41.2% 42.7% 43.7% 43.7% 43.7%
PAY PER VIEW - BEGINNING UNITS/MO 728 926 1,497 2,513 3,701 5,064 6,163
AVERAGE UNITS 827 1,212 2,005 3,107 4,382 5,613 6,774
ENDING UNITS 926 1,497 2,513 3,701 5,064 6,163 7,386
AVERAGE BUY RATE/MO 6.6% 9.6% 14.6% 19.6% 24.6% 27.6% 30.6%
CONVERTER RENTALS - BEG. 17,120 18,343 20,077 21,858 23,676 24,934 26,192
AVERAGE SUBSCRIBERS 17,732 19,210 20,967 22,767 24,305 25,563 26,838
ENDING SUBSCRIBERS 18,343 20,077 21,858 23,676 24,934 26,192 27,483
PENETRATION 53.3% 56.3% 59.3% 62.3% 63.8% 65.3% 66.8%
ADDRESSABLE HOMES 12,924 13,974 15,550 17,179 18,851 20,560 22,305
AVERAGE HOMES 13,449 14,762 16,364 18,015 19,706 21,432 23,209
ENDING HOMES 13,974 15,550 17,179 18,851 20,560 22,305 24,114
PENETRATION 40.6% 43.6% 46.6% 49.6% 52.6% 55.6% 58.6%
BASIC CHURN RATE 36% 36% 36% 36% 36% 36% 36%
128
FALCON CABLE SYSTEMS CO. EXHIBIT F
GILROY REGION - CALIFORNIA
AS OF DECEMBER 31, 1995
SERVICE RATES
- -------------
RUNNING RATES
AS OF AVERAGE RATES
CURRENT RATES DECEMBER 1995 FOR 1996
- ------------- ------------- --------------
BASIC $20.07 $20.20
EXPANDED BASIC $5.03 $5.19
NEW PRODUCT TIER #1 $4.20 $4.54
NEW PRODUCT TIER #2 $4.00 $4.00
NEW PRODUCT TIER #3 $4.00 $4.00
PAY $7.04 $7.04
PAY PER VIEW $15.31 $12.25
CONVERTER RENTALS $1.02 $0.92
INSTALLATIONS-NEW $50.00 $50.00
INSTALLATIONS-CHURN $25.00 $25.00
YEAR ENDING DECEMBER 31, 1996 1997 1998 1999 2000 2001 2002
------ ------- ------- ------ ------- ------- --------
PERCENTAGE RATE INCREASES
- -------------------------
BASIC 1% 3% 3% 3% 3% 3% 3%
EXPANDED BASIC 3% 10% 10% 9% 4% 3% 3%
NEW PRODUCT TIER #1 8% 3% 3% 3% 3% 3% 3%
NEW PRODUCT TIER #2 0% 3% 3% 3% 3% 3% 3%
NEW PRODUCT TIER #3 0% 3% 3% 3% 3% 3% 3%
PAY 0% 1% 1% 1% 1% 1% 1%
PAY PER VIEW -20% -10% -5% 3% 3% 3% 3%
CONVERTER/REMOTE RENTALS -10% 3% 3% 3% 3% 3% 3%
INSTALLATIONS-NEW 0% 3% 3% 3% 3% 3% 3%
INSTALLATIONS-CHURN 0% 3% 3% 3% 3% 3% 3%
AVERAGE RATES
- -------------
BASIC $20.20 $20.80 $21.43 $22.07 $22.73 $23.42 $24.12
EXPANDED BASIC 5.19 5.71 6.26 6.84 7.12 7.33 7.55
NEW PRODUCT TIER #1 4.54 4.67 4.81 4.96 5.11 5.26 5.42
NEW PRODUCT TIER #2 4.00 4.12 4.24 4.37 4.50 4.64 4.78
NEW PRODUCT TIER #3 4.00 4.12 4.24 4.37 4.50 4.64 4.78
PAY 7.04 7.11 7.18 7.25 7.32 7.40 7.47
PAY PER VIEW 12.25 11.02 10.47 10.78 11.11 11.44 11.78
CONVERTERS RENTALS 0.92 0.95 0.97 1.00 1.03 1.06 1.10
INSTALLATIONS-NEW 50.00 51.50 53.05 54.64 56.28 57.96 59.70
INSTALLATIONS-CHURN 25.00 25.75 26.52 27.32 28.14 28.98 29.85
129
FALCON CABLE SYSTEMS CO. EXHIBIT G
GILROY REGION - CALIFORNIA
AS OF DECEMBER 31, 1995
YEAR ENDING
DECEMBER 31, 1996 1997 1998 1999 2000 2001 2002 TOTAL
----------- ----------- ----------- ----------- ----------- ----------- ----------- ------------
REVENUES:
BASIC $8,183,005 $8,754,378 $9,331,147 $9,921,016 $10,521,714 $11,133,508 $11,765,772 $69,610,540
EXPANDED BASIC 1,931,897 2,207,654 2,505,254 2,822,923 3,027,418 3,203,449 3,385,371 19,083,966
NEW PRODUCT TIER #1 791,690 926,475 1,054,434 1,121,090 1,188,970 1,258,103 1,329,550 7,670,311
NEW PRODUCT TIER #2 0 22,938 121,302 330,989 562,667 679,081 717,646 2,434,623
NEW PRODUCT TIER #3 0 22,938 121,302 330,989 562,667 679,081 717,646 2,434,623
PAY TV 1,131,456 1,172,871 1,265,053 1,367,762 1,464,625 1,537,032 1,592,778 9,531,577
PAY PER VIEW 121,534 160,288 251,954 402,064 584,118 770,662 957,966 3,248,587
CONVERTER/REMOTE
RENTALS 195,383 218,026 245,108 274,125 301,425 326,540 353,106 1,913,714
INSTALLATIONS 295,256 308,759 325,244 341,694 358,016 375,106 395,327 2,399,404
COMMERCIAL 132,885 136,872 140,978 145,207 149,563 154,050 158,672 1,018,226
ADVERTISING 385,810 491,908 614,885 753,234 903,881 1,062,060 1,221,369 5,433,146
MISCELLANEOUS 872,609 938,586 1,014,594 1,100,182 1,185,759 1,263,887 1,338,896 7,714,513
----------- ----------- ----------- ----------- ----------- ----------- ----------- ------------
TOTAL REVENUES $14,041,526 $15,361,691 $16,991,254 $18,911,275 $20,810,824 $22,442,561 $23,934,099 $132,493,230
OPERATING EXPENSES:
OPERATIONS $ 2,064,345 $ 2,249,848 $ 2,412,998 $ 2,591,481 $ 2,769,969 $ 2,936,676 $ 3,099,788 $ 18,125,105
GENERAL &
ADMINISTRATIVE 1,158,941 1,238,634 1,322,695 1,411,711 1,501,747 1,589,892 1,678,653 9,902,273
SALES & MARKETING 561,994 732,575 899,476 1,018,709 1,146,308 1,265,334 1,386,374 7,010,770
PROGRAMMING 1,935,071 2,102,257 2,363,122 2,706,128 3,155,850 3,450,245 3,713,419 19,426,094
----------- ----------- ----------- ----------- ----------- ----------- ----------- ------------
TOTAL OPERATING
EXPENSES $ 5,720,351 $ 6,323,315 $ 6,998,292 $ 7,728,029 $ 8,573,875 $ 9,242,147 $ 9,878,234 $ 54,464,242
----------- ----------- ----------- ----------- ----------- ----------- ----------- ------------
OPERATING INCOME $ 8,321,175 $ 9,038,377 $ 9,992,962 $11,183,246 $12,236,949 $13,200,414 $14,055,865 $ 78,028,988
OPERATING MARGIN 59.3% 58.8% 58.8% 59.1% 58.8% 58.8% 58.7%
TOTAL REVENUE/
BASIC SUB/MONTH $34.66 $36.51 $39.02 $42.07 $44.96 $47.20 $49.06
CASH FLOW/BASIC
SUB/MONTH $20.54 $21.48 $22.95 $24.88 $26.44 $27.76 $28.81
OPERATIONS
% OF REVENUE 15% 15% 14% 14% 13% 13% 13%
G & A PERCENTAGE
OF REVENUE 8% 8% 8% 7% 7% 7% 7%
SALES & MARKETING
% OF REVENUE 4% 5% 5% 5% 6% 6% 6%
PROGRAMMING
% OF REVENUE 14% 14% 14% 14% 15% 15% 16%
130
FALCON CABLE SYSTEMS CO. EXHIBIT H
GILROY REGION - CALIFORNIA
AS OF DECEMBER 31, 1995
CAPITAL EXPENDITURES
- --------------------
YEAR ENDING DECEMBER 31, 1996 1997 1998 1999 2000 2001 2002 TOTAL
---------- ---------- ---------- ---------- ---------- ---------- ---------- -----------
ASSUMPTIONS AND INPUTS:
- ----------------------
BV OF EXISTING PLANT $9,910,561
ADDITIONAL MILES
OF PLANT 20.5 18.1 17.1 15.9 14.6 13.6 13.6
AERIAL PLANT
PER MILE $11,000 $11,220 $11,444 $11,673 $11,907 $12,145 $12,388
UNDERGROUND PLANT
PER MILE $18,000 $18,360 $18,727 $19,102 $19,484 $19,873 $20,271
PERCENTAGE OF
PLANT AERIAL 5% 5% 5% 5% 5% 5% 5%
PERCENTAGE OF
PLANT UNDERGROUND 95% 95% 95% 95% 95% 95% 95%
AVERAGE COST
PER CONVERTER $110 $112 $114 $117 $119 $121 $124
PERCENTAGE
CONVERTER USE 53% 56% 59% 62% 64% 65% 67%
PERCENTAGE
REPLACEMENT 5% 5% 5% 5% 5% 5% 5%
INSTALLATION
COST PER SUBSCRIBER $63 $64 $65 $67 $68 $69 $71
MISC. CAPITAL
PER SUBSCRIBER $5 $5 $5 $5 $5 $6 $6
INFLATION FACTOR
FOR CAPITALS 2% 2% 2% 2% 2% 2% 2% 115%
1.02 1.04 1.06 1.08 1.10 1.13 1.15
ANNUAL COSTS:
- ------------
23,775
PLANT ADDITIONS - AERIAL $11,287 $10,164 $9,785 $9,302 $8,712 $8,240 $8,401 $65,890
- UNDERGROUND 350,921 316,007 304,219 289,206 270,849 256,174 261,198 2,048,573
PLANT REBUILD/
UPGRADE/INCL. HE 33,898 5,507,000 5,726,000 5,956,000 41,457 43,050 44,690 17,352,096
AVERAGE COST
OF NEW CONVERTERS 79,980 78,609 81,235 83,029 81,939 81,511 85,393 571,697
CONVERTER
REPLACEMENT 96,889 108,703 121,012 134,034 144,345 154,973 165,959 925,916
INSTALLATION COSTS 825,430 865,410 908,594 951,507 993,907 1,036,911 1,083,843 6,665,602
MISC. CAPITAL
EXPENDITURES 168,803 178,836 188,768 198,753 208,740 218,733 228,911 1,391,544
---------- ---------- ---------- ---------- ---------- ---------- ---------- -----------
TOTAL CAPITAL
EXPENDITURES $1,567,208 $7,064,729 $7,339,613 $7,621,830 $1,749,949 $1,799,592 $1,878,395 $29,021,317
AS A % OF
OPERATING INCOME 18.8% 78.2% 73.4% 68.2% 14.3% 13.6% 13.4%
131
FALCON CABLE SYSTEMS CO. EXHIBIT I
GILROY REGION - CALIFORNIA
AS OF DECEMBER 31, 1995
DEPRECIATION
- ------------
YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5 YEAR 6 YEAR 7
---------- ---------- ---------- ---------- ---------- ---------- ----------
ESTIMATED
DEPRECIATION RATES 14.3% 24.5% 17.5% 12.5% 8.9% 8.9% 8.9%
DEPRECIATION - BEG.
& ADTNS. 1996 1997 1998 1999 2000 2001 2002 TOTAL
---------- ---------- ---------- ---------- ---------- ---------- ---------- -----------
YEAR 1 $1,640,173 $2,810,906 $2,007,462 $1,433,573 $1,024,965 $1,023,817 $1,024,965 $10,965,861
YEAR 2 1,009,550 1,730,152 1,235,621 882,385 630,880 630,174 6,118,762
YEAR 3 1,048,831 1,797,471 1,283,698 916,718 655,427 5,702,145
YEAR 4 1,089,160 1,866,586 1,333,058 951,967 5,240,771
YEAR 5 250,068 428,562 306,066 984,696
YEAR 6 257,162 440,720 697,882
YEAR 7 268,423 268,423
---------- ---------- ---------- ---------- ---------- ---------- ---------- -----------
TOTAL DEPRECIATION $1,640,173 $3,820,456 $4,786,445 $5,555,825 $5,307,702 $4,590,197 $4,277,742 $29,978,539
132
FALCON CABLE SYSTEMS CO. EXHIBIT J
GILROY REGION - CALIFORNIA
AS OF DECEMBER 31, 1995
ASSUMPTIONS AND INPUTS
- ----------------------
REMAINING LIFE OF FRANCHISES (YEARS) 7
AVERAGE SUBSCRIBER LIFE (YEARS) 8
INCOME TAX RATE 34%
CAPITAL GAIN RATE 34%
NET FMV OF EXISTING ASSETS $9,910,561
SUBSCRIBERS IN FRANCHISES 100%
LOW HIGH
ANALYSIS ANALYSIS
--------- ---------
DEBT PERCENTAGE 50% 50%
EQUITY PERCENTAGE 50% 50%
RESIDUAL MULTIPLE (ROE & ROI) 9 9
MULT OF PAST YEAR'S OPERATING INCOME 10.5 11.5
MULT OF CURRENT YEAR'S OPERATING INCOME 10.0 11.0
MULT OF NEXT YEAR'S OPERATING INCOME 9.5 10.5
TARGET RETURN ON EQUITY 14.0% 12.0%
TARGET RETURN ON INVESTMENT 16.6% 15.1%
133
HESPERIA, CA
134
FALCON CABLE SYSTEMS CO. EXHIBIT A
HESPERIA REGION - CALIFORNIA
AS OF DECEMBER 31, 1995
VALUATION METHODS
- -----------------
LOW HIGH
--- ----
I. MULTIPLE OF PAST YEAR'S OPERATING INCOME
OPERATING INCOME, PER BOOKS (12/31/95) $ 4,216,820 $ 4,216,820
VALUATION MULTIPLE 10.5 11.5
ESTIMATED FAIR MARKET VALUE $44,276,610 $48,493,430
----------- -----------
II. MULTIPLE OF "RUNNING RATE" OPERATING INCOME
ESTIMATED. OPERATING INCOME
TOTAL CURRENT YEAR'S REVENUE $ 8,028,258 $ 8,028,258
OPERATING MARGIN, PER BOOKS (12/31/95) 55.0% 55.0%
"RUNNING RATE" OPERATING INCOME $4,414,338 $4,414,338
VALUATION MULTIPLE 10.0 11.0
ESTIMATED FAIR MARKET VALUE $44,143,375 $48,557,713
----------- -----------
III. MULTIPLE OF NEXT YEAR'S OPERATING INCOME
OPERATING INCOME $ 4,580,803 $ 4,580,803
VALUATION MULTIPLE 9.5 10.5
ESTIMATED FAIR MARKET VALUE $43,517,628 $48,098,431
----------- -----------
IV. DISCOUNTED CASH FLOW RETURN ON EQUITY
TARGET RETURN ON EQUITY 14.0% 12.0%
ESTIMATED FAIR MARKET VALUE $32,599,933 $36,560,368
----------- -----------
V. DISCOUNTED CASH FLOW RETURN ON INVESTMENT
TARGET RETURN ON INVESTMENT 16.6% 15.1%
ESTIMATED FAIR MARKET VALUE $31,670,116 $35,251,299
----------- -----------
SUMMARY OF VALUES
- -----------------
I. MULTIPLE OF PAST YEAR'S OPERATING INCOME $44,276,610 $48,493,430
II. MULTIPLE OF "RUNNING RATE" OPERATING INCOME 44,143,375 48,557,713
III. MULTIPLE OF NEXT YEAR'S OPERATING INCOME 43,517,628 48,098,431
IV. DISCOUNTED CASH FLOW RETURN ON EQUITY 32,599,933 36,560,368
V. DISCOUNTED CASH FLOW RETURN ON INVESTMENT 31,670,116 35,251,299
RANGE OF ESTIMATED FAIR MARKET VALUES $36,820,000 $40,872,000
ESTIMATED FAIR MARKET VALUE $38,846,000
135
FALCON CABLE SYSTEMS CO. EXHIBIT B
HESPERIA REGION - CALIFORNIA LOW ANALYSIS
AS OF DECEMBER 31, 1995
RETURN ON EQUITY METHOD
PROFIT AND LOSS - LOW VALUE
- ---------------------------
YEAR ENDING DECEMBER 31, 1996 1997 1998 1999 2000 2001
----------- ----------- ----------- ----------- ----------- -----------
REVENUES $8,248,820 $8,847,099 $9,614,941 $10,465,621 $11,314,770 $12,082,783
OPERATING EXPENSES 3,668,017 3,948,555 4,313,107 4,630,815 4,964,157 5,275,992
----------- ----------- ----------- ----------- ----------- -----------
OPERATING INCOME $4,580,803 $4,898,544 $5,301,835 $5,834,806 $6,350,614 $6,806,792
OPERATING MARGIN 0.56 0.55 0.55 0.56 0.56 0.56
PARENT SERVICES/MGT FEE (5%) 412,441 442,355 480,747 523,281 565,739 604,139
FRANCHISE AMORTIZATION (15) 1,028,800 1,028,800 1,028,800 1,028,800 1,028,800 1,028,800
SUBSCRIBER LIST (8) 497,133 497,133 497,133 497,133 497,133 497,133
NON-COMPETE COVENANTS (0) 0 0 0 0 0 0
DEPRECIATION 1,997,324 4,405,394 5,149,922 4,831,032 3,722,372 3,297,420
INTEREST 1,544,438 1,984,723 2,571,658 2,474,751 2,283,396 2,030,501
----------- ----------- ----------- ----------- ----------- -----------
PRE-TAX INCOME ($899,333) ($3,459,860) ($4,426,425) ($3,520,192) ($1,746,826) ($651,203)
INCOME TAX (EXPENSE)/BENEFIT 305,773 1,176,353 1,504,985 1,196,865 593,921 221,409
----------- ----------- ----------- ----------- ----------- -----------
NET INCOME ($593,560) ($2,283,508) ($2,921,441) ($2,323,327) ($1,152,905) ($429,794)
SOURCES AND USES OF CASH
- ------------------------
SOURCES OF CASH -
PRE TAX INCOME ($899,333) ($3,459,860) ($4,426,425) ($3,520,192) ($1,746,826) ($651,203)
FRANCHISE AMORTIZATION (15) 1,028,800 1,028,800 1,028,800 1,028,800 1,028,800 1,028,800
SUBSCRIBER LIST (8) 497,133 497,133 497,133 497,133 497,133 497,133
NON-COMPETE COVENANTS (0) 0 0 0 0 0 0
DEPRECIATION 1,997,324 4,405,394 5,149,922 4,831,032 3,722,372 3,297,420
EQUITY 15,444,381
DEBT 15,444,381 4,402,846 5,869,347 0 0 0
RESIDUAL VALUE IN YEAR 10
----------- ----------- ----------- ----------- ----------- -----------
TOTAL SOURCES OF CASH $33,512,687 $6,874,313 $8,118,778 $2,836,773 $3,501,479 $4,172,151
USES OF CASH -
PURCHASE PRICE - CURRENT $32,599,933
CAPITAL EXPENDITURES 812,270 6,874,797 7,149,714 923,226 972,527 1,008,417
DEBT RETIREMENT 0 0 969,064 1,913,548 2,528,952 3,163,734
TAXES PAID ON NET INCOME 0 0 0 0 0 0
TAXES PAID ON SALE (RESIDUAL)
----------- ----------- ----------- ----------- ----------- -----------
TOTAL USES OF CASH $33,412,203 $6,874,797 $8,118,778 $2,836,773 $3,501,479 $4,172,151
ANNUAL CASH INCREASE/(DECREASE $100,484 ($484) ($0) $0 ($0) $0
CUMULATIVE CASH 100,484 100,000 100,000 100,000 100,000 100,000
YEAR ENDING DECEMBER 31, 2002 2003 2004 2005 TOTAL
----------- ----------- ----------- ----------- ------------
REVENUES $12,765,783 $13,466,484 $14,181,782 $14,925,345 $115,913,429
OPERATING EXPENSES 5,569,010 5,866,492 6,172,597 6,495,056 50,903,797
----------- ----------- ----------- ----------- ------------
OPERATING INCOME $7,196,773 $7,599,992 $8,009,185 $8,430,289 $65,009,632
OPERATING MARGIN 0.56 0.56 0.56 0.56
PARENT SERVICES/MGT FEE (5%) 638,289 673,324 709,089 746,267 5,795,671
FRANCHISE AMORTIZATION (15) 1,028,800 1,028,800 1,028,800 1,028,800 10,288,000
SUBSCRIBER LIST (8) 497,133 497,133 497,133 497,133 4,971,333
NON-COMPETE COVENANTS (0) 0 0 0 0 0
DEPRECIATION 3,183,294 2,672,563 1,860,526 1,355,114 32,474,961
INTEREST 1,714,128 1,335,411 887,077 625,071 17,451,154
----------- ----------- ----------- ----------- ------------
PRE-TAX INCOME $135,129 $1,392,760 $3,026,560 $4,177,904 ($5,971,487)
INCOME TAX (EXPENSE)/BENEFIT (45,944) (473,538) (1,029,030) (1,420,487) 2,030,306
----------- ----------- ----------- ----------- ------------
NET INCOME $89,185 $919,222 $1,997,529 $2,757,416 ($3,941,182)
SOURCES AND USES OF CASH
- ------------------------
SOURCES OF CASH -
PRE TAX INCOME $135,129 $1,392,760 $3,026,560 $4,177,904 ($5,971,487)
FRANCHISE AMORTIZATION (15) 1,028,800 1,028,800 1,028,800 1,028,800 10,288,000
SUBSCRIBER LIST (8) 497,133 497,133 497,133 497,133 4,971,333
NON-COMPETE COVENANTS (0) 0 0 0 0 0
DEPRECIATION 3,183,294 2,672,563 1,860,526 1,355,114 32,474,961
EQUITY 15,444,381
DEBT 0 0 0 0 25,716,575
RESIDUAL VALUE IN YEAR 10 75,872,604 75,872,604
----------- ----------- ----------- ----------- ------------
TOTAL SOURCES OF CASH $4,844,356 $5,591,256 $6,413,019 $82,931,555 $158,796,367
USES OF CASH -
PURCHASE PRICE - CURRENT $32,599,933
CAPITAL EXPENDITURES 1,057,191 1,107,912 1,148,080 1,189,715 22,243,848
DEBT RETIREMENT 3,787,165 4,483,345 2,620,061 6,250,707 25,716,575
TAXES PAID ON NET INCOME 0 0 0 0 0
TAXES PAID ON SALE (RESIDUAL) 21,349,154 21,349,154
----------- ----------- ----------- ----------- ------------
TOTAL USES OF CASH $4,844,356 $5,591,256 $3,768,141 $28,789,576 $101,909,510
ANNUAL CASH INCREASE/(DECREASE ($0) $0 $2,644,878 $54,141,979 $56,886,857
CUMULATIVE CASH 100,000 100,000 2,744,878 56,886,857
136
FALCON CABLE SYSTEMS CO. EXHIBIT B
HESPERIA REGION - CALIFORNIA HIGH ANALYSIS
AS OF DECEMBER 31, 1995
RETURN ON EQUITY METHOD
PROFIT AND LOSS - HIGH VALUE
- ----------------------------
YEAR ENDING DECEMBER 31, 1996 1997 1998 1999 2000 2001
----------- ----------- ---------- ----------- ----------- -----------
REVENUES $8,248,820 $8,847,099 $9,614,941 $10,465,621 $11,314,770 $12,082,783
OPERATING EXPENSES 3,668,017 3,948,555 4,313,107 4,630,815 4,964,157 5,275,992
----------- ----------- ----------- ----------- ------------ -----------
OPERATING INCOME $4,580,803 $4,898,544 $5,301,835 $5,834,806 $6,350,614 $6,806,792
OPERATING MARGIN 0.56 0.55 0.55 0.56 0.56 0.56
PARENT SERVICES/MGT FEE (5%) 412,441 442,355 480,747 523,281 565,739 604,139
FRANCHISE AMORTIZATION (15) 1,028,800 1,028,800 1,028,800 1,028,800 1,028,800 1,028,800
SUBSCRIBER LIST (8) 497,133 497,133 497,133 497,133 497,133 497,133
NON-COMPETE COVENANTS (0) 0 0 0 0 0 0
DEPRECIATION 1,997,324 4,405,394 5,149,922 4,831,032 3,722,372 3,297,420
INTEREST 1,752,869 2,216,341 2,843,542 2,733,557 2,568,083 2,343,657
----------- ----------- ----------- ----------- ------------ -----------
PRE-TAX INCOME ($1,107,764) ($3,691,478) ($4,698,309) ($3,778,999) ($2,031,513) ($964,358)
INCOME TAX (EXPENSE)/BENEFIT 376,640 1,255,103 1,597,425 1,284,859 690,714 327,882
----------- ----------- ----------- ----------- ------------ -----------
NET INCOME ($731,124) ($2,436,376) ($3,100,884) ($2,494,139) ($1,340,799) ($636,476)
SOURCES AND USES OF CASH
- ------------------------
SOURCES OF CASH -
PRE TAX INCOME ($1,107,764) ($3,691,478) ($4,698,309) ($3,778,999) ($2,031,513) ($964,358)
FRANCHISE AMORTIZATION (10) 1,028,800 1,028,800 1,028,800 1,028,800 1,028,800 1,028,800
SUBSCRIBER LIST (8) 497,133 497,133 497,133 497,133 497,133 497,133
NON-COMPETE COVENANTS (0) 0 0 0 0 0 0
DEPRECIATION 1,997,324 4,405,394 5,149,922 4,831,032 3,722,372 3,297,420
EQUITY 17,528,686
DEBT 17,528,686 4,634,721 6,272,012 0 0 0
RESIDUAL VALUE IN YEAR 10
----------- ----------- ----------- ----------- ------------ -----------
TOTAL SOURCES OF CASH $37,472,864 $6,874,570 $8,249,558 $2,577,967 $3,216,792 $3,858,996
USES OF CASH -
PURCHASE PRICE - CURRENT $36,560,368
CAPITAL EXPENDITURES 812,270 6,874,797 7,149,714 923,226 972,527 1,008,417
DEBT RETIREMENT 0 0 1,099,844 1,654,742 2,244,265 2,850,579
TAXES PAID ON NET INCOME 0 0 0 0 0 0
TAXES PAID ON SALE (RESIDUAL)
----------- ----------- ----------- ----------- ------------ -----------
TOTAL USES OF CASH $37,372,637 $6,874,797 $8,249,558 $2,577,967 $3,216,792 $3,858,996
ANNUAL CASH INCREASE/(DECREASE) $100,227 ($227) ($0) $0 ($0) $0
CUMULATIVE CASH 100,227 100,000 100,000 100,000 100,000 100,000
YEAR ENDING DECEMBER 31, 2002 2003 2004 2005 TOTAL
----------- ----------- ----------- ----------- ------------
REVENUES $12,765,783 $13,466,484 $14,181,782 $14,925,345 $115,913,429
OPERATING EXPENSES 5,569,010 5,866,492 6,172,597 6,495,056 50,903,797
----------- ----------- ----------- ----------- ------------
OPERATING INCOME $7,196,773 $7,599,992 $8,009,185 $8,430,289 $65,009,632
OPERATING MARGIN 0.56 0.56 0.56 0.56
PARENT SERVICES/MGT FEE (5%) 638,289 673,324 709,089 746,267 5,795,671
FRANCHISE AMORTIZATION (15) 1,028,800 1,028,800 1,028,800 1,028,800 10,288,000
SUBSCRIBER LIST (8) 497,133 497,133 497,133 497,133 4,971,333
NON-COMPETE COVENANTS (0) 0 0 0 0 0
DEPRECIATION 3,183,294 2,672,563 1,860,526 1,355,114 32,474,961
INTEREST 2,058,599 1,714,330 1,303,887 819,074 20,353,938
----------- ----------- ----------- ----------- ------------
PRE-TAX INCOME ($209,342) $1,013,842 $2,609,749 $3,983,900 ($8,874,272)
INCOME TAX (EXPENSE)/BENEFIT 71,176 (344,706) (887,315) (1,354,526) 3,017,252
----------- ----------- ----------- ----------- ------------
NET INCOME ($138,166) $669,136 $1,722,435 $2,629,374 ($5,857,019)
SOURCES AND USES OF CASH
- ------------------------
SOURCES OF CASH -
PRE TAX INCOME ($209,342) $1,013,842 $2,609,749 $3,983,900 ($8,874,272)
FRANCHISE AMORTIZATION (10) 1,028,800 1,028,800 1,028,800 1,028,800 10,288,000
SUBSCRIBER LIST (8) 497,133 497,133 497,133 497,133 4,971,333
NON-COMPETE COVENANTS (0) 0 0 0 0 0
DEPRECIATION 3,183,294 2,672,563 1,860,526 1,355,114 32,474,961
EQUITY 17,528,686
DEBT 0 0 0 0 28,435,419
RESIDUAL VALUE IN YEAR 10 75,872,604 75,872,604
----------- ----------- ----------- ----------- ------------
TOTAL SOURCES OF CASH $4,499,885 $5,212,338 $5,996,209 $82,737,552 $160,696,731
USES OF CASH -
PURCHASE PRICE - CURRENT $36,560,368
CAPITAL EXPENDITURES 1,057,191 1,107,912 1,148,080 1,189,715 22,243,848
DEBT RETIREMENT 3,442,694 4,104,426 4,848,129 8,190,741 28,435,419
TAXES PAID ON NET INCOME 0 0 0 0 0
TAXES PAID ON SALE (RESIDUAL) 19,015,660 19,015,660
----------- ----------- ----------- ----------- ------------
TOTAL USES OF CASH $4,499,885 $5,212,338 $5,996,209 $28,396,115 $106,255,294
ANNUAL CASH INCREASE/(DECREASE) ($0) $0 $0 $54,341,437 $54,441,437
CUMULATIVE CASH 100,000 100,000 100,000 54,441,437
137
FALCON CABLE SYSTEMS CO. EXHIBIT C
HESPERIA REGION - CALIFORNIA LOW ANALYSIS
AS OF DECEMBER 31, 1995
RETURN ON EQUITY METHOD
DEBT AMORTIZATION - LOW VALUE
TOTAL YEAR 1 CASH REQUIREMENTS $30,888,763
YEAR 1 DEBT REQUIREMENTS 15,444,381
YEAR 1 EQUITY REQUIREMENTS 15,444,381
FINANCING AVAILABLE $27,409,330 $29,775,219 $31,840,539 $34,461,927 $37,926,237 $41,278,990
UNUSED LEVERAGE 11,964,949 9,927,991 7,093,028 11,627,964 17,621,225 24,137,712
SENIOR DEBT: 1996 1997 1998 1999 2000 2001
---- ---- ---- ---- ---- ----
BEGINNING DEBT $0 $15,444,381 $15,444,381 $14,475,318 $13,409,347 $12,236,780
DEBT ADDED 15,444,381 0 0 0 0 0
TOTAL ANNUAL PAYMENTS 1,544,438 1,544,438 2,513,502 2,513,502 2,513,502 2,513,502
INTEREST 1,544,438 1,544,438 1,544,438 1,447,532 1,340,935 1,223,678
PRINCIPAL REPAYMENT 0 0 969,064 1,065,970 1,172,567 1,289,824
ENDING BALANCE 15,444,381 15,444,381 14,475,318 13,409,347 12,236,780 10,946,956
LINE OF CREDIT:
BEGINNING DEBT $0 $0 $4,402,846 $10,272,194 $9,424,616 $8,068,232
BORROWINGS 0 4,402,846 5,869,347 0 0 0
PRINCIPAL PAYMENTS 0 0 0 847,578 1,356,385 1,873,910
INTEREST 0 440,285 1,027,219 1,027,219 942,462 806,823
SENIOR DEBT COVERAGE 3.4 3.2 2.7 2.3 1.9 1.6
LOC DEBT COVERAGE 0.0 0.9 1.9 1.6 1.3 0.9
TOTAL DEBT COVERAGE 3.4 4.1 4.7 3.9 3.2 2.5
DEBT AMORTIZATION - LOW VALUE
TOTAL YEAR 1 CASH REQUIREMENTS
YEAR 1 DEBT REQUIREMENTS
YEAR 1 EQUITY REQUIREMENTS
FINANCING AVAILABLE $44,244,145 $46,779,024 $49,399,947 $52,059,701
UNUSED LEVERAGE 30,890,032 37,908,256 43,149,240 47,697,425
SENIOR DEBT: 2002 2003 2004 2005 TOTAL
---- ---- ---- ---- -----
BEGINNING DEBT $10,946,956 $9,528,150 $7,967,463 $6,250,707
DEBT ADDED 0 0 0 0 15,444,381
TOTAL ANNUAL PAYMENTS 2,513,502 2,513,502 2,513,502 2,513,502 23,196,892
INTEREST 1,094,696 952,815 796,746 625,071 12,114,787
PRINCIPAL REPAYMENT 1,418,806 1,560,687 1,716,756 1,888,431 11,082,105
ENDING BALANCE 9,528,150 7,967,463 6,250,707 4,362,276
LINE OF CREDIT:
BEGINNING DEBT $6,194,321 $3,825,963 $903,305 $0 $0
BORROWINGS 0 0 0 0 10,272,194
PRINCIPAL PAYMENTS 2,368,358 2,922,658 903,305 0 10,272,194
INTEREST 619,432 382,596 90,330 0 5,336,367
SENIOR DEBT COVERAGE 1.3 1.0 0.8 0.5
LOC DEBT COVERAGE 0.5 0.1 0.0 0.0
TOTAL DEBT COVERAGE 1.9 1.2 0.8 0.5
138
FALCON CABLE SYSTEMS CO. EXHIBIT C
HESPERIA REGION - CALIFORNIA HIGH ANALYSIS
AS OF DECEMBER 31, 1995
RETURN ON EQUITY METHOD
DEBT AMORTIZATION - HIGH VALUE
TOTAL YEAR 1 CASH REQUIREMENTS $35,057,371
YEAR 1 DEBT REQUIREMENTS 17,528,686
YEAR 1 EQUITY REQUIREMENTS 17,528,686
FINANCING AVAILABLE $31,626,150 $34,356,022 $36,739,084 $39,763,762 $43,761,042 $47,629,604
UNUSED LEVERAGE 14,097,464 12,192,616 9,403,509 14,082,929 20,324,475 27,043,614
SENIOR: 1996 1997 1998 1999 2000 2001
---- ---- ---- ---- ---- ----
BEGINNING DEBT $0 $17,528,686 $17,528,686 $16,428,841 $15,219,013 $13,888,201
DEBT ADDED 17,528,686 0 0 0 0 0
TOTAL ANNUAL PAYMENTS 1,752,869 1,752,869 2,852,713 2,852,713 2,852,713 2,852,713
INTEREST 1,752,869 1,752,869 1,752,869 1,642,884 1,521,901 1,388,820
PRINCIPAL REPAYMENT 0 0 1,099,844 1,209,829 1,330,812 1,463,893
ENDING BALANCE 17,528,686 17,528,686 16,428,841 15,219,013 13,888,201 12,424,308
LINE OF CREDIT:
BEGINNING DEBT $0 $0 $4,634,721 $10,906,733 $10,461,820 $9,548,367
BORROWINGS 0 4,634,721 6,272,012 0 0 0
PRINCIPAL PAYMENTS 0 0 0 444,913 913,453 1,386,686
INTEREST 0 463,472 1,090,673 1,090,673 1,046,182 954,837
SENIOR DEBT COVERAGE 3.8 3.6 3.1 2.6 2.2 1.8
LOC DEBT COVERAGE 0.0 0.9 2.1 1.8 1.5 1.2
TOTAL DEBT COVERAGE 3.8 4.5 5.2 4.4 3.7 3.0
FINANCING AVAILABLE $51,050,937 $53,975,797 $56,999,939 $60,068,886
UNUSED LEVERAGE 33,907,641 40,936,927 48,809,198 55,117,897
SENIOR: 2002 2003 2004 2005 TOTAL
---- ---- ---- ---- -----
BEGINNING DEBT $12,424,308 $10,814,026 $9,042,716 $7,094,275
DEBT ADDED 0 0 0 0 $17,528,686
TOTAL ANNUAL PAYMENTS 2,852,713 2,852,713 2,852,713 2,852,713 26,327,440
INTEREST 1,242,431 1,081,403 904,272 709,427 13,749,744
PRINCIPAL REPAYMENT 1,610,282 1,771,310 1,948,441 2,143,285 12,577,696
ENDING BALANCE 10,814,026 9,042,716 7,094,275 4,950,989
LINE OF CREDIT:
BEGINNING DEBT $8,161,681 $6,329,270 $3,996,153 $1,096,466 $0
BORROWINGS 0 0 0 0 10,906,733
PRINCIPAL PAYMENTS 1,832,412 2,333,116 2,899,688 1,096,466 10,906,733
INTEREST 816,168 632,927 399,615 109,647 6,604,194
SENIOR DEBT COVERAGE 1.5 1.2 0.9 0.6
LOC DEBT COVERAGE 0.9 0.5 0.1 0.0
TOTAL DEBT COVERAGE 2.4 1.7 1.0 0.6
139
FALCON CABLE SYSTEMS CO. EXHIBIT D
HESPERIA REGION - CALIFORNIA
AS OF DECEMBER 31, 1995
RETURN ON INVESTMENT METHOD
PROFIT AND LOSS
YEAR ENDING DECEMBER 31, 1996 1997 1998 1999 2000 2001
----------- ----------- ----------- ----------- ----------- -----------
REVENUES $ 8,248,820 $ 8,847,099 $ 9,614,941 $10,465,621 $11,314,770 $12,082,783
OPERATING EXPENSES 3,668,017 3,948,555 4,313,107 4,630,815 4,964,157 5,275,992
----------- ----------- ----------- ----------- ----------- -----------
OPERATING INCOME $ 4,580,803 $ 4,898,544 $ 5,301,835 $ 5,834,806 $ 6,350,614 $ 6,806,792
PLUS: RESIDUAL VALUE
LESS: CAPITAL EXPENDITURES 812,270 6,874,797 7,149,714 923,226 972,527 1,008,417
----------- ----------- ----------- ----------- ----------- -----------
TOTAL CASH FLOW $ 3,768,533 ($1,976,252) ($1,847,879) $ 4,911,580 $ 5,378,087 $ 5,798,375
NET PRESENT VALUE @ 16.6% $31,670,116
-----------
NET PRESENT VALUE @ 15.1% $35,251,299
-----------
YEAR ENDING DECEMBER 31, 2002 2003 2004 2005 TOTAL
----------- ----------- ----------- ----------- ------------
REVENUES $12,765,783 $13,466,484 $14,181,782 $14,925,345 $115,913,429
OPERATING EXPENSES 5,569,010 5,866,492 6,172,597 6,495,056 50,903,797
----------- ----------- ----------- ----------- ------------
OPERATING INCOME $ 7,196,773 $ 7,599,992 $ 8,009,185 $ 8,430,289 $ 65,009,632
PLUS: RESIDUAL VALUE 75,872,604 75,872,604
LESS: CAPITAL EXPENDITURES 1,057,191 1,107,912 1,148,080 1,189,715 22,243,848
----------- ----------- ----------- ----------- ------------
TOTAL CASH FLOW $ 6,139,582 $ 6,492,080 $ 6,861,105 $83,113,178 $118,638,388
NET PRESENT VALUE @ 16.6%
NET PRESENT VALUE @ 15.1%
140
FALCON CABLE SYSTEMS CO. EXHIBIT E
HESPERIA REGION - CALIFORNIA
AS OF DECEMBER 31, 1995
CABLE TELEVISION SUBSCRIBERS
YEAR ENDING DECEMBER 31, 1996 1997 1998 1999 2000 2001
---- ---- ---- ---- ---- ----
BEGINNING MILES 678.0
MILES ADDED 10.0 10.0 10.5 10.5 11.0 11.0
CUMULATIVE MILES 688.0 698.0 708.5 719.0 730.0 741.0
DENSITY OF ADDITIONAL PLANT 31 31 30 31 30 27
HOMES PASSED - BEGINNING 28,280
NEW HOMES & EXTENSIONS 311 315 318 321 325 299
HOMES PASSED - ENDING 28,591 28,906 29,224 29,545 29,870 30,169
GROWTH IN HOMES 1.1% 1.1% 1.1% 1.1% 1.1% 1.0%
BASIC - BEGINNING SUBSCRIBERS 18,513 19,003 19,501 19,861 20,227 20,599
AVERAGE SUBSCRIBERS 18,758 19,252 19,681 20,044 20,413 20,778
ENDING SUBSCRIBERS 19,003 19,501 19,861 20,227 20,599 20,956
PENETRATION 66.5% 67.5% 68.0% 68.5% 69.0% 69.5%
EXPANDED BASIC - BEGINNING 17,593 18,058 18,532 18,874 19,222 19,576
AVERAGE SUBSCRIBERS 17,826 18,295 18,703 19,048 19,399 19,745
ENDING SUBSCRIBERS 18,058 18,532 18,874 19,222 19,576 19,915
PENETRATION 95.0% 95.0% 95.0% 95.0% 95.0% 95.0%
NEW PRODUCT TIER #1 - BEGINNING 8,712 9,227 9,762 9,942 10,126 10,312
AVERAGE SUBSCRIBERS 8,970 9,495 9,852 10,034 10,219 10,401
ENDING SUBSCRIBERS 9,227 9,762 9,942 10,126 10,312 10,490
PENETRATION 48.6% 50.1% 50.1% 50.1% 50.1% 50.1%
NEW PRODUCT TIER #2 - BEGINNING 0 0 741 3,059 4,673 6,345
AVERAGE SUBSCRIBERS 0 371 1,900 3,866 5,509 6,400
ENDING SUBSCRIBERS 0 741 3,059 4,673 6,345 6,454
PENETRATION 0.0% 3.8% 15.4% 23.1% 30.8% 30.8%
NEW PRODUCT TIER #3 - BEGINNING 0 0 741 3,059 4,673 6,345
AVERAGE SUBSCRIBERS 0 371 1,900 3,866 5,509 6,400
ENDING SUBSCRIBERS 0 741 3,059 4,673 6,345 6,454
PENETRATION 0.0% 3.8% 15.4% 23.1% 30.8% 30.8%
PAY TV - BEGINNING UNITS 8,507 8,542 8,961 9,375 9,801 9,981
AVERAGE UNITS 8,524 8,751 9,168 9,588 9,891 10,067
ENDING UNITS 8,542 8,961 9,375 9,801 9,981 10,154
PENETRATION 45.0% 46.0% 47.2% 48.5% 48.5% 48.5%
PAY PER VIEW - BEGINNING UNITS/ 678 805 1,120 1,639 2,238 2,725
AVERAGE UNITS 742 963 1,380 1,939 2,482 2,946
ENDING UNITS 805 1,120 1,639 2,238 2,725 3,167
AVERAGE BUY RATE/MO 12.1% 15.1% 20.1% 25.1% 28.1% 31.1%
CONVERTER RENTALS - BEG. 7,218 7,789 8,578 9,730 10,921 12,151
AVERAGE SUBSCRIBERS 7,503 8,184 9,154 10,325 11,536 12,571
ENDING SUBSCRIBERS 7,789 8,578 9,730 10,921 12,151 12,990
PENETRATION 41.0% 44.0% 49.0% 54.0% 59.0% 62.0%
ADDRESSABLE HOMES - BEGINNING 6,140 6,682 7,443 8,176 8,934 9,716
AVERAGE HOMES 6,411 7,063 7,809 8,555 9,325 9,957
ENDING HOMES 6,682 7,443 8,176 8,934 9,716 10,198
PENETRATION 35.2% 38.2% 41.2% 44.2% 47.2% 48.7%
BASIC CHURN RATE 40% 40% 40% 40% 40% 40%
YEAR ENDING DECEMBER 31, 2002 2003 2004 2005
---- ---- ---- ----
BEGINNING MILES
MILES ADDED 11.5 12.0 12.0 12.0
CUMULATIVE MILES 752.5 764.5 776.5 788.5
DENSITY OF ADDITIONAL PLANT 26 25 26 26
HOMES PASSED - BEGINNING
NEW HOMES & EXTENSIONS 302 305 308 311
HOMES PASSED - ENDING 30,470 30,775 31,083 31,394
GROWTH IN HOMES 1.0% 1.0% 1.0% 1.0%
BASIC - BEGINNING SUBSCRIBERS 20,956 21,318 21,685 22,057
AVERAGE SUBSCRIBERS 21,137 21,502 21,871 22,246
ENDING SUBSCRIBERS 21,318 21,685 22,057 22,435
PENETRATION 70.0% 70.5% 71.0% 71.5%
EXPANDED BASIC - BEGINNING 19,915 20,259 20,607 20,961
AVERAGE SUBSCRIBERS 20,087 20,433 20,784 21,141
ENDING SUBSCRIBERS 20,259 20,607 20,961 21,320
PENETRATION 95.0% 95.0% 95.0% 95.0%
NEW PRODUCT TIER #1 - BEGINNING 10,490 10,672 10,855 11,042
AVERAGE SUBSCRIBERS 10,581 10,763 10,948 11,136
ENDING SUBSCRIBERS 10,672 10,855 11,042 11,231
PENETRATION 50.1% 50.1% 50.1% 50.1%
NEW PRODUCT TIER #2 - BEGINNING 6,454 6,566 6,679 6,794
AVERAGE SUBSCRIBERS 6,510 6,622 6,736 6,852
ENDING SUBSCRIBERS 6,566 6,679 6,794 6,910
PENETRATION 30.8% 30.8% 30.8% 30.8%
NEW PRODUCT TIER #3 - BEGINNING 6,454 6,566 6,679 6,794
AVERAGE SUBSCRIBERS 6,510 6,622 6,736 6,852
ENDING SUBSCRIBERS 6,566 6,679 6,794 6,910
PENETRATION 30.8% 30.8% 30.8% 30.8%
PAY TV - BEGINNING UNITS 10,154 10,329 10,507 10,687
AVERAGE UNITS 10,241 10,418 10,597 10,779
ENDING UNITS 10,329 10,507 10,687 10,870
PENETRATION 48.5% 48.5% 48.5% 48.5%
PAY PER VIEW - BEGINNING UNITS/ 3,167 3,481 3,815 4,169
AVERAGE UNITS 3,324 3,648 3,992 4,356
ENDING UNITS 3,481 3,815 4,169 4,544
AVERAGE BUY RATE/MO 32.6% 34.1% 35.6% 37.1%
CONVERTER RENTALS - BEG. 12,990 13,854 14,743 15,327
AVERAGE SUBSCRIBERS 13,422 14,299 15,035 15,627
ENDING SUBSCRIBERS 13,854 14,743 15,327 15,926
PENETRATION 65.0% 68.0% 69.5% 71.0%
ADDRESSABLE HOMES - BEGINNING 10,198 10,694 11,204 11,727
AVERAGE HOMES 10,446 10,949 11,465 11,996
ENDING HOMES 10,694 11,204 11,727 12,264
PENETRATION 50.2% 51.7% 53.2% 54.7%
BASIC CHURN RATE 40% 40% 40% 40%
141
FALCON CABLE SYSTEMS CO. EXHIBIT F
HESPERIA REGION - CALIFORNIA
AS OF DECEMBER 31, 1995
SERVICE RATES
- -------------
RUNNING RATES
AS OF AVERAGE RATES
CURRENT RATES DECEMBER 1995 FOR 1996
- ------------- ------------- --------
BASIC $18.03 $18.11
EXPANDED BASIC $7.15 $7.34
NEW PRODUCT TIER #1 $3.50 $3.96
NEW PRODUCT TIER #2 $4.00 $4.00
NEW PRODUCT TIER #3 $4.00 $4.00
PAY $6.60 $6.60
PAY PER VIEW $12.65 $12.65
CONVERTER RENTALS $3.87 $4.11
INSTALLATIONS-NEW $50.00 $50.00
INSTALLATIONS-CHURN $25.00 $25.00
YEAR ENDING DECEMBER 31, 1996 1997 1998 1999 2000 2001
---- ---- ---- ---- ---- ----
PERCENTAGE RATE INCREASES
- -------------------------
BASIC 0% 3% 3% 3% 3% 3%
EXPANDED BASIC 3% 3% 3% 3% 3% 3%
NEW PRODUCT TIER #1 13% 3% 3% 3% 3% 3%
NEW PRODUCT TIER #2 0% 3% 3% 3% 3% 3%
NEW PRODUCT TIER #3 0% 3% 3% 3% 3% 3%
PAY 0% 1% 1% 1% 1% 1%
PAY PER VIEW -15% -10% 3% 3% 3% 3%
CONVERTER RENTALS 6% 3% 3% 3% 3% 3%
INSTALLATIONS-NEW 0% 3% 3% 3% 3% 3%
INSTALLATIONS-CHURN 0% 3% 3% 3% 3% 3%
AVERAGE RATES
- -------------
BASIC $18.11 $18.65 $19.21 $19.79 $20.38 $20.99
EXPANDED BASIC 7.34 7.56 7.79 8.02 8.26 8.51
NEW PRODUCT TIER #1 3.96 4.08 4.20 4.33 4.46 4.59
NEW PRODUCT TIER #2 4.00 4.12 4.24 4.37 4.50 4.64
NEW PRODUCT TIER #3 4.00 4.12 4.24 4.37 4.50 4.64
PAY 6.60 6.67 6.74 6.80 6.87 6.94
PAY PER VIEW 10.75 9.67 9.96 10.26 10.57 10.89
CONVERTER RENTALS 4.11 4.24 4.36 4.49 4.63 4.77
INSTALLATIONS-NEW 50.00 51.50 53.05 54.64 56.28 57.96
INSTALLATIONS-CHURN 25.00 25.75 26.52 27.32 28.14 28.98
YEAR ENDING DECEMBER 31, 2002 2003 2004 2005
---- ---- ---- ----
PERCENTAGE RATE INCREASES
- -------------------------
BASIC 3% 3% 3% 3%
EXPANDED BASIC 3% 3% 3% 3%
NEW PRODUCT TIER #1 3% 3% 3% 3%
NEW PRODUCT TIER #2 3% 3% 3% 3%
NEW PRODUCT TIER #3 3% 3% 3% 3%
PAY 1% 1% 1% 1%
PAY PER VIEW 3% 3% 3% 3%
CONVERTER RENTALS 3% 3% 3% 3%
INSTALLATIONS-NEW 3% 3% 3% 3%
INSTALLATIONS-CHURN 3% 3% 3% 3%
AVERAGE RATES
- -------------
BASIC $21.62 $22.27 $22.94 $23.62
EXPANDED BASIC 8.77 9.03 9.30 9.58
NEW PRODUCT TIER #1 4.73 4.87 5.02 5.17
NEW PRODUCT TIER #2 4.78 4.92 5.07 5.22
NEW PRODUCT TIER #3 4.78 4.92 5.07 5.22
PAY 7.01 7.08 7.15 7.22
PAY PER VIEW 11.21 11.55 11.90 12.25
CONVERTER RENTALS 4.91 5.06 5.21 5.37
INSTALLATIONS-NEW 59.70 61.49 63.34 65.24
INSTALLATIONS-CHURN 29.85 30.75 31.67 32.62
142
FALCON CABLE SYSTEMS CO. EXHIBIT G
HESPERIA REGION - CALIFORNIA
AS OF DECEMBER 31, 1995
YEAR ENDING DECEMBER 31, 1996 1997 1998 1999 2000 2001
---------- ---------- ---------- ----------- ------------ ------------
REVENUES:
BASIC $4,075,580 $4,308,360 $4,536,580 $ 4,758,959 $ 4,991,971 $ 5,233,501
EXPANDED BASIC 1,569,177 1,660,412 1,748,366 1,834,070 1,923,871 2,016,955
NEW PRODUCT TIER #1 426,219 464,695 496,656 521,001 546,511 572,953
NEW PRODUCT TIER #2 0 18,318 96,745 202,754 297,597 356,103
NEW PRODUCT TIER #3 0 18,318 96,745 202,754 297,597 356,103
PAY TV 675,596 700,515 741,188 782,882 815,694 838,556
PAY PER VIEW 95,684 111,749 164,964 238,740 314,780 384,895
CONVERTER 370,390 416,078 479,380 556,938 640,913 719,365
INSTALLATIONS 170,395 179,947 183,175 192,106 201,464 210,207
COMMERCIAL 270,174 278,279 286,628 295,227 304,083 313,206
ADVERTISING*** 247,920 322,295 393,200 463,976 538,213 613,562
MISCELLANEOUS 347,686 368,131 391,312 416,214 442,077 467,376
---------- ---------- ---------- ----------- ------------ ------------
TOTAL REVENUES $8,248,820 $8,847,099 $9,614,941 $10,465,621 $11,314,770 $12,082,783
OPERATING EXPENSES:
OPERATIONS $1,195,823 $1,263,736 $1,342,113 $ 1,425,647 $ 1,510,946 $ 1,593,362
GENERAL & ADMINISTRATIVE 715,703 756,194 799,433 843,657 889,148 934,183
SALES & MARKETING 362,065 458,712 583,462 636,164 691,421 747,915
PROGRAMMING 1,394,425 1,469,914 1,588,099 1,725,348 1,872,641 2,000,531
---------- ---------- ---------- ----------- ------------ ------------
TOTAL OPERATING EXPENSES $3,668,017 $3,948,555 $4,313,107 $ 4,630,815 $ 4,964,157 $ 5,275,992
OPERATING INCOME $4,580,803 $4,898,544 $5,301,835 $ 5,834,806 $ 6,350,614 $ 6,806,792
OPERATING MARGIN 55.5% 55.4% 55.1% 55.8% 56.1% 56.3%
TOTAL REVENUE/BASIC SUB/MONTH $36.65 $38.30 $40.71 $43.51 $46.19 $48.46
CASH FLOW/BASIC SUB/MONTH $20.35 $21.20 $22.45 $24.26 $25.93 $27.30
OPERATIONS % OF REVENUE 14% 14% 14% 14% 13% 13%
G & A PERCENTAGE OF REVENUE 9% 9% 8% 8% 8% 8%
SALES & MARKETING % OF REVENUE 4% 5% 6% 6% 6% 6%
PROGRAMMING % OF REVENUE 17% 17% 17% 16% 17% 17%
YEAR ENDING DECEMBER 31, 2002 2003 2004 2005 TOTAL
----------- ----------- ----------- ----------- ------------
REVENUES:
BASIC $ 5,483,741 $ 5,745,651 $ 6,019,765 $ 6,306,641 $ 51,460,750
EXPANDED BASIC 2,113,396 2,214,334 2,319,975 2,430,535 19,831,090
NEW PRODUCT TIER #1 600,349 629,023 659,032 690,439 5,606,879
NEW PRODUCT TIER #2 373,131 390,952 409,603 429,123 2,574,326
NEW PRODUCT TIER #3 373,131 390,952 409,603 429,123 2,574,326
PAY TV 861,590 885,212 909,435 934,274 8,144,942
PAY PER VIEW 447,291 505,637 569,913 640,610 3,474,263
CONVERTER 791,136 868,082 940,181 1,006,477 6,788,940
INSTALLATIONS 220,206 230,669 241,618 253,075 2,082,862
COMMERCIAL 322,602 332,280 342,249 352,516 3,097,244
ADVERTISING*** 687,190 755,909 816,382 881,692 5,720,340
MISCELLANEOUS 492,020 517,784 544,027 570,840 4,557,467
----------- ----------- ----------- ----------- ------------
TOTAL REVENUES $12,765,783 $13,466,484 $14,181,782 $14,925,345 $115,913,429
OPERATING EXPENSES:
OPERATIONS $ 1,673,505 $ 1,756,936 $ 1,843,131 $ 1,932,884 $ 15,538,082
GENERAL & ADMINISTRATIVE 978,714 1,024,997 1,073,039 1,123,161 9,138,231
SALES & MARKETING 804,403 859,620 912,053 967,873 7,023,688
PROGRAMMING 2,112,388 2,224,938 2,344,374 2,471,138 19,203,795
----------- ----------- ----------- ----------- ------------
TOTAL OPERATING EXPENSES $ 5,569,010 $ 5,866,492 $ 6,172,597 $ 6,495,056 $ 50,903,797
OPERATING INCOME $ 7,196,773 $ 7,599,992 $ 8,009,185 $ 8,430,289 $ 65,009,632
OPERATING MARGIN 56.4% 56.4% 56.5% 56.5%
TOTAL REVENUE/BASIC SUB/MONTH $50.33 $52.19 $54.04 $55.91
CASH FLOW/BASIC SUB/MONTH $28.37 $29.46 $30.52 $31.58
OPERATIONS % OF REVENUE 13% 13% 13% 13%
G & A PERCENTAGE OF REVENUE 8% 8% 8% 8%
SALES & MARKETING % OF REVENUE 6% 6% 6% 6%
PROGRAMMING % OF REVENUE 17% 17% 17% 17%
143
FALCON CABLE SYSTEMS CO. EXHIBIT H
HESPERIA REGION - CALIFORNIA
AS OF DECEMBER 31, 1995
CAPITAL EXPENDITURES
YEAR ENDING DECEMBER 31, 1996 1997 1998 1999 2000 2001
----------- ---------- ---------- ----------- ----------- ------------
ASSUMPTIONS AND INPUTS:
BV OF EXISTING PLANT $13,164,804
ADDITIONAL MILES OF PLANT 10.0 10.0 10.5 10.5 11.0 11.0
AERIAL PLANT PER MILE $11,000 $11,220 $11,444 $11,673 $11,907 $12,145
UNDERGROUND PLANT PER MILE $18,000 $18,360 $18,727 $19,102 $19,484 $19,873
PERCENTAGE OF PLANT AERIAL 20% 20% 20% 20% 20% 20%
PERCENTAGE OF PLANT UNDERGROUND 80% 80% 80% 80% 80% 80%
AVERAGE COST PER CONVERTER $110 $112 $114 $117 $119 $121
PERCENTAGE CONVERTER USE 41% 44% 49% 54% 59% 62%
PERCENTAGE REPLACEMENT 5% 5% 5% 5% 5% 5%
INSTALLATION COST PER SUBSCRIBER $57 $58 $60 $61 $62 $63
MISC. CAPITAL PER SUBSCRIBER $5 $5 $5 $5 $5 $6
INFLATION FACTOR FOR CAPITALS 2% 2% 2% 2% 2% 2%
ANNUAL COSTS:
- -------------
PLANT ADDITIONS - AERIAL $22,000 $22,440 $24,033 $24,514 $26,195 $26,719
- UNDERGROUND 144,000 146,880 157,308 160,455 171,457 174,886
PLANT REBUILD/UPGRADE 34,578 6,060,650 6,302,700 38,913 40,299 41,724
AVERAGE COST OF NEW CONVERTERS 22,073 24,583 20,218 23,079 26,118 26,864
CONVERTER REPLACEMENT 41,735 46,894 54,665 62,586 71,035 77,541
INSTALLATION COSTS 454,094 475,167 488,409 507,323 526,943 545,981
MISC. CAPITAL EXPENDITURES 93,789 98,183 102,380 106,356 110,481 114,701
-------- ---------- ---------- -------- -------- ----------
TOTAL CAPITAL EXPENDITURES $812,270 $6,874,797 $7,149,714 $923,226 $972,527 $1,008,417
AS A % OF OPERATING INCOME 17.7% 140.3% 134.9% 15.8% 15.3% 14.8%
CAPITAL EXPENDITURES
YEAR ENDING DECEMBER 31, 2002 2003 2004 2005 TOTAL
---------- ---------- ---------- ---------- -----------
ASSUMPTIONS AND INPUTS:
BV OF EXISTING PLANT
ADDITIONAL MILES OF PLANT 11.5 12.0 12.0 12.0
AERIAL PLANT PER MILE $ 12,388 $ 12,636 $ 12,888 $ 13,146
UNDERGROUND PLANT PER MILE $ 20,271 $ 20,676 $ 21,090 $ 21,512
PERCENTAGE OF PLANT AERIAL 20% 20% 20% 20%
PERCENTAGE OF PLANT UNDERGROUND 80% 80% 80% 80%
AVERAGE COST PER CONVERTER $ 124 $ 126 $ 129 $ 131
PERCENTAGE CONVERTER USE 65% 68% 69% 71%
PERCENTAGE REPLACEMENT 5% 5% 5% 5%
INSTALLATION COST PER SUBSCRIBER $ 64 $ 66 $ 67 $ 68
MISC. CAPITAL PER SUBSCRIBER $ 6 $ 6 $ 6 $ 6
INFLATION FACTOR FOR CAPITALS 2% 2% 2% 2% 122%
ANNUAL COSTS:
- -------------
PLANT ADDITIONS - AERIAL $ 28,492 $ 30,325 $ 30,932 $ 31,550 $ 267,200
- UNDERGROUND 186,492 198,493 202,463 206,512 1,748,947
PLANT REBUILD/UPGRADE 43,219 44,787 46,399 48,059 12,701,329
AVERAGE COST OF NEW CONVERTERS 29,136 31,533 33,340 35,233 272,177
CONVERTER REPLACEMENT 84,356 91,569 97,105 102,922 730,407
INSTALLATION COSTS 566,476 587,712 609,713 632,507 5,394,325
MISC. CAPITAL EXPENDITURES 119,019 123,493 128,128 132,931 1,129,462
---------- ---------- ---------- ---------- -----------
TOTAL CAPITAL EXPENDITURES $1,057,191 $1,107,912 $1,148,080 $1,189,715 $22,243,848
AS A % OF OPERATING INCOME 14.7% 14.6% 14.3% 14.1%
144
FALCON CABLE SYSTEMS CO. EXHIBIT I
HESPERIA REGION - CALIFORNIA
AS OF DECEMBER 31, 1995
DEPRECIATION
- ------------
YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5 YEAR 6
---------- ----------- ---------- ----------- ---------- -----------
ESTIMATED DEPRECIATION RATES 14.3% 24.5% 17.5% 12.5% 8.9% 8.9%
DEPRECIATION - BEG. & ADTNS. 1996 1997 1998 1999 2000 2001
---------- ---------- ---------- ---------- ---------- ----------
YEAR 1 $1,997,324 $3,422,985 $2,444,590 $1,745,736 $1,248,153 $1,246,755
YEAR 2 982,408 1,683,638 1,202,402 858,662 613,919
YEAR 3 1,021,694 1,750,965 1,250,485 892,999
YEAR 4 131,929 226,098 161,472
YEAR 5 138,974 238,172
YEAR 6 144,103
YEAR 7
YEAR 8
YEAR 9
YEAR 10
---------- ---------- ---------- ---------- ---------- ----------
TOTAL DEPRECIATION $1,997,324 $4,405,394 $5,149,922 $4,831,032 $3,722,372 $3,297,420
YEAR 7 YEAR 8
------ ------
ESTIMATED DEPRECIATION RATES 8.9% 4.5%
DEPRECIATION - BEG. & ADTNS. 2002 2003 2004 2005 TOTAL
---------- ---------- ---------- ---------- -----------
YEAR 1 $1,248,153 $ 623,377 $13,977,074
YEAR 2 613,232 613,919 306,616 6,874,797
YEAR 3 638,469 637,754 638,469 318,877 7,149,714
YEAR 4 115,311 82,444 82,352 82,444 882,050
YEAR 5 170,095 121,469 86,847 86,749 842,306
YEAR 6 246,961 176,372 125,951 90,052 2,133,786
YEAR 7 151,073 258,906 184,903 132,043 1,795,572
YEAR 8 158,321 271,328 193,774 623,422
YEAR 9 164,061 281,165 445,225
YEAR 10 170,010 170,010
---------- ---------- ---------- ---------- -----------
TOTAL DEPRECIATION $3,183,294 $2,672,563 $1,860,526 $1,355,114 $32,474,961
145
FALCON CABLE SYSTEMS CO. EXHIBIT J
HESPERIA REGION - CALIFORNIA
AS OF DECEMBER 31, 1995
ASSUMPTIONS AND INPUTS
- ----------------------
REMAINING LIFE OF FRANCHISES (YEARS) 9.85
AVERAGE SUBSCRIBER LIFE (YEARS) 8
INCOME TAX RATE 34%
CAPITAL GAIN RATE 34%
NET FMV OF EXISTING ASSETS $13,164,804
SUBSCRIBERS IN FRANCHISES 100%
LOW HIGH
ANALYSIS ANALYSIS
-------- --------
DEBT PERCENTAGE 50% 50%
EQUITY PERCENTAGE 50% 50%
RESIDUAL MULTIPLE (ROE & ROI) 9 9
MULT OF PAST YEAR'S OPERATING INCOME 10.5 11.5
MULT OF CURRENT YEAR'S OPERATING INCOME 10.0 11.0
MULT OF NEXT YEAR'S OPERATING INCOME 9.5 10.5
TARGET RETURN ON EQUITY 14.0% 12.0%
TARGET RETURN ON INVESTMENT 16.6% 15.1%
146
SAN LUIS OBISPO, CA
147
FALCON CABLE SYSTEMS CO. EXHIBIT A
SAN LUIS OBISPO REGION - CALIF.
AS OF DECEMBER 31, 1995
VALUATION METHODS
LOW HIGH
--- ----
I. MULTIPLE OF PAST YEAR'S OPERATING INCOME
OPERATING INCOME, PER BOOKS (12/31/95) $2,548,832 $2,548,832
VALUATION MULTIPLE 10.5 11.5
----------- -----------
ESTIMATED FAIR MARKET VALUE $26,762,736 $29,311,568
----------- -----------
II. MULTIPLE OF "RUNNING RATE" OPERATING INCOME
ESTIMATED OPERATING INCOME
TOTAL CURRENT YEAR'S REVENUE $5,970,827 $5,970,827
OPERATING MARGIN, PER BOOKS (12/31/95) 48.1% 48.1%
----------- -----------
"RUNNING RATE" OPERATING INCOME 2,869,878 2,869,878
VALUATION MULTIPLE 10.0 11.0
----------- -----------
ESTIMATED FAIR MARKET VALUE $28,698,781 $31,568,659
----------- -----------
III. MULTIPLE OF NEXT YEAR'S OPERATING INCOME
OPERATING INCOME $3,116,863 $3,116,863
VALUATION MULTIPLE 9.5 10.5
----------- -----------
ESTIMATED FAIR MARKET VALUE $29,610,202 $32,727,066
----------- -----------
IV. DISCOUNTED CASH FLOW RETURN ON EQUITY
TARGET RETURN ON EQUITY 14.0% 12.0%
ESTIMATED FAIR MARKET VALUE $27,919,331 $30,339,543
----------- -----------
V. DISCOUNTED CASH FLOW RETURN ON INVESTMENT
TARGET RETURN ON INVSTMT 16.6% 15.1%
ESTIMATED FAIR MARKET VALUE $27,868,221 $30,068,209
----------- -----------
SUMMARY OF VALUES
I. MULTIPLE OF PAST YEAR'S OPERATING INCOME $26,762,736 $29,311,568
II. MULTIPLE OF "RUNNING RATE" OPERATING INCOME 28,698,781 31,568,659
III. MULTIPLE OF NEXT YEAR'S OPERATING INCOME 29,610,202 32,727,066
IV. DISCOUNTED CASH FLOW RETURN ON EQUITY 27,919,331 30,339,543
V. DISCOUNTED CASH FLOW RETURN ON INVESTMENT 27,868,221 30,068,209
----------- -----------
RANGE OF ESTIMATED FAIR MARKET VALUES $28,301,000 $30,869,000
ESTIMATED FAIR MARKET VALUE $29,585,000
148
FALCON CABLE SYSTEMS CO. EXHIBIT B
SAN LUIS OBISPO REGION - CALIF. LOW ANALYSIS
AS OF DECEMBER 31, 1995
RETURN ON EQUITY METHOD
- -----------------------
PROFIT AND LOSS - LOW VALUE
YEAR ENDING DECEMBER 31, 1996 1997 1998 1999
---- ---- ---- ----
REVENUES $6,314,102 $6,909,478 $7,657,824 $8,513,121
OPERATING EXPENSES 3,197,239 3,425,857 3,730,534 4,080,071
---------- ---------- ---------- ----------
OPERATING INCOME $3,116,863 $3,483,621 $3,927,290 $4,433,050
OPERATING MARGIN 0.49 0.50 0.51 0.52
PARENT SERVICES/MGT FEE (5%) 315,705 345,474 382,891 425,656
FRANCHISE AMORTIZATION (15) 903,133 903,133 903,133 903,133
SUBSCRIBER LIST (8) 290,933 290,933 290,933 290,933
NON-COMPETE COVENANTS (0) 0 0 0 0
DEPRECIATION 1,579,712 2,814,984 2,441,324 2,403,242
INTEREST 1,365,130 1,365,130 1,365,130 1,333,920
---------- ---------- ---------- ----------
PRE-TAX INCOME ($1,337,750) ($2,236,033) ($1,456,122) ($923,834)
INCOME TAX (EXPENSE)/BENEFIT 454,835 760,251 495,081 314,104
---------- ---------- ---------- ----------
NET INCOME ($882,915) ($1,475,782) ($961,041) ($609,730)
SOURCES AND USES OF CASH
- ------------------------
SOURCES OF CASH -
PRE TAX INCOME ($1,337,750) ($2,236,033) ($1,456,122) ($923,834)
FRANCHISE AMORTIZATION (15) 903,133 903,133 903,133 903,133
SUBSCRIBER LIST (8) 290,933 290,933 290,933 290,933
NON-COMPETE COVENANTS (0) 0 0 0 0
DEPRECIATION 1,579,712 2,814,984 2,441,324 2,403,242
EQUITY 13,651,296
DEBT 13,651,296 0 0 544,461
RESIDUAL VALUE IN YEAR 7
TOTAL SOURCES OF CASH $28,738,621 $1,773,018 $2,179,269 $3,217,935
----------- ---------- ---------- ----------
USES OF CASH -
PURCHASE PRICE - CURRENT $27,919,331
CAPITAL EXPENDITURES 718,921 753,647 2,262,385 2,355,791
DEBT RETIREMENT 0 0 856,556 942,212
TAXES PAID ON NET INCOME 0 0 0 0
----------- ---------- ---------- ----------
TAXES PAID ON SALE (RESIDUAL)
TOTAL USES OF CASH $28,638,252 $753,647 $3,118,941 $3,298,003
ANNUAL CASH INCREASE/(DECREASE) $100,369 $1,019,371 ($939,673) ($80,068)
CUMULATIVE CASH 100,369 1,119,740 180,068 100,000
YEAR ENDING DECEMBER 31, 2000 2001 2002 TOTAL
---- ---- ---- -----
REVENUES $9,342,916 $10,061,251 $10,726,262 $59,524,954
OPERATING EXPENSES 4,453,572 4,791,909 5,124,737 28,803,918
----------- ---------- ---------- ----------
OPERATING INCOME $4,889,344 $5,269,342 $5,601,525 $30,721,035
OPERATING MARGIN 0.52 0.52 0.52
PARENT SERVICES/MGT FEE (5%) 467,146 503,063 536,313 2,976,248
FRANCHISE AMORTIZATION (15) 903,133 903,133 903,133 6,321,933
SUBSCRIBER LIST (8) 290,933 290,933 290,933 2,036,533
NON-COMPETE COVENANTS (0) 0 0 0 0
DEPRECIATION 2,405,944 2,483,293 2,347,518 16,476,017
INTEREST 1,274,948 1,171,305 967,602 8,843,164
----------- ---------- ---------- ----------
PRE-TAX INCOME ($452,761) ($82,385) $556,025 ($5,932,860)
INCOME TAX (EXPENSE)/BENEFIT 153,939 28,011 (189,048) 2,017,173
----------- ---------- ---------- ----------
NET INCOME ($298,822) ($54,374) $366,976 ($3,915,688)
SOURCES AND USES OF CASH
- ------------------------
SOURCES OF CASH -
PRE TAX INCOME ($452,761) ($82,385) $556,025 ($5,932,860)
FRANCHISE AMORTIZATION (15) 903,133 903,133 903,133 6,321,933
SUBSCRIBER LIST (8) 290,933 290,933 290,933 2,036,533
NON-COMPETE COVENANTS (0) 0 0 0 0
DEPRECIATION 2,405,944 2,483,293 2,347,518 16,476,017
EQUITY 13,651,296
DEBT 352,493 0 0 14,548,250
RESIDUAL VALUE IN YEAR 7 50,413,722 50,413,722
----------- ---------- ---------- ----------
TOTAL SOURCES OF CASH $3,499,743 $3,594,975 $54,511,331 $97,514,891
USES OF CASH -
PURCHASE PRICE - CURRENT $27,919,331
CAPITAL EXPENDITURES 2,463,310 924,086 977,606 10,455,747
DEBT RETIREMENT 1,036,433 2,037,030 9,676,020 14,548,250
TAXES PAID ON NET INCOME 0 0 0 0
TAXES PAID ON SALE (RESIDUAL) 10,519,691 10,519,691
----------- ---------- ---------- ----------
TOTAL USES OF CASH $3,499,743 $2,961,116 $21,173,317 $63,443,019
ANNUAL CASH INCREASE/(DECREASE) ($0) $633,859 $33,338,014 $34,071,873
CUMULATIVE CASH 100,000 733,859 34,071,873
149
FALCON CABLE SYSTEMS CO. EXHIBIT B
SAN LUIS OBISPO REGION - CALIF. HIGH ANALYSIS
AS OF DECEMBER 31, 1995
RETURN ON EQUITY METHOD
- -----------------------
PROFIT AND LOSS - HIGH VALUE
YEAR ENDING DECEMBER 31, 1996 1997 1998 1999
---- ---- ---- ----
REVENUES $6,314,102 $6,909,478 $7,657,824 $8,513,121
OPERATING EXPENSES 3,197,239 3,425,857 3,730,534 4,080,071
---------- ---------- ---------- ----------
OPERATING INCOME $3,116,863 $3,483,621 $3,927,290 $4,433,050
OPERATING MARGIN 0.49 0.50 0.51 0.52
PARENT SERVICES/MGT FEE (5%) 315,705 345,474 382,891 425,656
FRANCHISE AMORTIZATION (15) 903,133 903,133 903,133 903,133
SUBSCRIBER LIST (8) 290,933 290,933 290,933 290,933
NON-COMPETE COVENANTS (0) 0 0 0 0
DEPRECIATION 1,579,712 2,814,984 2,441,324 2,403,242
INTEREST 1,492,508 1,492,508 1,520,801 1,516,672
---------- ---------- ---------- ----------
PRE-TAX INCOME ($1,465,129) ($2,363,412) ($1,611,793) ($1,106,586)
INCOME TAX (EXPENSE)/BENEFIT 498,144 803,560 548,010 376,239
NET INCOME ($966,985) ($1,559,852) ($1,063,783) ($730,347)
SOURCES AND USES OF CASH
- ------------------------
SOURCES OF CASH -
PRE TAX INCOME ($1,465,129) ($2,363,412) ($1,611,793) ($1,106,586)
FRANCHISE AMORTIZATION (15) 903,133 903,133 903,133 903,133
SUBSCRIBER LIST (8) 290,933 290,933 290,933 290,933
NON-COMPETE COVENANTS (0) 0 0 0 0
DEPRECIATION 1,579,712 2,814,984 2,441,324 2,403,242
EQUITY 14,925,083
DEBT 14,925,083 0 282,924 895,197
---------- ---------- ---------- ----------
RESIDUAL VALUE IN YEAR 7
TOTAL SOURCES OF CASH $31,158,816 $1,645,639 $2,306,522 $3,385,919
USES OF CASH -
PURCHASE PRICE - CURRENT $30,339,543
CAPITAL EXPENDITURES 718,921 753,647 2,262,385 2,355,791
DEBT RETIREMENT 0 0 936,480 1,030,128
TAXES PAID ON NET INCOME 0 0 0 0
---------- ---------- ---------- ----------
TAXES PAID ON SALE (RESIDUAL)
TOTAL USES OF CASH $31,058,464 $753,647 $3,198,866 $3,385,919
ANNUAL CASH INCREASE/(DECREASE) $100,352 $891,992 ($892,344) $0
CUMULATIVE CASH 100,352 992,344 100,000 100,000
YEAR ENDING DECEMBER 31, 2000 2001 2002 TOTAL
---- ---- ---- -----
REVENUES $9,342,916 $10,061,251 $10,726,262 $59,524,954
OPERATING EXPENSES 4,453,572 4,791,909 5,124,737 28,803,918
---------- ---------- ---------- ----------
OPERATING INCOME $4,889,344 $5,269,342 $5,601,525 $30,721,035
OPERATING MARGIN 0.52 0.52 0.52
PARENT SERVICES/MGT FEE (5%) 467,146 503,063 536,313 2,976,248
FRANCHISE AMORTIZATION (15) 903,133 903,133 903,133 6,321,933
SUBSCRIBER LIST (8) 290,933 290,933 290,933 2,036,533
NON-COMPETE COVENANTS (0) 0 0 0 0
DEPRECIATION 2,405,944 2,483,293 2,347,518 16,476,017
INTEREST 1,478,983 1,365,669 1,118,017 9,985,158
---------- ---------- ---------- ----------
PRE-TAX INCOME ($656,796) ($276,749) $405,610 ($7,074,855)
INCOME TAX (EXPENSE)/BENEFIT 223,311 94,095 (137,908) 2,405,451
---------- ---------- ---------- ----------
NET INCOME ($433,485) ($182,655) $267,703 ($4,669,404)
SOURCES AND USES OF CASH
- ------------------------
SOURCES OF CASH -
PRE TAX INCOME ($656,796) ($276,749) $405,610 ($7,074,855)
FRANCHISE AMORTIZATION (15) 903,133 903,133 903,133 6,321,933
SUBSCRIBER LIST (8) 290,933 290,933 290,933 2,036,533
NON-COMPETE COVENANTS (0) 0 0 0 0
DEPRECIATION 2,405,944 2,483,293 2,347,518 16,476,017
EQUITY 14,925,083
DEBT 653,236 0 0 16,756,440
RESIDUAL VALUE IN YEAR 7 50,413,722 50,413,722
---------- ---------- ---------- ----------
TOTAL SOURCES OF CASH $3,596,451 $3,400,610 $54,360,916 $99,854,874
USES OF CASH -
PURCHASE PRICE - CURRENT $30,339,543
CAPITAL EXPENDITURES 2,463,310 924,086 977,606 10,455,747
DEBT RETIREMENT 1,133,141 2,476,525 11,180,166 16,756,440
TAXES PAID ON NET INCOME 0 0 0 0
TAXES PAID ON SALE (RESIDUAL) 9,308,541 9,308,541
---------- ---------- ---------- ----------
TOTAL USES OF CASH $3,596,451 $3,400,610 $21,466,313 $66,860,270
ANNUAL CASH INCREASE/(DECREASE) ($0) $0 $32,894,603 $32,994,603
CUMULATIVE CASH 100,000 100,000 32,994,603
150
FALCON CABLE SYSTEMS CO. EXHIBIT C
SAN LUIS OBISPO REGION - CALIF. LOW ANALYSIS
AS OF DECEMBER 31, 1995
RETURN ON EQUITY METHOD
DEBT AMORTIZATION - LOW VALUE
TOTAL YEAR 1 CASH REQUIREMENTS $27,302,593
YEAR 1 DEBT REQUIREMENTS 13,651,296
YEAR 1 EQUITY REQUIREMENTS 13,651,296
FINANCING AVAILABLE $16,567,408 $20,259,612 $22,643,538 $25,527,383
UNUSED LEVERAGE 2,916,112 6,608,316 9,848,797 13,130,394
SENIOR DEBT: 1996 1997 1998 1999
---- ---- ---- ----
BEGINNING DEBT $0 $13,651,296 $13,651,296 $12,794,740
DEBT ADDED 13,651,296 0 0 0
TOTAL ANNUAL PAYMENTS 1,365,130 1,365,130 2,221,686 2,221,686
INTEREST 1,365,130 1,365,130 1,365,130 1,279,474
PRINCIPAL REPAYMENT 0 0 856,556 942,212
ENDING BALANCE 13,651,296 13,651,296 12,794,740 11,852,529
LINE OF CREDIT:
BEGINNING DEBT $0 $0 $0 $0
BORROWINGS 0 0 0 544,461
PRINCIPAL PAYMENTS 0 0 0 0
INTEREST 0 0 0 54,446
SENIOR DEBT COVERAGE 4.4 3.9 3.3 2.7
LOC DEBT COVERAGE 0.0 0.0 0.0 0.1
TOTAL DEBT COVERAGE 4.4 3.9 3.3 2.8
DEBT AMORTIZATION - LOW VALUE
TOTAL YEAR 1 CASH REQUIREMENTS
YEAR 1 DEBT REQUIREMENTS
YEAR 1 EQUITY REQUIREMENTS
FINANCING AVAILABLE $28,814,828 $31,780,733 $34,250,723
UNUSED LEVERAGE 17,101,778 22,104,713 25,828,787
SENIOR DEBT: 2000 2001 2002 TOTAL
---- ---- ---- -----
BEGINNING DEBT $11,852,529 $10,816,096 $9,676,020
DEBT ADDED 0 0 0 13,651,296
TOTAL ANNUAL PAYMENTS 2,221,686 2,221,686 2,221,686 13,838,687
INTEREST 1,185,253 1,081,610 967,602 8,609,327
PRINCIPAL REPAYMENT 1,036,433 1,140,076 1,254,084 5,229,360
ENDING BALANCE 10,816,096 9,676,020 8,421,936
LINE OF CREDIT:
BEGINNING DEBT $544,461 $896,954 $0 $0
BORROWINGS 352,493 0 0 896,954
PRINCIPAL PAYMENTS 0 896,954 0 896,954
INTEREST 89,695 89,695 0 233,837
SENIOR DEBT COVERAGE 2.2 1.8 1.5
LOC DEBT COVERAGE 0.2 0.0 0.0
TOTAL DEBT COVERAGE 2.4 1.8 1.5
151
FALCON CABLE SYSTEMS CO. EXHIBIT C
SAN LUIS OBISPO REGION - CALIF. HIGH ANALYSIS
AS OF DECEMBER 31, 1995
RETURN ON EQUITY METHOD
DEBT AMORTIZATION - HIGH VALUE
TOTAL YEAR 1 CASH REQUIREMENTS $29,850,166
YEAR 1 DEBT REQUIREMENTS 14,925,083
YEAR 1 EQUITY REQUIREMENTS 14,925,083
FINANCING AVAILABLE $19,116,240 $23,376,475 $26,127,159 $29,454,673
UNUSED LEVERAGE 4,191,157 8,451,393 11,855,632 15,318,078
SENIOR: 1996 1997 1998 1999
---- ---- ---- ----
BEGINNING DEBT $0 $14,925,083 $14,925,083 $13,988,603
DEBT ADDED 14,925,083 0 0 0
TOTAL ANNUAL PAYMENTS 1,492,508 1,492,508 2,428,989 2,428,989
INTEREST 1,492,508 1,492,508 1,492,508 1,398,860
PRINCIPAL REPAYMENT 0 0 936,480 1,030,128
ENDING BALANCE 14,925,083 14,925,083 13,988,603 12,958,474
LINE OF CREDIT:
BEGINNING DEBT $0 $0 $0 $282,924
BORROWINGS 0 0 282,924 895,197
PRINCIPAL PAYMENTS 0 0 0 0
INTEREST 0 0 28,292 117,812
SENIOR DEBT COVERAGE 4.8 4.3 3.6 2.9
LOC DEBT COVERAGE 0.0 0.0 0.1 0.3
TOTAL DEBT COVERAGE 4.8 4.3 3.6 3.2
DEBT AMORTIZATION - HIGH VALUE
TOTAL YEAR 1 CASH REQUIREMENTS
YEAR 1 DEBT REQUIREMENTS
YEAR 1 EQUITY REQUIREMENTS
FINANCING AVAILABLE $33,247,879 $36,670,077 $39,520,066
UNUSED LEVERAGE 19,591,188 26,091,199 30,312,288
SENIOR: 2000 2001 2002 TOTAL
---- ---- ---- -----
BEGINNING DEBT $12,958,474 $11,825,333 $10,578,878
DEBT ADDED 0 0 0 $14,925,083
TOTAL ANNUAL PAYMENTS 2,428,989 2,428,989 2,428,989 15,129,959
INTEREST 1,295,847 1,182,533 1,057,888 9,412,654
PRINCIPAL REPAYMENT 1,133,141 1,246,455 1,371,101 5,717,305
ENDING BALANCE 11,825,333 10,578,878 9,207,777
LINE OF CREDIT:
BEGINNING DEBT $1,178,121 $1,831,357 $601,288 $0
BORROWINGS 653,236 0 0 1,831,357
PRINCIPAL PAYMENTS 0 1,230,069 601,288 1,831,357
INTEREST 183,136 183,136 60,129 572,505
SENIOR DEBT COVERAGE 2.4 2.0 1.6
LOC DEBT COVERAGE 0.4 0.1 0.0
TOTAL DEBT COVERAGE 2.8 2.1 1.6
152
FALCON CABLE SYSTEMS CO. EXHIBIT D
SAN LUIS OBISPO REGION - CALIF.
AS OF DECEMBER 31, 1995
RETURN ON INVESTMENT METHOD
PROFIT AND LOSS
- ---------------
YEAR ENDING DECEMBER 31, 1996 1997 1998 1999
----------- ---------- ---------- ----------
REVENUES $6,314,102 $6,909,478 $7,657,824 $8,513,121
OPERATING EXPENSES 3,197,239 3,425,857 3,730,534 4,080,071
----------- ---------- ---------- ----------
OPERATING INCOME 3,116,863 3,483,621 3,927,290 4,433,050
PLUS: RESIDUAL VALUE
LESS: CAPITAL EXPENDITURES 718,921 753,647 2,262,385 2,355,791
----------- ---------- ---------- ----------
TOTAL CASH FLOW $2,397,942 $2,729,975 $1,664,904 $2,077,259
NET PRESENT VALUE @ 16.6% $27,868,221
-----------
NET PRESENT VALUE @ 15.1% $30,068,209
-----------
YEAR ENDING DECEMBER 31, 2000 2001 2002 TOTAL
---------- ----------- ----------- -----------
REVENUES $9,342,916 $10,061,251 $10,726,262 $59,524,954
OPERATING EXPENSES 4,453,572 4,791,909 5,124,737 28,803,918
---------- ----------- ----------- -----------
OPERATING INCOME 4,889,344 5,269,342 5,601,525 30,721,035
PLUS: RESIDUAL VALUE 50,413,722 50,413,722
LESS: CAPITAL EXPENDITURES 2,463,310 924,086 977,606 10,455,747
---------- ----------- ----------- -----------
TOTAL CASH FLOW $2,426,034 $4,345,256 $55,037,640 $70,679,010
NET PRESENT VALUE @ 16.6%
NET PRESENT VALUE @ 15.1%
153
FALCON CABLE SYSTEMS CO. EXHIBIT E
SAN LUIS OBISPO REGION - CALIF.
AS OF DECEMBER 31, 1995
CABLE TELEVISION SUBSCRIBERS
YEAR ENDING DECEMBER 31, 1996 1997 1998 1999 2000 2001 2002
---- ---- ---- ---- ---- ---- ----
BEGINNING MILES 408.9
MILES ADDED 20.0 20.0 21.0 21.0 22.0 22.0 23.0
CUMULATIVE MILES 428.9 448.9 469.9 490.9 512.9 534.9 557.9
DENSITY OF ADDITIONAL PLANT 24 24 23 24 22 22 21
HOMES PASSED - BEGINNING 26,138
NEW HOMES & EXTENSIONS 470 479 488 496 477 485 494
HOMES PASSED - ENDING 26,608 27,087 27,575 28,071 28,549 29,034 29,527
GROWTH IN HOMES 1.8% 1.8% 1.8% 1.8% 1.7% 1.7% 1.7%
BASIC - BEGINNING SUBSCRIBERS 15,635 16,049 16,474 16,908 17,353 17,791 18,238
AVERAGE SUBSCRIBERS 15,842 16,262 16,691 17,131 17,572 18,014 18,467
ENDING SUBSCRIBERS 16,049 16,474 16,908 17,353 17,791 18,238 18,696
PENETRATION 60.3% 60.8% 61.3% 61.8% 62.3% 62.8% 63.3%
EXPANDED BASIC - BEGINNING 13,605 13,966 14,335 14,713 15,100 15,481 15,870
AVERAGE SUBSCRIBERS 13,785 14,150 14,524 14,906 15,290 15,676 16,069
ENDING SUBSCRIBERS 13,966 14,335 14,713 15,100 15,481 15,870 16,269
PENETRATION 87.0% 87.0% 87.0% 87.0% 87.0% 87.0% 87.0%
NEW PRODUCT TIER #1 - BEGINNING 4,466 4,825 6,600 8,465 8,688 8,907 9,131
AVERAGE SUBSCRIBERS 4,646 5,713 7,533 8,576 8,797 9,019 9,245
ENDING SUBSCRIBERS 4,825 6,600 8,465 8,688 8,907 9,131 9,360
PENETRATION 30.1% 40.1% 50.1% 50.1% 50.1% 50.1% 50.1%
NEW PRODUCT TIER #2 - BEGINNING 0 899 1,845 3,449 5,553 6,618 6,785
AVERAGE SUBSCRIBERS 449 1,372 2,647 4,501 6,086 6,701 6,870
ENDING SUBSCRIBERS 899 1,845 3,449 5,553 6,618 6,785 6,955
PENETRATION 5.6% 11.2% 20.4% 32.0% 37.2% 37.2% 37.2%
NEW PRODUCT TIER #3 - BEGINNING 0 899 1,845 3,449 5,553 6,618 6,785
AVERAGE SUBSCRIBERS 449 1,372 2,647 4,501 6,086 6,701 6,870
ENDING SUBSCRIBERS 899 1,845 3,449 5,553 6,618 6,785 6,955
PENETRATION 5.6% 11.2% 20.4% 32.0% 37.2% 37.2% 37.2%
PAY TV - BEGINNING UNITS 3,733 3,511 3,686 4,037 4,447 4,870 4,993
AVERAGE UNITS 3,622 3,599 3,862 4,242 4,659 4,932 5,056
ENDING UNITS 3,511 3,686 4,037 4,447 4,870 4,993 5,118
PENETRATION 21.9% 22.4% 23.9% 25.6% 27.4% 27.4% 27.4%
PAY PER VIEW - BEGINNING UNITS/MO 273 363 655 1,135 1,727 2,435 3,051
AVERAGE UNITS 318 509 895 1,431 2,081 2,743 3,344
ENDING UNITS 363 655 1,135 1,727 2,435 3,051 3,637
AVERAGE BUY RATE/MO 6.5% 10.0% 15.0% 20.0% 25.0% 28.0% 31.0%
CONVERTER RENTALS - BEGINNING UNITS 6,009 6,971 7,979 9,035 9,793 10,574 11,387
AVERAGE SUBSCRIBERS 6,490 7,475 8,507 9,414 10,183 10,980 11,810
ENDING SUBSCRIBERS 6,971 7,979 9,035 9,793 10,574 11,387 12,233
PENETRATION 43.4% 48.4% 53.4% 56.4% 59.4% 62.4% 65.4%
ADDRESSABLE HOMES 4,964 5,577 6,548 7,566 8,633 9,740 10,897
AVERAGE HOMES 5,271 6,063 7,057 8,100 9,187 10,319 11,314
ENDING HOMES 5,577 6,548 7,566 8,633 9,740 10,897 11,732
PENETRATION 34.7% 39.7% 44.7% 49.7% 54.7% 59.7% 62.7%
BASIC CHURN RATE 34% 34% 34% 34% 34% 34% 34%
154
FALCON CABLE SYSTEMS CO. EXHIBIT F
SAN LUIS OBISPO REGION - CALIF.
AS OF DECEMBER 31, 1995
SERVICE RATES
- ------------
RUNNING RATES
AS OF AVERAGE RATES
CURRENT RATES DECEMBER 1995 FOR 1996
- ------------- ------------- --------
BASIC $15.79 $16.20
EXPANDED BASIC $7.54 $8.09
NEW PRODUCT TIER #1 $3.38 $3.65
NEW PRODUCT TIER #2 $5.00 $5.00
NEW PRODUCT TIER #3 $5.00 $5.00
PAY $7.49 $7.49
PAY PER VIEW $9.10 $9.10
CONVERTER RENTALS $2.38 $2.82
INSTALLATIONS-NEW $50.00 $50.00
INSTALLATIONS-CHURN $25.00 25.00
YEAR ENDING DECEMBER 31, 1996 1997 1998 1999 2000 2001 2002
---- ---- ---- ---- ---- ---- ----
PERCENTAGE RATE INCREASES
- -------------------------
BASIC 3% 3% 3% 3% 3% 3% 3%
EXPANDED BASIC 7% 3% 3% 3% 3% 3% 3%
NEW PRODUCT TIER #1 8% 3% 3% 3% 3% 3% 3%
NEW PRODUCT TIER #2 0% 3% 3% 3% 3% 3% 3%
NEW PRODUCT TIER #3 0% 3% 3% 3% 3% 3% 3%
PAY 0% 1% 1% 1% 1% 1% 1%
PAY PER VIEW 0% 3% 3% 3% 3% 3% 3%
CONVERTER RENTALS 19% 3% 3% 3% 3% 3% 3%
INSTALLATIONS-NEW 0% 3% 3% 3% 3% 3% 3%
INSTALLATIONS-CHURN 0% 3% 3% 3% 3% 3% 3%
AVERAGE RATES
- -------------
BASIC $16.20 $16.76 $17.26 $17.78 $18.31 $18.86 $19.42
EXPANDED BASIC 8.09 8.33 8.58 8.84 9.10 9.38 9.66
NEW PRODUCT TIER #1 3.65 3.76 3.87 3.99 4.11 4.23 4.36
NEW PRODUCT TIER #2 5.00 5.15 5.30 5.46 5.63 5.80 5.97
NEW PRODUCT TIER #3 5.00 5.15 5.30 5.46 5.63 5.80 5.97
PAY 7.49 7.57 7.64 7.72 7.79 7.87 7.95
PAY PER VIEW 9.10 9.38 9.66 9.95 10.25 10.55 10.87
CONVERTERS RENTALS 2.82 2.91 2.99 3.08 3.18 3.27 3.37
INSTALLATIONS-NEW 50.00 51.50 53.05 54.64 56.28 57.96 59.70
INSTALLATIONS-CHURN 25.00 25.75 26.52 27.32 28.14 28.98 29.85
155
FALCON CABLE SYSTEMS CO. EXHIBIT G
SAN LUIS OBISPO REGION - CALIF.
AS OF DECEMBER 31, 1995
YEAR ENDING DECEMBER 31, 1996 1997 1998 1999
---- ---- ---- ----
REVENUES:
BASIC $3,079,127 $3,269,684 $3,456,696 $3,654,159
EXPANDED BASIC 1,337,964 1,414,586 1,495,495 1,580,925
NEW PRODUCT TIER #1 203,457 257,694 349,983 410,433
NEW PRODUCT TIER #2 26,963 84,785 168,503 295,109
NEW PRODUCT TIER #3 26,963 84,785 168,503 295,109
PAY TV 325,570 326,700 354,083 392,848
PAY PER VIEW 34,716 57,240 103,722 170,809
CONVERTER RENTAL 219,696 260,627 305,505 348,222
INSTALLATIONS 124,179 131,245 138,704 146,577
COMMERCIAL 107,754 110,987 114,317 117,746
ADVERTISING 275,977 320,134 364,952 412,396
MISCELLANEOUS 551,735 591,011 637,361 688,789
---------- ---------- ---------- ----------
TOTAL REVENUES $6,314,102 $6,909,478 $7,657,824 $8,513,121
OPERATING EXPENSES:
OPERATIONS $1,089,676 $1,174,505 $1,272,220 $1,378,892
GENERAL & ADMINISTRATIVE 605,114 641,163 681,346 724,888
SALES & MARKETING 378,166 414,790 464,546 517,849
PROGRAMMING 1,124,283 1,195,400 1,312,422 1,458,441
---------- ---------- ---------- ----------
TOTAL OPERATING EXPENSES $3,197,239 $3,425,857 $3,730,534 $4,080,071
OPERATING INCOME $3,116,863 $3,483,621 $3,927,290 $4,433,050
OPERATING MARGIN 49.4% 50.4% 51.3% 52.1%
TOTAL REVENUE/BASIC SUB/MONTH $33.21 $35.41 $38.23 $41.41
CASH FLOW/BASIC SUB/MONTH $16.40 $17.85 $19.61 $21.57
OPERATIONS % OF REVENUE 17% 17% 17% 16%
G & A PERCENTAGE OF REVENUE 10% 9% 9% 9%
SALES & MARKETING % OF REVENUE 6% 6% 6% 6%
PROGRAMMING % OF REVENUE 18% 17% 17% 17%
YEAR ENDING DECEMBER 31, 2000 2001 2002 TOTAL
---- ---- ---- -----
REVENUES:
BASIC $3,860,726 $4,076,727 $4,304,538 $25,701,656
EXPANDED BASIC 1,670,293 1,763,743 1,862,302 11,125,308
NEW PRODUCT TIER #1 433,635 457,896 483,484 2,596,582
NEW PRODUCT TIER #2 410,959 466,124 492,171 1,944,613
NEW PRODUCT TIER #3 410,959 466,124 492,171 1,944,613
PAY TV 435,751 465,902 482,385 2,783,240
PAY PER VIEW 255,867 347,428 436,235 1,406,016
CONVERTER RENTAL 387,986 430,901 477,374 2,430,311
INSTALLATIONS 154,034 162,598 171,628 1,028,966
COMMERCIAL 121,279 124,917 128,664 825,665
ADVERTISING 461,884 512,691 563,960 2,911,993
MISCELLANEOUS 739,544 786,200 831,349 4,825,988
---------- ---------- ---------- -----------
TOTAL REVENUES $9,342,916 $10,061,251 $10,726,262 $59,524,954
OPERATING EXPENSES:
OPERATIONS $1,488,428 $1,594,512 $1,702,000 $9,700,232
GENERAL & ADMINISTRATIVE 769,189 812,710 856,817 5,091,227
SALES & MARKETING 574,353 619,666 666,234 3,635,604
PROGRAMMING 1,621,603 1,765,021 1,899,686 10,376,855
---------- ---------- ---------- -----------
TOTAL OPERATING EXPENSES $4,453,572 $4,791,909 $5,124,737 $28,803,918
OPERATING INCOME $4,889,344 $5,269,342 $5,601,525 $30,721,035
OPERATING MARGIN 52.3% 52.4% 52.2%
TOTAL REVENUE/BASIC SUB/MONTH $44.31 $46.54 $48.40
CASH FLOW/BASIC SUB/MONTH $23.19 $24.38 $25.28
OPERATIONS % OF REVENUE 16% 16% 16%
G & A PERCENTAGE OF REVENUE 8% 8% 8%
SALES & MARKETING % OF REVENUE 6% 6% 6%
PROGRAMMING % OF REVENUE 17% 18% 18%
156
FALCON CABLE SYSTEMS CO. EXHIBIT H
SAN LUIS OBISPO REGION - CALIF.
AS OF DECEMBER 31, 1995
CAPITAL EXPENDITURES
- --------------------
YEAR ENDING DECEMBER 31, 1996 1997 1998 1999
---- ---- ---- ----
ASSUMPTIONS AND INPUTS:
- ----------------------
BV OF EXISTING PLANT $10,335,746
ADDITIONAL MILES OF PLANT 20.0 20.0 21.0 21.0
AERIAL PLANT PER MILE $11,000 $11,220 $11,444 $11,673
UNDERGROUND PLANT PER MILE $18,000 $18,360 $18,727 $19,102
PERCENTAGE OF PLANT AERIAL 90% 90% 90% 90%
PERCENTAGE OF PLANT UNDERGROUND 10% 10% 10% 10%
AVERAGE COST PER CONVERTER $110 $112 $114 $117
PERCENTAGE CONVERTER USE 43% 48% 53% 56%
PERCENTAGE REPLACEMENT 5% 5% 5% 5%
INSTALLATION COST PER SUBSCRIBER $57 $58 $60 $61
MISC. CAPITAL PER SUBSCRIBER $5 $5 $5 $5
INFLATION FACTOR FOR CAPITALS 2% 2% 2% 2%
ANNUAL COSTS:
- ------------- 22,596
PLANT ADDITIONS - AERIAL $198,000 $201,960 $216,299 $220,625
36,000 36,720 39,327 40,114
PLANT REBUILD/UPGRADE/INCL. HDND. 20,853 22,311 1,483,900 1,543,300
AVERAGE COST OF NEW CONVERTERS 19,802 23,059 26,564 29,295
CONVERTER REPLACEMENT 37,349 43,608 50,369 55,692
INSTALLATION COSTS 327,706 343,055 359,099 375,870
MISC. CAPITAL EXPENDITURES 79,211 82,934 86,827 90,895
-------- -------- ---------- ----------
TOTAL CAPITAL EXPENDITURES $718,921 $753,647 $2,262,385 $2,355,791
AS A % OF OPERATING INCOME 23.1% 21.6% 57.6% 53.1%
CAPITAL EXPENDITURES
- --------------------
YEAR ENDING DECEMBER 31, 2000 2001 2002 TOTAL
---- ---- ---- -----
ASSUMPTIONS AND INPUTS:
- -----------------------
BV OF EXISTING PLANT
ADDITIONAL MILES OF PLANT 22.0 22.0 23.0
AERIAL PLANT PER MILE $11,907 $12,145 $12,388
UNDERGROUND PLANT PER MILE $19,484 $19,873 $20,271
PERCENTAGE OF PLANT AERIAL 90% 90% 90%
PERCENTAGE OF PLANT UNDERGROUND 10% 10% 10%
AVERAGE COST PER CONVERTER $119 $121 $124
PERCENTAGE CONVERTER USE 59% 62% 65%
PERCENTAGE REPLACEMENT 5% 5% 5%
INSTALLATION COST PER SUBSCRIBER $62 $63 $64
MISC. CAPITAL PER SUBSCRIBER $5 $6 $6
INFLATION FACTOR FOR CAPITALS 2% 2% 2% 115%
ANNUAL COSTS:
- -------------
PLANT ADDITIONS - AERIAL $235,754 $240,469 $256,427 $1,569,534
- UNDERGROUND 42,864 43,722 46,623 285,370
PLANT REBUILD/UPGRADE/INCL. HDND. 1,604,900 28,880 30,721 4,734,865
AVERAGE COST OF NEW CONVERTERS 30,977 33,940 37,099 200,736
CONVERTER REPLACEMENT 61,399 67,448 73,917 389,783
INSTALLATION COSTS 392,314 410,181 428,834 2,637,059
MISC. CAPITAL EXPENDITURES 95,101 99,447 103,985 638,401
---------- -------- --------- -----------
TOTAL CAPITAL EXPENDITURES $2,463,310 $924,086 $977,606 $10,455,747
AS A % OF OPERATING INCOME 50.4% 17.5% 17.5%
157
FALCON CABLE SYSTEMS CO. EXHIBIT I
SAN LUIS OBISPO REGION - CALIF.
AS OF DECEMBER 31, 1995
DEPRECIATION
- ------------
YEAR 1 YEAR 2 YEAR 3 YEAR 4
------ ------ ------ ------
ESTIMATED DEPRECIATION RATES 14.3% 24.5% 17.5% 12.5%
DEPRECIATION - BEG. & ADTNS. 1996 1997 1998 1999
---- ---- ---- ----
YEAR 1 $1,579,712 $2,707,288 $1,933,461 $1,380,728
YEAR 2 107,696 184,568 131,813
YEAR 3 323,295 554,058
YEAR 4 336,643
YEAR 5
YEAR 6
YEAR 7
---------- ---------- ---------- ----------
TOTAL DEPRECIATION $1,579,712 $2,814,984 $2,441,324 $2,403,242
YEAR 5 YEAR 6 YEAR 7
------ ------ ------
ESTIMATED DEPRECIATION RATES 8.9% 8.9% 8.9%
DEPRECIATION - BEG. & ADTNS. 2000 2001 2002 TOTAL
---- ---- ---- -----
YEAR 1 $987,182 $986,076 $987,182 $10,561,629
YEAR 2 94,130 67,301 67,225 652,733
YEAR 3 395,691 282,572 202,031 1,757,647
YEAR 4 576,933 412,028 294,238 1,619,842
YEAR 5 352,007 603,265 430,833 1,386,104
YEAR 6 132,052 226,309 358,360
YEAR 7 139,700 139,700
---------- ---------- ---------- -----------
TOTAL DEPRECIATION $2,405,944 $2,483,293 $2,347,518 $16,476,017
158
FALCON CABLE SYSTEMS CO. EXHIBIT J
SAN LUIS OBISPO REGION - CALIF.
AS OF DECEMBER 31, 1995
ASSUMPTIONS AND INPUTS
REMAINING LIFE OF FRANCHISES (YEARS) 7
AVERAGE SUBSCRIBER LIFE (YEARS) 8
INCOME TAX RATE 34%
CAPITAL GAIN RATE 34%
NET FMV OF EXISTING ASSETS $10,335,746
SUBSCRIBERS IN FRANCHISES 100%
LOW HIGH
ANALYSIS ANALYSIS
-------- --------
DEBT PERCENTAGE 50% 50%
EQUITY PERCENTAGE 50% 50%
RESIDUAL MULTIPLE (ROE & ROI) 9 9
MULT OF PAST YEAR'S OPERATING INCOME 10.5 11.5
MULT OF CURRENT YEAR'S OPERATING INCOME 10.0 11.0
MULT OF NEXT YEAR'S OPERATING INCOME 9.5 10.5
TARGET RETURN ON EQUITY 14.0% 12.0%
TARGET RETURN ON INVESTMENT 16.6% 15.1%
159
TULARE, CA
160
FALCON CABLE SYSTEMS CO. EXHIBIT A
TULARE REGION - CALIFORNIA
AS OF DECEMBER 31, 1995
VALUATION METHODS
- -----------------
LOW HIGH
--- ----
I. MULTIPLE OF PAST YEAR'S OPERATING INCOME
OPERATING INCOME, PER BOOKS (12/31/95) $3,177,814 $3,177,814
VALUATION MULTIPLE 10.5 11.5
----------- -----------
ESTIMATED FAIR MARKET VALUE $33,367,047 $36,544,861
----------- -----------
II. MULTIPLE OF "RUNNING RATE" OPERATING INCOME
ESTIMATED OPERATING INCOME
TOTAL CURRENT YEAR'S REVENUE $6,512,501 $6,512,501
OPERATING MARGIN, PER BOOKS (12/31/95) 48.9% 48.9%
---------- ----------
"RUNNING RATE" OPERATING INCOME 3,186,241 3,186,241
VALUATION MULTIPLE 10.0 11.0
----------- -----------
ESTIMATED FAIR MARKET VALUE $31,862,412 $35,048,654
----------- -----------
III. MULTIPLE OF NEXT YEAR'S OPERATING INCOME
OPERATING INCOME $3,329,175 $3,329,175
VALUATION MULTIPLE 9.5 10.5
----------- -----------
ESTIMATED FAIR MARKET VALUE $31,627,158 $34,956,333
----------- -----------
IV. DISCOUNTED CASH FLOW RETURN ON EQUITY
TARGET RETURN ON EQUITY 14.0% 12.0%
ESTIMATED FAIR MARKET VALUE $29,943,941 $32,317,838
----------- -----------
V. DISCOUNTED CASH FLOW RETURN ON INVESTMENT
TARGET RETURN ON INVSTMT 16.6% 15.1%
ESTIMATED FAIR MARKET VALUE $29,567,487 $31,820,292
----------- -----------
SUMMARY OF VALUES
- -----------------
I. MULTIPLE OF PAST YEAR'S OPERATING INCOME $33,367,047 $36,544,861
II. MULTIPLE OF "RUNNING RATE" OPERATING INCOME 31,862,412 35,048,654
III. MULTIPLE OF NEXT YEAR'S OPERATING INCOME 31,627,158 34,956,333
IV. DISCOUNTED CASH FLOW RETURN ON EQUITY 29,943,941 32,317,838
V. DISCOUNTED CASH FLOW RETURN ON INVESTMENT 29,567,487 31,820,292
----------- -----------
RANGE OF ESTIMATED FAIR MARKET VALUES $30,627,000 $33,317,000
ESTIMATED FAIR MARKET VALUE $31,972,000
-----------
161
FALCON CABLE SYSTEMS CO. EXHIBIT B
TULARE REGION - CALIFORNIA LOW ANALYSIS
AS OF DECEMBER 31, 1995
RETURN ON EQUITY METHOD
PROFIT AND LOSS - LOW VALUE
- ----------------------------
YEAR ENDING DECEMBER 31, 1996 1997 1998 1999
---- ---- ---- ----
REVENUES $7,024,036 $7,507,378 $8,090,912 $8,763,382
OPERATING EXPENSES 3,694,862 3,916,217 4,184,220 4,497,296
---------- ---------- ---------- ----------
OPERATING INCOME $3,329,175 $3,591,161 $3,906,692 $4,266,086
OPERATING MARGIN 0.47 0.48 0.48 0.49
PARENT SERVICES/MGT FEE (5%) 351,202 375,369 404,546 438,169
FRANCHISE AMORTIZATION (15) 999,467 999,467 999,467 999,467
SUBSCRIBER LIST (8) 345,200 345,200 345,200 345,200
NON-COMPETE COVENANTS (0) 0 0 0 0
DEPRECIATION 1,593,755 2,846,354 2,265,099 1,856,452
INTEREST 1,465,442 1,465,442 1,465,442 1,373,492
---------- ---------- ---------- ----------
PRE-TAX INCOME ($1,425,891) ($2,440,670) ($1,573,061) ($746,693)
INCOME TAX (EXPENSE)/BENEFIT 484,803 829,828 534,841 253,078
---------- ---------- ---------- ----------
NET INCOME ($941,088) ($1,610,842) ($1,038,221) ($492,818)
SOURCES AND USES OF CASH
- ------------------------
SOURCES OF CASH -
PRE TAX INCOME ($1,425,891) ($2,440,670) ($1,573,061) ($746,693)
FRANCHISE AMORTIZATION (15) 999,467 999,467 999,467 999,467
SUBSCRIBER LIST (8) 345,200 345,200 345,200 345,200
NON-COMPETE COVENANTS (0) 0 0 0 0
DEPRECIATION 1,593,755 2,846,354 2,265,099 1,856,452
EQUITY 14,654,415
DEBT 14,654,415 0 0 0
---------- ---------- ---------- ----------
RESIDUAL VALUE IN YEAR 7
TOTAL SOURCES OF CASH $30,821,381 $1,750,351 $2,036,705 $2,454,425
USES OF CASH -
PURCHASE PRICE - CURRENT $29,943,941
CAPITAL EXPENDITURES 777,146 804,754 821,315 850,650
DEBT RETIREMENT 0 0 919,497 1,011,447
TAXES PAID ON NET INCOME 0 0 0 0
TAXES PAID ON SALE (RESIDUAL)
---------- ---------- ---------- ----------
TOTAL USES OF CASH $30,721,087 $804,754 $1,740,812 $1,862,097
ANNUAL CASH INCREASE/(DECREASE) $100,274 $945,597 $295,893 $592,328
CUMULATIVE CASH 100,274 1,045,871 1,341,764 1,934,091
PROFIT AND LOSS - HIGH VALUE
- ----------------------------
YEAR ENDING DECEMBER 31, 2000 2001 2002 TOTAL
---- ---- ---- -----
REVENUES $9,492,062 $10,237,240 $11,002,417 $62,117,428
OPERATING EXPENSES 4,865,030 5,221,361 5,578,828 31,957,815
---------- ---------- ---------- -----------
OPERATING INCOME $4,627,032 $5,015,879 $5,423,588 $30,159,613
OPERATING MARGIN 0.49 0.49 0.49
PARENT SERVICES/MGT FEE (5%) 474,603 511,862 550,121 3,105,871
FRANCHISE AMORTIZATION (15) 999,467 999,467 999,467 6,996,267
SUBSCRIBER LIST (8) 345,200 345,200 345,200 2,416,400
NON-COMPETE COVENANTS (0) 0 0 0 0
DEPRECIATION 1,576,694 1,668,575 1,765,768 13,572,698
INTEREST 1,272,347 1,161,088 1,038,703 9,241,954
---------- ---------- ---------- -----------
PRE-TAX INCOME ($41,279) $329,687 $724,330 ($5,173,578)
INCOME TAX (EXPENSE)/BENEFIT 14,035 (112,094) (246,272) 1,759,016
---------- ---------- ---------- -----------
NET INCOME ($27,244) $217,594 $478,058 ($3,414,561)
SOURCES AND USES OF CASH
SOURCES OF CASH -
PRE TAX INCOME ($41,279) $329,687 $724,390 ($5,173,578)
FRANCHISE AMORTIZATION (15) 999,467 999,467 999,467 6,996,267
SUBSCRIBER LIST (8) 345,200 345,200 345,200 2,416,400
NON-COMPETE COVENANTS (0) 0 0 0 0
DEPRECIATION 1,576,694 1,668,575 1,765,768 13,572,698
EQUITY 14,654,415
DEBT 0 0 0 14,654,415
RESIDUAL VALUE IN YEAR 7 48,812,296 48,812,296
---------- ---------- ---------- -----------
TOTAL SOURCES OF CASH $2,880,082 $3,342,929 $52,647,061 $95,932,914
USES OF CASH -
PURCHASE PRICE - CURRENT $29,943,941
CAPITAL EXPENDITURES 897,487 914,713 961,883 6,027,949
DEBT RETIREMENT 1,112,591 1,223,851 10,387,029 14,654,415
TAXES PAID ON NET INCOME 0 0 0 0
TAXES PAID ON SALE (RESIDUAL) 10,421,746 10,421,746
---------- ---------- ---------- -----------
TOTAL USES OF CASH $2,010,078 $2,138,564 $21,770,658 $81,048,051
ANNUAL CASH INCREASE/(DECREASE) $870,003 $1,204,365 $30,876,403 $34,884,883
CUMULATIVE CASH 2,804,095 4,008,460 34,884,863
162
FALCON CABLE SYSTEMS CO. EXHIBIT B
TULARE REGION - CALIFORNIA HIGH ANALYSIS
AS OF DECEMBER 31, 1995
RETURN ON EQUITY METHOD
PROFIT AND LOSS - HIGH VALUE
- ----------------------------
YEAR ENDING DECEMBER 31, 1996 1997 1998 1999
---- ---- ---- ----
REVENUES $7,024,036 $7,507,378 $8,090,912 $8,763,382
OPERATING EXPENSES 3,694,862 3,916,217 4,184,220 4,497,296
---------- ---------- ---------- ----------
OPERATING INCOME $3,329,175 $3,591,161 $3,906,692 $4,266,086
OPERATING MARGIN 0.47 0.48 0.48 0.49
PARENT SERVICES/MGT FEE (5%) 351,202 375,369 404,546 438,169
FRANCHISE AMORTIZATION (15) 999,467 999,467 999,467 999,467
SUBSCRIBER LIST (8) 345,200 345,200 345,200 345,200
NON-COMPETE COVENANTS (0) 0 0 0 0
DEPRECIATION 1,593,755 2,846,354 2,265,099 1,856,452
INTEREST 1,590,393 1,590,393 1,590,393 1,490,603
---------- ---------- ---------- ----------
PRE-TAX INCOME ($1,550,842) ($2,565,622) ($1,698,013) ($863,805)
INCOME TAX (EXPENSE)/BENEFIT 527,286 872,311 577,324 293,694
---------- ---------- ---------- ----------
NET INCOME ($1,023,556) ($1,693,310) ($1,120,689) ($570,111)
SOURCES AND USES OF CASH
- ------------------------
SOURCES OF CASH -
PRE TAX INCOME ($1,550,842) ($2,565,622) ($1,698,013) ($863,805)
FRANCHISE AMORTIZATION (15) 999,467 999,467 999,467 999,467
SUBSCRIBER LIST (8) 345,200 345,200 345,200 345,200
NON-COMPETE COVENANTS (0) 0 0 0 0
DEPRECIATION 1,593,755 2,846,354 2,265,099 1,856,452
EQUITY 15,903,931
DEBT 15,903,931 0 0 0
---------- ---------- ---------- ----------
RESIDUAL VALUE IN YEAR 7
TOTAL SOURCES OF CASH $33,195,442 $1,625,399 $1,911,753 $2,337,313
USES OF CASH -
PURCHASE PRICE - CURRENT $32,317,838
CAPITAL EXPENDITURES 777,146 804,754 821,315 850,650
DEBT RETIREMENT 0 0 997,898 1,097,688
TAXES PAID ON NET INCOME 0 0 0 0
TAXES PAID ON SALE (RESIDUAL)
---------- ---------- ---------- ----------
TOTAL USES OF CASH $33,094,984 $804,754 $1,819,213 $1,948,339
ANNUAL CASH INCREASE/(DECREASE) $100,458 $820,645 $92,540 $388,975
CUMULATIVE CASH 100,458 921,103 1,013,643 1,402,618
PROFIT AND LOSS - HIGH VALUE
- ----------------------------
YEAR ENDING DECEMBER 31, 2000 2001 2002 TOTAL
---- ---- ---- -----
REVENUES $9,492,062 $10,237,240 $11,002,417 $62,117,428
OPERATING EXPENSES 4,865,030 5,221,361 5,578,828 31,957,815
---------- ---------- ---------- ----------
OPERATING INCOME $4,627,032 $5,015,879 $5,423,588 $30,159,613
OPERATING MARGIN 0.49 0.49 0.49
PARENT SERVICES/MGT FEE (5%) 474,603 511,862 550,121 3,105,871
FRANCHISE AMORTIZATION (15) 999,467 999,467 999,467 6,996,267
SUBSCRIBER LIST (8) 345,200 345,200 345,200 2,416,400
NON-COMPETE COVENANTS (0) 0 0 0 0
DEPRECIATION 1,576,694 1,668,575 1,765,768 13,572,698
INTEREST 1,380,834 1,260,089 1,127,268 10,029,974
---------- ---------- ---------- ----------
PRE-TAX INCOME ($149,767) $230,687 $635,764 ($5,961,598)
INCOME TAX (EXPENSE)/BENEFIT 50,921 (78,433) (216,160) 2,026,943
---------- ---------- ---------- ----------
NET INCOME ($98,846) $152,253 $419,604 ($3,934,654)
SOURCES AND USES OF CASH
- ------------------------
SOURCES OF CASH -
PRE TAX INCOME ($149,767) $230,687 $635,764 ($5,961,598)
FRANCHISE AMORTIZATION (15) 999,467 999,467 999,467 6,996,267
SUBSCRIBER LIST (8) 345,200 345,200 345,200 2,416,400
NON-COMPETE COVENANTS (0) 0 0 0 0
DEPRECIATION 1,576,694 1,668,575 1,765,768 13,572,698
EQUITY 15,903,931
DEBT 0 0 0 15,903,931
RESIDUAL VALUE IN YEAR 7 48,812,296 48,812,296
---------- ---------- ---------- ----------
TOTAL SOURCES OF CASH $2,771,595 $3,243,928 $52,558,496 $97,643,926
USES OF CASH -
PURCHASE PRICE - CURRENT $32,317,838
CAPITAL EXPENDITURES 897,487 914,713 961,883 6,027,949
DEBT RETIREMENT 1,207,457 1,328,203 11,272,685 15,903,931
TAXES PAID ON NET INCOME 0 0 0 0
TAXES PAID ON SALE (RESIDUAL) 9,346,694 9,346,694
---------- ---------- ---------- ----------
TOTAL USES OF CASH $2,104,944 $2,242,916 $21,581,262 $63,596,413
ANNUAL CASH INCREASE/(DECREASE) $666,650 $1,001,012 $30,977,233 $34,047,514
CUMULATIVE CASH 2,069,268 3,070,280 34,047,514
163
FALCON CABLE SYSTEMS CO.
TULARE REGION - CALIFORNIA EXHIBIT C
AS OF DECEMBER 31, 1995 LOW ANALYSIS
RETURN ON EQUITY METHOD
DEBT AMORTIZATION - LOW VALUE
- -----------------------------
TOTAL YEAR 1 CASH REQUIREMENTS $29,308,830
YEAR 1 DEBT REQUIREMENTS 14,654,415
YEAR 1 EQUITY REQUIREMENTS 14,654,415
FINANCING AVAILABLE $20,655,791 $21,639,635 $23,342,549 $25,393,496 $27,729,557 $30,075,709 $32,603,213
UNUSED LEVERAGE 6,001,376 6,985,219 9,607,631 12,670,025 16,118,677 19,688,680 23,562,420
SENIOR DEBT: 1996 1997 1998 1999 2000 2001 2002 TOTAL
---- ---- ---- ---- ---- ---- ---- -----
BEGINNING DEBT $0 $14,654,415 $14,654,415 $13,734,918 $12,723,471 $11,610,880 $10,387,029
DEBT ADDED 14,654,415 0 0 0 0 0 0 14,654,415
TOTAL ANNUAL PAYMENTS 1,465,442 1,465,442 2,384,939 2,384,939 2,384,939 2,384,939 2,384,939 14,855,576
INTEREST 1,465,442 1,465,442 1,465,442 1,373,492 1,272,347 1,161,088 1,038,703 9,241,954
PRINCIPAL REPAYMENT 0 0 919,497 1,011,447 1,112,591 1,223,851 1,346,236 5,613,622
ENDING BALANCE 14,654,415 14,654,415 13,734,918 12,723,471 11,610,880 10,387,029 9,040,794
LINE OF CREDIT:
BEGINNING DEBT $0 $0 $0 $0 $0 $0 $0 $0
BORROWINGS 0 0 0 0 0 0 0 0
PRINCIPAL PAYMENTS 0 0 0 0 0 0 0 0
INTEREST 0 0 0 0 0 0 0 0
SENIOR DEBT COVERAGE 4.4 4.1 3.5 3.0 2.5 2.1 1.7
LOC DEBT COVERAGE 0.0 0.0 0.0 0.0 0.0 0.0 0.0
TOTAL DEBT COVERAGE 4.4 4.1 3.5 3.0 2.5 2.1 1.7
164
FALCON CABLE SYSTEMS CO. EXHIBIT C
TULARE REGION - CALIFORNIA HIGH ANALYSIS
AS OF DECEMBER 31, 1995
RETURN ON EQUITY METHOD
DEBT AMORTIZATION - HIGH VALUE
- ------------------------------
TOTAL YEAR 1 CASH REQUIREMENTS $31,807,863
YEAR 1 DEBT REQUIREMENTS 15,903,931
YEAR 1 EQUITY REQUIREMENTS 15,903,931
FINANCING AVAILABLE $23,833,605 $24,968,809 $26,933,710 $29,300,188
UNUSED LEVERAGE 7,929,674 9,064,878 12,027,677 15,491,843
SENIOR: 1996 1997 1998 1999
---- ---- ---- ----
BEGINNING DEBT $0 $15,903,931 $15,903,931 $14,906,033
DEBT ADDED 15,903,931 0 0 0
TOTAL ANNUAL PAYMENTS 1,590,393 1,590,393 2,588,292 2,588,292
INTEREST 1,590,393 1,590,393 1,590,393 1,490,603
PRINCIPAL REPAYMENT 0 0 997,898 1,097,688
ENDING BALANCE 15,903,931 15,903,931 14,906,033 13,808,345
LINE OF CREDIT:
BEGINNING DEBT $0 $0 $0 $0
BORROWINGS 0 0 0 0
PRINCIPAL PAYMENTS 0 0 0 0
INTEREST 0 0 0 0
SENIOR DEBT COVERAGE 4.8 4.4 3.8 3.2
LOC DEBT COVERAGE 0.0 0.0 0.0 0.0
TOTAL DEBT COVERAGE 4.8 4.4 3.8 3.2
DEBT AMORTIZATION - HIGH VALUE
- ------------------------------
TOTAL YEAR 1 CASH REQUIREMENTS
YEAR 1 DEBT REQUIREMENTS
YEAR 1 EQUITY REQUIREMENTS
FINANCING AVAILABLE $31,995,643 $34,702,741 $37,619,092
UNUSED LEVERAGE 19,394,755 23,430,056 27,807,431
SENIOR: 2000 2001 2002 TOTAL
---- ---- ---- -----
BEGINNING DEBT $13,808,345 $12,600,888 $11,272,685
DEBT ADDED 0 0 0 $15,903,931
TOTAL ANNUAL PAYMENTS 2,588,292 2,588,292 2,588,292 16,122,244
INTEREST 1,380,834 1,260,089 1,127,268 10,029,974
PRINCIPAL REPAYMENT 1,207,457 1,328,203 1,461,023 6,092,270
ENDING BALANCE 12,600,888 11,272,685 9,811,662
LINE OF CREDIT:
BEGINNING DEBT $0 $0 $0 $0
BORROWINGS 0 0 0 0
PRINCIPAL PAYMENTS 0 0 0 0
INTEREST 0 0 0 0
SENIOR DEBT COVERAGE 2.7 2.2 1.8
LOC DEBT COVERAGE 0.0 0.0 0.0
TOTAL DEBT COVERAGE 2.7 2.2 1.8
165
FALCON CABLE SYSTEMS CO. EXHIBIT D
TULARE REGION - CALIFORNIA
AS OF DECEMBER 31, 1995
RETURN ON INVESTMENT METHOD
PROFIT AND LOSS
- ---------------
YEAR ENDING DECEMBER 31, 1996 1997 1998 1999 2000 2001 2002 TOTAL
---- ---- ---- ---- ---- ---- ---- -----
REVENUES $7,024,036 $7,507,378 $8,090,912 $8,763,382 $9,492,062 $10,237,240 $11,002,417 $62,117,428
OPERATING EXPENSES 3,694,862 3,916,217 4,184,220 4,497,296 4,865,030 5,221,361 5,578,828 31,957,815
---------- --------- --------- ---------- --------- ---------- ----------- -----------
OPERATING INCOME 3,329,175 3,591,161 3,906,692 4,266,086 4,627,032 5,015,879 5,423,588 30,159,613
PLUS: RESIDUAL VALUE 48,812,296 48,812,296
LESS: CAPITAL EXPENDITURES 777,146 804,754 821,315 850,650 897,487 914,713 961,883 6,027,949
---------- --------- --------- ---------- --------- ---------- ----------- -----------
TOTAL CASH FLOW $2,552,029 $2,786,407 $3,085,377 $3,415,435 $3,729,545 $4,101,166 $53,274,001 $72,943,960
NET PRESENT VALUE @ 16.6% $29,587,487
-----------
NET PRESENT VALUE @ 15.1% $31,820,292
-----------
166
FALCON CABLE SYSTEMS CO. EXHIBIT E
TULARE REGION - CALIFORNIA
AS OF DECEMBER 31, 1995
CABLE TELEVISION SUBSCRIBERS
- ----------------------------
YEAR ENDING DECEMBER 31, 1996 1997 1998 1999 2000 2001 2002
---- ---- ---- ---- ---- ---- ----
BEGINNING MILES 675.9
MILES ADDED 14.2 13.4 12.5 11.5 11.8 10.7 10.9
CUMULATIVE MILES 690.0 703.4 716.0 727.5 739.3 750.0 761.0
DENSITY OF ADDITIONAL PLANT 87 87 87 87 87 87 87
HOMES PASSED - BEGINNING 41,053
NEW HOMES & EXTENSIONS 1,232 1,163 1,086 1,002 1,025 931 950
HOMES PASSED - ENDING 42,285 43,447 44,534 45,536 46,560 47,491 48,441
GROWTH IN HOMES 3.0% 2.8% 2.5% 2.3% 2.3% 2.0% 2.0%
BASIC - BEGINNING SUBSCRIBERS 15,249 15,706 16,247 16,765 17,369 17,993 18,590
AVERAGE SUBSCRIBERS 15,478 15,977 16,506 17,067 17,681 18,292 18,897
ENDING SUBSCRIBERS 15,706 16,247 16,765 17,369 17,993 18,590 19,204
PENETRATION 37.1% 37.4% 37.6% 38.1% 38.6% 39.1% 39.6%
EXPANDED BASIC - BEGINNING 14,787 15,231 15,755 16,257 16,843 17,448 18,027
AVERAGE SUBSCRIBERS 15,009 15,493 16,006 16,550 17,146 17,737 18,325
ENDING SUBSCRIBERS 15,231 15,755 16,257 16,843 17,448 18,027 18,623
PENETRATION 97.0% 97.0% 97.0% 97.0% 97.0% 97.0% 97.0%
NEW PRODUCT TIER #1 - BEGINNING 7,001 7,368 7,865 8,451 8,756 9,070 9,372
AVERAGE SUBSCRIBERS 7,185 7,617 8,158 8,604 8,913 9,221 9,526
ENDING SUBSCRIBERS 7,368 7,865 8,451 8,756 9,070 9,372 9,681
PENETRATION 46.9% 48.4% 50.4% 50.4% 50.4% 50.4% 50.4%
NEW PRODUCT TIER #2 - BEGINNING 0 0 0 0 0 0 0
AVERAGE SUBSCRIBERS 0 0 0 0 0 0 0
ENDING SUBSCRIBERS 0 0 0 0 0 0 0
PENETRATION 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
PAY TV - BEGINNING UNITS 7,110 7,009 7,332 7,817 8,403 9,019 9,319
AVERAGE UNITS 7,060 7,170 7,574 8,110 8,711 9,169 9,472
ENDING UNITS 7,009 7,332 7,817 8,403 9,019 9,319 9,626
PENETRATION 44.6% 45.1% 46.6% 48.4% 50.1% 50.1% 50.1%
PAY PER VIEW - BEGINNING UNITS/MO 451 550 846 1,394 2,037 2,711 3,218
AVERAGE UNITS 501 698 1,120 1,716 2,374 2,964 3,495
ENDING UNITS 550 846 1,394 2,037 2,711 3,218 3,772
AVERAGE BUY RATE/MO 6.8% 9.8% 14.8% 19.8% 24.8% 27.8% 30.8%
CONVERTER RENTALS - BEG. 8,791 9,133 9,610 10,168 10,795 11,452 12,112
AVERAGE SUBSCRIBERS 8,962 9,372 9,889 10,481 11,124 11,782 12,408
ENDING SUBSCRIBERS 9,133 9,610 10,168 10,795 11,452 12,112 12,704
PENETRATION 58.1% 59.1% 60.6% 62.1% 63.6% 65.1% 66.1%
ADDRESSABLE HOMES 7,830 8,143 8,667 9,446 10,308 10,948 11,591
AVERAGE HOMES 7,987 8,405 9,057 9,877 10,628 11,269 11,926
ENDING HOMES 8,143 8,667 9,446 10,308 10,948 11,591 12,262
PENETRATION 51.8% 53.3% 56.3% 59.3% 60.8% 62.3% 63.8%
BASIC CHURN RATE 38% 38% 38% 38% 38% 38% 38%
167
FALCON CABLE SYSTEMS CO. EXHIBIT F
TULARE REGION - CALIFORNIA
AS OF DECEMBER 31, 1995
SERVICE RATES
- -------------
RUNNING RATES
AS OF AVERAGE RATES
CURRENT RATES DECEMBER 1995 FOR 1996
- ------------- -------------- --------
BASIC $16.23 $17.56
EXPANDED BASIC $5.00 $5.84
NEW PRODUCT TIER #1 $5.95 $6.43
NEW PRODUCT TIER #2 N/A N/A
PAY $6.15 $6.15
PAY PER VIEW $16.20 $12.96
CONVERTER RENTALS $3.38 $3.45
INSTALLATIONS-NEW $50.00 $50.00
INSTALLATIONS-CHURN $25.00 $25.00
YEAR ENDING DECEMBER 31, 1996 1997 1998 1999 2000 2001 2002
---- ---- ---- ---- ---- ---- ----
PERCENTAGE RATE INCREASES
- -------------------------
BASIC 8% 3% 3% 3% 3% 3% 3%
EXPANDED BASIC 17% 3% 3% 3% 3% 3% 3%
NEW PRODUCT TIER #1 8% 3% 3% 3% 3% 3% 3%
NEW PRODUCT TIER #2 0% 3% 3% 3% 3% 3% 3%
PAY 0% 1% 1% 1% 1% 1% 1%
PAY PER VIEW -20% -15% -10% 3% 3% 3% 3%
CONVERTER RENTALS 2% 3% 3% 3% 3% 3% 3%
INSTALLATIONS-NEW 0% 3% 3% 3% 3% 3% 3%
INSTALLATIONS-CHURN 0% 3% 3% 3% 3% 3% 3%
AVERAGE RATES
- -------------
BASIC $17.56 $18.05 $18.59 $19.15 $19.72 $20.31 $20.92
EXPANDED BASIC 5.84 6.02 6.20 6.38 6.58 6.77 6.98
NEW PRODUCT TIER #1 6.43 6.62 6.82 7.02 7.23 7.45 7.67
NEW PRODUCT TIER #2 0.00 0.00 0.00 0.00 0.00 0.00 0.00
PAY 6.15 6.21 6.27 6.34 6.40 6.46 6.53
PAY PER VIEW 12.96 11.02 9.91 10.21 10.52 10.83 11.16
CONVERTERS RENTALS 3.45 3.55 3.66 3.77 3.88 4.00 4.12
INSTALLATIONS-NEW 50.00 51.50 53.05 54.64 56.28 57.96 59.70
INSTALLATIONS-CHURN 25.00 25.75 26.52 27.32 28.14 28.98 29.85
168
FALCON CABLE SYSTEMS CO. EXHIBIT G
TULARE REGION - CALIFORNIA
AS OF DECEMBER 31, 1995
YEAR ENDING DECEMBER 31, 1996 1997 1998 1999
---- ---- ---- ----
BASIC $3,260,966 $3,460,351 $3,682,180 $3,921,595
EXPANDED BASIC 1,052,315 1,118,829 1,190,553 1,267,962
NEW PRODUCT TIER #1 554,015 604,962 667,414 724,965
NEW PRODUCT TIER #2 0 0 0 0
PAY TV 521,082 534,554 570,299 616,726
PAY PER VIEW 77,878 92,300 133,265 210,237
CONVERTER RENTALS 370,856 399,436 434,124 473,939
INSTALLATIONS 134,568 145,888 153,503 166,534
COMMERCIAL 85,197 90,386 98,767 111,163
ADVERTISING 300,695 353,316 406,314 463,198
MISCELLANEOUS 666,465 707,355 754,493 807,064
---------- ---------- ---------- ----------
TOTAL REVENUES $7,024,036 $7,507,378 $8,090,912 $8,763,382
OPERATING EXPENSES:
OPERATIONS $1,475,220 $1,557,894 $1,648,920 $1,747,264
GENERAL & ADMINISTRATIVE 620,727 657,442 698,255 743,088
SALES & MARKETING 404,874 450,171 496,661 546,832
PROGRAMMING 1,194,041 1,250,710 1,340,385 1,460,112
---------- ---------- ---------- ----------
TOTAL OPERATING EXPENSES $3,694,862 $3,916,217 $4,184,220 $4,497,296
---------- ---------- ---------- ----------
OPERATING INCOME $3,329,175 $3,591,161 $3,906,692 $4,266,086
OPERATING MARGIN 47.4% 47.8% 48.3% 48.7%
TOTAL REVENUE/BASIC SUB/MONTH $37.82 $39.16 $40.85 $42.79
CASH FLOW/BASIC SUB/MONTH $17.92 $18.73 $19.72 $20.83
OPERATIONS % OF REVENUE 21% 21% 20% 20%
G & A PERCENTAGE OF REVENUE 9% 9% 9% 8%
SALES & MARKETING % OF REVENUE 6% 6% 6% 6%
PROGRAMMING % OF REVENUE 17% 17% 17% 17%
YEAR ENDING DECEMBER 31, 2000 2001 2002 TOTAL
---- ---- ---- -----
BASIC $4,184,616 $ 4,458,968 $ 4,744,809 $27,713,484
EXPANDED BASIC 1,353,005 1,441,710 1,534,131 8,958,505
NEW PRODUCT TIER #1 773,588 824,306 877,149 5,026,400
NEW PRODUCT TIER #2 0 0 0 0
PAY TV 669,076 711,296 742,197 4,365,230
PAY PER VIEW 299,629 385,363 467,950 1,666,620
CONVERTER RENTALS 518,077 565,197 613,062 3,374,691
INSTALLATIONS 177,567 186,991 198,830 1,163,881
COMMERCIAL 128,869 153,876 189,248 857,507
ADVERTISING 523,413 586,223 650,708 3,283,867
MISCELLANEOUS 864,221 923,310 984,333 5,707,243
---------- ----------- ----------- -----------
TOTAL REVENUES $9,492,062 $10,237,240 $11,002,417 $62,117,428
OPERATING EXPENSES:
OPERATIONS $1,852,664 $1,959,850 $2,070,631 $12,312,443
GENERAL & ADMINISTRATIVE 791,897 842,437 894,806 5,248,652
SALES & MARKETING 612,695 669,397 727,991 3,908,620
PROGRAMMING 1,607,773 1,749,678 1,885,400 10,488,100
---------- ----------- ----------- -----------
TOTAL OPERATING EXPENSES $4,865,030 $ 5,221,361 $ 5,578,828 $31,957,815
---------- ----------- ----------- -----------
OPERATING INCOME $4,627,032 $ 5,015,879 $ 5,423,588 $30,159,613
OPERATING MARGIN 48.7% 49.0% 49.3%
TOTAL REVENUE/BASIC SUB/MONTH $44.74 $46.64 $48.52
CASH FLOW/BASIC SUB/MONTH $21.81 $22.85 $23.92
OPERATIONS % OF REVENUE 20% 19% 19%
G & A PERCENTAGE OF REVENUE 8% 8% 8%
SALES & MARKETING % OF REVENUE 6% 7% 7%
PROGRAMMING % OF REVENUE 17% 17% 17%
169
FALCON CABLE SYSTEMS CO. EXHIBIT H
TULARE REGION - CALIFORNIA
AS OF DECEMBER 31, 1995
CAPITAL EXPENDITURES
- --------------------
YEAR ENDING DECEMBER 31, 1996 1997 1998 1999
---- ---- ---- ----
ASSUMPTIONS AND INPUTS:
- -----------------------
BV OF EXISTING PLANT $10,375,794
ADDITIONAL MILES OF PLANT 14.2 13.4 12.5 11.5
AERIAL PLANT PER MILE $11,000 $11,220 $11,444 $11,673
UNDERGROUND PLANT PER MILE $16,000 $18,360 $18,727 $19,102
PERCENTAGE OF PLANT AERIAL 10% 10% 10% 10%
PERCENTAGE OF PLANT UNDERGROUND 90% 90% 90% 90%
AVERAGE COST PER CONVERTER $110 $112 $114 $117
PERCENTAGE CONVERTER USE 58% 59% 61% 62%
PERCENTAGE REPLACEMENT 5% 5% 5% 5%
INSTALLATION COST PER SUBSCRIBER $55 $56 $57 $59
MISC. CAPITAL PER SUBSCRIBER $5 $5 $5 $5
INFLATION FACTOR FOR CAPITALS 2% 2% 2% 2%
ANNUAL COSTS:
- -------------
PLANT ADDITIONS - AERIAL $15,612 $15,035 $14,325 $13,479
- UNDERGROUND 229,924 221,428 210,971 198,513
PLANT REBUILD/UPGRADE/INCL. HE 34,468 35,696 37,325 38,749
AVERAGE COST OF NEW CONVERTERS 29,262 35,874 35,920 43,863
CONVERTER REPLACEMENT 48,770 52,119 56,385 60,813
INSTALLATION COSTS 341,721 362,920 360,525 404,655
MISC. CAPITAL EXPENDITURES 77,389 81,481 85,883 90,558
-------- -------- -------- --------
TOTAL CAPITAL EXPENDITURES $777,146 $604,754 $621,315 $850,550
AS A % OF OPERATING INCOME 23.3% 22.4% 21.0% 19.9%
YEAR ENDING DECEMBER 31, 2000 2001 2002 TOTAL
---- ---- ---- -----
ASSUMPTIONS AND INPUTS:
- -----------------------
BV OF EXISTING PLANT
ADDITIONAL MILES OF PLANT 11.8 10.7 10.9
AERIAL PLANT PER MILE $11,907 $12,145 $12,388
UNDERGROUND PLANT PER MILE $19,484 $19,873 $20,271
PERCENTAGE OF PLANT AERIAL 10% 10% 10%
PERCENTAGE OF PLANT UNDERGROUND 90% 90% 90%
AVERAGE COST PER CONVERTER $119 $121 $124
PERCENTAGE CONVERTER USE 64% 65% 66%
PERCENTAGE REPLACEMENT 5% 5% 5%
INSTALLATION COST PER SUBSCRIBER $60 $61 $62
MISC. CAPITAL PER SUBSCRIBER $5 $6 $6
INFLATION FACTOR FOR CAPITALS 2% 2% 2% 115%
ANNUAL COSTS:
- -------------
PLANT ADDITIONS - AERIAL $14,058 $13,033 $13,559 $99,102
- UNDERGROUND 207,039 191,939 199,694 1,459,509
PLANT REBUILD/UPGRADE/INCL. HE 40,161 41,629 43,078 271,307
AVERAGE COST OF NEW CONVERTERS 47,261 47,262 50,315 289,778
CONVERTER REPLACEMENT 65,818 71,184 76,169 431,257
INSTALLATION COSTS 427,455 448,689 472,660 2,838,626
MISC. CAPITAL EXPENDITURES 95,694 100,977 106,407 638,369
-------- -------- -------- ----------
TOTAL CAPITAL EXPENDITURES $897,487 $914,713 $961,883 $6,027,949
AS A % OF OPERATING INCOME 19.4% 18.2% 17.7%
170
FALCON CABLE SYSTEMS CO. EXHIBIT I
TULARE REGION - CALIFORNIA
AS OF DECEMBER 31, 1995
DEPRECIATION
- ------------
YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5 YEAR 6 YEAR 7
------ ------ ------ ------ ------ ------ ------
ESTIMATED DEPRECIATION RATES 14.3% 24.5% 17.5% 12.5% 8.9% 8.9% 8.9%
DEPRECIATION - BEG. & ADTNS. 1996 1997 1998 1999 2000 2001 2002 TOTAL
---- ---- ---- ---- ---- ---- ---- -----
YEAR 1 $1,593,755 $2,731,355 $1,950,649 $1,393,002 $995,958 $994,842 $995,956 $10,655,519
YEAR 2 114,999 197,084 140,751 100,514 71,665 71,784 696,998
YEAR 3 117,366 201,140 143,646 102,582 73,343 638,079
YEAR 4 121,558 208,324 148,779 106,246 684,907
YEAR 5 128,251 210,795 156,970 605,016
YEAR 6 130,712 224,013 354,726
YEAR 7 137,453 137,453
---------- ---------- ---------- ---------- ---------- ---------- ---------- -----------
TOTAL DEPRECIATION $1,593,755 $2,846,354 $2,265,099 $1,856,452 $1,576,694 $1,688,575 $1,765,768 $13,572,698
171
FALCON CABLE SYSTEMS CO. EXHIBIT J
TULARE REGION - CALIFORNIA
AS OF DECEMBER 31, 1995
ASSUMPTIONS AND INPUTS
- ----------------------
REMAINING LIFE OF FRANCHISES (YEARS) 7
AVERAGE SUBSCRIBER LIFE (YEARS) 8
INCOME TAX RATE 34%
CAPITAL GAIN RATE 34%
NET FMV OF EXISTING ASSETS $10,375,794
SUBSCRIBERS IN FRANCHISES 100%
LOW HIGH
ANALYSIS ANALYSIS
-------- --------
DEBT PERCENTAGE 50% 50%
EQUITY PERCENTAGE 50% 50%
RESIDUAL MULTIPLE (ROE & ROI) 9 9
MULT OF PAST YEAR'S OPERATING INCOME 10.5 11.5
MULT OF CURRENT YEAR'S OPERATING INCOME 10.0 11.0
MULT OF NEXT YEAR'S OPERATING INCOME 9.5 10.5
TARGET RETURN ON EQUITY 14.0% 12.0%
TARGET RETURN ON INVESTMENT 16.6% 15.1%
172
CENTRAL REGION, OR
173
FALCON CABLE SYSTEMS CO. EXHIBIT A
CENTRAL REGION - OREGON
AS OF DECEMBER 31, 1995
VALUATION METHODS
- -----------------
LOW HIGH
----------- -----------
I. MULTIPLE OF PAST YEAR'S OPERATING INCOME
OPERATING INCOME, PER BOOKS (DECEMBER 31, 1995) $ 2,712,460 $ 2,712,460
VALUATION MULTIPLE 10.5 11.5
----------- -----------
ESTIMATED FAIR MARKET VALUE $28,480,830 $31,193,290
----------- -----------
II. MULTIPLE OF "RUNNING RATE" OPERATING INCOME
ESTIMATED OPERATING INCOME
TOTAL CURRENT YEAR'S REVENUE $ 4,980,876 $ 4,980,876
OPERATING MARGIN, PER BOOKS (DECEMBER 31, 1995) 55.1% 55.1%
----------- -----------
"RUNNING RATE" OPERATING INCOME 2,743,218 2,743,218
VALUATION MULTIPLE 10.0 11.0
----------- -----------
ESTIMATED FAIR MARKET VALUE $27,432,177 $30,175,395
----------- -----------
III. MULTIPLE OF NEXT YEAR'S OPERATING INCOME
OPERATING INCOME $ 2,740,648 $ 2,740,648
VALUATION MULTIPLE 9.5 10.5
----------- -----------
ESTIMATED FAIR MARKET VALUE $26,036,156 $28,776,804
----------- -----------
IV. DISCOUNTED CASH FLOW RETURN ON EQUITY
TARGET RETURN ON EQUITY 14.0% 12.0%
ESTIMATED FAIR MARKET VALUE $24,125,971 $26,253,741
----------- -----------
V. DISCOUNTED CASH FLOW RETURN ON INVESTMENT
TARGET RETURN ON INVESTMENT 16.6% 15.1%
ESTIMATED FAIR MARKET VALUE $23,806,704 $25,813,664
----------- -----------
SUMMARY OF VALUES
- -----------------
I. MULTIPLE OF PAST YEAR'S OPERATING INCOME $28,480,830 $31,193,290
II. MULTIPLE OF "RUNNING RATE" OPERATING INCOME 27,432,177 30,175,395
III. MULTIPLE OF NEXT YEAR'S OPERATING INCOME 26,036,156 28,776,804
IV. DISCOUNTED CASH FLOW RETURN ON EQUITY 24,125,971 26,253,741
V. DISCOUNTED CASH FLOW RETURN ON INVESTMENT 23,806,704 25,813,664
RANGE OF ESTIMATED FAIR MARKET VALUES $25,126,000 $27,462,000
----------- -----------
ESTIMATED FAIR MARKET VALUE $26,294,000
-----------
174
FALCON CABLE SYSTEMS CO. EXHIBIT B
CENTRAL REGION - OREGON LOW ANALYSIS
AS OF DECEMBER 31, 1995
RETURN ON EQUITY METHOD
PROFIT AND LOSS - LOW VALUE
- ---------------------------
YEAR ENDING DECEMBER 31, 1996 1997 1998 1999 2000
---- ---- ---- ---- ----
REVENUES $ 5,505,473 $ 5,911,255 $ 6,465,718 $7,109,814 $7,658,421
OPERATING EXPENSES 2,764,825 2,975,093 3,260,530 3,559,699 3,794,401
----------- ----------- ----------- ---------- ----------
OPERATING INCOME $ 2,740,648 $ 2,936,162 $ 3,205,188 $3,550,115 $3,864,020
OPERATING MARGIN 0.50 0.50 0.50 0.50 0.50
PARENT SERVICES/MGT FEE (5%) 275,274 295,563 323,286 355,491 382,921
FRANCHISE AMORTIZATION (15) 808,333 808,333 808,333 808,333 808,333
SUBSCRIBER LIST (8) 287,000 287,000 287,000 287,000 287,000
NON-COMPETE COVENANTS (0) 0 0 0 0 0
DEPRECIATION 1,290,879 2,286,181 1,934,104 1,693,492 1,388,241
INTEREST 1,171,388 1,171,388 1,171,388 1,097,889 1,017,040
----------- ----------- ----------- ---------- ----------
PRE-TAX INCOME ($1,092,227) ($1,912,304) ($1,318,923) ($692,090) ($19,515)
INCOME TAX (EXPENSE)/BENEFIT 371,357 650,183 448,434 235,311 6,635
----------- ----------- ----------- ---------- ----------
NET INCOME ($720,870) ($1,262,120) ($870,489) ($456,779) ($12,880)
SOURCES AND USES OF CASH
- ------------------------
SOURCES OF CASH -
PRE TAX INCOME ($1,092,227) ($1,912,304) ($1,318,923) ($692,090) ($19,515)
FRANCHISE AMORTIZATION (15) 808,333 808,333 808,333 808,333 808,333
SUBSCRIBER LIST (8) 287,000 287,000 287,000 287,000 287,000
NON-COMPETE COVENANTS (0) 0 0 0 0 0
DEPRECIATION 1,290,879 2,286,181 1,934,104 1,693,492 1,388,241
EQUITY 11,713,882
DEBT 11,713,882 0 0 0 0
RESIDUAL VALUE IN YEAR 8
------------ ----------- ----------- ---------- ----------
TOTAL SOURCES OF CASH $24,721,751 $ 1,469,211 $ 1,710,514 $2,096,735 $2,464,059
USES OF CASH -
PURCHASE PRICE - CURRENT $24,125,971
CAPITAL EXPENDITURES 495,521 517,076 1,592,176 593,800 651,350
DEBT RETIREMENT 0 0 734,992 808,491 889,341
TAXES PAID ON NET INCOME 0 0 0 0 0
TAXES PAID ON SALE (RESIDUAL) ------------ ----------- ----------- ---------- ----------
TOTAL USES OF CASH $24,621,492 $ 517,076 $ 2,327,168 $1,402,291 $1,540,690
ANNUAL CASH INCREASE/(DECREASE) $100,259 $ 952,134 ($616,654) $694,444 $923,369
CUMULATIVE CASH 100,259 1,052,393 435,739 1,130,183 2,053,552
YEAR ENDING DECEMBER 31, 2001 2002 2003 TOTAL
---- ---- ---- -----
REVENUES $8,161,506 $8,680,035 $ 9,218,457 $58,710,679
OPERATING EXPENSES 4,047,030 4,304,682 4,570,306 29,276,566
---------- ---------- ----------- -----------
OPERATING INCOME $4,114,476 $4,375,353 $ 4,648,151 $29,434,112
OPERATING MARGIN 0.50 0.50 0.50
PARENT SERVICES/MGT FEE (5%) 408,075 434,002 460,923 2,935,534
FRANCHISE AMORTIZATION (15) 808,333 808,333 808,333 6,466,667
SUBSCRIBER LIST (8) 287,000 287,000 287,000 2,296,000
NON-COMPETE COVENANTS (0) 0 0 0 0
DEPRECIATION 1,411,612 1,451,994 1,126,147 12,582,650
INTEREST 928,106 830,278 722,668 8,110,146
---------- ---------- ----------- -----------
PRE-TAX INCOME $271,350 $563,745 $ 1,243,079 ($2,956,884)
INCOME TAX (EXPENSE)/BENEFIT (92,259) (191,673) (422,647) 1,005,341
---------- ---------- ----------- -----------
NET INCOME $179,091 $ 372,072 $ 820,432 ($1,951,543)
SOURCES AND USES OF CASH
- ------------------------
SOURCES OF CASH -
PRE TAX INCOME $271,350 $ 563,745 $ 1,243,079 ($2,956,884)
FRANCHISE AMORTIZATION (15) 808,333 808,333 808,333 6,466,667
SUBSCRIBER LIST (8) 287,000 287,000 287,000 2,296,000
NON-COMPETE COVENANTS (0) 0 0 0 0
DEPRECIATION 1,411,612 1,451,994 1,126,147 12,582,650
EQUITY 11,713,882
DEBT 0 0 0 11,713,882
RESIDUAL VALUE IN YEAR 8 41,833,356 41,833,356
---------- ----------- ------------ -----------
TOTAL SOURCES OF CASH $2,778,295 $ 3,111,073 $ 45,297,915 $83,649,553
USES OF CASH -
PURCHASE PRICE - CURRENT $24,125,971
CAPITAL EXPENDITURES 681,735 713,504 746,718 5,991,879
DEBT RETIREMENT 978,275 1,076,102 7,226,682 11,713,882
TAXES PAID ON NET INCOME 0 0 0 0
TAXES PAID ON SALE (RESIDUAL) 10,235,339 10,235,339
---------- ----------- ------------ -----------
TOTAL USES OF CASH $1,660,010 $ 1,789,606 $ 18,208,738 $52,067,071
ANNUAL CASH INCREASE/(DECREASE) $1,118,285 $ 1,321,467 $ 27,089,177 $31,582,482
CUMULATIVE CASH 3,171,838 4,493,305 31,582,482
175
FALCON CABLE SYSTEMS CO. EXHIBIT B
CENTRAL REGION - OREGON HIGH ANALYSIS
AS OF DECEMBER 31, 1995
RETURN ON EQUITY METHOD
PROFIT AND LOSS - HIGH VALUE
- ----------------------------
YEAR ENDING DECEMBER 31, 1996 1997 1998 1999 2000
---- ---- ---- ---- ----
REVENUES $5,505,473 $5,911,255 $6,465,718 $7,109,814 $7,658,421
OPERATING EXPENSES 2,764,825 2,975,093 3,260,530 3,559,699 3,794,401
---------- ---------- ---------- ---------- ----------
OPERATING INCOME $2,740,648 $2,936,162 $3,205,188 $3,550,115 $3,864,020
OPERATING MARGIN 0.50 0.50 0.50 0.50 0.50
PARENT SERVICES/MGT FEE(5%) 275,274 295,563 323,286 355,491 382,921
FRANCHISE AMORTIZATION(15) 808,333 808,333 808,333 808,333 808,333
SUBSCRIBER LIST (8) 287,000 287,000 287,000 287,000 287,000
NON-COMPETE COVENANTS(0) 0 0 0 0 0
DEPRECIATION 1,290,879 2,286,181 1,934,104 1,693,492 1,388,241
INTEREST 1,283,375 1,283,375 1,283,375 1,202,849 1,114,270
---------- ---------- ---------- ---------- ----------
PRE-TAX INCOME ($1,204,213) ($2,024,290) ($1,430,909) ($797,050) ($116,745)
INCOME TAX (EXPENSE)/BENEFIT 409,432 688,259 486,509 270,997 39,693
----------- ----------- ----------- --------- ---------
NET INCOME ($794,781) ($1,336,032) ($944,400) ($526,053) ($77,052)
SOURCES AND USES OF CASH
- ------------------------
SOURCES OF CASH -
PRE TAX INCOME ($1,204,213) ($2,024,290) ($1,430,909) ($797,050) ($116,745)
FRANCHISE AMORTIZATION(15) 808,333 808,333 808,333 808,333 808,333
SUBSCRIBER LIST (8) 287,000 287,000 287,000 287,000 287,000
NON-COMPETE COVENANTS (0) 0 0 0 0 0
DEPRECIATION 1,290,879 2,286,181 1,934,104 1,693,492 1,388,241
EQUITY 12,833,747
DEBT 12,833,747 0 0 0 0
RESIDUAL VALUE IN YEAR 8
----------- ---------- ---------- ---------- ----------
TOTAL SOURCES OF CASH $26,849,494 $1,357,224 $1,598,527 $1,991,775 $2,366,829
USES OF CASH -
PURCHASE PRICE - CURRENT $26,253,741
CAPITAL EXPENDITURES 495,521 517,076 1,592,176 593,800 651,350
DEBT RETIREMENT 0 0 805,259 885,784 974,363
TAXES PAID ON NET INCOME 0 0 0 0 0
TAXES PAID ON SALE (RESIDUAL)
----------- -------- ---------- ------- ---------
TOTAL USES OF CASH $26,749,262 $517,076 $2,397,434 $1,479,584 $1,625,713
ANNUAL CASH INCREASE/(DECREASE) $100,232 $840,148 ($798,907) $512,191 $741,116
CUMULATIVE CASH 100,232 940,380 141,473 653,664 1,394,780
176
FALCON CABLE SYSTEMS CO. EXHIBIT B
CENTRAL REGION - OREGON HIGH ANALYSIS
AS OF DECEMBER 31, 1995
RETURN ON EQUITY METHOD
PROFIT AND LOSS - HIGH VALUE
- ----------------------------
YEAR ENDING DECEMBER 31, 2001 2002 2003 TOTAL
---- ---- ---- -----
REVENUES $8,161,506 $8,680,035 $9,218,457 $58,710,679
OPERATING EXPENSES 4,047,030 4,304,682 4,570,306 29,276,566
---------- ---------- ---------- -----------
OPERATING INCOME $4,114,476 $4,375,353 $4,648,151 $29,434,112
OPERATING MARGIN 0.50 0.50 0.50
PARENT SERVICES/MGT FEE(5%) 408,075 434,002 460,923 2,935,534
FRANCHISE AMORTIZATION(15) 808,333 808,333 808,333 6,466,667
SUBSCRIBER LIST(8) 287,000 287,000 287,000 2,296,000
NON-COMPETE COVENANTS(0) 0 0 0 0
DEPRECIATION 1,411,612 1,451,994 1,126,147 12,582,650
INTEREST 1,016,834 909,654 791,756 8,885,488
---------- ---------- ---------- -----------
PRE-TAX INCOME $182,621 $484,369 $1,173,991 ($3,732,226)
INCOME TAX (EXPENSE)/BENEFIT (62,091) (164,685) (399,157) 1,268,957
---------- ---------- ---------- -----------
NET INCOME $120,530 $319,684 $774,834 ($2,463,269)
SOURCES AND USES OF CASH
- ------------------------
SOURCES OF CASH -
PRE TAX INCOME $182,621 $484,369 $1,173,991 ($3,732,226)
FRANCHISE AMORTIZATION(15) 808,333 808,333 808,333 6,466,667
SUBSCRIBER LIST(8) 287,000 287,000 287,000 2,296,000
NON-COMPETE COVENANTS (0) 0 0 0 0
DEPRECIATION 1,411,612 1,451,994 1,126,147 12,582,650
EQUITY 12,833,747
DEBT 0 0 0 12,833,747
RESIDUAL VALUE IN YEAR 8 41,833,356 41,833,356
---------- ---------- ----------- -----------
TOTAL SOURCES OF CASH $2,689,567 $3,031,697 $45,228,827 $85,113,941
USES OF CASH -
PURCHASE PRICE - CURRENT $26,253,741
CAPITAL EXPENDITURES 681,735 713,504 746,718 5,991,879
DEBT RETIREMENT 1,071,799 1,178,979 7,917,563 12,833,747
TAXES PAID ON NET INCOME 0 0 0 0
TAXES PAID ON SALE (RESIDUAL) 9,248,281 9,248,281
---------- ---------- ----------- -----------
TOTAL USES OF CASH $1,753,534 $1,892,483 $17,912,562 $54,327,648
ANNUAL CASH INCREASE/(DECREASE) $936,033 $1,139,214 $27,316,266 $30,786,292
CUMULATIVE CASH 2,330,813 3,470,027 30,786,292
177
FALCON CABLE SYSTEMS CO.
CENTRAL REGION - OREGON EXHIBIT C
AS OF DECEMBER 31, 1995 LOW ANALYSIS
RETURN ON EQUITY METHOD
DEBT AMORTIZATION - LOW VALUE
- -----------------------------
TOTAL YEAR 1 CASH REQUIREMENTS $23,427,765
YEAR 1 DEBT REQUIREMENTS 11,713,882
YEAR 1 EQUITY REQUIREMENTS 11,713,882
FINANCING AVAILABLE $17,630,990 $17,814,212 $19,085,050 $20,833,723 $23,075,747
UNUSED LEVERAGE 5,917,108 6,100,329 8,106,160 10,663,324 13,794,689
SENIOR DEBT: 1996 1997 1998 1999 2000
---- ---- ---- ---- ----
BEGINNING DEBT $0 $11,713,882 $11,713,882 $10,978,890 $10,170,399
DEBT ADDED 11,713,882 0 0 0 0
TOTAL ANNUAL PAYMENTS 1,171,388 1,171,388 1,906,380 1,906,380 1,906,380
INTEREST 1,171,388 1,171,388 1,171,388 1,097,889 1,017,040
PRINCIPAL REPAYMENT 0 0 734,992 808,491 889,341
ENDING BALANCE 11,713,882 11,713,882 10,978,890 10,170,399 9,281,058
LINE OF CREDIT:
BEGINNING DEBT $0 $0 $0 $0 $0
BORROWINGS 0 0 0 0 0
PRINCIPAL PAYMENTS 0 0 0 0 0
INTEREST 0 0 0 0 0
SENIOR DEBT COVERAGE 4.3 4.0 3.4 2.9 2.4
LOC DEBT COVERAGE 0.0 0.0 0.0 0.0 0.0
TOTAL DEBT COVERAGE 4.3 4.0 3.4 2.9 2.4
TOTAL YEAR 1 CASH REQUIREMENTS
YEAR 1 DEBT REQUIREMENTS
YEAR 1 EQUITY REQUIREMENTS
FINANCING AVAILABLE $25,116,131 $26,744,095 $28,439,793
UNUSED LEVERAGE 16,813,348 19,517,413 22,396,824
SENIOR DEBT: 2001 2002 2003 TOTAL
---- ---- ---- -----
BEGINNING DEBT $9,281,058 $8,302,784 $7,226,682
DEBT ADDED 0 0 0 $11,713,882
TOTAL ANNUAL PAYMENTS 1,906,380 1,906,380 1,906,380 13,781,059
INTEREST 928,106 830,278 722,668 8,110,146
PRINCIPAL REPAYMENT 978,275 1,076,102 1,183,712 5,670,913
ENDING BALANCE 8,302,784 7,226,682 6,042,969
LINE OF CREDIT:
BEGINNING DEBT $0 $0 $0 $0
BORROWINGS 0 0 0 0
PRINCIPAL PAYMENTS 0 0 0 0
INTEREST 0 0 0 0
SENIOR DEBT COVERAGE 2.0 1.7 1.3
LOC DEBT COVERAGE 0.0 0.0 0.0
TOTAL DEBT COVERAGE 2.0 1.7 1.3
178
FALCON CABLE SYSTEMS CO. EXHIBIT C
CENTRAL REGION - OREGON HIGH ANALYSIS
AS OF DECEMBER 31, 1995
RETURN ON EQUITY METHOD
DEBT AMORTIZATION - HIGH VALUE
TOTAL YEAR 1 CASH REQUIREMENTS $25,667,495
YEAR 1 DEBT REQUIREMENTS 12,833,747
YEAR 1 EQUITY REQUIREMENTS 12,833,747
FINANCING AVAILABLE $20,343,450 $20,554,860 $22,021,211 $24,038,911 $26,625,862
UNUSED LEVERAGE 7,509,703 7,721,113 9,992,723 12,896,206 16,457,521
SENIOR: 1996 1997 1998 1999 2000
---- ---- ---- ---- ----
BEGINNING DEBT $0 $12,833,747 $12,833,747 $12,028,489 $11,142,704
DEBT ADDED 12,833,747 0 0 0 0
TOTAL ANNUAL PAYMENTS 1,283,375 1,283,375 2,088,633 2,088,633 2,088,633
INTEREST 1,283,375 1,283,375 1,283,375 1,202,849 1,114,270
PRINCIPAL REPAYMENT 0 0 805,259 885,784 974,363
ENDING BALANCE 12,833,747 12,833,747 12,028,489 11,142,704 10,168,342
LINE OF CREDIT:
BEGINNING DEBT $0 $0 $0 $0 $0
BORROWINGS 0 0 0 0 0
PRINCIPAL PAYMENTS 0 0 0 0 0
INTEREST 0 0 0 0 0
SENIOR DEBT COVERAGE 4.7 4.4 3.8 3.1 2.6
LOC DEBT COVERAGE 0.0 0.0 0.0 0.0 0.0
TOTAL DEBT COVERAGE 4.7 4.4 3.8 3.1 2.6
TOTAL YEAR 1 CASH REQUIREMENTS
YEAR 1 DEBT REQUIREMENTS
YEAR 1 EQUITY REQUIREMENTS
FINANCING AVAILABLE $28,980,152 $30,858,571 $32,815,146
UNUSED LEVERAGE 19,883,609 22,941,007 26,194,459
SENIOR: 2001 2002 2003 TOTAL
---- ---- ---- -----
BEGINNING DEBT $10,168,342 $9,096,542 $7,917,563
DEBT ADDED 0 0 0 $12,833,747
TOTAL ANNUAL PAYMENTS 2,088,633 2,088,633 2,088,633 15,098,549
INTEREST 1,016,834 909,654 791,756 8,885,488
PRINCIPAL REPAYMENT 1,071,799 1,178,979 1,296,877 6,213,061
ENDING BALANCE 9,096,542 7,917,563 6,620,686
LINE OF CREDIT:
BEGINNING DEBT $0 $0 $0 $0
BORROWINGS 0 0 0 0
PRINCIPAL PAYMENTS 0 0 0 0
INTEREST 0 0 0 0
SENIOR DEBT COVERAGE 2.2 1.8 1.4
LOC DEBT COVERAGE 0.0 0.0 0.0
TOTAL DEBT COVERAGE 2.2 1.8 1.4
179
FALCON CABLE SYSTEMS CO.
CENTRAL REGION - OREGON EXHIBIT D
AS OF DECEMBER 31, 1995
RETURN ON INVESTMENT METHOD
PROFIT AND LOSS
- ---------------
YEAR ENDING DECEMBER 31, 1996 1997 1998 1999 2000
---- ---- ---- ---- ----
REVENUES $5,505,473 $5,911,255 $6,465,718 $7,109,814 $7,658,421
OPERATING EXPENSES 2,764,825 2,975,093 3,260,530 3,559,699 3,794,401
OPERATING INCOME $2,740,648 $2,936,162 $3,205,188 $3,550,115 $3,864,020
PLUS: RESIDUAL VALUE
LESS: CAPITAL EXPENDITURES 495,521 517,076 1,592,176 593,800 651,350
TOTAL CASH FLOW $2,245,127 $2,419,085 $1,613,012 $2,956,315 $3,212,670
NET PRESENT VALUE @ 16.6% $23,806,704
NET PRESENT VALUE @ 15.1% $25,813,664
YEAR ENDING DECEMBER 31, 2001 2002 2003 TOTAL
---- ---- ---- -----
REVENUES $8,161,506 $8,680,035 $9,218,457 $58,710,679
OPERATING EXPENSES 4,047,030 4,304,682 4,570,306 29,276,566
OPERATING INCOME $4,114,476 $4,375,353 $4,648,151 $29,434,112
PLUS: RESIDUAL VALUE 41,833,356 41,833,356
LESS: CAPITAL EXPENDITURES 681,735 713,504 746,718 5,991,879
TOTAL CASH FLOW $3,432,741 $3,661,849 $45,734,789 $65,275,589
180
FALCON CABLE SYSTEMS CO. EXHIBIT E
CENTRAL REGION - OREGON
AS OF DECEMBER 31, 1995
CABLE TELEVISION SUBSCRIBERS
YEAR ENDING DECEMBER 31, 1996 1997 1998 1999 2000 2001 2002 2003
---- ---- ---- ---- ---- ---- ---- ----
BEGINNING MILES 660.3
MILES ADDED 7.9 8.0 9.7 9.8 11.6 11.8 11.9 12.1
CUMULATIVE MILES 668.2 676.2 685.9 695.7 707.3 719.1 731.0 743.1
DENSITY OF ADDITIONAL PLANT 33 33 33 33 33 33 33 33
HOMES PASSED - BEGINNING 26,355
NEW HOMES & EXTENSIONS 264 266 323 326 385 391 396 402
HOMES PASSED - ENDING 26,619 26,885 27,207 27,534 27,919 28,310 28,707 29,108
GROWTH IN HOMES 1.0% 1.0% 1.2% 1.2% 1.4% 1.4% 1.4% 1.4%
BASIC - BEGINNING SUBSCRIBERS 14,225 14,500 14,780 15,093 15,412 15,767 16,130 16,499
AVERAGE SUBSCRIBERS 14,363 14,640 14,936 15,253 15,590 15,948 16,314 16,687
ENDING SUBSCRIBERS 14,500 14,780 15,093 15,412 15,767 16,130 16,499 16,875
PENETRATION 54.5% 55.0% 55.5% 56.0% 56.5% 57.0% 57.5% 58.0%
EXPANDED BASIC - BEGINNING 12,921 13,171 13,425 13,710 13,999 14,322 14,651 14,987
AVERAGE SUBSCRIBERS 13,046 13,298 13,567 13,854 14,161 14,486 14,819 15,158
ENDING SUBSCRIBERS 13,171 13,425 13,710 13,999 14,322 14,651 14,987 15,329
PENETRATION 90.8% 90.8% 90.8% 90.8% 90.8% 90.8% 90.8% 90.8%
NEW PRODUCT TIER #1 - BEGINNING 9,266 9,445 9,627 9,832 10,039 10,271 10,507 10,747
AVERAGE SUBSCRIBERS 9,356 9,536 9,729 10,155 10,389 10,627 10,870
ENDING SUBSCRIBERS 9,445 9,627 9,832 10,039 10,271 10,507 10,747 10,992
PENETRATION 65.1% 65.1% 65.1% 65.1% 65.1% 65.1% 65.1% 65.1%
NEW PRODUCT TIER #2 - BEGINNING 0 1,015 2,069 3,849 5,240 5,361 5,484 5,610
AVERAGE SUBSCRIBERS 508 1,542 2,959 4,544 5,300 5,422 5,547 5,674
ENDING SUBSCRIBERS 1,015 2,069 3,849 5,240 5,361 5,484 5,610 5,738
PENETRATION 7.0% 14.0% 25.5% 34.0% 34.0% 34.0% 34.0% 34.0%
NEW PRODUCT TIER #3 - BEGINNING 0 1,015 2,069 3,849 5,240 5,361 5,484 5,610
AVERAGE SUBSCRIBERS 508 1,542 2,959 4,544 5,300 5,422 5,547 5,674
ENDING SUBSCRIBERS 1,015 2,069 3,849 5,240 5,361 5,484 5,610 5,738
PENETRATION 7.0% 14.0% 25.5% 34.0% 34.0% 34.0% 34.0% 34.0%
40%
PAY TV - BEGINNING UNITS 5,516 5,695 5,879 6,079 6,285 6,508 6,738 6,975
AVERAGE UNITS 5,606 5,787 5,979 6,182 6,396 6,623 6,857 7,097
ENDING UNITS 5,695 5,879 6,079 6,285 6,508 6,738 6,975 7,219
PENETRATION 39.3% 39.8% 40.3% 40.8% 41.3% 41.8% 42.3% 42.8%
PAY PER VIEW - BEGINNING UNITS/MO 0 0 292 839 1,463 1,990 2,415 2,651
AVERAGE UNITS 0 146 565 1,151 1,727 2,202 2,533 2,777
ENDING UNITS 0 292 839 1,463 1,990 2,415 2,651 2,902
AVERAGE BUY RATE/MO 0.0% 5.0% 12.5% 20.0% 25.0% 28.0% 29.5% 31.0%
CONVERTER RENTALS - BEGINNING 6,016 6,567 7,137 7,742 8,367 9,033 9,725 10,442
AVERAGE SUBSCRIBERS 6,292 6,852 7,439 8,054 8,700 9,379 10,084 10,815
ENDING SUBSCRIBERS 6,567 7,137 7,742 8,367 9,033 9,725 10,442 11,187
PENETRATION 45.3% 48.3% 51.3% 54.3% 57.3% 60.3% 63.3% 66.3%
ADDRESSABLE HOMES 4,762 5,289 5,835 6,713 7,317 7,959 8,626 8,988
AVERAGE HOMES 5,026 5,562 6,274 7,015 7,638 8,292 8,807 9,175
ENDING HOMES 5,289 5,835 6,713 7,317 7,959 8,626 8,988 9,362
PENETRATION 36.5% 39.5% 44.5% 47.5% 50.5% 53.5% 54.5% 55.5%
BASIC CHURN RATE 28% 28% 28% 28% 28% 28% 28% 28%
181
FALCON CABLE SYSTEMS CO.
CENTRAL REGION - OREGON EXHIBIT F
AS OF DECEMBER 31, 1995
SERVICE RATES
- -------------
RUNNING RATES
AS OF AVERAGE RATES
CURRENT RATES DECEMBER 1995 FOR 1996
- ------------- ------------- --------
BASIC $15.98 $17.60
EXPANDED BASIC $4.99 $5.43
NEW PRODUCT TIER #1 $4.41 $5.13
NEW PRODUCT TIER #2 $4.00 $4.00
NEW PRODUCT TIER #3 $4.00 $4.00
PAY $7.93 $7.93
PAY PER VIEW N/A N/A
CONVERTER RENTALS $0.55 $0.54
INSTALLATIONS-NEW $50.00 $50.00
INSTALLATIONS-CHURN $25.00 $25.00
YEAR ENDING DECEMBER 31, 1996 1997 1998 1999 2000 2001 2002 2003
---- ---- ---- ---- ---- ---- ---- ----
PERCENTAGE RATE INCREASES
- -------------------------
BASIC 10% 3% 3% 3% 3% 3% 3% 3%
EXPANDED BASIC 9% 3% 3% 3% 3% 3% 3% 3%
NEW PRODUCT TIER #1 16% 3% 3% 3% 3% 3% 3% 3%
NEW PRODUCT TIER #2 0% 3% 3% 3% 3% 3% 3% 3%
NEW PRODUCT TIER #3 0% 3% 3% 3% 3% 3% 3% 3%
PAY 0% 1% 1% 1% 1% 1% 1% 1%
PAY PER VIEW 0% 3% 3% 3% 3% 3% 3% 3%
CONVERTER RENTALS -2% 3% 3% 3% 3% 3% 3% 3%
INSTALLATIONS-NEW 0% 3% 3% 3% 3% 3% 3% 3%
INSTALLATIONS-CHURN 0% 3% 3% 3% 3% 3% 3% 3%
AVERAGE RATES
- -------------
BASIC $17.60 $18.13 $18.67 $19.23 $19.81 $20.40 $21.01 $21.64
EXPANDED BASIC 5.43 5.59 5.76 5.93 6.11 6.29 6.48 6.67
NEW PRODUCT TIER #1 5.13 5.28 5.44 5.60 5.77 5.94 6.12 6.30
NEW PRODUCT TIER #2 4.00 4.12 4.24 4.37 4.50 4.64 4.78 4.92
NEW PRODUCT TIER #3 4.00 4.12 4.24 4.37 4.50 4.64 4.78 4.92
PAY 7.93 8.01 8.09 8.17 8.25 8.33 8.42 8.50
PAY PER VIEW 7.50 7.73 7.96 8.20 8.44 8.69 8.96 9.22
CONVERTER RENTALS 0.54 0.56 0.57 0.59 0.61 0.63 0.65 0.67
INSTALLATIONS-NEW 50.00 51.50 53.05 54.64 56.28 57.96 59.70 61.49
INSTALLATIONS-CHURN 25.00 25.75 26.52 27.32 28.14 28.98 29.85 30.75
182
FALCON CABLE SYSTEMS CO.
CENTRAL REGION - OREGON EXHIBIT G
AS OF DECEMBER 31, 1995
YEAR ENDING DECEMBER 31, 1996 1997 1998 1999 2000
---- ---- ---- ---- ----
REVENUES:
BASIC $3,033,046 $3,184,371 $3,346,309 $3,519,639 $3,705,344
EXPANDED BASIC 849,445 891,826 937,178 985,722 1,037,731
NEW PRODUCT TIER #1 575,473 604,184 634,909 667,796 703,031
NEW PRODUCT TIER #2 24,361 76,241 150,680 238,358 286,355
NEW PRODUCT TIER #3 24,361 76,241 150,680 238,358 286,355
PAY TV 533,313 556,082 580,266 605,946 633,252
PAY-PER-VIEW 0 13,521 53,987 113,221 174,892
CONVERTER RENTALS 40,833 45,806 51,222 57,120 63,551
INSTALLATIONS 91,674 96,198 102,291 107,535 114,538
COMMERCIAL 104,155 107,279 110,498 113,813 117,227
ADVERTISING 5,125 25,623 102,492 204,984 266,479
MISCELLANEOUS 223,690 233,882 245,207 257,323 269,666
---------- ---------- ---------- ---------- ----------
TOTAL REVENUES $5,505,473 $5,911,255 $6,465,718 $7,109,814 $7,658,421
OPERATING EXPENSES:
OPERATIONS $1,119,791 $1,178,723 $1,249,858 $1,328,393 $1,404,541
GENERAL & ADMINISTRATIVE 542,197 569,390 600,434 634,404 668,217
SALES & MARKETING 188,772 245,183 334,379 408,360 428,358
PROGRAMMING 914,064 981,798 1,075,859 1,188,543 1,293,285
---------- ---------- ---------- ---------- ----------
TOTAL OPERATING EXPENSES $2,764,825 $2,975,093 $3,260,530 $3,559,699 $3,794,401
---------- ---------- ---------- ---------- ----------
OPERATING INCOME $2,740,648 $2,936,162 $3,205,188 $3,550,115 $3,864,020
OPERATING MARGIN 49.8% 49.7% 49.6% 49.9 50.5%
TOTAL REVENUE/BASIC SUB/MONTH $31.94 $33.65 $36.07 $38.84 $40.94
CASH FLOW/BASIC SUB/MONTH $15.90 $16.71 $17.88 $19.40 $20.65
OPERATIONS % OF REVENUE 20% 20% 19% 19% 18%
G & A PERCENTAGE OF REVENUE 10% 10% 9% 9% 9%
SALES & MARKETING % OF REVENUE 3% 4% 5% 6% 6%
PROGRAMMING % OF REVENUE 17% 17% 17% 17% 17%
YEAR ENDING DECEMBER 31, 2001 2002 2003 TOTAL
---- ---- ---- -----
REVENUES:
BASIC $3,904,349 $4,113,723 $4,333,994 $29,140,774
EXPANDED BASIC 1,093,465 1,152,103 1,213,793 8,161,261
NEW PRODUCT TIER #1 740,789 780,514 822,307 5,529,003
NEW PRODUCT TIER #2 301,735 317,915 334,938 1,730,583
NEW PRODUCT TIER #3 301,735 317,915 334,938 1,730,583
PAY TV 662,279 692,483 723,906 4,987,527
PAY-PER-VIEW 229,788 272,241 307,363 1,165,013
CONVERTER RENTALS 70,564 78,141 86,321 493,557
INSTALLATIONS 120,632 127,041 133,781 893,691
COMMERCIAL 120,744 124,366 128,097 926,178
ADVERTISING 333,099 408,046 489,656 1,835,504
MISCELLANEOUS 282,328 295,546 309,364 2,117,005
---------- ---------- ---------- -----------
TOTAL REVENUES $8,161,506 $8,680,035 $9,218,457 $58,710,679
OPERATING EXPENSES:
OPERATIONS $1,480,125 $1,558,774 $1,640,861 $10,961,065
GENERAL & ADMINISTRATIVE 702,844 739,010 776,853 5,233,349
SALES & MARKETING 476,992 530,540 588,228 3,200,812
PROGRAMMING 1,387,069 1,476,358 1,564,364 9,881,340
---------- ---------- ---------- -----------
TOTAL OPERATING EXPENSES $4,047,030 $4,304,682 $4,570,306 $29,276,566
---------- ---------- ---------- -----------
OPERATING INCOME $4,114,476 $4,375,353 $4,648,151 $29,434,112
OPERATING MARGIN 50.4% 50.4% 50.4%
TOTAL REVENUE/BASIC SUB/MONTH $42.65 $44.34 $46.04
CASH FLOW/BASIC SUB/MONTH $21.50 $22.35 $23.21
OPERATIONS % OF REVENUE 18% 18% 18%
G & A PERCENTAGE OF REVENUE 9% 9% 8%
SALES & MARKETING % OF REVENUE 6% 6% 6%
PROGRAMMING % OF REVENUE 17% 17% 17%
183
FALCON CABLE SYSTEMS CO. EXHIBIT H
CENTRAL REGION - OREGON
AS OF DECEMBER 31, 1995
CAPITAL EXPENDITURES
- --------------------
YEAR ENDING DECEMBER 31, 1996 1997 1998 1999 2000
---- ---- ---- ---- ----
ASSUMPTIONS AND INPUTS:
- -----------------------
BV OF EXISTING PLANT $8,537,924
ADDITIONAL MILES OF PLANT 7.9 8.0 9.7 9.8 11.6
AERIAL PLANT PER MILE $12,000 $12,240 $12,485 $12,734 $12,989
UNDERGROUND PLANT PER MILE $18,000 $18,360 $18,727 $19,102 $19,484
PERCENTAGE OF PLANT AERIAL 50% 50% 50% 50% 50%
PERCENTAGE OF PLANT UNDERGROUND 50% 50% 50% 50% 50%
AVERAGE COST PER CONVERTER $110 $112 $114 $117 $119
PERCENTAGE CONVERTER USE 45% 48% 51% 54% 57%
PERCENTAGE REPLACEMENT 5% 5% 5% 5% 5%
INSTALLATION COST PER SUBSCRIBER $52 $53 $54 $55 $56
MISC. CAPITAL PER SUBSCRIBER $5 $5 $5 $5 $5
INFLATION FACTOR FOR CAPITALS 2% 2% 2% 2% 2%
ANNUAL COSTS:
- -------------
PLANT ADDITIONS - AERIAL $47,542 $48,977 $60,548 $62,500 $75,267
71,312 73,466 90,822 93,750 112,901
PLANT REBUILD/UPGRADE/INCL. HDND. 33,675 34,761 1,059,850 37,123 38,408
AVERAGE COST OF NEW CONVERTERS 13,718 15,140 18,396 20,204 24,241
CONVERTER REPLACEMENT 35,435 39,284 43,379 47,827 52,567
INSTALLATION COSTS 222,026 230,784 241,482 251,465 263,592
MISC. CAPITAL EXPENDITURES 71,813 74,664 77,700 80,931 84,374
-------- -------- ---------- -------- --------
TOTAL CAPITAL EXPENDITURES $495,521 $517,076 $1,592,176 $593,800 $651,350
AS A % OF OPERATING INCOME 18.1% 17.6% 49.7% 16.7 16.9%
YEAR ENDING DECEMBER 31, 2001 2002 2003 TOTAL
---- ---- ---- -----
ASSUMPTIONS AND INPUTS:
- -----------------------
BV OF EXISTING PLANT
ADDITIONAL MILES OF PLANT 11.8 11.9 12.1
AERIAL PLANT PER MILE $13,249 $13,514 $13,784
UNDERGROUND PLANT PER MILE $19,873 $20,271 $20,676
PERCENTAGE OF PLANT AERIAL 50% 50% 50%
PERCENTAGE OF PLANT UNDERGROUND 50% 50% 50%
AVERAGE COST PER CONVERTER $121 $124 $126
PERCENTAGE CONVERTER USE 60% 63% 66%
PERCENTAGE REPLACEMENT 5% 5% 5%
INSTALLATION COST PER SUBSCRIBER $57 $59 $60
MISC. CAPITAL PER SUBSCRIBER $6 $6 $6
INFLATION FACTOR FOR CAPITALS 2% 2% 2% 117%
ANNUAL COSTS:
- -------------
PLANT ADDITIONS - AERIAL $77,847 $80,516 $83,276 $536,474
116,771 120,774 124,914 804,710
PLANT REBUILD/UPGRADE/INCL. HDND. 39,828 41,300 42,824 1,327,770
AVERAGE COST OF NEW CONVERTERS 26,528 28,958 31,539 178,726
CONVERTER REPLACEMENT 57,727 63,232 69,100 408,551
INSTALLATION COSTS 274,990 286,861 299,222 2,070,421
MISC. CAPITAL EXPENDITURES 88,042 91,863 95,842 665,228
-------- -------- -------- ----------
TOTAL CAPITAL EXPENDITURES $681,735 $713,504 $746,718 $5,991,879
AS A % OF OPERATING INCOME 16.6% 16.3% 16.1%
184
FALCON CABLE SYSTEMS CO. EXHIBIT I
CENTRAL REGION - OREGON
AS OF DECEMBER 31, 1995
DEPRECIATION
- ------------
YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5
------ ------ ------ ------ ------
ESTIMATED DEPRECIATION RATES 14.3% 24.5% 17.5% 12.5% 8.9%
DEPRECIATION - BEG. & ADTNS. 1996 1997 1998 1999 2000
---- ---- ---- ---- ----
YEAR 1 $1,290,879 $2,212,291 $1,579,950 $1,128,277 $806,687
YEAR 2 73,890 126,632 90,437 64,583
YEAR 3 227,522 389,924 278,472
YEAR 4 84,854 145,422
YEAR 5 93,078
YEAR 6
YEAR 7
YEAR 8
---------- ---------- ---------- ---------- ----------
TOTAL DEPRECIATION $1,290,879 $2,286,181 $1,934,104 $1,693,492 $1,388,241
YEAR 6 YEAR 7 YEAR 8
------ ------ ------
ESTIMATED DEPRECIATION RATES 8.9% 8.9% 4.5%
DEPRECIATION - BEG. & ADTNS. 2001 2002 2003 TOTAL
YEAR 1 $805,783 $806,687 $402,892 $9,033,445
YEAR 2 46,175 46,123 46,175 494,015
YEAR 3 198,863 142,181 142,022 1,378,984
YEAR 4 103,856 74,166 53,026 461,323
YEAR 5 159,516 113,921 81,354 447,868
YEAR 6 97,420 166,957 119,235 383,612
YEAR 7 101,960 174,737 276,697
YEAR 8 106,706 106,706
---------- ---------- ---------- -----------
TOTAL DEPRECIATION $1,411,612 $1,451,994 $1,126,147 $12,582,650
185
FALCON CABLE SYSTEMS CO. EXHIBIT J
CENTRAL REGION - OREGON
AS OF DECEMBER 31, 1995
ASSUMPTIONS AND INPUTS
- ----------------------
REMAINING LIFE OF FRANCHISES (YEARS) 8
AVERAGE SUBSCRIBER LIFE (YEARS) 8
INCOME TAX RATE 34%
CAPITAL GAIN RATE 34%
NET FMV OF EXISTING ASSETS $8,537,924
SUBSCRIBERS IN FRANCHISES 100%
LOW HIGH
ANALYSIS ANALYSIS
-------- --------
DEBT PERCENTAGE 50% 50%
EQUITY PERCENTAGE 50% 50%
RESIDUAL MULTIPLE (ROE & ROI) 9 9
MULT OF PAST YEAR'S OPERATING INCOME 10.5 11.5
MULT OF CURRENT YEAR'S OPERATING INCOME 10.0 11.0
MULT OF NEXT YEAR'S OPERATING INCOME 9.5 10.5
TARGET RETURN ON EQUITY 14.0% 12.0%
TARGET RETURN ON INVESTMENT 16.6% 15.1%
186
COOS BAY, OR
187
FALCON CABLE SYSTEMS CO. EXHIBIT A
COOS BAY REGION - OREGON
AS OF DECEMBER 31, 1995
VALUATION METHODS
- -----------------
LOW HIGH
--- ----
I. MULTIPLE OF PAST YEAR'S OPERATING INCOME
ADJUSTED OPERATING INCOME, PER BOOKS (DECEMBER 31, 1995) $3,687,386 $3,687,386
VALUATION MULTIPLE 10.5 11.5
---- ----
ESTIMATED FAIR MARKET VALUE $38,717,553 $42,404,939
----------- -----------
II. MULTIPLE OF "RUNNING RATE" OPERATING INCOME
ESTIMATED OPERATING INCOME
TOTAL CURRENT YEAR'S REVENUE $7,110,616 $7,110,616
OPERATING MARGIN, PER BOOKS (DECEMBER 31, 1995) 55.5% 55.5%
"RUNNING RATE" OPERATING INCOME 3,943,903 3,943,903
VALUATION MULTIPLE 10.0 11.0
---- ----
ESTIMATED FAIR MARKET VALUE $39,439,031 $43,382,934
----------- -----------
III. MULTIPLE OF NEXT YEAR'S OPERATING INCOME
OPERATING INCOME $3,922,856 $3,922,856
VALUATION MULTIPLE 9.5 10.5
---- ----
ESTIMATED FAIR MARKET VALUE $37,267,128 $41,189,983
----------- -----------
IV. DISCOUNTED CASH FLOW RETURN ON EQUITY
TARGET RETURN ON EQUITY 14.0% 12.0%
ESTIMATED FAIR MARKET VALUE $29,654,142 $32,072,794
----------- -----------
V. DISCOUNTED CASH FLOW RETURN ON INVESTMENT
TARGET RETURN ON INVSTMT 16.6% 15.1%
ESTIMATED FAIR MARKET VALUE $29,386,825 $31,656,216
----------- -----------
SUMMARY OF VALUES
- -----------------
I. MULTIPLE OF PAST YEAR'S OPERATING INCOME $38,717,553 $42,404,939
II. MULTIPLE OF "RUNNING RATE" OPERATING INCOME 39,439,031 43,382,934
III. MULTIPLE OF NEXT YEAR'S OPERATING INCOME 37,267,128 41,189,983
IV. DISCOUNTED CASH FLOW RETURN ON EQUITY 29,654,142 32,072,794
V. DISCOUNTED CASH FLOW RETURN ON INVESTMENT 29,386,825 31,656,216
----------- -----------
RANGE OF ESTIMATED FAIR MARKET VALUES $33,017,000 $35,984,000
ESTIMATED FAIR MARKET VALUE $34,501,000
-----------
188
FALCON CABLE SYSTEMS CO. EXHIBIT B
COOS BAY REGION - OREGON LOW ANALYSIS
AS OF DECEMBER 31, 1995
RETURN ON EQUITY METHOD
PROFIT AND LOSS - LOW VALUE
- ---------------------------
YEAR ENDING DECEMBER 31, 1996 1997 1998 1999 2000 2001 2002 TOTAL
---- ---- ---- ---- ---- ---- ---- -----
REVENUES $7,499,836 $7,923,595 $8,444,768 $9,025,877 $9,574,462 $10,033,185 $10,483,111 $62,984,835
OPERATING EXPENSES 3,576,981 3,840,354 4,081,846 4,325,562 4,559,679 4,772,376 4,983,987 30,140,786
----------- ----------- ---------- ---------- ---------- ---------- ----------- -----------
OPERATING INCOME $3,922,856 $4,083,241 $4,362,922 $4,700,314 $5,014,784 $5,260,808 $5,499,125 $32,844,049
OPERATING MARGIN 0.52 0.52 0.52 0.52 0.52 0.52 0.52
PARENT SERVICES/MGT FEE (5%) 374,992 396,180 422,238 451,294 478,723 501,659 524,156 3,149,242
FRANCHISE AMORTIZATION (15) 1,336,867 1,336,867 1,336,867 1,336,867 1,336,867 1,336,867 1,336,867 9,358,067
SUBSCRIBER LIST (8) 380,133 380,133 380,133 380,133 380,133 380,133 380,133 2,660,933
NON-COMPETE COVENANTS (0) 0 0 0 0 0 0 0 0
DEPRECIATION 1,053,762 2,151,172 2,191,238 2,155,919 1,911,328 1,735,088 1,678,150 12,876,657
INTEREST 1,407,934 1,423,098 1,482,422 1,403,611 1,306,436 1,115,524 997,942 9,136,967
----------- ----------- ---------- ---------- ---------- ---------- ----------- -----------
PRE-TAX INCOME ($630,832) ($1,604,209) ($1,449,977) ($1,027,510) ($398,703) $191,537 $581,877 ($4,337,816)
INCOME TAX (EXPENSE)/
BENEFIT 214,483 545,431 492,992 349,353 135,559 (65,123) (197,838) 1,474,858
----------- ----------- ---------- ---------- ---------- ---------- ----------- -----------
NET INCOME ($416,349) ($1,058,778) ($956,985) ($678,156) ($263,144) $126,414 $384,039 ($2,862,959)
SOURCES AND USES OF CASH
- ------------------------
SOURCES OF CASH -
PRE TAX INCOME ($630,832) ($1,604,209) ($1,449,977) ($1,027,510) ($398,703) $191,537 $581,877 ($4,337,816)
FRANCHISE AMORTIZATION (15) 1,336,867 1,336,867 1,336,867 1,336,867 1,336,867 1,336,867 1,336,867 9,358,067
SUBSCRIBER LIST (8) 380,133 380,133 380,133 380,133 380,133 380,133 380,133 2,660,933
NON-COMPETE COVENANTS (0) 0 0 0 0 0 0 0 0
DEPRECIATION 1,053,762 2,151,172 2,191,238 2,155,919 1,911,328 1,735,088 1,678,150 12,876,657
EQUITY 14,079,342 14,079,342
DEBT 14,079,342 151,639 593,242 95,302 0 0 0 14,919,525
RESIDUAL VALUE IN YEAR 7 49,492,121 49,492,121
----------- ----------- ---------- ---------- ---------- ---------- ----------- -----------
TOTAL SOURCES OF CASH $30,298,613 $2,415,602 $3,051,503 $2,940,711 $3,229,625 $3,643,625 $53,469,148 $99,048,828
USES OF CASH -
PURCHASE PRICE - CURRENT $29,654,142 $29,654,142
CAPITAL EXPENDITURES 544,049 2,416,024 2,168,089 1,968,956 627,440 648,989 671,250 9,044,798
DEBT RETIREMENT 0 0 883,414 971,755 1,909,114 1,175,824 9,979,418 14,919,525
TAXES PAID ON NET INCOME 0 0 0 0 0 0 0 0
TAXES PAID ON SALE
(RESIDUAL) 10,659,347 10,659,347
----------- ----------- ---------- ---------- ---------- ---------- ----------- -----------
TOTAL USES OF CASH $30,198,191 $2,416,024 $3,051,503 $2,940,711 $2,536,553 $1,824,813 $21,310,015 $64,277,812
ANNUAL CASH INCREASE/
(DECREASE) $100,422 ($422) $0 ($0) $693,072 $1,818,811 $32,159,133 $34,771,016
CUMULATIVE CASH 100,422 100,000 100,000 100,000 793,072 2,611,883 34,771,016
189
FALCON CABLE SYSTEMS CO. EXHIBIT B
COOS BAY REGION - OREGON HIGH ANALYSIS
AS OF DECEMBER 31, 1995
RETURN ON EQUITY METHOD
PROFIT AND LOSS - HIGH VALUE
- ----------------------------
YEAR ENDING DECEMBER 31, 1996 1997 1998 1999 2000 2001 2002 TOTAL
---- ---- ---- ---- ---- ---- ---- -----
REVENUES $7,499,836 $7,923,595 $8,444,768 $9,025,877 $9,574,462 $10,033,185 $10,483,111 $62,984,835
OPERATING EXPENSES 3,576,981 3,840,354 4,081,846 4,325,562 4,559,679 4,772,376 4,983,987 30,140,786
----------- ----------- ----------- ----------- ---------- ----------- ----------- ------------
OPERATING INCOME $3,922,856 $4,083,241 $4,362,922 $4,700,314 $5,014,784 $5,260,808 $5,499,125 $32,844,049
OPERATING MARGIN 0.52 0.52 0.52 0.52 0.52 0.52 0.52
PARENT SERVICES/MGT FEE (5%) 374,992 396,180 422,238 451,294 478,723 501,659 524,156 3,149,242
FRANCHISE AMORTIZATION (15) 1,336,867 1,336,867 1,336,867 1,336,867 1,336,867 1,336,867 1,336,867 9,358,067
SUBSCRIBER LIST (8) 380,133 380,133 380,133 380,133 380,133 380,133 380,133 2,660,933
NON-COMPETE COVENANTS (0) 0 0 0 0 0 0 0 0
DEPRECIATION 1,053,762 2,151,172 2,191,238 2,155,919 1,911,328 1,735,088 1,678,150 12,876,657
INTEREST 1,535,228 1,564,543 1,648,458 1,588,982 1,483,021 1,240,461 1,088,168 10,148,862
----------- ----------- ----------- ----------- ---------- ----------- ----------- ------------
PRE-TAX INCOME ($758,127) ($1,745,654) ($1,616,013) ($1,212,881) ($575,288) $66,600 $491,652 ($5,349,711)
INCOME TAX (EXPENSE)/
BENEFIT 257,763 593,522 549,444 412,380 195,598 (22,644) (167,162) 1,818,902
----------- ----------- ----------- ----------- ---------- ----------- ----------- ------------
NET INCOME ($500,364) ($1,152,132) ($1,066,568) ($800,502) ($379,690) $43,956 $324,490 ($3,530,809)
SOURCES AND USES OF CASH
- ------------------------
SOURCES OF CASH -
PRE TAX INCOME ($758,127) ($1,745,654) ($1,616,013) ($1,212,881) ($575,288) $66,600 $491,652 ($5,349,711)
FRANCHISE AMORTIZATION (15) 1,336,867 1,336,867 1,336,867 1,336,867 1,336,867 1,336,867 1,336,867 9,358,067
SUBSCRIBER LIST (8) 380,133 380,133 380,133 380,133 380,133 380,133 380,133 2,660,933
NON-COMPETE COVENANTS (0) 0 0 0 0 0 0 0 0
DEPRECIATION 1,053,762 2,151,172 2,191,238 2,155,919 1,911,328 1,735,088 1,678,150 12,876,657
EQUITY 15,352,284 15,352,284
DEBT 15,352,284 293,145 839,149 368,532 0 0 0 16,853,110
RESIDUAL VALUE IN YEAR 7 49,492,121 49,492,121
----------- ----------- ----------- ----------- ---------- ----------- ----------- ------------
TOTAL SOURCES OF CASH $32,717,204 $2,415,663 $3,131,375 $3,028,570 $3,053,039 $3,518,688 $53,378,922 $101,243,461
USES OF CASH -
PURCHASE PRICE - CURRENT $32,072,794 $32,072,794
CAPITAL EXPENDITURES 544,049 2,416,024 2,168,089 1,968,956 627,440 648,989 671,250 9,044,798
DEBT RETIREMENT 0 0 963,285 1,059,614 2,425,600 1,522,933 10,881,678 16,853,110
TAXES PAID ON NET INCOME 0 0 0 0 0 0 0 0
TAXES PAID ON SALE
(RESIDUAL) 9,492,961 9,492,961
----------- ----------- ----------- ----------- ---------- ----------- ----------- ------------
TOTAL USES OF CASH $32,616,843 $2,416,024 $3,131,375 $3,028,570 $3,053,039 $2,171,923 $21,045,889 $67,463,663
ANNUAL CASH INCREASE/
(DECREASE) $100,361 ($361) $0 ($0) $0 $1,346,765 $32,333,033 $33,779,798
CUMULATIVE CASH 100,361 100,000 100,000 100,000 100,000 1,446,765 33,779,798
190
FALCON CABLE SYSTEMS CO. EXHIBIT C
COOS BAY REGION - OREGON LOW ANALYSIS
AS OF DECEMBER 31, 1995
RETURN ON EQUITY METHOD
DEBT AMORTIZATION - LOW VALUE
- -----------------------------
TOTAL YEAR 1 CASH REQUIREMENTS $28,158,684
YEAR 1 DEBT REQUIREMENTS 14,079,342
YEAR 1 EQUITY REQUIREMENTS 14,079,342
FINANCING AVAILABLE $23,968,009 $25,498,561 $26,541,066 $28,358,992 $30,552,044 $32,596,093 $34,195,253
UNUSED LEVERAGE 9,888,667 11,267,580 12,600,257 15,294,636 19,396,802 22,616,675 25,509,241
SENIOR DEBT: 1996 1997 1998 1999 2000 2001 2002 TOTAL
---- ---- ---- ---- ---- ---- ---- -----
BEGINNING DEBT $0 $14,079,342 $14,079,342 $13,195,928 $12,224,173 $11,155,242 $9,979,418
DEBT ADDED 14,079,342 0 0 0 0 0 0 14,079,342
TOTAL ANNUAL PAYMENTS 1,407,934 1,407,934 2,291,348 2,291,348 2,291,348 2,291,348 2,291,348 14,272,609
INTEREST 1,407,934 1,407,934 1,407,934 1,319,593 1,222,417 1,115,524 997,942 8,879,279
PRINCIPAL REPAYMENT 0 0 883,414 971,755 1,068,931 1,175,824 1,293,406 5,393,330
ENDING BALANCE 14,079,342 14,079,342 13,195,928 12,224,173 11,155,242 9,979,418 8,686,012
LINE OF CREDIT:
BEGINNING DEBT $0 $0 $151,639 $744,881 $840,183 $0 $0 $0
BORROWINGS 0 151,639 593,242 95,302 0 0 0 840,183
PRINCIPAL PAYMENTS 0 0 0 0 840,183 0 0 840,183
INTEREST 0 15,164 74,488 84,018 84,018 0 0 257,689
SENIOR DEBT COVERAGE 3.6 3.4 3.0 2.6 2.2 1.9 1.6
LOC DEBT COVERAGE 0.0 0.0 0.2 0.2 0.0 0.0 0.0
TOTAL DEBT COVERAGE 3.6 3.5 3.2 2.8 2.2 1.9 1.6
191
FALCON CABLE SYSTEMS CO. EXHIBIT C
COOS BAY REGION - OREGON HIGH ANALYSIS
AS OF DECEMBER 31, 1995
RETURN ON EQUITY METHOD
DEBT AMORTIZATION - HIGH VALUE
- ------------------------------
TOTAL YEAR 1 CASH REQUIREMENTS $30,704,569
YEAR 1 DEBT REQUIREMENTS 15,352,284
YEAR 1 EQUITY REQUIREMENTS 15,352,284
FINANCING AVAILABLE $27,655,395 $29,421,417 $30,624,307 $32,721,914 $35,252,359 $37,610,877 $39,456,061
UNUSED LEVERAGE 12,303,111 13,775,987 15,103,014 17,891,703 22,847,747 26,729,199 29,984,729
SENIOR: 1996 1997 1998 1999 2000 2001 2002 TOTAL
---- ---- ---- ---- ---- ---- ---- -----
BEGINNING DEBT $0 $15,352,284 $15,352,284 $14,388,999 $13,329,386 $12,163,811 $10,881,678
DEBT ADDED 15,352,284 0 0 0 0 0 0 $15,352,284
TOTAL ANNUAL PAYMENTS 1,535,228 1,535,228 2,498,514 2,498,514 2,498,514 2,498,514 2,498,514 15,563,025
INTEREST 1,535,228 1,535,228 1,535,228 1,438,900 1,332,939 1,216,381 1,088,168 9,682,073
PRINCIPAL REPAYMENT 0 0 963,285 1,059,614 1,165,575 1,282,133 1,410,346 5,880,952
ENDING BALANCE 15,352,284 15,352,284 14,388,999 13,329,386 12,163,811 10,881,678 9,471,332
LINE OF CREDIT:
BEGINNING DEBT $0 $0 $293,145 $1,132,294 $1,500,826 $240,801 $0 $0
BORROWINGS 0 293,145 839,149 368,532 0 0 0 1,500,826
PRINCIPAL PAYMENTS 0 0 0 0 1,260,025 240,801 0 1,500,826
INTEREST 0 29,314 113,229 150,083 150,083 24,080 0 466,789
SENIOR DEBT COVERAGE 3.9 3.8 3.3 2.8 2.4 2.1 1.7
LOC DEBT COVERAGE 0.0 0.1 0.3 0.3 0.0 0.0 0.0
TOTAL DEBT COVERAGE 3.9 3.8 3.6 3.2 2.5 2.1 1.7
192
FALCON CABLE SYSTEMS CO. EXHIBIT D
COOS BAY REGION - OREGON
AS OF DECEMBER 31, 1995
RETURN ON INVESTMENT METHOD
PROFIT AND LOSS
- ---------------
YEAR ENDING DECEMBER 31, 1996 1997 1998 1999 2000 2001 2002 TOTAL
---- ---- ---- ---- ---- ---- ---- -----
REVENUES $7,499,836 $7,923,595 $8,444,768 $9,025,877 $9,574,462 $10,033,185 $10,483,111 $62,984,835
OPERATING EXPENSES 3,576,981 3,840,354 4,081,846 4,325,562 4,559,679 4,772,376 4,983,987 30,140,786
---------- ---------- ---------- ---------- ---------- ----------- ----------- -----------
OPERATING INCOME 3,922,856 4,083,241 4,362,922 4,700,314 5,014,784 5,260,808 5,499,125 32,844,049
PLUS: RESIDUAL VALUE 49,492,121 49,492,121
LESS: CAPITAL EXPENDITURES 544,049 2,416,024 2,168,089 1,968,956 627,440 648,989 671,250 9,044,798
---------- ---------- ---------- ---------- ---------- ----------- ----------- -----------
TOTAL CASH FLOW $3,378,807 $1,667,217 $2,194,832 $2,731,358 $4,387,344 $4,611,819 $54,319,996 $73,291,372
NET PRESENT VALUE @ 16.6% $29,386,825
-----------
NET PRESENT VALUE @ 15.1% $31,656,216
-----------
193
FALCON CABLE SYSTEMS CO. EXHIBIT E
COOS BAY REGION - OREGON
AS OF DECEMBER 31, 1995
CABLE TELEVISION SUBSCRIBERS
- ----------------------------
YEAR ENDING DECEMBER 31, 1996 1997 1998 1999 2000 2001 2002
---- ---- ---- ---- ---- ---- ----
BEGINNING MILES 444.8
MILES ADDED 3.3 3.4 3.4 3.4 3.6 3.6 3.7
CUMULATIVE MILES 448.1 451.4 454.8 458.2 461.8 465.5 469.1
DENSITY OF ADDITIONAL PLANT 35 35 35 35 33 33 33
HOMES PASSED - BEGINNING 23,663
NEW HOMES & EXTENSIONS 118 119 120 120 121 121 122
HOMES PASSED - ENDING 23,781 23,900 24,020 24,140 24,261 24,382 24,504
GROWTH IN HOMES 0.5% 0.5% 0.5% 0.5% 0.5% 0.5% 0.5%
BASIC - BEGINNING SUBSCRIBERS 17,900 18,049 18,199 18,350 18,502 18,655 18,809
AVERAGE SUBSCRIBERS 17,974 18,124 18,274 18,426 18,579 18,732 18,887
ENDING SUBSCRIBERS 18,049 18,199 18,350 18,502 18,655 18,809 18,965
PENETRATION 75.9% 76.1% 76.4% 76.6% 76.9% 77.1% 77.4%
EXPANDED BASIC - BEGINNING 17,424 17,569 17,715 17,862 18,010 18,159 18,309
AVERAGE SUBSCRIBERS 17,496 17,642 17,789 17,936 18,085 18,234 18,385
ENDING SUBSCRIBERS 17,569 17,715 17,862 18,010 18,159 18,309 18,460
PENETRATION 97.3% 97.3% 97.3% 97.3% 97.3% 97.3% 97.3%
NEW PRODUCT TIER #1 - BEGINNING 12,143 12,244 12,346 12,448 12,551 12,655 12,760
AVERAGE SUBSCRIBERS 12,194 12,295 12,397 12,500 12,603 12,708 12,813
ENDING SUBSCRIBERS 12,244 12,346 12,448 12,551 12,655 12,760 12,865
PENETRATION 67.8% 67.8% 67.8% 67.8% 67.8% 67.8% 67.8%
NEW PRODUCT TIER #2 - BEGINNING 1,779 2,335 3,629 5,127 7,019 7,078 7,136
AVERAGE SUBSCRIBERS 2,057 2,982 4,378 6,073 7,048 7,107 7,166
ENDING SUBSCRIBERS 2,335 3,629 5,127 7,019 7,078 7,136 7,195
PENETRATION 12.9% 19.9% 27.9% 37.9% 37.9% 37.9% 37.9%
NEW PRODUCT TIER #3 - BEGINNING 0 0 364 734 1,943 2,612 2,633
AVERAGE SUBSCRIBERS 0 182 549 1,338 2,277 2,623 2,644
ENDING SUBSCRIBERS 0 364 734 1,943 2,612 2,633 2,655
PENETRATION 0.0% 2.0% 4.0% 10.5% 14.0% 14.0% 14.0%
PAY TV - BEGINNING UNITS 7,024 6,902 7,141 7,384 7,445 7,507 7,569
AVERAGE UNITS 6,963 7,022 7,263 7,415 7,476 7,538 7,600
ENDING UNITS 6,902 7,141 7,384 7,445 7,507 7,569 7,631
PENETRATION 38.2% 39.2% 40.2% 40.2% 40.2% 40.2% 40.2%
PAY PER VIEW - BEGINNING UNITS/MO 1,745 1,903 2,535 3,170 3,816 4,219 4,647
AVERAGE UNITS 1,824 2,219 2,852 3,493 4,017 4,433 4,812
ENDING UNITS 1,903 2,535 3,170 3,816 4,219 4,647 4,978
AVERAGE BUY RATE/MO 32.1% 34.1% 36.1% 37.6% 39.1% 40.6% 42.1%
CONVERTER RENTALS - BEGINNING UNIT 8,268 8,517 9,134 9,760 10,396 11,042 11,698
AVERAGE SUBSCRIBERS 8,393 8,826 9,447 10,078 10,719 11,370 12,030
ENDING SUBSCRIBERS 8,517 9,134 9,760 10,396 11,042 11,698 12,363
PENETRATION 47.2% 50.2% 53.2% 56.2% 59.2% 62.2% 65.2%
ADDRESSABLE HOMES 5,611 5,928 7,434 8,780 10,148 10,791 11,445
AVERAGE HOMES 5,770 6,681 8,107 9,464 10,470 11,118 11,634
ENDING HOMES 5,928 7,434 8,780 10,148 10,791 11,445 11,824
PENETRATION 32.8% 40.8% 47.8% 54.8% 57.8% 60.8% 62.3%
BASIC CHURN RATE 32% 32% 32% 32% 32% 32% 32%
194
FALCON CABLE SYSTEMS CO. EXHIBIT F
COOS BAY REGION - OREGON
AS OF DECEMBER 31, 1995
SERVICE RATES
RUNNING RATES
AS OF AVERAGE RATES
CURRENT RATES DECEMBER 1995 FOR 1996
- ------------- ------------- -------------
BASIC $17.24 $18.15
EXPANDED BASIC $3.78 $4.33
NEW PRODUCT TIER #1 $4.37 $4.71
NEW PRODUCT TIER #2 $5.00 $5.00
NEW PRODUCT TIER #3 $4.00 $4.00
PAY $6.41 $6.41
PAY PER VIEW $5.35 $5.35
CONVERTER RENTALS $2.08 $1.94
INSTALLATIONS-NEW $50.00 $50.00
INSTALLATIONS-CHURN $25.00 $25.00
YEAR ENDING DECEMBER 31, 1996 1997 1998 1999 2000 2001 2002
---- ---- ---- ---- ---- ---- ----
PERCENTAGE RATE INCREASES
- -------------------------
BASIC 5% 3% 3% 3% 3% 3% 3%
EXPANDED BASIC 15% 3% 3% 3% 3% 3% 3%
NEW PRODUCT TIER #1 8% 3% 3% 3% 3% 3% 3%
NEW PRODUCT TIER #2 0% 3% 3% 3% 3% 3% 3%
NEW PRODUCT TIER #3 0% 3% 3% 3% 3% 3% 3%
PAY 0% 1% 1% 1% 1% 1% 1%
PAY PER VIEW 0% 3% 3% 3% 3% 3% 3%
CONVERTER/REMOTE RENTALS -7% 3% 3% 3% 3% 3% 3%
INSTALLATIONS-NEW 0% 3% 3% 3% 3% 3% 3%
INSTALLATIONS-CHURN 0% 3% 3% 3% 3% 3% 3%
AVERAGE RATES
- -------------
BASIC $18.15 $18.69 $19.25 $19.83 $20.42 $21.04 $21.67
EXPANDED BASIC 4.33 4.46 4.59 4.73 4.87 5.02 5.17
NEW PRODUCT TIER #1 4.71 4.85 5.00 5.15 5.30 5.46 5.63
NEW PRODUCT TIER #2 5.00 5.15 5.30 5.46 5.63 5.80 5.97
NEW PRODUCT TIER #3 4.00 4.12 4.24 4.37 4.50 4.64 4.78
PAY 6.41 6.47 6.54 6.60 6.67 6.74 6.80
PAY PER VIEW 5.35 5.51 5.67 5.84 6.02 6.20 6.39
CONVERTERS RENTALS 1.94 2.00 2.06 2.12 2.18 2.25 2.32
INSTALLATIONS-NEW 50.00 51.50 53.05 54.64 56.28 57.96 59.70
INSTALLATIONS-CHURN 25.00 25.75 26.52 27.32 28.14 28.98 29.85
195
FALCON CABLE SYSTEMS CO. EXHIBIT G
COOS BAY REGION - OREGON
AS OF DECEMBER 31, 1995
10.47
13.04 15.84 18.85 21.97 25.06 27.83 30.37
YEAR ENDING DECEMBER 31, 1996 1997 1998 1999 2000 2001 2002 TOTAL
---- ---- ---- ---- ---- ---- ---- -----
REVENUES:
BASIC $3,914,100 $4,065,049 $4,221,774 $4,384,494 $4,553,437 $4,728,839 $4,910,947 $30,778,640
EXPANDED BASIC 908,426 943,459 979,834 1,017,599 1,056,809 1,097,519 1,139,784 7,143,430
NEW PRODUCT TIER #1 689,424 716,012 743,617 772,278 802,036 832,931 865,007 5,421,304
NEW PRODUCT TIER #2 123,428 184,284 278,656 398,173 475,987 494,323 513,359 2,468,210
NEW PRODUCT TIER #3 0 8,998 27,956 70,198 123,026 145,931 151,551 527,660
PAY TV 535,549 545,460 569,828 587,571 598,362 609,346 620,524 4,066,640
PAY PER VIEW 117,054 146,669 194,181 244,910 290,174 329,793 368,744 1,691,527
CONVERTER RENTALS 195,298 211,536 233,225 256,271 280,743 306,717 334,273 1,818,063
INSTALLATIONS 120,276 124,906 129,713 134,704 139,886 145,265 150,850 945,601
COMMERCIAL 180,101 185,504 191,069 196,801 202,705 208,786 215,050 1,380,014
ADVERTISING 234,370 287,103 344,524 404,816 465,538 521,402 573,543 2,831,296
MISCELLANEOUS 481,812 504,615 530,390 558,062 585,759 612,332 639,480 3,912,450
---------- ---------- ---------- ---------- ---------- ---------- ---------- -----------
TOTAL REVENUES $7,499,836 $7,923,595 $8,444,768 $9,025,877 $9,574,462 $10,033,185 $10,483,111 $62,984,835
OPERATING EXPENSES:
OPERATIONS $1,196,962 $1,249,151 $1,307,749 $1,370,303 $1,432,593 $1,491,797 $1,551,946 $9,600,500
GENERAL & ADMINISTRATIVE 698,451 726,694 757,355 789,832 822,602 854,733 887,618 5,537,283
SALES & MARKETING 326,286 438,458 493,157 537,082 581,692 624,202 665,232 3,666,110
PROGRAMMING 1,355,282 1,426,052 1,523,585 1,628,347 1,722,792 1,801,645 1,879,190 11,336,892
---------- ---------- ---------- ---------- ---------- ---------- ---------- -----------
TOTAL OPERATING EXPENSES $3,576,981 $3,840,354 $4,081,846 $4,325,562 $4,559,679 $4,772,376 $4,983,987 $30,140,786
---------- ---------- ---------- ---------- ---------- ---------- ---------- -----------
OPERATING INCOME $3,922,856 $4,083,241 $4,362,922 $4,700,314 $5,014,784 $5,260,808 $5,499,125 $32,844,049
OPERATING MARGIN 52.3% 51.5% 51.7% 52.1% 52.4% 52.4% 52.5%
TOTAL REVENUE/BASIC SUB/MONTH $34.77 $36.43 $38.51 $40.82 $42.95 $44.63 $46.25
CASH FLOW/BASIC SUB/MONTH $18.19 $18.77 $19.90 $21.26 $22.49 $23.40 $24.26
16% 16% 15% 15% 15% 15% 15%
G & A PERCENTAGE OF REVENUE 9% 9% 9% 9% 9% 9% 8%
SALES & MARKETING % OF REVENUE 4.4% 5.5% 5.8% 6.0% 6.1% 6.2% 6.3%
PROGRAMMING % OF REVENUE 18% 18% 18% 18% 18% 18% 18%
196
FALCON CABLE SYSTEMS CO. EXHIBIT H
COOS BAY REGION - OREGON
AS OF DECEMBER 31, 1995
CAPITAL EXPENDITURES
- --------------------
YEAR ENDING DECEMBER 31, 1996 1997 1998 1999 2000 2001 2002 TOTAL
---- ---- ---- ---- ---- ---- ---- -----
ASSUMPTIONS AND INPUTS:
- -----------------------
BV OF EXISTING PLANT $6,830,072
ADDITIONAL MILES OF PLANT 3.3 3.4 3.4 3.4 3.6 3.6 3.7
AERIAL PLANT PER MILE $12,000 $12,240 $12,485 $12,734 $12,989 $13,249 $13,514
UNDERGROUND PLANT PER MILE $18,000 $18,360 $18,727 $19,102 $19,484 $19,873 $20,271
PERCENTAGE OF PLANT AERIAL 20% 20% 20% 20% 20% 20% 20%
PERCENTAGE OF PLANT UNDERGROUND 80% 80% 80% 80% 80% 80% 80%
AVERAGE COST PER CONVERTER $110 $112 $114 $117 $119 $121 $124
PERCENTAGE CONVERTER USE 47.2% 50% 53% 56% 59% 62% 65%
PERCENTAGE REPLACEMENT 5% 5% 5% 5% 5% 5% 5%
INSTALLATION COST PER SUBSCRIBER $55 $56 $57 $58 $60 $61 $62
MISC. CAPITAL PER SUBSCRIBER $5 $5 $5 $5 $5 $6 $6
INFLATION FACTOR FOR CAPITALS 2% 2% 2% 2% 2% 2% 2% 115%
ANNUAL COSTS:
- -------------
PLANT ADDITIONS - AERIAL $8,006 $8,207 $8,413 $8,624 $9,430 $9,666 $9,909 $62,253
- UNDERGROUND 48,034 49,240 50,476 51,743 56,577 57,998 59,453 373,520
PLANT REBUILD/UPGRADE/INCL. HDND. 22,683 1,876,475 1,609,750 1,391,200 25,495 26,210 26,945 4,978,758
AVERAGE COST OF NEW CONVERTERS 7,732 8,447 9,194 9,977 10,794 11,649 12,542 70,335
CONVERTER REPLACEMENT 46,459 50,820 55,391 60,181 65,198 70,451 75,949 424,447
INSTALLATION COSTS 321,263 330,404 339,802 349,463 359,395 369,605 380,102 2,450,036
MISC. CAPITAL EXPENDITURES 89,872 92,432 95,064 97,769 100,551 103,410 106,350 685,449
TOTAL CAPITAL EXPENDITURES $544,049 $2,416,024 $2,168,089 $1,968,956 $627,440 $648,989 $671,250 $9,044,798
AS A % OF OPERATING INCOME 13.9% 59.2% 49.7% 41.9% 12.5% 12.3% 12.2%
197
FALCON CABLE SYSTEMS CO. EXHIBIT I
COOS BAY REGION - OREGON
AS OF DECEMBER 31, 1995
DEPRECIATION
- ------------
YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5 YEAR 6 YEAR 7
------ ------ ------ ------ ------ ------ ------
ESTIMATED DEPRECIATION RATES 14.3% 24.5% 17.5% 12.5% 8.9% 8.9% 8.9%
DEPRECIATION - BEG. & ADTNS. 1996 1997 1998 1999 2000 2001 2002 TOTAL
---- ---- ---- ---- ---- ---- ---- -----
YEAR 1 $1,053,762 $1,805,922 $1,289,734 $921,028 $658,509 $657,772 $658,509 $7,045,235
YEAR 2 345,250 591,684 422,563 301,761 215,751 215,509 2,092,519
YEAR 3 309,820 530,965 379,199 270,794 193,610 1,684,389
YEAR 4 281,364 482,197 344,370 245,923 1,353,854
YEAR 5 89,661 153,660 109,739 353,060
YEAR 6 92,741 158,938 251,678
YEAR 7 95,922 95,922
TOTAL DEPRECIATION $1,053,762 $2,151,172 $2,191,238 $2,155,919 $1,911,328 $1,735,088 $1,678,150 $12,876,657
---------- ---------- ---------- ---------- ---------- ---------- ---------- -----------
198
FALCON CABLE SYSTEMS CO. EXHIBIT J
COOS BAY REGION - OREGON
AS OF DECEMBER 31, 1995
ASSUMPTIONS AND INPUTS
- ----------------------
REMAINING LIFE OF FRANCHISES (YEARS) 7
AVERAGE SUBSCRIBER LIFE (YEARS) 8
INCOME TAX RATE 34%
CAPITAL GAIN RATE 34%
NET FMV OF EXISTING ASSETS $6,830,072
SUBSCRIBERS IN FRANCHISES 100%
LOW HIGH
ANALYSIS ANALYSIS
-------- --------
DEBT PERCENTAGE 50% 50%
EQUITY PERCENTAGE 50% 50%
RESIDUAL MULTIPLE (ROE & ROI) 9 9
MULT OF PAST YEAR'S OPERATING INCOME 10.5 11.5
MULT OF CURRENT YEAR'S OPERATING INCOME 10.0 11.0
MULT OF NEXT YEAR'S OPERATING INCOME 9.5 10.5
TARGET RETURN ON EQUITY 14.0% 12.0%
TARGET RETURN ON INVESTMENT 16.6% 15.1%
199
DALLAS, OR
200
FALCON CABLE SYSTEMS CO. EXHIBIT A
DALLAS REGION - OREGON
AS OF DECEMBER 31, 1995
VALUATION METHODS
- -----------------
LOW HIGH
---------- ----------
I. MULTIPLE OF PAST YEAR'S OPERATING INCOME
ADJUSTED OPERATING INCOME, PER BOOKS (DECEMBER 31, 1995) $ 3,664,003 $ 3,664,003
VALUATION MULTIPLE 10.5 11.5
----------- -----------
ESTIMATED FAIR MARKET VALUE $38,472,032 $42,136,035
----------- -----------
II. MULTIPLE OF "RUNNING RATE" OPERATING INCOME
ESTIMATED OPERATING INCOME
TOTAL CURRENT YEAR'S REVENUE $ 6,190,695 $ 6,190,695
OPERATING MARGIN, PER BOOKS (DECEMBER 31, 1995) 60.2% 60.2%
----------- -----------
"RUNNING RATE" OPERATING INCOME 3,728,656 3,728,656
VALUATION MULTIPLE 10.0 11.0
----------- -----------
ESTIMATED FAIR MARKET VALUE $37,286,555 $41,015,211
----------- -----------
III. MULTIPLE OF NEXT YEAR'S OPERATING INCOME
OPERATING INCOME $ 3,962,160 $ 3,962,160
VALUATION MULTIPLE 9.5 10.5
----------- -----------
ESTIMATED FAIR MARKET VALUE $37,640,524 $41,602,684
----------- -----------
IV. DISCOUNTED CASH FLOW RETURN ON EQUITY
TARGET RETURN ON EQUITY 14.0% 12.0%
ESTIMATED FAIR MARKET VALUE $31,469,600 $34,160,482
----------- -----------
V. DISCOUNTED CASH FLOW RETURN ON INVESTMENT
TARGET RETURN ON INVSTMT 16.6% 15.1%
ESTIMATED FAIR MARKET VALUE $31,009,915 $33,500,707
----------- -----------
SUMMARY OF VALUES
- -----------------
I. MULTIPLE OF PAST YEAR'S OPERATING INCOME $38,472,032 $42,136,035
II. MULTIPLE OF "RUNNING RATE" OPERATING INCOME 37,286,555 41,015,211
III. MULTIPLE OF NEXT YEAR'S OPERATING INCOME 37,640,524 41,602,684
IV. DISCOUNTED CASH FLOW RETURN ON EQUITY 31,469,600 34,160,482
V. DISCOUNTED CASH FLOW RETURN ON INVESTMENT 31,009,915 33,500,707
----------- -----------
RANGE OF ESTIMATED FAIR MARKET VALUES $33,789,000 $36,878,000
ESTIMATED FAIR MARKET VALUE $35,334,000
-----------
201
FALCON CABLE SYSTEMS CO. EXHIBIT B
DALLAS REGION - OREGON LOW ANALYSIS
AS OF DECEMBER 31, 1995
RETURN ON EQUITY METHOD
PROFIT AND LOSS - LOW VALUE
- ---------------------------
YEAR ENDING DECEMBER 31, 1996 1997 1998 1999
---------- ---------- ---------- ----------
REVENUES $6,671,920 $7,164,985 $7,802,502 $8,481,542
OPERATING EXPENSES 2,709,760 2,923,366 3,170,665 3,439,033
---------- ---------- ---------- ----------
OPERATING INCOME $3,962,160 $4,241,619 $4,631,838 $5,042,508
OPERATING MARGIN 0.59 0.59 0.59 0.59
PARENT SERVICES/MGT FEE (5%) 333,596 358,249 390,125 424,077
FRANCHISE AMORTIZATION (15) 1,298,800 1,298,800 1,298,800 1,298,800
SUBSCRIBER LIST (8) 402,267 402,267 402,267 402,267
NON-COMPETE COVENANTS (0) 0 0 0 0
DEPRECIATION 1,254,936 2,634,296 2,869,764 2,667,109
INTEREST 1,519,872 1,633,247 1,842,049 1,746,684
---------- ---------- ---------- ----------
PRE-TAX INCOME ($847,310) ($2,085,239) ($2,171,167) ($1,496,429)
INCOME TAX (EXPENSE)/BENEFIT 288,085 708,981 738,197 508,786
---------- ---------- ---------- ----------
NET INCOME ($559,225) ($1,376,258) ($1,432,970) ($987,643)
SOURCES AND USES OF CASH
- ------------------------
SOURCES OF CASH -
PRE TAX INCOME ($847,310) ($2,085,239) ($2,171,167) ($1,496,429)
FRANCHISE AMORTIZATION (15) 1,298,800 1,298,800 1,298,800 1,298,800
SUBSCRIBER LIST (8) 402,267 402,267 402,267 402,267
NON-COMPETE COVENANTS (0) 0 0 0 0
DEPRECIATION 1,254,936 2,634,296 2,869,764 2,667,109
EQUITY 15,198,715
DEBT 15,198,715 1,133,754 2,088,021 0
RESIDUAL VALUE IN YEAR 7
---------- ---------- ---------- ----------
TOTAL SOURCES OF CASH $32,506,124 $3,383,877 $4,487,685 $2,871,747
USES OF CASH -
PURCHASE PRICE - CURRENT $31,469,600
CAPITAL EXPENDITURES 936,193 3,384,208 3,534,035 789,812
DEBT RETIREMENT 0 0 953,649 2,081,935
TAXES PAID ON NET INCOME 0 0 0 0
TAXES PAID ON SALE (RESIDUAL)
---------- ---------- ---------- ----------
TOTAL USES OF CASH $32,405,792 $3,384,208 $4,487,685 $2,871,747
ANNUAL CASH INCREASE/(DECREASE) $100,331 ($331) $0 ($0)
CUMULATIVE CASH 100,331 100,000 100,000 100,000
YEAR ENDING DECEMBER 31, 2000 2001 2002 TOTAL
---------- ---------- ---------- ----------
REVENUES $9,145,030 $9,786,141 $10,403,766 $59,455,887
OPERATING EXPENSES 3,706,819 3,973,497 4,242,635 24,165,775
---------- ---------- ---------- ----------
OPERATING INCOME $5,438,211 $5,812,644 $6,161,131 $35,290,111
OPERATING MARGIN 0.59 0.59 0.59
PARENT SERVICES/MGT FEE (5%) 457,251 489,307 520,188 2,972,794
FRANCHISE AMORTIZATION (15) 1,298,800 1,298,800 1,298,800 9,091,600
SUBSCRIBER LIST (8) 402,267 402,267 402,267 2,815,867
NON-COMPETE COVENANTS (0) 0 0 0 0
DEPRECIATION 2,138,850 1,998,349 1,998,476 15,561,781
INTEREST 1,538,491 1,278,505 1,077,283 10,636,130
---------- ---------- ---------- ----------
PRE-TAX INCOME ($397,448) $345,416 $864,117 ($5,788,060)
INCOME TAX (EXPENSE)/BENEFIT 135,132 (117,441) (293,800) 1,967,941
---------- ---------- ---------- ----------
NET INCOME ($262,316) $227,975 $570,317 ($3,820,120)
SOURCES AND USES OF CASH
- ------------------------
SOURCES OF CASH -
PRE TAX INCOME ($397,448) $345,416 $864,117 ($5,788,060)
FRANCHISE AMORTIZATION (15) 1,298,800 1,298,800 1,298,800 9,091,600
SUBSCRIBER LIST (8) 402,267 402,267 402,267 2,815,867
NON-COMPETE COVENANTS (0) 0 0 0 0
DEPRECIATION 2,138,850 1,998,349 1,998,476 15,561,781
EQUITY 15,198,715
DEBT 0 0 0 18,420,490
RESIDUAL VALUE IN YEAR 7 55,450,179 55,450,179
---------- ---------- ---------- ----------
TOTAL SOURCES OF CASH $3,442,469 $4,044,832 $60,013,839 $110,750,571
USES OF CASH -
PURCHASE PRICE - CURRENT $31,469,600
CAPITAL EXPENDITURES 842,613 888,014 932,782 11,307,657
DEBT RETIREMENT 2,599,856 2,012,221 10,772,828 18,420,490
TAXES PAID ON NET INCOME 0 0 0 0
TAXES PAID ON SALE (RESIDUAL) 11,680,397 11,680,397
---------- ---------- ---------- ----------
TOTAL USES OF CASH $3,442,469 $2,900,235 $23,386,008 $72,878,144
ANNUAL CASH INCREASE/(DECREASE) $0 $1,144,597 $36,627,831 $37,872,428
CUMULATIVE CASH 100,000 1,244,597 37,872,428
202
FALCON CABLE SYSTEMS CO. EXHIBIT B
DALLAS REGION - OREGON HIGH ANALYSIS
AS OF DECEMBER 31, 1995
RETURN ON EQUITY METHOD
PROFIT AND LOSS - HIGH VALUE
- ----------------------------
YEAR ENDING DECEMBER 31, 1996 1997 1998 1999
---------- ---------- ---------- ----------
REVENUES $6,671,920 $7,164,985 $7,802,502 $8,481,542
OPERATING EXPENSES 2,709,760 2,923,366 3,170,665 3,439,033
---------- ---------- ---------- ----------
OPERATING INCOME $3,962,160 $4,241,619 $4,631,838 $5,042,508
OPERATING MARGIN 0.59 0.59 0.59 0.59
PARENT SERVICES/MGT FEE (5%) 333,596 358,249 390,125 424,077
FRANCHISE AMORTIZATION (15) 1,298,800 1,298,800 1,298,800 1,298,800
SUBSCRIBER LIST (8) 402,267 402,267 402,267 402,267
NON-COMPETE COVENANTS (0) 0 0 0 0
DEPRECIATION 1,254,936 2,634,296 2,869,764 2,667,109
INTEREST 1,661,498 1,790,608 2,026,768 1,922,517
---------- ---------- ---------- ----------
PRE-TAX INCOME ($988,936) ($2,242,600) ($2,355,886) ($1,672,261)
INCOME TAX (EXPENSE)/BENEFIT 336,238 762,484 801,001 568,569
---------- ---------- ---------- ----------
NET INCOME ($652,698) ($1,480,116) ($1,554,885) ($1,103,693)
SOURCES AND USES OF CASH
- ------------------------
SOURCES OF CASH -
PRE TAX INCOME ($988,936) ($2,242,600) ($2,355,886) ($1,672,261)
FRANCHISE AMORTIZATION (15) 1,298,800 1,298,800 1,298,800 1,298,800
SUBSCRIBER LIST (8) 402,267 402,267 402,267 402,267
NON-COMPETE COVENANTS (0) 0 0 0 0
DEPRECIATION 1,254,936 2,634,296 2,869,764 2,667,109
EQUITY 16,614,975
DEBT 16,614,975 1,291,103 2,361,604 0
RESIDUAL VALUE IN YEAR 7
---------- ---------- ---------- ----------
TOTAL SOURCES OF CASH $35,197,017 $3,383,865 $4,576,548 $2,695,914
USES OF CASH -
PURCHASE PRICE - CURRENT $34,160,482
CAPITAL EXPENDITURES 936,193 3,384,208 3,534,035 789,812
DEBT RETIREMENT 0 0 1,042,513 1,906,102
TAXES PAID ON NET INCOME 0 0 0 0
TAXES PAID ON SALE (RESIDUAL)
---------- ---------- ---------- ----------
TOTAL USES OF CASH $35,096,674 $3,384,208 $4,576,548 $2,695,914
ANNUAL CASH INCREASE/(DECREASE) $100,343 ($343) $0 ($0)
CUMULATIVE CASH 100,343 100,000 100,000 100,000
YEAR ENDING DECEMBER 31, 2000 2001 2002 TOTAL
---------- ---------- ---------- ----------
REVENUES $9,145,030 $9,786,141 $10,403,766 $59,455,887
OPERATING EXPENSES 3,706,819 3,973,497 4,242,635 24,165,775
---------- ---------- ---------- ----------
OPERATING INCOME $5,438,211 $5,812,644 $6,161,131 $35,290,111
OPERATING MARGIN 0.59 0.59 0.59
PARENT SERVICES/MGT FEE (5%) 457,251 489,307 520,188 2,972,794
FRANCHISE AMORTIZATION (15) 1,298,800 1,298,800 1,298,800 9,091,600
SUBSCRIBER LIST (8) 402,267 402,267 402,267 2,815,867
NON-COMPETE COVENANTS (0) 0 0 0 0
DEPRECIATION 2,138,850 1,998,349 1,998,476 15,561,781
INTEREST 1,731,907 1,491,263 1,196,857 11,821,416
---------- ---------- ---------- ----------
PRE-TAX INCOME ($590,864) $132,658 $744,544 ($6,973,347)
INCOME TAX (EXPENSE)/BENEFIT 200,894 (45,104) (253,145) 2,370,938
---------- ---------- ---------- ----------
NET INCOME ($389,970) $87,554 $491,399 ($4,602,409)
SOURCES AND USES OF CASH
- ------------------------
SOURCES OF CASH -
PRE TAX INCOME ($590,864) $132,658 $744,544 ($6,973,347)
FRANCHISE AMORTIZATION (15) 1,298,800 1,298,800 1,298,800 9,091,600
SUBSCRIBER LIST (8) 402,267 402,267 402,267 2,815,867
NON-COMPETE COVENANTS (0) 0 0 0 0
DEPRECIATION 2,138,850 1,998,349 1,998,476 15,561,781
EQUITY 16,614,975
DEBT 0 0 0 20,267,682
RESIDUAL VALUE IN YEAR 7 55,450,179 55,450,179
---------- ---------- ---------- ----------
TOTAL SOURCES OF CASH $3,249,053 $3,832,074 $59,894,265 $112,828,737
USES OF CASH -
PURCHASE PRICE - CURRENT $34,160,482
CAPITAL EXPENDITURES 842,613 888,014 932,782 11,307,657
DEBT RETIREMENT 2,406,440 2,944,060 11,968,566 20,267,682
TAXES PAID ON NET INCOME 0 0 0 0
TAXES PAID ON SALE (RESIDUAL) 10,362,500 10,362,500
---------- ---------- ---------- ----------
TOTAL USES OF CASH $3,249,053 $3,832,074 $23,263,849 $76,098,320
ANNUAL CASH INCREASE/(DECREASE) $0 $0 $36,630,416 $36,730,416
CUMULATIVE CASH 100,000 100,000 36,730,416
203
FALCON CABLE SYSTEMS CO. EXHIBIT C
DALLAS REGION - OREGON LOW ANALYSIS
AS OF DECEMBER 31, 1995
RETURN ON EQUITY METHOD
DEBT AMORTIZATION - LOW VALUE
- -----------------------------
TOTAL YEAR 1 CASH REQUIREMENTS $30,397,431
YEAR 1 DEBT REQUIREMENTS 15,198,715
YEAR 1 EQUITY REQUIREMENTS 15,198,715
FINANCING AVAILABLE $23,816,020 $25,754,042 $27,570,525 $30,106,944
UNUSED LEVERAGE 8,617,304 9,421,573 10,103,684 14,722,038
SENIOR DEBT: 1996 1997 1998 1999
---------- ----------- ----------- -----------
BEGINNING DEBT $0 $15,198,715 $15,198,715 $14,245,066
DEBT ADDED 15,198,715 0 0 0
TOTAL ANNUAL PAYMENTS 1,519,872 1,519,872 2,473,521 2,473,521
INTEREST 1,519,872 1,519,872 1,519,872 1,424,507
PRINCIPAL REPAYMENT 0 0 953,649 1,049,014
ENDING BALANCE 15,198,715 15,198,715 14,245,066 13,196,052
LINE OF CREDIT:
BEGINNING DEBT $0 $0 $1,133,754 $3,221,775
BORROWINGS 0 1,133,754 2,088,021 0
PRINCIPAL PAYMENTS 0 0 0 1,032,921
INTEREST 0 113,375 322,177 322,177
SENIOR DEBT COVERAGE 3.8 3.6 3.1 2.6
LOC DEBT COVERAGE 0.0 0.3 0.7 0.4
TOTAL DEBT COVERAGE 3.8 3.9 3.8 3.1
DEBT AMORTIZATION - LOW VALUE
- -----------------------------
TOTAL YEAR 1 CASH REQUIREMENTS
YEAR 1 DEBT REQUIREMENTS
YEAR 1 EQUITY REQUIREMENTS
FINANCING AVAILABLE $32,776,305 $35,348,370 $37,782,186
UNUSED LEVERAGE 19,991,255 24,575,541 28,405,596
SENIOR DEBT: 2000 2001 2002 TOTAL
----------- ----------- ----------- ----------
BEGINNING DEBT $13,196,052 $12,042,136 $10,772,828
DEBT ADDED 0 0 0 15,198,715
TOTAL ANNUAL PAYMENTS 2,473,521 2,473,521 2,473,521 15,407,348
INTEREST 1,319,605 1,204,214 1,077,283 9,585,223
PRINCIPAL REPAYMENT 1,153,916 1,269,307 1,396,238 5,822,125
ENDING BALANCE 12,042,136 10,772,828 9,376,590
LINE OF CREDIT:
BEGINNING DEBT $2,188,854 $742,914 $0 $0
BORROWINGS 0 0 0 3,221,775
PRINCIPAL PAYMENTS 1,445,940 742,914 0 3,221,775
INTEREST 218,885 74,291 0 1,050,907
SENIOR DEBT COVERAGE 2.2 1.9 1.5
LOC DEBT COVERAGE 0.1 0.0 0.0
TOTAL DEBT COVERAGE 2.4 1.9 1.5
204
FALCON CABLE SYSTEMS CO. EXHIBIT C
DALLAS REGION - OREGON HIGH ANALYSIS
AS OF DECEMBER 31, 1995
RETURN ON EQUITY METHOD
DEBT AMORTIZATION - HIGH VALUE
- ------------------------------
TOTAL YEAR 1 CASH REQUIREMENTS $33,229,950
YEAR 1 DEBT REQUIREMENTS 16,614,975
YEAR 1 EQUITY REQUIREMENTS 16,614,975
FINANCING AVAILABLE $27,480,023 $29,716,203 $31,812,144 $34,738,782
UNUSED LEVERAGE 10,865,047 11,810,125 12,586,976 17,419,715
SENIOR: 1996 1997 1998 1999
---------- ----------- ----------- -----------
BEGINNING DEBT $0 $16,614,975 $16,614,975 $15,572,462
DEBT ADDED 16,614,975 0 0 0
TOTAL ANNUAL PAYMENTS 1,661,498 1,661,498 2,704,011 2,704,011
INTEREST 1,661,498 1,661,498 1,661,498 1,557,246
PRINCIPAL REPAYMENT 0 0 1,042,513 1,146,764
ENDING BALANCE 16,614,975 16,614,975 15,572,462 14,425,697
LINE OF CREDIT:
BEGINNING DEBT $0 $0 $1,291,103 $3,652,707
BORROWINGS 0 1,291,103 2,361,604 0
PRINCIPAL PAYMENTS 0 0 0 759,338
INTEREST 0 129,110 365,271 365,271
SENIOR DEBT COVERAGE 4.2 3.9 3.4 2.9
LOC DEBT COVERAGE 0.0 0.3 0.8 0.6
TOTAL DEBT COVERAGE 4.2 4.2 4.2 3.4
DEBT AMORTIZATION - HIGH VALUE
- ------------------------------
TOTAL YEAR 1 CASH REQUIREMENTS
YEAR 1 DEBT REQUIREMENTS
YEAR 1 EQUITY REQUIREMENTS
FINANCING AVAILABLE $37,818,813 $40,786,580 $43,594,830
UNUSED LEVERAGE 22,906,186 29,009,909 33,344,502
SENIOR: 2000 2001 2002 TOTAL
----------- ----------- ----------- -----------
BEGINNING DEBT $14,425,697 $13,164,256 $11,776,671
DEBT ADDED 0 0 0 $16,614,975
TOTAL ANNUAL PAYMENTS 2,704,011 2,704,011 2,704,011 16,843,048
INTEREST 1,442,570 1,316,426 1,177,667 10,478,401
PRINCIPAL REPAYMENT 1,261,441 1,387,585 1,526,344 6,364,647
ENDING BALANCE 13,164,256 11,776,671 10,250,328
LINE OF CREDIT:
BEGINNING DEBT $2,893,369 $1,748,370 $191,895 $0
BORROWINGS 0 0 0 3,652,707
PRINCIPAL PAYMENTS 1,144,999 1,556,475 191,895 3,652,707
INTEREST 289,337 174,837 19,189 1,343,015
SENIOR DEBT COVERAGE 2.4 2.0 1.7
LOC DEBT COVERAGE 0.3 0.0 0.0
TOTAL DEBT COVERAGE 2.7 2.1 1.7
205
FALCON CABLE SYSTEMS CO. EXHIBIT D
DALLAS REGION - OREGON
AS OF DECEMBER 31, 1995
RETURN ON INVESTMENT METHOD
PROFIT AND LOSS
- ---------------
YEAR ENDING DECEMBER 31, 1996 1997 1998 1999
---------- ---------- ---------- ----------
REVENUES $6,671,920 $7,164,985 $7,802,502 $8,481,542
OPERATING EXPENSES 2,709,760 2,923,366 3,170,665 3,439,033
---------- ---------- ---------- ----------
OPERATING INCOME 3,962,160 4,241,619 4,631,838 5,042,508
PLUS: RESIDUAL VALUE
LESS: CAPITAL EXPENDITURES 936,193 3,384,208 3,534,035 789,812
---------- ---------- ---------- ----------
TOTAL CASH FLOW $3,025,968 $857,411 $1,097,802 $4,252,696
NET PRESENT VALUE @ 16.6% $31,009,915
----------
NET PRESENT VALUE @ 15.1% $33,500,707
----------
YEAR ENDING DECEMBER 31, 2000 2001 2002 TOTAL
---------- ---------- ----------- -----------
REVENUES $9,145,030 $9,786,141 $10,403,766 $59,455,887
OPERATING EXPENSES 3,706,819 3,973,497 4,242,635 24,165,775
OPERATING INCOME 5,438,211 5,812,644 6,161,131 35,290,111
PLUS: RESIDUAL VALUE 55,450,179 55,450,179
LESS: CAPITAL EXPENDITURES 842,613 888,014 932,782 11,307,657
TOTAL CASH FLOW $4,595,598 $4,924,630 $60,678,528 $79,432,634
NET PRESENT VALUE @ 16.6%
NET PRESENT VALUE @ 15.1%
206
FALCON CABLE SYSTEMS CO. EXHIBIT E
DALLAS REGION - OREGON
AS OF DECEMBER 31, 1995
CABLE TELEVISION SUBSCRIBERS
- ----------------------------
YEAR ENDING DECEMBER 31, 1996 1997 1998 1999
------ ----- ----- -----
BEGINNING MILES 466.6
MILES ADDED 13.0 13.0 13.5 13.5
CUMULATIVE MILES 479.6 492.6 506.1 519.6
DENSITY OF ADDITIONAL PLANT 37 37 37 37
HOMES PASSED - BEGINNING 23,770
NEW HOMES & EXTENSIONS 475 485 495 504
HOMES PASSED - ENDING 24,245 24,730 25,225 25,729
GROWTH IN HOMES 2.0% 2.0% 2.0% 2.0%
BASIC - BEGINNING SUBSCRIBERS 16,928 17,388 17,859 18,343
AVERAGE SUBSCRIBERS 17,158 17,623 18,101 18,558
ENDING SUBSCRIBERS 17,388 17,859 18,343 18,774
PENETRATION 71.7% 72.2% 72.7% 73.0%
EXPANDED BASIC - BEGINNING 12,481 12,820 13,168 13,524
AVERAGE SUBSCRIBERS 12,651 12,994 13,346 13,683
ENDING SUBSCRIBERS 12,820 13,168 13,524 13,842
PENETRATION 73.7% 73.7% 73.7% 73.7%
NEW PRODUCT TIER #1 - BEGINNING 7,458 7,834 8,493 9,182
AVERAGE SUBSCRIBERS 7,646 8,164 8,838 9,290
ENDING SUBSCRIBERS 7,834 8,493 9,182 9,398
PENETRATION 45.1% 47.6% 50.1% 50.1%
NEW PRODUCT TIER #2 - BEGINNING 0 0 536 1,834
AVERAGE SUBSCRIBERS 0 268 1,185 2,325
ENDING SUBSCRIBERS 0 536 1,834 2,816
PENETRATION 0.0% 3.0% 10.0% 15.0%
NEW PRODUCT TIER #3 - BEGINNING 0 0 536 1,834
AVERAGE SUBSCRIBERS 0 268 1,185 2,325
ENDING SUBSCRIBERS 0 536 1,834 2,816
PENETRATION 0.0% 3.0% 10.0% 15.0%
PAY TV - BEGINNING UNITS 7,380 7,407 7,786 8,180
AVERAGE UNITS 7,393 7,596 7,983 8,276
ENDING UNITS 7,407 7,786 8,180 8,372
PENETRATION 42.6% 43.6% 44.6% 44.6%
PAY PER VIEW - BEGINNING UNITS/MO 359 515 833 1,401
AVERAGE UNITS 437 674 1,117 1,716
ENDING UNITS 515 833 1,401 2,031
AVERAGE BUY RATE/MO 6.8% 9.8% 14.8% 19.8%
CONVERTER RENTALS - BEG. 7,977 8,368 9,130 9,928
AVERAGE SUBSCRIBERS 8,172 8,749 9,529 10,326
ENDING SUBSCRIBERS 8,368 9,130 9,928 10,724
PENETRATION 48.1% 51.1% 54.1% 57.1%
ADDRESSABLE HOMES 6,810 7,604 8,524 9,488
AVERAGE HOMES 7,207 8,064 9,006 9,882
ENDING HOMES 7,604 8,524 9,488 10,275
PENETRATION 43.7% 47.7% 51.7% 54.7%
BASIC CHURN RATE 28% 28% 28% 28%
YEAR ENDING DECEMBER 31, 2000 2001 2002
------ ----- -----
BEGINNING MILES
MILES ADDED 14.5 15.0 15.5
CUMULATIVE MILES 534.1 549.1 564.6
DENSITY OF ADDITIONAL PLANT 35 35 35
HOMES PASSED - BEGINNING
NEW HOMES & EXTENSIONS 515 525 535
HOMES PASSED - ENDING 26,244 26,769 27,304
GROWTH IN HOMES 2.0% 2.0% 2.0%
BASIC - BEGINNING SUBSCRIBERS 18,774 19,215 19,666
AVERAGE SUBSCRIBERS 18,994 19,440 19,897
ENDING SUBSCRIBERS 19,215 19,666 20,128
PENETRATION 73.2% 73.5% 73.7%
EXPANDED BASIC - BEGINNING 13,842 14,167 14,500
AVERAGE SUBSCRIBERS 14,004 14,333 14,670
ENDING SUBSCRIBERS 14,167 14,500 14,840
PENETRATION 73.7% 73.7% 73.7%
NEW PRODUCT TIER #1 - BEGINNING 9,398 9,618 9,844
AVERAGE SUBSCRIBERS 9,508 9,731 9,960
ENDING SUBSCRIBERS 9,618 9,844 10,075
PENETRATION 50.1% 50.1% 50.1%
NEW PRODUCT TIER #2 - BEGINNING 2,816 3,843 3,933
AVERAGE SUBSCRIBERS 3,330 3,888 3,979
ENDING SUBSCRIBERS 3,843 3,933 4,026
PENETRATION 20.0% 20.0% 20.0%
NEW PRODUCT TIER #3 - BEGINNING 2,816 3,843 3,933
AVERAGE SUBSCRIBERS 3,330 3,888 3,979
ENDING SUBSCRIBERS 3,843 3,933 4,026
PENETRATION 20.0% 20.0% 20.0%
PAY TV - BEGINNING UNITS 8,372 8,569 8,770
AVERAGE UNITS 8,471 8,670 8,873
ENDING UNITS 8,569 8,770 8,976
PENETRATION 44.6% 44.6% 44.6%
PAY PER VIEW - BEGINNING UNITS/MO 2,031 2,581 3,171
AVERAGE UNITS 2,306 2,876 3,496
ENDING UNITS 2,581 3,171 3,822
AVERAGE BUY RATE/MO 23.3% 26.8% 30.3%
CONVERTER RENTALS - BEG. 10,724 11,553 12,414
AVERAGE SUBSCRIBERS 11,138 11,983 12,710
ENDING SUBSCRIBERS 11,553 12,414 13,007
PENETRATION 60.1% 63.1% 64.6%
ADDRESSABLE HOMES 10,275 11,093 11,845
AVERAGE HOMES 10,684 11,469 12,235
ENDING HOMES 11,093 11,845 12,626
PENETRATION 57.7% 60.2% 62.7%
BASIC CHURN RATE 28% 28% 28%
207
FALCON CABLE SYSTEMS CO. EXHIBIT F
DALLAS REGION - OREGON
AS OF DECEMBER 31, 1995
SERVICE RATES
- -------------
RUNNING RATES
AS OF AVERAGE RATES
CURRENT RATES DECEMBER 1995 FOR 1996
- ------------- ------------- -------------
BASIC $16.47 $17.15
EXPANDED BASIC $5.94 $6.82
NEW PRODUCT TIER #1 $4.35 $5.47
NEW PRODUCT TIER #2 $4.00 $4.00
NEW PRODUCT TIER #3 $4.00 $4.00
PAY $6.96 $6.96
PAY PER VIEW $9.99 $6.96
CONVERTER RENTALS $0.70 $0.96
INSTALLATIONS-NEW $50.00 $50.00
INSTALLATIONS-CHURN $25.00 $25.00
YEAR ENDING DECEMBER 31, 1996 1997 1998 1999 2000 2001 2002
---- ---- ---- ---- ---- ---- ----
PERCENTAGE RATE INCREASES
- -------------------------
BASIC 4% 3% 3% 3% 3% 3% 3%
EXPANDED BASIC 15% 3% 3% 3% 3% 3% 3%
NEW PRODUCT TIER #1 26% 3% 3% 3% 3% 3% 3%
NEW PRODUCT TIER #2 0% 3% 3% 3% 3% 3% 3%
NEW PRODUCT TIER #3 0% 3% 3% 3% 3% 3% 3%
PAY 0% 1% 1% 1% 1% 1% 1%
PAY PER VIEW 0% 3% 3% 3% 3% 3% 3%
CONVERTER/REMOTE RENTALS 37% 3% 3% 3% 3% 3% 3%
INSTALLATIONS-NEW 0% 3% 3% 3% 3% 3% 3%
INSTALLATIONS-CHURN 0% 3% 3% 3% 3% 3% 3%
AVERAGE RATES
- -------------
BASIC $17.15 $17.67 $18.20 $18.74 $19.31 $19.89 $20.48
EXPANDED BASIC 6.82 7.03 7.24 7.45 7.68 7.91 8.15
NEW PRODUCT TIER #1 5.47 5.63 5.80 5.97 6.15 6.34 6.53
NEW PRODUCT TIER #2 4.00 4.12 4.24 4.37 4.50 4.64 4.78
NEW PRODUCT TIER #3 4.00 4.12 4.24 4.37 4.50 4.64 4.78
PAY 6.96 7.03 7.10 7.17 7.24 7.31 7.39
PAY PER VIEW 9.99 10.29 10.59 10.91 11.24 11.58 11.92
CONVERTERS RENTALS 0.96 0.99 1.02 1.05 1.09 1.12 1.15
INSTALLATIONS-NEW 50.00 51.50 53.05 54.64 56.28 57.96 59.70
INSTALLATIONS-CHURN 25.00 25.75 26.52 27.32 28.14 28.98 29.85
208
FALCON CABLE SYSTEMS CO. EXHIBIT G
DALLAS REGION - OREGON
AS OF DECEMBER 31, 1995
YEAR ENDING DECEMBER 31, 1996 1997 1998 1999
---------- ---------- ---------- ----------
REVENUES:
BASIC $3,531,731 $3,736,395 $3,952,729 $4,174,155
EXPANDED BASIC 1,035,600 1,095,613 1,159,048 1,223,977
NEW PRODUCT TIER #1 501,690 551,725 615,168 666,039
NEW PRODUCT TIER #2 0 13,244 60,345 121,956
NEW PRODUCT TIER #3 0 13,244 60,345 121,956
PAY TV 617,483 640,781 680,140 712,172
PAY PER VIEW 52,349 83,168 142,029 224,763
CONVERTER RENTALS 94,583 104,294 116,999 130,588
INSTALLATIONS 113,515 120,058 126,972 131,273
COMMERCIAL 236,291 243,380 250,681 258,202
ADVERTISING 247,294 309,117 370,941 435,855
MISCELLANEOUS 241,384 253,965 267,105 280,605
---------- ---------- ---------- ----------
TOTAL REVENUES $6,671,920 $7,164,985 $7,802,502 $8,481,542
OPERATING EXPENSES:
OPERATIONS $811,276 $861,632 $919,592 $980,196
GENERAL & ADMINISTRATIVE 505,962 534,237 565,599 598,071
SALES & MARKETING 274,794 333,108 373,741 416,013
PROGRAMMING 1,117,728 1,194,390 1,311,733 1,444,754
---------- ---------- ---------- ----------
TOTAL OPERATING EXPENSES $2,709,760 $2,923,366 $3,170,665 $3,439,033
---------- ---------- ---------- ----------
OPERATING INCOME $3,962,160 $4,241,619 $4,631,838 $5,042,508
OPERATING MARGIN 59.4% 59.2% 59.4% 59.5%
TOTAL REVENUE/BASIC SUB/MONTH $32.40 $33.88 $35.92 $38.09
CASH FLOW/BASIC SUB/MONTH $19.24 $20.06 $21.32 $22.64
OPERATIONS % OF REVENUE 12% 12% 12% 12%
G & A PERCENTAGE OF REVENUE 8% 7% 7% 7%
SALES & MARKETING % OF REVENUE 4.1% 4.6% 4.8% 4.9%
PROGRAMMING % OF REVENUE 17% 17% 17% 17%
YEAR ENDING DECEMBER 31, 2000 2001 2002 TOTAL
---------- ---------- ---------- -----------
REVENUES:
BASIC $4,400,419 $4,638,892 $4,890,233 $29,324,555
EXPANDED BASIC 1,290,323 1,360,250 1,433,950 8,598,762
NEW PRODUCT TIER #1 702,142 740,194 780,298 4,557,257
NEW PRODUCT TIER #2 179,874 216,352 228,075 819,847
NEW PRODUCT TIER #3 179,874 216,352 228,075 819,847
PAY TV 736,198 761,025 786,680 4,934,480
PAY PER VIEW 311,072 399,558 500,308 1,713,247
CONVERTER RENTALS 145,090 160,778 175,651 927,983
INSTALLATIONS 138,378 145,867 153,759 929,822
COMMERCIAL 265,948 273,926 282,144 1,810,573
ADVERTISING 501,234 563,888 620,277 3,048,605
MISCELLANEOUS 294,478 309,058 324,315 1,970,910
---------- ---------- ---------- -----------
TOTAL REVENUES $9,145,030 $9,786,141 $10,403,766 $59,455,887
OPERATING EXPENSES:
OPERATIONS $1,042,134 $1,105,440 $1,170,189 $6,890,459
GENERAL & ADMINISTRATIVE 630,870 664,596 699,298 4,198,633
SALES & MARKETING 458,855 500,970 540,669 2,898,148
PROGRAMMING 1,574,960 1,702,492 1,832,479 10,178,535
---------- ---------- ---------- -----------
TOTAL OPERATING EXPENSES $3,706,819 $3,973,497 $4,242,635 $24,165,775
---------- ---------- ---------- -----------
OPERATING INCOME $5,438,211 $5,812,644 $6,161,131 $35,290,111
OPERATING MARGIN 59.5% 59.4% 59.2%
TOTAL REVENUE/BASIC SUB/MONTH $40.12 $41.95 $43.57
CASH FLOW/BASIC SUB/MONTH $23.86 $24.92 $25.80
OPERATIONS % OF REVENUE 11% 11% 11%
G & A PERCENTAGE OF REVENUE 7% 7% 7%
SALES & MARKETING % OF REVENUE 5.0% 5.1% 5.2%
PROGRAMMING % OF REVENUE 17% 17% 18%
209
FALCON CABLE SYSTEMS CO. EXHIBIT H
DALLAS REGION - OREGON
AS OF DECEMBER 31, 1995
CAPITAL EXPENDITURES
YEAR ENDING DECEMBER 31, 1996 1997 1998 1999
---------- ------- ------- -------
ASSUMPTIONS AND INPUTS:
BV OF EXISTING PLANT $7,845,728
ADDITIONAL MILES OF PLANT 13.0 13.0 13.5 13.5
AERIAL PLANT PER MILE $12,000 $12,240 $12,485 $12,734
UNDERGROUND PLANT PER MILE $18,000 $18,360 $18,727 $19,102
PERCENTAGE OF PLANT AERIAL 5% 5% 5% 5%
PERCENTAGE OF PLANT UNDERGROUND 95% 95% 95% 95%
AVERAGE COST PER CONVERTER $110 $112 $114 $117
PERCENTAGE CONVERTER USE 48% 51% 54% 57%
PERCENTAGE REPLACEMENT 5% 5% 5% 5%
INSTALLATION COST PER SUBSCRIBER $55 $56 $57 $58
MISC. CAPITAL PER SUBSCRIBER $5 $5 $5 $5
INFLATION FACTOR FOR CAPITALS 2% 2% 2% 2%
1.02 1.04 1.06 1.08
ANNUAL COSTS:
PLANT ADDITIONS - AERIAL $7,800 $7,956 $8,427 $8,596
- 222,300 226,746 240,176 244,980
PLANT REBUILD/UPGRADE/INCL. HDND. 269,075 2,687,225 2,796,500 27,391
AVERAGE COST OF NEW CONVERTERS 24,339 27,040 29,936 28,751
CONVERTER REPLACEMENT 44,805 49,868 55,311 61,155
INSTALLATION COSTS 282,085 295,493 309,524 320,469
MISC. CAPITAL EXPENDITURES 85,789 89,880 94,161 98,470
---------- ------- ------- -------
TOTAL CAPITAL EXPENDITURES $936,193 $3,384,208 $3,534,035 $789,812
AS A % OF OPERATING INCOME 23.6% 79.8% 76.3% 15.7%
YEAR ENDING DECEMBER 31, 2000 2001 2002 TOTAL
-------- ------- ------- -------
ASSUMPTIONS AND INPUTS:
BV OF EXISTING PLANT
ADDITIONAL MILES OF PLANT 14.5 15.0 15.5
AERIAL PLANT PER MILE $12,989 $13,249 $13,514
UNDERGROUND PLANT PER MILE $19,484 $19,873 $20,271
PERCENTAGE OF PLANT AERIAL 5% 5% 5%
PERCENTAGE OF PLANT UNDERGROUND 95% 95% 95%
AVERAGE COST PER CONVERTER $119 $121 $124
PERCENTAGE CONVERTER USE 60% 63% 65%
PERCENTAGE REPLACEMENT 5% 5% 5%
INSTALLATION COST PER SUBSCRIBER $59 $60 $62
MISC. CAPITAL PER SUBSCRIBER $5 $6 $6
INFLATION FACTOR FOR CAPITALS 2% 2% 2% 115%
ANNUAL COSTS:
PLANT ADDITIONS - AERIAL $9,417 $9,937 $10,473 $62,606
- 268,389 283,197 298,489 1,784,277
PLANT REBUILD/UPGRADE/INCL. HDND. 28,684 30,074 31,537 5,870,486
AVERAGE COST OF NEW CONVERTERS 31,576 34,591 36,951 213,185
CONVERTER REPLACEMENT 67,198 73,652 78,717 430,705
INSTALLATION COSTS 334,549 349,244 364,579 2,255,943
MISC. CAPITAL EXPENDITURES 102,800 107,319 112,035 690,453
-------- -------- -------- -----------
TOTAL CAPITAL EXPENDITURES $842,613 $888,014 $932,782 $11,307,657
AS A % OF OPERATING INCOME 15.5% 15.3% 15.1%
210
FALCON CABLE SYSTEMS CO. EXHIBIT I
DALLAS REGION - OREGON
AS OF DECEMBER 31, 1995
DEPRECIATION
- ------------
YEAR 1 YEAR 2 YEAR 3 YEAR 4
------ ------ ------ ------
ESTIMATED DEPRECIATION RATES 14.3% 24.5% 17.5% 12.5%
DEPRECIATION - BEG. & ADTNS. 1996 1997 1998 1999
YEAR 1 $1,254,936 $2,150,692 $1,535,958 $1,096,862
YEAR 2 483,603 828,792 591,898
YEAR 3 505,014 865,485
YEAR 4 112,864
YEAR 5
YEAR 6
YEAR 7
---------- ---------- ---------- ----------
TOTAL DEPRECIATION $1,254,936 $2,634,296 $2,869,764 $2,667,109
YEAR 5 YEAR 6 YEAR 7
------ ------ ------
ESTIMATED DEPRECIATION RATES 8.9% 8.9% 8.9%
DEPRECIATION - BEG. & ADTNS. 2000 2001 2002 TOTAL
---------- ---------- ---------- -----------
YEAR 1 $784,226 $783,347 $784,226 $8,390,247
YEAR 2 422,688 302,210 301,871 2,931,062
YEAR 3 618,103 441,401 315,589 2,745,592
YEAR 4 193,425 138,138 98,648 543,075
YEAR 5 120,409 206,356 147,373 474,138
YEAR 6 126,897 217,475 344,372
YEAR 7 133,295 133,295
---------- ---------- ---------- -----------
TOTAL DEPRECIATION $2,138,850 $1,998,349 $1,998,476 $15,561,781
211
FALCON CABLE SYSTEMS CO. EXHIBIT J
DALLAS REGION - OREGON
AS OF DECEMBER 31, 1995
ASSUMPTIONS AND INPUTS
- ----------------------
REMAINING LIFE OF FRANCHISES (YEARS) 7
AVERAGE SUBSCRIBER LIFE (YEARS) 8
INCOME TAX RATE 34%
CAPITAL GAIN RATE 34%
NET FMV OF EXISTING ASSETS $7,845,728
SUBSCRIBERS IN FRANCHISES 100%
LOW HIGH
ANALYSIS ANALYSIS
-------- --------
DEBT PERCENTAGE 50% 50%
EQUITY PERCENTAGE 50% 50%
RESIDUAL MULTIPLE (ROE & ROI) 9 9
MULT OF PAST YEAR'S OPERATING INCOME 10.5 11.5
MULT OF CURRENT YEAR'S OPERATING INCOME 10.0 11.0
MULT OF NEXT YEAR'S OPERATING INCOME 9.5 10.5
TARGET RETURN ON EQUITY 14.0% 12.0%
TARGET RETURN ON INVESTMENT 16.6% 15.1%
212
FLORENCE, OR
213
FALCON CABLE SYSTEMS CO. EXHIBIT A
FLORENCE REGION - OREGON
AS OF DECEMBER 31, 1995
VALUATION METHODS LOW HIGH
- ----------------- --- ----
I. MULTIPLE OF PAST YEAR'S OPERATING INCOME
OPERATING INCOME, PER BOOKS (DECEMBER 31, 1995) $1,059,119 $1,059,119
VALUATION MULTIPLE 10.5 11.5
----------- -----------
ESTIMATED FAIR MARKET VALUE $11,120,750 $12,179,869
----------- -----------
II. MULTIPLE OF "RUNNING RATE" OPERATING INCOME
ESTIMATED OPERATING INCOME
TOTAL CURRENT YEAR'S REVENUE $1,953,529 $1,953,529
OPERATING MARGIN, PER BOOKS (DECEMBER 31, 1995) 54.7% 54.7%
----------- -----------
"RUNNING RATE" OPERATING INCOME 1,068,873 1,068,873
VALUATION MULTIPLE 10.0 11.0
----------- -----------
ESTIMATED FAIR MARKET VALUE $10,688,733 $11,757,606
----------- -----------
III. MULTIPLE OF NEXT YEAR'S OPERATING INCOME
OPERATING INCOME $1,140,159 $1,140,159
VALUATION MULTIPLE 9.5 10.5
----------- -----------
ESTIMATED FAIR MARKET VALUE $10,831,514 $11,971,673
----------- -----------
IV. DISCOUNTED CASH FLOW RETURN ON EQUITY
TARGET RETURN ON EQUITY 14.0% 12.0%
ESTIMATED FAIR MARKET VALUE $9,842,046 $10,835,349
----------- -----------
V. DISCOUNTED CASH FLOW RETURN ON INVESTMENT
TARGET RETURN ON INVSTMT 16.6% 15.1%
ESTIMATED FAIR MARKET VALUE $9,707,817 $10,612,381
----------- -----------
SUMMARY OF VALUES
- -----------------
I. MULTIPLE OF PAST YEAR'S OPERATING INCOME $11,120,750 $12,179,869
II. MULTIPLE OF "RUNNING RATE" OPERATING INCOME 10,688,733 11,757,606
III. MULTIPLE OF NEXT YEAR'S OPERATING INCOME 10,831,514 11,971,673
IV. DISCOUNTED CASH FLOW RETURN ON EQUITY 9,842,046 10,835,349
V. DISCOUNTED CASH FLOW RETURN ON INVESTMENT 9,707,817 10,612,381
----------- -----------
RANGE OF ESTIMATED FAIR MARKET VALUES $10,191,000 $11,201,000
ESTIMATED FAIR MARKET VALUE $10,696,000
-----------
214
FALCON CABLE SYSTEMS CO. EXHIBIT B
FLORENCE REGION - OREGON LOW ANALYSIS
AS OF DECEMBER 31, 1995
RETURN ON EQUITY METHOD
PROFIT AND LOSS - LOW VALUE
- ---------------------------
YEAR ENDING DECEMBER 31, 1996 1997 1998 1999 2000
----------- ---------- ---------- ---------- ----------
REVENUES $2,090,507 $2,274,330 $2,478,712 $2,685,374 $2,885,397
OPERATING EXPENSES 950,348 1,029,443 1,109,804 1,196,081 1,283,845
----------- ---------- ---------- ---------- ----------
OPERATING INCOME $1,140,159 $1,244,886 $1,368,907 $1,489,294 $1,601,552
OPERATING MARGIN 0.55 0.55 0.55 0.55 0.56
PARENT SERVICES/MGT FEE (5%) 104,525 113,716 123,936 134,269 144,270
FRANCHISE AMORTIZATION (15) 389,667 389,667 389,667 389,667 389,667
SUBSCRIBER LIST (8) 100,000 100,000 100,000 100,000 100,000
NON-COMPETE COVENANTS (0) 0 0 0 0 0
DEPRECIATION 413,604 740,096 720,664 708,408 574,033
INTEREST 480,228 480,228 505,782 475,649 416,950
----------- ---------- ---------- ---------- ----------
PRE-TAX INCOME ($347,865) ($578,821) ($471,140) ($318,700) ($23,367)
INCOME TAX (EXPENSE)/BENEFIT 118,274 196,799 160,188 108,358 7,945
----------- ---------- ---------- ---------- ----------
NET INCOME ($229,591) ($382,022) ($310,953) ($210,342) ($15,423)
SOURCES AND USES OF CASH
- ------------------------
SOURCES OF CASH -
PRE TAX INCOME ($347,865) ($578,821) ($471,140) ($318,700) ($23,367)
FRANCHISE AMORTIZATION (15) 389,667 389,667 389,667 389,667 389,667
SUBSCRIBER LIST (8) 100,000 100,000 100,000 100,000 100,000
NON-COMPETE COVENANTS (0) 0 0 0 0 0
DEPRECIATION 413,604 740,096 720,664 708,408 574,033
EQUITY 4,802,279
DEBT 4,802,279 0 255,537 0 0
----------- ---------- ---------- ---------- ----------
RESIDUAL VALUE IN YEAR 9
TOTAL SOURCES OF CASH $10,159,963 $650,942 $994,727 $879,376 $1,040,332
USES OF CASH -
PURCHASE PRICE - CURRENT $9,842,046
CAPITAL EXPENDITURES 217,813 218,806 1,125,647 230,670 244,024
DEBT RETIREMENT 0 0 301,321 586,990 364,598
TAXES PAID ON NET INCOME 0 0 0 0 0
----------- ---------- ---------- ---------- ----------
TAXES PAID ON SALE (RESIDUAL)
TOTAL USES OF CASH $10,059,858 $218,806 $1,426,968 $817,660 $608,622
ANNUAL CASH INCREASE/(DECREASE) $100,105 $432,136 ($432,241) $61,716 $431,710
CUMULATIVE CASH 100,105 532,241 100,000 161,716 593,426
RETURN ON EQUITY METHOD
PROFIT AND LOSS - LOW VALUE
- ---------------------------
YEAR ENDING DECEMBER 31, 2001 2002 2003 2004 TOTAL
---------- ---------- ---------- ---------- -----------
REVENUES $3,079,488 $3,274,528 $3,477,801 $3,693,943 $25,940,081
OPERATING EXPENSES 1,369,253 1,453,545 1,541,214 1,636,280 11,569,814
---------- ---------- ---------- ---------- -----------
OPERATING INCOME $1,710,235 $1,820,983 $1,936,587 $2,057,663 $14,370,267
OPERATING MARGIN 0.56 0.56 0.56 0.56
PARENT SERVICES/MGT FEE (5%) 153,974 163,726 173,890 184,697 1,297,004
FRANCHISE AMORTIZATION (15) 389,667 389,667 389,667 389,667 3,507,000
SUBSCRIBER LIST (8) 100,000 100,000 100,000 100,000 900,000
NON-COMPETE COVENANTS (0) 0 0 0 0 0
DEPRECIATION 554,072 547,168 314,342 322,851 4,895,239
INTEREST 380,491 340,385 296,268 247,740 3,623,722
---------- ---------- ---------- ---------- -----------
PRE-TAX INCOME $132,031 $280,037 $662,420 $812,708 $147,302
INCOME TAX (EXPENSE)/BENEFIT (44,890) (95,212) (225,223) (276,321) (50,083)
---------- ---------- ---------- ---------- -----------
NET INCOME $87,140 $184,824 $437,197 $536,387 $97,220
SOURCES AND USES OF CASH
- ------------------------
SOURCES OF CASH -
PRE TAX INCOME $132,031 $280,037 $662,420 $812,708 $147,302
FRANCHISE AMORTIZATION (15) 389,667 389,667 389,667 389,667 3,507,000
SUBSCRIBER LIST (8) 100,000 100,000 100,000 100,000 900,000
NON-COMPETE COVENANTS (0) 0 0 0 0 0
DEPRECIATION 554,072 547,168 314,342 322,851 4,895,239
EQUITY 4,802,279
DEBT 0 0 0 0 5,057,815
RESIDUAL VALUE IN YEAR 9 18,518,963 18,518,963
---------- ---------- ---------- ---------- -----------
TOTAL SOURCES OF CASH $1,175,770 $1,316,872 $1,466,429 $20,144,188 $37,828,599
USES OF CASH -
PURCHASE PRICE - CURRENT $9,842,046
CAPITAL EXPENDITURES 249,526 252,380 264,995 278,230 3,082,090
DEBT RETIREMENT 401,058 441,164 485,280 2,477,404 5,057,815
TAXES PAID ON NET INCOME 0 0 0 50,083 50,083
TAXES PAID ON SALE (RESIDUAL) 5,065,003 5,065,003
---------- ---------- ---------- ---------- -----------
TOTAL USES OF CASH $650,584 $693,544 $750,275 $7,870,720 $23,097,037
ANNUAL CASH INCREASE/(DECREASE) $525,186 $623,328 $716,153 $12,273,468 $14,731,562
CUMULATIVE CASH 1,118,612 1,741,940 2,458,094 14,731,562
215
FALCON CABLE SYSTEMS CO. EXHIBIT B
FLORENCE REGION - OREGON HIGH ANALYSIS
AS OF DECEMBER 31, 1995
RETURN ON EQUITY METHOD
PROFIT AND LOSS - HIGH VALUE
- ----------------------------
YEAR ENDING DECEMBER 31, 1996 1997 1998 1999 2000
----------- ----------- ----------- ----------- -----------
REVENUES $2,090,507 $2,274,330 $2,478,712 $2,685,374 $2,885,397
OPERATING EXPENSES 950,348 1,029,443 1,109,804 1,196,081 1,283,845
----------- ----------- ----------- ----------- -----------
OPERATING INCOME $1,140,159 $1,244,886 $1,368,907 $1,489,294 $1,601,552
OPERATING MARGIN 0.55 0.55 0.55 0.55 0.56
PARENT SERVICES/MGT FEE (5%) 104,525 113,716 123,936 134,269 144,270
FRANCHISE AMORTIZATION (15) 389,667 389,667 389,667 389,667 389,667
SUBSCRIBER LIST (8) 100,000 100,000 100,000 100,000 100,000
NON-COMPETE COVENANTS (0) 0 0 0 0 0
DEPRECIATION 413,604 740,096 720,664 708,408 574,033
INTEREST 532,509 532,509 573,322 539,909 481,465
----------- ----------- ----------- ----------- -----------
PRE-TAX INCOME ($400,145) ($631,102) ($538,681) ($382,959) ($87,882)
INCOME TAX (EXPENSE)/BENEFIT 136,049 214,575 183,151 130,206 29,880
----------- ----------- ----------- ----------- -----------
NET INCOME ($264,096) ($416,527) ($355,529) ($252,753) ($58,002)
SOURCES AND USES OF CASH
- ------------------------
SOURCES OF CASH -
PRE TAX INCOME ($400,145) ($631,102) ($538,681) ($382,959) ($87,882)
FRANCHISE AMORTIZATION (15) 389,667 389,667 389,667 389,667 389,667
SUBSCRIBER LIST (8) 100,000 100,000 100,000 100,000 100,000
NON-COMPETE COVENANTS (0) 0 0 0 0 0
DEPRECIATION 413,604 740,096 720,664 708,408 574,033
EQUITY 5,325,087
DEBT 5,325,087 0 408,130 0 0
----------- ----------- ----------- ----------- -----------
RESIDUAL VALUE IN YEAR 9
TOTAL SOURCES OF CASH $11,153,298 $598,661 $1,079,780 $815,116 $975,818
USES OF CASH -
PURCHASE PRICE - CURRENT $10,835,349
CAPITAL EXPENDITURES 217,813 218,806 1,125,647 230,670 244,024
DEBT RETIREMENT 0 0 334,125 584,446 595,512
TAXES PAID ON NET INCOME 0 0 0 0 0
----------- ----------- ----------- ----------- -----------
TAXES PAID ON SALE (RESIDUAL)
TOTAL USES OF CASH $11,053,162 $218,806 $1,459,772 $815,116 $839,536
ANNUAL CASH INCREASE/(DECREASE) $100,137 $379,855 ($379,992) ($0) $136,282
CUMULATIVE CASH 100,137 479,992 100,000 100,000 236,282
RETURN ON EQUITY METHOD
PROFIT AND LOSS - HIGH VALUE
- ----------------------------
YEAR ENDING DECEMBER 31, 2001 2002 2003 2004 TOTAL
----------- ----------- ----------- ----------- -----------
REVENUES $3,079,488 $3,274,528 $3,477,801 $3,693,943 $25,940,081
OPERATING EXPENSES 1,369,253 1,453,545 1,541,214 1,636,280 11,569,814
----------- ----------- ----------- ----------- -----------
OPERATING INCOME $1,710,235 $1,820,983 $1,936,587 $2,057,663 $14,370,267
OPERATING MARGIN 0.56 0.56 0.56 0.56
PARENT SERVICES/MGT FEE (5%) 153,974 163,726 173,890 184,697 1,297,004
FRANCHISE AMORTIZATION (15) 389,667 389,667 389,667 389,667 3,507,000
SUBSCRIBER LIST (8) 100,000 100,000 100,000 100,000 900,000
NON-COMPETE COVENANTS (0) 0 0 0 0 0
DEPRECIATION 554,072 547,168 314,342 322,851 4,895,239
INTEREST 421,913 377,441 328,522 274,711 4,062,301
----------- ----------- ----------- ----------- -----------
PRE-TAX INCOME $90,608 $242,980 $630,166 $785,737 ($291,277)
INCOME TAX (EXPENSE)/BENEFIT (30,807) (82,613) (214,256) (267,151) 99,034
----------- ----------- ----------- ----------- -----------
NET INCOME $59,801 $160,367 $415,910 $518,586 ($192,243)
SOURCES AND USES OF CASH
- ------------------------
SOURCES OF CASH -
PRE TAX INCOME $90,608 $242,980 $630,166 $785,737 ($291,277)
FRANCHISE AMORTIZATION (15) 389,667 389,667 389,667 389,667 3,507,000
SUBSCRIBER LIST (8) 100,000 100,000 100,000 100,000 900,000
NON-COMPETE COVENANTS (0) 0 0 0 0 0
DEPRECIATION 554,072 547,168 314,342 322,851 4,895,239
EQUITY 5,325,087
DEBT 0 0 0 0 5,733,217
RESIDUAL VALUE IN YEAR 9 18,518,963 18,518,963
----------- ----------- ----------- ----------- -----------
TOTAL SOURCES OF CASH $1,134,347 $1,279,815 $1,434,175 $20,117,218 $38,588,228
USES OF CASH -
PURCHASE PRICE - CURRENT $10,835,349
CAPITAL EXPENDITURES 249,526 252,380 264,995 278,230 3,082,090
DEBT RETIREMENT 444,720 489,192 538,111 2,747,111 5,733,217
TAXES PAID ON NET INCOME 0 0 0 0 0
TAXES PAID ON SALE (RESIDUAL) 4,628,245 4,628,245
----------- ----------- ----------- ----------- -----------
TOTAL USES OF CASH $694,246 $741,572 $803,106 $7,653,586 $24,278,901
ANNUAL CASH INCREASE/(DECREASE) $440,101 $538,243 $631,069 $12,463,631 $14,309,327
CUMULATIVE CASH 676,384 1,214,627 1,845,696 14,309,327
216
FALCON CABLE SYSTEMS CO. EXHIBIT C
FLORENCE REGION - OREGON LOW ANALYSIS
AS OF DECEMBER 31, 1995
RETURN ON EQUITY METHOD
DEBT AMORTIZATION - LOW VALUE
- -----------------------------
TOTAL YEAR 1 CASH REQUIREMENTS $9,604,557
YEAR 1 DEBT REQUIREMENTS 4,802,279
YEAR 1 EQUITY REQUIREMENTS 4,802,279
FINANCING AVAILABLE $6,884,274 $7,411,036 $8,091,760 $8,897,899 $9,680,409
UNUSED LEVERAGE 2,081,995 2,608,757 3,335,266 4,728,394 5,875,503
SENIOR DEBT: 1996 1997 1998 1999 2000
----------- ----------- ----------- ----------- -----------
BEGINNING DEBT $0 $4,802,279 $4,802,279 $4,500,958 $4,169,505
DEBT ADDED 4,802,279 0 0 0 0
TOTAL ANNUAL PAYMENTS 480,228 480,228 781,549 781,549 781,549
INTEREST 480,228 480,228 480,228 450,096 416,950
PRINCIPAL REPAYMENT 0 0 301,321 331,453 364,598
ENDING BALANCE 4,802,279 4,802,279 4,500,958 4,169,505 3,804,906
LINE OF CREDIT:
BEGINNING DEBT $0 $0 $0 $255,537 $0
BORROWINGS 0 0 255,537 0 0
PRINCIPAL PAYMENTS 0 0 0 255,537 0
INTEREST 0 0 25,554 25,554 0
SENIOR DEBT COVERAGE 4.2 3.9 3.3 2.8 2.4
LOC DEBT COVERAGE 0.0 0.0 0.2 0.0 0.0
TOTAL DEBT COVERAGE 4.2 3.9 3.5 2.8 2.4
RETURN ON EQUITY METHOD
DEBT AMORTIZATION - LOW VALUE
- -----------------------------
TOTAL YEAR 1 CASH REQUIREMENTS
YEAR 1 DEBT REQUIREMENTS
YEAR 1 EQUITY REQUIREMENTS
FINANCING AVAILABLE $10,410,091 $11,116,527 $11,836,390 $12,587,817
UNUSED LEVERAGE 7,006,242 8,153,843 9,358,986 10,644,221
SENIOR DEBT: 2001 2002 2003 2004 TOTAL
----------- ----------- ----------- ----------- -----------
BEGINNING DEBT $3,804,906 $3,403,848 $2,962,685 $2,477,404
DEBT ADDED 0 0 0 0 $4,802,279
TOTAL ANNUAL PAYMENTS 781,549 781,549 781,549 781,549 6,431,297
INTEREST 380,491 340,385 296,268 247,740 3,572,614
PRINCIPAL REPAYMENT 401,058 441,164 485,280 533,808 2,858,683
ENDING BALANCE 3,403,848 2,962,685 2,477,404 1,943,596
LINE OF CREDIT:
BEGINNING DEBT $0 $0 $0 $0 $0
BORROWINGS 0 0 0 0 255,537
PRINCIPAL PAYMENTS 0 0 0 0 255,537
INTEREST 0 0 0 0 51,107
SENIOR DEBT COVERAGE 2.0 1.6 1.3 0.9
LOC DEBT COVERAGE 0.0 0.0 0.0 0.0
TOTAL DEBT COVERAGE 2.0 1.6 1.3 0.9
217
FALCON CABLE SYSTEMS CO. EXHIBIT C
FLORENCE REGION - OREGON HIGH ANALYSIS
AS OF DECEMBER 31, 1995
RETURN ON EQUITY METHOD
DEBT AMORTIZATION - HIGH VALUE
- ------------------------------
TOTAL YEAR 1 CASH REQUIREMENTS $10,650,173
YEAR 1 DEBT REQUIREMENTS 5,325,087
YEAR 1 EQUITY REQUIREMENTS 5,325,087
FINANCING AVAILABLE $7,943,393 $8,551,195 $9,336,646 $10,266,806 $11,169,703
UNUSED LEVERAGE 2,618,306 3,226,109 3,937,554 5,452,160 6,950,569
SENIOR: 1996 1997 1998 1999 2000
----------- ----------- ---------- ----------- -----------
BEGINNING DEBT $0 $5,325,087 $5,325,087 $4,990,962 $4,623,425
DEBT ADDED 5,325,087 0 0 0 0
TOTAL ANNUAL PAYMENTS 532,509 532,509 866,633 866,633 866,633
INTEREST 532,509 532,509 532,509 499,096 462,342
PRINCIPAL REPAYMENT 0 0 334,125 367,537 404,291
ENDING BALANCE 5,325,087 5,325,087 4,990,962 4,623,425 4,219,134
LINE OF CREDIT:
BEGINNING DEBT $0 $0 $0 $408,130 $191,221
BORROWINGS 0 0 408,130 0 0
PRINCIPAL PAYMENTS 0 0 0 216,909 191,221
INTEREST 0 0 40,813 40,813 19,122
SENIOR DEBT COVERAGE 4.7 4.3 3.6 3.1 2.6
LOC DEBT COVERAGE 0.0 0.0 0.3 0.1 0.0
TOTAL DEBT COVERAGE 4.7 4.3 3.9 3.2 2.6
RETURN ON EQUITY METHOD
DEBT AMORTIZATION - HIGH VALUE
- ------------------------------
TOTAL YEAR 1 CASH REQUIREMENTS
YEAR 1 DEBT REQUIREMENTS
YEAR 1 EQUITY REQUIREMENTS
FINANCING AVAILABLE $12,011,643 $12,826,762 $13,657,373 $14,524,404
UNUSED LEVERAGE 8,237,229 9,541,540 10,910,262 12,369,215
SENIOR: 2001 2002 2003 2004 TOTAL
----------- ----------- ----------- ----------- -----------
BEGINNING DEBT $4,219,134 $3,774,414 $3,285,222 $2,747,111
DEBT ADDED 0 0 0 0 $5,325,087
TOTAL ANNUAL PAYMENTS 866,633 866,633 866,633 866,633 7,131,450
INTEREST 421,913 377,441 328,522 274,711 3,961,553
PRINCIPAL REPAYMENT 444,720 489,192 538,111 591,922 3,169,898
ENDING BALANCE 3,774,414 3,285,222 2,747,111 2,155,189
LINE OF CREDIT:
BEGINNING DEBT $0 $0 $0 $0 $0
BORROWINGS 0 0 0 0 408,130
PRINCIPAL PAYMENTS 0 0 0 0 408,130
INTEREST 0 0 0 0 100,748
SENIOR DEBT COVERAGE 2.2 1.8 1.4 1.0
LOC DEBT COVERAGE 0.0 0.0 0.0 0.0
TOTAL DEBT COVERAGE 2.2 1.8 1.4 1.0
218
FALCON CABLE SYSTEMS CO. EXHIBIT D
FLORENCE REGION - OREGON
AS OF DECEMBER 31, 1995
RETURN ON INVESTMENT METHOD
PROFIT AND LOSS
- ---------------
YEAR ENDING DECEMBER 31, 1996 1997 1998 1999 2000
----------- ----------- ----------- ----------- -----------
REVENUES $2,090,507 $2,274,330 $2,478,712 $2,685,374 $2,885,397
OPERATING EXPENSES 950,348 1,029,443 1,109,804 1,196,081 1,283,845
----------- ----------- ----------- ----------- -----------
OPERATING INCOME $1,140,159 $1,244,886 $1,368,907 $1,489,294 $1,601,552
PLUS: RESIDUAL VALUE
LESS: CAPITAL EXPENDITURES 217,813 218,806 1,125,647 230,670 244,024
----------- ----------- ----------- ----------- -----------
TOTAL CASH FLOW $922,347 $1,026,080 $243,260 $1,258,624 $1,357,529
NET PRESENT VALUE @ 16.6% $9,707,817
-----------
NET PRESENT VALUE @ 15.1% $10,612,381
-----------
RETURN ON INVESTMENT METHOD
PROFIT AND LOSS
- ---------------
YEAR ENDING DECEMBER 31, 2001 2002 2003 2004 TOTAL
REVENUES $3,079,488 $3,274,528 $3,477,801 $3,693,943 $25,940,081
OPERATING EXPENSES 1,369,253 1,453,545 1,541,214 1,636,280 11,569,814
----------- ----------- ----------- ----------- -----------
OPERATING INCOME $1,710,235 $1,820,983 $1,936,587 $2,057,663 $14,370,267
PLUS: RESIDUAL VALUE 18,518,963 18,518,963
LESS: CAPITAL EXPENDITURES 249,526 252,380 264,995 278,230 3,082,090
----------- ----------- ----------- ----------- -----------
TOTAL CASH FLOW $1,460,709 $1,568,603 $1,671,592 $20,298,396 $29,807,140
NET PRESENT VALUE @ 16.6%
NET PRESENT VALUE @ 15.1%
219
FALCON CABLE SYSTEMS CO. EXHIBIT E
FLORENCE REGION - OREGON
AS OF DECEMBER 31, 1995
CABLE TELEVISION SUBSCRIBERS
- -----------------------------
YEAR ENDING DECEMBER 31, 1996 1997 1998 1999 2000
----- ----- ----- ----- -----
BEGINNING MILES 136.3
MILES ADDED 4.8 4.3 3.8 3.9 4.0
CUMULATIVE MILES 141.1 145.4 149.2 153.1 157.1
DENSITY OF ADDITIONAL PLANT 57 56 55 55 55
HOMES PASSED - BEGINNING 7,826
NEW HOMES & EXTENSIONS 274 243 209 214 219
HOMES PASSED - ENDING 8,100 8,343 8,551 8,765 8,984
GROWTH IN HOMES 3.5% 3.0% 2.5% 2.5% 2.5%
BASIC - BEGINNING SUBSCRIBERS 3,947 4,126 4,291 4,441 4,596
AVERAGE SUBSCRIBERS 4,036 4,208 4,366 4,519 4,676
ENDING SUBSCRIBERS 4,126 4,291 4,441 4,596 4,756
PENETRATION 50.9% 51.4% 51.9% 52.4% 52.9%
EXPANDED BASIC - BEGINNING 3,706 3,874 4,029 4,170 4,315
AVERAGE SUBSCRIBERS 3,790 3,951 4,100 4,243 4,390
ENDING SUBSCRIBERS 3,874 4,029 4,170 4,315 4,465
PENETRATION 93.9% 93.9% 93.9% 93.9% 93.9%
NEW PRODUCT TIER #1 - BEGINNING 1,344 1,435 1,775 2,087 2,160
AVERAGE SUBSCRIBERS 1,390 1,605 1,931 2,124 2,197
ENDING SUBSCRIBERS 1,435 1,775 2,087 2,160 2,235
PENETRATION 37.1% 44.1% 50.1% 50.1% 50.1%
NEW PRODUCT TIER #2 - BEGINNING 308 611 1,064 1,546 1,760
AVERAGE SUBSCRIBERS 459 838 1,305 1,653 1,791
ENDING SUBSCRIBERS 611 1,064 1,546 1,760 1,822
PENETRATION 14.8% 24.8% 34.8% 38.3% 38.3%
PAY TV - BEGINNING UNITS 1,053 1,059 1,145 1,229 1,318
AVERAGE UNITS 1,056 1,102 1,187 1,274 1,341
ENDING UNITS 1,059 1,145 1,229 1,318 1,364
PENETRATION 25.7% 26.7% 27.7% 28.7% 28.7%
PAY PER VIEW - BEGINNING UNITS/MO 300 342 411 538 688
AVERAGE UNITS 321 376 474 613 755
ENDING UNITS 342 411 538 688 823
AVERAGE BUY RATE/MO 23.0% 24.5% 27.5% 30.5% 32.0%
CONVERTER RENTALS - BEGINNING 1,910 2,058 2,205 2,416 2,638
AVERAGE SUBSCRIBERS 1,984 2,132 2,310 2,527 2,755
ENDING SUBSCRIBERS 2,058 2,205 2,416 2,638 2,872
PENETRATION 49.9% 51.4% 54.4% 57.4% 60.4%
ADDRESSABLE HOMES - BEGINNING 1,366 1,490 1,678 1,959 2,257
AVERAGE HOMES 1,428 1,584 1,819 2,108 2,415
ENDING HOMES 1,490 1,678 1,959 2,257 2,573
PENETRATION 36.1% 39.1% 44.1% 49.1% 54.1%
BASIC CHURN RATE 35% 35% 35% 35% 35%
YEAR ENDING DECEMBER 31, 2001 2002 2003 2004
----- ----- ----- -----
BEGINNING MILES
MILES ADDED 3.8 3.4 3.5 3.6
CUMULATIVE MILES 160.9 164.4 167.9 171.4
DENSITY OF ADDITIONAL PLANT 53 53 53 53
HOMES PASSED - BEGINNING
NEW HOMES & EXTENSIONS 202 184 187 191
HOMES PASSED - ENDING 9,187 9,370 9,558 9,749
GROWTH IN HOMES 2.3% 2.0% 2.0% 2.0%
BASIC - BEGINNING SUBSCRIBERS 4,756 4,909 5,054 5,203
AVERAGE SUBSCRIBERS 4,832 4,981 5,128 5,279
ENDING SUBSCRIBERS 4,909 5,054 5,203 5,355
PENETRATION 53.4% 53.9% 54.4% 54.9%
EXPANDED BASIC - BEGINNING 4,465 4,609 4,745 4,885
AVERAGE SUBSCRIBERS 4,537 4,677 4,815 4,957
ENDING SUBSCRIBERS 4,609 4,745 4,885 5,028
PENETRATION 93.9% 93.9% 93.9% 93.9%
NEW PRODUCT TIER #1 - BEGINNING 2,235 2,307 2,375 2,445
AVERAGE SUBSCRIBERS 2,271 2,341 2,410 2,481
ENDING SUBSCRIBERS 2,307 2,375 2,445 2,517
PENETRATION 50.1% 50.1% 50.1% 50.1%
NEW PRODUCT TIER #2 - BEGINNING 1,822 1,880 1,936 1,993
AVERAGE SUBSCRIBERS 1,851 1,908 1,964 2,022
ENDING SUBSCRIBERS 1,880 1,936 1,993 2,051
PENETRATION 38.3% 38.3% 38.3% 38.3%
PAY TV - BEGINNING UNITS 1,364 1,408 1,449 1,492
AVERAGE UNITS 1,386 1,429 1,471 1,514
ENDING UNITS 1,408 1,449 1,492 1,536
PENETRATION 28.7% 28.7% 28.7% 28.7%
PAY PER VIEW - BEGINNING UNITS/MO 823 924 1,006 1,094
AVERAGE UNITS 873 965 1,050 1,140
ENDING UNITS 924 1,006 1,094 1,187
AVERAGE BUY RATE/MO 33.0% 34.0% 35.0% 36.0%
CONVERTER RENTALS - BEGINNING 2,872 3,038 3,204 3,376
AVERAGE SUBSCRIBERS 2,955 3,121 3,290 3,466
ENDING SUBSCRIBERS 3,038 3,204 3,376 3,556
PENETRATION 61.9% 63.4% 64.9% 66.4%
ADDRESSABLE HOMES - BEGINNING 2,573 2,803 2,962 3,127
AVERAGE HOMES 2,688 2,883 3,045 3,213
ENDING HOMES 2,803 2,962 3,127 3,299
PENETRATION 57.1% 58.6% 60.1% 61.6%
BASIC CHURN RATE 35% 35% 35% 35%
220
FALCON CABLE SYSTEMS CO. EXHIBIT F
FLORENCE REGION - OREGON
AS OF DECEMBER 31, 1995
SERVICE RATES
- -------------
RUNNING RATES
AS OF AVERAGE RATES
CURRENT RATES DECEMBER 1995 FOR 1996
- -------------- ------------- ---------------
BASIC $23.40 $24.91
EXPANDED BASIC $3.79 $4.24
NEW PRODUCT TIER #1 $3.20 $3.50
NEW PRODUCT TIER #2 $4.50 $4.50
PAY $8.00 $8.00
PAY PER VIEW $7.77 $7.77
CONVERTER RENTALS $3.92 $3.66
INSTALLATIONS-NEW $50.00 $50.00
INSTALLATIONS-CHURN $25.00 $25.00
YEAR ENDING DECEMBER 31, 1996 1997 1998 1999 2000 2001 2002 2003 2004
------ ------ ------ ------ ------ ------ ------ ------ ------
PERCENTAGE RATE INCREASES
- -------------------------
BASIC 6% 3% 3% 3% 3% 3% 3% 3% 3%
EXPANDED BASIC 12% 3% 3% 3% 3% 3% 3% 3% 3%
NEW PRODUCT TIER #1 9% 3% 3% 3% 3% 3% 3% 3% 3%
NEW PRODUCT TIER #2 0% 3% 3% 3% 3% 3% 3% 3% 3%
PAY 0% 1% 1% 1% 1% 1% 1% 1% 1%
PAY PER VIEW 0% 3% 3% 3% 3% 3% 3% 3% 3%
CONVERTER/REMOTE RENTALS -7% 3% 3% 3% 3% 3% 3% 3% 3%
INSTALLATIONS-NEW 0% 3% 3% 3% 3% 3% 3% 3% 3%
INSTALLATIONS-CHURN 0% 3% 3% 3% 3% 3% 3% 3% 3%
AVERAGE RATES
- -------------
BASIC $24.91 $25.65 $26.42 $27.22 $28.03 $28.87 $29.74 $30.63 $31.55
EXPANDED BASIC 4.24 4.36 4.49 4.63 4.77 4.91 5.06 5.21 5.37
NEW PRODUCT TIER #1 3.50 3.61 3.71 3.83 3.94 4.06 4.18 4.31 4.43
NEW PRODUCT TIER #2 4.50 4.64 4.77 4.92 5.06 5.22 5.37 5.53 5.70
PAY 8.00 8.08 8.16 8.25 8.33 8.41 8.50 8.58 8.67
PAY PER VIEW 7.77 8.01 8.25 8.49 8.75 9.01 9.28 9.56 9.85
CONVERTER RENTALS 3.66 3.77 3.88 4.00 4.12 4.24 4.37 4.50 4.63
INSTALLATIONS-NEW 50.00 51.50 53.05 54.64 56.28 57.96 59.70 61.49 63.34
INSTALLATIONS-CHURN 25.00 25.75 26.52 27.32 28.14 28.98 29.85 30.75 31.67
221
FALCON CABLE SYSTEMS CO. EXHIBIT G
FLORENCE REGION - OREGON
AS OF DECEMBER 31, 1995
YEAR ENDING DECEMBER 31, 1996 1997 1998 1999 2000
----------- ----------- ----------- ----------- -----------
REVENUES:
BASIC $1,206,428 $1,295,592 $1,384,485 $1,475,809 $1,573,014
EXPANDED BASIC 192,675 206,915 221,112 235,697 251,222
NEW PRODUCT TIER #1 58,381 69,454 86,065 97,485 103,905
NEW PRODUCT TIER #2 24,806 46,584 74,762 97,542 108,855
PAY TV 101,436 106,903 116,292 126,027 134,016
PAY PER VIEW 29,951 36,159 46,937 62,463 79,272
CONVERTER RENTALS 87,080 96,365 107,574 121,170 136,080
INSTALLATIONS 35,142 36,883 38,495 41,016 43,698
COMMERCIAL 130,053 133,955 137,973 142,112 146,376
ADVERTISING 131,002 147,378 162,115 178,327 196,159
MISCELLANEOUS 93,554 98,141 102,902 107,726 112,801
----------- ----------- ----------- ----------- -----------
TOTAL REVENUES $2,090,507 $2,274,330 $2,478,712 $2,685,374 $2,885,397
OPERATING EXPENSES:
OPERATIONS $360,049 $385,710 $412,326 $439,808 $467,879
GENERAL & ADMINISTRATIVE 183,167 194,126 205,312 216,778 228,727
SALES & MARKETING 106,693 123,141 134,102 147,380 161,926
PROGRAMMING 300,438 326,466 358,065 392,114 425,313
----------- ----------- ----------- ----------- -----------
TOTAL OPERATING EXPENSES $950,348 $1,029,443 $1,109,804 $1,196,081 $1,283,845
OPERATING INCOME $1,140,159 $1,244,886 $1,368,907 $1,489,294 $1,601,552
OPERATING MARGIN 54.5% 54.7% 55.2% 55.5% 55.5%
TOTAL REVENUE/BASIC SUB/MONTH $43.16 $45.04 $47.31 $49.52 $51.42
CASH FLOW/BASIC SUB/MONTH $23.54 $24.65 $26.13 $27.47 $28.54
OPERATIONS % OF REVENUE 17% 17% 17% 16% 16%
G & A PERCENTAGE OF REVENUE 9% 9% 8% 8% 8%
SALES & MARKETING % OF REVENUE 5% 5% 5% 5% 6%
PROGRAMMING % OF REVENUE 14% 14% 14% 15% 15%
YEAR ENDING DECEMBER 31, 2001 2002 2003 2004 TOTAL
----------- ----------- ----------- ----------- -----------
REVENUES:
BASIC $1,674,390 $1,777,793 $1,885,144 $1,998,807 $14,271,461
EXPANDED BASIC 267,412 283,926 301,071 319,224 2,279,256
NEW PRODUCT TIER #1 110,602 117,432 124,523 132,031 899,878
NEW PRODUCT TIER #2 115,870 123,026 130,455 138,320 860,221
PAY TV 139,883 145,637 151,433 157,446 1,179,072
PAY PER VIEW 94,437 107,487 120,423 134,706 711,835
CONVERTER RENTALS 150,348 163,546 177,573 192,682 1,232,419
INSTALLATIONS 45,947 48,182 51,069 54,126 394,557
COMMERCIAL 150,767 155,290 159,949 164,747 1,321,222
ADVERTISING 211,852 228,800 247,104 266,873 1,769,611
MISCELLANEOUS 117,980 123,409 129,056 134,980 1,020,549
----------- ----------- ----------- ----------- -----------
TOTAL REVENUES $3,079,488 $3,274,528 $3,477,801 $3,693,943 $25,940,081
OPERATING EXPENSES:
OPERATIONS $496,050 $524,412 $554,051 $585,380 $4,225,666
GENERAL & ADMINISTRATIVE 241,027 253,568 266,576 280,291 2,069,571
SALES & MARKETING 175,606 188,555 202,409 219,185 1,458,997
PROGRAMMING 456,571 487,010 518,177 551,424 3,815,579
----------- ----------- ----------- ----------- -----------
TOTAL OPERATING EXPENSES $1,369,253 $1,453,545 $1,541,214 $1,636,280 $11,569,814
OPERATING INCOME $1,710,235 $1,820,983 $1,936,587 $2,057,663 $14,370,267
OPERATING MARGIN 55.5% 55.6% 55.7% 55.7%
TOTAL REVENUE/BASIC SUB/MONTH $53.11 $54.78 $56.51 $58.31
CASH FLOW/BASIC SUB/MONTH $29.49 $30.46 $31.47 $32.48
OPERATIONS % OF REVENUE 16% 16% 16% 16%
G & A PERCENTAGE OF REVENUE 8% 8% 8% 8%
SALES & MARKETING % OF REVENUE 6% 6% 6% 6%
PROGRAMMING % OF REVENUE 15% 15% 15% 15%
222
FALCON CABLE SYSTEMS CO. EXHIBIT H
FLORENCE REGION - OREGON
AS OF DECEMBER 31, 1995
CAPITAL EXPENDITURES
- --------------------
YEAR ENDING DECEMBER 31, 1996 1997 1998 1999 2000
----------- ----------- ----------- ----------- -----------
ASSUMPTIONS AND INPUTS:
- -----------------------
BV OF EXISTING PLANT $2,676,547
ADDITIONAL MILES OF PLANT 4.8 4.3 3.8 3.9 4.0
AERIAL PLANT PER MILE $12,000 $12,240 $12,485 $12,734 $12,989
UNDERGROUND PLANT PER MILE $18,000 $18,360 $18,727 $19,102 $19,484
PERCENTAGE OF PLANT AERIAL 10% 10% 10% 10% 10%
PERCENTAGE OF PLANT UNDERGROUND 90% 90% 90% 90% 90%
AVERAGE COST PER CONVERTER $110 $112 $114 $117 $119
PERCENTAGE CONVERTER USE 50% 51% 54% 57% 60%
PERCENTAGE REPLACEMENT 5% 5% 5% 5% 5%
INSTALLATION COST PER SUBSCRIBER $56 $57 $59 $60 $61
MISC. CAPITAL PER SUBSCRIBER $5 $5 $5 $5 $5
INFLATION FACTOR FOR CAPITALS 2% 2% 2% 2% 2%
ANNUAL COSTS:
- -------------
PLANT ADDITIONS - AERIAL $5,724 $5,309 $4,762 $4,978 $5,205
- UNDERGROUND 77,276 71,674 64,282 67,206 70,264
PLANT REBUILD/UPGRADE/INCL. HDND. 6,951 7,338 915,325 8,076 8,453
AVERAGE COST OF NEW CONVERTERS 9,804 9,542 9,339 10,374 11,492
CONVERTER REPLACEMENT 10,831 11,894 13,356 14,877 16,524
INSTALLATION COSTS 87,045 91,585 95,871 101,183 106,779
MISC. CAPITAL EXPENDITURES 20,182 21,463 22,713 23,976 25,307
----------- ----------- ----------- ----------- -----------
TOTAL CAPITAL EXPENDITURES $217,813 $218,806 $1,125,647 $230,670 $244,024
AS A % OF OPERATING INCOME 19.1% 17.6% 82.2% 15.5% 15.2%
YEAR ENDING DECEMBER 31, 2001 2002 2003 2004 TOTAL
----------- ----------- ----------- ----------- -----------
ASSUMPTIONS AND INPUTS:
- -----------------------
BV OF EXISTING PLANT
ADDITIONAL MILES OF PLANT 3.8 3.4 3.5 3.6
AERIAL PLANT PER MILE $13,249 $13,514 $13,784 $14,060
UNDERGROUND PLANT PER MILE $19,873 $20,271 $20,676 $21,090
PERCENTAGE OF PLANT AERIAL 10% 10% 10% 10%
PERCENTAGE OF PLANT UNDERGROUND 90% 90% 90% 90%
AVERAGE COST PER CONVERTER $121 $124 $126 $129
PERCENTAGE CONVERTER USE 62% 63% 65% 66%
PERCENTAGE REPLACEMENT 5% 5% 5% 5%
INSTALLATION COST PER SUBSCRIBER $62 $63 $65 $66
MISC. CAPITAL PER SUBSCRIBER $6 $6 $6 $6
INFLATION FACTOR FOR CAPITALS 2% 2% 2% 2% 120%
ANNUAL COSTS:
- -------------
PLANT ADDITIONS - AERIAL $5,014 $4,648 $4,836 $5,032 $45,508
- UNDERGROUND 67,689 62,752 65,288 67,925 614,358
PLANT REBUILD/UPGRADE/INCL. HDND. 8,848 9,242 9,628 10,030 983,890
AVERAGE COST OF NEW CONVERTERS 11,496 11,389 12,206 13,074 98,717
CONVERTER REPLACEMENT 17,874 19,274 20,719 22,259 147,607
INSTALLATION COSTS 111,929 117,026 122,864 128,983 963,265
MISC. CAPITAL EXPENDITURES 26,676 28,049 29,454 30,926 228,745
----------- ----------- ----------- ----------- -----------
TOTAL CAPITAL EXPENDITURES $249,526 $252,380 $264,995 $278,230 $3,082,090
AS A % OF OPERATING INCOME 14.6% 13.9% 13.7% 13.5%
223
FALCON CABLE SYSTEMS CO. EXHIBIT I
FLORENCE REGION - OREGON
AS OF DECEMBER 31, 1995
DEPRECIATION
- ------------
YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5
----------- ----------- ----------- ----------- -----------
ESTIMATED DEPRECIATION RATES 14.3% 24.5% 17.5% 12.5% 8.9%
DEPRECIATION - BEG. & ADTNS. 1996 1997 1998 1999 2000
----------- ----------- ----------- ----------- -----------
YEAR 1 $413,604 $708,829 $506,223 $361,506 $258,466
YEAR 2 31,267 53,586 38,269 27,329
YEAR 3 160,855 275,671 196,876
YEAR 4 32,963 56,491
YEAR 5 34,871
YEAR 6
YEAR 7
YEAR 8
YEAR 9
-------- -------- -------- -------- --------
TOTAL DEPRECIATION $413,604 $740,096 $720,664 $708,408 $574,033
YEAR 6 YEAR 7 YEAR 8
----------- ----------- -----------
ESTIMATED DEPRECIATION RATES 8.9% 8.9% 4.5%
DEPRECIATION - BEG. & ADTNS. 2001 2002 2003 2004 TOTAL
----------- ----------- ----------- ----------- -----------
YEAR 1 $258,177 $258,466 $2,765,271
YEAR 2 19,539 19,518 19,539 209,047
YEAR 3 140,593 100,520 100,408 100,520 1,075,443
YEAR 4 40,344 28,811 20,599 20,576 199,783
YEAR 5 59,761 42,680 30,479 21,791 189,582
YEAR 6 35,657 61,109 43,642 31,166 171,574
YEAR 7 36,065 61,808 44,141 142,014
YEAR 8 37,868 64,897 102,765
YEAR 9 39,759 39,759
----------- ----------- ----------- ----------- -----------
TOTAL DEPRECIATION $554,072 $547,168 $314,342 $322,851 $4,895,239
224
FALCON CABLE SYSTEMS CO. EXHIBIT J
FLORENCE REGION - OREGON
AS OF DECEMBER 31, 1995
ASSUMPTIONS AND INPUTS
- ----------------------
REMAINING LIFE OF FRANCHISES (YEARS) 9
AVERAGE SUBSCRIBER LIFE (YEARS) 8
INCOME TAX RATE 34%
CAPITAL GAIN RATE 34%
NET FMV OF EXISTING ASSETS $2,676,547
SUBSCRIBERS IN FRANCHISES 100%
LOW HIGH
ANALYSIS ANALYSIS
----------- -----------
DEBT PERCENTAGE 50% 50%
EQUITY PERCENTAGE 50% 50%
RESIDUAL MULTIPLE (ROE & ROI) 9 9
MULT OF PAST YEAR'S OPERATING INCOME 10.5 11.5
MULT OF CURRENT YEAR'S OPERATING INCOME 10.0 11.0
MULT OF NEXT YEAR'S OPERATING INCOME 9.5 10.5
TARGET RETURN ON EQUITY 14.0% 12.0%
TARGET RETURN ON INVESTMENT 16.6% 15.1%
225
APPENDIX B
ALLOCATION OF SYSTEM FAIR MARKET VALUE TO EXCHANGE AND SALES CLUSTERS
FOR COOS BAY, DALLAS, AND FLORENCE
226
COOS BAY - SALE
227
FALCON CABLE SYSTEMS CO. EXHIBIT A
COOS BAY REGION - SALE
AS OF DECEMBER 31, 1995
VALUATION METHODS
- -----------------
LOW HIGH
--- ----
I. MULTIPLE OF PAST YEAR'S OPERATING INCOME
ADJUSTED OPERATING INCOME, PER BOOKS (DECEMBER 31, 1995) $2,825,070 $2,825,070
VALUATION MULTIPLE 10.5 11.5
---- ----
ESTIMATED FAIR MARKET VALUE $29,663,239 $32,488,309
----------- -----------
II. MULTIPLE OF "RUNNING RATE" OPERATING INCOME
ESTIMATED OPERATING INCOME
TOTAL CURRENT YEAR'S REVENUE $5,624,448 $5,624,448
OPERATING MARGIN, PER BOOKS (DECEMBER 31, 1995) 54.4% 54.4%
----- -----
"RUNNING RATE" OPERATING INCOME 3,057,310 3,057,310
VALUATION MULTIPLE 10.0 11.0
---- ----
ESTIMATED FAIR MARKET VALUE $30,573,102 $33,630,412
----------- -----------
III. MULTIPLE OF NEXT YEAR'S OPERATING INCOME
OPERATING INCOME $3,198,621 $3,198,621
VALUATION MULTIPLE 9.5 10.5
---- ----
ESTIMATED FAIR MARKET VALUE $30,386,896 $33,585,517
----------- -----------
IV. DISCOUNTED CASH FLOW RETURN ON EQUITY
TARGET RETURN ON EQUITY 14.0% 12.0%
ESTIMATED FAIR MARKET VALUE $24,325,213 $26,176,650
----------- -----------
V. DISCOUNTED CASH FLOW RETURN ON INVESTMENT
TARGET RETURN ON INVSTMT 16.6% 15.1%
ESTIMATED FAIR MARKET VALUE $24,087,871 $25,882,068
----------- -----------
SUMMARY OF VALUES
- -----------------
I. MULTIPLE OF PAST YEAR'S OPERATING INCOME $29,663,239 $32,488,309
II. MULTIPLE OF "RUNNING RATE" OPERATING INCOME 30,573,102 33,630,412
III. MULTIPLE OF NEXT YEAR'S OPERATING INCOME 30,386,896 33,585,517
IV. DISCOUNTED CASH FLOW RETURN ON EQUITY 24,325,213 26,176,650
V. DISCOUNTED CASH FLOW RETURN ON INVESTMENT 24,087,871 25,882,068
---------- ----------
RANGE OF ESTIMATED FAIR MARKET VALUES $26,670,000 $29,004,000
ESTIMATED FAIR MARKET VALUE $27,837,000
-----------
228
FALCON CABLE SYSTEMS CO. EXHIBIT B
COOS BAY REGION - SALE LOW ANALYSIS
AS OF DECEMBER 31, 1995
RETURN ON EQUITY METHOD
PROFIT AND LOSS - LOW VALUE
- ---------------------------
YEAR ENDING DECEMBER 31, 1996 1997 1998 1999
---- ---- ---- ----
REVENUES $5,884,413 $6,177,231 $6,523,907 $6,899,841
OPERATING EXPENSES 2,685,792 2,861,645 3,018,664 3,173,709
--------- --------- --------- ---------
OPERATING INCOME $3,198,621 $3,315,586 $3,505,243 $3,726,132
OPERATING MARGIN 0.54 0.54 0.54 0.54
PARENT SERVICES/MGT FEE (5%) 294,221 308,862 326,195 344,992
FRANCHISE AMORTIZATION (15) 1,155,600 1,155,600 1,155,600 1,155,600
SUBSCRIBER LIST (8) 297,333 297,333 297,333 297,333
NON-COMPETE COVENANTS (0) 0 0 0 0
DEPRECIATION 693,989 1,243,896 1,226,319 1,413,092
INTEREST 1,152,115 1,152,115 1,152,115 1,079,825
--------- --------- --------- ---------
PRE-TAX INCOME ($394,637) ($842,219) ($652,320) ($564,710)
INCOME TAX (EXPENSE)/BENEFIT 134,177 286,355 221,789 192,001
--------- --------- --------- ---------
NET INCOME ($260,461) ($555,865) ($430,531) ($372,709)
SOURCES AND USES OF CASH
- ------------------------
SOURCES OF CASH -
PRE TAX INCOME ($394,637) ($842,219) ($652,320) ($564,710)
FRANCHISE AMORTIZATION (15) 1,155,600 1,155,600 1,155,600 1,155,600
SUBSCRIBER LIST (8) 297,333 297,333 297,333 297,333
NON-COMPETE COVENANTS (0) 0 0 0 0
DEPRECIATION 693,989 1,243,896 1,226,319 1,413,092
EQUITY 11,521,150
DEBT 11,521,150 0 0 0
RESIDUAL VALUE IN YEAR 7
--------- --------- --------- ---------
TOTAL SOURCES OF CASH $24,794,586 $1,854,609 $2,026,933 $2,301,315
USES OF CASH -
PURCHASE PRICE - CURRENT $24,325,213
CAPITAL EXPENDITURES 369,108 381,716 1,983,494 1,777,461
DEBT RETIREMENT 0 0 722,899 795,189
TAXES PAID ON NET INCOME 0 0 0 0
TAXES PAID ON SALE (RESIDUAL)
--------- --------- --------- ---------
TOTAL USES OF CASH $24,694,321 $381,716 $2,706,394 $2,572,650
ANNUAL CASH INCREASE/(DECREASE) $100,265 $1,472,894 ($679,461) ($271,335)
CUMULATIVE CASH 100,265 1,573,159 893,698 622,363
YEAR ENDING DECEMBER 31, 2000 2001 2002 TOTAL
---- ---- ---- -----
REVENUES $7,257,273 $7,565,069 $7,864,354 $48,172,089
OPERATING EXPENSES 3,322,942 3,460,424 3,596,527 22,119,703
--------- --------- --------- ----------
OPERATING INCOME $3,934,331 $4,104,646 $4,267,827 $26,052,386
OPERATING MARGIN 0.54 0.54 0.54
PARENT SERVICES/MGT FEE (5%) 362,864 378,253 393,218 2,408,604
FRANCHISE AMORTIZATION (15) 1,155,600 1,155,600 1,155,600 8,089,200
SUBSCRIBER LIST (8) 297,333 297,333 297,333 2,081,333
NON-COMPETE COVENANTS (0) 0 0 0 0
DEPRECIATION 1,324,827 1,193,767 1,114,174 8,210,064
INTEREST 1,000,306 912,835 816,618 7,265,929
--------- --------- --------- ---------
PRE-TAX INCOME ($206,599) $166,856 $490,885 ($2,002,745)
INCOME TAX (EXPENSE)/BENEFIT 70,244 (56,731) (166,901) 680,933
------ ------- -------- -------
NET INCOME ($136,355) $110,125 $323,984 ($1,321,812)
SOURCES AND USES OF CASH
- ------------------------
SOURCES OF CASH -
PRE TAX INCOME ($206,599) $166,856 $490,885 ($2,002,745)
FRANCHISE AMORTIZATION (15) 1,155,600 1,155,600 1,155,600 8,089,200
SUBSCRIBER LIST (8) 297,333 297,333 297,333 2,081,333
NON-COMPETE COVENANTS (0) 0 0 0 0
DEPRECIATION 1,324,827 1,193,767 1,114,174 8,210,064
EQUITY 11,521,150
DEBT 0 0 0 11,521,150
RESIDUAL VALUE IN YEAR 7 38,410,446 38,410,446
--------- --------- ---------- ----------
TOTAL SOURCES OF CASH $2,571,162 $2,813,557 $41,468,438 $77,830,599
USES OF CASH -
PURCHASE PRICE - CURRENT $24,325,213
CAPITAL EXPENDITURES 428,657 440,091 451,794 5,832,321
DEBT RETIREMENT 874,708 962,179 8,166,176 11,521,150
TAXES PAID ON NET INCOME 0 0 0 0
TAXES PAID ON SALE (RESIDUAL) 8,374,460 8,374,460
--------- --------- --------- ---------
TOTAL USES OF CASH $1,303,365 $1,402,270 $16,992,429 $50,053,144
ANNUAL CASH INCREASE/(DECREASE) $1,267,797 $1,411,287 $24,476,009 $27,777,455
CUMULATIVE CASH 1,890,159 3,301,446 27,777,455
229
FALCON CABLE SYSTEMS CO. EXHIBIT B
COOS BAY REGION - SALE HIGH ANALYSIS
AS OF DECEMBER 31, 1995
RETURN ON EQUITY METHOD
PROFIT AND LOSS - HIGH VALUE
- ----------------------------
YEAR ENDING DECEMBER 31, 1996 1997 1998 1999
---- ---- ---- ----
REVENUES $5,884,413 $6,177,231 $6,523,907 $6,899,841
OPERATING EXPENSES 2,685,792 2,861,645 3,018,664 3,173,709
--------- --------- --------- ---------
OPERATING INCOME $3,198,621 $3,315,586 $3,505,243 $3,726,132
OPERATING MARGIN 0.54 0.54 0.54 0.54
PARENT SERVICES/MGT FEE (5%) 294,221 308,862 326,195 344,992
FRANCHISE AMORTIZATION (15) 1,155,600 1,155,600 1,155,600 1,155,600
SUBSCRIBER LIST (8) 297,333 297,333 297,333 297,333
NON-COMPETE COVENANTS (0) 0 0 0 0
DEPRECIATION 693,989 1,243,896 1,226,319 1,413,092
INTEREST 1,249,555 1,249,555 1,249,555 1,171,152
--------- --------- --------- ---------
PRE-TAX INCOME ($492,078) ($939,660) ($749,760) ($656,037)
INCOME TAX (EXPENSE)/BENEFIT 167,306 319,484 254,919 223,052
------- ------- ------- -------
NET INCOME ($324,771) ($620,176) ($494,842) ($432,984)
SOURCES AND USES OF CASH
- ------------------------
SOURCES OF CASH -
PRE TAX INCOME ($492,078) ($939,660) ($749,760) ($656,037)
FRANCHISE AMORTIZATION (15) 1,155,600 1,155,600 1,155,600 1,155,600
SUBSCRIBER LIST (8) 297,333 297,333 297,333 297,333
NON-COMPETE COVENANTS (0) 0 0 0 0
DEPRECIATION 693,989 1,243,896 1,226,319 1,413,092
EQUITY 12,495,555
DEBT 12,495,555 0 0 0
RESIDUAL VALUE IN YEAR 7
--------- --------- --------- ---------
TOTAL SOURCES OF CASH $26,645,954 $1,757,169 $1,929,492 $2,209,988
USES OF CASH -
PURCHASE PRICE - CURRENT $26,176,650
CAPITAL EXPENDITURES 369,108 381,716 1,983,494 1,777,461
DEBT RETIREMENT 0 0 784,039 862,442
TAXES PAID ON NET INCOME 0 0 0 0
TAXES PAID ON SALE (RESIDUAL)
--------- --------- --------- ---------
TOTAL USES OF CASH $26,545,759 $381,716 $2,767,533 $2,639,903
ANNUAL CASH INCREASE/(DECREASE) $100,196 $1,375,453 ($838,041) ($429,915)
CUMULATIVE CASH 100,196 1,475,649 637,608 207,693
YEAR ENDING DECEMBER 31, 2000 2001 2002 TOTAL
---- ---- ---- -----
REVENUES $7,257,273 $7,565,069 $7,864,354 $48,172,089
OPERATING EXPENSES 3,322,942 3,460,424 3,596,527 22,119,703
--------- --------- --------- ----------
OPERATING INCOME $3,934,331 $4,104,646 $4,267,827 $26,052,386
OPERATING MARGIN 0.54 0.54 0.54
PARENT SERVICES/MGT FEE (5%) 362,864 378,253 393,218 2,408,604
FRANCHISE AMORTIZATION (15) 1,155,600 1,155,600 1,155,600 8,089,200
SUBSCRIBER LIST (8) 297,333 297,333 297,333 2,081,333
NON-COMPETE COVENANTS (0) 0 0 0 0
DEPRECIATION 1,324,827 1,193,767 1,114,174 8,210,064
INTEREST 1,084,907 990,039 885,683 7,880,447
--------- ------- ------- ---------
PRE-TAX INCOME ($291,200) $89,653 $421,819 ($2,617,263)
INCOME TAX (EXPENSE)/BENEFIT 99,008 (30,482) (143,418) 889,869
------ ------- -------- -------
NET INCOME ($192,192) $59,171 $278,401 ($1,727,394)
SOURCES AND USES OF CASH
- ------------------------
SOURCES OF CASH -
PRE TAX INCOME ($291,200) $89,653 $421,819 ($2,617,263)
FRANCHISE AMORTIZATION (15) 1,155,600 1,155,600 1,155,600 8,089,200
SUBSCRIBER LIST (8) 297,333 297,333 297,333 2,081,333
NON-COMPETE COVENANTS (0) 0 0 0 0
DEPRECIATION 1,324,827 1,193,767 1,114,174 8,210,064
EQUITY 12,495,555
DEBT 0 0 0 12,495,555
RESIDUAL VALUE IN YEAR 7 38,410,446 38,410,446
--------- --------- ---------- ----------
TOTAL SOURCES OF CASH $2,486,560 $2,736,353 $41,399,373 $79,164,890
USES OF CASH -
PURCHASE PRICE - CURRENT $26,176,650
CAPITAL EXPENDITURES 428,657 440,091 451,794 5,832,321
DEBT RETIREMENT 948,687 1,043,555 8,856,832 12,495,555
TAXES PAID ON NET INCOME 0 0 0 0
TAXES PAID ON SALE (RESIDUAL) 7,536,035 7,536,035
--------- --------- --------- ---------
TOTAL USES OF CASH $1,377,344 $1,483,646 $16,844,661 $52,040,562
ANNUAL CASH INCREASE/(DECREASE) $1,109,217 $1,252,707 $24,554,712 $27,124,329
CUMULATIVE CASH 1,316,910 2,569,617 27,124,329
230
FALCON CABLE SYSTEMS CO. EXHIBIT C
COOS BAY REGION - SALE LOW ANALYSIS
AS OF DECEMBER 31, 1995
RETURN ON EQUITY METHOD
DEBT AMORTIZATION - LOW VALUE
- -----------------------------
TOTAL YEAR 1 CASH REQUIREMENTS $23,042,301
YEAR 1 DEBT REQUIREMENTS 11,521,150
YEAR 1 EQUITY REQUIREMENTS 11,521,150
FINANCING AVAILABLE $18,362,957 $20,791,034 $21,551,309 $22,784,080
UNUSED LEVERAGE 6,841,807 9,269,884 10,753,058 12,781,018
SENIOR DEBT: 1996 1997 1998 1999
---- ---- ---- ----
BEGINNING DEBT $0 $11,521,150 $11,521,150 $10,798,251
DEBT ADDED 11,521,150 0 0 0
TOTAL ANNUAL PAYMENTS 1,152,115 1,152,115 1,875,014 1,875,014
INTEREST 1,152,115 1,152,115 1,152,115 1,079,825
PRINCIPAL REPAYMENT 0 0 722,899 795,189
ENDING BALANCE 11,521,150 11,521,150 10,798,251 10,003,062
LINE OF CREDIT:
BEGINNING DEBT $0 $0 $0 $0
BORROWINGS 0 0 0 0
PRINCIPAL PAYMENTS 0 0 0 0
INTEREST 0 0 0 0
SENIOR DEBT COVERAGE 3.6 3.5 3.1 2.7
LOC DEBT COVERAGE 0.0 0.0 0.0 0.0
TOTAL DEBT COVERAGE 3.6 3.5 3.1 2.7
TOTAL YEAR 1 CASH REQUIREMENTS
YEAR 1 DEBT REQUIREMENTS
YEAR 1 EQUITY REQUIREMENTS
FINANCING AVAILABLE $24,219,859 $25,573,155 $26,680,196
UNUSED LEVERAGE 15,091,504 17,406,979 19,572,417
SENIOR DEBT: 2000 2001 2002 TOTAL
---- ---- ---- -----
BEGINNING DEBT $10,003,062 $9,128,354 $8,166,176
DEBT ADDED 0 0 0 11,521,150
TOTAL ANNUAL PAYMENTS 1,875,014 1,875,014 1,875,014 11,679,301
INTEREST 1,000,306 912,835 816,618 7,265,929
PRINCIPAL REPAYMENT 874,708 962,179 1,058,397 4,413,371
ENDING BALANCE 9,128,354 8,166,176 7,107,779
LINE OF CREDIT:
BEGINNING DEBT $0 $0 $0 $0
BORROWINGS 0 0 0 0
PRINCIPAL PAYMENTS 0 0 0 0
INTEREST 0 0 0 0
SENIOR DEBT COVERAGE 2.3 2.0 1.7
LOC DEBT COVERAGE 0.0 0.0 0.0
TOTAL DEBT COVERAGE 2.3 2.0 1.7
231
FALCON CABLE SYSTEMS CO. EXHIBIT C
COOS BAY REGION - SALE HIGH ANALYSIS
AS OF DECEMBER 31, 1995
RETURN ON EQUITY METHOD
DEBT AMORTIZATION - HIGH VALUE
- ------------------------------
TOTAL YEAR 1 CASH REQUIREMENTS $24,991,110
YEAR 1 DEBT REQUIREMENTS 12,495,555
YEAR 1 EQUITY REQUIREMENTS 12,495,555
FINANCING AVAILABLE $21,188,028 $23,989,655 $24,866,895 $26,289,324
UNUSED LEVERAGE 8,692,473 11,494,100 13,155,379 15,440,250
SENIOR: 1996 1997 1998 1999
---- ---- ---- ----
BEGINNING DEBT $0 $12,495,555 $12,495,555 $11,711,516
DEBT ADDED 12,495,555 0 0 0
TOTAL ANNUAL PAYMENTS 1,249,555 1,249,555 2,033,594 2,033,594
INTEREST 1,249,555 1,249,555 1,249,555 1,171,152
PRINCIPAL REPAYMENT 0 0 784,039 862,442
ENDING BALANCE 12,495,555 12,495,555 11,711,516 10,849,074
LINE OF CREDIT:
BEGINNING DEBT $0 $0 $0 $0
BORROWINGS 0 0 0 0
PRINCIPAL PAYMENTS 0 0 0 0
INTEREST 0 0 0 0
SENIOR DEBT COVERAGE 3.9 3.8 3.3 2.9
LOC DEBT COVERAGE 0.0 0.0 0.0 0.0
TOTAL DEBT COVERAGE 3.9 3.8 3.3 2.9
TOTAL YEAR 1 CASH REQUIREMENTS
YEAR 1 DEBT REQUIREMENTS
YEAR 1 EQUITY REQUIREMENTS
FINANCING AVAILABLE $27,945,991 $29,507,486 $30,784,842
UNUSED LEVERAGE 18,045,603 20,650,654 23,075,920
SENIOR: 2000 2001 2002 TOTAL
---- ---- ---- -----
BEGINNING DEBT $10,849,074 $9,900,387 $8,856,832
DEBT ADDED 0 0 0 $12,495,555
TOTAL ANNUAL PAYMENTS 2,033,594 2,033,594 2,033,594 12,667,081
INTEREST 1,084,907 990,039 885,683 7,880,447
PRINCIPAL REPAYMENT 948,687 1,043,555 1,147,911 4,786,634
ENDING BALANCE 9,900,387 8,856,832 7,708,921
LINE OF CREDIT:
BEGINNING DEBT $0 $0 $0 $0
BORROWINGS 0 0 0 0
PRINCIPAL PAYMENTS 0 0 0 0
INTEREST 0 0 0 0
SENIOR DEBT COVERAGE 2.5 2.2 1.8
LOC DEBT COVERAGE 0.0 0.0 0.0
TOTAL DEBT COVERAGE 2.5 2.2 1.8
232
FALCON CABLE SYSTEMS CO. EXHIBIT D
COOS BAY REGION - SALE
AS OF DECEMBER 31, 1995
RETURN ON INVESTMENT METHOD
PROFIT AND LOSS
- ---------------
YEAR ENDING DECEMBER 31, 1996 1997 1998 1999
---- ---- ---- ----
REVENUES $5,884,413 $6,177,231 $6,523,907 $6,899,841
OPERATING EXPENSES 2,685,792 2,861,645 3,018,664 3,173,709
--------- --------- --------- ---------
OPERATING INCOME 3,198,621 3,315,586 3,505,243 3,726,132
PLUS: RESIDUAL VALUE
LESS: CAPITAL EXPENDITURES 369,108 381,716 1,983,494 1,777,461
TOTAL CASH FLOW $2,829,512 $2,933,870 $1,521,749 $1,948,671
NET PRESENT VALUE @ 16.6% $24,087,871
-----------
NET PRESENT VALUE @ 15.1% $25,882,068
-----------
YEAR ENDING DECEMBER 31, 2000 2001 2002 TOTAL
---- ---- ---- -----
REVENUES $7,257,273 $7,565,069 $7,864,354 $48,172,089
OPERATING EXPENSES 3,322,942 3,460,424 3,596,527 22,119,703
--------- --------- --------- ----------
OPERATING INCOME 3,934,331 4,104,646 4,267,827 26,052,386
PLUS: RESIDUAL VALUE 38,410,446 38,410,446
LESS: CAPITAL EXPENDITURES 428,657 440,091 451,794 5,832,321
TOTAL CASH FLOW $3,505,674 $3,664,554 $42,226,480 $58,630,511
NET PRESENT VALUE @ 16.6%
NET PRESENT VALUE @ 15.1%
233
FALCON CABLE SYSTEMS CO. EXHIBIT E
COOS BAY REGION - SALE
AS OF DECEMBER 31, 1995
CABLE TELEVISION SUBSCRIBERS
- ----------------------------
YEAR ENDING DECEMBER 31, 1996 1997 1998 1999 2000 2001 2002
---- ---- ---- ---- ---- ---- ----
BEGINNING MILES 325.6
MILES ADDED 0.5 0.6 0.5 0.7 1.3 1.3 1.3
CUMULATIVE MILES 326.0 326.6 327.2 327.8 329.1 330.4 331.7
DENSITY OF ADDITIONAL PLANT 0 8 5 11 19 19 18
HOMES PASSED - BEGINNING 17,754
NEW HOMES & EXTENSIONS 0 4 3 7 25 24 23
HOMES PASSED - ENDING 17,754 17,759 17,761 17,769 17,794 17,818 17,842
GROWTH IN HOMES 0.0% 0.0% 0.0% 0.0% 0.1% 0.1% 0.1%
BASIC - BEGINNING SUBSCRIBERS 13,578 13,622 13,670 13,717 13,767 13,831 13,894
AVERAGE SUBSCRIBERS 13,600 13,646 13,694 13,742 13,799 13,863 13,926
ENDING SUBSCRIBERS 13,622 13,670 13,717 13,767 13,831 13,894 13,957
PENETRATION 76.7% 77.0% 77.2% 77.5% 77.7% 78.0% 78.2%
EXPANDED BASIC - BEGINNING 13,249 13,292 13,339 13,384 13,433 13,496 13,558
AVERAGE SUBSCRIBERS 13,271 13,316 13,362 13,409 13,465 13,527 13,588
ENDING SUBSCRIBERS 13,292 13,339 13,384 13,433 13,496 13,558 13,619
PENETRATION 97.6% 97.6% 97.6% 97.6% 97.6% 97.6% 97.6%
NEW PRODUCT TIER #1 - BEGINNING 8,207 8,234 8,263 8,291 8,321 8,360 8,398
AVERAGE SUBSCRIBERS 8,220 8,248 8,277 8,306 8,341 8,379 8,417
ENDING SUBSCRIBERS 8,234 8,263 8,291 8,321 8,360 8,398 8,436
PENETRATION 60.4% 60.4% 60.4% 60.4% 60.4% 60.4% 60.4%
NEW PRODUCT TIER #2 - BEGINNING 1,779 2,330 3,261 4,369 5,486 5,512 5,537
AVERAGE SUBSCRIBERS 2,054 2,795 3,815 4,928 5,499 5,525 5,550
ENDING SUBSCRIBERS 2,330 3,261 4,369 5,486 5,512 5,537 5,562
PENETRATION 17.1% 23.9% 31.9% 39.9% 39.9% 39.9% 39.9%
NEW PRODUCT TIER #3 - BEGINNING 0 0 0 0 585 1,072 1,077
AVERAGE SUBSCRIBERS 0 0 0 293 828 1,074 1,079
ENDING SUBSCRIBERS 0 0 0 585 1,072 1,077 1,082
PENETRATION 0.0% 0.0% 0.0% 4.3% 7.8% 7.8% 7.8%
PAY TV - BEGINNING UNITS 6,041 5,925 6,082 6,240 6,263 6,292 6,321
AVERAGE UNITS 5,983 6,003 6,161 6,251 6,277 6,306 6,335
ENDING UNITS 5,925 6,082 6,240 6,263 6,292 6,321 6,349
PENETRATION 43.5% 44.5% 45.5% 45.5% 45.5% 45.5% 45.5%
PAY PER VIEW - BEGINING UNITS/MO 1,745 1,894 2,299 2,740 3,123 3,357 3,586
AVERAGE UNITS 1,820 2,097 2,519 2,931 3,240 3,472 3,690
ENDING UNITS 1,894 2,299 2,740 3,123 3,357 3,586 3,794
AVERAGE BUY RATE/MO 32.1% 34.1% 36.1% 37.6% 39.1% 40.6% 42.1%
CONVERTER RENTALS - BEGINNING UNITS 7,412 7,573 7,907 8,139 8,376 8,622 8,870
AVERAGE SUBSCRIBERS 7,492 7,740 8,023 8,257 8,499 8,746 8,995
ENDING SUBSCRIBERS 7,573 7,907 8,139 8,376 8,622 8,870 9,119
PENETRATION 55.6% 57.8% 59.3% 60.8% 62.3% 63.8% 65.3%
ADDRESSABLE HOMES 5,611 5,902 6,743 7,589 8,305 8,585 8,833
AVERAGE HOMES 5,756 6,322 7,166 7,947 8,445 8,709 8,923
ENDING HOMES 5,902 6,743 7,589 8,305 8,585 8,833 9,013
PENETRATION 43.3% 49.3% 55.3% 60.3% 62.1% 63.6% 64.6%
BASIC CHURN RATE 32% 32% 32% 32% 32% 32% 32%
234
FALCON CABLE SYSTEMS CO. EXHIBIT F
COOS BAY REGION - SALE
AS OF DECEMBER 31, 1995
SERVICE RATES
- -------------
RUNNING RATES
AS OF AVERAGE RATES
CURRENT RATES DECEMBER 1995 FOR 1996
- ------------- ------------- --------
BASIC $17.22 $18.18
EXPANDED BASIC $4.31 $4.78
NEW PRODUCT TIER #1 $5.14 $5.17
NEW PRODUCT TIER #2 $5.00 $5.00
NEW PRODUCT TIER #3 $4.00 $4.00
PAY $6.41 $6.41
PAY PER VIEW $5.35 $5.35
CONVERTER RENTALS $2.06 $2.06
INSTALLATIONS-NEW $50.00 $50.00
INSTALLATIONS-CHURN $25.00 $25.00
YEAR ENDING DECEMBER 31, 1996 1997 1998 1999 2000 2001 2002
---- ---- ---- ---- ---- ---- ----
PERCENTAGE RATE INCREASES
- -------------------------
BASIC 6% 3% 3% 3% 3% 3% 3%
EXPANDED BASIC 11% 3% 3% 3% 3% 3% 3%
NEW PRODUCT TIER #1 1% 3% 3% 3% 3% 3% 3%
NEW PRODUCT TIER #2 0% 3% 3% 3% 3% 3% 3%
NEW PRODUCT TIER #3 0% 3% 3% 3% 3% 3% 3%
PAY 0% 1% 1% 1% 1% 1% 1%
PAY PER VIEW 0% 3% 3% 3% 3% 3% 3%
CONVERTER/REMOTE RENTALS 0% 3% 3% 3% 3% 3% 3%
INSTALLATIONS-NEW 0% 3% 3% 3% 3% 3% 3%
INSTALLATIONS-CHURN 0% 3% 3% 3% 3% 3% 3%
AVERAGE RATES
- -------------
BASIC $18.18 $18.73 $19.29 $19.87 $20.46 $21.08 $21.71
EXPANDED BASIC 4.78 4.92 5.07 5.22 5.38 5.54 5.71
NEW PRODUCT TIER #1 5.17 5.33 5.48 5.65 5.82 5.99 6.17
NEW PRODUCT TIER #2 5.00 5.15 5.30 5.46 5.63 5.80 5.97
NEW PRODUCT TIER #3 4.00 4.12 4.24 4.37 4.50 4.64 4.78
PAY 6.41 6.47 6.54 6.60 6.67 6.74 6.80
PAY PER VIEW 5.35 5.51 5.67 5.84 6.02 6.20 6.39
CONVERTERS RENTALS 2.06 2.12 2.19 2.25 2.32 2.39 2.46
INSTALLATIONS-NEW 50.00 51.50 53.05 54.64 56.28 57.96 59.70
INSTALLATIONS-CHURN 25.00 25.75 26.52 27.32 28.14 28.98 29.85
235
FALCON CABLE SYSTEMS CO. EXHIBIT G
COOS BAY REGION - SALE
AS OF DECEMBER 31, 1995
YEAR ENDING DECEMBER 31, 1996 1997 1998 1999
---- ---- ---- ----
REVENUES:
BASIC $2,967,172 $3,066,553 $3,169,466 $3,276,081
EXPANDED BASIC 761,174 786,668 813,069 840,419
NEW PRODUCT TIER #1 509,998 527,080 544,768 563,094
NEW PRODUCT TIER #2 123,262 172,742 242,831 323,082
NEW PRODUCT TIER #3 0 0 0 15,344
PAY TV 460,158 466,354 483,389 495,383
PAY PER VIEW 116,781 138,603 171,527 205,541
CONVERTER RENTALS 185,209 197,062 210,406 223,052
INSTALLATIONS 88,277 91,363 94,371 97,696
COMMERCIAL 122,288 125,957 129,736 133,628
ADVERTISING 177,334 216,173 258,161 301,906
MISCELLANEOUS 372,759 388,676 406,182 424,614
------- ------- ------- -------
TOTAL REVENUES $5,884,413 $6,177,231 $6,523,907 $6,899,841
OPERATING EXPENSES:
OPERATIONS $853,768 $886,134 $921,905 $959,674
GENERAL & ADMINISTRATIVE 529,381 548,303 568,580 589,839
SALES & MARKETING 226,278 302,622 338,746 367,186
PROGRAMMING 1,076,365 1,124,587 1,189,433 1,257,010
--------- --------- --------- ---------
TOTAL OPERATING EXPENSES $2,685,792 $2,861,645 $3,018,664 $3,173,709
---------- ---------- ---------- ----------
OPERATING INCOME $3,198,621 $3,315,586 $3,505,243 $3,726,132
OPERATING MARGIN 54.4% 53.7% 53.7% 54.0%
TOTAL REVENUE/BASIC SUB/MONTH $36.06 $37.72 $39.70 $41.84
CASH FLOW/BASIC SUB/MONTH $19.60 $20.25 $21.33 $22.60
OPERATIONS % OF REVENUE 15% 14% 14% 14%
G & A PERCENTAGE OF REVENUE 9% 9% 9% 9%
SALES & MARKETING % OF REVENUE 4% 5% 5% 5%
PROGRAMMING % OF REVENUE 18% 18% 18% 18%
YEAR ENDING DECEMBER 31, 2000 2001 2002 TOTAL
---- ---- ---- -----
REVENUES:
BASIC $3,388,377 $3,506,138 $3,627,777 $23,001,565
EXPANDED BASIC 869,227 899,436 930,640 5,900,634
NEW PRODUCT TIER #1 582,395 602,636 623,543 3,953,513
NEW PRODUCT TIER #2 371,362 384,269 397,600 2,015,149
NEW PRODUCT TIER #3 44,759 59,783 61,857 181,743
PAY TV 502,415 509,781 517,225 3,434,704
PAY PER VIEW 234,004 258,272 282,781 1,407,509
CONVERTER RENTALS 236,458 250,635 265,496 1,568,319
INSTALLATIONS 101,656 105,151 108,759 687,272
COMMERCIAL 137,637 141,766 146,019 937,030
ADVERTISING 345,770 385,858 422,884 2,108,086
MISCELLANEOUS 443,215 461,345 479,772 2,976,565
------- ------- -------
TOTAL REVENUES $7,257,273 $7,565,069 $7,864,354 $48,172,089
OPERATING EXPENSES:
OPERATIONS $998,051 $1,034,948 $1,072,176 $6,726,656
GENERAL & ADMINISTRATIVE 611,535 633,147 655,161 4,135,946
SALES & MARKETING 396,085 423,492 449,671 2,504,080
PROGRAMMING 1,317,270 1,368,836 1,419,519 8,753,021
--------- --------- --------- ---------
TOTAL OPERATING EXPENSES $3,322,942 $3,460,424 $3,596,527 $22,119,703
---------- ---------- ---------- -----------
OPERATING INCOME $3,934,331 $4,104,646 $4,267,827 $26,052,386
OPERATING MARGIN 54.2% 54.3% 54.3% 54.1%
TOTAL REVENUE/BASIC SUB/MONTH $43.83 $45.48 $47.06
CASH FLOW/BASIC SUB/MONTH $23.76 $24.67 $25.54
OPERATIONS % OF REVENUE 14% 14% 14%
G & A PERCENTAGE OF REVENUE 8% 8% 8%
SALES & MARKETING % OF REVENUE 5% 6% 6%
PROGRAMMING % OF REVENUE 18% 18% 18%
236
FALCON CABLE SYSTEMS CO. EXHIBIT H
COOS BAY REGION - SALE
AS OF DECEMBER 31, 1995
CAPITAL EXPENDITURES
- --------------------
YEAR ENDING DECEMBER 31, 1996 1997 1998 1999 2000 2001 2002 TOTAL
---- ---- ---- ---- ---- ---- ---- -----
ASSUMPTIONS AND INPUTS:
- -----------------------
BV OF EXISTING PLANT $4,487,357
ADDITIONAL MILES OF PLANT 0.5 0.6 0.5 0.7 1.3 1.3 1.3
AERIAL PLANT PER MILE $12,000 $12,240 $12,485 $12,734 $12,989 $13,249 $13,514
UNDERGROUND PLANT PER MILE $18,000 $18,360 $18,727 $19,102 $19,484 $19,873 $20,271
PERCENTAGE OF PLANT AERIAL 20% 20% 20% 20% 20% 20% 20%
PERCENTAGE OF PLANT UNDERGROUND 80% 80% 80% 80% 80% 80% 80%
AVERAGE COST PER CONVERTER $110 $112 $114 $117 $119 $121 $124
PERCENTAGE CONVERTER USE 56% 58% 59% 61% 62% 64% 65%
PERCENTAGE REPLACEMENT 5% 5% 5% 5% 5% 5% 5%
INSTALLATION COST PER SUBSCRIBER $53 $54 $55 $57 $58 $59 $60
MISC. CAPITAL PER SUBSCRIBER $5 $5 $5 $5 $5 $6 $6
INFLATION FACTOR FOR CAPITALS 2% 2% 2% 2% 2% 2% 2% 115%
ANNUAL COSTS:
- -------------
PLANT ADDITIONS - AERIAL $1,140 $1,420 $1,359 $1,678 $3,420 $3,444 $3,467 $15,929
- UNDERGROUND 6,839 8,523 8,155 10,071 20,519 20,666 20,804 95,577
PLANT REBUILD/UPGRADE/INCL. HDND. 16,604 16,991 1,609,750 1,391,200 18,170 18,606 19,052 3,090,372
AVERAGE COST OF NEW CONVERTERS 2,720 3,100 3,162 3,563 4,747 4,918 5,091 27,302
CONVERTER REPLACEMENT 41,513 44,201 46,417 48,707 51,093 53,616 56,230 341,777
INSTALLATION COSTS 232,292 237,884 243,417 249,326 256,027 262,312 268,736 1,749,994
MISC. CAPITAL EXPENDITURES 68,001 69,596 71,234 72,915 74,682 76,528 78,414 511,370
------- ------ ------ ------ ------ ------ ------ -------
TOTAL CAPITAL EXPENDITURES $369,108 $381,716 $1,983,494 $1,777,461 $428,657 $440,091 $451,794 $5,832,321
AS A % OF OPERATING INCOME 11.5% 11.5% 56.6% 47.7% 10.9% 10.7% 10.6%
237
FALCON CABLE SYSTEMS CO. EXHIBIT I
COOS BAY REGION - SALE
AS OF DECEMBER 31, 1995
DEPRECIATION
- ------------
YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5 YEAR 6 YEAR 7
------ ------ ------ ------ ------ ------ ------
ESTIMATED DEPRECIATION RATES 14.3% 24.5% 17.5% 12.5% 8.9% 8.9% 8.9%
DEPRECIATION - BEG. & ADTNS. 1996 1997 1998 1999 2000 2001 2002 TOTAL
---- ---- ---- ---- ---- ---- ---- -----
YEAR 1 $693,989 $1,189,348 $849,396 $606,573 $433,682 $433,197 $433,682 $4,639,867
YEAR 2 54,547 93,482 66,762 47,676 34,087 34,049 330,604
YEAR 3 283,441 485,758 346,913 247,738 177,126 1,540,977
YEAR 4 253,999 435,300 310,878 222,005 1,222,182
YEAR 5 61,255 104,978 74,972 241,205
YEAR 6 62,889 107,778 170,667
YEAR 7 64,561 64,561
------- ------- ------- ------- ------- ------- ------ ------
TOTAL DEPRECIATION $693,989 $1,243,896 $1,226,319 $1,413,092 $1,324,827 $1,193,767 $1,114,174 $8,210,064
238
FALCON CABLE SYSTEMS CO. EXHIBIT J
COOS BAY REGION - SALE
AS OF DECEMBER 31, 1995
ASSUMPTIONS AND INPUTS
- ----------------------
REMAINING LIFE OF FRANCHISES (YEARS) 7
AVERAGE SUBSCRIBER LIFE (YEARS) 8
INCOME TAX RATE 34%
CAPITAL GAIN RATE 34%
NET FMV OF EXISTING ASSETS $4,487,357
SUBSCRIBERS IN FRANCHISES 100%
<Caption
LOW HIGH
ANALYSIS ANALYSIS
-------- --------
DEBT PERCENTAGE 50% 50%
EQUITY PERCENTAGE 50% 50%
RESIDUAL MULTIPLE (ROE & ROI) 9 9
MULT OF PAST YEAR'S OPERATING INCOME 10.5 11.5
MULT OF CURRENT YEAR'S OPERATING INCOME 10.0 11.0
MULT OF NEXT YEAR'S OPERATING INCOME 9.5 10.5
TARGET RETURN ON EQUITY 14.0% 12.0%
TARGET RETURN ON INVESTMENT 16.6% 15.1%
239
COOS BAY - EXCHANGE
240
FALCON CABLE SYSTEMS CO. EXHIBIT A
COOS BAY REGION - EXCHANGE
AS OF DECEMBER 31, 1995
VALUATION METHODS
- -----------------
LOW HIGH
--- ----
I. MULTIPLE OF PAST YEAR'S OPERATING INCOME
ADJUSTED OPERATING INCOME, PER BOOKS (DECEMBER 31, 1995) $897,025 $897,025
VALUATION MULTIPLE 10.5 11.5
---- ----
ESTIMATED FAIR MARKET VALUE $9,418,762 $10,315,787
---------- -----------
II. MULTIPLE OF "RUNNING RATE" OPERATING INCOME
ESTIMATED OPERATING INCOME
TOTAL CURRENT YEAR'S REVENUE $1,529,017 $1,529,017
OPERATING MARGIN, PER BOOKS (DECEMBER 31, 1995) 47.2% 47.2%
---- ----
"RUNNING RATE" OPERATING INCOME 721,003 721,003
VALUATION MULTIPLE 10.0 11.0
---- ----
ESTIMATED FAIR MARKET VALUE $7,210,033 $7,931,037
---------- ----------
III. MULTIPLE OF NEXT YEAR'S OPERATING INCOME
OPERATING INCOME $761,161 $761,161
VALUATION MULTIPLE 9.5 10.5
--- ----
ESTIMATED FAIR MARKET VALUE $7,231,027 $7,992,188
---------- ----------
IV. DISCOUNTED CASH FLOW RETURN ON EQUITY
TARGET RETURN ON EQUITY 14.0% 12.0%
ESTIMATED FAIR MARKET VALUE $5,628,480 $6,123,716
---------- ----------
V. DISCOUNTED CASH FLOW RETURN ON INVESTMENT
TARGET RETURN ON INVSTMT 16.6% 15.1%
ESTIMATED FAIR MARKET VALUE $5,586,058 $6,079,621
---------- ----------
SUMMARY OF VALUES
- -----------------
I. MULTIPLE OF PAST YEAR'S OPERATING INCOME $9,418,762 $10,315,787
II. MULTIPLE OF "RUNNING RATE" OPERATING INCOME 7,210,033 7,931,037
III. MULTIPLE OF NEXT YEAR'S OPERATING INCOME 7,231,027 7,992,188
IV. DISCOUNTED CASH FLOW RETURN ON EQUITY 5,628,480 6,123,716
V. DISCOUNTED CASH FLOW RETURN ON INVESTMENT 5,586,058 6,079,621
--------- ---------
RANGE OF ESTIMATED FAIR MARKET VALUES $6,363,000 $6,965,000
ESTIMATED FAIR MARKET VALUE $6,664,000
----------
241
FALCON CABLE SYSTEMS CO. EXHIBIT B
COOS BAY REGION - EXCHANGE LOW ANALYSIS
AS OF DECEMBER 31, 1995
RETURN ON EQUITY METHOD
PROFIT AND LOSS - LOW VALUE
- ---------------------------
YEAR ENDING DECEMBER 31, 1996 1997 1998 1999
---- ---- ---- ----
REVENUES $1,614,178 $1,738,939 $1,904,487 $2,093,424
OPERATING EXPENSES 853,018 928,286 1,001,620 1,080,657
------- ------- --------- ---------
OPERATING INCOME $761,161 $810,653 $902,867 $1,012,766
OPERATING MARGIN 0.47 0.47 0.47 0.48
PARENT SERVICES/MGT FEE (5%) 80,709 86,947 95,224 104,671
FRANCHISE AMORTIZATION (15) 199,733 199,733 199,733 199,733
SUBSCRIBER LIST (8) 64,600 64,600 64,600 64,600
NON-COMPETE COVENANTS (0) 0 0 0 0
DEPRECIATION 358,010 904,939 963,108 739,931
INTEREST 274,248 450,865 450,865 433,070
------- ------- ------- -------
PRE-TAX INCOME ($216,139) ($896,432) ($870,664) ($529,239)
INCOME TAX (EXPENSE)/BENEFIT 73,487 304,787 296,026 179,941
------ ------- ------- -------
NET INCOME ($142,652) ($591,645) ($574,638) ($349,298)
SOURCES AND USES OF CASH
- ------------------------
SOURCES OF CASH -
PRE TAX INCOME ($216,139) ($896,432) ($870,664) ($529,239)
FRANCHISE AMORTIZATION (15) 199,733 199,733 199,733 199,733
SUBSCRIBER LIST (8) 64,600 64,600 64,600 64,600
NON-COMPETE COVENANTS (0) 0 0 0 0
DEPRECIATION 358,010 904,939 963,108 739,931
EQUITY 2,742,477
DEBT 2,742,477 1,766,178 0 0
RESIDUAL VALUE IN YEAR 7
--------- --------- -------- --------
TOTAL SOURCES OF CASH $5,891,158 $2,039,019 $356,777 $475,025
USES OF CASH -
PURCHASE PRICE - CURRENT $5,628,480
CAPITAL EXPENDITURES 162,603 2,039,094 178,824 186,040
DEBT RETIREMENT 0 0 177,953 288,985
TAXES PAID ON NET INCOME 0 0 0 0
TAXES PAID ON SALE (RESIDUAL)
--------- --------- -------- --------
TOTAL USES OF CASH $5,791,083 $2,039,094 $356,777 $475,025
ANNUAL CASH INCREASE/(DECREASE) $100,075 ($75) $0 $0
CUMULATIVE CASH 100,075 100,000 100,000 100,000
YEAR ENDING DECEMBER 31, 2000 2001 2002 TOTAL
---- ---- ---- -----
REVENUES $2,274,318 $2,420,635 $2,561,842 $14,607,822
OPERATING EXPENSES 1,157,790 1,227,581 1,296,948 7,545,899
--------- --------- --------- ---------
OPERATING INCOME $1,116,528 $1,193,054 $1,264,894 $7,061,923
OPERATING MARGIN 0.49 0.49 0.49
PARENT SERVICES/MGT FEE (5%) 113,716 121,032 128,092 730,391
FRANCHISE AMORTIZATION (15) 199,733 199,733 199,733 1,398,133
SUBSCRIBER LIST (8) 64,600 64,600 64,600 452,200
NON-COMPETE COVENANTS (0) 0 0 0 0
DEPRECIATION 581,900 534,215 555,196 4,637,299
INTEREST 404,172 362,961 311,715 2,687,896
------- ------- ------- ---------
PRE-TAX INCOME ($247,594) ($89,487) $5,558 ($2,843,997)
INCOME TAX (EXPENSE)/BENEFIT 84,182 30,426 (1,890) 966,959
------ ------ ------ -------
NET INCOME ($163,412) ($59,061) $3,668 ($1,877,038)
SOURCES AND USES OF CASH
- ------------------------
SOURCES OF CASH -
PRE TAX INCOME ($247,594) ($89,487) $5,558 ($2,843,997)
FRANCHISE AMORTIZATION (15) 199,733 199,733 199,733 1,398,133
SUBSCRIBER LIST (8) 64,600 64,600 64,600 452,200
NON-COMPETE COVENANTS (0) 0 0 0 0
DEPRECIATION 581,900 534,215 555,196 4,637,299
EQUITY 2,742,477
DEBT 0 0 0 4,508,655
RESIDUAL VALUE IN YEAR 7 11,384,046 11,384,046
--------- --------- ---------- ----------
TOTAL SOURCES OF CASH $598,640 $709,062 $12,209,133 $22,278,813
USES OF CASH -
PURCHASE PRICE - CURRENT $5,628,480
CAPITAL EXPENDITURES 186,530 196,605 207,177 3,156,873
DEBT RETIREMENT 412,110 512,457 3,117,150 4,508,655
TAXES PAID ON NET INCOME 0 0 0 0
TAXES PAID ON SALE (RESIDUAL) 2,122,392 2,122,392
--------- --------- --------- ---------
TOTAL USES OF CASH $598,640 $709,062 $5,446,719 $15,416,399
ANNUAL CASH INCREASE/(DECREASE) ($0) $0 $6,762,414 $6,862,414
CUMULATIVE CASH 100,000 100,000 6,862,414
242
FALCON CABLE SYSTEMS CO. EXHIBIT B
COOS BAY REGION - EXCHANGE HIGH ANALYSIS
AS OF DECEMBER 31, 1995
RETURN ON EQUITY METHOD
PROFIT AND LOSS - HIGH VALUE
- ----------------------------
YEAR ENDING DECEMBER 31, 1996 1997 1998 1999
---- ---- ---- ----
REVENUES $1,614,178 $1,738,939 $1,904,487 $2,093,424
OPERATING EXPENSES 853,018 928,286 1,001,620 1,080,657
------- ------- --------- ---------
OPERATING INCOME $761,161 $810,653 $902,867 $1,012,766
OPERATING MARGIN 0.47 0.47 0.47 0.48
PARENT SERVICES/MGT FEE (5%) 80,709 86,947 95,224 104,671
FRANCHISE AMORTIZATION (15) 199,733 199,733 199,733 199,733
SUBSCRIBER LIST (8) 64,600 64,600 64,600 64,600
NON-COMPETE COVENANTS (0) 0 0 0 0
DEPRECIATION 358,010 904,939 963,108 739,931
INTEREST 300,313 479,826 484,209 465,365
------- ------- ------- -------
PRE-TAX INCOME ($242,205) ($925,392) ($904,007) ($561,534)
INCOME TAX (EXPENSE)/BENEFIT 82,350 314,633 307,362 190,922
------- ------- ------- -------
NET INCOME ($159,855) ($610,759) ($596,645) ($370,613)
SOURCES AND USES OF CASH
- ------------------------
SOURCES OF CASH -
PRE TAX INCOME ($242,205) ($925,392) ($904,007) ($561,534)
FRANCHISE AMORTIZATION (15) 199,733 199,733 199,733 199,733
SUBSCRIBER LIST (8) 64,600 64,600 64,600 64,600
NON-COMPETE COVENANTS (0) 0 0 0 0
DEPRECIATION 358,010 904,939 963,108 739,931
EQUITY 3,003,132
DEBT 3,003,132 1,795,131 43,823 0
RESIDUAL VALUE IN YEAR 7
--------- --------- -------- --------
TOTAL SOURCES OF CASH $6,386,402 $2,039,011 $367,257 $442,730
USES OF CASH -
PURCHASE PRICE - CURRENT $6,123,716
CAPITAL EXPENDITURES 162,603 2,039,094 178,824 186,040
DEBT RETIREMENT 0 0 188,433 256,690
TAXES PAID ON NET INCOME 0 0 0 0
TAXES PAID ON SALE (RESIDUAL)
--------- --------- -------- --------
TOTAL USES OF CASH $6,286,319 $2,039,094 $367,257 $442,730
ANNUAL CASH INCREASE/(DECREASE) $100,083 ($83) $0 $0
CUMULATIVE CASH 100,083 100,000 100,000 100,000
YEAR ENDING DECEMBER 31, 2000 2001 2002 TOTAL
---- ---- ---- -----
REVENUES $2,274,318 $2,420,635 $2,561,842 $14,607,822
OPERATING EXPENSES 1,157,790 1,227,581 1,296,948 7,545,899
--------- --------- --------- ---------
OPERATING INCOME $1,116,528 $1,193,054 $1,264,894 $7,061,923
OPERATING MARGIN 0.49 0.49 0.49
PARENT SERVICES/MGT FEE (5%) 113,716 121,032 128,092 730,391
FRANCHISE AMORTIZATION (15) 199,733 199,733 199,733 1,398,133
SUBSCRIBER LIST (8) 64,600 64,600 64,600 452,200
NON-COMPETE COVENANTS (0) 0 0 0 0
DEPRECIATION 581,900 534,215 555,196 4,637,299
INTEREST 439,696 402,038 354,700 2,926,147
------- ------- ------- ---------
PRE-TAX INCOME ($283,118) ($128,564) ($37,427) ($3,082,247)
INCOME TAX (EXPENSE)/BENEFIT 96,260 43,712 12,725 1,047,964
------ ------ ------ ---------
NET INCOME ($186,858) ($84,852) ($24,702) ($2,034,283)
SOURCES AND USES OF CASH
- ------------------------
SOURCES OF CASH -
PRE TAX INCOME ($283,118) ($128,564) ($37,427) ($3,082,247)
FRANCHISE AMORTIZATION (15) 199,733 199,733 199,733 1,398,133
SUBSCRIBER LIST (8) 64,600 64,600 64,600 452,200
NON-COMPETE COVENANTS (0) 0 0 0 0
DEPRECIATION 581,900 534,215 555,196 4,637,299
EQUITY 3,003,132
DEBT 0 0 0 4,842,085
RESIDUAL VALUE IN YEAR 7 11,384,046 11,384,046
-------- -------- ---------- ----------
TOTAL SOURCES OF CASH $563,115 $669,985 $12,166,148 $22,634,648
USES OF CASH -
PURCHASE PRICE - CURRENT $6,123,716
CAPITAL EXPENDITURES 186,530 196,605 207,177 3,156,873
DEBT RETIREMENT 376,585 473,380 3,546,998 4,842,085
TAXES PAID ON NET INCOME 0 0 0 0
TAXES PAID ON SALE (RESIDUAL) 1,873,006 1,873,006
-------- -------- --------- ----------
TOTAL USES OF CASH $563,115 $669,985 $5,627,181 $15,995,681
ANNUAL CASH INCREASE/(DECREASE) ($0) $0 $6,538,967 $6,638,967
CUMULATIVE CASH 100,000 100,000 6,638,967
243
FALCON CABLE SYSTEMS CO. EXHIBIT C
COOS BAY REGION - EXCHANGE LOW ANALYSIS
AS OF DECEMBER 31, 1995
RETURN ON EQUITY METHOD
DEBT AMORTIZATION - LOW VALUE
- -----------------------------
TOTAL YEAR 1 CASH REQUIREMENTS $5,484,953
YEAR 1 DEBT REQUIREMENTS 2,742,477
YEAR 1 EQUITY REQUIREMENTS 2,742,477
FINANCING AVAILABLE $5,830,662 $4,947,545 $5,269,245 $5,868,636
UNUSED LEVERAGE 3,088,186 438,890 938,543 1,826,919
SENIOR DEBT: 1996 1997 1998 1999
---- ---- ---- ----
BEGINNING DEBT $0 $2,742,477 $2,742,477 $2,570,399
DEBT ADDED 2,742,477 0 0 0
TOTAL ANNUAL PAYMENTS 274,248 274,248 446,325 446,325
INTEREST 274,248 274,248 274,248 257,040
PRINCIPAL REPAYMENT 0 0 172,078 189,286
ENDING BALANCE 2,742,477 2,742,477 2,570,399 2,381,113
LINE OF CREDIT:
BEGINNING DEBT $0 $0 $1,766,178 $1,760,303
BORROWINGS 0 1,766,178 0 0
PRINCIPAL PAYMENTS 0 0 5,875 99,699
INTEREST 0 176,618 176,618 176,030
SENIOR DEBT COVERAGE 3.6 3.4 2.8 2.4
LOC DEBT COVERAGE 0.0 2.2 1.9 1.6
TOTAL DEBT COVERAGE 3.6 5.6 4.8 4.0
TOTAL YEAR 1 CASH REQUIREMENTS
YEAR 1 DEBT REQUIREMENTS
YEAR 1 EQUITY REQUIREMENTS
FINANCING AVAILABLE $6,582,981 $7,257,430 $7,754,852
UNUSED LEVERAGE 2,953,374 4,140,279 6,062,927
SENIOR DEBT: 2000 2001 2002 TOTAL
---- ---- ---- -----
BEGINNING DEBT $2,381,113 $2,172,899 $1,943,864
DEBT ADDED 0 0 0 2,742,477
TOTAL ANNUAL PAYMENTS 446,325 446,325 446,325 2,780,123
INTEREST 238,111 217,290 194,386 1,729,571
PRINCIPAL REPAYMENT 208,214 229,036 251,939 1,050,552
ENDING BALANCE 2,172,899 1,943,864 1,691,925
LINE OF CREDIT:
BEGINNING DEBT $1,660,604 $1,456,708 $1,173,287 $0
BORROWINGS 0 0 0 1,766,178
PRINCIPAL PAYMENTS 203,896 283,422 1,173,287 1,766,178
INTEREST 166,060 145,671 117,329 958,326
SENIOR DEBT COVERAGE 1.9 1.6 1.3
LOC DEBT COVERAGE 1.3 1.0 0.0
TOTAL DEBT COVERAGE 3.3 2.6 1.3
244
FALCON CABLE SYSTEMS CO. EXHIBIT C
COOS BAY REGION - EXCHANGE HIGH ANALYSIS
AS OF DECEMBER 31, 1995
RETURN ON EQUITY METHOD
DEBT AMORTIZATION - HIGH VALUE
- ------------------------------
TOTAL YEAR 1 CASH REQUIREMENTS $6,006,263
YEAR 1 DEBT REQUIREMENTS 3,003,132
YEAR 1 EQUITY REQUIREMENTS 3,003,132
FINANCING AVAILABLE $6,727,687 $5,708,705 $6,079,898 $6,771,503
UNUSED LEVERAGE 3,724,556 910,443 1,426,245 2,374,540
SENIOR: 1996 1997 1998 1999
---- ---- ---- ----
BEGINNING DEBT $0 $3,003,132 $3,003,132 $2,814,699
DEBT ADDED 3,003,132 0 0 0
TOTAL ANNUAL PAYMENTS 300,313 300,313 488,746 488,746
INTEREST 300,313 300,313 300,313 281,470
PRINCIPAL REPAYMENT 0 0 188,433 207,276
ENDING BALANCE 3,003,132 3,003,132 2,814,699 2,607,423
LINE OF CREDIT:
BEGINNING DEBT $0 $0 $1,795,131 $1,838,954
BORROWINGS 0 1,795,131 43,823 0
PRINCIPAL PAYMENTS 0 0 0 49,414
INTEREST 0 179,513 183,895 183,895
SENIOR DEBT COVERAGE 3.9 3.7 3.1 2.6
LOC DEBT COVERAGE 0.0 2.2 2.0 1.8
TOTAL DEBT COVERAGE 3.9 5.9 5.2 4.3
TOTAL YEAR 1 CASH REQUIREMENTS
YEAR 1 DEBT REQUIREMENTS
YEAR 1 EQUITY REQUIREMENTS
FINANCING AVAILABLE $7,595,747 $8,373,957 $8,947,906
UNUSED LEVERAGE 3,575,369 6,245,342 7,095,174
SENIOR: 2000 2001 2002 TOTAL
---- ---- ---- -----
BEGINNING DEBT $2,607,423 $2,379,419 $2,128,616
DEBT ADDED 0 0 0 $3,003,132
TOTAL ANNUAL PAYMENTS 488,746 488,746 488,746 3,044,355
INTEREST 260,742 237,942 212,862 1,893,955
PRINCIPAL REPAYMENT 228,004 250,804 275,884 1,150,400
ENDING BALANCE 2,379,419 2,128,616 1,852,731
LINE OF CREDIT:
BEGINNING DEBT $1,789,540 $1,640,958 $1,418,382 $0
BORROWINGS 0 0 0 1,838,954
PRINCIPAL PAYMENTS 148,582 222,576 1,418,382 1,838,954
INTEREST 178,954 164,096 141,838 1,032,192
SENIOR DEBT COVERAGE 2.1 1.8 1.5
LOC DEBT COVERAGE 1.5 1.2 0.0
TOTAL DEBT COVERAGE 3.6 3.0 1.5
245
FALCON CABLE SYSTEMS CO. EXHIBIT D
COOS BAY REGION - EXCHANGE
AS OF DECEMBER 31, 1995
RETURN ON INVESTMENT METHOD
PROFIT AND LOSS
- ---------------
YEAR ENDING DECEMBER 31, 1996 1997 1998 1999
---- ---- ---- ----
REVENUES $1,614,178 $1,738,939 $1,904,487 $2,093,424
OPERATING EXPENSES 853,018 928,286 1,001,620 1,080,657
------- ------- --------- ---------
OPERATING INCOME 761,161 810,653 902,867 1,012,766
PLUS: RESIDUAL VALUE
LESS: CAPITAL EXPENDITURES 162,603 2,039,094 178,824 186,040
------- --------- ------- -------
TOTAL CASH FLOW $598,558 ($1,228,441) $724,043 $826,726
NET PRESENT VALUE @ 16.6% $5,586,058
----------
NET PRESENT VALUE @ 15.1% $6,079,621
----------
YEAR ENDING DECEMBER 31, 2000 2001 2002 TOTAL
---- ---- ---- -----
REVENUES $2,274,318 $2,420,635 $2,561,842 $14,607,822
OPERATING EXPENSES 1,157,790 1,227,581 1,296,948 7,545,899
--------- --------- --------- ---------
OPERATING INCOME 1,116,528 1,193,054 1,264,894 7,061,923
PLUS: RESIDUAL VALUE 11,384,046 11,384,046
LESS: CAPITAL EXPENDITURES 186,530 196,605 207,177 3,156,873
------- ------- ------- ---------
TOTAL CASH FLOW $929,997 $996,450 $12,441,763 $15,289,096
NET PRESENT VALUE @ 16.6%
NET PRESENT VALUE @ 15.1%
246
FALCON CABLE SYSTEMS CO. EXHIBIT E
COOS BAY REGION - EXCHANGE
AS OF DECEMBER 31, 1995
CABLE TELEVISION SUBSCRIBERS
- ----------------------------
YEAR ENDING DECEMBER 31, 1996 1997 1998 1999
---- ---- ---- ----
BEGINNING MILES 119.2
MILES ADDED 2.9 2.8 2.8 2.7
CUMULATIVE MILES 122.1 124.8 127.7 130.4
DENSITY OF ADDITIONAL PLANT 41 41 41 41
HOMES PASSED - BEGINNING 5,909.0
NEW HOMES & EXTENSIONS 118 115 117 113
HOMES PASSED - ENDING 6,027 6,142 6,258 6,371
GROWTH IN HOMES 2.0% 1.9% 1.9% 1.8%
BASIC - BEGINNING SUBSCRIBERS 4,322 4,424 4,523 4,624
AVERAGE SUBSCRIBERS 4,373 4,473 4,574 4,674
ENDING SUBSCRIBERS 4,424 4,523 4,624 4,724
PENETRATION 73.4% 73.6% 73.9% 74.1%
EXPANDED BASIC - BEGINNING 4,175 4,273 4,369 4,467
AVERAGE SUBSCRIBERS 4,224 4,321 4,418 4,515
ENDING SUBSCRIBERS 4,273 4,369 4,467 4,563
PENETRATION 96.6% 96.6% 96.6% 96.6%
NEW PRODUCT TIER #1 - BEGINNING 3,936 4,028 4,119 4,211
AVERAGE SUBSCRIBERS 3,982 4,074 4,165 4,257
ENDING SUBSCRIBERS 4,028 4,119 4,211 4,302
PENETRATION 91.1% 91.1% 91.1% 91.1%
NEW PRODUCT TIER #2 - BEGINNING 0 0 362 740
AVERAGE SUBSCRIBERS 0 181 551 1,061
ENDING SUBSCRIBERS 0 362 740 1,382
PENETRATION 0.0% 8.0% 16.0% 29.3%
NEW PRODUCT TIER #3 - BEGINNING 0 0 362 740
AVERAGE SUBSCRIBERS 0 181 551 1,061
ENDING SUBSCRIBERS 0 362 740 1,382
PENETRATION 0.0% 8.0% 16.0% 29.3%
PAY TV - BEGINNING UNITS 983 962 1,029 1,098
AVERAGE UNITS 972 995 1,063 1,110
ENDING UNITS 962 1,029 1,098 1,122
PENETRATION 21.7% 22.7% 23.7% 23.7%
PAY PER VIEW - BEGINNING UNITS/MO 0 0 237 421
AVERAGE UNITS 0 119 329 534
ENDING UNITS 0 237 421 646
AVERAGE BUY RATE/MO 0.0% 37.5% 35.0% 36.0%
CONVERTER RENTALS - BEGINNING UNITS 856 920 1,224 1,575
AVERAGE SUBSCRIBERS 888 1,072 1,399 1,769
ENDING SUBSCRIBERS 920 1,224 1,575 1,963
PENETRATION 20.8% 27.1% 34.1% 41.6%
ADDRESSABLE HOMES 0 0 633 1,202
AVERAGE HOMES 0 317 918 1,499
ENDING HOMES 0 633 1,202 1,795
PENETRATION 0.0% 14.0% 26.0% 38.0%
BASIC CHURN RATE 32% 32% 32% 32%
YEAR ENDING DECEMBER 31, 2000 2001 2002
---- ---- ----
BEGINNING MILES
MILES ADDED 2.3 2.3 2.4
CUMULATIVE MILES 132.7 135.0 137.4
DENSITY OF ADDITIONAL PLANT 41 41 41
HOMES PASSED - BEGINNING
NEW HOMES & EXTENSIONS 96 97 98
HOMES PASSED - ENDING 6,467 6,564 6,662
GROWTH IN HOMES 1.5% 1.5% 1.5%
BASIC - BEGINNING SUBSCRIBERS 4,724 4,811 4,899
AVERAGE SUBSCRIBERS 4,767 4,855 4,944
ENDING SUBSCRIBERS 4,811 4,899 4,989
PENETRATION 74.4% 74.6% 74.9%
EXPANDED BASIC - BEGINNING 4,563 4,647 4,733
AVERAGE SUBSCRIBERS 4,605 4,690 4,776
ENDING SUBSCRIBERS 4,647 4,733 4,820
PENETRATION 96.6% 96.6% 96.6%
NEW PRODUCT TIER #1 - BEGINNING 4,302 4,381 4,462
AVERAGE SUBSCRIBERS 4,341 4,421 4,503
ENDING SUBSCRIBERS 4,381 4,462 4,544
PENETRATION 91.1% 91.1% 91.1%
NEW PRODUCT TIER #2 - BEGINNING 1,382 1,556 1,585
AVERAGE SUBSCRIBERS 1,469 1,571 1,599
ENDING SUBSCRIBERS 1,556 1,585 1,614
PENETRATION 32.4% 32.4% 32.4%
NEW PRODUCT TIER #3 - BEGINNING 1,382 1,556 1,585
AVERAGE SUBSCRIBERS 1,469 1,571 1,599
ENDING SUBSCRIBERS 1,556 1,585 1,614
PENETRATION 32.4% 32.4% 32.4%
PAY TV - BEGINNING UNITS 1,122 1,142 1,163
AVERAGE UNITS 1,132 1,153 1,174
ENDING UNITS 1,142 1,163 1,185
PENETRATION 23.7% 23.7% 23.7%
PAY PER VIEW - BEGINNING UNITS/MO 646 841 1,039
AVERAGE UNITS 744 940 1,117
ENDING UNITS 841 1,039 1,194
AVERAGE BUY RATE/MO 38.0% 40.0% 42.0%
CONVERTER RENTALS - BEGINNING UNITS 1,963 2,360 2,771
AVERAGE SUBSCRIBERS 2,161 2,565 2,983
ENDING SUBSCRIBERS 2,360 2,771 3,196
PENETRATION 49.1% 56.6% 64.1%
ADDRESSABLE HOMES 1,795 2,213 2,597
AVERAGE HOMES 2,004 2,405 2,720
ENDING HOMES 2,213 2,597 2,844
PENETRATION 46.0% 53.0% 57.0%
BASIC CHURN RATE 32% 32% 32%
247
FALCON CABLE SYSTEMS CO. EXHIBIT F
COOS BAY REGION - EXCHANGE
AS OF DECEMBER 31, 1995
SERVICE RATES
- -------------
RUNNING RATES
AS OF AVERAGE RATES
CURRENT RATES DECEMBER 1995 FOR 1996
- ------------- ------------- --------
BASIC $17.60 $18.05
EXPANDED BASIC $2.20 $2.91
NEW PRODUCT TIER #1 $3.51 $3.76
NEW PRODUCT TIER #2 $5.00 $5.00
NEW PRODUCT TIER #3 $4.00 $4.00
PAY $6.41 $6.41
PAY PER VIEW $5.35 $5.35
CONVERTER RENTALS $0.86 $0.86
INSTALLATIONS-NEW $50.00 $50.00
INSTALLATIONS-CHURN $25.00 $25.00
YEAR ENDING DECEMBER 31, 1996 1997 1998 1999 2000 2001 2002
---- ---- ---- ---- ---- ---- ----
PERCENTAGE RATE INCREASES
- -------------------------
BASIC 3% 3% 3% 3% 3% 3% 3%
EXPANDED BASIC 32% 3% 3% 3% 3% 3% 3%
NEW PRODUCT TIER #1 7% 3% 3% 3% 3% 3% 3%
NEW PRODUCT TIER #2 0% 3% 3% 3% 3% 3% 3%
NEW PRODUCT TIER #3 0% 3% 3% 3% 3% 3% 3%
PAY 0% 1% 1% 1% 1% 1% 1%
PAY PER VIEW 0% 3% 3% 3% 3% 3% 3%
CONVERTER/REMOTE RENTALS 0% 3% 3% 3% 3% 3% 3%
INSTALLATIONS-NEW 0% 3% 3% 3% 3% 3% 3%
INSTALLATIONS-CHURN 0% 3% 3% 3% 3% 3% 3%
AVERAGE RATES
- -------------
BASIC $18.05 $18.59 $19.15 $19.72 $20.32 $20.93 $21.55
EXPANDED BASIC 2.91 3.00 3.09 3.18 3.28 3.38 3.48
NEW PRODUCT TIER #1 3.76 3.87 3.99 4.11 4.23 4.36 4.49
NEW PRODUCT TIER #2 5.00 5.15 5.30 5.46 5.63 5.80 5.97
NEW PRODUCT TIER #3 4.00 4.12 4.24 4.37 4.50 4.64 4.78
PAY 6.41 6.47 6.54 6.60 6.67 6.74 6.80
PAY PER VIEW 5.35 5.51 5.67 5.84 6.02 6.20 6.39
CONVERTERS RENTALS 0.86 0.89 0.91 0.94 0.97 1.00 1.03
INSTALLATIONS-NEW 50.00 51.50 53.05 54.64 56.28 57.96 59.70
INSTALLATIONS-CHURN 25.00 25.75 26.52 27.32 28.14 28.98 29.85
248
FALCON CABLE SYSTEMS CO. EXHIBIT G
COOS BAY REGION - EXCHANGE
AS OF DECEMBER 31, 1995
YEAR ENDING DECEMBER 31, 1996 1997 1998 1999
---- ---- ---- ----
REVENUES:
BASIC $947,168 $997,995 $1,051,027 $1,106,316
EXPANDED BASIC 147,612 155,533 163,798 172,414
NEW PRODUCT TIER #1 179,674 189,315 199,375 209,863
NEW PRODUCT TIER #2 0 11,181 35,065 69,550
NEW PRODUCT TIER #3 0 8,945 28,052 55,640
PAY TV 74,793 77,316 83,432 87,947
PAY PER VIEW 0 7,848 22,409 37,413
CONVERTER RENTALS 9,166 11,395 15,320 19,948
INSTALLATIONS 31,871 33,398 35,171 36,818
COMMERCIAL 57,812 59,547 61,333 63,173
ADVERTISING 57,017 70,861 86,227 102,688
MISCELLANEOUS 109,067 115,607 123,277 131,655
------- ------- ------- -------
TOTAL REVENUES $1,614,178 $1,738,939 $1,904,487 $2,093,424
OPERATING EXPENSES:
OPERATIONS $278,747 $295,400 $314,585 $335,177
GENERAL & ADMINISTRATIVE 223,063 233,529 244,982 257,150
SALES & MARKETING 72,891 99,334 110,250 121,838
PROGRAMMING 278,316 300,024 331,803 366,492
------- ------- ------- -------
TOTAL OPERATING EXPENSES $853,018 $928,286 $1,001,620 $1,080,657
-------- -------- ---------- ----------
OPERATING INCOME $761,161 $810,653 $902,867 $1,012,766
OPERATING MARGIN 47.2% 46.6% 47.4% 48.4%
TOTAL REVENUE/BASIC SUB/MONTH $30.76 $32.40 $34.70 $37.32
CASH FLOW/BASIC SUB/MONTH $14.51 $15.10 $16.45 $18.06
OPERATIONS % OF REVENUE 17% 17% 17% 16%
G & A PERCENTAGE OF REVENUE 14% 13% 13% 12%
SALES & MARKETING % OF REVENUE 5% 6% 6% 6%
PROGRAMMING % OF REVENUE 17% 17% 17% 18%
YEAR ENDING DECEMBER 31, 2000 2001 2002 TOTAL
---- ---- ---- -----
REVENUES:
BASIC $1,162,201 $1,219,113 $1,278,798 $7,762,619
EXPANDED BASIC 181,123 189,993 199,294 1,209,766
NEW PRODUCT TIER #1 220,465 231,260 242,582 1,472,535
NEW PRODUCT TIER #2 99,200 109,244 114,592 438,832
NEW PRODUCT TIER #3 79,360 87,395 91,674 351,065
PAY TV 90,595 93,186 95,850 603,119
PAY PER VIEW 53,706 69,915 85,558 276,848
CONVERTER RENTALS 25,106 30,691 36,763 148,389
INSTALLATIONS 38,042 39,903 41,853 257,057
COMMERCIAL 65,068 67,020 69,031 442,985
ADVERTISING 119,454 135,135 150,143 721,524
MISCELLANEOUS 139,998 147,779 155,701 923,083
------- ------- -------
TOTAL REVENUES $2,274,318 $2,420,635 $2,561,842 $14,607,822
OPERATING EXPENSES:
OPERATIONS $355,196 $374,041 $393,220 $2,346,366
GENERAL & ADMINISTRATIVE 269,342 281,183 293,346 1,802,595
SALES & MARKETING 133,595 144,914 156,088 838,910
PROGRAMMING 399,657 427,443 454,293 2,558,028
------- ------- ------- ---------
TOTAL OPERATING EXPENSES $1,157,790 $1,227,581 $1,296,948 $7,545,899
---------- ---------- ---------- ----------
OPERATING INCOME $1,116,528 $1,193,054 $1,264,894 $7,061,923
OPERATING MARGIN 49.1% 49.3% 49.4% 48.3%
TOTAL REVENUE/BASIC SUB/MONTH $39.76 $41.55 $43.18
CASH FLOW/BASIC SUB/MONTH $19.52 $20.48 $21.32
OPERATIONS % OF REVENUE 16% 15% 15%
G & A PERCENTAGE OF REVENUE 12% 12% 11%
SALES & MARKETING % OF REVENUE 6% 6% 6%
PROGRAMMING % OF REVENUE 18% 18% 18%
249
FALCON CABLE SYSTEMS CO. EXHIBIT H
COOS BAY REGION - EXCHANGE
AS OF DECEMBER 31, 1995
CAPITAL EXPENDITURES
- --------------------
YEAR ENDING DECEMBER 31, 1996 1997 1998 1999 2000 2001 2002 TOTAL
---- ---- ---- ---- ---- ---- ---- -----
ASSUMPTIONS AND INPUTS:
- -----------------------
BV OF EXISTING PLANT $2,342,715
ADDITIONAL MILES OF PLANT 2.9 2.8 2.8 2.7 2.3 2.3 2.4
AERIAL PLANT PER MILE $12,000 $12,240 $12,485 $12,734 $12,989 $13,249 $13,514
UNDERGROUND PLANT PER MILE $18,000 $18,360 $18,727 $19,102 $19,484 $19,873 $20,271
PERCENTAGE OF PLANT AERIAL 20% 20% 20% 20% 20% 20% 20%
PERCENTAGE OF PLANT UNDERGROUND 80% 80% 80% 80% 80% 80% 80%
AVERAGE COST PER CONVERTER $110 $112 $114 $117 $119 $121 $124
PERCENTAGE CONVERTER USE 21% 27% 34% 42% 49% 57% 64%
PERCENTAGE REPLACEMENT 5% 5% 5% 5% 5% 5% 5%
INSTALLATION COST PER SUBSCRIBER $54 $55 $56 $57 $58 $59 $61
MISC. CAPITAL PER SUBSCRIBER $5 $5 $5 $5 $5 $6 $6
INFLATION FACTOR FOR CAPITALS 2% 2% 2% 2% 2% 2% 2% 115%
ANNUAL COSTS:
- -------------
PLANT ADDITIONS - AERIAL $6,866 $6,786 $7,053 $6,945 $6,010 $6,222 $6,442 $46,324
- UNDERGROUND 41,196 40,717 42,320 41,672 36,059 37,331 38,649 277,944
PLANT REBUILD/UPGRADE/INCL. HDND. 6,079 1,876,475 6,774 7,057 7,325 7,604 7,893 1,919,207
AVERAGE COST OF NEW CONVERTERS 2,323 3,017 3,959 4,811 5,083 6,083 7,153 32,430
CONVERTER REPLACEMENT 4,946 6,714 8,814 11,216 13,795 16,521 19,438 81,445
INSTALLATION COSTS 79,330 82,571 86,112 89,539 92,458 96,041 99,762 625,811
MISC. CAPITAL EXPENDITURES 21,864 22,813 23,792 24,801 25,801 26,801 27,841 173,713
------ ------ ------ ------ ------ ------ ------ -------
TOTAL CAPITAL EXPENDITURES $162,603 $2,039,094 $178,824 $186,040 $186,530 $196,605 $207,177 $3,156,873
AS A % OF OPERATING INCOME 21.4% 251.5% 19.8% 18.4% 16.7% 16.5% 16.4%
250
FALCON CABLE SYSTEMS CO. EXHIBIT I
COOS BAY REGION - EXCHANGE
AS OF DECEMBER 31, 1995
DEPRECIATION
- ------------
YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5 YEAR 6 YEAR 7
------ ------ ------ ------ ------ ------ ------
ESTIMATED DEPRECIATION RATES 14.3% 24.5% 17.5% 12.5% 8.9% 8.9% 8.9%
DEPRECIATION - BEG. & ADTNS. 1996 1997 1998 1999 2000 2001 2002 TOTAL
---- ---- ---- ---- ---- ---- ---- -----
YEAR 1 $358,010 $613,552 $438,180 $312,914 $223,725 $223,474 $223,725 $2,393,581
YEAR 2 291,386 499,374 356,637 254,683 182,091 181,887 1,766,059
YEAR 3 25,554 43,794 31,276 22,335 15,969 138,929
YEAR 4 26,585 45,561 32,538 23,236 127,921
YEAR 5 26,655 45,681 32,624 104,961
YEAR 6 28,095 48,148 76,243
YEAR 7 29,606 29,606
-------- -------- -------- -------- -------- -------- -------- ----------
TOTAL DEPRECIATION $358,010 $904,939 $963,108 $739,931 $581,900 $534,215 $555,196 $4,637,299
251
FALCON CABLE SYSTEMS CO. EXHIBIT J
COOS BAY REGION - EXCHANGE
AS OF DECEMBER 31, 1995
ASSUMPTIONS AND INPUTS
- ----------------------
REMAINING LIFE OF FRANCHISES (YEARS) 7
AVERAGE SUBSCRIBER LIFE (YEARS) 8
INCOME TAX RATE 34%
CAPITAL GAIN RATE 34%
NET FMV OF EXISTING ASSETS $2,342,715
SUBSCRIBERS IN FRANCHISES 100%
LOW HIGH
ANALYSIS ANALYSIS
-------- --------
DEBT PERCENTAGE 50% 50%
EQUITY PERCENTAGE 50% 50%
RESIDUAL MULTIPLE (ROE & ROI) 9 9
MULT OF PAST YEAR'S OPERATING INCOME 10.5 11.5
MULT OF CURRENT YEAR'S OPERATING INCOME 10.0 11.0
MULT OF NEXT YEAR'S OPERATING INCOME 9.5 10.5
TARGET RETURN ON EQUITY 14.0% 12.0%
TARGET RETURN ON INVESTMENT 16.6% 15.1%
252
DALLAS - SALE
253
FALCON CABLE SYSTEMS CO. EXHIBIT A
DALLAS REGION - SALE
AS OF DECEMBER 31, 1995
VALUATION METHODS
- -----------------
LOW HIGH
--- ----
I. MULTIPLE OF PAST YEAR'S OPERATING INCOME
ADJUSTED OPERATING INCOME, PER BOOKS (DECEMBER 31, 1995) $1,424,832 $1,424,832
VALUATION MULTIPLE 10.5 11.5
---- ----
ESTIMATED FAIR MARKET VALUE $14,960,738 $16,385,570
----------- -----------
II. MULTIPLE OF "RUNNING RATE" OPERATING INCOME
ESTIMATED OPERATING INCOME
TOTAL CURRENT YEAR'S REVENUE $2,605,152 $2,605,152
OPERATING MARGIN, PER BOOKS (DECEMBER 31, 1995) 60.4% 60.4%
----- -----
"RUNNING RATE" OPERATING INCOME 1,574,523 1,574,523
VALUATION MULTIPLE 10.0 11.0
---- ----
ESTIMATED FAIR MARKET VALUE $15,745,227 $17,319,750
----------- -----------
III. MULTIPLE OF NEXT YEAR'S OPERATING INCOME
OPERATING INCOME $1,660,673 $1,660,673
VALUATION MULTIPLE 9.5 10.5
--- ----
ESTIMATED FAIR MARKET VALUE $15,776,391 $17,437,064
----------- -----------
IV. DISCOUNTED CASH FLOW RETURN ON EQUITY
TARGET RETURN ON EQUITY 14.0% 12.0%
ESTIMATED FAIR MARKET VALUE $14,334,131 $15,426,595
----------- -----------
V. DISCOUNTED CASH FLOW RETURN ON INVESTMENT
TARGET RETURN ON INVSTMT 16.6% 15.1%
ESTIMATED FAIR MARKET VALUE $13,989,432 $15,032,075
----------- -----------
SUMMARY OF VALUES
- -----------------
I. MULTIPLE OF PAST YEAR'S OPERATING INCOME $14,960,738 $16,385,570
II. MULTIPLE OF "RUNNING RATE" OPERATING INCOME 15,745,227 17,319,750
III. MULTIPLE OF NEXT YEAR'S OPERATING INCOME 15,776,391 17,437,064
IV. DISCOUNTED CASH FLOW RETURN ON EQUITY 14,334,131 15,426,595
V. DISCOUNTED CASH FLOW RETURN ON INVESTMENT 13,989,432 15,032,075
---------- ----------
RANGE OF ESTIMATED FAIR MARKET VALUES $14,762,000 $16,042,000
ESTIMATED FAIR MARKET VALUE $15,402,000
-----------
254
FALCON CABLE SYSTEMS CO. EXHIBIT B
DALLAS REGION - SALE LOW ANALYSIS
AS OF DECEMBER 31, 1995
RETURN ON EQUITY METHOD
PROFIT AND LOSS - LOW VALUE
- ---------------------------
YEAR ENDING DECEMBER 31, 1996 1997 1998 1999
---- ---- ---- ----
REVENUES $2,747,693 $2,942,374 $3,165,196 $3,400,467
OPERATING EXPENSES 1,087,020 1,165,761 1,260,445 1,362,210
--------- --------- --------- ---------
OPERATING INCOME $1,660,673 $1,776,612 $1,904,751 $2,038,257
OPERATING MARGIN 0.60 0.60 0.60 0.60
PARENT SERVICES/MGT FEE (5%) 137,385 147,119 158,260 170,023
FRANCHISE AMORTIZATION (15) 687,200 687,200 687,200 687,200
SUBSCRIBER LIST (8) 153,533 153,533 153,533 153,533
NON-COMPETE COVENANTS (0) 0 0 0 0
DEPRECIATION 315,120 585,519 511,976 463,484
INTEREST 695,714 695,714 695,714 652,061
------- ------- ------- -------
PRE-TAX INCOME ($328,279) ($492,473) ($301,932) ($88,045)
INCOME TAX (EXPENSE)/BENEFIT 111,615 167,441 102,657 29,935
------- ------- ------- ------
NET INCOME ($216,664) ($325,032) ($199,275) ($58,110)
SOURCES AND USES OF CASH
- ------------------------
SOURCES OF CASH -
PRE TAX INCOME ($328,279) ($492,473) ($301,932) ($88,045)
FRANCHISE AMORTIZATION (15) 687,200 687,200 687,200 687,200
SUBSCRIBER LIST (8) 153,533 153,533 153,533 153,533
NON-COMPETE COVENANTS (0) 0 0 0 0
DEPRECIATION 315,120 585,519 511,976 463,484
EQUITY 6,957,142
DEBT 6,957,142 0 0 0
RESIDUAL VALUE IN YEAR 7
--------- -------- --------- ---------
TOTAL SOURCES OF CASH $14,741,858 $933,780 $1,050,777 $1,216,173
USES OF CASH -
PURCHASE PRICE - CURRENT $14,334,131
CAPITAL EXPENDITURES 307,630 318,205 338,434 346,544
DEBT RETIREMENT 0 0 436,529 480,181
TAXES PAID ON NET INCOME 0 0 0 0
TAXES PAID ON SALE (RESIDUAL)
---------- -------- -------- --------
TOTAL USES OF CASH $14,641,761 $318,205 $774,963 $826,726
ANNUAL CASH INCREASE/(DECREASE) $100,097 $615,574 $275,814 $389,447
CUMULATIVE CASH 100,097 715,671 991,486 1,380,933
YEAR ENDING DECEMBER 31, 2000 2001 2002 TOTAL
---- ---- ---- -----
REVENUES $3,638,199 $3,883,772 $4,141,720 $23,919,421
OPERATING EXPENSES 1,464,268 1,568,874 1,679,019 9,587,597
--------- --------- --------- ---------
OPERATING INCOME $2,173,932 $2,314,898 $2,462,701 $14,331,825
OPERATING MARGIN 0.60 0.60 0.59
PARENT SERVICES/MGT FEE (5%) 181,910 194,189 207,086 1,195,971
FRANCHISE AMORTIZATION (15) 687,200 687,200 687,200 4,810,400
SUBSCRIBER LIST (8) 153,533 153,533 153,533 1,074,733
NON-COMPETE COVENANTS (0) 0 0 0 0
DEPRECIATION 434,596 477,319 522,691 3,310,705
INTEREST 604,043 551,223 493,121 4,387,592
------- ------- ------- ---------
PRE-TAX INCOME $112,650 $251,434 $399,069 ($447,576)
INCOME TAX (EXPENSE)/BENEFIT (38,301) (85,488) (135,684) 152,176
------- ------- -------- -------
NET INCOME $74,349 $165,946 $263,386 ($295,400)
SOURCES AND USES OF CASH
- ------------------------
SOURCES OF CASH -
PRE TAX INCOME $112,650 $251,434 $399,069 ($447,576)
FRANCHISE AMORTIZATION (15) 687,200 687,200 687,200 4,810,400
SUBSCRIBER LIST (8) 153,533 153,533 153,533 1,074,733
NON-COMPETE COVENANTS (0) 0 0 0 0
DEPRECIATION 434,596 477,319 522,691 3,310,705
EQUITY 6,957,142
DEBT 0 0 0 6,957,142
RESIDUAL VALUE IN YEAR 7 22,164,309 22,164,309
--------- --------- ---------- ----------
TOTAL SOURCES OF CASH $1,387,979 $1,569,486 $23,926,802 $44,826,855
USES OF CASH -
PURCHASE PRICE - CURRENT $14,334,131
CAPITAL EXPENDITURES 376,970 398,887 421,694 2,508,365
DEBT RETIREMENT 528,200 581,020 4,931,213 6,957,142
TAXES PAID ON NET INCOME 0 0 0 0
TAXES PAID ON SALE (RESIDUAL) 4,783,826 4,783,826
--------- --------- --------- ---------
TOTAL USES OF CASH $905,169 $979,907 $10,136,733 $28,583,463
ANNUAL CASH INCREASE/(DECREASE) $482,809 $589,580 $13,790,070 $16,243,392
CUMULATIVE CASH 1,863,742 2,453,322 16,243,392
255
FALCON CABLE SYSTEMS CO. EXHIBIT B
DALLAS REGION - SALE HIGH ANALYSIS
AS OF DECEMBER 31, 1995
RETURN ON EQUITY METHOD
PROFIT AND LOSS - HIGH VALUE
- ----------------------------
YEAR ENDING DECEMBER 31, 1996 1997 1998 1999
---- ---- ---- ----
REVENUES $2,747,693 $2,942,374 $3,165,196 $3,400,467
OPERATING EXPENSES 1,087,020 1,165,761 1,260,445 1,362,210
--------- --------- --------- ---------
OPERATING INCOME $1,660,673 $1,776,612 $1,904,751 $2,038,257
OPERATING MARGIN 0.60 0.60 0.60 0.60
PARENT SERVICES/MGT FEE (5%) 137,385 147,119 158,260 170,023
FRANCHISE AMORTIZATION (15) 687,200 687,200 687,200 687,200
SUBSCRIBER LIST (8) 153,533 153,533 153,533 153,533
NON-COMPETE COVENANTS (0) 0 0 0 0
DEPRECIATION 315,120 585,519 511,976 463,484
INTEREST 753,219 753,219 753,219 705,958
------- ------- ------- -------
PRE-TAX INCOME ($385,784) ($549,978) ($359,437) ($141,942)
INCOME TAX (EXPENSE)/BENEFIT 131,166 186,992 122,208 48,260
------- ------- ------- ------
NET INCOME ($254,617) ($362,985) ($237,228) ($93,681)
SOURCES AND USES OF CASH
- ------------------------
SOURCES OF CASH -
PRE TAX INCOME ($385,784) ($549,978) ($359,437) ($141,942)
FRANCHISE AMORTIZATION (15) 687,200 687,200 687,200 687,200
SUBSCRIBER LIST (8) 153,533 153,533 153,533 153,533
NON-COMPETE COVENANTS (0) 0 0 0 0
DEPRECIATION 315,120 585,519 511,976 463,484
EQUITY 7,532,189
DEBT 7,532,189 0 0 0
RESIDUAL VALUE IN YEAR 7
--------- --------- --------- ---------
TOTAL SOURCES OF CASH $15,834,448 $876,275 $993,272 $1,162,276
USES OF CASH -
PURCHASE PRICE - CURRENT $15,426,595
CAPITAL EXPENDITURES 307,630 318,205 338,434 346,544
DEBT RETIREMENT 0 0 472,610 519,871
TAXES PAID ON NET INCOME 0 0 0 0
TAXES PAID ON SALE (RESIDUAL)
--------- -------- -------- --------
TOTAL USES OF CASH $15,734,225 $318,205 $811,044 $866,415
ANNUAL CASH INCREASE/(DECREASE) $100,223 $558,070 $182,228 $295,861
CUMULATIVE CASH 100,223 658,292 840,520 1,136,381
YEAR ENDING DECEMBER 31, 2000 2001 2002 TOTAL
---- ---- ---- -----
REVENUES $3,638,199 $3,883,772 $4,141,720 $23,919,421
OPERATING EXPENSES 1,464,268 1,568,874 1,679,019 9,587,597
--------- --------- --------- ---------
OPERATING INCOME $2,173,932 $2,314,898 $2,462,701 $14,331,825
OPERATING MARGIN 0.60 0.60 0.59
PARENT SERVICES/MGT FEE (5%) 181,910 194,189 207,086 1,195,971
FRANCHISE AMORTIZATION (15) 687,200 687,200 687,200 4,810,400
SUBSCRIBER LIST (8) 153,533 153,533 153,533 1,074,733
NON-COMPETE COVENANTS (0) 0 0 0 0
DEPRECIATION 434,596 477,319 522,691 3,310,705
INTEREST 653,971 596,785 533,881 4,750,251
------- ------- ------- ---------
PRE-TAX INCOME $62,722 $205,872 $358,310 ($810,236)
INCOME TAX (EXPENSE)/BENEFIT (21,325) (69,997) (121,825) 275,480
------- ------- -------- -------
NET INCOME $41,396 $135,876 $236,485 ($534,755)
SOURCES AND USES OF CASH
- ------------------------
SOURCES OF CASH -
PRE TAX INCOME $62,722 $205,872 $358,310 ($810,236)
FRANCHISE AMORTIZATION (15) 687,200 687,200 687,200 4,810,400
SUBSCRIBER LIST (8) 153,533 153,533 153,533 1,074,733
NON-COMPETE COVENANTS (0) 0 0 0 0
DEPRECIATION 434,596 477,319 522,691 3,310,705
EQUITY 7,532,189
DEBT 0 0 0 7,532,189
RESIDUAL VALUE IN YEAR 7 22,164,309 22,164,309
--------- --------- ---------- ----------
TOTAL SOURCES OF CASH $1,338,051 $1,523,925 $23,886,043 $45,614,290
USES OF CASH -
PURCHASE PRICE - CURRENT $15,426,595
CAPITAL EXPENDITURES 376,970 398,887 421,694 2,508,365
DEBT RETIREMENT 571,858 629,044 5,338,805 7,532,189
TAXES PAID ON NET INCOME 0 0 0 0
TAXES PAID ON SALE (RESIDUAL) 4,289,083 4,289,083
-------- --------- --------- ---------
TOTAL USES OF CASH $948,828 $1,027,931 $10,049,583 $29,756,233
ANNUAL CASH INCREASE/(DECREASE) $389,223 $495,993 $13,836,460 $15,858,057
CUMULATIVE CASH 1,525,604 2,021,597 15,858,057
256
FALCON CABLE SYSTEMS CO. EXHIBIT C
DALLAS REGION - SALE LOW ANALYSIS
AS OF DECEMBER 31, 1995
RETURN ON EQUITY METHOD
DEBT AMORTIZATION - LOW VALUE
- -----------------------------
TOTAL YEAR 1 CASH REQUIREMENTS $13,914,284
YEAR 1 DEBT REQUIREMENTS 6,957,142
YEAR 1 EQUITY REQUIREMENTS 6,957,142
FINANCING AVAILABLE $9,261,409 $10,794,373 $11,547,981 $12,380,883
UNUSED LEVERAGE 2,304,267 3,837,231 5,027,367 6,340,451
SENIOR DEBT: 1996 1997 1998 1999
---- ---- ---- ----
BEGINNING DEBT $0 $6,957,142 $6,957,142 $6,520,613
DEBT ADDED 6,957,142 0 0 0
TOTAL ANNUAL PAYMENTS 695,714 695,714 1,132,243 1,132,243
INTEREST 695,714 695,714 695,714 652,061
PRINCIPAL REPAYMENT 0 0 436,529 480,181
ENDING BALANCE 6,957,142 6,957,142 6,520,613 6,040,432
LINE OF CREDIT:
BEGINNING DEBT $0 $0 $0 $0
BORROWINGS 0 0 0 0
PRINCIPAL PAYMENTS 0 0 0 0
INTEREST 0 0 0 0
SENIOR DEBT COVERAGE 4.2 3.9 3.4 3.0
LOC DEBT COVERAGE 0.0 0.0 0.0 0.0
TOTAL DEBT COVERAGE 4.2 3.9 3.4 3.0
TOTAL YEAR 1 CASH REQUIREMENTS
YEAR 1 DEBT REQUIREMENTS
YEAR 1 EQUITY REQUIREMENTS
FINANCING AVAILABLE $13,248,672 $14,130,557 $15,046,838
UNUSED LEVERAGE 7,736,440 9,199,344 10,754,747
SENIOR DEBT: 2000 2001 2002 TOTAL
---- ---- ---- -----
BEGINNING DEBT $6,040,432 $5,512,232 $4,931,213
DEBT ADDED 0 0 0 6,957,142
TOTAL ANNUAL PAYMENTS 1,132,243 1,132,243 1,132,243 7,052,643
INTEREST 604,043 551,223 493,121 4,387,592
PRINCIPAL REPAYMENT 528,200 581,020 639,122 2,665,051
ENDING BALANCE 5,512,232 4,931,213 4,292,091
LINE OF CREDIT:
BEGINNING DEBT $0 $0 $0 $0
BORROWINGS 0 0 0 0
PRINCIPAL PAYMENTS 0 0 0 0
INTEREST 0 0 0 0
SENIOR DEBT COVERAGE 2.5 2.1 1.7
LOC DEBT COVERAGE 0.0 0.0 0.0
TOTAL DEBT COVERAGE 2.5 2.1 1.7
257
FALCON CABLE SYSTEMS CO. EXHIBIT C
DALLAS REGION - SALE HIGH ANALYSIS
AS OF DECEMBER 31, 1995
RETURN ON EQUITY METHOD
DEBT AMORTIZATION - HIGH VALUE
- ------------------------------
TOTAL YEAR 1 CASH REQUIREMENTS $15,064,379
YEAR 1 DEBT REQUIREMENTS 7,532,189
YEAR 1 EQUITY REQUIREMENTS 7,532,189
FINANCING AVAILABLE $10,686,241 $12,455,046 $13,324,593 $14,285,634
UNUSED LEVERAGE 3,154,052 4,922,856 6,265,014 7,745,926
SENIOR: 1996 1997 1998 1999
---- ---- ---- ----
BEGINNING DEBT $0 $7,532,189 $7,532,189 $7,059,579
DEBT ADDED 7,532,189 0 0 0
TOTAL ANNUAL PAYMENTS 753,219 753,219 1,225,829 1,225,829
INTEREST 753,219 753,219 753,219 705,958
PRINCIPAL REPAYMENT 0 0 472,610 519,871
ENDING BALANCE 7,532,189 7,532,189 7,059,579 6,539,708
LINE OF CREDIT:
BEGINNING DEBT $0 $0 $0 $0
BORROWINGS 0 0 0 0
PRINCIPAL PAYMENTS 0 0 0 0
INTEREST 0 0 0 0
SENIOR DEBT COVERAGE 4.5 4.2 3.7 3.2
LOC DEBT COVERAGE 0.0 0.0 0.0 0.0
TOTAL DEBT COVERAGE 4.5 4.2 3.7 3.2
TOTAL YEAR 1 CASH REQUIREMENTS
YEAR 1 DEBT REQUIREMENTS
YEAR 1 EQUITY REQUIREMENTS
FINANCING AVAILABLE $15,286,930 $16,304,489 $17,361,737
UNUSED LEVERAGE 9,319,080 10,965,683 12,714,880
SENIOR: 2000 2001 2002 TOTAL
---- ---- ---- -----
BEGINNING DEBT $6,539,708 $5,967,850 $5,338,805
DEBT ADDED 0 0 0 $7,532,189
TOTAL ANNUAL PAYMENTS 1,225,829 1,225,829 1,225,829 7,635,584
INTEREST 653,971 596,785 533,881 4,750,251
PRINCIPAL REPAYMENT 571,858 629,044 691,949 2,885,332
ENDING BALANCE 5,967,850 5,338,805 4,646,857
LINE OF CREDIT:
BEGINNING DEBT $0 $0 $0 $0
BORROWINGS 0 0 0 0
PRINCIPAL PAYMENTS 0 0 0 0
INTEREST 0 0 0 0
SENIOR DEBT COVERAGE 2.7 2.3 1.9
LOC DEBT COVERAGE 0.0 0.0 0.0
TOTAL DEBT COVERAGE 2.7 2.3 1.9
258
FALCON CABLE SYSTEMS CO. EXHIBIT D
DALLAS REGION - SALE
AS OF DECEMBER 31, 1995
RETURN ON INVESTMENT METHOD
PROFIT AND LOSS
- ---------------
YEAR ENDING DECEMBER 31, 1996 1997 1998 1999
---- ---- ---- ----
REVENUES $2,747,693 $2,942,374 $3,165,196 $3,400,467
OPERATING EXPENSES 1,087,020 1,165,761 1,260,445 1,362,210
--------- --------- --------- ---------
OPERATING INCOME 1,660,673 1,776,612 1,904,751 2,038,257
PLUS: RESIDUAL VALUE
LESS: CAPITAL EXPENDITURES 307,630 318,205 338,434 346,544
TOTAL CASH FLOW $1,353,043 $1,458,407 $1,566,317 $1,691,713
NET PRESENT VALUE @ 16.6% $13,989,432
-----------
NET PRESENT VALUE @ 15.1% $15,032,075
-----------
YEAR ENDING DECEMBER 31, 2000 2001 2002 TOTAL
---- ---- ---- -----
REVENUES $3,638,199 $3,883,772 $4,141,720 $23,919,421
OPERATING EXPENSES 1,464,268 1,568,874 1,679,019 9,587,597
--------- --------- --------- ---------
OPERATING INCOME 2,173,932 2,314,898 2,462,701 14,331,825
PLUS: RESIDUAL VALUE 22,164,309 22,164,309
LESS: CAPITAL EXPENDITURES 376,970 398,887 421,694 2,508,365
TOTAL CASH FLOW $1,796,962 $1,916,011 $24,205,315 $33,987,768
NET PRESENT VALUE @ 16.6%
NET PRESENT VALUE @ 15.1%
259
FALCON CABLE SYSTEMS CO. EXHIBIT E
DALLAS REGION - SALE
AS OF DECEMBER 31, 1995
CABLE TELEVISION SUBSCRIBERS
- ----------------------------
YEAR ENDING DECEMBER 31, 1996 1997 1998 1999 2000 2001 2002
---- ---- ---- ---- ---- ---- ----
BEGINNING MILES 162.7
MILES ADDED 6.1 6.0 6.3 6.2 7.1 7.5 7.8
CUMULATIVE MILES 168.8 174.8 181.1 187.3 194.4 201.9 209.7
DENSITY OF ADDITIONAL PLANT 36 38 36 38 34 33 32
HOMES PASSED - BEGINNING 9,209
NEW HOMES & EXTENSIONS 221 226 231 236 241 247 253
HOMES PASSED - ENDING 9,430 9,655 9,886 10,122 10,364 10,611 10,863
GROWTH IN HOMES 2.4% 2.4% 2.4% 2.4% 2.4% 2.4% 2.4%
BASIC - BEGINNING SUBSCRIBERS 6,775 6,984 7,200 7,421 7,624 7,832 8,045
AVERAGE SUBSCRIBERS 6,880 7,092 7,311 7,523 7,728 7,938 8,154
ENDING SUBSCRIBERS 6,984 7,200 7,421 7,624 7,832 8,045 8,263
PENETRATION 74.1% 74.6% 75.1% 75.3% 75.6% 75.8% 76.1%
EXPANDED BASIC - BEGINNING 5,403 5,570 5,742 5,918 6,080 6,246 6,416
AVERAGE SUBSCRIBERS 5,487 5,656 5,830 5,999 6,163 6,331 6,503
ENDING SUBSCRIBERS 5,570 5,742 5,918 6,080 6,246 6,416 6,590
PENETRATION 79.7% 79.7% 79.7% 79.7% 79.7% 79.7% 79.7%
NEW PRODUCT TIER #1 - BEGINNING 3,834 3,953 4,074 4,200 4,314 4,432 4,553
AVERAGE SUBSCRIBERS 3,893 4,013 4,137 4,257 4,373 4,492 4,614
ENDING SUBSCRIBERS 3,953 4,074 4,200 4,314 4,432 4,553 4,676
PENETRATION 56.6% 56.6% 56.6% 56.6% 56.6% 56.6% 56.6%
NEW PRODUCT TIER #2 - BEGINNING 0 0 0 0 0 0 0
AVERAGE SUBSCRIBERS 0 0 0 0 0 0 0
ENDING SUBSCRIBERS 0 0 0 0 0 0 0
PENETRATION 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
NEW PRODUCT TIER #3 - BEGINNING 0 0 0 0 0 0 0
AVERAGE SUBSCRIBERS 0 0 0 0 0 0 0
ENDING SUBSCRIBERS 0 0 0 0 0 0 0
PENETRATION 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
PAY TV - BEGINNING UNITS 3,427 3,463 3,642 3,828 3,933 4,040 4,150
AVERAGE UNITS 3,445 3,552 3,735 3,880 3,986 4,095 4,206
ENDING UNITS 3,463 3,642 3,828 3,933 4,040 4,150 4,263
PENETRATION 49.6% 50.6% 51.6% 51.6% 51.6% 51.6% 51.6%
PAY PER VIEW - BEGINNING UNITS/MO 212 288 438 700 985 1,209 1,450
AVERAGE UNITS 250 363 569 842 1,097 1,330 1,580
ENDING UNITS 288 438 700 985 1,209 1,450 1,709
AVERAGE BUY RATE/MO 6.8% 9.8% 14.8% 19.8% 23.3% 26.8% 30.3%
CONVERTER RENTALS - BEGINNING UNITS 4,512 4,669 4,849 5,035 5,211 5,392 5,579
AVERAGE SUBSCRIBERS 4,590 4,759 4,942 5,123 5,301 5,485 5,675
ENDING SUBSCRIBERS 4,669 4,849 5,035 5,211 5,392 5,579 5,772
PENETRATION 66.8% 67.3% 67.8% 68.3% 68.8% 69.3% 69.8%
ADDRESSABLE HOMES 4,020 4,249 4,488 4,737 4,981 5,195 5,417
AVERAGE HOMES 4,135 4,369 4,613 4,859 5,088 5,306 5,532
ENDING HOMES 4,249 4,488 4,737 4,981 5,195 5,417 5,647
PENETRATION 60.8% 62.3% 63.8% 65.3% 66.3% 67.3% 68.3%
BASIC CHURN RATE 28% 28% 28% 28% 28% 28% 28%
260
FALCON CABLE SYSTEMS CO. EXHIBIT F
DALLAS REGION - SALE
AS OF DECEMBER 31, 1995
SERVICE RATES
- -------------
RUNNING RATES
AS OF AVERAGE RATES
CURRENT RATES DECEMBER 1995 FOR 1996
- ------------- ------------- --------
BASIC $16.94 $17.19
EXPANDED BASIC $5.08 $5.85
NEW PRODUCT TIER #1 $5.87 $6.22
NEW PRODUCT TIER #2 $0.00 $4.00
NEW PRODUCT TIER #3 $0.00 $4.00
PAY $6.96 $6.96
PAY PER VIEW $9.98 $9.98
CONVERTER RENTALS $0.67 $0.99
INSTALLATIONS-NEW $50.00 $50.00
INSTALLATIONS-CHURN $25.00 $25.00
YEAR ENDING DECEMBER 31, 1996 1997 1998 1999 2000 2001 2002
---- ---- ---- ---- ---- ---- ----
PERCENTAGE RATE INCREASES
- -------------------------
BASIC 1% 3% 3% 3% 3% 3% 3%
EXPANDED BASIC 15% 3% 3% 3% 3% 3% 3%
NEW PRODUCT TIER #1 6% 3% 3% 3% 3% 3% 3%
NEW PRODUCT TIER #2 0% 3% 3% 3% 3% 3% 3%
NEW PRODUCT TIER #3 0% 3% 3% 3% 3% 3% 3%
PAY 0% 1% 1% 1% 1% 1% 1%
PAY PER VIEW 0% 3% 3% 3% 3% 3% 3%
CONVERTER/REMOTE RENTALS 48% 3% 3% 3% 3% 3% 3%
INSTALLATIONS-NEW 0% 3% 3% 3% 3% 3% 3%
INSTALLATIONS-CHURN 0% 3% 3% 3% 3% 3% 3%
AVERAGE RATES
- -------------
BASIC $17.19 $17.71 $18.24 $18.78 $19.35 $19.93 $20.53
EXPANDED BASIC $5.85 6.03 6.21 6.39 6.58 6.78 6.99
NEW PRODUCT TIER #1 $6.22 6.41 6.60 6.80 7.00 7.21 7.43
NEW PRODUCT TIER #2 $4.00 4.12 4.24 4.37 4.50 4.64 4.78
NEW PRODUCT TIER #3 $4.00 4.12 4.24 4.37 4.50 4.64 4.78
PAY $6.96 7.03 7.10 7.17 7.24 7.31 7.39
PAY PER VIEW $9.98 10.28 10.59 10.91 11.23 11.57 11.92
CONVERTERS RENTALS $0.99 1.02 1.05 1.08 1.11 1.15 1.18
INSTALLATIONS-NEW $50.00 51.50 53.05 54.64 56.28 57.96 59.70
INSTALLATIONS-CHURN $25.00 25.75 26.52 27.32 28.14 28.98 29.85
261
FALCON CABLE SYSTEMS CO. EXHIBIT G
DALLAS REGION - SALE
AS OF DECEMBER 31, 1995
YEAR ENDING DECEMBER 31, 1996 1997 1998 1999
---- ---- ---- ----
REVENUES:
BASIC $1,419,150 $1,506,856 $1,599,871 $1,695,660
EXPANDED BASIC 385,151 408,954 434,198 460,195
NEW PRODUCT TIER #1 290,594 308,553 327,600 347,214
NEW PRODUCT TIER #2 0 0 0 0
NEW PRODUCT TIER #3 0 0 0 0
PAY TV 287,728 299,669 318,218 333,909
PAY PER VIEW 29,911 44,786 72,307 110,221
CONVERTER RENTALS 54,535 58,232 62,287 66,504
INSTALLATIONS 46,518 49,373 52,399 54,425
COMMERCIAL 41,115 42,348 43,619 44,927
ADVERTISING 99,156 124,396 149,816 176,676
MISCELLANEOUS 93,834 99,205 104,881 110,737
------ ------ ------- -------
TOTAL REVENUES $2,747,693 $2,942,374 $3,165,196 $3,400,467
OPERATING EXPENSES:
OPERATIONS $280,520 $298,960 $319,349 $340,533
GENERAL & ADMINISTRATIVE 251,307 264,537 278,709 293,381
SALES & MARKETING 81,561 95,770 109,842 124,605
PROGRAMMING 473,632 506,494 552,545 603,691
TOTAL OPERATING EXPENSES $1,087,020 $1,165,761 $1,260,445 $1,362,210
---------- ---------- ---------- ----------
OPERATING INCOME $1,660,673 $1,776,612 $1,904,751 $2,038,257
OPERATING MARGIN 60.4% 60.4% 60.2% 59.9%
TOTAL REVENUE/BASIC SUB/MONTH $33.28 $34.57 $36.08 $37.67
CASH FLOW/BASIC SUB/MONTH $20.12 $20.88 $21.71 $22.58
OPERATIONS % OF REVENUE 10% 10% 10% 10%
G & A PERCENTAGE OF REVENUE 9% 9% 9% 9%
SALES & MARKETING % OF REVENUE 3% 3% 3% 4%
PROGRAMMING % OF REVENUE 17% 17% 17% 18%
YEAR ENDING DECEMBER 31, 2000 2001 2002 TOTAL
---- ---- ---- -----
REVENUES:
BASIC $1,794,159 $1,898,314 $2,008,447 $11,922,457
EXPANDED BASIC 486,927 515,194 545,084 3,235,704
NEW PRODUCT TIER #1 367,383 388,711 411,262 2,441,317
NEW PRODUCT TIER #2 0 0 0 0
NEW PRODUCT TIER #3 0 0 0 0
PAY TV 346,445 359,439 372,908 2,318,316
PAY PER VIEW 147,845 184,585 225,901 815,555
CONVERTER RENTALS 70,884 75,546 80,507 468,496
INSTALLATIONS 57,574 60,904 64,424 385,616
COMMERCIAL 46,275 47,663 49,093 315,040
ADVERTISING 203,926 230,257 254,204 1,238,431
MISCELLANEOUS 116,782 123,160 129,891 778,490
------- ------- ------- -------
TOTAL REVENUES $3,638,199 $3,883,772 $4,141,720 $23,919,421
OPERATING EXPENSES:
OPERATIONS $362,862 $386,440 $411,480 $2,400,144
GENERAL & ADMINISTRATIVE 308,417 324,165 340,717 2,061,231
SALES & MARKETING 139,657 154,431 168,260 874,126
PROGRAMMING 653,332 703,839 758,562 4,252,095
TOTAL OPERATING EXPENSES $1,464,268 $1,568,874 $1,679,019 $9,587,597
---------- ---------- ---------- ----------
OPERATING INCOME $2,173,932 $2,314,898 $2,462,701 $14,331,825
OPERATING MARGIN 59.8% 59.6% 59.5% 59.9%
TOTAL REVENUE/BASIC SUB/MONTH $39.23 $40.77 $42.33
CASH FLOW/BASIC SUB/MONTH $23.44 $24.30 $25.17
OPERATIONS % OF REVENUE 10% 10% 10%
G & A PERCENTAGE OF REVENUE 8% 8% 8%
SALES & MARKETING % OF REVENUE 4% 4% 4%
PROGRAMMING % OF REVENUE 18% 18% 18%
262
FALCON CABLE SYSTEMS CO. EXHIBIT H
DALLAS REGION - SALE
AS OF DECEMBER 31, 1995
CAPITAL EXPENDITURES
- --------------------
YEAR ENDING DECEMBER 31, 1996 1997 1998 1999
---- ---- ---- ----
ASSUMPTIONS AND INPUTS:
- -----------------------
BV OF EXISTING PLANT $1,897,545
ADDITIONAL MILES OF PLANT 6.1 6.0 6.3 6.2
AERIAL PLANT PER MILE $12,000 $12,240 $12,485 $12,734
UNDERGROUND PLANT PER MILE $18,000 $18,360 $18,727 $19,102
PERCENTAGE OF PLANT AERIAL 5% 5% 5% 5%
PERCENTAGE OF PLANT UNDERGROUND 95% 95% 95% 95%
AVERAGE COST PER CONVERTER $110 $112 $114 $117
PERCENTAGE CONVERTER USE 67% 67% 68% 68%
PERCENTAGE REPLACEMENT 5% 5% 5% 5%
INSTALLATION COST PER SUBSCRIBER $56 $57 $58 $59
MISC. CAPITAL PER SUBSCRIBER $5 $5 $5 $5
INFLATION FACTOR FOR CAPITALS 2% 2% 2% 2%
ANNUAL COSTS:
- -------------
PLANT ADDITIONS - AERIAL $3,652 $3,651 $3,959 $3,958
104,075 104,046 112,833 112,816
PLANT REBUILD/UPGRADE/INCL. HE 8,298 8,780 9,272 9,801
AVERAGE COST OF NEW CONVERTERS 15,400 16,277 17,201 16,158
CONVERTER REPLACEMENT 24,909 26,389 27,953 29,605
INSTALLATION COSTS 116,898 122,893 129,187 134,290
MISC. CAPITAL EXPENDITURES 34,399 36,170 38,030 39,915
------ ------ ------ ------
TOTAL CAPITAL EXPENDITURES $307,630 $318,205 $338,434 $346,544
AS A % OF OPERATING INCOME 18.5% 17.9% 17.8% 17.0%
YEAR ENDING DECEMBER 31, 2000 2001 2002 TOTAL
---- ---- ---- -----
ASSUMPTIONS AND INPUTS:
- -----------------------
BV OF EXISTING PLANT
ADDITIONAL MILES OF PLANT 7.1 7.5 7.8
AERIAL PLANT PER MILE $12,989 $13,249 $13,514
UNDERGROUND PLANT PER MILE $19,484 $19,873 $20,271
PERCENTAGE OF PLANT AERIAL 5% 5% 5%
PERCENTAGE OF PLANT UNDERGROUND 95% 95% 95%
AVERAGE COST PER CONVERTER $119 $121 $124
PERCENTAGE CONVERTER USE 69% 69% 70%
PERCENTAGE REPLACEMENT 5% 5% 5%
INSTALLATION COST PER SUBSCRIBER $61 $62 $63
MISC. CAPITAL PER SUBSCRIBER $5 $6 $6
INFLATION FACTOR FOR CAPITALS 2% 2% 2% 115%
ANNUAL COSTS:
- -------------
PLANT ADDITIONS - AERIAL $4,604 $4,942 $5,289 $30,055
131,223 140,839 150,743 856,576
PLANT REBUILD/UPGRADE/INCL. HE 10,340 10,946 11,594 69,032
AVERAGE COST OF NEW CONVERTERS 17,032 17,953 18,922 118,943
CONVERTER REPLACEMENT 31,249 32,980 34,804 207,888
INSTALLATION COSTS 140,697 147,405 154,428 945,797
MISC. CAPITAL EXPENDITURES 41,824 43,822 45,915 280,074
------ ------ ------ -------
TOTAL CAPITAL EXPENDITURES $376,970 $398,887 $421,694 $2,508,365
AS A % OF OPERATING INCOME 17.3% 17.2% 17.1%
263
FALCON CABLE SYSTEMS CO. EXHIBIT I
DALLAS REGION - SALE
AS OF DECEMBER 31, 1995
DEPRECIATION
- ------------
YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5 YEAR 6 YEAR 7
------ ------ ------ ------ ------ ------ ------
ESTIMATED DEPRECIATION RATES 14.3% 24.5% 17.5% 12.5% 8.9% 8.9% 8.9%
DEPRECIATION - BEG. & ADTNS. 1996 1997 1998 1999 2000 2001 2002 TOTAL
---- ---- ---- ---- ---- ---- ---- -----
YEAR 1 $315,120 $540,047 $385,685 $275,426 $196,922 $196,702 $196,922 $2,106,825
YEAR 2 45,472 77,928 55,654 39,744 28,416 28,384 275,598
YEAR 3 48,362 82,883 59,192 42,270 30,222 262,929
YEAR 4 49,521 84,869 60,611 43,283 238,284
YEAR 5 53,869 92,320 65,932 212,121
YEAR 6 57,001 97,687 154,688
YEAR 7 60,260 60,260
------- ------- ------- ------- ------- ------- ------ ------
TOTAL DEPRECIATION $315,120 $585,519 $511,976 $463,484 $434,596 $477,319 $522,691 $3,310,705
264
FALCON CABLE SYSTEMS CO. EXHIBIT J
DALLAS REGION - SALE
AS OF DECEMBER 31, 1995
ASSUMPTIONS AND INPUTS
- ----------------------
REMAINING LIFE OF FRANCHISES (YEARS) 7
AVERAGE SUBSCRIBER LIFE (YEARS) 8
INCOME TAX RATE 34%
CAPITAL GAIN RATE 34%
NET FMV OF EXISTING ASSETS $1,897,545
SUBSCRIBERS IN FRANCHISES 100%
LOW HIGH
ANALYSIS ANALYSIS
-------- --------
DEBT PERCENTAGE 50% 50%
EQUITY PERCENTAGE 50% 50%
RESIDUAL MULTIPLE (ROE & ROI) 9 9
MULT OF PAST YEAR'S OPERATING INCOME 10.5 11.5
MULT OF CURRENT YEAR'S OPERATING INCOME 10.0 11.0
MULT OF NEXT YEAR'S OPERATING INCOME 9.5 10.5
TARGET RETURN ON EQUITY 14.0% 12.0%
TARGET RETURN ON INVESTMENT 16.6% 15.1%
265
DALLAS - EXCHANGE
266
FALCON CABLE SYSTEMS CO. EXHIBIT A
DALLAS REGION - EXCHANGE
AS OF DECEMBER 31, 1995
VALUATION METHODS
- -----------------
LOW HIGH
--- ----
I. MULTIPLE OF PAST YEAR'S OPERATING INCOME
ADJUSTED OPERATING INCOME, PER BOOKS (DECEMBER 31, 1995) $2,228,584 $2,228,584
VALUATION MULTIPLE 10.5 11.5
---- ----
ESTIMATED FAIR MARKET VALUE $23,400,128 $25,628,712
----------- -----------
II. MULTIPLE OF "RUNNING RATE" OPERATING INCOME
ESTIMATED OPERATING INCOME
TOTAL CURRENT YEAR'S REVENUE $3,736,193 $3,736,193
OPERATING MARGIN, PER BOOKS (DECEMBER 31, 1995) 58.4% 58.4%
----- -----
"RUNNING RATE" OPERATING INCOME 2,181,383 2,181,383
VALUATION MULTIPLE 10.0 11.0
---- ----
ESTIMATED FAIR MARKET VALUE $21,813,835 $23,995,218
----------- -----------
III. MULTIPLE OF NEXT YEAR'S OPERATING INCOME
OPERATING INCOME $2,290,039 $2,290,039
VALUATION MULTIPLE 9.5 10.5
--- ----
ESTIMATED FAIR MARKET VALUE $21,755,370 $24,045,409
IV. DISCOUNTED CASH FLOW RETURN ON EQUITY
TARGET RETURN ON EQUITY 14.0% 12.0%
ESTIMATED FAIR MARKET VALUE $17,231,814 $18,739,501
----------- -----------
V. DISCOUNTED CASH FLOW RETURN ON INVESTMENT
TARGET RETURN ON INVSTMT 16.6% 15.1%
ESTIMATED FAIR MARKET VALUE $16,926,793 $18,370,153
----------- -----------
SUMMARY OF VALUES
- -----------------
I. MULTIPLE OF PAST YEAR'S OPERATING INCOME $23,400,128 $25,628,712
II. MULTIPLE OF "RUNNING RATE" OPERATING INCOME 21,813,835 23,995,218
III. MULTIPLE OF NEXT YEAR'S OPERATING INCOME 21,755,370 24,045,409
IV. DISCOUNTED CASH FLOW RETURN ON EQUITY 17,231,814 18,739,501
V. DISCOUNTED CASH FLOW RETURN ON INVESTMENT 16,926,793 18,370,153
---------- ----------
RANGE OF ESTIMATED FAIR MARKET VALUES $19,041,000 $20,823,000
ESTIMATED FAIR MARKET VALUE $19,932,000
-----------
267
FALCON CABLE SYSTEMS CO. EXHIBIT B
DALLAS REGION - EXCHANGE LOW ANALYSIS
AS OF DECEMBER 31, 1995
RETURN ON EQUITY METHOD
PROFIT AND LOSS - LOW VALUE
- ---------------------------
YEAR ENDING DECEMBER 31, 1996 1997 1998 1999
---- ---- ---- ----
REVENUES $3,922,294 $4,216,945 $4,627,442 $5,070,879
OPERATING EXPENSES 1,632,255 1,766,004 1,915,993 2,080,389
--------- --------- --------- ---------
OPERATING INCOME $2,290,039 $2,450,941 $2,711,448 $2,990,490
OPERATING MARGIN 0.58 0.58 0.59 0.59
PARENT SERVICES/MGT FEE (5%) 196,115 210,847 231,372 253,544
FRANCHISE AMORTIZATION (15) 641,133 641,133 641,133 641,133
SUBSCRIBER LIST (8) 218,467 218,467 218,467 218,467
NON-COMPETE COVENANTS (0) 0 0 0 0
DEPRECIATION 941,191 2,052,561 2,363,435 2,209,358
INTEREST 835,588 1,021,299 1,273,712 1,221,283
--------- --------- --------- ---------
PRE-TAX INCOME ($542,454) ($1,693,366) ($2,016,671) ($1,553,295)
INCOME TAX (EXPENSE)/BENEFIT 184,435 575,744 685,668 528,120
------- ------- ------- -------
NET INCOME ($358,020) ($1,117,621) ($1,331,003) ($1,025,175)
SOURCES AND USES OF CASH
- ------------------------
SOURCES OF CASH -
PRE TAX INCOME ($542,454) ($1,693,366) ($2,016,671) ($1,553,295)
FRANCHISE AMORTIZATION (15) 641,133 641,133 641,133 641,133
SUBSCRIBER LIST (8) 218,467 218,467 218,467 218,467
NON-COMPETE COVENANTS (0) 0 0 0 0
DEPRECIATION 941,191 2,052,561 2,363,435 2,209,358
EQUITY 8,355,879
DEBT 8,355,879 1,857,109 2,524,133 0
RESIDUAL VALUE IN YEAR 7
--------- --------- --------- ---------
TOTAL SOURCES OF CASH $17,970,094 $3,075,904 $3,730,497 $1,515,663
USES OF CASH -
PURCHASE PRICE - CURRENT $17,231,814
CAPITAL EXPENDITURES 638,177 3,076,008 3,206,204 444,565
DEBT RETIREMENT 0 0 524,293 1,071,098
TAXES PAID ON NET INCOME 0 0 0 0
TAXES PAID ON SALE (RESIDUAL)
--------- --------- --------- ---------
TOTAL USES OF CASH $17,869,991 $3,076,008 $3,730,497 $1,515,663
ANNUAL CASH INCREASE/(DECREASE) $100,103 ($103) $0 $0
CUMULATIVE CASH 100,103 100,000 100,000 100,000
YEAR ENDING DECEMBER 31, 2000 2001 2002 TOTAL
---- ---- ---- -----
REVENUES $5,497,440 $5,891,841 $6,249,084 $35,475,924
OPERATING EXPENSES 2,243,598 2,402,486 2,557,707 14,598,433
--------- --------- --------- ----------
OPERATING INCOME $3,253,842 $3,489,355 $3,691,376 $20,877,491
OPERATING MARGIN 0.59 0.59 0.59
PARENT SERVICES/MGT FEE (5%) 274,872 294,592 312,454 1,773,796
FRANCHISE AMORTIZATION (15) 641,133 641,133 641,133 4,487,933
SUBSCRIBER LIST (8) 218,467 218,467 218,467 1,529,267
NON-COMPETE COVENANTS (0) 0 0 0 0
DEPRECIATION 1,708,709 1,524,712 1,479,078 12,279,044
INTEREST 1,114,173 974,379 801,311 7,241,745
--------- ------- ------- ---------
PRE-TAX INCOME ($703,512) ($163,929) $238,933 ($6,434,294)
INCOME TAX (EXPENSE)/BENEFIT 239,194 55,736 (81,237) 2,187,660
------- ------ ------- ---------
NET INCOME ($464,318) ($108,193) $157,696 ($4,246,634)
SOURCES AND USES OF CASH
- ------------------------
SOURCES OF CASH -
PRE TAX INCOME ($703,512) ($163,929) $238,933 ($6,434,294)
FRANCHISE AMORTIZATION (15) 641,133 641,133 641,133 4,487,933
SUBSCRIBER LIST (8) 218,467 218,467 218,467 1,529,267
NON-COMPETE COVENANTS (0) 0 0 0 0
DEPRECIATION 1,708,709 1,524,712 1,479,078 12,279,044
EQUITY 8,355,879
DEBT 0 0 0 12,737,122
RESIDUAL VALUE IN YEAR 7 33,222,386 33,222,386
--------- --------- ---------- ----------
TOTAL SOURCES OF CASH $1,864,797 $2,220,383 $35,799,998 $66,177,336
USES OF CASH -
PURCHASE PRICE - CURRENT $17,231,814
CAPITAL EXPENDITURES 466,861 489,698 511,651 8,833,164
DEBT RETIREMENT 1,397,936 1,730,685 8,013,109 12,737,122
TAXES PAID ON NET INCOME 0 0 0 0
TAXES PAID ON SALE (RESIDUAL) 6,466,582 6,466,582
--------- --------- --------- ---------
TOTAL USES OF CASH $1,864,797 $2,220,383 $14,991,343 $45,268,681
ANNUAL CASH INCREASE/(DECREASE) ($0) ($0) $20,808,655 $20,908,655
CUMULATIVE CASH 100,000 100,000 20,908,655
268
FALCON CABLE SYSTEMS CO. EXHIBIT B
DALLAS REGION - EXCHANGE HIGH ANALYSIS
AS OF DECEMBER 31, 1995
RETURN ON EQUITY METHOD
PROFIT AND LOSS - HIGH VALUE
- ----------------------------
YEAR ENDING DECEMBER 31, 1996 1997 1998 1999
---- ---- ---- ----
REVENUES $3,922,294 $4,216,945 $4,627,442 $5,070,879
OPERATING EXPENSES 1,632,255 1,766,004 1,915,993 2,080,389
--------- --------- --------- ---------
OPERATING INCOME $2,290,039 $2,450,941 $2,711,448 $2,990,490
OPERATING MARGIN 0.58 0.58 0.59 0.59
PARENT SERVICES/MGT FEE (5%) 196,115 210,847 231,372 253,544
FRANCHISE AMORTIZATION (15) 641,133 641,133 641,133 641,133
SUBSCRIBER LIST (8) 218,467 218,467 218,467 218,467
NON-COMPETE COVENANTS (0) 0 0 0 0
DEPRECIATION 941,191 2,052,561 2,363,435 2,209,358
INTEREST 914,947 1,109,461 1,377,202 1,319,794
--------- --------- --------- ---------
PRE-TAX INCOME ($621,813) ($1,781,528) ($2,120,162) ($1,651,806)
INCOME TAX (EXPENSE)/BENEFIT 211,417 605,719 720,855 561,614
------- ------- ------- -------
NET INCOME ($410,397) ($1,175,808) ($1,399,307) ($1,090,192)
SOURCES AND USES OF CASH
- ------------------------
SOURCES OF CASH -
PRE TAX INCOME ($621,813) ($1,781,528) ($2,120,162) ($1,651,806)
FRANCHISE AMORTIZATION (15) 641,133 641,133 641,133 641,133
SUBSCRIBER LIST (8) 218,467 218,467 218,467 218,467
NON-COMPETE COVENANTS (0) 0 0 0 0
DEPRECIATION 941,191 2,052,561 2,363,435 2,209,358
EQUITY 9,149,468
DEBT 9,149,468 1,945,140 2,677,418 0
RESIDUAL VALUE IN YEAR 7
--------- --------- --------- ---------
TOTAL SOURCES OF CASH $19,477,913 $3,075,773 $3,780,291 $1,417,152
USES OF CASH -
PURCHASE PRICE - CURRENT $18,739,501
CAPITAL EXPENDITURES 638,177 3,076,008 3,206,204 444,565
DEBT RETIREMENT 0 0 574,087 972,587
TAXES PAID ON NET INCOME 0 0 0 0
TAXES PAID ON SALE (RESIDUAL)
--------- --------- --------- ---------
TOTAL USES OF CASH $19,377,678 $3,076,008 $3,780,291 $1,417,152
ANNUAL CASH INCREASE/(DECREASE) $100,235 ($235) $0 ($0)
CUMULATIVE CASH 100,235 100,000 100,000 100,000
YEAR ENDING DECEMBER 31, 2000 2001 2002 TOTAL
---- ---- ---- ----
REVENUES $5,497,440 $5,891,841 $6,249,084 $35,475,924
OPERATING EXPENSES 2,243,598 2,402,486 2,557,707 14,598,433
--------- --------- --------- ----------
OPERATING INCOME $3,253,842 $3,489,355 $3,691,376 $20,877,491
OPERATING MARGIN 0.59 0.59 0.59
PARENT SERVICES/MGT FEE (5%) 274,872 294,592 312,454 1,773,796
FRANCHISE AMORTIZATION (15) 641,133 641,133 641,133 4,487,933
SUBSCRIBER LIST (8) 218,467 218,467 218,467 1,529,267
NON-COMPETE COVENANTS (0) 0 0 0 0
DEPRECIATION 1,708,709 1,524,712 1,479,078 12,279,044
INTEREST 1,222,535 1,093,578 932,429 7,969,946
--------- --------- ------- ---------
PRE-TAX INCOME ($811,874) ($283,127) $107,815 ($7,162,495)
INCOME TAX (EXPENSE)/BENEFIT 276,037 96,263 (36,657) 2,435,248
------- ------ ------- ---------
NET INCOME ($535,837) ($186,864) $71,158 ($4,727,246)
SOURCES AND USES OF CASH
- ------------------------
SOURCES OF CASH -
PRE TAX INCOME ($811,874) ($283,127) $107,815 ($7,162,495)
FRANCHISE AMORTIZATION (15) 641,133 641,133 641,133 4,487,933
SUBSCRIBER LIST (8) 218,467 218,467 218,467 1,529,267
NON-COMPETE COVENANTS (0) 0 0 0 0
DEPRECIATION 1,708,709 1,524,712 1,479,078 12,279,044
EQUITY 9,149,468
DEBT 0 0 0 13,772,025
RESIDUAL VALUE IN YEAR 7 33,222,386 33,222,386
--------- --------- ---------- ----------
TOTAL SOURCES OF CASH $1,756,435 $2,101,185 $35,668,880 $67,277,628
USES OF CASH -
PURCHASE PRICE - CURRENT $18,739,501
CAPITAL EXPENDITURES 466,861 489,698 511,651 8,833,164
DEBT RETIREMENT 1,289,574 1,611,487 9,324,290 13,772,025
TAXES PAID ON NET INCOME 0 0 0 0
TAXES PAID ON SALE (RESIDUAL) 5,706,380 5,706,380
--------- --------- --------- ---------
TOTAL USES OF CASH $1,756,435 $2,101,185 $15,542,321 $47,051,070
ANNUAL CASH INCREASE/(DECREASE) $0 ($0) $20,126,558 $20,226,558
CUMULATIVE CASH 100,000 100,000 20,226,558
269
FALCON CABLE SYSTEMS CO. EXHIBIT C
DALLAS REGION - EXCHANGE LOW ANALYSIS
AS OF DECEMBER 31, 1995
RETURN ON EQUITY METHOD
DEBT AMORTIZATION - LOW VALUE
- -----------------------------
TOTAL YEAR 1 CASH REQUIREMENTS $16,711,758
YEAR 1 DEBT REQUIREMENTS 8,355,879
YEAR 1 EQUITY REQUIREMENTS 8,355,879
FINANCING AVAILABLE $14,485,794 $14,885,253 $15,931,118 $17,624,413
UNUSED LEVERAGE 6,129,915 4,672,265 3,718,290 6,482,683
SENIOR DEBT: 1996 1997 1998 1999
---- ---- ---- ----
BEGINNING DEBT $0 $8,355,879 $8,355,879 $7,831,586
DEBT ADDED 8,355,879 0 0 0
TOTAL ANNUAL PAYMENTS 835,588 835,588 1,359,881 1,359,881
INTEREST 835,588 835,588 835,588 783,159
PRINCIPAL REPAYMENT 0 0 524,293 576,722
ENDING BALANCE 8,355,879 8,355,879 7,831,586 7,254,864
LINE OF CREDIT:
BEGINNING DEBT $0 $0 $1,857,109 $4,381,243
BORROWINGS 0 1,857,109 2,524,133 0
PRINCIPAL PAYMENTS 0 0 0 494,376
INTEREST 0 185,711 438,124 438,124
SENIOR DEBT COVERAGE 3.6 3.4 2.9 2.4
LOC DEBT COVERAGE 0.0 0.8 1.6 1.3
TOTAL DEBT COVERAGE 3.6 4.2 4.5 3.7
TOTAL YEAR 1 CASH REQUIREMENTS
YEAR 1 DEBT REQUIREMENTS
YEAR 1 EQUITY REQUIREMENTS
FINANCING AVAILABLE $19,438,183 $21,149,973 $22,680,804
UNUSED LEVERAGE 9,694,389 13,136,863 17,525,786
SENIOR DEBT: 2000 2001 2002 TOTAL
---- ---- ---- -----
BEGINNING DEBT $7,254,864 $6,620,469 $5,922,635
DEBT ADDED 0 0 0 8,355,879
TOTAL ANNUAL PAYMENTS 1,359,881 1,359,881 1,359,881 8,470,580
INTEREST 725,486 662,047 592,264 5,269,719
PRINCIPAL REPAYMENT 634,394 697,834 767,617 3,200,861
ENDING BALANCE 6,620,469 5,922,635 5,155,018
LINE OF CREDIT:
BEGINNING DEBT $3,886,866 $3,123,325 $2,090,474 $0
BORROWINGS 0 0 0 4,381,243
PRINCIPAL PAYMENTS 763,541 1,032,851 2,090,474 4,381,243
INTEREST 388,687 312,333 209,047 1,972,026
SENIOR DEBT COVERAGE 2.0 1.7 1.4
LOC DEBT COVERAGE 1.0 0.6 0.0
TOTAL DEBT COVERAGE 3.0 2.3 1.4
270
FALCON CABLE SYSTEMS CO. EXHIBIT C
DALLAS REGION - EXCHANGE HIGH ANALYSIS
AS OF DECEMBER 31, 1995
RETURN ON EQUITY METHOD
DEBT AMORTIZATION - HIGH VALUE
- ------------------------------
TOTAL YEAR 1 CASH REQUIREMENTS $18,298,935
YEAR 1 DEBT REQUIREMENTS 9,149,468
YEAR 1 EQUITY REQUIREMENTS 9,149,468
FINANCING AVAILABLE $16,714,377 $17,175,292 $18,382,060 $20,335,861
UNUSED LEVERAGE 7,564,910 6,080,685 5,184,122 8,110,511
SENIOR: 1996 1997 1998 1999
---- ---- ---- ----
BEGINNING DEBT $0 $9,149,468 $9,149,468 $8,575,381
DEBT ADDED 9,149,468 0 0 0
TOTAL ANNUAL PAYMENTS 914,947 914,947 1,489,034 1,489,034
INTEREST 914,947 914,947 914,947 857,538
PRINCIPAL REPAYMENT 0 0 574,087 631,496
ENDING BALANCE 9,149,468 9,149,468 8,575,381 7,943,885
LINE OF CREDIT:
BEGINNING DEBT $0 $0 $1,945,140 $4,622,557
BORROWINGS 0 1,945,140 2,677,418 0
PRINCIPAL PAYMENTS 0 0 0 341,092
INTEREST 0 194,514 462,256 462,256
SENIOR DEBT COVERAGE 4.0 3.7 3.2 2.7
LOC DEBT COVERAGE 0.0 0.8 1.7 1.4
TOTAL DEBT COVERAGE 4.0 4.5 4.9 4.1
TOTAL YEAR 1 CASH REQUIREMENTS
YEAR 1 DEBT REQUIREMENTS
YEAR 1 EQUITY REQUIREMENTS
FINANCING AVAILABLE $22,428,673 $24,403,815 $26,170,159
UNUSED LEVERAGE 11,492,896 17,918,685 20,525,550
SENIOR: 2000 2001 2002 TOTAL
---- ---- ---- -----
BEGINNING DEBT $7,943,885 $7,249,240 $6,485,130
DEBT ADDED 0 0 0 $9,149,468
TOTAL ANNUAL PAYMENTS 1,489,034 1,489,034 1,489,034 9,275,062
INTEREST 794,389 724,924 648,513 5,770,204
PRINCIPAL REPAYMENT 694,645 764,110 840,521 3,504,858
ENDING BALANCE 7,249,240 6,485,130 5,644,609
LINE OF CREDIT:
BEGINNING DEBT $4,281,465 $3,686,537 $2,839,160 $0
BORROWINGS 0 0 0 4,622,557
PRINCIPAL PAYMENTS 594,928 847,377 2,839,160 4,622,557
INTEREST 428,147 368,654 283,916 2,199,742
SENIOR DEBT COVERAGE 2.2 1.9 1.5
LOC DEBT COVERAGE 1.1 0.8 0.0
TOTAL DEBT COVERAGE 3.4 2.7 1.5
271
FALCON CABLE SYSTEMS CO. EXHIBIT D
DALLAS REGION - EXCHANGE
AS OF DECEMBER 31, 1995
RETURN ON INVESTMENT METHOD
PROFIT AND LOSS
- ---------------
YEAR ENDING DECEMBER 31, 1996 1997 1998 1999
---- ---- ---- ----
REVENUES $3,922,294 $4,216,945 $4,627,442 $5,070,879
OPERATING EXPENSES 1,632,255 1,766,004 1,915,993 2,080,389
--------- --------- --------- ---------
OPERATING INCOME 2,290,039 2,450,941 2,711,448 2,990,490
PLUS: RESIDUAL VALUE
LESS: CAPITAL EXPENDITURES 638,177 3,076,008 3,206,204 444,565
------- --------- --------- -------
TOTAL CASH FLOW $1,651,862 ($625,066) ($494,756) $2,545,925
NET PRESENT VALUE @ 16.6% $16,926,793
-----------
NET PRESENT VALUE @ 15.1% $18,370,153
-----------
YEAR ENDING DECEMBER 31, 2000 2001 2002 TOTAL
---- ---- ---- -----
REVENUES $5,497,440 $5,891,841 $6,249,084 $35,475,924
OPERATING EXPENSES 2,243,598 2,402,486 2,557,707 14,598,433
--------- --------- --------- ----------
OPERATING INCOME 3,253,842 3,489,355 3,691,376 20,877,491
PLUS: RESIDUAL VALUE 33,222,386 33,222,386
LESS: CAPITAL EXPENDITURES 466,861 489,698 511,651 8,833,164
------- ------- ------- ---------
TOTAL CASH FLOW $2,786,981 $2,999,657 $36,402,111 $45,266,713
NET PRESENT VALUE @ 16.6%
NET PRESENT VALUE @ 15.1%
272
FALCON CABLE SYSTEMS CO. EXHIBIT E
DALLAS REGION - EXCHANGE
AS OF DECEMBER 31, 1995
CABLE TELEVISION SUBSCRIBERS
- ----------------------------
YEAR ENDING DECEMBER 31, 1996 1997 1998 1999
---- ---- ---- ----
BEGINNING MILES 303.9
MILES ADDED 6.9 7.0 7.2 7.3
CUMULATIVE MILES 310.8 317.8 325.0 332.3
DENSITY OF ADDITIONAL PLANT 37 37 37 37
HOMES PASSED - BEGINNING 14,561.0
NEW HOMES & EXTENSIONS 255 259 264 268
HOMES PASSED - ENDING 14,816 15,075 15,339 15,607
GROWTH IN HOMES 1.8% 1.8% 1.8% 1.8%
BASIC - BEGINNING SUBSCRIBERS 10,153.0 10,405 10,662 10,925
AVERAGE SUBSCRIBERS 10,279 10,533 10,794 11,041
ENDING SUBSCRIBERS 10,405 10,662 10,925 11,156
PENETRATION 70.2% 70.7% 71.2% 71.5%
EXPANDED BASIC - BEGINNING 7,078.0 7,254 7,433 7,617
AVERAGE SUBSCRIBERS 7,166 7,343 7,525 7,697
ENDING SUBSCRIBERS 7,254 7,433 7,617 7,777
PENETRATION 69.7% 69.7% 69.7% 69.7%
NEW PRODUCT TIER #1 - BEGINNING 3,624.0 3,880 4,414 4,970
AVERAGE SUBSCRIBERS 3,752 4,147 4,692 5,023
ENDING SUBSCRIBERS 3,880 4,414 4,970 5,075
PENETRATION 37.3% 41.4% 45.5% 45.5%
NEW PRODUCT TIER #2 - BEGINNING 0 0 512 1,835
AVERAGE SUBSCRIBERS 0 256 1,174 2,329
ENDING SUBSCRIBERS 0 512 1,835 2,822
PENETRATION 0.0% 4.8% 16.8% 25.3%
NEW PRODUCT TIER #3 - BEGINNING 0 0 512 1,835
AVERAGE SUBSCRIBERS 0 256 1,174 2,329
ENDING SUBSCRIBERS 0 512 1,835 2,822
PENETRATION 0.0% 4.8% 16.8% 25.3%
PAY TV - BEGINNING UNITS 3,953.0 3,947 4,151 4,363
AVERAGE UNITS 3,950 4,049 4,257 4,409
ENDING UNITS 3,947 4,151 4,363 4,455
PENETRATION 37.9% 38.9% 39.9% 39.9%
PAY PER VIEW - BEGINNING UNITS/MO 147 227 393 702
AVERAGE UNITS 187 310 547 874
ENDING UNITS 227 393 702 1,047
AVERAGE BUY RATE/MO 6.8% 9.8% 14.8% 19.8%
CONVERTER RENTALS - BEGINNING UNITS 3,465 3,707 4,279 4,903
AVERAGE SUBSCRIBERS 3,586 3,993 4,591 5,211
ENDING SUBSCRIBERS 3,707 4,279 4,903 5,520
PENETRATION 35.6% 40.1% 44.9% 49.5%
ADDRESSABLE HOMES 2,790.0 3,353 4,023 4,750
AVERAGE HOMES 3,072 3,688 4,387 5,024
ENDING HOMES 3,353 4,023 4,750 5,297
PENETRATION 32.2% 37.7% 43.5% 47.5%
BASIC CHURN RATE 28% 28% 28% 28%
YEAR ENDING DECEMBER 31, 2000 2001 2002
------ ------ ------
BEGINNING MILES
MILES ADDED 7.4 7.5 7.7
CUMULATIVE MILES 339.7 347.2 354.9
DENSITY OF ADDITIONAL PLANT 37 37 37
HOMES PASSED - BEGINNING
NEW HOMES & EXTENSIONS 273 278 283
HOMES PASSED - ENDING 15,880 16,158 16,441
GROWTH IN HOMES 1.8% 1.8% 1.8%
BASIC - BEGINNING SUBSCRIBERS 11,156 11,391 11,626
AVERAGE SUBSCRIBERS 11,273 11,508 11,747
ENDING SUBSCRIBERS 11,391 11,626 11,867
PENETRATION 71.7% 72.0% 72.2%
EXPANDED BASIC - BEGINNING 7,777 7,941 8,105
AVERAGE SUBSCRIBERS 7,859 8,023 8,189
ENDING SUBSCRIBERS 7,941 8,105 8,273
PENETRATION 69.7% 69.7% 69.7%
NEW PRODUCT TIER #1 - BEGINNING 5,075 5,182 5,289
AVERAGE SUBSCRIBERS 5,129 5,236 5,344
ENDING SUBSCRIBERS 5,182 5,289 5,399
PENETRATION 45.5% 45.5% 45.5%
NEW PRODUCT TIER #2 - BEGINNING 2,822 3,850 3,930
AVERAGE SUBSCRIBERS 3,336 3,890 3,970
ENDING SUBSCRIBERS 3,850 3,930 4,011
PENETRATION 33.8% 33.8% 33.8%
NEW PRODUCT TIER #3 - BEGINNING 2,822 3,850 3,930
AVERAGE SUBSCRIBERS 3,336 3,890 3,970
ENDING SUBSCRIBERS 3,850 3,930 4,011
PENETRATION 33.8% 33.8% 33.8%
PAY TV - BEGINNING UNITS 4,455 4,549 4,643
AVERAGE UNITS 4,502 4,596 4,691
ENDING UNITS 4,549 4,643 4,739
PENETRATION 39.9% 39.9% 39.9%
PAY PER VIEW - BEGINNING UNITS/MO 1,047 1,372 1,721
AVERAGE UNITS 1,210 1,546 1,916
ENDING UNITS 1,372 1,721 2,111
AVERAGE BUY RATE/MO 23.3% 26.8% 30.3%
CONVERTER RENTALS - BEGINNING UNITS 5,520 6,160 6,822
AVERAGE SUBSCRIBERS 5,840 6,491 7,026
ENDING SUBSCRIBERS 6,160 6,822 7,230
PENETRATION 54.1% 58.7% 60.9%
ADDRESSABLE HOMES 5,297 5,898 6,427
AVERAGE HOMES 5,597 6,163 6,701
ENDING HOMES 5,898 6,427 6,975
PENETRATION 51.8% 55.3% 58.8%
BASIC CHURN RATE 28% 28% 28%
273
FALCON CABLE SYSTEMS CO. EXHIBIT F
DALLAS REGION - EXCHANGE
AS OF DECEMBER 31, 1995
SERVICE RATES
- -------------
RUNNING RATES
AS OF AVERAGE RATES
CURRENT RATES DECEMBER 1995 FOR 1996
- ------------- ------------- -------------
BASIC $16.81 $17.12
EXPANDED BASIC $6.60 $7.54
NEW PRODUCT TIER #1 $4.49 $4.69
NEW PRODUCT TIER #2 $0.00 $4.00
NEW PRODUCT TIER #3 $0.00 $4.00
PAY 6.96 $6.96
PAY PER VIEW 9.99 $9.99
CONVERTER RENTALS 0.63 $0.94
INSTALLATIONS-NEW 50.00 $50.00
INSTALLATIONS-CHURN 25.00 $25.00
YEAR ENDING DECEMBER 31, 1996 1997 1998 1999 2000 2001 2002
---- ---- ---- ---- ---- ---- ----
PERCENTAGE RATE INCREASES
- -------------------------
BASIC 2% 3% 3% 3% 3% 3% 3%
EXPANDED BASIC 14% 3% 3% 3% 3% 3% 3%
NEW PRODUCT TIER #1 4% 3% 3% 3% 3% 3% 3%
NEW PRODUCT TIER #2 0% 3% 3% 3% 3% 3% 3%
NEW PRODUCT TIER #3 0% 3% 3% 3% 3% 3% 3%
PAY 0% 1% 1% 1% 1% 1% 1%
PAY PER VIEW 0% 3% 3% 3% 3% 3% 3%
CONVERTER/REMOTE RENTALS 49% 3% 3% 3% 3% 3% 3%
INSTALLATIONS-NEW 0% 3% 3% 3% 3% 3% 3%
INSTALLATIONS-CHURN 0% 3% 3% 3% 3% 3% 3%
AVERAGE RATES
- -------------
BASIC $17.12 $17.63 $18.16 $18.71 $19.27 $19.85 $20.44
EXPANDED BASIC $7.54 7.77 8.00 8.24 8.49 8.74 9.00
NEW PRODUCT TIER #1 $4.69 4.83 4.98 5.12 5.28 5.44 5.60
NEW PRODUCT TIER #2 $4.00 4.12 4.24 4.37 4.50 4.64 4.78
NEW PRODUCT TIER #3 $4.00 4.12 4.24 4.37 4.50 4.64 4.78
PAY $6.96 7.03 7.10 7.17 7.24 7.31 7.39
PAY PER VIEW $9.99 10.29 10.60 10.92 11.25 11.59 11.93
CONVERTERS RENTALS $0.94 0.97 1.00 1.03 1.06 1.09 1.12
INSTALLATIONS-NEW $50.00 51.50 53.05 54.64 56.28 57.96 59.70
INSTALLATIONS-CHURN $25.00 25.75 26.52 27.32 28.14 28.98 29.85
274
FALCON CABLE SYSTEMS CO. EXHIBIT G
DALLAS REGION - EXCHANGE
AS OF DECEMBER 31, 1995
YEAR ENDING DECEMBER 31, 1996 1997 1998 1999
---- ---- ---- ----
REVENUES:
BASIC $2,111,690 $2,228,916 $2,352,532 $2,478,500
EXPANDED BASIC 648,344 684,335 722,288 760,964
NEW PRODUCT TIER #1 211,171 240,390 280,145 308,895
NEW PRODUCT TIER #2 0 12,651 59,765 122,155
NEW PRODUCT TIER #3 0 12,651 59,765 122,155
PAY TV 329,901 341,562 362,701 379,394
PAY PER VIEW 22,430 38,297 69,639 114,590
CONVERTER RENTALS 40,448 46,387 54,936 64,232
INSTALLATIONS 67,056 70,757 74,658 76,947
COMMERCIAL 195,177 201,032 207,063 213,275
ADVERTISING 148,148 184,758 221,199 259,300
MISCELLANEOUS 147,928 155,209 162,751 170,472
---------- ---------- ---------- ----------
TOTAL REVENUES $3,922,294 $4,216,945 $4,627,442 $5,070,879
OPERATING EXPENSES:
OPERATIONS $492,002 $521,302 $555,951 $592,481
GENERAL & ADMINISTRATIVE 332,140 349,489 369,050 389,345
SALES & MARKETING 163,907 207,203 231,424 256,507
PROGRAMMING 644,206 688,010 759,569 842,056
---------- ---------- ---------- ----------
TOTAL OPERATING EXPENSES $1,632,255 $1,766,004 $1,915,993 $2,080,389
---------- ---------- ---------- ----------
OPERATING INCOME $2,290,039 $2,450,941 $2,711,448 $2,990,490
OPERATING MARGIN 58.4% 58.1% 58.6% 59.0%
TOTAL REVENUE/BASIC SUB/MONTH $31.80 $33.36 $35.73 $38.27
CASH FLOW/BASIC SUB/MONTH $18.57 $19.39 $20.93 $22.57
OPERATIONS % OF REVENUE 13% 12% 12% 12%
G & A PERCENTAGE OF REVENUE 8% 8% 8% 8%
SALES & MARKETING % OF REVENUE 4.2% 4.9% 5.0% 5.1%
PROGRAMMING % OF REVENUE 16% 16% 16% 17%
YEAR ENDING DECEMBER 31, 2000 2001 2002 TOTAL
REVENUES:
BASIC $2,606,631 $2,740,872 $2,881,499 $17,400,640
EXPANDED BASIC 800,304 841,519 884,695 5,342,449
NEW PRODUCT TIER #1 324,863 341,594 359,120 2,066,177
NEW PRODUCT TIER #2 180,237 216,452 227,558 818,819
NEW PRODUCT TIER #3 180,237 216,452 227,558 818,819
PAY TV 391,260 403,421 415,885 2,624,124
PAY PER VIEW 163,303 215,011 274,370 897,641
CONVERTER RENTALS 74,136 84,876 94,630 459,646
INSTALLATIONS 80,919 84,895 89,245 544,477
COMMERCIAL 219,673 226,263 233,051 1,495,533
ADVERTISING 297,485 333,815 366,196 1,810,900
MISCELLANEOUS 178,390 186,670 195,277 1,196,698
---------- ---------- ---------- -----------
TOTAL REVENUES $5,497,440 $5,891,841 $6,249,084 $35,475,924
OPERATING EXPENSES:
OPERATIONS $629,095 $665,589 $701,831 $4,158,251
GENERAL & ADMINISTRATIVE 409,697 430,273 451,036 2,731,029
SALES & MARKETING 281,811 306,527 329,667 1,777,047
PROGRAMMING 922,994 1,000,097 1,075,174 5,932,106
---------- ---------- ---------- -----------
TOTAL OPERATING EXPENSES $2,243,598 $2,402,486 $2,557,707 $14,598,433
---------- ---------- ---------- ----------
OPERATING INCOME $3,253,842 $3,489,355 $3,691,376 $20,877,491
OPERATING MARGIN 59.2% 59.2% 59.1% 58.8%
TOTAL REVENUE/BASIC SUB/MONTH $40.64 $42.66 $44.33
CASH FLOW/BASIC SUB/MONTH $24.05 $25.27 $26.19
OPERATIONS % OF REVENUE 11% 11% 11%
G & A PERCENTAGE OF REVENUE 7% 7% 7%
SALES & MARKETING % OF REVENUE 5.1% 5.2% 5.3%
PROGRAMMING % OF REVENUE 17% 17% 17%
275
FALCON CABLE SYSTEMS CO. EXHIBIT H
DALLAS REGION - EXCHANGE
AS OF DECEMBER 31, 1995
CAPITAL EXPENDITURES
- --------------------
YEAR ENDING DECEMBER 31, 1996 1997 1998 1999
---------- ---------- ---------- ----------
ASSUMPTIONS AND INPUTS:
- -----------------------
BV OF EXISTING PLANT $5,948,183
ADDITIONAL MILES OF PLANT 6.9 7.0 7.2 7.3
AERIAL PLANT PER MILE $12,000 $12,240 $12,485 $12,734
UNDERGROUND PLANT PER MILE $18,000 $18,360 $18,727 $19,102
PERCENTAGE OF PLANT AERIAL 5% 5% 5% 5%
PERCENTAGE OF PLANT UNDERGROUND 95% 95% 95% 95%
AVERAGE COST PER CONVERTER $110 $112 $114 $117
PERCENTAGE CONVERTER USE 36% 40% 45% 49%
PERCENTAGE REPLACEMENT 5% 5% 5% 5%
INSTALLATION COST PER SUBSCRIBER $54 $55 $56 $57
MISC. CAPITAL PER SUBSCRIBER $5 $5 $5 $5
INFLATION FACTOR FOR CAPITALS 2% 2% 2% 2%
ANNUAL COSTS:
- -------------
PLANT ADDITIONS - AERIAL $4,148 $4,305 $4,468 $4,637
118,225 122,700 127,344 132,164
PLANT REBUILD/UPGRADE/INCL. HE 269,075 2,687,225 2,796,500 17,590
AVERAGE COST OF NEW CONVERTERS 9,866 11,592 13,522 13,296
CONVERTER REPLACEMENT 19,895 23,423 27,381 31,551
INSTALLATION COSTS 165,573 173,042 180,840 186,744
MISC. CAPITAL EXPENDITURES 51,394 53,721 56,150 58,582
---------- ---------- ---------- ----------
TOTAL CAPITAL EXPENDITURES $638,177 $3,076,008 $3,206,204 $444,565
AS A % OF OPERATING INCOME 27.9% 125.5% 118.2% 14.9%
YEAR ENDING DECEMBER 31, 2000 2001 2002 TOTAL
---- ---- ---- -----
ASSUMPTIONS AND INPUTS:
- -----------------------
BV OF EXISTING PLANT
ADDITIONAL MILES OF PLANT 7.4 7.5 7.7
AERIAL PLANT PER MILE $12,989 $13,249 $13,514
UNDERGROUND PLANT PER MILE $19,484 $19,873 $20,271
PERCENTAGE OF PLANT AERIAL 5% 5% 5%
PERCENTAGE OF PLANT UNDERGROUND 95% 95% 95%
AVERAGE COST PER CONVERTER $119 $121 $124
PERCENTAGE CONVERTER USE 54% 59% 61%
PERCENTAGE REPLACEMENT 5% 5% 5%
INSTALLATION COST PER SUBSCRIBER $58 $60 $61
MISC. CAPITAL PER SUBSCRIBER $5 $6 $6
INFLATION FACTOR FOR CAPITALS 2% 2% 2% 115%
ANNUAL COSTS:
- -------------
PLANT ADDITIONS - AERIAL $4,813 $4,995 $5,184 $32,551
137,166 142,358 147,746 927,701
PLANT REBUILD/UPGRADE/INCL. HE 18,344 19,128 19,943 5,827,805
AVERAGE COST OF NEW CONVERTERS 15,127 16,796 18,148 98,348
CONVERTER REPLACEMENT 35,915 40,587 43,876 222,627
INSTALLATION COSTS 194,485 202,302 210,611 1,313,598
MISC. CAPITAL EXPENDITURES 61,012 63,531 66,143 410,533
---------- ---------- ---------- ----------
TOTAL CAPITAL EXPENDITURES $466,861 $489,698 $511,651 $8,833,164
AS A % OF OPERATING INCOME 14.3% 14.0% 13.9%
276
FALCON CABLE SYSTEMS CO. EXHIBIT I
DALLAS REGION - EXCHANGE
AS OF DECEMBER 31, 1995
DEPRECIATION
- ------------
YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5 YEAR 6 YEAR 7
------ ------ ------ ------ ------ ------ ------
ESTIMATED DEPRECIATION RATES 14.3% 24.5% 17.5% 12.5% 8.9% 8.9% 8.9%
DEPRECIATION - BEG. & ADTNS. 1996 1997 1998 1999 2000 2001 2002 TOTAL
---- ---- ---- ---- ---- ---- ---- -----
YEAR 1 $941,191 $1,612,999 $1,151,954 $822,636 $588,162 $587,503 $588,162 $6,292,608
YEAR 2 439,561 753,314 537,994 384,193 274,687 274,380 2,664,130
YEAR 3 458,167 785,199 560,765 400,455 286,314 2,490,900
YEAR 4 63,528 108,874 77,754 55,526 305,683
YEAR 5 66,714 114,334 81,654 262,703
YEAR 6 69,978 119,927 189,905
YEAR 7 73,115 73,115
-------- ---------- ---------- ---------- ---------- ---------- ---------- -----------
TOTAL DEPRECIATION $941,191 $2,052,561 $2,363,435 $2,209,358 $1,708,709 $1,524,712 $1,479,078 $12,279,044
277
FALCON CABLE SYSTEMS CO. EXHIBIT J
DALLAS REGION - EXCHANGE
AS OF DECEMBER 31, 1995
ASSUMPTIONS AND INPUTS
- ----------------------
REMAINING LIFE OF FRANCHISES (YEARS) 7
AVERAGE SUBSCRIBER LIFE (YEARS) 8
INCOME TAX RATE 34%
CAPITAL GAIN RATE 34%
NET FMV OF EXISTING ASSETS $5,948,183
SUBSCRIBERS IN FRANCHISES 100%
LOW HIGH
ANALYSIS ANALYSIS
-------- --------
DEBT PERCENTAGE 50% 50%
EQUITY PERCENTAGE 50% 50%
RESIDUAL MULTIPLE (ROE & ROI) 9 9
MULT OF PAST YEAR'S OPERATING INCOME 10.5 11.5
MULT OF CURRENT YEAR'S OPERATING INCOME 10.0 11.0
MULT OF NEXT YEAR'S OPERATING INCOME 9.5 10.5
TARGET RETURN ON EQUITY 14.0% 12.0%
TARGET RETURN ON INVESTMENT 16.6% 15.1%
278
FLORENCE-EXCHANGE
279
FALCON CABLE SYSTEMS CO. EXHIBIT A
FLORENCE REGION - EXCHANGE
AS OF DECEMBER 31, 1995
VALUATION METHODS
- -----------------
LOW HIGH
I. MULTIPLE OF PAST YEAR'S OPERATING INCOME
OPERATING INCOME, PER BOOKS (DECEMBER 31, 1995) $1,006,163 $1,006,163
----------- -----------
VALUATION MULTIPLE 10.5 11.5
----------- -----------
ESTIMATED FAIR MARKET VALUE $10,564,712 $11,570,875
----------- -----------
II. MULTIPLE OF "RUNNING RATE" OPERATING INCOME
ESTIMATED OPERATING INCOME
TOTAL CURRENT YEAR'S REVENUE $1,906,777 $1,906,777
OPERATING MARGIN, PER BOOKS (DECEMBER 31, 1995) 54.9% 54.9%
----------- -----------
"RUNNING RATE" OPERATING INCOME 1,047,246 1,047,246
VALUATION MULTIPLE 10.0 11.0
----------- -----------
ESTIMATED FAIR MARKET VALUE $10,472,457 $11,519,703
----------- -----------
III. MULTIPLE OF NEXT YEAR'S OPERATING INCOME
OPERATING INCOME $1,110,876 $1,110,876
VALUATION MULTIPLE 9.5 10.5
----------- -----------
ESTIMATED FAIR MARKET VALUE $10,553,325 $11,664,201
----------- -----------
IV. DISCOUNTED CASH FLOW RETURN ON EQUITY
TARGET RETURN ON EQUITY 14.0% 12.0%
ESTIMATED FAIR MARKET VALUE $9,603,311 $10,572,968
----------- -----------
V. DISCOUNTED CASH FLOW RETURN ON INVESTMENT
TARGET RETURN ON INVSTMT 16.6% 15.1%
ESTIMATED FAIR MARKET VALUE $9,470,275 $10,352,769
----------- -----------
SUMMARY OF VALUES
- -----------------
I. MULTIPLE OF PAST YEAR'S OPERATING INCOME $10,564,712 $11,570,875
II. MULTIPLE OF "RUNNING RATE" OPERATING INCOME 10,472,457 11,519,703
III. MULTIPLE OF NEXT YEAR'S OPERATING INCOME 10,553,325 11,664,201
IV. DISCOUNTED CASH FLOW RETURN ON EQUITY 9,603,311 10,572,968
V. DISCOUNTED CASH FLOW RETURN ON INVESTMENT 9,470,275 10,352,769
----------- -----------
RANGE OF ESTIMATED FAIR MARKET VALUES $9,932,000 $10,917,000
ESTIMATED FAIR MARKET VALUE $10,425,000
-----------
280
FALCON CABLE SYSTEMS CO. EXHIBIT B
FLORENCE REGION - EXCHANGE LOW ANALYSIS
AS OF DECEMBER 31, 1995
RETURN ON EQUITY METHOD
PROFIT AND LOSS - LOW VALUE
- ---------------------------
YEAR ENDING DECEMBER 31, 1996 1997 1998 1999 2000
---------- ---------- ---------- ---------- ----------
REVENUES $2,022,632 $2,201,449 $2,400,299 $2,601,239 $2,795,196
OPERATING EXPENSES 911,756 987,811 1,065,251 1,148,434 1,232,960
---------- ---------- ---------- ---------- ----------
OPERATING INCOME $1,110,876 $1,213,638 $1,335,048 $1,452,804 $1,562,236
OPERATING MARGIN 0.55 0.55 0.56 0.56 0.56
PARENT SERVICES/MGT FEE (5%) 101,132 110,072 120,015 130,062 139,760
FRANCHISE AMORTIZATION (15) 377,467 377,467 377,467 377,467 377,467
SUBSCRIBER LIST (8) 97,800 97,800 97,800 97,800 97,800
NON-COMPETE COVENANTS (0) 0 0 0 0 0
DEPRECIATION 407,282 727,908 709,299 697,547 563,297
INTEREST 468,526 468,526 494,993 465,595 406,791
---------- ---------- ---------- ---------- ----------
PRE-TAX INCOME ($341,330) ($568,136) ($464,526) ($315,666) ($22,878)
INCOME TAX (EXPENSE)/BENEFIT 116,052 193,166 157,939 107,327 7,779
---------- ---------- ---------- ---------- ----------
NET INCOME ($225,278) ($374,970) ($306,587) ($208,340) ($15,100)
SOURCES AND USES OF CASH
- ------------------------
SOURCES OF CASH -
PRE TAX INCOME ($341,330) ($568,136) ($464,526) ($315,666) ($22,878)
FRANCHISE AMORTIZATION (15) 377,467 377,467 377,467 377,467 377,467
SUBSCRIBER LIST (8) 97,800 97,800 97,800 97,800 97,800
NON-COMPETE COVENANTS (0) 0 0 0 0 0
DEPRECIATION 407,282 727,908 709,299 697,547 563,297
EQUITY 4,685,263
DEBT 4,685,263 0 264,665 0 0
---------- ---------- ---------- ---------- ----------
RESIDUAL VALUE IN YEAR 9
TOTAL SOURCES OF CASH $9,911,745 $635,039 $984,705 $857,147 $1,015,685
USES OF CASH -
PURCHASE PRICE - CURRENT $9,603,311
CAPITAL EXPENDITURES 208,367 209,335 1,116,497 220,604 233,268
DEBT RETIREMENT 0 0 293,979 588,042 355,714
TAXES PAID ON NET INCOME 0 0 0 0 0
---------- ---------- ---------- ---------- ----------
TAXES PAID ON SALE (RESIDUAL)
TOTAL USES OF CASH $9,811,678 $209,335 $1,410,476 $808,645 $588,982
ANNUAL CASH INCREASE/(DECREASE) $100,067 $425,704 ($425,771) $48,502 $426,703
CUMULATIVE CASH 100,067 525,771 100,000 148,502 575,205
RETURN ON EQUITY METHOD
PROFIT AND LOSS - LOW VALUE
- ---------------------------
YEAR ENDING DECEMBER 31, 2001 2002 2003 2004 TOTAL
---------- ---------- ---------- ---------- ----------
REVENUES $2,983,410 $3,172,462 $3,368,978 $3,577,807 $25,123,472
OPERATING EXPENSES 1,315,210 1,396,366 1,480,650 1,571,979 11,110,419
---------- ---------- ---------- ---------- ----------
OPERATING INCOME $1,668,200 $1,776,095 $1,888,329 $2,005,828 $14,013,053
OPERATING MARGIN 0.56 0.56 0.56 0.56
PARENT SERVICES/MGT FEE (5%) 149,170 158,623 168,449 178,890 1,256,174
FRANCHISE AMORTIZATION (15) 377,467 377,467 377,467 377,467 3,397,200
SUBSCRIBER LIST (8) 97,800 97,800 97,800 97,800 880,200
NON-COMPETE COVENANTS (0) 0 0 0 0 0
DEPRECIATION 542,173 534,127 304,076 312,137 4,797,846
INTEREST 371,219 332,091 289,049 241,704 3,538,495
---------- ---------- ---------- ---------- ----------
PRE-TAX INCOME $130,370 $275,988 $651,488 $797,830 $143,139
INCOME TAX (EXPENSE)/BENEFIT (44,326) (93,836) (221,506) (271,262) (48,667)
---------- ---------- ---------- ---------- ----------
NET INCOME $86,044 $182,152 $429,982 $526,568 $94,472
SOURCES AND USES OF CASH
- ------------------------
SOURCES OF CASH -
PRE TAX INCOME $130,370 $275,988 $651,488 $797,830 $143,139
FRANCHISE AMORTIZATION (15) 377,467 377,467 377,467 377,467 3,397,200
SUBSCRIBER LIST (8) 97,800 97,800 97,800 97,800 880,200
NON-COMPETE COVENANTS (0) 0 0 0 0 0
DEPRECIATION 542,173 534,127 304,076 312,137 4,797,846
EQUITY 4,685,263
DEBT 0 0 0 0 4,949,928
RESIDUAL VALUE IN YEAR 9 18,052,449 18,052,449
---------- ---------- ---------- ---------- ----------
TOTAL SOURCES OF CASH $1,147,810 $1,285,381 $1,430,830 $19,637,682 $36,906,025
USES OF CASH -
PURCHASE PRICE - CURRENT $9,603,311
CAPITAL EXPENDITURES 238,542 241,177 253,119 265,642 2,986,551
DEBT RETIREMENT 391,286 430,414 473,456 2,417,038 4,949,928
TAXES PAID ON NET INCOME 0 0 0 48,667 48,667
TAXES PAID ON SALE (RESIDUAL) 4,942,863 4,942,863
---------- ---------- ---------- ---------- ----------
TOTAL USES OF CASH $629,827 $671,591 $726,575 $7,674,211 $22,531,321
ANNUAL CASH INCREASE/(DECREASE) $517,982 $613,790 $704,256 $11,963,471 $14,374,705
CUMULATIVE CASH 1,093,188 1,706,978 2,411,233 14,374,705
281
FALCON CABLE SYSTEMS CO. EXHIBIT B
FLORENCE REGION - EXCHANGE HIGH ANALYSIS
AS OF DECEMBER 31, 1995
RETURN ON EQUITY METHOD
PROFIT AND LOSS - HIGH VALUE
- ----------------------------
YEAR ENDING DECEMBER 31, 1996 1997 1998 1999 2000
---------- ---------- ---------- ---------- ----------
REVENUES $2,022,632 $2,201,449 $2,400,299 $2,601,239 $2,795,196
OPERATING EXPENSES 911,756 987,811 1,065,251 1,148,434 1,232,960
---------- ---------- ---------- ---------- ----------
OPERATING INCOME $1,110,876 $1,213,638 $1,335,048 $1,452,804 $1,562,236
OPERATING MARGIN 0.55 0.55 0.56 0.56 0.56
PARENT SERVICES/MGT FEE (5%) 101,132 110,072 120,015 130,062 139,760
FRANCHISE AMORTIZATION (15) 377,467 377,467 377,467 377,467 377,467
SUBSCRIBER LIST (8) 97,800 97,800 97,800 97,800 97,800
NON-COMPETE COVENANTS (0) 0 0 0 0 0
DEPRECIATION 407,282 727,908 709,299 697,547 563,297
INTEREST 519,561 519,561 560,926 528,326 470,945
---------- ---------- ---------- ---------- ----------
PRE-TAX INCOME ($392,365) ($619,170) ($530,460) ($378,398) ($87,032)
INCOME TAX (EXPENSE)/BENEFIT 133,404 210,518 180,356 128,655 29,591
---------- ---------- ---------- ---------- ----------
NET INCOME ($258,961) ($408,652) ($350,103) ($249,742) ($57,441)
SOURCES AND USES OF CASH
- ------------------------
SOURCES OF CASH -
PRE TAX INCOME ($392,365) ($619,170) ($530,460) ($378,398) ($87,032)
FRANCHISE AMORTIZATION (15) 377,467 377,467 377,467 377,467 377,467
SUBSCRIBER LIST (8) 97,800 97,800 97,800 97,800 97,800
NON-COMPETE COVENANTS (0) 0 0 0 0 0
DEPRECIATION 407,282 727,908 709,299 697,547 563,297
EQUITY 5,195,609
DEBT 5,195,609 0 413,655 0 0
---------- ---------- ---------- ---------- ----------
RESIDUAL VALUE IN YEAR 9
TOTAL SOURCES OF CASH $10,881,403 $584,004 $1,067,761 $794,416 $951,531
USES OF CASH -
PURCHASE PRICE - CURRENT $10,572,968
CAPITAL EXPENDITURES 208,367 209,335 1,116,497 220,604 233,268
DEBT RETIREMENT 0 0 326,001 573,813 592,904
TAXES PAID ON NET INCOME 0 0 0 0 0
---------- ---------- ---------- ---------- ----------
TAXES PAID ON SALE (RESIDUAL)
TOTAL USES OF CASH $10,781,335 $209,335 $1,442,498 $794,416 $826,171
ANNUAL CASH INCREASE/(DECREASE) $100,067 $374,669 ($374,736) $0 $125,360
CUMULATIVE CASH 100,067 474,736 100,000 100,000 225,360
RETURN ON EQUITY METHOD
PROFIT AND LOSS - HIGH VALUE
- ----------------------------
YEAR ENDING DECEMBER 31, 2001 2002 2003 2004 TOTAL
---------- ---------- ---------- ---------- ----------
REVENUES $2,983,410 $3,172,462 $3,368,978 $3,577,807 $25,123,472
OPERATING EXPENSES 1,315,210 1,396,366 1,480,650 1,571,979 11,110,419
---------- ---------- ---------- ---------- ----------
OPERATING INCOME $1,668,200 $1,776,095 $1,888,329 $2,005,828 $14,013,053
OPERATING MARGIN 0.56 0.56 0.56 0.56
PARENT SERVICES/MGT FEE (5%) 149,170 158,623 168,449 178,890 1,256,174
FRANCHISE AMORTIZATION (15) 377,467 377,467 377,467 377,467 3,397,200
SUBSCRIBER LIST (8) 97,800 97,800 97,800 97,800 880,200
NON-COMPETE COVENANTS (0) 0 0 0 0 0
DEPRECIATION 542,173 534,127 304,076 312,137 4,797,846
INTEREST 411,655 368,264 320,534 268,032 3,967,805
---------- ---------- ---------- ---------- ----------
PRE-TAX INCOME $89,934 $239,815 $620,003 $771,502 ($286,171)
INCOME TAX (EXPENSE)/BENEFIT (30,578) (81,537) (210,801) (262,311) 97,298
---------- ---------- ---------- ---------- ----------
NET INCOME $59,357 $158,278 $409,202 $509,192 ($188,873)
SOURCES AND USES OF CASH
- ------------------------
SOURCES OF CASH -
PRE TAX INCOME $89,934 $239,815 $620,003 $771,502 ($286,171)
FRANCHISE AMORTIZATION (15) 377,467 377,467 377,467 377,467 3,397,200
SUBSCRIBER LIST (8) 97,800 97,800 97,800 97,800 880,200
NON-COMPETE COVENANTS (0) 0 0 0 0 0
DEPRECIATION 542,173 534,127 304,076 312,137 4,797,846
EQUITY 5,195,609
DEBT 0 0 0 0 5,609,264
RESIDUAL VALUE IN YEAR 9 18,052,449 18,052,449
---------- ---------- ---------- ---------- ----------
TOTAL SOURCES OF CASH $1,107,374 $1,249,208 $1,399,345 $19,611,354 $37,646,398
USES OF CASH -
PURCHASE PRICE - CURRENT $10,572,968
CAPITAL EXPENDITURES 238,542 241,177 253,119 265,642 2,986,551
DEBT RETIREMENT 433,907 477,297 525,027 2,680,316 5,609,264
TAXES PAID ON NET INCOME 0 0 0 0 0
TAXES PAID ON SALE (RESIDUAL) 4,515,882 4,515,882
---------- ---------- ---------- ---------- ----------
TOTAL USES OF CASH $672,448 $718,475 $778,146 $7,461,840 $23,684,665
ANNUAL CASH INCREASE/(DECREASE) $434,926 $530,733 $621,199 $12,149,514 $13,961,732
CUMULATIVE CASH 660,285 1,191,019 1,812,218 13,961,732
282
FALCON CABLE SYSTEMS CO. EXHIBIT C
FLORENCE REGION - EXCHANGE LOW ANALYSIS
AS OF DECEMBER 31, 1995
RETURN ON EQUITY METHOD
DEBT AMORTIZATION - LOW VALUE
- -----------------------------
TOTAL YEAR 1 CASH REQUIREMENTS $9,370,527
YEAR 1 DEBT REQUIREMENTS 4,685,263
YEAR 1 EQUITY REQUIREMENTS 4,685,263
FINANCING AVAILABLE $6,540,060 $7,220,696 $7,888,646 $8,677,812 $9,443,228
UNUSED LEVERAGE 1,854,796 2,535,432 3,232,697 4,609,904 5,731,034
SENIOR DEBT: 1996 1997 1998 1999 2000
---------- ---------- ---------- ---------- ----------
BEGINNING DEBT $0 $4,685,263 $4,685,263 $4,391,285 $4,067,908
DEBT ADDED 4,685,263 0 0 0 0
TOTAL ANNUAL PAYMENTS 468,526 468,526 762,505 762,505 762,505
INTEREST 468,526 468,526 468,526 439,128 406,791
PRINCIPAL REPAYMENT 0 0 293,979 323,377 355,714
ENDING BALANCE 4,685,263 4,685,263 4,391,285 4,067,908 3,712,194
LINE OF CREDIT:
BEGINNING DEBT $0 $0 $0 $264,665 $0
BORROWINGS 0 0 264,665 0 0
PRINCIPAL PAYMENTS 0 0 0 264,665 0
INTEREST 0 0 26,466 26,466 0
SENIOR DEBT COVERAGE 4.2 3.9 3.3 2.8 2.4
LOC DEBT COVERAGE 0.0 0.0 0.2 0.0 0.0
TOTAL DEBT COVERAGE 4.2 3.9 3.5 2.8 2.4
RETURN ON EQUITY METHOD
DEBT AMORTIZATION - LOW VALUE
- -----------------------------
TOTAL YEAR 1 CASH REQUIREMENTS
YEAR 1 DEBT REQUIREMENTS
YEAR 1 EQUITY REQUIREMENTS
FINANCING AVAILABLE $10,154,533 $10,843,297 $11,544,619 $12,274,136
UNUSED LEVERAGE 6,833,625 7,952,803 9,127,580 10,377,899
SENIOR DEBT: 2001 2002 2003 2004 TOTAL
---------- ---------- ---------- ---------- ----------
BEGINNING DEBT $3,712,194 $3,320,908 $2,890,494 $2,417,038
DEBT ADDED 0 0 0 0 $4,685,263
TOTAL ANNUAL PAYMENTS 762,505 762,505 762,505 762,505 6,274,588
INTEREST 371,219 332,091 289,049 241,704 3,485,562
PRINCIPAL REPAYMENT 391,286 430,414 473,456 520,801 2,789,026
ENDING BALANCE 3,320,908 2,890,494 2,417,038 1,896,237
LINE OF CREDIT:
BEGINNING DEBT $0 $0 $0 $0 $0
BORROWINGS 0 0 0 0 264,665
PRINCIPAL PAYMENTS 0 0 0 0 264,665
INTEREST 0 0 0 0 52,933
SENIOR DEBT COVERAGE 2.0 1.6 1.3 0.9
LOC DEBT COVERAGE 0.0 0.0 0.0 0.0
TOTAL DEBT COVERAGE 2.0 1.6 1.3 0.9
283
FALCON CABLE SYSTEMS CO. EXHIBIT C
FLORENCE REGION - EXCHANGE HIGH ANALYSIS
AS OF DECEMBER 31, 1995
RETURN ON EQUITY METHOD
DEBT AMORTIZATION - HIGH VALUE
- ------------------------------
TOTAL YEAR 1 CASH REQUIREMENTS $10,391,219
YEAR 1 DEBT REQUIREMENTS 5,195,609
YEAR 1 EQUITY REQUIREMENTS 5,195,609
FINANCING AVAILABLE $7,546,223 $8,331,572 $9,102,284 $10,012,860 $10,896,033
UNUSED LEVERAGE 2,350,613 3,135,963 3,819,021 5,303,408 6,779,485
SENIOR: 1996 1997 1998 1999 2000
---------- ---------- ---------- ---------- ----------
BEGINNING DEBT $0 $5,195,609 $5,195,609 $4,869,609 $4,511,008
DEBT ADDED 5,195,609 0 0 0 0
TOTAL ANNUAL PAYMENTS 519,561 519,561 845,562 845,562 845,562
INTEREST 519,561 519,561 519,561 486,961 451,101
PRINCIPAL REPAYMENT 0 0 326,001 358,601 394,461
ENDING BALANCE 5,195,609 5,195,609 4,869,609 4,511,008 4,116,548
LINE OF CREDIT:
BEGINNING DEBT $0 $0 $0 $413,655 $198,443
BORROWINGS 0 0 413,655 0 0
PRINCIPAL PAYMENTS 0 0 0 215,212 198,443
INTEREST 0 0 41,365 41,365 19,844
SENIOR DEBT COVERAGE 4.7 4.3 3.6 3.1 2.6
LOC DEBT COVERAGE 0.0 0.0 0.3 0.1 0.0
TOTAL DEBT COVERAGE 4.7 4.3 4.0 3.2 2.6
RETURN ON EQUITY METHOD
DEBT AMORTIZATION - HIGH VALUE
- ------------------------------
TOTAL YEAR 1 CASH REQUIREMENTS
YEAR 1 DEBT REQUIREMENTS
YEAR 1 EQUITY REQUIREMENTS
FINANCING AVAILABLE $11,716,769 $12,511,496 $13,320,714 $14,162,465
UNUSED LEVERAGE 8,034,128 9,306,153 10,640,398 12,059,679
SENIOR: 2001 2002 2003 2004 TOTAL
---------- ---------- ---------- ---------- ----------
BEGINNING DEBT $4,116,548 $3,682,641 $3,205,343 $2,680,316
DEBT ADDED 0 0 0 0 $5,195,609
TOTAL ANNUAL PAYMENTS 845,562 845,562 845,562 845,562 6,958,053
INTEREST 411,655 368,264 320,534 268,032 3,865,229
PRINCIPAL REPAYMENT 433,907 477,297 525,027 577,530 3,092,823
ENDING BALANCE 3,682,641 3,205,343 2,680,316 2,102,786
LINE OF CREDIT:
BEGINNING DEBT $0 $0 $0 $0 $0
BORROWINGS 0 0 0 0 413,655
PRINCIPAL PAYMENTS 0 0 0 0 413,655
INTEREST 0 0 0 0 102,575
SENIOR DEBT COVERAGE 2.2 1.8 1.4 1.0
LOC DEBT COVERAGE 0.0 0.0 0.0 0.0
TOTAL DEBT COVERAGE 2.2 1.8 1.4 1.0
284
FALCON CABLE SYSTEMS CO. EXHIBIT D
FLORENCE REGION - EXCHANGE
AS OF DECEMBER 31, 1995
RETURN ON INVESTMENT METHOD
PROFIT AND LOSS
- ---------------
YEAR ENDING DECEMBER 31, 1996 1997 1998 1999 2000
---------- ---------- ---------- ---------- ----------
REVENUES $2,022,632 $2,201,449 $2,400,299 $2,601,239 $2,795,196
OPERATING EXPENSES 911,756 987,811 1,065,251 1,148,434 1,232,960
---------- ---------- ---------- ---------- ----------
OPERATING INCOME $1,110,876 $1,213,638 $1,335,048 $1,452,804 $1,562,236
PLUS: RESIDUAL VALUE
LESS: CAPITAL EXPENDITURES 208,367 209,335 1,116,497 220,604 233,268
---------- ---------- ---------- ---------- ----------
TOTAL CASH FLOW $902,509 $1,004,303 $218,551 $1,232,201 $1,328,968
NET PRESENT VALUE @ 16.6% $9,470,275
NET PRESENT VALUE @ 15.1% $10,352,769
YEAR ENDING DECEMBER 31, 2001 2002 2003 2004 TOTAL
---------- ---------- ---------- ---------- ----------
REVENUES $2,983,410 $3,172,462 $3,368,978 $3,577,807 $25,123,472
OPERATING EXPENSES 1,315,210 1,396,366 1,480,650 1,571,979 11,110,419
---------- ---------- ---------- ---------- ----------
OPERATING INCOME $1,668,200 $1,776,095 $1,888,329 $2,005,828 $14,013,053
PLUS: RESIDUAL VALUE 18,052,449 18,052,449
LESS: CAPITAL EXPENDITURES 238,542 241,177 253,119 265,642 2,986,551
---------- ---------- ---------- ---------- ----------
TOTAL CASH FLOW $1,429,658 $1,534,918 $1,635,210 $19,792,634 $29,078,951
NET PRESENT VALUE @ 16.6%
NET PRESENT VALUE @ 15.1%
285
FALCON CABLE SYSTEMS CO. EXHIBIT E
FLORENCE REGION - EXCHANGE
AS OF DECEMBER 31, 1995
CABLE TELEVISION SUBSCRIBERS
- ----------------------------
YEAR ENDING DECEMBER 31, 1996 1997 1998 1999 2000
---------- ---------- ---------- ---------- ----------
BEGINNING MILES 129.8
MILES ADDED 4.5 4.1 3.6 3.7 3.8
CUMULATIVE MILES 134.3 138.5 142.1 145.8 149.6
DENSITY OF ADDITIONAL PLANT 58 56 55 55 55
HOMES PASSED - BEGINNING 7,483
NEW HOMES & EXTENSIONS 262 232 199 204 210
HOMES PASSED - ENDING 7,745 7,977 8,177 8,381 8,591
GROWTH IN HOMES 3.5% 3.0% 2.5% 2.5% 2.5%
BASIC - BEGINNING SUBSCRIBERS 3,751 3,921 4,079 4,221 4,369
AVERAGE SUBSCRIBERS 3,836 4,000 4,150 4,295 4,445
ENDING SUBSCRIBERS 3,921 4,079 4,221 4,369 4,521
PENETRATION 50.6% 51.1% 51.6% 52.1% 52.6%
EXPANDED BASIC - BEGINNING 3,517 3,676 3,824 3,958 4,096
AVERAGE SUBSCRIBERS 3,597 3,750 3,891 4,027 4,168
ENDING SUBSCRIBERS 3,676 3,824 3,958 4,096 4,239
PENETRATION 93.8% 93.8% 93.8% 93.8% 93.8%
NEW PRODUCT TIER #1 - BEGINNING 1,170 1,263 1,592 1,900 1,966
AVERAGE SUBSCRIBERS 1,216 1,427 1,746 1,933 2,000
ENDING SUBSCRIBERS 1,263 1,592 1,900 1,966 2,034
PENETRATION 34.3% 41.6% 48.0% 48.0% 48.0%
NEW PRODUCT TIER #2 - BEGINNING 308 610 1,063 1,543 1,759
AVERAGE SUBSCRIBERS 459 837 1,303 1,651 1,790
ENDING SUBSCRIBERS 610 1,063 1,543 1,759 1,820
PENETRATION 15.6% 26.1% 36.6% 40.3% 40.3%
PAY TV - BEGINNING UNITS 992 998 1,079 1,159 1,243
AVERAGE UNITS 995 1,038 1,119 1,201 1,264
ENDING UNITS 998 1,079 1,159 1,243 1,286
PENETRATION 25.4% 26.4% 27.4% 28.4% 28.4%
PAY PER VIEW - BEGINNING UNITS/MO 300 342 410 538 687
AVERAGE UNITS 321 376 474 612 755
ENDING UNITS 342 410 538 687 822
AVERAGE BUY RATE/MO 23.0% 24.5% 27.5% 30.5% 32.0%
CONVERTER RENTALS - BEGINNING 1,897 2,036 2,179 2,371 2,585
AVERAGE SUBSCRIBERS 1,966 2,107 2,275 2,478 2,692
ENDING SUBSCRIBERS 2,036 2,179 2,371 2,585 2,800
PENETRATION 51.9% 53.4% 56.2% 59.2% 61.9%
ADDRESSABLE HOMES - BEGINNING 1,366 1,491 1,677 1,957 2,255
AVERAGE HOMES 1,428 1,584 1,817 2,106 2,413
ENDING HOMES 1,491 1,677 1,957 2,255 2,571
PENETRATION 38.0% 41.1% 46.4% 51.6% 56.9%
BASIC CHURN RATE 35% 35% 35% 35% 35%
YEAR ENDING DECEMBER 31, 2001 2002 2003 2004
---------- ---------- ---------- ----------
BEGINNING MILES
MILES ADDED 3.6 3.3 3.3 3.4
CUMULATIVE MILES 153.2 156.5 159.9 163.3
DENSITY OF ADDITIONAL PLANT 54 54 54 54
HOMES PASSED - BEGINNING
NEW HOMES & EXTENSIONS 193 176 179 183
HOMES PASSED - ENDING 8,784 8,960 9,139 9,322
GROWTH IN HOMES 2.3% 2.0% 2.0% 2.0%
BASIC - BEGINNING SUBSCRIBERS 4,521 4,667 4,805 4,947
AVERAGE SUBSCRIBERS 4,594 4,736 4,876 5,019
ENDING SUBSCRIBERS 4,667 4,805 4,947 5,092
PENETRATION 53.1% 53.6% 54.1% 54.6%
EXPANDED BASIC - BEGINNING 4,239 4,376 4,505 4,638
AVERAGE SUBSCRIBERS 4,307 4,440 4,571 4,706
ENDING SUBSCRIBERS 4,376 4,505 4,638 4,774
PENETRATION 93.8% 93.8% 93.8% 93.8%
NEW PRODUCT TIER #1 - BEGINNING 2,034 2,100 2,162 2,226
AVERAGE SUBSCRIBERS 2,067 2,131 2,194 2,259
ENDING SUBSCRIBERS 2,100 2,162 2,226 2,291
PENETRATION 48.0% 48.0% 48.0% 48.0%
NEW PRODUCT TIER #2 - BEGINNING 1,820 1,879 1,934 1,992
AVERAGE SUBSCRIBERS 1,850 1,907 1,963 2,021
ENDING SUBSCRIBERS 1,879 1,934 1,992 2,050
PENETRATION 40.3% 40.3% 40.3% 40.3%
PAY TV - BEGINNING UNITS 1,286 1,327 1,367 1,407
AVERAGE UNITS 1,307 1,347 1,387 1,428
ENDING UNITS 1,327 1,367 1,407 1,449
PENETRATION 28.4% 28.4% 28.4% 28.4%
PAY PER VIEW - BEGINNING UNITS/MO 822 925 1,007 1,093
AVERAGE UNITS 873 966 1,050 1,139
ENDING UNITS 925 1,007 1,093 1,185
AVERAGE BUY RATE/MO 33.0% 34.0% 35.0% 36.0%
CONVERTER RENTALS - BEGINNING 2,800 2,960 3,107 3,261
AVERAGE SUBSCRIBERS 2,880 3,034 3,184 3,341
ENDING SUBSCRIBERS 2,960 3,107 3,261 3,421
PENETRATION 63.4% 64.7% 65.9% 67.2%
ADDRESSABLE HOMES - BEGINNING 2,571 2,803 2,963 3,125
AVERAGE HOMES 2,687 2,883 3,044 3,209
ENDING HOMES 2,803 2,963 3,125 3,293
PENETRATION 60.1% 61.7% 63.2% 64.7%
BASIC CHURN RATE 35% 35% 35% 35%
286
FALCON CABLE SYSTEMS CO. EXHIBIT F
FLORENCE REGION - EXCHANGE
AS OF DECEMBER 31, 1995
SERVICE RATES
- -------------
RUNNING RATES
AS OF AVERAGE RATES
CURRENT RATES DECEMBER 1995 FOR 1996
- ------------- ------------------ -----------------
BASIC $24.32 $25.48
EXPANDED BASIC $3.93 $4.36
NEW PRODUCT TIER #1 $3.50 $3.50
NEW PRODUCT TIER #2 $4.50 $4.50
PAY $8.00 $8.00
PAY PER VIEW $7.77 $7.77
CONVERTER RENTALS $3.66 $3.66
INSTALLATIONS-NEW $50.00 $50.00
INSTALLATIONS-CHURN $25.00 25.00
YEAR ENDING DECEMBER 31, 1996 1997 1998 1999 2000 2001 2002 2003 2004
------ ------ ------ ------ ------ ------ ------ ------ ------
PERCENTAGE RATE INCREASES
- -------------------------
BASIC 5% 3% 3% 3% 3% 3% 3% 3% 3%
EXPANDED BASIC 11% 3% 3% 3% 3% 3% 3% 3% 3%
NEW PRODUCT TIER #1 0% 3% 3% 3% 3% 3% 3% 3% 3%
NEW PRODUCT TIER #2 0% 3% 3% 3% 3% 3% 3% 3% 3%
PAY 0% 1% 1% 1% 1% 1% 1% 1% 1%
PAY PER VIEW 0% 3% 3% 3% 3% 3% 3% 3% 3%
CONVERTER/REMOTE RENTALS 0% 3% 3% 3% 3% 3% 3% 3% 3%
INSTALLATIONS-NEW 0% 3% 3% 3% 3% 3% 3% 3% 3%
INSTALLATIONS-CHURN 0% 3% 3% 3% 3% 3% 3% 3% 3%
AVERAGE RATES
- --------------
BASIC $25.48 $26.24 $27.03 $27.84 $28.68 $29.54 $30.42 $31.34 $32.28
EXPANDED BASIC 4.36 4.49 4.62 4.76 4.91 5.05 5.20 5.36 5.52
NEW PRODUCT TIER #1 3.50 3.61 3.71 3.82 3.94 4.06 4.18 4.30 4.43
NEW PRODUCT TIER #2 4.50 4.64 4.77 4.92 5.06 5.22 5.37 5.53 5.70
PAY 8.00 8.08 8.16 8.25 8.33 8.41 8.50 8.58 8.67
PAY PER VIEW 7.77 8.01 8.25 8.49 8.75 9.01 9.28 9.56 9.85
CONVERTER RENTALS 3.66 3.77 3.88 4.00 4.12 4.24 4.37 4.50 4.64
INSTALLATIONS-NEW 50.00 51.50 53.05 54.64 56.28 57.96 59.70 61.49 63.34
INSTALLATIONS-CHURN 25.00 25.75 26.52 27.32 28.14 28.98 29.85 30.75 31.67
287
FALCON CABLE SYSTEMS CO. EXHIBIT G
FLORENCE REGION - EXCHANGE
AS OF DECEMBER 31, 1995
YEAR ENDING DECEMBER 31, 1996 1997 1998 1999 2000
---------- ---------- ---------- ---------- ----------
REVENUES:
BASIC $1,172,900 $1,259,661 $1,346,167 $1,435,046 $1,529,652
EXPANDED BASIC 188,109 202,024 215,898 230,152 245,325
NEW PRODUCT TIER #1 51,083 61,753 77,797 88,700 94,548
NEW PRODUCT TIER #2 24,790 46,528 74,655 97,430 108,765
PAY TV 95,546 100,703 109,589 118,806 126,363
PAY PER VIEW 29,961 36,155 46,900 62,409 79,200
CONVERTER RENTALS 86,367 95,334 106,007 118,936 133,089
INSTALLATIONS 33,407 35,064 36,599 38,998 41,550
COMMERCIAL*** 126,672 130,472 134,386 138,417 142,570
ADVERTISING*** 124,501 140,072 154,088 169,506 186,468
MISCELLANEOUS *** 89,297 93,685 98,213 102,836 107,666
---------- ---------- ---------- ---------- ----------
TOTAL REVENUES $2,022,632 $2,201,449 $2,400,299 $2,601,239 $2,795,196
OPERATING EXPENSES:
OPERATIONS $346,213 $370,966 $396,663 $423,183 $450,229
GENERAL & ADMINISTRATIVE 177,629 188,185 198,964 210,013 221,518
SALES & MARKETING 101,859 117,569 128,041 140,728 154,625
PROGRAMMING 286,055 311,091 341,583 374,511 406,588
---------- ---------- ---------- ---------- ----------
TOTAL OPERATING EXPENSES $911,756 $987,811 $1,065,251 $1,148,434 $1,232,960
OPERATING INCOME $1,110,876 $1,213,638 $1,335,048 $1,452,804 $1,562,236
OPERATING MARGIN 54.9% 55.1% 55.6% 55.9% 55.9%
TOTAL REVENUE/BASIC SUB/MONTH $43.94 $45.87 $48.20 $50.47 $52.40
CASH FLOW/BASIC SUB/MONTH $24.13 $25.29 $26.81 $28.19 $29.29
OPERATIONS % OF REVENUE 17% 17% 17% 16% 16%
G & A PERCENTAGE OF REVENUE 9% 9% 8% 8% 8%
SALES & MARKETING % OF REVENUE 5% 5% 5% 5% 6%
PROGRAMMING % OF REVENUE 14% 14% 14% 14% 15%
YEAR ENDING DECEMBER 31, 2001 2002 2003 2004 TOTAL
---------- ---------- ---------- ---------- ----------
BASIC $1,628,323 $1,728,975 $1,833,475 $1,944,125 $13,878,325
EXPANDED BASIC 261,150 277,292 294,052 311,798 2,225,799
NEW PRODUCT TIER #1 100,647 106,868 113,327 120,166 814,889
NEW PRODUCT TIER #2 115,781 122,938 130,369 138,236 859,494
PAY TV 131,902 137,336 142,808 148,486 1,111,540
PAY PER VIEW 94,430 107,582 120,476 134,607 711,720
CONVERTER RENTALS 146,617 159,088 171,996 185,866 1,203,300
INSTALLATIONS 43,691 45,818 48,567 51,476 375,170
COMMERCIAL*** 146,847 151,252 155,790 160,464 1,286,870
ADVERTISING*** 201,396 217,519 234,934 253,741 1,682,225
MISCELLANEOUS *** 112,625 117,793 123,185 128,841 974,141
---------- ---------- ---------- ---------- ----------
TOTAL REVENUES $2,983,410 $3,172,462 $3,368,978 $3,577,807 $25,123,472
OPERATING EXPENSES:
OPERATIONS $477,364 $504,681 $533,199 $563,338 $4,065,834
GENERAL & ADMINISTRATIVE 233,360 245,434 257,954 271,150 2,004,207
SALES & MARKETING 167,698 180,074 193,315 209,347 1,393,257
PROGRAMMING 436,788 466,177 496,182 528,144 3,647,120
---------- ---------- ---------- ---------- ----------
TOTAL OPERATING EXPENSES $1,315,210 $1,396,366 $1,480,650 $1,571,979 $11,110,419
OPERATING INCOME $1,668,200 $1,776,095 $1,888,329 $2,005,828 $14,013,053
OPERATING MARGIN 55.9% 56.0% 56.1% 56.1%
TOTAL REVENUE/BASIC SUB/MONTH $54.12 $55.83 $57.58 $59.40
CASH FLOW/BASIC SUB/MONTH $30.26 $31.25 $32.27 $33.30
OPERATIONS % OF REVENUE 16% 16% 16% 16%
G & A PERCENTAGE OF REVENUE 8% 8% 8% 8%
SALES & MARKETING % OF REVENUE 6% 6% 6% 6%
PROGRAMMING % OF REVENUE 15% 15% 15% 15%
288
FALCON CABLE SYSTEMS CO. EXHIBIT H
FLORENCE REGION - EXCHANGE
AS OF DECEMBER 31, 1995
CAPITAL EXPENDITURES
- --------------------
YEAR ENDING DECEMBER 31, 1996 1997 1998 1999 2000
---------- ---------- ---------- ---------- ----------
ASSUMPTIONS AND INPUTS:
- ----------------------- 129.79
BV OF EXISTING PLANT $2,641,752
ADDITIONAL MILES OF PLANT 4.5 4.1 3.6 3.7 3.8
AERIAL PLANT PER MILE $12,000 $12,240 $12,485 $12,734 $12,989
UNDERGROUND PLANT PER MILE $18,000 $18,360 $18,727 $19,102 $19,484
PERCENTAGE OF PLANT AERIAL 10% 10% 10% 10% 10%
PERCENTAGE OF PLANT UNDERGROUND 90% 90% 90% 90% 90%
AVERAGE COST PER CONVERTER $110 $112 $114 $117 $119
PERCENTAGE CONVERTER USE 52% 53% 56% 59% 62%
PERCENTAGE REPLACEMENT 5% 5% 5% 5% 5%
INSTALLATION COST PER SUBSCRIBER $57 $58 $59 $60 $61
MISC. CAPITAL PER SUBSCRIBER $5 $5 $5 $5 $5
INFLATION FACTOR FOR CAPITALS 2% 2% 2% 2% 2%
ANNUAL COSTS:
- -------------
PLANT ADDITIONS - AERIAL $5,451 $5,056 $4,535 $4,741 $4,957
- UNDERGRO 73,591 68,256 61,216 64,001 66,913
PLANT REBUILD/UPGRADE/INCL. HDND. 6,619 6,988 915,325 7,690 8,050
AVERAGE COST OF NEW CONVERTERS 9,710 9,442 9,183 10,184 11,220
CONVERTER REPLACEMENT 10,712 11,751 13,110 14,579 16,106
INSTALLATION COSTS 83,103 87,443 91,541 96,617 101,966
MISC. CAPITAL EXPENDITURES 19,180 20,399 21,588 22,790 24,057
---------- ---------- ---------- ---------- ----------
TOTAL CAPITAL EXPENDITURES $208,367 $209,335 $1,116,497 $220,604 $233,268
AS A % OF OPERATING INCOME 18.8% 17.2% 83.6% 15.2% 14.9%
YEAR ENDING DECEMBER 31, 2001 2002 2003 2004 TOTAL
---------- ---------- ---------- ---------- ----------
ASSUMPTIONS AND INPUTS:
- -----------------------
BV OF EXISTING PLANT
ADDITIONAL MILES OF PLANT 3.6 3.3 3.3 3.4
AERIAL PLANT PER MILE $13,249 $13,514 $13,784 $14,060
UNDERGROUND PLANT PER MILE $19,873 $20,271 $20,676 $21,090
PERCENTAGE OF PLANT AERIAL 10% 10% 10% 10%
PERCENTAGE OF PLANT UNDERGROUND 90% 90% 90% 90%
AVERAGE COST PER CONVERTER $121 $124 $126 $129
PERCENTAGE CONVERTER USE 63% 65% 66% 67%
PERCENTAGE REPLACEMENT 5% 5% 5% 5%
INSTALLATION COST PER SUBSCRIBER $62 $64 $65 $66
MISC. CAPITAL PER SUBSCRIBER $6 $6 $6 $6
INFLATION FACTOR FOR CAPITALS 2% 2% 2% 2% 120%
ANNUAL COSTS:
- -------------
PLANT ADDITIONS - AERIAL $4,775 $4,427 $4,605 $4,792 $43,338
- UNDERGRO 64,461 59,760 62,174 64,686 585,058
PLANT REBUILD/UPGRADE/INCL. HDND. 8,426 8,801 9,169 9,552 980,620
AVERAGE COST OF NEW CONVERTERS 11,218 11,066 11,811 12,600 96,435
CONVERTER REPLACEMENT 17,412 18,694 20,011 21,412 143,787
INSTALLATION COSTS 106,890 111,764 117,346 123,196 919,867
MISC. CAPITAL EXPENDITURES 25,360 26,666 28,003 29,405 217,446
---------- ---------- ---------- ---------- ----------
TOTAL CAPITAL EXPENDITURES $238,542 $241,177 $253,119 $265,642 $2,986,551
AS A % OF OPERATING INCOME 14.3% 13.6% 13.4% 13.2%
289
FALCON CABLE SYSTEMS CO. EXHIBIT I
FLORENCE REGION - EXCHANGE
AS OF DECEMBER 31, 1995
DEPRECIATION
- ------------
YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5
---------- ---------- ---------- ---------- ----------
ESTIMATED DEPRECIATION RATES 14.3% 24.5% 17.5% 12.5% 8.9%
DEPRECIATION - BEG. & ADTNS. 1996 1997 1998 1999 2000
---------- ---------- ---------- ---------- ----------
YEAR 1 $407,282 $697,994 $498,486 $355,980 $254,516
YEAR 2 29,914 51,266 36,613 26,146
YEAR 3 159,547 273,430 195,275
YEAR 4 31,524 54,026
YEAR 5 33,334
YEAR 6
YEAR 7
YEAR 8
YEAR 9
---------- ---------- ---------- ---------- ----------
TOTAL DEPRECIATION $407,282 $727,908 $709,299 $697,547 $563,297
YEAR 6 YEAR 7 YEAR 8
---------- ---------- ----------
ESTIMATED DEPRECIATION RATES 8.9% 8.9% 4.5%
DEPRECIATION - BEG. & ADTNS. 2001 2002 2003 2004 TOTAL
---------- ---------- ---------- ---------- ----------
YEAR 1 $254,231 $254,516 $2,723,004
YEAR 2 18,694 18,673 18,694 199,999
YEAR 3 139,450 99,703 99,592 99,703 1,066,701
YEAR 4 38,584 27,553 19,700 19,678 191,065
YEAR 5 57,127 40,799 29,135 20,831 181,226
YEAR 6 34,088 58,419 41,721 29,794 164,021
YEAR 7 34,464 59,064 42,182 135,710
YEAR 8 36,171 61,989 98,160
YEAR 9 37,960 37,960
---------- ---------- ---------- ---------- ----------
TOTAL DEPRECIATION $542,173 $534,127 $304,076 $312,137 $4,797,846
290
FALCON CABLE SYSTEMS CO. EXHIBIT J
FLORENCE REGION - EXCHANGE
AS OF DECEMBER 31, 1995
ASSUMPTIONS AND INPUTS
- ----------------------
REMAINING LIFE OF FRANCHISES (YEARS) 9
AVERAGE SUBSCRIBER LIFE (YEARS) 8
INCOME TAX RATE 34%
CAPITAL GAIN RATE 34%
NET FMV OF EXISTING ASSETS $2,641,752
SUBSCRIBERS IN FRANCHISES 100%
LOW HIGH
ANALYSIS ANALYSIS
---------- ----------
DEBT PERCENTAGE 50% 50%
EQUITY PERCENTAGE 50% 50%
RESIDUAL MULTIPLE (ROE & ROI) 9 9
MULT OF PAST YEAR'S OPERATING INCOME 10.5 11.5
MULT OF CURRENT YEAR'S OPERATING INCOME 10.0 11.0
MULT OF NEXT YEAR'S OPERATING INCOME 9.5 10.5
TARGET RETURN ON EQUITY 14.0% 12.0%
TARGET RETURN ON INVESTMENT 16.6% 15.1%
291
APPENDIX C
ALLOCATION OF SALE AND EXCHANGE VALUES TO HEADENDS
292
ALLOCATION OF SALE AND EXCHANGE VALUES TO HEADENDS
Alloc. by Alloc. by
Region/ Alloc. Cumulative Cumulative Average Allocated
Headend by Subs. Cash Flow Free Cash Flow Alloc. Value
- ------- -------- ---------- -------------- --------- ---------
Coos Bay - Sale
Coos Bay 76.5% 76.3% 79.7% 77.5% $21,736,981
Reedsport 19.1% 18.5% 14.3% 17.3% 4,850,816
Gardiner 0.8% 0.6% 0.6% 0.7% 183,751
Hauser 3.6% 3.6% 4.2% 3.8% 1,065,451
----------
Total $27,837,000
Coos Bays - Exchange
Myrtle Point 17.9% 18.5% 27.5% 21.3% $ 1,397,883
Powers 4.7% 4.3% 2.9% 4.0% 259,618
Coquille 41.6% 40.9% 38.3% 40.3% 2,644,535
Bandon 35.8% 37.9% 34.2% 36.0% 2,361,965
----------
Total $ 6,664,000
Sum $34,501,000
Dallas - Sale
Dallas 98.7% 97.2% 96.9% 97.6% $15,270,285
Wilson River 1.3% 0.5% 0.6% 0.8% 131,715
----------
Total $15,402,000
Dallas - Exchange
Silverton 17.3% 18.5% 27.6% 21.1% $4,221,179
Nehalem 45.4% 47.2% 47.6% 46.7% 9,350,470
Tillamook 24.4% 24.2% 12.7% 20.5% 4,093,022
Netarts 8.2% 6.2% 7.6% 7.3% 1,467,322
Brickyard Road 4.8% 3.5% 3.7% 4.0% 800,008
----------
Total $19,932,000
Sum $35,334,000
Florence - Sale
Mapleton -- -- -- -- $271,000
Florence - Exchange
Florence -- -- -- -- $10,425,000
----------
Sum $10,696,000
293
SUMMARY OF SALE AND EXCHANGE VALUES
Sale
--------
Coos Bay $ 27,837,000
Dallas 15,402,000
Florence 271,000
Gilroy 76,000,000
Tulare 31,972,000
SLO 29,585,000
Central 26,294,000
------------
Total $207,361,000
Exchange
--------
Coos Bay $ 6,664,000
Dallas 19,932,000
Hesperia 38,846,000
Florence 10,425,000
------------
Total $ 75,867,000
Sum of Sale and
Exchange Properties $283,228,000