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EXHIBIT 2
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
The following unaudited pro forma condensed combined statements of
operations reflect the acquisition by FHGLP of the assets of FCSC and the
assumption of certain of its liabilities as if the acquisition had occurred on
January 1, 1995 and January 1, 1996, respectively. The unaudited pro forma
condensed combined statement of operations for the year ended December 31, 1995
also reflects the pro forma effect of FHGLP's acquisition on December 28, 1995
of the stock of Falcon First, Inc., ("Falcon First") as if such acquisition had
occurred on January 1, 1995. The unaudited pro forma balance sheet as of March
31, 1996 reflects the acquisition of FCSC's assets and the assumption of
certain of its liabilities assuming the acquisition had occurred on March 31,
1996.
The pro forma adjustments are based upon currently available
information and upon certain assumptions that management believes are
reasonable. The acquisition of FCSC will be accounted for by FHGLP as a
purchase. The pro forma adjustments for the acquisitions of Falcon First and
FCSC include estimated adjustments to tangible and intangible assets, goodwill,
notes payable, and other accounts. The pro forma adjustments for the
acquisition of FCSC have been made based on an appraised determination of the
fair market value of the assets acquired. The pro forma adjustments for the
acquisition of Falcon First have been made based on management's determination
of the fair market value of the assets acquired. The adjustments included in
the unaudited pro forma combined financial statements represent FHGLP's
preliminary determination of those adjustments. There can be no assurance that
the actual adjustments will not differ from the pro forma adjustments reflected
in the pro forma combined financial information.
The unaudited pro forma condensed combined financial statements are
not necessarily indicative of either future results of operations or results
that might have been achieved if the foregoing transactions had been
consummated as of the indicated dates. The unaudited pro forma condensed
combined financial statements should be read in conjunction with the historical
financial statements of FHGLP, together with the related notes thereto,
included in FHGLP's Annual Report on Form 10K for the year ended December 31,
1995.
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Exhibit No. II A & B
FALCON HOLDING GROUP, L.P. AND SUBSIDIARIES
PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
Year ended December 31, 1995
Unaudited
Historical
--------------------- Pro Forma Pro Forma Incl Historical Pro Forma Pro Forma
FHGLP FALCON FIRST Adjustments FALCON FIRST FCSC Adjustments Combined
-------- ------------ ----------- -------------- ---------- ----------- ---------
(Dollars in Thousands)
REVENUES $151,208 $ 31,556 $ (1,554)(1) $181,210 $ 52,935 $ (2,647)(7) $231,498
-------- -------- -------- -------- -------- -------- --------
EXPENSES:
Service costs 41,626 10,031 - 51,657 16,213 - 67,870
General and administrative
expenses 30,026 5,639 (1,554)(2) 34,111 8,188 1,972 (7) 44,271
General Partner management fees
and reimbursed expenses - - - - 4,619 (4,619)(8) -
Depreciation and amortization 54,386 16,210 7,133 (3) 77,729 16,825 10,477 (9) 105,031
-------- -------- -------- -------- -------- -------- --------
Total Expenses 126,038 31,880 5,579 163,497 45,845 7,830 217,172
-------- -------- -------- -------- -------- -------- --------
Operating Income (Loss) 25,170 (324) (7,133) 17,713 7,090 (10,477) 14,326
OTHER INCOME (EXPENSE):
Interest expense, net (57,777) (16,229) 7,062 (4) (66,944) (16,795) 4,712 (10) (79,027)
Equity in net loss of affiliated
partnerships (5,705) - 4,772 (5) (933) - - (933)
Other income, net 13,077 7 - 13,084 5,901 - 18,985
-------- -------- -------- -------- -------- -------- --------
Loss before income tax benefit (25,235) (16,546) 4,701 (37,080) (3,804) (5,765) (46,649)
INCOME TAX EXPENSE, (BENEFIT) - 678 (6,634)(6) (5,956) - - (5,956)
-------- -------- -------- -------- -------- -------- --------
NET LOSS $(25,235) $(17,224) $ 11,335 $(31,124) $(3,804) $ (5,765) $(40,693)
======== ======== ======== ======== ======== ======== ========
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FALCON HOLDING GROUP, L.P. AND SUBSIDIARIES
PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1996
Unaudited
Historical
-------------------- Pro Forma Pro Forma
FHGLP FCSC Adjustments Combined
-------- ------- ----------- ---------
(Dollars in Thousands)
REVENUES $ 46,203 $13,478 $ (674)(7) $ 59,007
-------- ------- ------- --------
EXPENSES:
Service costs 12,756 3,670 - 16,426
General and administrative expenses 7,984 1,922 506 (7) 10,412
General Partner management fees
and reimbursed expenses - 1,180 (1,180)(8) -
Depreciation and amortization 20,150 3,643 2,619 (9) 26,412
-------- ------- ------- --------
Total Expenses 40,890 10,415 1,945 53,250
-------- ------- ------- --------
Operating income 5,313 3,063 (2,619) 5,757
OTHER INCOME (EXPENSE):
Interest expense, net (15,602) (4,136) 970 (10) (18,768)
Other income, net 1,180 1,480 - 2,660
Equity in net loss of affiliated
partnerships 15 - - 15
Minority interest in net loss of
consolidated subsidiary 8 - - 8
-------- ------- ------- --------
NET INCOME (LOSS) $ (9,086) $ 407 $(1,649) $(10,328)
======== ======= ======= ========
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NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
STATEMENTS OF OPERATIONS:
(1) To eliminate FHGLP management fee income from Falcon First.
(2) To eliminate Falcon First's management fee expense to FHGLP.
(3) To record additional amortization expense attributable to the preliminary
adjustments of Falcon First's intangible assets to estimated fair value.
There was no pro forma adjustment to depreciation expense because the book
value of the plant and equipment prior to acquisition approximated fair
value.
(4) To reduce interest expense as a result of the repayment of FHGLP's and
Falcon First's borrowings under the Loan Agreement with a portion of the
proceeds based upon the differences in interest rate structure, and record
amortization expense on debt issue costs estimated at $4,854,700 incurred
in connection with the new borrowings.
(5) To eliminate losses recorded in 1995 by FHGLP related to its investment in
Falcon First.
(6) To record estimated future tax effects, based on current tax law, of the
differences in the financial reporting and income tax bases of Falcon
First's assets.
(7) To eliminate FHGLP management fee income and expense reimbursements from
FCSC.
(8) To eliminate FCSC management fees and reimbursed expenses.
(9) To record additional depreciation and amortization expense attributable to
the increase in FCSC's assets to reflect the appraised value of the
acquired assets.
(10)To reduce interest expense to reflect the terms of the Amended and Restated
FHGLP Bank Credit Agreement as if the borrowings thereunder related to the
acquisition had been in effect during the entire period; and to record the
amortization of debt issue costs estimated at $3,375,800 incurred in
connection with the Amended and Restated Bank Credit Agreement.
Three months
Year ended ended
December 31, March 31,
1995 1996
------------- -------------
(Dollars in Thousands)
Eliminate interest expense related to the former Bank Credit Agreement $(41,502) $(8,176)
Eliminate interest expense related to FCSC's borrowings (16,154) (3,847)
Eliminate amortization expense on historical deferred loan costs (407) (128)
Record estimated interest expense on borrowings under the Amended and
Restated Bank Credit Agreement 52,695 12,957
Record amortization expense on Amended and Restated FHGLP debt issue costs 656 164
-------- -------
$ (4,712) $ 970
======== =======
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Exhibit No. II C
FALCON HOLDING GROUP, L.P. AND SUBSIDIARIES
PRO FORMA CONDENSED COMBINED BALANCE SHEET
MARCH 31, 1996
UNAUDITED
Historical
-------------------- Pro Forma Pro Forma
FHGLP FCSC Adjustments Combined
-------- ---------- ----------- ---------
(Dollars in Thousands)
ASSETS:
Cash and cash equivalents $ 11,019 $ 1,479 $ 3,467 (1) $ 15,965
Receivables:
Trade 6,943 1,089 - 8,032
Affiliates 11,809 - (5,332)(2) 6,477
Other assets 5,008 1,786 - 6,794
Cable materials, equipment and supplies 4,170 1,123 (15)(3) 5,278
Investment in affiliated partnerships and
other investments 12,279 - - 12,279
Property, plant and equipment, net 224,703 70,045 9,351 (3) 304,099
Franchise cost and goodwill, net 274,786 30,052 63,695 (3)
356 (6)
(986)(4) 367,903
Customer lists and other intangible costs, net 5,729 1,236 74,604 (3)
2,275 (5) 83,844
Deferred loan costs, net 11,425 722 3,020 (6) 15,167
-------- -------- -------- ---------
$567,871 $107,532 $150,435 $ 825,838
======== ======== ======== =========
LIABILITIES:
Notes payable $673,238 $171,749 $ 81,299 (7) $ 926,286
Accounts payable 2,993 1,181 (1,181)(8) 2,993
Accrued expenses and other 26,728 8,049 (2,815)(9) 31,962
Payable to general partner 0 5,332 (5,332)(10) -
Customer deposits and prepayments 1,208 671 - 1,879
Deferred income taxes 7,440 - - 7,440
Minority interest 219 - - 219
Equity in losses of affiliated partnerships
in excess of investment 4,551 - (986)(4) 3,565
-------- -------- -------- ---------
TOTAL LIABILITIES 716,377 186,982 70,985 974,344
-------- -------- -------- ---------
REDEEMABLE PARTNERS' EQUITY 271,902 - - 271,902
-------- -------- -------- ---------
PARTNERS' DEFICIT:
General partner (12,183) (18) 18 (11) (12,183)
Limited partners (408,418) (79,432) 79,432 (11) (408,418)
Unrealized gain on available-for-sale securities 193 - - 193
-------- -------- -------- ---------
TOTAL PARTNERS' DEFICIT (420,408) (79,450) 79,450 (420,408)
-------- -------- -------- ---------
$567,871 $107,532 $150,435 $ 825,838
======== ======== ======== =========
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NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
BALANCE SHEET:
(1) To record additional cash paid to FHGLP as an adjustment of the purchase
price related to the assumption of certain liabilities by FHGLP.
(2) To eliminate management fees receivable from FCSC.
(3) To allocate to the respective acquired assets the excess of the
$247,396,800 purchase price over their book values based upon their
appraised values at December 31, 1995, as adjusted for capital expenditure
activity in the first quarter of 1996.
As of
March 31,
1996
----------
(Dollars in Thousands)
Allocation of excess of cost over book value:
Property, Plant & Equipment $ 9,351
Franchise Cost and Goodwill 63,695
Customer list 74,604
Inventory (15)
--------
$147,635
========
(4) To eliminate FHGLP's equity in losses of the general partner of FCSC in
excess of FHGLP's investment.
(5) To record other organization costs of $2,275,000 incurred in connection
with the FHGLP's acquisition of FCSC's assets.
(6) To eliminate FCSC's historical deferred loan costs and record additional
debt issue costs incurred in connection with the Amended and Restated FHGLP
Bank Credit Agreement.
As of
March 31,
1996
----------
(Dollars in Thousands)
Eliminate FCSC's historical deferred loan costs, net $ (356)
Record debt issue costs related to additional borrowings 3,376
------
$3,020
======
The pro forma effect of eliminating the historical deferred loan costs has
been reflected as additional goodwill.
(7) To eliminate historical debt and record additional bank debt incurred under
the Amended and Restated Bank Credit Agreement in connection with the FHGLP
acquisition of FCSC and repayment of certain Subordinated Notes of FHGLP.
As of
March 31,
1996
----------
(Dollars in Thousands)
Record additional bank borrowings $ 281,624
Eliminate a portion of FHGLP's Subordinated Notes retired at closing (28,576)
Eliminate FCSC debt (171,749)
---------
$ 81,299
=========
(8) To eliminate accounts payable not assumed by FHGLP.
(9) To eliminate FCSC's accrued interest related to debt retired at the
acquisition date.
(10)To eliminate FCSC's accrued management fees payable to FHGLP.
(11)To eliminate FCSC's partners' deficit.