SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
(Amendment No. 1)
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): December 19, 1997
FRONTIERVISION OPERATING PARTNERS, L.P.
FRONTIERVISION CAPITAL CORPORATION
(Exact names of Registrants as Specified in Their Charters)
Delaware 333-9535 84-1316775
Delaware 333-9535-01 84-1353734
(States or Other Jurisdiction (Commission File Nos.) (IRS Employer
of Incorporation or Organization) Identification Numbers)
1777 South Harrison Street,
Suite P-200, Denver, Colorado 80210
(Address of Principal Executive Offices) (Zip Code)
(303) 757-1588
(Registrants' Telephone Number, Including Area Code)
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
In a press release dated December 23, 1997 and in a report on Form 8-K filed the
same date (the "8-K"), FrontierVision Operating Partners, L.P., a Delaware
limited partnership ("FVOP" or the "Company"), a wholly-owned subsidiary of
FrontierVision Holdings, L.P., a Delaware limited partnership ("Holdings"),
announced the purchase of cable television systems from an affiliate of Cox
Communications, Inc. ("Cox Central Ohio Systems"). The Company completed the
purchase of the Cox Central Ohio Systems on December 19, 1997.
This 8-K/A is filed by the Registrants to amend the 8-K, to include the required
financial statements and pro forma financial information for the Cox Central
Ohio Systems.
2
FINANCIAL STATEMENTS.
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders
Cox Communications, Inc.
We have audited the accompanying combined statement of net assets of Cox
Communications, Inc.'s ("CCI") Central Ohio Cluster as of December 31, 1996, and
the related combined statements of income, changes in net assets, and cash flows
for the year then ended. These financial statements are the responsibility of
CCI's management. Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the combined financial position of Cox
Communications, Inc.'s Central Ohio Cluster at December 31, 1996, and the
combined results of its operations and its cash flows for the year then ended,
in conformity with generally accepted accounting principles.
As discussed in Note 1, CCI sold the assets and certain liabilities of the
Central Ohio Cluster.
DELOITTE & TOUCHE LLP
August 29, 1997
(December 19, 1997 as to the second paragraph in Note 1)
Atlanta, Georgia
3
CENTRAL OHIO CLUSTER
COMBINED STATEMENTS OF NET ASSETS
-----------------------------------
September 30, December 31,
1997 1996
--------------- ----------------
(Unaudited)
(Thousands of Dollars)
ASSETS
Cash $ 28 $ 239
Accounts receivable, less allowance for doubtful
accounts of $87 and $66 2,511 2,310
Net plant and equipment 24,278 24,512
Intangible assets 148,284 151,263
Other assets 853 1,448
-------------- -------------
Total assets $ 175,954 $ 179,772
============== =============
LIABILITIES AND NET ASSETS
Accounts payable and accrued expenses $ 667 $ 1,245
Deferred income 1,416 1,430
Deferred income taxes 62,294 63,442
Other liabilities 399 191
Amounts due to Affiliates 29,571 35,107
-------------- -------------
Total liabilities 94,347 101,415
Net assets 81,607 78,357
-------------- -------------
Total liabilities and net assets $ 175,954 $ 179,772
============== =============
See notes to combined financial statements.
4
CENTRAL OHIO CLUSTER
COMBINED STATEMENTS OF INCOME
--------------------------------------------------------
Nine Months Ended Nine Months Ended Year Ended
September 30, September 30, December 31,
1997 1996 1996
-------- -------- --------
(Unaudited) (Unaudited)
(Thousands of Dollars)
Revenues $ 25,486 $ 23,389 $ 31,749
Costs and expenses:
Operating 8,387 7,371 10,132
Selling, general and administrative 3,408 3,772 5,143
Depreciation 3,735 3,579 4,846
Amortization 2,979 2,979 3,972
-------- -------- --------
Operating income 6,977 5,688 7,656
Interest expense with affiliates (1,443) (1,851) (2,346)
Other, net (25) 6 5
-------- -------- --------
Income before income taxes 5,509 3,843 5,315
Income taxes (2,259) (1,576) (2,176)
-------- -------- --------
Net income $ 3,250 $ 2,267 $ 3,139
======== ======== ========
See notes to combined financial statements.
5
CENTRAL OHIO CLUSTER
COMBINED STATEMENTS OF CHANGES IN NET ASSETS
--------------------
(Thousands of Dollars)
--------------------
Balance at December 31, 1995 $75,218
Net income 3,139
-------
Balance at December 31, 1996 78,357
Net income (Unaudited) 3,250
-------
Balance at September 30, 1997 (Unaudited) $81,607
=======
See notes to combined financial statements.
6
CENTRAL OHIO CLUSTER
COMBINED STATEMENTS OF CASH FLOWS
---------------------------------------------------------
Nine Months Nine Months
Ended Ended Year Ended
September 30, September 30, December 31,
1997 1996 1996
-------- -------- --------
(Unaudited) (Unaudited)
(Thousands of Dollars)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 3,250 $ 2,267 $ 3,139
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 3,735 3,579 4,846
Amortization 2,979 2,979 3,972
Deferred income taxes (1,148) (1,245) (1,849)
(Increase) decrease in accounts receivable (201) 155 (120)
Decrease in other assets 595 348 206
Increase (decrease) in accounts payable and accrued expenses (592) 289 803
Other, net 208 (20) (42)
-------- -------- --------
Net cash provided by operating activities 8,826 8,352 10,955
-------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures (3,501) (2,549) (2,939)
-------- -------- --------
Net cash used in investing activities (3,501) (2,549) (2,939)
-------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Decrease in amounts due to Affiliates (5,536) (4,933) (7,777)
-------- -------- --------
Net cash provided by financing activities (5,536) (4,933) (7,777)
-------- -------- --------
Net increase (decrease) in cash (211) 870 239
Cash at beginning of period 239 -- --
-------- -------- --------
Cash at end of period $ 28 $ 870 $ 239
======== ======== ========
Cash paid during the period for:
Interest $ 17 $ 11 $ 14
Income taxes 788 852 905
See notes to combined financial statements.
7
CENTRAL OHIO CLUSTER
NOTES TO COMBINED FINANCIAL STATEMENTS
(Information as of and for the Nine Months Ended
September 30, 1997 is unaudited)
(1) ORGANIZATION AND BASIS OF PRESENTATION
The combined financial statements represent the combined operations of Cox
Communications, Inc.'s ("CCI") cable television systems serving eight
communities in Central Ohio (collectively referred to as the "Central Ohio
Cluster"). These cable television systems were acquired by CCI, an indirect
75.3% owned subsidiary of Cox Enterprises, Inc. ("CEI"), from the Times Mirror
Company ("Times Mirror") in connection with CCI's acquisition of Times Mirror
Cable Television, Inc. ("TMCT") on February 1, 1995. The historical combined
financial statements do not necessarily reflect the results of operations or
financial position that would have existed had the Central Ohio Cluster been an
independent company. All significant intercompany accounts and transactions have
been eliminated in the combined financial statements of the Central Ohio
Cluster.
On December 19, 1997, CCI sold the assets and certain liabilities of the Central
Ohio Cluster to FrontierVision Operating Partners, L.P. for approximately $204.0
million.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Revenue Recognition
The Central Ohio Cluster bills its customers in advance; however, revenue is
recognized as cable television services are provided. Receivables are generally
collected within 30 days. Credit risk is managed by disconnecting services to
customers who are delinquent generally greater than 75 days. Other revenues are
recognized as services are provided. Revenues obtained from the connection of
customers to the cable television systems are less than related direct selling
costs; therefore, such revenues are recognized as services are provided.
Plant and Equipment
Depreciation is computed using principally the straight-line method at rates
based upon estimated useful lives of five to 20 years for building and building
improvements, five to 12 years for cable television systems and three to 10
years for other plant and equipment.
The costs of initial cable television connections are capitalized as cable plant
at standard rates for the Central Ohio Cluster's labor and at actual cost for
materials and outside labor. Expenditures for maintenance and repairs are
charged to operating expense as incurred. At the time of retirement, sale or
other disposition of property, the original cost and related accumulated
depreciation are written off.
Intangible Assets
Intangible assets consist of goodwill and cable television franchise rights
recorded in connection with the acquisition of the Central Ohio Cluster from
TMCT and are amortized on a straight-line basis over 40 years. The Central Ohio
Cluster assesses on an on-going basis the recoverability of intangible assets
based on estimates of future undiscounted cash flows for the applicable business
acquired compared to net book value. The Central Ohio Cluster also evaluates the
amortization period of intangible assets to determine whether events or
circumstances warrant revised estimated of useful lives.
8
CENTRAL OHIO CLUSTER
NOTES TO COMBINED FINANCIAL STATEMENTS
(Information as of and for the Nine Months Ended
September 30, 1997 is unaudited)
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Impairment of Long-Lived Assets
Effective January 1, 1996, the Central Ohio Cluster adopted Statement of
Financial Accounting Standards ("SFAS") No. 121, "Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to be Disposed Of." This
statement requires that long-lived assets and certain intangibles be reviewed
for impairment when events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable, with any impairment losses
being reported in the period in which the recognition criteria are first applied
based on the fair value of the asset. Long-lived assets and certain intangibles
to be disposed of are required to be reported at the lower of carrying amounts
or fair value less cost to sell.
Income Taxes
The accounts of the Central Ohio Cluster are included in the consolidated
federal income tax return and certain state income tax returns of CEI. Current
federal and state income tax expenses and benefits have been allocated on a
separate return basis to the Central Ohio Cluster based on the current year tax
effects of the inclusion of its income, expenses and credits in the consolidated
income tax returns of CEI or based on separate state income tax returns.
Deferred income tax assets and liabilities arise from temporary differences in
the financial reporting and income tax basis of assets and liabilities. These
differences primarily result from property and intangible assets.
Fees and Taxes
The Central Ohio Cluster incurs various fees and taxes in connection with the
operations of its cable television systems, including franchise fees paid to
various franchise authorities, copyright fees paid to the U.S. Copyright
Tribunal and business and franchise taxes paid to the State of Ohio. A portion
of these fees and taxes are passed through to the Central Ohio Cluster's
subscribers. Amounts collected from subscribers are recorded as a reduction of
operating expenses.
Pension, Postretirement and Postemployment Benefits
CCI generally provides defined pension benefits to substantially all employees
based on years of service and compensation during those years. CCI also provides
certain health care and life insurance benefits to substantially all retirees
and employees through certain CEI plans. Expense related to the CCI and CEI
plans is allocated to the Central Ohio Cluster through the intercompany account.
The amount of the allocations is generally based on actuarial determinations of
the effects of the Central Ohio Cluster employees' participation in the plans.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
9
CENTRAL OHIO CLUSTER
NOTES TO COMBINED FINANCIAL STATEMENTS
(Information as of and for the Nine Months Ended
September 30, 1997 is unaudited)
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
The unaudited combined financial statements as of and for the nine months ended
September 30, 1997 and 1996, in the opinion of management, include all
adjustments, consisting only of normal recurring adjustments, necessary for a
fair presentation of the financial position and results of operations for this
period. Operating results for nine months ended September 30, 1997 are not
necessarily indicative of the results that may be expected for the entire year.
(3) CASH MANAGEMENT SYSTEM
The Central Ohio Cluster participates in CEI's cash management system, whereby
the bank sends daily notification of checks presented for payment. CEI transfers
funds from other sources to cover the checks presented for payment.
(4) PLANT AND EQUIPMENT
------------------------------
September 30, December 31,
1997 1996
-------- --------
(In Thousands)
Land $ 313 $ 311
Buildings and building improvements 990 1,033
Transmission and distribution plant 43,531 41,329
Miscellaneous equipment 2,343 1,478
Construction in progress 531 825
-------- --------
Plant and equipment, at cost 47,708 44,976
Less accumulated depreciation (23,430) (20,464)
-------- --------
Net plant and equipment $ 24,278 $ 24,512
======== ========
(5) INTANGIBLE ASSETS
--------------------------------
September 30, December 31,
1997 1996
--------- ---------
(In Thousands)
Goodwill $ 158,876 $ 158,876
Less accumulated amortization (10,592) (7,613)
--------- ---------
Net intangible assets $ 148,284 $ 151,263
========= =========
10
CENTRAL OHIO CLUSTER
NOTES TO COMBINED FINANCIAL STATEMENTS
(Information as of and for the Nine Months Ended
September 30, 1997 is unaudited)
(6) INCOME TAXES
Current and deferred income tax expenses (benefits) are as follows:
----------------------------
Nine months ended Year ended
September 30, 1997 December 31, 1996
------- -------
(In Thousands)
Current:
Federal $ 2,906 $ 3,289
State 520 736
------- -------
Total current 3,426 4,025
------- -------
Deferred:
Federal (1,119) (1,385)
State (48) (464)
------- -------
Total deferred (1,167) (1,849)
------- -------
Net income tax expense $ 2,259 $ 2,176
======= =======
Income tax expense differs from the amount computed by applying the U.S.
statutory federal income tax rate (35%) to income (loss) before income taxes as
a result of the following items:
-------------------------
Nine months ended Year ended
September 30, 1997 December 31, 1996
------ ------
(In Thousands)
Computed tax expense at federal statutory
rates on income before income taxes $1,928 $1,860
State income taxes, net of federal tax benefit 307 177
Other, net 24 139
------ ------
Net income tax expense $2,259 $2,176
====== ======
Significant components of the net deferred tax liability consist of the
following:
-------------------------------
Nine months ended Year ended
September 30, 1997 December 31, 1996
-------- --------
(Thousands of Dollars)
Plant and equipment $ (5,618) $ (5,787)
Franchise rights (57,569) (58,638)
Other 893 983
-------- --------
Net deferred tax liability $(62,294) $(63,442)
======== ========
(7) RETIREMENT PLANS
Qualified Pension Plan
Effective January 1, 1996, CCI established the Cox Communications, Inc. Pension
Plan (the "CCI Plan"), a qualified noncontributory defined benefit pension plan
for substantially all of CCI's employees including the Central Ohio Cluster's
employees. Plan assets consist primarily of common stock, investment-
11
CENTRAL OHIO CLUSTER
NOTES TO COMBINED FINANCIAL STATEMENTS
(Information as of and for the Nine Months Ended
September 30, 1997 is unaudited)
(7) RETIREMENT PLANS (CONTINUED)
grade corporate bonds, cash and cash equivalents and U.S. government
obligations. The CCI Plan calls for benefits to be paid to eligible employees at
retirement based primarily upon years of service with CCI and compensation rates
near retirement. The funded status of the portion of the CCI Plan covering the
employees of the Central Ohio Cluster is not determinable. The fair value of the
CCI Plan assets was greater than the projected benefit obligation as of December
31, 1996.
Total pension expense attributable to the Central Ohio Cluster employees'
participation in the CCI Plan was $33,000 for the nine month period ended
September 30, 1997 and $158,000 for the year ended December 31, 1996.
The assumptions used in the actuarial computations at December 31, 1996 were:
Discount rate 7.75%
Rate of increase in compensation levels 5.50%
Expected long-term rate of return on plan assets 9.00%
Other Retirement Plans
CEI provides certain health care and life insurance benefits to substantially
all retirees of CEI and its subsidiaries. Postretirement expense allocated to
the Central Ohio Cluster by CEI was $13,000 for the nine month period ended
September 30, 1997 and $15,000 for the year ended December 31, 1996. CEI has
been contributing additional amounts to the Cox Pension Plan Trust to fund
health care benefits pursuant to Section 401(h) of the Internal Revenue Code.
CEI is funding benefits to the extent contributions are tax deductible. In
general, retiree health benefits are paid as covered expenses are incurred. The
funded status of the postretirement plan covering the employees of the Central
Ohio Cluster is not determinable. The accumulated postretirement benefit
obligation for the postretirement plan of CEI substantially exceeded the fair
value of assets held in the Cox Pension Plan Trust at December 31, 1996.
In addition, substantially all of Central Ohio Cluster's employees are eligible
to participate in the savings and investment plan of CEI. Under the terms of the
plan, the Central Ohio Cluster matches 50% of employee contributions up to a
maximum of 6% of the employee's base salary. The Central Ohio Cluster's expense
under the plan was $57,000 for the nine-month period ended September 30, 1997
and $83,000 for the year ended December 31, 1996.
(8) TRANSACTIONS WITH AFFILIATED COMPANIES
The Central Ohio Cluster borrows funds for working capital and other needs from
CCI. Certain management services are provided to the Central Ohio Cluster by CCI
and CEI. Such services include legal, corporate secretarial, tax, treasury,
internal audit, risk management, benefits administration and other support
services. The Central Ohio Cluster was allocated expenses for the nine months
ended September 30, 1997 and for the year ended December 31, 1996 of
approximately of $604,000 and $1,320,000, respectively, related to these
services. Allocated expenses are based on management's estimate of expenses
related to the services provided to the Central Ohio Cluster in relation to
those provided to other divisions of CCI and CEI. Management believes that these
allocations were made on a reasonable basis. However, the allocations are not
necessarily indicative of the level of expenses that might have been incurred
had the Central Ohio Cluster contracted directly with third parties. Management
has not made a
12
CENTRAL OHIO CLUSTER
NOTES TO COMBINED FINANCIAL STATEMENTS
(Information as of and for the Nine Months Ended
September 30, 1997 is unaudited)
(8) TRANSACTIONS WITH AFFILIATED COMPANIES (CONTINUED)
study or any attempt to obtain quotes from third parties to determine what the
cost of obtaining such services from third parties would have been. The fees and
expenses to be paid by the Central Ohio Cluster various transactions, including
those described above. At December 31, 1996 and September 30, 1997, outstanding
amounts due to affiliates bear interest at fifty basis points above CCI's
commercial paper borrowings. This rate as of September 30, 1997 and December 31,
1996 was 6.32% and 6.6%, respectively.
In accordance with the requirements of SFAS No. 107, "Disclosures About Fair
Value of Financial Instruments," the Central Ohio Cluster has estimated the fair
value of its intercompany advances and notes payable. Given the short-term
nature of these advances, the carrying amounts reported in the statements of net
assets approximate fair value.
(9) COMMITMENTS AND CONTINGENCIES
The Central Ohio Cluster leases office facilities and various items of equipment
under noncancelable operating leases. Rental expense under operating leases
amounted to $259,000 for the nine month period ended September 30, 1997 and
$331,000 for the year ended December 31, 1996. Future minimum lease payments as
of September 30, 1997 for all noncancelable operating leases are as follows:
1997 $ 18
1998 40
1999 31
2000 31
2001 31
2002 7
------
Total $ 158
======
The FCC has adopted rate regulations required by the Cable Television Consumer
Protection and Competition Act of 1992 (the "1992 Cable Act"). Beginning in
September 1995, the FCC authorized a method of implementing rate adjustments
which allows cable operators to increase rates for programming annually on the
basis of proposed increases in external costs rather than on the basis of cost
increases incurred in the preceding quarter. Local franchising authorities have
the ability to obtain certification from the FCC to regulate rates charged by
the Central Ohio Cluster for basic cable services and associated basic cable
services equipment. In addition, the rates charged by the Central Ohio Cluster
for cable programming services ("CPS") can be regulated by the FCC should any
franchising authority of the Central Ohio Cluster file rate complaints with the
FCC. To date, the local franchising authorities for the Central Ohio Cluster
have not become certified by the FCC to regulate rates for basic cable service
and associated basic cable services equipment and no complaints have been filed
by customers with the FCC regarding rates charged for CPS. Though rates for
basic and CPS are presently not regulated, management of the Central Ohio
Cluster believes the rates charged for basic and CPS comply in all material
respects with the 1992 Cable Act and that should such rates become regulated in
the future the impact on the financial position and results of operation of the
Central Ohio Cluster would not be material.
13
CENTRAL OHIO CLUSTER
NOTES TO COMBINED FINANCIAL STATEMENTS
(Information as of and for the Nine Months Ended
September 30, 1997 is unaudited)
(9) COMMITMENTS AND CONTINGENCIES (CONTINUED)
On February 1, 1996, Congress passed the Telecommunications Act of 1996 (the
"1996 Act"), which was signed into law by the President on February 8, 1996.
Among other provisions, the 1996 Act deregulates the CPS tier of large cable
television operators on March 31, 1999 and upon enactment, the CPS rates of
small cable television operators, where a small cable operator serves 50,000 or
fewer subscribers, revises the procedures for filing a CPS complaint and adds a
new effective competition test.
14
PRO FORMA FINANCIAL INFORMATION.
PRO FORMA FINANCIAL DATA
The unaudited pro forma financial data presented below are derived from the
historical financial statements of FrontierVision Operating Partners, L.P.
("FVOP" or the "Company") and certain cable television systems assets purchased
from Cox Communications, Inc. in central Ohio (the "Acquisition System") on
December 19, 1997. The unaudited pro forma balance sheet data as of September
30, 1997 give pro forma effect to the Acquisition System as if such transaction
had been consummated on September 30, 1997. The unaudited pro forma consolidated
statement of operations data for the nine months ended September 30, 1997 and
for the year ended December 31, 1996 give pro forma effect to the Acquisition
System as if such transaction had been consummated on January 1, 1996.
The unaudited pro forma financial data give effect to the Acquisition described
above under the purchase method of accounting and are based upon the assumptions
and adjustments described in the accompanying notes to the unaudited pro forma
financial statements presented on the following pages. The allocation of the
total purchase price for the Acquisition System presented is based on a
preliminary estimate and is subject to a final allocation adjustment.
The unaudited pro forma financial data presented do not consider any future
events which may have occurred after the Acquisition was consummated. The
Company believes revenue and operating expense synergies and purchasing and
other cost reductions of the combined operations of the existing systems and the
Acquisition System will be realized after the Company has installed its
management controls, systems and marketing programs. However, for purposes of
the unaudited pro forma financial data presented herein, these synergies have
not been reflected because their realization cannot be assured.
The unaudited pro forma financial data do not purport to represent what the
Company's results of operations or financial condition would have actually been
or what operations would be if the transaction that gives rise to the pro forma
adjustments had occurred on the date assumed. The unaudited pro forma financial
data presented below should be read in conjunction with the audited and
unaudited historical financial statements and related notes thereto of FVOP and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" (as included in FVOP's Quarterly Report on Form 10-Q for the nine
months ended September 30, 1997 (File No. 333-9535)) as well as in conjunction
with the audited and unaudited historical financial statements and related notes
thereto of the Acquisition System included elsewhere in this Form 8-K/A.
15
FrontierVision Operating Parnters, L.P. and Subsidiary
Unaudited Pro Forma Balance Sheet
September 30, 1997
(In Thousands)
------------------------------------------------------------------
Pro Forma
FVOP Cox Adjustments
and Central Ohio for the
Subsidiary Systems Acquisition Pro Forma
Actual Acquisition System Consolidated
--------------- ------------ ------------ ---------------
Cash and cash equivalents................... $ 81,798 $ 28 $ (28) (a) $ 81,798
Accounts receivable, net.................... 4,312 2,511 6,823
Prepaid expenses............................ 2,734 2,734
Property and equipment, net................. 220,607 24,278 5,692 (a) 250,577
Franchise costs and intangible assets, net. 352,171 148,284 26,346 (a) 526,801
Deferred financing costs and other, net..... 11,768 853 (853) (b) 11,768
Deposits.................................... 7,959 7,959
---------- ----------- --------- ------------
Total assets.............................. $ 681,349 $ 175,954 $ 31,157 $ 888,460
========== =========== ========== ============
Accounts payable and accrued liabilities.... $ 11,012 $ 1,066 $ 300 (a) $ 12,378
Subscriber prepayments and deposits......... 1,544 1,416 2,960
Accrued interest payable.................... 11,004 11,004
Deferred income taxes....................... 62,294 (62,294) (b)
Debt........................................ 378,845 29,571 204,329 (a) 583,174
(29,571) (b)
Partners' capital........................... 278,944 81,607 (81,607) (b) 278,944
---------- ----------- --------- ------------
Total liabilities and partners' capital... $ 681,349 $ 175,954 $ 31,157 $ 888,460
========== =========== ========= ============
16
Footnotes to the Unaudited Pro Forma Balance Sheet
September 30, 1997
(In Thousands)
(a) Represents adjustments to the historical balance sheet of the Acquisition
System to reflect the purchase of the Acquisition System, including (i) fair
value adjustments recorded in connection with purchase accounting, including
estimated transaction costs, and (ii) incremental indebtedness incurred to
acquire the Acquisition System.
The combined purchase price allocation for the Acquisition System, based on an
estimate, is as follows:
-----------------------------------------
Purchase
Historical Price Preliminary
Acquisition System Balance Adjustments Allocation
------------- ------------- ----------
Property and equipment........................................ $ 24,278 $ 5,692 $ 29,970
Franchise costs and other intangible assets:.................. 148,284 26,346 174,630
--------- ----------- ---------
Aggregate purchase price, including transaction costs......... $ 204,600
=========
(b) Represents the reversal of the historical equity accounts of the Acquisition
System, and the elimination of the debt balance, certain deferred financing
costs and deferred income taxes, which items were not assumed under the
acquisition agreement.
17
FrontierVision Operating Partners, L.P. and Subsidiary
Unaudited Pro Forma Statement of Operations
(For the Nine Months Ended September 30, 1997)
(In Thousands)
------------------------------------------------------------------
Pro Forma
Cox Adjustments
FVOP and Central Ohio for the
Subsidiary Systems Acquisition Pro Forma
Actual Acquisition System Consolidated
--------------- ------------ ------------- ------------
Statement of Operations
Revenue................................. $ 102,386 $ 25,486 $ $ 127,872
Expenses
System operations..................... 52,794 11,191 470 (a) 64,455
Corporate administrative expense...... 3,120 604 (285) (b) 3,439
Depreciation and amortization......... 45,090 6,714 4,801 (c) 56,605
------------ ----------- ----------- -----------
Operating income (loss)................. 1,382 6,977 (4,986) 3,373
Interest expense, net................... (32,290) (1,443) (8,837) (d) (42,570)
Other expense........................... (54) (25) (79)
------------- ----------- ----------- -----------
Net income (loss) before income taxes. (30,962) 5,509 (13,823) (39,276)
Provision for income taxes.............. (2,259) 2,259 (e)
------------- ----------- ----------- -----------
Net income (loss)....................... $ (30,962) $ 3,250 $ (11,564) $ (39,276)
============ =========== =========== ===========
18
FrontierVision Operating Partners, L.P. and Subsidiary
Unaudited Pro Forma Statement of Operations
(For the Year Ended December 31, 1996)
(In Thousands)
--------------------------------------------------------------------
Pro Forma
Cox Adjustments
FVOP and Central Ohio for the
Subsidiary Systems Acquisition Pro Forma
Actual Acquisition System Consolidated
--------------- -------------- ------------- ------------
Statement of Operations
Revenues.............................. $ 76,464 $ 31,749 $ $ 108,213
Expenses
System operations................... 39,181 13,955 915 (a) 54,051
Corporate administrative expense.... 2,930 1,320 (923) (b) 3,327
Depreciation and amortization....... 35,336 8,818 6,570 (c) 50,724
------------ ------------ ---------- ------------
Operating income (loss)............... (983) 7,656 (6,562) 111
Interest expense, net................. (22,422) (2,346) (33,346) (d) (58,114)
Other income (expense)................ (396) 5 (391)
------------ ------------- ---------- ------------
Net income (loss) before income taxes (23,801) 5,315 (39,908) (58,394)
Provision for income taxes............ (2,176) 2,176 (e)
------------ ------------- ---------- ------------
Net income (loss)..................... $ (23,801) $ 3,139 $ (37,732) $ (58,394)
============ ============= =========== ============
19
Footnotes to the Unaudited Pro Forma Statement of Operations
For the Nine Months Ended September 30, 1997
and the Year Ended December 31, 1996
(In Thousands)
(a) Represents the anticipated increase in programming costs for the Acquisition
System of $515 and $915 for September 30, 1997 and December 31, 1996,
respectively, based on the Company's current negotiated programming contracts,
offset partially by the estimated cost savings of $45 for September 30, 1997,
resulting from the elimination of duplicative functions attributable to the
Acquisition System.
(b) Represents the elimination of management fees and allocated overhead costs
of $604 and $1,320 for Septemer 30, 1997 and December 31, 1996, respectively,
and the inclusion of the Company's estimated incremental overhead cost of $319
and $397 for September 30, 1997 and December 31, 1996, attributable to the
Acquisition Systems.
(c) Represents the additional depreciation and amortization expense arising from
the purchase of the Acquisition System as if such acquisition had occurred on
January 1, 1996. Pro forma depreciation and amortization is calculated on a
straight-line basis over periods that are consistent with the Company's stated
accounting policy. The cost basis of the purchased assets utilized in these
calculations is based on a preliminary asset allocation between property and
equipment and intangible assets and is subject to a final allocation adjustment.
(d) Represents the net adjustment to (i) record interest expense on the
incremental indebtedness needed to purchase the Acquisition System and (ii)
reverse the historical interest expense of the Acquisition System. Adjustments
to interest expense are calculated as if all indebtedness had been outstanding
since January 1, 1996 with interest accruing at rates as follows: 8.48% and
8.47% weighted average interest rate on borrowings under the Company's Senior
Credit Facility at September 30, 1997 and December 31, 1996, respectively, 11.0%
for $200,000 of FVOP Notes, and 11.5% for the UVC Note of $8,845 and $8,124 at
September 30, 1997 and December 31, 1996, respectively. A 1/8% change in the
assumed interest rate would result in a $547 and $752 change to the Company's
pro forma net loss for the nine months ended September 30, 1997 and for the year
ended December 31, 1996, respectively.
(e) Represents adjustments to reverse the provision of income taxes. FVOP is
structured as a partnership, and accordingly, is not subject to income taxes.
20
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrants have duly caused this report to be signed on their behalf by the
undersigned thereunto duly authorized.
FRONTIERVISION OPERATING PARTNERS, L.P.
By: FrontierVision Holdings, L.P., its general partner,
By: FrontierVision Partners, L.P., its general partner,
By: FVP GP, L.P., its general partner
By: FrontierVision Inc., its general partner
By: /s/ JAMES W. McHose
--------------------
James W. McHose
Vice President and Treasurer
Date: January 28, 1998 By: /s/ JAMES W. MCHOSE
-------------------
James W. McHose
Vice President and Treasurer
FRONTIERVISION CAPITAL CORP.
Date: January 28, 1998 By: /s/ JAMES W. MCHOSE
-------------------
James W. McHose
Vice President and Treasurer