SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
--------
Current Report
---------------
Pursuant to Section 13 or 15 (d) of the
Securities Exchange Act of 1934
Date of Report:
November 5, 1999
Mediacom LLC
Mediacom Capital Corporation
(Exact names of Registrants as specified in their charters)
- ------------------------------------------------------------------------------------------------------------------
New York 333-57285-01 06-1433421
New York 333-57285 06-1513997
- ------------------------------------------------------------------------------------------------------------------
(State or other jurisdiction or (Commission File Number) (I.R.S. Employer
incorporation) Identification Numbers)
- ------------------------------------------------------------------------------------------------------------------
100 Crystal Run Road
Middletown, New York 10941
(Address of principal executive offices)
(914) 695-2600
(Registrants' telephone number including area code)
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On November 5, 1999, we acquired for approximately $740 million, subject to
certain adjustments, the cable systems of Triax Midwest Associates, L.P. As of
June 30, 1999, the Triax systems passed approximately 521,000 homes and served
approximately 341,500 basic subscribers in Arizona, Illinois, Indiana, Iowa,
Michigan, Minnesota, Ohio and Wisconsin. The acquisition was financed with $10.5
million of capital contributions from Mediacom LLC's existing members and
borrowings under a new credit facility. Reference is made to the Asset Purchase
Agreement, which is incorporated by reference herein, for more detailed
information as to the acquisition.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial statements of business acquired.
(1) Audited financial statements of Triax Midwest
Associates, L.P. as of December 31, 1998 and 1997 and June 30, 1999 (unaudited)
and for the years ended December 31, 1998, 1997 and 1996 and for the six month
period ended June 30, 1999 (unaudited) are included in this report.
TRIAX MIDWEST ASSOCIATES, L.P.
FINANCIAL STATEMENTS
Contents Page
-------- ----
Report of Independent Public Accountants.................................. F-2
Balance Sheets as of December 31, 1997 and 1998 and June 30, 1999
(unaudited).............................................................. F-3
Statements of Operations for the Years Ended December 31, 1996, 1997 and
1998 and for the Six Months Ended June 30, 1998 and 1999 (unaudited)..... F-4
Statements of Partners' Deficit for the Years Ended December 31, 1996,
1997 and 1998 and for the Six Months Ended June 30, 1999 (unaudited)..... F-5
Statements of Cash Flows for the Years Ended December 31, 1996, 1997 and
1998 and for the Six Months Ended June 30, 1998 and 1999 (unaudited)..... F-6
Notes to Financial Statements............................................. F-7
Note--Upon completion of this offering and the exchange of membership
interests in Mediacom LLC for our common stock, Mediacom LLC will become a
wholly-owned subsidiary of us. Prior to such time, Mediacom Communications
Corporation had no assets, liabilities, contingent liabilities or operations.
F-1
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Triax Midwest Associates, L.P.:
We have audited the accompanying balance sheets of TRIAX MIDWEST ASSOCIATES,
L.P. (a Missouri limited partnership) as of December 31, 1997 and 1998, and
the related statements of operations, partners' deficit and cash flows for
each of the three years in the period ended December 31, 1998. These financial
statements are the responsibility of the Partnership's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits 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 audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Triax Midwest Associates,
L.P. as of December 31, 1997 and 1998, and the results of its operations and
its cash flows for each of the three years in the period ended December 31,
1998 in conformity with generally accepted accounting principles.
Arthur Andersen LLP
Denver, Colorado
February 26, 1999
F-2
TRIAX MIDWEST ASSOCIATES, L.P.
BALANCE SHEETS
As of December 31, 1997 and 1998 and June 30, 1999 (Unaudited)
(In Thousands)
June 30,
1997 1998 1999
-------- -------- -----------
(Unaudited)
ASSETS
Cash.......................................... $ 3,297 $ 2,327 $ 2,820
Receivables, net of allowance of $554, $331
and $330, respectively....................... 2,555 2,303 1,890
Property, plant and equipment, net............ 124,616 153,224 162,168
Purchased intangibles, net.................... 157,671 185,268 165,170
Deferred costs, net........................... 5,980 6,995 3,511
Other assets.................................. 2,202 2,911 2,324
-------- -------- --------
$296,321 $353,028 $337,883
======== ======== ========
LIABILITIES AND PARTNERS' DEFICIT
Accrued interest expense...................... $ 6,057 $ 5,383 $ 5,003
Accounts payable and other accrued expenses... 11,582 11,714 12,113
Subscriber prepayments and deposits........... 695 828 823
Payables to affiliates........................ 359 348 350
Debt.......................................... 323,604 404,418 409,290
-------- -------- --------
342,297 422,691 427,579
Partners' deficit............................. (45,976) (69,663) (89,696)
-------- -------- --------
$296,321 $353,028 $337,883
======== ======== ========
The accompanying notes to the financial statements are an integral part of
these balance sheets.
F-3
TRIAX MIDWEST ASSOCIATES, L.P.
STATEMENTS OF OPERATIONS
For the Years Ended December 31, 1996, 1997 and 1998
and for the Six Months Ended June 30, 1998 and 1999 (Unaudited)
(In Thousands)
For the
Six Months Ended
For the Years Ended December 31, June 30,
---------------------------------- ------------------
1996 1997 1998 1998 1999
---------- ---------- ---------- -------- --------
(Unaudited)
Revenues................ $ 60,531 $ 101,521 $ 119,669 $ 57,155 $ 67,257
Operating expenses:
Programming........... 12,934 20,066 25,275 11,882 15,213
Operating, selling,
general and
administrative....... 16,459 26,050 32,241 13,935 16,263
Management fees....... 2,667 3,573 4,048 1,933 2,218
Administration fees
paid to an
affiliate............ 444 1,482 1,826 843 1,040
Depreciation and
amortization......... 26,492 48,845 65,391 28,451 35,644
---------- ---------- ---------- -------- --------
58,996 100,016 128,781 57,044 70,378
---------- ---------- ---------- -------- --------
Operating income
(loss)................. 1,535 1,505 (9,112) 111 (3,121)
Other expenses:
Interest.............. 18,311 26,006 29,358 13,558 16,252
---------- ---------- ---------- -------- --------
Net loss before
cumulative effect of
accounting change...... (16,776) (24,501) (38,470) (13,447) (19,373)
Cumulative effect of
accounting change...... -- -- -- -- (660)
---------- ---------- ---------- -------- --------
Net loss................ $ (16,776) $ (24,501) $ (38,470) $(13,447) $(20,033)
========== ========== ========== ======== ========
The accompanying notes in the financial statements are an integral part of
these statements.
F-4
TRIAX MIDWEST ASSOCIATES, L.P.
STATEMENTS OF PARTNERS' DEFICIT
For the Years Ended December 31, 1996, 1997 and 1998
and for the Six Months Ended June 30, 1999 (Unaudited)
(In Thousands)
Pre Recapitalization Limited
Partners (Note 1)
------------------------------- Post
Accumulated Recapitalization
Residual Special Limited
Non-Managing Managing Equity Interest Limited Cavalier Partners
General Partner General Partner of TTC Partner Cable, L.P. All Others (Note 1) Total
--------------- --------------- --------------- ------- ----------- ---------- ---------------- --------
(Effective (Effective
August 30, August 30,
1996) 1996)
BALANCES,
December 31,
1995............ $(83,549) $ -- $ -- $ -- $ -- $ -- $ -- $(83,549)
Net loss for the
eight month
period ended
August 30,
1996............ (9,022) -- -- -- -- -- -- (9,022)
-------- ----- ------ ------- -------- -------- -------- --------
BALANCES, August
30, 1996........ (92,571) -- -- -- -- -- -- (92,571)
Cash redemption
of partnership
interests....... -- -- -- (6,680) (12,071) (19,500) -- (38,251)
Allocation of
partners'
capital in
connection with
recapitalization.. -- -- -- 6,680 12,071 19,500 (38,251) --
Accumulation of
residual equity
interest of
TTC............. (62) -- 62 -- -- -- -- --
Cash
contributions... 1,100 -- -- -- -- -- 50,250 51,350
Issuance of
limited
partnership
units in
connection with
acquisition of
cable
properties...... -- -- -- -- -- -- 59,765 59,765
Cash
distributions to
DD Cable
Partners........ -- -- -- -- -- -- (4,200) (4,200)
Syndication
costs........... (26) -- -- -- -- -- (2,578) (2,604)
Net loss for the
four month
period ended
December 31,
1996............ (78) -- -- -- -- -- (7,676) (7,754)
-------- ----- ------ ------- -------- -------- -------- --------
BALANCES,
December 31,
1996............ (91,637) -- 62 -- -- -- 57,310 (34,265)
Accumulation of
residual equity
interest of
TTC............. (488) -- 488 -- -- -- -- --
Cash
contributions... -- -- -- -- -- -- 13,043 13,043
Syndication
costs........... -- -- -- -- -- -- (253) (253)
Net loss for the
year ended
December 31,
1997............ (245) -- -- -- -- -- (24,256) (24,501)
-------- ----- ------ ------- -------- -------- -------- --------
BALANCES,
December 31,
1997............ (92,370) -- 550 -- -- -- 45,844 (45,976)
Accumulation of
residual equity
interest of
TTC............. (738) -- 738 -- -- -- -- --
Cash
contributions... -- -- -- -- -- -- 15,000 15,000
Syndication
costs........... -- -- -- -- -- -- (217) (217)
Net loss for the
year ended
December 31,
1998............ (385) -- -- -- -- -- (38,085) (38,470)
-------- ----- ------ ------- -------- -------- -------- --------
BALANCES,
December 31,
1998............ (93,493) -- 1,288 -- -- -- 22,542 (69,663)
Accumulation of
residual equity
interest of TTC
(Unaudited)..... (472) -- 472 -- -- -- -- --
Net loss for the
six months ended
June 30, 1999
(Unaudited)..... (200) -- -- -- -- -- (19,833) (20,033)
-------- ----- ------ ------- -------- -------- -------- --------
BALANCES, June
30, 1999
(Unaudited)..... $(94,165) $ -- $1,760 $ -- $ -- $ -- $ 2,709 $(89,696)
======== ===== ====== ======= ======== ======== ======== ========
The accompanying notes to the financial statements are an integral part of
these statements.
F-5
TRIAX MIDWEST ASSOCIATES, L.P.
STATEMENTS OF CASH FLOWS
For the Years Ended December 31, 1996, 1997 and 1998
and For the Six Months Ended June 30, 1998 and 1999 (Unaudited)
(In Thousands)
For the Years Ended For the Six Months
December 31, Ended June 30,
------------------------------ -----------------------
1996 1997 1998 1998 1999
--------- -------- --------- ----------- -----------
(Unaudited) (Unaudited)
CASH FLOWS FROM
OPERATING ACTIVITIES:
Net loss.............. (16,776) (24,501) (38,470) (13,447) (20,033)
Adjustments to
reconcile net loss to
net cash flows from
operating
activities--
Depreciation and
amortization......... 26,492 48,845 65,391 28,451 35,644
Accretion of interest
on preferred stock
obligation........... 90 -- -- -- --
Amortization of
deferred loan costs.. 370 651 790 348 446
Cumulative effect of
accounting change.... -- -- -- -- 660
Loss (gain) on asset
dispositions......... -- -- 1,732 (492) 2
Decrease (increase) in
subscriber
receivables, net..... 1,926 (503) 93 (550) 413
(Increase) decrease in
other assets......... (7) (556) (623) (516) 672
Increase (decrease) in
accrued interest
expense.............. 181 1,312 (674) (6,057) (381)
Increase (decrease) in
accounts payable and
other accrued
expenses............. 4,502 525 (452) (1,555) 199
(Decrease) increase in
subscriber
prepayments and
deposits............. (2,684) 13 129 62 (5)
Write-off loan costs.. 174 -- -- -- --
(Decrease) increase in
payables to
affiliates........... (31) 113 (11) 23 2
--------- -------- --------- --------- --------
Net cash flows from
operating
activities.......... 14,237 25,899 27,905 6,267 17,619
--------- -------- --------- --------- --------
CASH FLOWS FROM
INVESTING ACTIVITIES:
Purchase of property,
plant and equipment.. (10,275) (23,101) (36,122) (14,906) (21,358)
Acquisition of
properties, including
purchased
intangibles.......... -- (71,850) (86,255) (23,112) (20)
Proceeds from exchange
of properties,
including
intangibles.......... -- -- 1,594 1,594 --
Proceeds from sale of
properties, including
intangibles.......... -- -- 1,674 367 268
Cash paid for
franchise costs...... (582) (776) (2,122) (3,664) (528)
Cash paid for other
intangibles.......... (823) (37) -- -- (90)
--------- -------- --------- --------- --------
Net cash flows from
investing
activities.......... (11,680) (95,764) (121,231) (39,721) (21,728)
--------- -------- --------- --------- --------
CASH FLOWS FROM
FINANCING ACTIVITIES:
Proceeds from
borrowings........... 275,000 67,000 399,000 345,000 12,000
Repayment of debt..... (268,477) (14,000) (319,000) (313,000) (7,000)
Contributions from
partners............. 51,350 13,043 15,000 -- --
Cash redemptions of
partnership
interests............ (38,251) -- -- -- --
Cash distributions to
DD Cable Partners.... (4,200) -- -- -- --
Payments on capital
leases............... (314) (322) (703) (272) (392)
Cash paid for loan
costs................ (5,683) (80) (1,724) (1,570) (6)
Cash paid for
syndication costs.... (2,604) (253) (217) -- --
Repayment of preferred
stock obligations.... (2,760) -- -- -- --
--------- -------- --------- --------- --------
Net cash flows from
financing
activities.......... 4,061 65,388 92,356 30,158 4,602
--------- -------- --------- --------- --------
NET INCREASE (DECREASE)
IN CASH............... 6,618 (4,477) (970) (3,296) 493
CASH, beginning of
period................ 1,156 7,774 3,297 3,297 2,327
--------- -------- --------- --------- --------
CASH, end of period.... $ 7,774 $ 3,297 $ 2,327 $ 1 $ 2,820
========= ======== ========= ========= ========
SUPPLEMENTAL DISCLOSURE
OF CASH FLOW
INFORMATION:
Cash paid during the
period for interest.. $ 16,848 $ 24,043 $ 29,209 $ 19,267 $ 16,186
========= ======== ========= ========= ========
SUPPLEMENTAL SCHEDULE
OF NON-CASH INVESTING
AND FINANCING
ACTIVITIES:
Property additions
financed by capital
leases............... $ 391 $ 1,313 $ 1,517 $ 678 $ 481
========= ======== ========= ========= ========
Net book value of
assets divested in
exchange............. $ -- $ -- $ 4,404 $ 4,404 $ --
========= ======== ========= ========= ========
Net book value of non-
monetary assets
acquired in
exchange............. $ -- $ -- $ 2,958 $ 2,958 $ --
========= ======== ========= ========= ========
The accompanying notes to the financial statements are an integral part of
these statements.
F-6
TRIAX MIDWEST ASSOCIATES, L.P.
NOTES TO FINANCIAL STATEMENTS
December 31, 1997 and 1998 and June 30, 1999
(All amounts related to the June 30, 1998 and 1999 periods are unaudited)
(1) THE PARTNERSHIP
Organization and Capitalization
Triax Midwest Associates, L.P. (the "Partnership") is a Missouri limited
partnership originally formed for the purpose of acquiring, constructing and
operating cable television properties, located primarily in Indiana, Illinois,
Iowa, Minnesota and Wisconsin. The Partnership was capitalized and commenced
operations on June 1, 1988. The non-managing general partner is Triax Cable
General Partner, L.P. ("Triax Cable GP"), a Missouri limited partnership. The
general partner of Triax Cable GP is Midwest Partners, L.L.C. The managing
general partner of the Partnership is Triax Midwest General Partner, L.P., a
Delaware limited partnership, and its general partner is Triax Midwest, L.L.C.
Partnership Recapitalization
On August 30, 1996 (the "Contribution Date"), the Partnership completed a
recapitalization of the Partnership in which new credit facilities were put in
place (Note 4), additional partnership interests were issued and selected
partnership interests were redeemed. Under the terms of a partnership amendment
and other related documents, the Partnership received approximately $50.3
million in cash from new limited partners in exchange for limited partnership
interests ("New Cash Partners"). Approximately $38.3 million in cash was then
utilized to redeem the special limited partnership interest and certain other
existing limited partnership interests. For financial reporting purposes, this
portion of the Partnership Recapitalization was accounted for as an equity
transaction with no effect on the carrying value of the Partnership's assets.
However, for tax purposes, even though the New Cash Partners assumed the
redeemed limited partners' tax basis capital accounts, they will be entitled to
additional outside tax basis reflecting the amount invested.
In addition, the Partnership purchased certain net assets of DD Cable Partners,
L.P. and DD Cable Holdings, Inc. ("DD Cable") through the net issuance of
approximately $55.6 million in limited partnership interests. For financial
reporting purposes, the acquisition was accounted for under the purchase method
of accounting at fair market value. For tax purposes, the basis in the acquired
net assets was recorded at DD Cable's historical tax basis. This results in a
built-in gain on these assets based on the difference between the fair market
value and tax basis of the assets at August 30, 1996.
In connection with the Partnership Recapitalization, the general partnership
interest of Triax Cable GP was converted to a non-managing general partnership
interest. Triax Cable GP then contributed an additional $1.1 million to
maintain its approximate 1% proportionate interest in the Partnership. Triax
Midwest General Partner, L.P. ("Midwest GP" or the "Managing General Partner")
was appointed the managing general partner. The general partner of Midwest GP
is Triax Midwest, L.L.C., a wholly-owned subsidiary of Triax Telecommunications
Company, L.L.C. ("TTC"). Midwest GP made no partnership equity contributions to
the Partnership and received only a residual interest in the Partnership, as
discussed below under "Allocations of Profits, Losses, Distributions and
Credits Subsequent to Partnership Recapitalization".
As provided for in the Partnership Agreement, as amended, certain of the New
Cash Partners (the "Committed Partners") committed to fund additional monies
totaling $50.0 million for future acquisitions of the Partnership through
August 1999. In conjunction with the Partnership's Indiana and Illinois
Acquisitions during 1997 and the Illinois acquisition of September 30, 1998
(Note 3), certain limited partners contributed approximately $13.0 million and
$15.0 million, respectively. Of these total contributions, approximately $27.0
million was contributed by the Committed Partners, which reduced their total
funding commitment to approximately $23.0 million.
F-7
TRIAX MIDWEST ASSOCIATES, L.P.
NOTES TO FINANCIAL STATEMENTS--(Continued)
December 31, 1997 and 1998 and June 30, 1999
(All amounts related to the June 30, 1998 and 1999 periods are unaudited)
During 1997, TTC and certain officers of TTC (the "Officers") purchased limited
partner interests in Triax Investors Midwest, L.P. ("Investors Midwest"), which
holds a limited partner interest in the Partnership. Subsequent to TTC's and
the Officers' purchase of these Investors Midwest interests, Investors Midwest
elected to distribute its interest in the Partnership to certain of its
partners, resulting in TTC owning a direct limited partner interest in the
Partnership.
The Partnership Agreement, as amended, provides that on August 30, 2001 each
limited partner has the option to sell its interest to the Partnership for fair
market value at the time of the sale. The fair market value is to be determined
by appraised value approved by a majority vote of the Advisory Committee. In
accordance with the Partnership Agreement, if the Partnership is unable to
finance the acquisition of such interests, such selling limited partners can
cause the liquidation of the Partnership.
Allocation of Profits, Losses, Distributions and Credits Subsequent to
Partnership Recapitalization
Distributions
Cash distributions are to be made to both the limited partners and Triax Cable
GP equal to their adjusted capital contributions, then to the limited partners
and Triax Cable GP in an amount sufficient to yield a return of 13% per annum,
compounded annually (the "Priority Return"), then varying rates of distribution
to the Managing General Partner (17% to 20%) and to the limited partners and
Triax Cable GP (83% to 80%) based on internal rates of return earned by the New
Cash Partners, as set forth in the Amended and Restated Partnership Agreement,
on their adjusted capital contributions.
Losses from Operations
The Partnership will allocate its losses to the limited partners and Triax
Cable GP according to their proportionate interests in the book value of the
Partnership, except losses will not be allocated to any limited partner which
would cause the limited partner's capital account to become negative by an
amount greater than an amount which the limited partners are obligated to
contribute to the Partnership.
Profits and Gains
Generally, the Partnership will allocate its profits according to the limited
partners' and Triax Cable GP's proportionate interests in the book value of the
Partnership until profits allocated to limited partners equal losses previously
allocated to them. A special allocation of gain equal to the difference between
the fair value and tax basis of contributed property will be made, with respect
to partners contributing property to the Partnership, upon the sale of the
contributed Partnership assets.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
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.
F-8
TRIAX MIDWEST ASSOCIATES, L.P.
NOTES TO FINANCIAL STATEMENTS--(Continued)
December 31, 1997 and 1998 and June 30, 1999
(All amounts related to the June 30, 1998 and 1999 periods are unaudited)
Revenue Recognition
Revenues are recognized in the period the related services are provided to the
subscribers.
Income Taxes
No provision has been made for federal, state or local income taxes because
they are the responsibility of the individual partners. The principal
difference between tax and financial reporting results from different
depreciable tax basis in various assets acquired (Note 1).
Property, Plant and Equipment
Property, plant and equipment are stated at cost. Replacements, renewals and
improvements are capitalized and costs for repairs and maintenance are charged
directly to expense when incurred. The Partnership capitalized a portion of
technician and installer salaries to property, plant and equipment, which
amounted to $1,134,000 in 1996, $1,196,132 in 1997, $1,333,296 in 1998 and
$601,889 and $590,351 for the six months ended June 30, 1998 and 1999,
respectively.
Depreciation and amortization are computed using the straight-line method over
the following estimated useful lives (amounts in thousands):
1997 1998 June 30, 1999 Life
--------- --------- ------------- -------------
Predominantly
Property, plant and
equipment.............. $ 217,561 $ 266,965 $ 288,560 10 years
Less--Accumulated
depreciation........... (92,945) (113,741) (126,392)
--------- --------- ---------
$ 124,616 $ 153,224 $ 162,168
========= ========= =========
Purchased Intangibles
Purchased intangibles are being amortized using the straight-line method over
the following estimated useful lives (amounts in thousands):
1997 1998 June 30, 1999 Life
--------- --------- ------------- -------------
Franchises.............. $ 245,028 $ 310,544 $ 311,056 5-11.5 years
Noncompete.............. 400 1,595 1,595 3 years
Goodwill................ 12,804 12,804 12,804 20 years
--------- --------- ---------
258,232 324,943 325,455
Less--Accumulated
amortization........... (100,561) (139,675) (160,285)
--------- --------- ---------
$ 157,671 $ 185,268 $ 165,170
========= ========= =========
Impairment of Long-Lived Assets
The Company reviews its long-lived assets for impairment whenever events or
changes in circumstances indicate that the carrying amount of an asset may not
be recoverable from future undiscounted cash flows. Impairment losses are
recorded for the difference between the carrying value and fair value of the
long-lived asset.
F-9
TRIAX MIDWEST ASSOCIATES, L.P.
NOTES TO FINANCIAL STATEMENTS--(Continued)
December 31, 1997 and 1998 and June 30, 1999
(All amounts related to the June 30, 1998 and 1999 periods are unaudited)
Deferred Costs
Deferred costs are being amortized using the straight-line method over the
following estimated useful lives (amounts in thousands):
June 30,
1997 1998 1999 Life
------- ------- -------- ----------
Deferred loan costs................ $ 5,763 $ 7,488 $ 7,493 2-7 years
Organizational costs............... 858 858 -- 5-10 years
Other.............................. 500 500 500
------- ------- -------
7,121 8,846 7,993
Less--Accumulated amortization..... (1,141) (1,851) (4,482)
------- ------- -------
$ 5,980 $ 6,995 $ 3,511
======= ======= =======
Organizational Costs
American Institute of Certified Public Accountants Statement of Position 98-5
("SOP 98-5") provides guidance on the financial reporting of start-up and
organization costs. SOP 98-5 broadly defines start-up activities and requires
the costs of such start-up activities and organization costs to be expensed as
incurred. SOP 98-5 is effective for fiscal years beginning after December 15,
1998 and the initial application is reported as a cumulative effect of a change
in accounting principle. Effective January 1, 1999, the Partnership recognized
a cumulative effect of an accounting change adjustment related to net deferred
organization costs totaling approximately $660,000 as of December 31, 1998.
Reclassifications
Certain amounts in the accompanying financial statements have been reclassified
to conform to the current year presentation.
(3) ACQUISITIONS/SALES
On August 30, 1996, the Partnership purchased certain cable television system
assets, located in Illinois, Minnesota, Wisconsin and Iowa, from DD Cable,
including the assumption of certain liabilities of the acquired business. The
acquisition was financed by issuing net limited partnership interests valued at
approximately $55.6 million. In addition, the Partnership utilized a portion of
newly executed $375 million credit facility (Note 4) to repay approximately
$116 million of existing indebtedness of DD Cable.
F-10
TRIAX MIDWEST ASSOCIATES, L.P.
NOTES TO FINANCIAL STATEMENTS--(Continued)
December 31, 1997 and 1998 and June 30, 1999
(All amounts related to the June 30, 1998 and 1999 periods are unaudited)
The purchase price was allocated to the acquired assets and liabilities as
follows (amounts in thousands):
Current assets $ 3,519
Property, plant and equipment 59,786
Franchise costs 117,007
---------
Subtotal 180,312
Less--current liabilities assumed (4,579)
---------
175,733
Less--cash distributed for:
Payment of existing DD Cable debt (115,968)
Cash distributions to DD Cable (4,200)
---------
Total net partnership interest issued $ 55,565
=========
On June 30, 1997, the Partnership acquired certain cable television system
assets, located in Indiana, including certain liabilities of the acquired
business, from Triax Associates I, L.P. (the "Indiana Acquisition"). The
purchase price of $52.0 million was accounted for by the purchase method of
accounting and was allocated to the acquired assets and liabilities as follows
(amounts in thousands):
Current assets $ 316
Property, plant and equipment 18,793
Franchise costs 33,007
Non-compete 200
---------
Subtotal 52,316
Less--current liabilities assumed (403)
---------
Total cash paid for acquisition $ 51,913
=========
Also on June 30, 1997, the Partnership acquired certain cable television system
assets, located in Illinois, including certain liabilities of the acquired
business, from an unrelated third party (the "Illinois Acquisition"). The
purchase price of $20.1 million was accounted for by the purchase method of
accounting.
The Indiana and Illinois Acquisitions were financed by partners' contributions
of approximately $13.0 million and proceeds of $60.0 million on the revolving
credit facility.
On September 30, 1998, the Partnership purchased certain cable television
system assets, located in Illinois, from an unrelated third party ("Marcus"),
including the assumption of certain liabilities of the acquired business. The
acquisition was financed by partners' contributions of $15.0 million and
proceeds of approximately $45.8 million from the revolving credit facility.
F-11
TRIAX MIDWEST ASSOCIATES, L.P.
NOTES TO FINANCIAL STATEMENTS--(Continued)
December 31, 1997 and 1998 and June 30, 1999
(All amounts related to the June 30, 1998 and 1999 periods are unaudited)
The purchase price was allocated to the acquired assets and liabilities as
follows (amounts in thousands):
Current assets $ 109
Property, plant and equipment 10,000
Franchise costs 50,555
Non-compete 500
-------
Subtotal 61,164
Less--current liabilities assumed (328)
-------
Total cash paid for acquisition $60,836
=======
The Partnership has reported the operating results of DD Cable, the Indiana
Acquisition and Marcus from the respective acquisition dates. The following
tables show the unaudited pro forma results of operations for the year of the
acquisitions and their prior year:
For the Year Ended December 31, 1996
-----------------------------------------------------------------
Unaudited
Actual Pro Forma Results(/1/)
-------- ----------------------
REVENUES $ 60,531 $ 99,554
======== ========
NET LOSS $(16,776) $(28,878)
======== ========
(/1/) Presents pro forma effect of the DD Cable Acquisition and the Indiana
Acquisition.
For the Year Ended December 31, 1997
-----------------------------------------------------------------
Unaudited
Actual Pro Forma Results(/2/)
-------- ----------------------
REVENUES $101,521 $118,722
======== ========
NET LOSS $(24,501) $(31,001)
======== ========
(/2/) Presents pro forma effect of the Indiana Acquisition and Marcus.
For the Year Ended December 31, 1998
-----------------------------------------------------------------
Unaudited
Actual Pro Forma Results(/3/)
-------- ----------------------
REVENUES $119,669 $128,182
======== ========
NET LOSS $(38,470) $(41,754)
======== ========
(/3/) Presents pro forma effect of Marcus.
F-12
TRIAX MIDWEST ASSOCIATES, L.P.
NOTES TO FINANCIAL STATEMENTS--(Continued)
December 31, 1997 and 1998 and June 30, 1999
(All amounts related to the June 30, 1998 and 1999 periods are unaudited)
On June 30, 1998, the Partnership purchased certain cable television system
assets, located in Indiana, from an unrelated third party, including the
assumption of certain liabilities of the acquired business. The acquisition was
financed by proceeds of approximately $22.8 million from the revolving credit
facility. The purchase price was allocated to the acquired assets and
liabilities as follows (amounts in thousands):
Property, plant and equipment..................................... $ 8,383
Franchise costs................................................... 14,499
Non-compete....................................................... 200
-------
Subtotal........................................................ 23,082
Less--current liabilities assumed................................. (270)
-------
Total cash paid for acquisition................................. $22,812
=======
On January 21, 1998, the Partnership acquired certain cable television system
assets located in Gilberts, Illinois, including certain liabilities of the
acquired business, from an unrelated third party (the "Gilberts Acquisition").
The purchase price of approximately $307,000 was accounted for by the purchase
method of accounting.
On December 31, 1998, the Partnership acquired certain cable television system
assets, located in Kentland, Indiana, including certain liabilities of the
acquired business, from an unrelated third party (the "Kentland Acquisition").
The purchase price of $2.5 million was accounted for by the purchase method of
accounting, $200,000 of which will be paid during 1999, and has been recorded
as other accrued expenses in the accompanying balance sheet.
The Indiana, Kentland and Gilberts Acquisitions were financed by proceeds on
the revolving credit facility.
On February 27, 1998, the Partnership closed on an Asset Exchange Agreement
with an unrelated third party whereby the Partnership conveyed certain systems
serving approximately 3,700 subscribers in exchange for another system in
Illinois serving approximately 2,400 subscribers and received approximately
$1,600,000 in cash consideration. A gain of approximately $150,000 was
recognized on this transaction, and was recorded against write-off of retired
plant in the accompanying statement of operations.
On June 30, 1998, the Partnership sold certain cable television system assets
located in Central City, Iowa, including certain liabilities of the system, to
an unrelated third party for cash of approximately $367,000.
On September 30, 1998, the Partnership sold certain cable television system
assets related to five systems in Iowa, including certain liabilities of the
systems, to an unrelated third party for cash of approximately $1.3 million.
F-13
TRIAX MIDWEST ASSOCIATES, L.P.
NOTES TO FINANCIAL STATEMENTS--(Continued)
December 31, 1997 and 1998 and June 30, 1999
(All amounts related to the June 30, 1998 and 1999 periods are unaudited)
(4) DEBT
Debt consists of the following at December 31, 1997, 1998 and June 30, 1999
(amounts in thousands):
June 30,
1997 1998 1999
-------- -------- -----------
(Unaudited)
Bank Revolving credit loan, due June 30,
2006, interest payable at rates based on
varying interest rate options............. $ 82,000 $ 97,000 $102,000
Term A Loan, due June 30, 2006, interest
payable at rates based on varying interest
rate options.............................. 180,000 220,000 220,000
Term B Loan, due June 30, 2007, interest
payable at rates based on varying interest
rate options.............................. 35,000 60,000 60,000
Term C Loan, due June 30, 2007, interest
payable at 9.48%.......................... 25,000 25,000 25,000
Various equipment loans and vehicle
leases.................................... 1,604 2,418 2,290
-------- -------- --------
$323,604 $404,418 $409,290
======== ======== ========
In connection with the Partnership Recapitalization discussed in Note 1, the
Partnership entered into a $375 million credit facility with a group of
lenders, consisting of a Revolving Credit Loan, Term A, Term B and Term C
Loans. A commitment fee is charged on the daily unused portion of the available
commitment. This fee ranges from 1/4% to 3/8% per annum based on the
Partnership's leverage ratio, as defined. The Revolving Credit Loan and each of
the Term A, B, and C Loans are collateralized by all of the property, plant and
equipment of the Partnership, as well as the rights under all present and
future permits, licenses and franchises.
On June 24, 1998, the Partnership completed a restructuring of the Revolving
Credit Loan and the Term A, B and C Loans. Under the terms of the restructuring
agreement, the total availability of this facility increased from $375 million
to $475 million, in order to complete certain planned acquisitions (see Note 3)
and to provide for future growth.
The Partnership entered into LIBOR interest rate agreements with the lenders
related to the Revolving Credit Loan and the Term A and Term B Loans. The
Partnership fixed the interest rate for the Revolving Credit Loan on $71
million at 7.38% for the period from April 6, 1999 to July 6, 1999 and on $25
million at 7.38% for the period from April 26, 1999 to July 26, 1999. The Term
A Loan and Term B Loans are fixed at 7.38% and 7.50%, respectively, for the
period from April 26, 1999 to July 26, 1999. In addition, the Partnership has
entered into various interest rate swap transactions covering $195 million in
notional amount as of June 30, 1999, which fixes the weighted average three-
month variable rate at 5.6%. These swap transactions expire at various dates
through October 2000.
The Term A Loan requires principal payments to be made quarterly, beginning in
September 2000. The quarterly payments begin at $1,375,000 per quarter and
increase each September 30th thereafter. The Term B and Term C Loans require
total quarterly principal payments of $177,083 for the quarters ending
September 2000 and December 2000. Quarterly principal payments totaling $88,542
are then required through December 31, 2005, at which time the quarterly
payments increase to $3,187,500 through December 31, 2006 and $35,062,500 at
March 31, 2007. The Loans are due in full on June 30, 2007.
F-14
TRIAX MIDWEST ASSOCIATES, L.P.
NOTES TO FINANCIAL STATEMENTS--(Continued)
December 31, 1997 and 1998 and June 30, 1999
(All amounts related to the June 30, 1998 and 1999 periods are unaudited)
The loan agreements contain various covenants, the most restrictive of which
relate to maintenance of certain debt coverage ratios, meeting cash flow goals
and limitations on indebtedness.
Debt maturities required on all debt as of December 31, 1998 are as follows
(amounts in thousands):
Year Amount
---- --------
1999.............................................................. $ 775
2000.............................................................. 3,861
2001.............................................................. 16,375
2002.............................................................. 31,417
2003.............................................................. 39,407
Thereafter........................................................ 312,583
--------
$404,418
========
(5) RELATED PARTY TRANSACTIONS
During the eight month period ending August 31, 1996, TTC provided management
services to the Partnership for a fee equal to 5% of gross revenues, as
defined. Charges for such management services amounted to approximately
$1,567,000. TTC also allocated certain overhead expenses to the Partnership
which primarily relate to employment costs. These overhead expenses amounted to
approximately $371,000 for the eight months ended August 31, 1996.
Commencing August 30, 1996, the Partnership entered into an agreement with TTC
to provide management services to the Partnership for a fee equal to 4% of
gross revenues, as defined. The agreement also states the Partnership will only
be required to pay a maximum fixed monthly payment of $275,000, which can be
adjusted for any acquisitions or dispositions by the Partnership at a rate of
$.8333 per acquired/disposed subscriber. Charges for such management services
provided by TTC amounted to approximately $1,100,000, $3,573,000 and $4,048,000
in 1996, 1997 and 1998, respectively, and $1,933,000 and $2,218,000 for the six
months ended June 30, 1998 and 1999, respectively. The remainder of the
management fees earned but unpaid will be distributable to TTC only after Triax
Cable GP and the limited partners have been distributed their original capital
investments and then the deferred and unpaid portion of the management fee will
be paid pari passu with the first 7.5% of the Priority Return, as defined. The
earned but unpaid fees totaled approximately $62,000, $488,000 and $738,000 in
1996, 1997 and 1998, respectively, and $353,000 and $422,000 for the six months
ended June 30, 1998 and 1999, respectively. The cumulative unpaid fees totaled
approximately $62,000, $550,000, $1,288,000 and $1,760,000 as of December 31,
1996, 1997, 1998 and June 30, 1999, respectively. These amounts have been
reflected in the statement of partners' deficit as "accumulated residual equity
interest of TTC", which has been allocated to the non-managing General Partner.
Commencing August 30, 1996, the Partnership entered into a programming
agreement with InterMedia Capital Management II, L.P. ("InterMedia"), an
affiliate of DD Cable, to purchase programming at InterMedia's cost, which
includes volume discounts InterMedia might earn. Included in this agreement is
a provision that requires the Partnership to remit to InterMedia an
administrative fee, based on a calculation stipulated in the agreement, which
amounted to approximately $444,000, $1,482,000 and $1,826,000 in 1996, 1997 and
1998, respectively, and $843,000 and $1,040,000 for the six months ended June
30, 1998 and 1999, respectively.
F-15
TRIAX MIDWEST ASSOCIATES, L.P.
NOTES TO FINANCIAL STATEMENTS--(Continued)
December 31, 1997 and 1998 and June 30, 1999
(All amounts related to the June 30, 1998 and 1999 periods are unaudited)
(6) LEASES
The Partnership leases office facilities, headend sites and other equipment
under noncancelable operating lease agreements, some of which contain renewal
options. Total rent expense, including month-to-month rental arrangements, was
approximately $364,000, $583,000 and $737,000 in 1996, 1997 and 1998,
respectively, and $336,000 and $413,000 for the six months ended June 30, 1998
and 1999, respectively. Pole attachment fees totaled approximately $496,000,
$798,000 and $970,000 in 1996, 1997 and 1998, respectively, and $473,000 and
$538,000 for the six months ended June 30, 1998 and 1999, respectively.
Future minimum rental commitments under noncancelable operating leases
subsequent to December 31, 1998 are as follows (amounts in thousands):
Year Amount
---- ------
1999................................................................ $685
2000................................................................ $511
2001................................................................ $377
2002................................................................ $298
2003................................................................ $238
Thereafter.......................................................... $757
(7) FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts of cash and cash equivalents approximates fair value
because of the nature of the investments and the length of maturity of the
investments.
The estimated fair value of the Partnership's debt instruments are based on
borrowing rates that would be substantially equivalent to existing rates,
therefore, there is no material difference in the fair market value and the
current value.
(8) REGULATORY MATTERS
In October 1992, Congress enacted the Cable Television Consumer and Competition
Act of 1992 (the "1992 Cable Act") which greatly expanded federal and local
regulation of the cable television industry. In April 1993, the Federal
Communications Commission ("FCC") adopted comprehensive regulations, effective
September 1, 1993, governing rates charged to subscribers for basic cable and
cable programming services (other than programming offered on a per-channel or
per-program basis). The FCC implemented regulation, which allowed cable
operators to justify regulated rates in excess of the FCC benchmarks through
cost of service showings at both the franchising authority level for basic
service and to the FCC in response to complaints on rates for cable programming
services.
On February 22, 1994, the FCC issued further regulations which modified the
FCC's previous benchmark approach, adopted interim rules to govern cost of
service proceedings initiated by cable operators, and lifted the stay of rate
regulations for small cable systems, which were defined as all systems serving
1,000 or fewer subscribers.
On November 10, 1994, the FCC adopted "going forward" rules that provided cable
operators with the ability to offer new product tiers priced as operators
elect, provided certain limited conditions are met, permit cable operators to
add new channels at reasonable prices to existing cable programming service
tiers, and created an additional option pursuant to which small cable operators
may add channels to cable programming service tiers.
F-16
TRIAX MIDWEST ASSOCIATES, L.P.
NOTES TO FINANCIAL STATEMENTS--(Continued)
December 31, 1997 and 1998 and June 30, 1999
(All amounts related to the June 30, 1998 and 1999 periods are unaudited)
In May 1995, the FCC adopted small company rules that provided small systems
regulatory relief by implementing an abbreviated cost of service rate
calculation method. Using this methodology, for small systems seeking to
establish rates no higher than $1.24 per channel, the rates are deemed to be
reasonable.
In February 1996, the Telecommunications Act of 1996 ("1996 Act") was enacted
which, among other things, deregulated cable rates for small systems on their
programming tiers.
Federal law is expected to eliminate the regulation of rates for non-basic
cable programming service tiers after March 31, 1999.
Management of the Partnership believes they have complied in all material
respects with the provisions of the 1992 Cable Act and the 1996 Act, including
rate setting provisions. To date, the FCC's regulations have not had a material
adverse effect on the Partnership due to the lack of certifications by the
local franchising authorities. Several rate complaints have been filed against
the Partnership with the FCC. However, management does not believe this matter
will have a material adverse impact on the Partnership.
(9) COMMITMENTS AND CONTINGENCIES
The Partnership has been named as a defendant in a class action lawsuit in the
state of Illinois, challenging the Partnership's policy for charging late
payment fees when customers fail to pay for subscriber services in a timely
manner. The Partnership is currently in settlement negotiations with the
plaintiffs and expects the litigation to be settled by the end of the year.
However, management does not believe the ultimate outcome of this matter will
have a material adverse effect on its financial condition.
(10) EVENTS SUBSEQUENT TO DATE OF AUDITOR'S REPORT (UNAUDITED)
On April 29, 1999, the Partnership entered into a definitive agreement to sell
its cable television system assets to Mediacom LLC for $740 million, subject to
adjustment for subscriber benchmarks and other pro-rations in the normal
course. The sale is expected to occur in the fourth quarter of 1999 subject to
regulatory and other customary approvals.
On July 31, 1999, the Partnership acquired certain cable television system
assets, located in Illinois, including certain liabilities of the acquired
business, from an unrelated third party. The purchase price of approximately
$4.0 million was accounted for by the purchase method of accounting.
Effective September 30, 1999, the Partnership acquired certain cable television
system assets, located in Illinois, including certain liabilities of the
acquired business, from an unrelated third party. The purchase price of $1.1
million was accounted for by the purchase method of accounting.
In September 1999, the Partnership's independent billing company notified the
Partnership of its intent to assess additional charges should the Partnership
terminate the existing contract between the parties prior to the contractual
termination date of June 24, 2004. Mediacom LLC intends to change the billing
service provider for subscribers obtained in connection with its asset purchase
from the Partnership. The Partnership intends to vigorously defend against any
claims by the billing company, and believes the ultimate resolution of this
matter will not have a material adverse impact on its financial position or
results of operations.
F-17
(b) Pro forma financial information.
(1) Pro forma combined financial information consisting
of pro forma combined balance sheet as of June 30, 1999 and pro forma
consolidated statements of operations for the six month period ended June 30,
1999 and the year ended December 31, 1998 are included in this report.
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL DATA
The following unaudited pro forma consolidated balance sheet and statement of
operations as of and for the six months ended June 30, 1999 and the statement of
operations for the year ended December 31, 1998 are based on the historical
consolidated financial statements of Mediacom LLC, as adjusted to illustrate the
estimated effects of the following transactions as if each transaction had
occurred on January 1, 1998 for the statement of operations data and on June 30,
1999 for the balance sheet data:
. the acquisitions of the Clearlake, Cablevision, and Caruthersville cable
systems on January 9, 1998, January 23, 1998 and October 1, 1998,
respectively; and
. the issuance and sale of the 8 1/2% senior notes on April 1, 1998 and the
application of $194.5 million of net proceeds from the sale to repay
outstanding indebtedness under the subsidiary credit facilities;
. the issuance and sale of the 7 7/8% senior notes on February 26, 1999 and
the application of $121.9 million of net proceeds from the sale to repay
outstanding indebtedness under the subsidiary credit facilities;
. the repayment of an unsecured senior subordinated note in the original
amount of $2.8 million and accrued interest;
. the arrangement of new subsidiary credit facilities and the repayment of
all outstanding indebtedness under the former subsidiary credit facilities;
. the $10.5 million equity contribution made by members of Mediacom LLC in
connection with the acquisition of the Triax systems on November 5, 1999;
and
. the acquisition of the Triax systems on November 5, 1999 and borrowings
under the new subsidiary credit facilities to fund such acquisition.
The unaudited pro forma consolidated financial statements give effect to the
acquisitions of the cable systems under the purchase method of accounting. The
purchase price allocation among property, plant and equipment, intangible
assets, other assets and liabilities of the Triax systems is preliminary and
will be completed upon receipt of appraisal reports. The Company does not
believe that the adjustments resulting from the final allocation of the purchase
price will be material to the financial statements.
The unaudited pro forma consolidated financial statements do not purport to
represent what the results of operations or financial condition would actually
have been had the transactions described above occurred on the dates indicated
or to project the results of operations or financial condition for any future
period or date. You should read the historical consolidated financial statements
of Mediacom LLC and the historical financial statements of Triax, incorporated
by reference or appearing elsewhere in this document.
Unaudited Pro Forma Consolidated Statement of Operations
For the Six Months Ended June 30, 1999
(dollars in thousands)
Mediacom LLC Triax
(Historical) (Historical) Adjustments Total
------------------ ------------ -------------- --------------
Revenues . $ 74,178 $ 67,257 $ - $141,435
Costs and expenses:
Service costs . 24,175 22,924 - 47,099
Selling, general and
administrative expenses . 14,502 9,592 - 24,094
Management fee expense . 3,588 2,218 - 5,806
Depreciation and (a)
amortization . 41,431 35,644 15,804 92,879
------------ ---------- ---------- ----------
Operating loss . (9,518) (3,121) (15,804) (28,443)
Interest expense, net . 13,392 16,252 11,839 (b) 41,483
Other expenses . 734 - - 734
------------ ---------- ---------- ----------
Net loss from
Continuing operations . $(23,644) $(19,373) $(27,643) $(70,660)
============ ========== ========== ==========
See accompanying notes to unaudited pro forma consolidated statement of
operations.
Notes to Unaudited Pro Forma Consolidated Statement of Operations
For the Six Months Ended June 30, 1999
(dollars in thousands)
For purposes of determining the pro forma effects of the transactions
described above on the historical consolidated statement of operations of
Mediacom LLC for the six months ended June 30, 1999, the following adjustments
have been made:
(a) Represents increase to historical depreciation and amortization expense
as a result of a preliminary allocation of the Triax purchase price and
other costs:
Estimated Asset Pro Forma
Triax Fair Values Life Expense
Property, plant and equipment........................................ $293,018 7 $ 41,860
Franchise costs...................................................... 224,822 15 14,988
Subscriber lists..................................................... 224,822 5 44,964
Deferred financing costs............................................. 7,000 8.5 824
Other................................................................ 3,900 15 260
Annualized pro forma depreciation and
Amortization (A).................................................. 102,896
--------
Pro forma depreciation and amortization--Six months
ended June 30, 1999 (A divided by 2).............................. 51,448
Historical--Triax.................................................... (35,644)
--------
Increase to depreciation and amortization............................ $ 15,804
========
(b) Represents increase to interest expense due to incremental indebtedness
arising from the acquisition of the Triax systems and the 7 7/8% senior
note offering and decrease to interest expenses arising from the repayment
of the unsecured senior subordinated note in the original amount of $2,800
and accrued interest. An 1/8% change in the interest rates will increase
or decrease the interest expense per annum by $909 after adjusting for
interest rate swap agreements. Historical interest expense of Triax has
been eliminated, as the Company has not assumed their debt obligations.
Principal Interest Pro Forma
Rate Expense
Subsidiary credit facilities......................................... $777,229 7.22% $ 56,116
8 1/2% senior notes.................................................. 200,000 8.50% 17,000
7 7/8% senior notes.................................................. 125,000 7.88% 9,850
----------
Pro forma interest expense (A)....................................... - 82,966
Pro forma interest expense-Six months ended June 30, 41,483
1999 (A divided by 2).............................................
Historical interest expense.......................................... (29,644)
----------
Increase to interest expense......................................... $ 11,839
==========
Unaudited Pro Forma Consolidated Statement of Operations
For the Year Ended December 31, 1998
(dollars in thousands)
Mediacom LLC Triax
(Historical) Adjustments Subtotal (Historical) Adjustments Total
Statement of
Operations Data:
Revenues.................... $129,297 $ 6,888 (a) $136,185 $119,669 $ 11,434 (d) $ 267,288
Costs and expenses:
Service costs.............. 43,849 2,803 (a) 46,652 37,534 3,897 (d) 88,083
Selling, general and
administrative
expenses.................. 25,596 2,274 (a) 27,870 21,808 1,892 (d) 51,570
Management fee
expense................... 5,797 7 (a) 5,804 4,048 -- 9,852
Depreciation and
amortization.............. 65,793 3,090 (b) 68,883 65,391 37,505 (e) 171,779
------------- ----------- ---------- --------- ------------ ---------
Operating loss............... (11,738) (1,286) (13,024) (9,112) (31,860) (53,996)
Interest expense, net....... 23,994 2,783 (c) 26,777 29,358 31,445 (f) 87,580
Other expenses.............. 4,058 - 4,058 -- 4,058
------------- ----------- ---------- --------- ------------ ---------
Net loss.................... $(39,790) $(4,069) $(43,859) $(38,470) $(63,305) $(145,634)
============= =========== ========== ========= ============ =========
See accompanying notes to unaudited pro forma consolidated statement of
operations.
Notes to Unaudited Pro Forma Consolidated Statement of Operations
For the Year Ended December 31, 1998
(dollars in thousands)
For purposes of determining the pro forma effects of the transactions
described above on the historical consolidated statement of operations of
Mediacom LLC for the year ended December 31, 1998, the following adjustments
have been made:
(a) The table below represents actual revenues, service costs, and selling,
general and administrative expenses and management fee expense of the
Clearlake, Cablevision and Caruthersville systems recognized prior to the
respective dates of acquisition.
Clearlake Cablevision Caruthersville Total
------------- ------------- --------------- ----------
Revenues........................................... $133 $5,603 $1,152 $6,888
Service costs...................................... 152 2,272 379 2,803
Selling, general and administrative
expenses......................................... 139 1,839 296 2,274
Management fee expense............................. 7 -- -- 7
(b) Represents historical depreciation and amortization of the Cablevision,
Clearlake and Caruthersville systems recognized prior to the respective
dates of acquisition and additional depreciation and amortization related
to the step-up in value of the systems based on the final allocation of
their purchase price. See note 3 of the historical consolidated financial
statements of Mediacom LLC for the year ended December 31, 1998.
(c) Represents increase to interest expense due to incremental indebtedness
arising from the acquisition of the Clearlake, Cablevision and
Caruthersville systems and the 8 1/2% senior note offering. An 1/8%
change in the interest rates will increase or decrease the interest
expense per annum by $106 after adjusting for interest rate swap
agreements.
Interest Pro Forma
Principal Rate Expense
------------- ----------- -----------
Subsidiary credit facilities............................................. $134,425 7.04% $ 9,464
8 1/2% senior notes...................................................... 200,000 8.50 17,000
Unsecured senior subordinated note....................................... 3,480 9.00 313
--------
Pro forma interest expense............................................... 26,777
Historical--Mediacom LLC................................................. (23,994)
--------
Increase to interest expense............................................. $ 2,783
========
(d) The table below represents historical revenues, service costs, and
selling, general and administrative expenses of the Jones systems and the
Marcus systems, recognized prior to the respective dates of acquisition by
Triax. These systems were acquired by Triax on June 30, 1998 and September
30, 1998, respectively. See note 3 to the historical financial statements
of Triax for the year ended December 31, 1998.
Jones Marcus Total
Revenues.............................................................. $2,920 $8,514 $11,434
Service costs......................................................... 936 2,961 3,897
Selling, general and administrative expenses.......................... 702 1,190 1,892
Notes to Unaudited Pro Forma Consolidated Statement of Operations
For the Year Ended December 31, 1998
(dollars in thousands)
(e) Represents increase to historical depreciation and amortization as a
result of a preliminary allocation of the Triax purchase price and other
costs:
Estimated
Asset Fair Asset Pro Forma
Triax Values Life Expense
- ----- ------------ -------- ------------
Property, plant and equipment.................................... $293,018 7 $ 41,860
Franchise costs.................................................. 224,822 15 14,988
Subscriber lists................................................. 224,822 5 44,964
Deferred financing costs......................................... 7,000 8.5 824
Other acquisition costs.......................................... 3,900 15 260
--------
Pro forma depreciation and amortization.......................... 102,896
Historical--Triax................................................ (65,391)
--------
Increase to depreciation and amortization........................ $ 37,505
========
(f) Represents increase to interest expense due to incremental indebtedness
arising from the acquisition of the Triax system, the 8 1/2% senior note
offering and the 7 7/8% senior note offering and decrease to interest
expenses arising from the repayment of the unsecured senior subordinated
note in the original amount of $2,800 and accrued interest. An 1/8%
change in the interest rates will increase or decrease the interest
expense per annum by $886 after adjusting for interest rate swap
agreements. Historical interest expense of Triax has been eliminated, as
the Company did not assume its debt obligations.
Interest Pro Forma
Principal Rate Expense
------------ --------- ----------
Subsidiary credit facilities.................................................. $759,130 8.00% $ 60,730
8 1/2% senior notes........................................................... 200,000 8.50 17,000
7 7/8% notes.................................................................. 125,000 7.88 9,850
--------
Pro forma interest expense.................................................... 87,580
Pro forma-Mediacom LLC........................................................ (26,777)
Historical-Triax.............................................................. (29,358)
--------
Increase to interest expense.................................................. $ 31,445
========
Unaudited Pro Forma Consolidated Balance Sheet
As of June 30, 1999
(dollars in thousands)
Mediacom LLC Triax
Historical Historical Adjustments Total
---------- ---------- ----------- -----
Assets
Cash and cash equivalents.............................. $ 1,555 $ 2,820 $ (2,820) (a) $ 1,555
Subscriber accounts receivable,........................ (a)
net................................................... 2,342 1,890 911 5,143
Prepaid expenses and other............................. 279 (a)
assets................................................ 1,690 -- 1,969
Inventory.............................................. 10,135 -- 2,000 (b) 12,135
Property, plant and equipment,......................... (b)
net................................................... 277,126 162,168 130,850 570,144
Intangible assets, net................................. 140,956 165,170 288,374 (b) 594,500
Other assets, net...................................... 14,606 5,835 (1,080) (c) 19,361
-------- -------- -------- --- ----------
Total assets......................................... $448,410 $337,883 $418,514 $1,204,807
======== ======== ======== ==========
Liabilities and Stockholders'
Equity
Debt................................................... $359,629 $409,290 $333,310 (d) $1,102,229
Accounts payable and accrued........................... (a)
expenses.............................................. 31,751 17,466 (14,413) 34,804
Subscriber advance payments............................ (a)
and deposits.......................................... 1,888 823 1,666 4,377
Deferred income tax liability.......................... -- -- -- --
Other liabilities...................................... 135 -- -- 135
-------- -------- -------- ----------
Total liabilities.................................... 393,403 427,579 320,563 1,141,545
Members' equity
Capital contributions................................. 124,990 -- 10,500 (e) 135,490
Accumulated deficit................................... (69,983) (89,696) 87,451 (f) (72,228)
-------- -------- -------- --- ----------
Total member's equity................................ 55,007 (89,696) 97,951 63,262
-------- -------- -------- ----------
Total liabilities and
members' equity..................................... $448,410 $337,883 $418,514 $1,204,807
======== ======== ======== ==========
See accompanying notes to unaudited pro forma consolidated balance sheet.
Notes to Unaudited Pro Forma Consolidated Balance Sheet
As of June 30, 1999
(dollars in thousands)
For purposes of determining the pro forma effect of the transactions described
above on the historical consolidated balance sheet of Mediacom LLC as of June
30, 1999, the following adjustments have been made:
(a) Represents elimination of cash not included in the acquisition of Triax
and adjustments to working capital due to timing differences between the
financial statements as of June 30, 1999 and the amounts assumed at the
closing of the acquisition.
Working
Preliminary Capital
Closing as of
Working June 30,
Capital 1999 Adjustments
-------------- ----------------- ----------------
Assets acquired:
Cash and cash equivalents............................... $ - $ 2,820 $(2,820)
Subscriber accounts receivable, net..................... 2,801 1,890 911
Prepaid expenses and other assets....................... 279 - 279
Liabilities assumed:
Accounts payable and accrued expenses................... 3,053 17,466 14,413
Subscriber advance payments and deposits................ 2,489 823 (1,666)
------- -------- -------
Net working capital........................................... $(2,462) $(13,579) $11,117
======= ======== =======
(b) Represents an increase to property, plant and equipment and intangible
assets as a result of the acquisitions based on a preliminary allocation
of the purchase price assuming estimated fair values of:
Estimated Fair Value
-----------------------------
Property,
Purchase Other Net Plant and
Price Assets Equipment Intangibles
----- ------ --------- -----------
Original Triax purchase price............................ $740,100 $ -- $ 296,040 $ 444,060
Preliminary subscriber adjustment........................ 9,026 -- 3,610 5,416
Preliminary purchase price
adjustment............................................. (4,464) -- (4,632) 168
Property, plant and equipment
reclassified as inventory.............................. -- 2,000 (2,000) --
Net working capital...................................... (2,462) (2,462) - --
-------- ------- ---------
Subtotal................................................. $742,200 $ (462) $ 293,018 $ 449,644
Closing costs............................................ 3,900 - - 3,900
-------- ---------
Total acquisition costs.................................. $746,100 $ (462) $ 293,018 $ 453,544
======== =======
Historical Amounts....................................... (162,168) (165,170)
--------- ---------
Increase................................................. $ 130,850 $ 288,374
========= =========
(c) Represents adjustment to other assets in connection with:
. the incurrence of $7,000 in closing costs in connection with the new
subsidiary credit facilities;
. the elimination of unamortized deferred financing costs related to
the former subsidiary credit facilities of $2,245; and
. the elimination of unamortized deferred loan costs and other costs
of Triax of $5,835.
Notes to Unaudited Pro Forma Consolidated Balance Sheet
As of June 30, 1999
(dollars in thousands)
(d) Represents the following adjustments to debt related to the acquisition
of the Triax system:
Proceeds from the subsidiary credit facilities . $ 777,263
Repayment of the former subsidiary credit facilities . (31,000)
Repayment of the unsecured senior subordinated note . (3,629)
Elimination of Triax . (409,324)
---------
Increase to debt . $ 333,310
=========
(e) Represents adjustment to capital contributions in connection with
additional capital contributions to Mediacom LLC by its members of
$10,500; and
(f) Represents adjustments to accumulated deficit in connection with:
. elimination of Triax accumulated deficit accounts of $89,696;
. write-off of unamortized deferred financing costs related to the
former subsidiary credit facilities of $2,245.
(c) Exhibits
Exhibit
Number Exhibit Descriptions
- ------ --------------------
2.9 Asset Purchase Agreement, dated April 29, 1999, between Mediacom LLC and
Triax Midwest Associates, L.P. (filed as an exhibit to the Quarterly
Report on Form 10-Q for the quarterly period ended March 31, 1999 of
Mediacom LLC and Mediacom Capital Corporation.)
13
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
MEDIACOM LLC
MEDIACOM CAPITAL CORPORATION
November 12, 1999 By: /s/ Mark E. Stephan
---------------------------------
Mark E. Stephan
14
